Reparations to be paid to the Third World

CCCP^

I have lately been thinking about the dire position of countries in the Third World, specifically Africa. Since most of the nations there gained independence in the 1950s and 60s, it could be said argued that most of the nations have not progressed well, and infact are in retrograde. They face myriad problems which seem insurmountable - poverty, tyranny, war, famine. These problems are Africa's problems, but they are not necessarily their creation. Europeans, Russians and Americans have a responsibility to help developing nations.

After all, it was colonialism that messed up Africa so bad. And the Cold War proxy wars didn't help either. Europe grew rich on the extensive wealth being robbed from Africa, not to mention the ridicolous interest that had to be paid back on loans.

I think that an international fund, under the auspices of the United Nations and Amnesty International, should be created.

The fund would provide money for the development of infrastructure and industry. Africa has a huge amount of natural resources, and they should be exploited - exploited for the benefit of Africans (but that would probably scare the EU and US though, they live in mortal fear of South America or Africa ever coming together because they would rival them economically, no more robbing blind).

The sale of armaments to states experiencing civil war by other nations should cease outright. This will probably never happen, but it should happen. Africa was the cradle of humanity, and it's a mortal shame to see what has become of it. Does anyone else think this is a practical idea?

Munya

No, I don't think reparations should be paid and why did you use Europeans like a nationality?

Fratton Fred

Munya wrote: »

No, I don't think reparations should be paid and why did you use Europeans like a nationality?

Pretty much every country in europe has had a hand in the exploitation of Africa, so it is a fairly reasonable catch all i'd say.

The Arabs states did their fair share of exploiting as well, african slavery goes back to biblical times.

Reparations is dodgy territory and I don't think it can or should be paid. i do however think that the developed countries need to far more responsible than they are now, especially the EU nations.

mikemac

Algerian pirates were involved in sacking Baltimore and taking slaves.
If reparations are due to Africa, then Algeria needs to be reminded of this incident

http://www.divainternational.ch/spip.php?article249

brianthebard

Munya wrote: »

No, I don't think reparations should be paid and why did you use Europeans like a nationality?

Can you expand on why they shouldn't be paid? I think at the very least African debts should be cancelled, and any future "loans" by the World bank should be in Africa's favour, not the countries loaning the money.

Munya

brianthebard wrote: »

Can you expand on why they shouldn't be paid? I think at the very least African debts should be cancelled, and any future "loans" by the World bank should be in Africa's favour, not the countries loaning the money.

That's how you see it should be done?

Munya

Fratton Fred wrote: »

Pretty much every country in europe has had a hand in the exploitation of Africa, so it is a fairly reasonable catch all i'd say.

Then he didn't need to say Russians imo.

Bubs101

I can't see why I would want more competitors on a global scale if I were one of the European countries. A weaker Africa helps Europe in the long term. Cheaper food etc. and to be honest, I'd rather a better standard of living myself than have to pay higher food prices or reperations through tax for Africans

brianthebard

Munya wrote: »

That's how you see it should be done?

Yes why is this surprising? You still haven't said why reparations shouldn't be paid.

CCCP^

Munya wrote: »

Then he didn't need to say Russians imo.

The Russians and Americans turned Africa into their little playground during the Cold War. If you recall Ethiopia and Somalia, at one point were allied to Washington and Moscow, and following a coup and change of events switched the other way around. It would have been laughable if this were a comedy, but it wasn't, these countries and their people were just pawns.

Bubs101 wrote: »

I can't see why I would want more competitors on a global scale if I were one of the European countries. A weaker Africa helps Europe in the long term. Cheaper food etc. and to be honest, I'd rather a better standard of living myself than have to pay higher food prices or reperations through tax for Africans

I think your wrong on this. The World we live in needn't be based on the principle that in order for someone to be well off somebody has to go without. True, that's what often happens with our Capitalist system, but Africa probably contains more natural resources than Europe ever did, and if it's lands were managed efficiently, could support enough food for billions of people.

As it is, the Sahara is rapidly spreading and what land there is can't sustain the current population. Are more competitors not good for business? I was always told this in school, but obviously only 'certain' competitors are allowed.

In 100 years, people might very well look back upon what happened to Africa and see it as a holocaust 1,000 times worse than what happened to the Jews or the Armenians. It's worse because of our indifference.

bartholomewbinn

African leaders are doing nothing to rid Zimbabwe of the Illegal murderous tyrant who has reduced a once prosperous country to penury. Until the said African leaders do their duty I suggest we in Europe just stand back and allow them to come to their senses before we throw good money after bad.

CCCP^

bartholomewbinn wrote: »

African leaders are doing nothing to rid Zimbabwe of the Illegal murderous tyrant who has reduced a once prosperous country to penury. Until the said African leaders do their duty I suggest we in Europe just stand back and allow them to come to their senses before we throw good money after bad.

They won't get rid of Mugabe until sufficient pressure is put on Mbeki, President of South Africa, because South Africa is Zimbabwe's chief (and probably sole) trading partner. The sanctions against Zimbabwe won't do diddly. They just make the poor even poorer.

Bottle_of_Smoke

I just don't trust Africa to not f*ck it up. All I can see is any reparations being squandered on arms. I think Ghaddafi brought this point up colonial reparations a while back actually

Overheal

See if we paid them everything back to day and lifted the protectionist taxes all that money would just end up in the hands of the wrong people (if you need an example check out Iraq and Saddam's history) and for exports - well, look what happened with conflict diamonds? Whats to say they dont do the same thing if they were to discover exporting food and clothing was also profitable? Africa is a big mess.

