Trade vs Aid
The NZ Herald has a nice line in the debate about helping the third world:
It has been estimated that barriers to trade in developed economies cost poor nations more than $100 billion a year, about twice what rich countries give in aid.
I’m not optimistic of progress though with a protectionist President and Congress in the United States, and the loss of Mandelson as Trade Commissioner for the EU.
No TweetBacks yet. (Be the first to Tweet this post)
Tags: Free Trade, NZ Herald, overseas aid
November 19th, 2008 at 11:42 am
The article misses out one of the biggest barriers to trade – corruption and add on costs.
Then there is the political and social set ups in those same poor countries that interfere with democracy and the fair rule of law so that trade can happen.
As the article points out quite well, Bob Geldorf bless his soul misses the point.
Why should we be giving a UN designated figure anyway, we’re a sovereign country with relationships with whom we give monies to.
It is our choice and he has no say in the matter and rightly so as through our relationships look at a myriad of factors and benefits when making decisions.
Whilst we could do better we do very well if you want to compare us to toehrs, it’s all relative.
Our government has a responsibility and an obligation to make sure OUR money gets used wisely and properly and that means good stewardship.
Whom we give money to and how they use it is more important than how much.
November 19th, 2008 at 12:03 pm
DPF – tackle the hold that business lobby groups have over Washington, and you tackle this problem.
But as Adam Smith warned – this is what happens when relatively weak developing nations lower trade barriers in an attempt to trade freely with powerful developed Nations – what you have is an asymmetric bargaining arrangement, and therefore a deal that favors the stronger party. The IMF and World Bank (read the US banking lobby group) should never have foisted this situation on to developing countries, with corrupt rulers, only to happy to pocket the loans in return for the implementation of economic liberalisation measures/austerity for the poor.
What these countries really need is a strong Nationalist government that’s prepared to to put the needs of the country ahead of the needs of the trans-national corporate elite and domestic political elite (read “free trade”). Look at what the four Asian Tiger countries have achieved with this approach. Combine this approach with generous aid (like the US gave to Japan after WW2) and you’ve got a winning formula.
November 19th, 2008 at 12:06 pm
NYU’s William Easterly provides a much more realistic take on the effects of aid than the likes of Sach’s & Geldof who tend to promote utopian solutions:
“In truth, Africans are and will be escaping poverty the same way everybody else did: through the efforts of resourceful entrepreneurs, democratic reformers and ordinary citizens at home, not through PR extravaganzas of ill-informed outsiders.
The real Africa needs increased trade from the West more than it needs more aid handouts. A respected Ugandan journalist, Andrew Mwenda, made this point at a recent African conference despite the fact that the world’s most famous celebrity activist — Bono — was attempting to shout him down. Mwenda was suffering from too much reality for Bono’s taste: “What man or nation has ever become rich by holding out a begging bowl?” asked Mwenda. ”
http://www.latimes.com/news/opinion/la-oe-easterly6jul06,0,6188154.story?coll=la-opinion-rightrail
November 19th, 2008 at 12:10 pm
Mandelson is as corrupt as they come.
He should have gone to jail for Mortgage Fraud.
The rest of the debate is very hard to construct a positive approach.
The US has always had a default position of ‘Protectionism’ and ‘Isolationism’.
Strangely they have everything they need to get on without the rest of the World.
I have always refused to give money to International Charities. Their Administration costs are off the Richter Scale.
Corruption is ingrained in so many developing Nations culture. And has always existed in the ‘First World’
Free Trade is an idealist concept, and the Rich will always seek to protect their position.
This is pure Darwinism.
November 19th, 2008 at 12:10 pm
good point Bob R.
“What man or nation has ever become rich by holding out a begging bowl?” asked Mwenda. ”
November 19th, 2008 at 12:13 pm
Good point, as long as you don’t have dysentery from all that dirty water you have to drink…
November 19th, 2008 at 12:18 pm
“What man or nation has ever become rich by holding out a begging bowl?”
Have you ever seen the “clapper” man in Dunedin? He’s a busker who can’t sing, has no sense of rhythm, plays no instrument, and has one mean mental illness. Now I swear, this guy absolutely cleans up. Best hustler in the city.
November 19th, 2008 at 12:29 pm
There are also environmental factors of course which make it difficult to develop a well educated population which is crucial to development. In this respect, aid to improve pre-natal care and nutrition for children is certainly crucial.
http://www.slate.com/id/2178122/entry/2178124/
November 19th, 2008 at 12:49 pm
roger nome “But as Adam Smith warned – this is what happens when relatively weak developing nations lower trade barriers in an attempt to trade freely with powerful developed Nations – what you have is an asymmetric bargaining arrangement, and therefore a deal that favors the stronger party.” Where did Adam Smith say this????
