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Free trade, inequality and power
- Colin D Butler, Free trade, inequality and power (8 January 2002)
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Re: Free trade, inequality and power
- Matthias Schuppe (11 January 2002)
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For poor people in poor region Globalisation is a desease
- Manoj K. Tiwary (12 July 2002)
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Colin D Butler, PhD student National Centre for Epidemiology & Population Health, Australian National University, Canberra 0200, Free trade, inequality and power
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Rao (1) argues that trade between unequal partners is better for everyone than no trade at all, since it is not a zero sum game. This argument dates from the 19th century British economist, David Ricardo. However, while specialisation and free trade will lead to increased total production, the benefits between unequal partners, as Rao implicitly admits, are rarely shared equally. Despite increased production, it is not even certain that the population of the weaker economy will benefit; an oversupply of goods produced by that and similar economies may lead to lower wages. This is because the price of such goods is not set by benign agreement, but by supply and demand. As well, the doctrine of comparative advantage being of mutual benefit holds only for a static position. (2) Uganda may have a comparative disadvantage in software design, but if it produces only coffee then its software industry can never develop. Furthermore, over- specialisation in coffee will always leave it vulnerable to shifts in fashion and bad weather, as well as over-supply. While an oversupply of goods produced by the stronger economy is also possible that economy’s strengths generally cushion it better from adversity. These cushions include the flow of interest from poor to wealthy populations, the leverage afforded to creditor populations over the economic and social policies of indebted populations, and the selective and self-serving use of tariffs and subsidies by more powerful economies. For these reasons relative inequality remains very important. Feacham admits that there are many failings with recent and current global economic policy, but laments the naďveté of the health community for going further than he will in its criticism. He claims that the health community uses no, or only circular, citations to support their critique. But Feacham again claims that globalisation has reduced poverty and inequity. (3) In absolute terms, the number of calorie-deficient people in the world has declined marginally in recent decades, but there are several plausible explanations: “globalisation” is only one. In any case this is hardly a record to boast of. In terms of hard, tradeable currency, such as US dollars, the evidence that global inequality has become more extreme in recent decades is unequivocal. No authority disputes this, though some obfuscate by referring instead to the slippery concept of income adjusted for “purchasing power parity”. (4-5) In fact, the global Gini co-efficient (using foreign exchange-adjusted currency) increased from an already high value of 71% in 1964 to peak at 80% in 1995, before falling, very slightly, to 79% in 1999. (5) In comparison Brazil, a country normally considered to be extremely unfair, has a Gini coefficient of little more than 60%. It is the widening of the gap between rich and poor that so many of the medical profession find unsettling, and so many activists find outrageous. The “mainstream” view on globalisation and development that Feacham identifies, (3) profits from and supports this inequality; power allows it to become mainstream. To paraphrase Virchow, those concerned with health have to find the courage to continue to challenge power. 1. Rao JN Globalisation should be supported BMJ 2002 324: 44 (5 January) [Full Text]. 2. Mehmet O. 1999. Westernizing the Third World: the Eurocentricity of economic development theories. Routledge, London, New York, NY, USA. 3. Feachem RGA Globalisation and health (author’s reply) BMJ 2002 324: 44 (5 January ) [Full Text]. 4. Melchior A, Telle K, and Wiig H. 2000. Globalisation and inequality. World income distribution and living standards, 1960-1998, Rep. No. 6B. Royal Norwegian Ministry of Foreign Affairs; Norwegian Institute of International Affairs (NUPI), Oslo [Full Text]. http://odin.dep.no/ud 5. Butler CD Inequality, global change and the sustainability of civilisation. Glob Chge Humn Hlth 2000 1, 156-172 [Full Text]. http://www.baltzer.nl/kaphtml.htm/GLOB1 |
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Matthias Schuppe, Research Officer European Health Forum Gastein, 5630 Bad Hofgastein, Austria
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Looking at the arguments of many proponents of a critical position on globalisation I am sometimes amazed by the lack of consideration for even the most basic principles of (international) economics. Most of us seem to accept the free exchange of goods and services (free markets and division of labour) as standard operating procedure for our national economies and also within the EU as the most efficient allocation mechanism for scarce resources. Why does a trade regime become unfair if it tries to promote these very same principles internationally? If it is better to set the prices for goods by benign agreement rather than by supply and demand (Colin Butler) why don’t we introduce this principle into our national economic policies? David Ricardo’s theory of comparative advantage describes a static position and does not guarantee an even / fair distribution of the gains from trade (strategic trade policies could take into account shifting comparative advantage, but let’s put this aside for the moment). But why should developing countries not reap the benefits of trade even if these benefits are unevenly distributed? What is really the alternative for Uganda. Will it be able to develop a flourishing IT- industry by closing it’s border’s to imports of Microsoft products? India did not develop it’s IT-industry through protectionism, but through investing into education. “Trade and industry are the sectors where wealth is produced” (David Legge) but it will be the political sphere which will determine how this wealth shall be distributed. Nobody disputes that there will be winners and losers. Inequalities are on the rise and this should be a source of concern (but leaving aside sub-Saharan Africa most Developing Countries are still better off in absolute terms than 10, 20 years ago). But if mainstream economists including critics like Rudi Dornbusch agree that on balance Globalisation will be beneficial why do some of us want to hold up or revert Globalisation instead of trying to reap the benefits and to use these benefits to the advantage of those who have not benefited from these gains. However economic and trade policy are a rather unfit instrument for distributional policies as these are highly susceptible to special interest influence and rent seeking to the detriment of all of us. It would make much more sense to address disadvantages and inequalities through other measures such as international development policy, environmental policy and health policy. |
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Manoj K. Tiwary, Consultant, Arogyam Centre for Heath and Development, Patna, Bihar, India-800 014
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Like any other process, globalisation also affects different strata of people differently. Feachem's article candidly admits this proposition. However, the moot issue which needs to be elaborated empirically is how and to what extent the forces of globalisation affect a range of people. While working in one of the most backward regions of the world, i.e., north region of the state of Bihar in India, I have witnessed the health services currently being provided to the majority of people, are entrapped by old exloitative forces and unwittingly, the forces of globalisation are helping the cause. Let me elaborate it. In India, following independence, a large network of Primary Health Centres (PHCs) was put in place which, in congruence with the notion of welfare state, was intended to cater to the health demands of rural and/or poor people. It showed promises beyond even few euphoric years but like other sectors, health department also suffered from a work ethics devoid of accountability and effeciency. By 1980s public health services were in complete disarray and governemnt was coming under acute pressure to revive it or undertake health policy reforms. At this critical juncture the notion of globalisation with its cherished idea of letting market forces work unhindered, provided much needed reprieve to the dwindling and ineffecient health department of the state. As a result, the government readily complied with the idea and private health sector encouraged by the winds of globalisation became active. At present the health service arena of rural Bihar is infested with private doctors, quacks and all other paramedics who are cheerfully filling the vaccum created by a retreating state. And the sole looser in this saga is poor people who continue to languish without any immediate prospect of improvemnet. Mushrooming of private clinics, medical stores and other health related paraphernelia is largely attributed to the local wealthy people who seized the opportunity to exploit underprivileged class. Hence globalisation has enveloped that region and many similar underdeveloped regions with full force and by all accounts a qualitatively compromised and deteriorated health service is the outcome. Without any choice, sick people are infected with this hitherto unknown disease, that is, globalisation and sadly its dignosis is not described in any medical book. |
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