Kama

(Stolen) Thought Experiment:

Think of the expropropriation of gold from the New World, not as a vicious brutal theft, but as a 'friendly loan' from the Americas to Europe, a Marshall Plan for Western capitalism.
Charge a modicum of interest per annum.
See who owes who what.

It's planets worth of gold bullion

Booty capitalism can be considered as the foundation of the Western 'economic miracle'.


And Bubs, thanks for your honesty. I think thats a fair statement of a lot of people unvoiced opinion, and one I'm opposed to. I honestly think that that form of 'realist' policy is a key contributor to how some developing countries have been 'kept back', their resources exploited in a neocolonial arrangement. Reparations are not to my mind the key issue; the legitimacy of their debt is.

jhegarty

Fratton Fred wrote: »

Pretty much every country in europe has had a hand in the exploitation of Africa, so it is a fairly reasonable catch all i'd say.

And how much exploitation of Africa did Ireland do ?

and I can't remember any of the newer EU members in eastern Europe having many African colonies....

cabinteelytom

This is an excellant idea, though 'reparations' is an unneccessarily controversial term. A Marshall Plan for Africa- is a spot on idea.

Bubs101

jhegarty wrote: »

And how much exploitation of Africa did Ireland do ?

There was no Ireland but as part of the U.K. we "raped" the African countries but such a simple outlook forgets that the U.K. actually left really decent infrastructure and systems in place that helped them get an edge on their neighbors who were colonised by the likes of the French who were left up **** creek paddleless.

The natural resources plan that CCCP suggested is really flawed in that since those countries are so poor, if a certain country or trading block wanted their natural resources or land they could use DFI through a state owned company and use a different state owned company to export it to Europe. That way it will probably make profit in the long run, all money spent on transport and the such will go back into the economy and the host country will benefit by getting some desperately needed jobs.

When making this "poor Africa" argument, people always forget that around the 70's and 60's, Africa was expected to make massive strides. Alot of the coutries had found oil and the poorer ones were starting to get richer. They were taking control of their own land etc. but THEY SQUANDERED IT. Asia surpassed them in 10 years from nothing through good management. History has shown that the only way Africa can be run anyway succesfully is by Europeans and their decendants, ala South Africa pre Mandela and the colonies

CCCP^

jhegarty wrote: »

And how much exploitation of Africa did Ireland do ?

and I can't remember any of the newer EU members in eastern Europe having many African colonies....

I'd imagine the 'natives' weren't too overcome with joy when Catholic missionaries from Ireland arrived en masse and told them their beliefs and traditions were a load of voodoo.

Kama, here's another thought experiment for you. If Africa had colonized Europe, and the question of reparations was brought up, do you think people might consider it?

The Americans gave Europe Marshall Aid, despite the fact that it was their fault that WW2 happened in the first place. Why should they have been given money for wrecking their own continent?

Bubs101

CCCP^ wrote: »

The Americans gave Europe Marshall Aid, despite the fact that it was their fault that WW2 happened in the first place. Why should they have been given money for wrecking their own continent?

That was all so America could make more money and friends. After WW2 they had no trading partners. In 10 years they did and they were even richer. From what I understand alot of the money had to be spent on American goods which created jobs in America

CCCP^

Bubs101 wrote: »

That was all so America could make more money and friends. After WW2 they had no trading partners. In 10 years they did and they were even richer. From what I understand alot of the money had to be spent on American goods which created jobs in America

It's pretty obvious giving the track record of American foreign policy for the last 70 years that the US Gov't doesn't want friends, it wants subjugated allies. Why not have taken the oppurtunity while Europe was weakened to cement their position and take it over? After all, that's what they've been trying to do ever since - take stuff over.

Bubs101

CCCP^ wrote: »

It's pretty obvious giving the track record of American foreign policy for the last 70 years that the US Gov't doesn't want friends, it wants subjugated allies. Why not have taken the oppurtunity while Europe was weakened to cement their position and take it over? After all, that's what they've been trying to do ever since - take stuff over.

No, what they have been trying to do is consolidate their power and their position at the top of the political food chain, like any sound Superpower would do. Pray tell what exactly have they taken over?

Fratton Fred

Money is not the answer though. If America were to give Zimbabwe a chunk of cash right now, what do you think would happen to it? would it get given out to the people who need it or would Mugabe buy himself a new rolls royce and increase the size of the army?

Policies need to be changed, such as the Common Agricultural policy. don't give these guys charity, give them a leg up and the chance to compete on a global footing.

the simplest way we can start right now is by buying fairtrade products that ensure third world farmers get a decent rate for their products.

DadaKopf

Bubs101 wrote:

Asia surpassed them in 10 years from nothing through good management.

Not quite true. In books like Ha Joon Chang's Kicking Away the Ladder, it's clear that the East Asian tiger countries were riddled with cronyism and corruption, something African people are constantly accused of. One of the major elements in East Asia's success was that, under a then powerful Japan (the 'Yellow Peril' of the 1970s), countries like South Korea and Taiwan could simply ignore the IMF's and World Bank's advice while they embarked on state-led development programmes. It was when the IMF forced its hand in the 1990s that their economies collapsed.

It's simply wrong to compare the historical cultures of one geographical region to another, but in the sense that both East Asia and Africa are, in different ways, hotwired into the global capitalist system, it's OK to make some comparisons.

In African countries, they were forced to accept the strict conditions of IMF structural adjustment policies very early on and, like Latin American countries, their governments had no one protecting them from the destruction like the East Asian Tigers did.

