(Crossposted from connexions)
A conversation has sprung up as a result of this post which has to do with the morality (or otherwise) of the “market”. My position is that while completely free markets may be fine in theory, in practice they are subject to sin in the same way as the rest of creation and as such they need to operate with constraints which, amongst other things, will protect the weak from the strong. So, I’d argue, it should be permissible for a developing country to use mechanisms such as import tariffs and price controls to protect their own producers in way that should be denied to a strong economy such as the EU or USA. Similarly, I support the fair trade movement, which argues that it is right that producers should be paid a just price for their products even (especially) when the “market” price is low.
John, of Locusts and Honey has argued coherently against me. His position, if I’ve understood him correctly, is that the price fixed by the market is the moral one:
I would argue that the market price is the moral price for goods and services because they represent what people are willing, of their own volition, to pay for said goods and services. Price controls, subsidies, and the like represent what people are paying for through the use of government force — which I am taking to be an immoral action
For John (and I hope I’m not misrepresenting him) the nub of the argument is to do with the question of private property, namely: who has the right to direct what I shall do with my stuff. The answer: no one
Your ‘help’ — i.e. your money — is your property. It is your exclusive right to set the terms under which your property is tranfered to me.
I’m a long way from convinced that this argued can be sustained either from scripture or from the Wesleyan inheritance that John and I hold in common. Wesley argued that individual wealth was not given for the individual alone, but was “food for the hungry, drink for the thirsty, raiment for the naked”, not as a matter of individual choice, but of duty. (There’s a lot more to be said about Wesley, but here probably isn’t the place. But here are some selected quotes from my blog archives, originally posted almost exactly 2 years ago, which give some more insight into Wesley’s mind on this matter.)
Do the scriptures give an absolute right to property? I’d argue that they don’t. One obvious place to begin is in the Levitical code which, amongst other things, regulates land and property. The land is not “owned” by the people, but rather held in stewardship — the owner is God. This finds practical expression in the laws concerning gleaning, the sabbatical year, and especially the year of Jubilee: “the land shall not be sold in perpetuity, for the land is mine”. Similarly, Deuteronomy’s law on pledges (chapter 24) places restrictions on the conditions which the wealthy can impose upon the poor. In God’s economy, protection of the poor is given a higher priority than an absolute right to property.
In the parables of Jesus, we see these priorities mirrored. In the Rich man & Lazarus, the rich man is apparently judged because he did not care for the poor man at his gate. It is not that he was evil, merely that he did not recognize the responsibilities that his wealth gave him. Jesus portrays God as a landowner who pays his workers according to their need rather than the market value of their labour. Storing up “treasure on earth” is contrasted with storing riches in heaven, and the enemy who takes your coat is also to be given your cloak. Again, the priority is not “individual freedom” or “private property” but justice (or righteousness, it’s the same thing).
Ultimately, what I’m arguing is that the only appropriate way to judge the morality of any economic system is not according to some theoretical notion of “freedom”, or anything else, but rather by what actually happens to the least and lowest under that system. It is the fate of the poor which is the standard by which the market economy will be judged and whether one looks to Niger or New Orleans, it is palpably obvious that in this regard the market economy is a failure.
Published 2 years, 11 months ago
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ISTM that the market can only set a moral price if the market is and of itself morally based. I submit that it is not, and therefore is not coapable of setting a moral price. NOt that governments are automatically able to do so either but the market sets what people are willing to pay, with no concern for morality or if all who need can afford to pay. The market has a terribly skewed sense of priority–profits over people for example.
Check out my recent resopnse on connexions.
***Similarly, I support the fair trade movement, which argues that it is right that producers should be paid a just price for their products even (especially) when the “market” price is low.***
If morality is our primary concern, then such a principle should be avoided at all cost. (bad pun intended)
In a free market, both the buyer and the seller determine the price of a product. The seller factors in all of the cost to make the product (labor, materials, etc.) and adds to this a per-item profit. The buyer determines how much of the product they are willing to buy relative to other products (known as “opportunity cost”).