“What these countries really need is a strong Nationalist government that’s prepared to to put the needs of the country ahead of the needs of the trans-national corporate elite and domestic political elite (read “free trade”).” If this were true then, by definition, it would not be free trade.
“Look at what the four Asian Tiger countries have achieved with this approach.” Actually they did not use that approach see ‘State Development Planning: Did it Create an East Asian Miracle?’ by Benjamin Powell, Independent Institute Working Paper Number 54, September 28, 2004.
“East Asian countries have recorded large increases in per capita GDP over the last fifty years. Some observers have referred to this growth as an “East Asian Miracle.” One popular explanation attributes the rapid growth to state led industrial development planning. This paper critically assesses the arguments surrounding state development planning and East Asia’s growth. Whether the state can acquire the knowledge necessary to calculate which industries it should promote and how state development planning can deal with political incentive problems faced by planners are both examined. When we look at the development record of East Asian countries we find that to the extent development planning did exist, it could not calculate which industries would promote development, so it instead promoted industrialization. We also find that what rapid growth in living standards did occur can be better explained by free markets than state planning because, as measured in economic freedom indexes, these countries were some of the most free market in the world.”
November 19th, 2008 at 12:55 pm
Having traded with Africa for close to 20 years, I have no doubt that trade is the most successful way to raise their standard of living. Aid is always short term relief but giving them businesses that can compete internationally is the long term solution. They are also very proud people who still believe that hard work is the key to success. They don’t want handouts, they want a hand up.
November 19th, 2008 at 1:23 pm
Sorry bad english . What I meant to say was.
Aid is always short term relief but allowing them to create businesses that can compete…
November 19th, 2008 at 1:30 pm
In my experience the default for Africans is entrepreneur and capitalist.
socialism isn’t their default.
just go to a township and watch life as it goes on.
November 19th, 2008 at 1:30 pm
Paul:
November 19th, 2008 at 3:55 pm
DPF:
“……I’m not optimistic of progress though with a protectionist President and Congress in the United States….”
HEAR, HEAR.
Nice to see someone else who is realistic about the unforeseen outcomes of what the rest of the world might have wished America into……….
November 19th, 2008 at 4:49 pm
roger nome. And where did that quote come from? For a start we don’t have free trade today. If you actually believe that quote then check the trade literature. As I pointed out before if we take the example of Asian Tigers they didn’t use such methods to any great degree.
“Look at what the four Asian Tiger countries have achieved with this approach.” Actually they did not use that approach see ‘State Development Planning: Did it Create an East Asian Miracle?’ by Benjamin Powell, Independent Institute Working Paper Number 54, September 28, 2004.
“East Asian countries have recorded large increases in per capita GDP over the last fifty years. Some observers have referred to this growth as an “East Asian Miracle.” One popular explanation attributes the rapid growth to state led industrial development planning. This paper critically assesses the arguments surrounding state development planning and East Asia’s growth. Whether the state can acquire the knowledge necessary to calculate which industries it should promote and how state development planning can deal with political incentive problems faced by planners are both examined. When we look at the development record of East Asian countries we find that to the extent development planning did exist, it could not calculate which industries would promote development, so it instead promoted industrialization. We also find that what rapid growth in living standards did occur can be better explained by free markets than state planning because, as measured in economic freedom indexes, these countries were some of the most free market in the world.”
November 19th, 2008 at 6:09 pm
“East Asian countries have recorded large increases in per capita GDP over the last fifty years. Some observers have referred to this growth as an “East Asian Miracle.” One popular explanation attributes the rapid growth to state led industrial development planning.”
Remember though that East Asians have tended to outperform all groups (when you look at group averages, as opposed to individuals) on psychometric tests. This cognitive talent is also linked to economic growth, when combined with policies and institutions (rule of law & enforceable contracts, good governance etc):
“We survey the psychological literature on cross-cultural IQ tests and conclude that intelligence tests provide one useful measure of human capital. Using a new database of national average IQ, we show that in growth regressions that include only robust control variables, IQ is statistically significant in 99.8% of these 1330 regressions, easily passing a Bayesian model-averaging robustness test. A 1 point increase in a nation’s average IQ is associated with a persistent 0.11% annual increase in GDP per capita. ” http://www.springerlink.com/content/d15x2810855wx085/
November 19th, 2008 at 9:11 pm
DPF, methinks you’re overly nervous about Obama’s supposed protectionism.
That was fodder for blue-collar voters during the election campaign.
Now that he’s president, the diplomats in Washington pushing for the preservation of the Trans-Pacific economic co-operation agreement (including NZ’s Roy Ferguson) are quietly confident that he won’t stand in the way of the US taking full part in the upcoming negotiation, the power of the Washington farm lobby groups notwithstanding.
With a bit of luck and a good tail wind, the easing of that rhetoric will spread elsewhere to trade policy, like administration support for renewal of Trade Promotion Authority, for example.