I'm not absolving blame on part of certain governments, or ignoring other aspects such as geographical terrain, or the impact of the 'resource curse', and the legacy of colonialism, but this international aspect has had a hugely powerful effect on the state of sub-Saharan Africa today.

the simplest way we can start right now is by buying fairtrade products that ensure third world farmers get a decent rate for their products.

I'd like to see studies about how effective that really is. I'm generally skeptical about development approaches that call on people to consume more, differently. I don't know that being 'consumers' rather than 'citizens' or whatever is a good idea; it depoliticises people and disrupts organisation among people to change the deep structures of injustice embedded in our capitalist system.

meditraitor

Most african countries have had 50-100years to fix their problems. The majority of them are far richer in resource terms than Europe but they still fucked it up.

Stop spoon feeding them and they might grow up.

DadaKopf

There's an argument that constant interventions by the West via 'development aid' have interrupted the 'learning processes' that all rich developed countries went through. Those processes took hundreds of years - for example, the emergence of popular democracy which involved enormous death and destruction. Don't forget Europe twice destroyed itself in war within the last 50-100 years.

As for Ireland, we haven't even fully emerged from the bog.

SkepticOne

CCCP^ wrote: »

True, that's what often happens with our Capitalist system, but Africa probably contains more natural resources than Europe ever did, and if it's lands were managed efficiently, could support enough food for billions of people.

Ironically this wealth of natural resources causes problems as it undermines the social contract. This is why "reparations" or aid paid to governments also won't work.

brianthebard

Bubs101 wrote: »

No, what they have been trying to do is consolidate their power and their position at the top of the political food chain, like any sound Superpower would do. Pray tell what exactly have they taken over?

well they have a very obvious interventionist policy on south and latin america for one,thats fairly clear.And as already pointed out many nations in africa,along with korea,vietnam,parts of south america and more were all used as killing fields in the cold war.Just to be clear do you endorse the USA's superpower status and manifest destiny ideology?

Bubs101

brianthebard wrote: »

well they have a very obvious interventionist policy on south and latin america for one,thats fairly clear

I'm not denying that they have an interventionalist policy, only a madman would do that, but there are really very few cases of them trying to take over anything. They have no problem interfering if they think it will benefit them but there's a big difference between that and "taking over"

brianthebard wrote: »

.And as already pointed out many nations in africa,along with korea,vietnam,parts of south america and more were all used as killing fields in the cold war.

But alot of those "killing fields" started because two domestic, ideologically opposed parties asked for help. It was in their interest to help parties who opposed communist sects and vice versa for the U.S.S.R. but it was rare enough that the U.S. initiated the wars. They normally just came in and helped their side and as a result elevated the conflict

brianthebard wrote: »

Just to be clear do you endorse the USA's superpower status and manifest destiny ideology?

I'm not sure what you mean here by"manifest destiny" but I don't support the U.S. in general. I do however think that they should get certain privileges in global politics because of their power

DadaKopf

Manifest Destiny was an official presidential policy in the 19th century (or early 20th) which declared America's God-given right to dominate the Americas as Britain and Germany were doing (and latterly the world via the 'full spectrum dominance' policy). The Manifest Destiny was the political-ideological force behind the wars fought by the US to eject Spain and other empires from its sphere of influence and to gradually expand its power southwards and westwards.

The Manifest Destiny is still frequently cited and daily referenced indirectly. It is the animus of America's imperialist politics.

Kama

On the reparations/debt forgiveness approach, I read a very iteresting article once, which took as its pemise a reaccounting of Sub-Saharan African debt. Since people seem to be in agreement that corrupt elites were part of the problem, I think its an interesting approach.

The assumptions were that money loaned to a country, that was not invested in that country in any way, squirrelled away in the Caymans or what have you, should not be counted as the sovereign debt. Any money that could be shown to be, was.

On this basis, with a variety of assumptions, the debt was long ago paid off, and the subsequent payments can be viewed as a loan to the West.

I think its a more feasible approach than reparations, politically and economically; attempting to come to an accounting of what we owe is highly subjective, while producing figures on levels of graft in relation to actual aid is A: far easier and B: fairer. Should citizens be held accountable for the sins of past elites, especially given the likelihood of our collusion with these elites for various reasons?

Or, for brevity...
Compound Interest + Inherited Debt = the Financialization of Slavery?


Would anyone object to such a scheme, and if so, why?

Overheal

Why is this suddenly about America's foreign policy and not the First World's foreign policy?

DadaKopf wrote:

The Manifest Destiny is still frequently cited and daily referenced indirectly. It is the animus of America's imperialist politics.

Which no longer reflects the will of the people.

Kama wrote: »

Or, for brevity...
Compound Interest + Inherited Debt = the Financialization of Slavery?


Would anyone object to such a scheme, and if so, why?

Its not slavery as we once knew it then. Financial Slavery: sure. We aren't having them pick cotton fields or anything, but by placing mass amounts of unpayable debt on them (shackles) the only way they can seemingly pay back is to export cheap materials, which get taxed the hell out of. in that way we profit more from the taxes on the goods than we do the goods themselves. Might this be the reason behind the EU's spoiled food stockpiles?

Would I object to such a scheme? Its already happened.

DadaKopf

Why is this suddenly about America's foreign policy and not the First World's foreign policy? [...] Which no longer reflects the will of the people.

Someone asked, I answered.

Kama: I think it's an interesting idea. However, I'm not so sure about it. First of all, the idea that many/most of these debts are illegitimate is gaining legal weight. 'Odious debt' can be described as follows:

“If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, this debt is odious for the population of all the State. This debt is not an obligation for the nation.”