Now imagine that two farmers grow fruit, one has apples and the other has oranges. The apple farmer (Farmer A) is hard-working and productive but the orange farmer (Farmer O) is an agricultural genius. Even though he has a product that is harder to grow, he is able to use his skills to squeeze out more fruit than other farmers in his area. Because of this skill, he can produce his crops cheaper than his neighbors.
Let’s say that you are a buyer and for a dollar can get either two apples from Farmer A or three oranges from Farmer O. Let’s also say that you like apples and oranges equally well. Which would you buy more of? Most people will buy more oranges which means that Farmer O will sell more than Farmer A.
According to your “fair trade” idea, though, Farmer A deserves to get paid a price that is higher than the “market” value. Let’s say that the government agrees with you and decides to subsidize Farmer A by paying him an extra 50 cents so that he will be able to compete with Farmer B. Who will now be better off? No one. Here’s why:
Farmer B: The price of apples and oranges are now equal so Farmer B’s productivity advantage is useless. Since oranges are harder to grow he is better off just planting apples and will switch to that crop since the government provides money for doing nothing.
Farmer A: Farmer A used to sell his apples for the market price but now that the government has subsidized the crop, other people (such as Farmer B) have an incentive to grow apples too. Now he will make more per apple but will sell fewer apples because of the increase in the apple supply. He will likely lose more money than before the government intervened.
The Buyer: The buyer used to be able to have a choice of apples and oranges but now no one can afford to grow oranges so he has fewer choices.
Also, where did the government get the money to pay apple farmers? They took money from other people (Farmer B, buyer, etc.) in order to make them pay a higher price than they think the product was worth. How is this fair to them? Subsidies may help the farmers in the short run (in the long run it tends to put them out of business) but it eventually hurts everyone.
What you are talking about has been tried for hundreds of years (mostly notably in the Soviet Union). Look at the countries that practice the policies you are talking about and you’ll see that they are almost always poor. It is an inevitable result of forcing people to pay more for a product than they think it is worth.
The problem is not free markets make people poor but that poor people often don’t have access to free markets.
Absolutely Joe Carter. As a Christian student of Economics and Finance (BS in Finance with a minor in Economics and an MBA in Finance) I couldn’t have said it better than you. Kudos, Joe.
Joe - your example is very clear. But in the real world, a farmer cannot simply switch from apples to oranges at whim. Farmers in developing economies may have very little choice over the crops they grow. If they have been pushed into growing, for example, coffee and then the coffee price is pushed down by the multinationals that control the market how can that be called “free”? That’s one of my issues with free marketeers: it sounds great in theory, but in practice you’re saying (almost as a mantra) “government bad - corporation good”. And it is nonsense.
And you misrepresent the fair trade movement by introducing government subsidy. I never mentioned that. In fair trade, the consumer is given the choice by being able to identify in the grocery store which products are guaranteed to have paid a fair price to their primary producer. I choose to pay a little more for my coffee, for example, because the extra will enable the farmer to send his children to school. That has nothing to do with government subsidy. It’s consumer power.
I had a smile in my local supermarket when I noticed a certain British food company was carrying the fair trade logo on its sugar. I remembered how, about 20 yrs ago when I was in the food trade, a representative of that very company held forth at great length in my office about what nonsense this fair trade malarkey was, and how it would ruin economies. His arguments reminded me alot of yours. But now the market for fairly traded goods is growing apace. And his company has the logo.
I call that progress.
I didn’t see much evidence of the fair trade movement on my visits to WalMart when I was last there. But if it hasn’t arrived yet, I’ll wager you it will be there soon.
Who determines what is fair? Who says multinationals control food prices? I could say the same thing only opposite ywith your mantra that it is good in theory but in practice you are saying corporation bad- government good and that too is nonsense. The fact remains that price controls are incredibly inefficient. Basic economics states that. Lower prices for those who buy goods are good for all people on the planet. It seems your concept is promoting inflation which dramtically hurts all people around the world.
While I would use apples and oranges in that one is a northern crop and the other is a tropical crop in Joes example? (just having fun) I thought the example was a perfect one. I guess Richard got sidetracked by the geographic problems of the two types of fruit mentioned.
Okay replace apples and oranges with coffee and cocoa (both are easily able to be changed from one to the other and require the same type of climate). Do you feel better? (Just having fun) Your great, 