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Paul Collier, fair trade, and useful idiots

October 5, 2010

I just (finally) read Paul Collier’s The Bottom Billion, which was… interesting. I liked his analysis of “traps” that the LDCs (to use the WTO’s parlance for Collier’s “bottom billion” countries) face – the natural resource trap, which is Collier’s slightly retooled version of the resource curse, the trap of being landlocked, the trap of falling into a cycle of civil wars or military coups, and the trap of corruption and bad governance in a small country. I even found his hyper-interventionist philosophy pretty good food for thought.

He’s got a paragraph on the problem with the fair-trade commodity movement that I think is pretty great, and clearly written:

The price premium in fair trade products is a form of charitable transfer… the problem with it… is that it encourages recipients to stay doing what they are doing – producing coffee. A key economic problem for the bottom billion is that producers have not diversified out of a narrow range of primary commodities… They get charity as long as they stay producing the crops that have locked them into poverty.

In other words, fair trade commodities are better than non-fair trade commodities, but it’s not a systemic solution. Fair trade is a stopgap, and one that might actually make it more difficult in the long-run to get where we want to go.

So there’s that, which I appreciated. But then, when Collier gets to talking about trade and investment policy, he gets all sad-eyed that the Multilateral Agreement on Investment (MAI) fell through, and misty-eyed about the benefits of trade liberalization. He also starts sounding like The Economist circa 2000, writing off anyone who thinks the neoliberal trade model is problematic as simpletons who just don’t understand trade policy. What’s weird is that this seems a bit self-contradictory. Collier readily admits, as we saw above, that diversification of a country’s economy, particularly into manufacturing, is necessary for economic growth. He even admits that the bottom billion countries probably need trade protections from Asia in order to achieve this goal, conceding the point that free trade means that the poorest countries are unable to create viable domestic industries.

Then, he says things like “Today’s useful idiots campaign for trade barriers,” and that anyone opposed to trade liberalization must be a “confused Christian, infiltrating Marxist, or [cynical] corporate marketing executive.” Apparently, in Collier’s world, there are no sentient economists (or activists, or NGOs, or policymakers) that believe infant-industry protection is a reasonable policy tool. Except perhaps when he advocates for it himself?

Flying Whale

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