It seems unfair that the people who ousted despotic dictators and corrupt regimes should be expected to pay the debts they incurred, and siphoned off into foreign bank accounts. These debts should be written off, and public money also siphoned off through corruption should be repatriated. Some ill-gotten gains have been repatriated - on condition that the money be spent on development works benefiting the poorest in those countries. [Remember, too, that the West has facilitated (and paid) these corrupt transfers.)

Now, the conditions attached to these loans are also to blame for the state of African countries (and developing countries across the world). So it can also be argued that the loans given by rich countries to poor countries have contributed to their further impoverishment. This returns us to the issue of cancelling all debt, quite apart from any issue of reparations.

If there were to be reparations, I would say it would have to be political rather than financial.

Fratton Fred

DadaKopf wrote: »

If there were to be reparations, I would say it would have to be political rather than financial.

Yep. Financial reperations just wont work.

Reperations for what? who pays what to whom and for what.

For legal financial reperations to happen I am guessing there needs to be a demonstration of loss and what is the loss to an individual? is their life better or worse for european intervention? it would be impossible to say surely.

fly_agaric

Overheal wrote: »

Might this be the reason behind the EU's spoiled food stockpiles?

The food mountains are gone.
The farmers' EU subsidies used to be linked to how much milk, meat etc they produced (not sure, maybe the policy was a holdover to food shortages in the years after Europe was devestated by WW2).

As a result they produced far too much of some things...I don't think it had much to do with enslaving Africa or odious debt?
I think the subsidy is based on the size of their farm or something now so no more waste production.

Zambia

Reparations are not a good idea unfortunatly there is a massive skills shortage in africa which it will not address. In short every country in africa does not have the skills in enough numbers to run itself correctly.

Here is a classic example
http://news.bbc.co.uk/1/hi/business/1672792.stm

However african countries would rather deal in a global market without addressing the issue. Hence permanently crippling themselves with bad deals and inadequate leadership any company that ran itself the same way would go to the wall.

To address the issue would mean bringing in a load of white(non black) people in goverment which lets face it is not going to happen.

Gaining independance means just that you are out in the world on your own you have to think and act for yourself and take the consequences. In fact I would find the idea of reparations insulting for that very reason at this stage. If reparations are due they where due at the time of independance.

Its like saying Im an idiot but its all your fault for concieving me dad when you where a horny naive teenager so pay my bills.

jmayo

Reparations, yeah sure why not :rolleyes:
Lets give the dictators even more money to invest with those nice friendly Swiss bankers.

Some people seem to believe that the colonial powers left the countries destitude and asset stripped everything on the way out.
Yes the colonial powers left a continent that has some country's borders based on geographical features rather than tribal boundaries, but does that mean that one tribe or race should machette their neighbours ?

Examples of countries that were left in good fettle that have since gone down hill.
Ghana was better off, financially and educationally, than South Korea in the mid fifiies. Compare the two today.
Look at Zimbabwe in 1980 and look at it today and they can't blame the Brits for that.

Someone suggested a Marshall Plan for Africa.
Again most of the money will be siphoned off by the corrupt despotic regimes that run a hell of a lot of the countries.

Of course I will quiet openly admit that the US and the Soviets used Africa as a playground where they fought proxy wars throughout the cold war.
They flooded the continent with arms. Today it is the Chinese that are screwing the continent.

But the Africans themselves have to shoulder a fair chunk of the blame along the way.
Africa and Africans need to start sorting out some of their own problems and need to start to learn to stand on their own feet and stop always using the whiteman as an excuse.
They had a chance to start that process in Sharem el Sheik and they blew it.

Kama

jmayo wrote:

Yes the colonial powers left a continent that has some country's borders based on geographical features rather than tribal boundaries, but does that mean that one tribe or race should machette their neighbours ?

Hehe yes, African physical geography is full of peculiarly straight rivers, and no one in this country ever died over an arbitrary tribalist boundary imposed by a former imperialist state

But the difference between South Korea and Ghana is an interesting one. I'm currently reading Bad Samaritans by Ha-Joon Chang, who does into detail on just this, noting Koreas strong protectionist trade barrriers, infant industry promotion, and strict capital controls as central to Korea's success during this period, contra to the conventional free trade mythos.

Dadakopf wrote:

I think it's an interesting idea. However, I'm not so sure about it.

I thought so too, I'm wondering what you would see as the drawbacks?

Political reparations are highly subjective, and impossible to quantify. Debt recalculation is practicable, neutral with regard to blame, and very difficult to argue against. I view it as a better approach than how debt forgiveness usually has rolled, not just as a transfer payment, but because it puts into question the legitimacy of the debt in the first place, which is a significant political move toward a more just global order.

jmayo

Kama wrote: »

Hehe yes, African physical geography is full of peculiarly straight rivers, and no one in this country ever died over an arbitrary tribalist boundary imposed by a former imperialist state

Ok a line of latitude or longitude is probably more a geographical descriptor than a geographical feature ?

Kama wrote: »

But the difference between South Korea and Ghana is an interesting one. I'm currently reading Bad Samaritans by Ha-Joon Chang, who does into detail on just this, noting Koreas strong protectionist trade barrriers, infant industry promotion, and strict capital controls as central to Korea's success during this period, contra to the conventional free trade mythos.

The reason I raised Ghana as example was I recently came across comparison between the two in mid 1950s.
When Ghana got independence it was in better shape than South Korea which was a basket case after the Korean war.
Of course the Koreans probably got US and Japanese aid to progress, but Ghana just went backwards.

In no way would I ever say that the good old free trade open borders and WTO is what poor nations need.
I believe it is a myth propogated to get people on side or feel guilty in developed countries.
All it really does is allow Western companies to take over resources (water/power, etc) in poorer countries and then screw the locals for all they can get.
It allows easy movement of capital and access to cheap labour.
We are constantly being told EU farmers should allow cheaper agricultural imports into Europe to help the poor subsitence farmers in Africa or South America etc.
Funny all I see in our major supermarkets are onions or apples from NZ and strawberries or pears from South Africa.

As has probably being said how would reparations be calculated?
Would governments have to pay out, would companies have to pay out, or in the case of Congo/Zaire would the Belgian royal family have to cough up ?

Sadly until African leaders and Africans themselves start sorting out the despotic little dictators and so called democrats that rule the continent then it does matter how much money the developed world pumps in.

Kama

jmayo wrote:

The reason I raised Ghana as example was I recently came across comparison between the two in mid 1950s.

Yep, its the divergence between development in Africa and Asia 1950-80 and 1980-now which is the issue. Ghana and Korea seem good examples of this general trend, whether we look at them as strictly country-based or regional examples. Huntingdon in Clash of Civilizations thought that the difference was primarily of cultural origins, hard-working Asians versus lazy Africans: Personality > Policy. Chang in Bad Samaritans thinks the difference is more to do with institutions and policy.

When Ghana got independence it was in better shape than South Korea which was a basket case after the Korean war.

Yup, South Korea circa 1960 had an economy based on exporting human hair for wigs and raw fish; hardly a promising beginning for a now-rich country. Average yearly income was $82, less than half the Ghanaian $179

Of course the Koreans probably got US and Japanese aid to progress, but Ghana just went backwards.

Chang tells the story a little differently. President Park, a national dictator, raised per capita income from $82 to over $1000 by 1977. How? The country was effectively mobilised for economic development, for example people found smoking foreign cigarettes were reported as unpatriotic, as all foreign currency was needed for the development effort. Heavy and chemical industry was mandated and developed with strong government involvement and protection, classic Infant Industry policies. The government owned all banks, and directed credit flows as it saw fit.
Park was assassinated around 1980, by which point the country was moving into the high-tech model we know know it for.

Or, in short:

Less US and Japanese aid, more economic mobilization by a dictator?

Sand

Most third world/developing economies are export based - advocating protectionism and the restriction of free trade to help them? Might as well nuke them from orbit, just to be sure.

Its protectionism that basically hangs a big "**** You" sign on the trade walls around the US and EU, distorting market outcomes that would see African and other third world farmers getting access to the the highest consumption markets in the world, leading to investment in agriculture to allow them to meet standards set, and once theyre getting past subsistence level farming, invest in education.

Its protectionism that means that even if a third world entrepreneur comes up with a good business idea, invests in a factory, hires the best and brightest to prevent the brain drain to the EU and US hes royally ****ed over by the trade walls built around the EU and US. So instead the entreprenuers and their brightest move emigrate to the EU and US, set up there and the only thing the the developing world sees is maybe a low value manufacturing plant.

Everyone - EU, US, and the Third World - are told we need protectionism, like trade is some zero sum game where somebody loses. If I buy a paper from a newsagent, someones getting ****ed over obviously - me or the shopkeeper. We clearly cant both benefit from the trade. Can we? Someone has to set quotas, someone has to set a price otherwise the end of the world will come.

When the reality is we need more free trade so everyone can win. Special deals where market outcomes are distorted are just putting off the day when youve got to get out into the world and compete with the best. The developing world doesnt need special advantages - it already has an immense cost base advantage. The reason why the trade barriers are up against the developing world is that the fat, lazy, inefficient corporations and producers in the EU and US are terrified of the possibility of competion from the developing world.

On another point regarding the failure of the third world economies, one interesting book I read regarding the economic development was "The Mystery of Capital - Why Capitalism triumphs in the west and fails everywhere else" by Hernando De Soto. It basically put forward the reason as being property rights and laws are extremely well developed and protected in the west, but property ownership is often not legally established or recorded, let alone protected in many developing economies. Vast portions of the population are living in houses, working in jobs that are outside the legal system - invisible to the regime. So a massive lack of information - and capital needs collateral, and collateral needs information and legal record of ownership. Boom, there goes one plank of capitalism with a lot of dead assets and capital that people cannot borrow against.

Given their lack of status, theres often an understandable unwillingness to invest in these extra-legal dwellings or industries that can be literally bulldozed the next day by the powers that be. There goes another major plank of capitalism right there. And so on.

He also takes time to point out the situation isnt unique and was known in Western societies too - namely, the massive, illegal settler land grab in the American West by European migrants. Most settlers were illegals, and not recognised by the U.S. government as having any claim to the lands they lived on which often technically the U.S. had recognised as belonging to various Native American nations and tribes. The expansion west was often a much delayed legal normalisation of "facts on the ground" for most of the early 19th century.

Its an excellent book, and I have only extremely briefly covered the main argument of the book so Id really reccomend it.

Kama

Agree with much of what you said, Sand. Our protectionism is a complete F*** You, pure hypocrisy tbh.
Especially since according to our own theory, unilateral trade liberalization is its own reward.

Similarly property rights are a necessary basis for development, as I remember de Soto did a lot of his work on slums. Once the dwellers had rights to it, they improved their houses more (since they weren't as vulnerable to being evicted tomorrow), had equity to borrow against (from the recognition of their property) and so forth.

I'm not as convinced by the pure market narrative for development: that's why I offered the case study of Korea's development (ripped straight from Ha-Joon Chang).

Korea: ISI + High Tariffs = Successful Development.
Counter-example plx! It's fine to talk about markets in theory; practice is what intrigues me.

Sand wrote:

Everyone - EU, US, and the Third World - are told we need protectionism, like trade is some zero sum game where somebody loses....
When the reality is we need more free trade so everyone can win

As far as I remember it, free trade does not claim that everybody can win. Perhaps you mean a Kaldor-Hicks efficiency, where the winners can, in theory compensate the losers? Trade can, and does, have losers. In theory, they can be compensated from the larger cake.
In practice, they tend not to be: There are uncompensated losers.

Most third world/developing economies are export based - advocating protectionism and the restriction of free trade to help them?

In development policy, following Chang, I would say that yes, there is an optimal level of protectionism, and that if you want to develop higher-level value-added industries, as opposed to an raw-material export-based cash-crop economy, protectionism is near obligate. Even if it goes against comparative advantage in the short-term, the benefits in the medium term can outweigh the costs. Chang uses Nokia as an example: supported at a loss for 17 years by its lumber and mining business before it made a profit.

I'm not against trade; but I think countries should trade as they wish, on their own terms. As he points out, if the market will punish the inefficient anyway, there's no need for extensive trade legislation forbidding protectionism etc, is there?

Sand

I'm not as convinced by the pure market narrative for development: that's why I offered the case study of Korea's development (ripped straight from Ha-Joon Chang).

Korea: ISI + High Tariffs = Successful Development.
Counter-example plx! It's fine to talk about markets in theory; practice is what intrigues me.

If I remember correctly - there was a similar thread a year or more ago -, Koreas auto industry was a complete joke until protectionism was loosened and foreign investment in the Korean auto industry was allowed. Theres also the assumption governments can "pick winners" in which to bet vast amounts of public finances to support - and again, if i recall correctly the Korean government backed a whole lot of losers.

But the basic fallacy of "Well go with protectionism while everyone else goes with free trade models" comes down to everyone else saying ...."woah, woah, woah.....why the **** should we do that"? If you have some people engaging in protectionism, whilst others arent then the people who arent engaged in protectionism are losing out. Realistically, those EU/US trade walls arent going to come down out of charity alone - Peter Mandelson will need something to bring back to EU producers as a tradeoff.

The concept of protectionism for a export economy work fine until you consider persuading everyone else to allow you free access to their markets whilst youre not allowing them access to yours.

As far as I remember it, free trade does not claim that everybody can win. Perhaps you mean a Kaldor-Hicks efficiency, where the winners can, in theory compensate the losers? Trade can, and does, have losers. In theory, they can be compensated from the larger cake.
In practice, they tend not to be: There are uncompensated losers.

"Everyone" might be better expressed as "Everyone overall" - inefficient domestic producer obviously lose out if they dont have tariffs and market distortions to protect them from free trade. The choice for them is to either continue in their losing industry or invest into an industry in which they have an advantage or can otherwise compete.

I mean that whilst Wayne Rooney might be better at everything than anyone in the world, everyone is better off overall [Wayne might be slightly worse off as he has to pay someone to mow his lawn] if he concentrates on playing football and pays someone else to mow his lawn. The "developed" world has a huge advantage in terms of technology, infrastructure and branding over the developing world - everyone is better off overall if the developed world concentrates on those advantages as opposed to subsidising inefficient industries it is not good at - like the EU CAP and food production, a protectionist measure which simply distorts an otherwise natural market outcome where the EU would import its food from the developing world.

All free trade does is to remove those market distortions that practically invariably lead to consumers getting ****ed over, to appease domestic producers who fund the political campaigns of elected representitives who create those market distortions.

Under such an outcome - inefficient food manufacturers in the EU will be worse off unless they can leverage a "home grown" branding campaign to convince consumers to pay more for basically the same product, but the vast majority of people in the EU will be better off as they will be getting cheaper food and wont have to pay taxes to subsidise the inefficient manufactuers.

In development policy, following Chang, I would say that yes, there is an optimal level of protectionism, and that if you want to develop higher-level value-added industries, as opposed to an raw-material export-based cash-crop economy, protectionism is near obligate.

That assumes that higher-value added industries/technological innovation are a result of protectionism, as opposed to free societies. And a strong legal protection of patents/intellectual property of courses. I dont think China or India will ever rival the US/EU higher-value added industries because the best and brightest of China and India move to the US/EU due to the freer society and greater. Protectionism basically failed for Ireland, badly. Our economy only turned around when we experimented with free trade and economic liberalisation.

edanto

Interesting discussion between Kama & Sand, I've learnt a lot from it. Just wanted to throw in a little something...

Sand wrote: »

Our economy only turned around when we experimented with free trade and economic liberalisation.

Not to mention the €55bn (minimum) in cash handouts that the EU gave us from 1973-2008

So, if we wanted to apply the same Ireland/EU recipe of success from the developed world to Africa.

As well as a free market, functioning economic and legal system, the EU gave Ireland ( 55,000,000,000/4,000,000,000 people/35 years ) roughly €400 per person per year.

So, for the next year, the west could give Africa €400 x 1,000,000,000 people = €400bn in aid instead of the €100bn they were planning to, free access to our markets on just terms and then let's see how the African countries get on then.

I believe the reparations solution is flawed because of practical problems of agreement, collection, & disbursement and if you were going to go to that much trouble, then a more permanent solution would be a reform of the international economic system so that:

<> Corporations pay an equitable rate of tax {Death and taxes: the true toll of tax dodging, which looks at the impact of tax dodging, both legal and illegal, on the developing world - http://christianaid.org.uk/images/deathandtaxes.pdf }

<> Introduce the Tobin Tax http://en.wikipedia.org/wiki/Tobin_tax

<> Regulate secret banks so that corrupt dictators have nowhere to hide their money - corruption in developing countries is facilitated by our banking system, why does no-one ever mention that?!

<> Costs externalised in traditional corporate activity such as environmental degradation, health and educational damage to the population are levied as invoices to the corporations involved by the government of the developing country.

jmayo

edanto wrote: »

Not to mention the €55bn (minimum) in cash handouts that the EU gave us from 1973-2008

As well as a free market, functioning economic and legal system, the EU gave Ireland ( 55,000,000,000/4,000,000,000 people/35 years ) roughly €400 per person per year.

<> Regulate secret banks so that corrupt dictators have nowhere to hide their money - corruption in developing countries is facilitated by our banking system, why does no-one ever mention that?!
....

Edanto I take issue with the fact you seem to believe that the EU gave us a functioning legal system.
Our legal system grew out of the British legal system and all we have gotten from EU are laws relating to worker rights, anti-discrimination etc.
Now nowhere have I said that the system functioned well before or after accession to EU, but it did function.
If anything we now live in a more legalistic and less just society but that is another debate.

I agree the Western World Banks be they based in Switzerland, Liechenstien or the Caymans have gotten away with or rather condoned murder by readily accepting the ill gotten gains from not alone African dictators but western criminals and right back to the Nazis.

jmayo

edanto wrote: »

Not to mention the €55bn (minimum) in cash handouts that the EU gave us from 1973-2008

As well as a free market, functioning economic and legal system, the EU gave Ireland ( 55,000,000,000/4,000,000,000 people/35 years ) roughly €400 per person per year.

<> Regulate secret banks so that corrupt dictators have nowhere to hide their money - corruption in developing countries is facilitated by our banking system, why does no-one ever mention that?!
....

Edanto I take issue with the fact you seem to believe that the EU gave us a functioning legal system.
Our legal system grew out of the British legal system and all we have gotten from EU are laws relating to worker rights, anti-discrimination etc.
Now nowhere have I said that the system functioned well before or after accession to EU, but it did function.
If anything we now live in a more legalistic and less just society but that is another debate.

I agree the Western World Banks be they based in Switzerland, Liechenstien or the Caymans have gotten away with or rather condoned murder by readily accepting the ill gotten gains from not alone African dictators but western criminals and right back to the Nazis.

edanto

Apologies for my implication that the EU introduced a legal system to us, what I meant was more of a legal forum for trade rules, agreements and dispute resolution which was the basis of the EEC.

jmayo

edanto wrote: »

Apologies for my implication that the EU introduced a legal system to us, what I meant was more of a legal forum for trade rules, agreements and dispute resolution which was the basis of the EEC.

No worries.
It is just I believe we give the EU too much credit for some things and not enough for others. I was big fan of EU and how it managed to unite the major players in Europe, thus preventing the habit of going to war and it also included the little guys like ourselves and helped us along.

Anyway I digress from the subject.
I don't think pumping money into Africa in a similar fashion as done with Ireland will ever work until there are stable institutions, democratically elected governments and accountability in place.
Otherwise the funds will just end up with a banker in Switzerland or an arms dealer operating out of some ex Soviet republic.

How many European style democracies (lets not get into arguemnet about how US hasn't true democracy) exist in Africa ?
They usually have either a one party state, a dictator, a military regime or some guy whose family took over when the country got independence.

Sand

Not to mention the €55bn (minimum) in cash handouts that the EU gave us from 1973-2008

So, if we wanted to apply the same Ireland/EU recipe of success from the developed world to Africa.

As well as a free market, functioning economic and legal system, the EU gave Ireland ( 55,000,000,000/4,000,000,000 people/35 years ) roughly €400 per person per year.

So, for the next year, the west could give Africa €400 x 1,000,000,000 people = €400bn in aid instead of the €100bn they were planning to, free access to our markets on just terms and then let's see how the African countries get on then.

Whilst the effect of cash handouts cant be completely discounted, if we were recieving these handouts in the 70s why werent the 80s an era of unbridled prosperity? Instead the country was an economic basket case with anyone with a qualification and a small bit of ambition heading to the US or UK. Similar to the brain drain 3rd world economies suffer.

If aid is a significant factor in development, why isnt Africa [ for example] giving us aid as of the top of my head, I believe the amount of aid to Africa over the decades amounts to hundreds of billions if not trillions. If throwing money at Africa worked, it should have worked by now. There are countries in Africa where every citizen should practically be a millionaire with the oil resources an other natural resources possessed. But Africas share of global gdp and trade is 1-2% of the total. For a continent of Africas resources, thats frankly shocking.

Essentially giving aid to Africa with their current government/regime structures and civil society is like trying to fill a bucket with a hole in it. Just not going to work unless the holes are plugged. But it makes us feel better about the whole thing.

The third world needs free trade, but it also needs a tolerable administration of justice - accountable governments, legal protections for individuals and property etc etc.

Instead, the situation in Africa is so desperate that the leadership of South Africa, the great hope of the continent, practically assist Mugabe and Co. in raping their countries of wealth and civic society.

Quite simply, there is no hope of significant development in Africa [ or any third world country] unless the very basic problems of how Africa is run are resolved. Reparations would simply go the way of the existing aid payments - into the regimes pockets to be spent on weapons & secret police to suppress the population, villas in Spain and deposits in Swiss banks.

edanto

Sand wrote: »

I believe the amount of aid to Africa over the decades amounts to hundreds of billions if not trillions. If throwing money at Africa worked, it should have worked by now.

Do the maths man.

Our current economic system replete with things like Bretton Woods, massive corporate control of the world and corrupt deals with dodgy leaders of poor countries contributes to an efficient mechanism for pumping wealth OUT of Africa and into our hands.

Kama

Possibly we are going a bit off topic from the reparations issue itself into general development economics, but anyways, tis relevant neh?

Sand wrote:

auto industry was a complete joke until protectionism was loosened and foreign investment in the Korean auto industry was allowed.

Again, we can read this differently. Chang's argument is that in the medium to long term it is worthwhile to develop a (at that time-point) inefficient industry, and to lower tariff barriers later once it is in a position to compete. The co-incidence of economic success and trade liberalization can plausibly be read causally eitherway, as an end to Bad Protectionsism, or as Good Protectionism creating the conditions for later success. Moar Research Needed.

The principle argument, following on from his earlier books, is that these policies are the ones the 'core' industrial nations used (Britain, United States, Japan, etc) at various historical points, and that its a curious coincidence that 'we' now tell developing nations not to use these policies; the conventional rejoinder is that they succeeded in spite of, rather than because of, protectionist policy. My love for Chang stems a lot fropm his use of historical example, something often absent in economics, which tends imo to theoretical-mathematical narratives with less actual concrete examples.

Susan Strange said that this obsession with econometrics and general theory over evidence is a luxury often absent in sectoral analysis, such as development or industry-specific, Milton Friedman that 'economics has become increasingly an arcane branch of mathematics rather than dealing with real economic problems', while Coase said that "economics is a theoretical system which floats in the air and which bears little relation to what happens in the real world". Free trade theory is one thing; development economics is a more practical discipline. What works, works.

Sand wrote:

"Everyone" might be better expressed as "Everyone overall" - inefficient domestic producer obviously lose out if they dont have tariffs and market distortions to protect them from free trade.

I agree, this is what Kaldor-Hicks, as opposed to say, Pareto efficiency is about. An issue with this is 'everyone overall' can have some distributional-equity issues...Reductio ad absurdum, if everyone but Bill Gates has 10 apples, and Bill has 100 apples, an efficient scenario would be Bill having 200 Apples and everyone else having none. Obviously I'm oversimplifying; but there are similar scenarios on a global level, which while they might be an efficient 'market outcome' are abhorrent socially, and have associated costs the market may not internalise.

(Note the liberal model always assumes a 'Night-Watchman' state...externalising security costs. A philosophically 'minimal' state can end up footing a huge bill...the US prison system come to mind as an example)

Sand wrote:

The "developed" world has a huge advantage in terms of technology, infrastructure and branding over the developing world - everyone is better off overall if the developed world concentrates on those advantages

So...the developed world should try and maintain its position with high-value added industries, and the less-developed should stick to the lower-value industries? Yes, that is their current comparative advantage; its also conveniently neocolonialist...on strict market principles, of course.
Resource producers stay making our coffee, while we stick a label on it and gain most of the value-added...Many African nations got similar advice decades ago, grew coffee as a cash crop as a loan condition essentially, and caused a coffee glut which wiped out their earnings. Our trade barriers are also to blame here, I think we all agree that asymmetric protectionism under the guise of 'free trade' is an abomination?

Sand wrote:

That assumes that higher-value added industries/technological innovation are a result of protectionism, as opposed to free societies.

So you are assuming that the causality runs the other way?
*points finger at China*
No technical or scientific progress there, honest...All those giant, well-funded research labs come up with diddly-squat due to their lack of political freedom.

I'm not saying free societies don't spur innovation, I think they do, but the stonger argument (value-added/innovation results from primarily) brings the the Scottish verdict of 'Not Proven' comes to mind.

Sand wrote:

And a strong legal protection of patents/intellectual property of courses.

Again, this wasn't how 'we' developed. The Swiss kept IP out of their chemical industry for a *long* time, while accepting mechanical patents. The US only came onboard with global copyright on books quite late, and so forth. My base argument against strong IP Is that it prevents knowledge transfer to developing countries, which is in my view a key base of economic development.

Accession to strong IP positions tends to come *after* you have developed a position to protect, unsurprisingly, and weak IP is hugely beneficial to developing countries. Plus a weak IP regime, by distributing at low-cost, creates a future market in a region where the current effective demand isn't sufficient to be a market for said product. The Indonesian who buys fake Raybans and a clone IPod will in the next generation but the 'real thing'...but IP is a huge area to get into, its an argument I'd love to have, mebbe in a diff thread...for starters, its a politically created monopoly hehe...and tbh its role in spurring innovation seems imo over-rated. I regard a lot of IP as essentially a rentier system rather than a productive incentive, needs an overhaul tbh.

Sand wrote:

Our economy only turned around when we experimented with free trade and economic liberalisation.

Plus: EU Funds
Plus: EU import point
Plus: World Boom

Corporate tax rate was key, to the annoyance of our EU brethren. But note, this isn't generalizable: not everyone can undercut on corporate taxation.

Sand wrote:

into the regimes pockets to be spent on weapons & secret police to suppress the population, villas in Spain and deposits in Swiss banks.

Agree 100%. But one solution to the, rather than 'Moar Trade!' is the regulation of tax havens, which goes against a lot of the financial liberalization argument: the role of financial liberalization in aiding terrorist/dictator/nasties in shuffling funds globally is a massive one.

Tobin tax, as mentioned, would be shweet, and makes sense on economic and other grounds. Trade systems that encouraged reductions in armanents/repression, human/worker rights in exchange for trade/debt annulment would be a practical mechanism.

Free Trade + Slave and Convict Labour = Something Wrong Somewhere IMO

Agree also Edanto, aid looked at without looking at the other flows in the opposite direction is a flawed picture.