Month: December 2013

Ethical trading as profit sharing: An alternative perspective on the terms of international market transactions

On 8 December, 2013

In Distribution, Economics, International, Old Blog

The increase in cross-border trade around the world during recent decades has been accompanied by a growing concern with the terms under which international market transactions occur. The claim that these terms are often morally problematic has come to play a prominent role in theoretical debates as well as in political initiatives such as the Fairtrade movement. While it is not always clear what the exact normative basis for this claim is taken to be, defenses most commonly focus on the low absolutelevels of welfare enjoyed by trading parties in developing countries. My aim in this contribution is to suggest that this focus tends to ignore what appears to be a justified independent concern with the relativedistribution of the economic benefits that result from international market transactions.

According to what appears to be the predominant perspective, the terms of international market transactions are morally problematic if they leave one of the trading parties badly off in certain absolute terms – for example, if the price that producers of coffee or other agricultural commodities are being offered is insufficient to provide for even their basic needs. Common as it is, this perspective faces a well-rehearsed objection. First, badly off as a party may be in absolute terms, she typically derives an economic benefit from the transaction; and second, it is not obvious why the mere act of engaging in a mutually beneficial exchange with a party that happens to be badly off should be taken to give rise to a particular (role-specific) responsibility for that party’s absolute level of welfare.

For the present purpose, I am going to set aside the question of whether this objection is successful or whether transacting parties can indeed be held responsible for each other’s absolute welfare. Instead, I am going to present an alternative perspective on the evaluation of the terms of market transactions that is immune to the mentioned objection and that seems to be neglected in current debates. According to this perspective, trading parties have a responsibility to transact at a price that ensures that each of them receive a fair share of the economic benefits that result from a transaction.

In rough terms, the argument in support of this view takes the following shape. International market transactions represent a form of mutually advantageous cooperation: they are typically beneficial for both parties involved, and the realization of each party’s benefit depends on the other party’s material contribution to the exchange. At the same time, trading parties generally face a range of possible mutually advantageous prices. The limits of this range are defined by the respective price at which an exchange would cease to be beneficial to each party, such that the choice of the price at which the transaction ultimately takes place determines the size of the benefit that each party derives from the transaction. Given the cooperative character of market transactions, parties ought to be disposed to transact at a price that ensures a fair amount of benefit to each of them.

This second perspective imposes clear constraints on the morally permissible terms of international market transactions even if we assume that parties have no responsibility for each other’s absolute welfare. In one way, the demand of a fair distribution of transactional benefits is more limited than the initial perspective described above. Conceptually, the demand is constrained by the range of mutually advantageous prices in a given situation, and it may well be that no price on this range is sufficient to fully provide for a party’s basic needs. There is another way, however, in which fairness in the distribution of transactional benefits is significantly more demanding. According to the first perspective, there would appear to be no moral constraint on the profit that a party may make as a result of a transaction above and beyond what is required to guarantee that each party enjoys the relevant absolute level of welfare. To stay with the example, provided that her foreign suppliers are sufficiently well-off, a European coffee importer would be morally free to make whatever profit she is able to obtain in the market. Any such profit, however, is a reflection of the price at which the initial transaction took place and thus subject to a fair distribution of transactional benefits. Following the perspective I have described, then, rather than focusing on absolute levels of welfare, we should think about ethical trading in terms of profit sharing.

Questioning the State

By Justice Everywhere Archive

On 2 December, 2013

In Democracy, Governance, Old Blog

The history of nation-states is not a pretty one. State creation is often a bloody and very painful exercise. Either states boundaries are decided through years of fighting or as an arbitrary decision by colonial authorities. Once states have been created, violent border disputes aside, states have been responsible for the repression of thousands of its own citizens. Perhaps even more damning, the nation-state framework seems to be an obstacle to addressing urgent international issues, such as global climate change and a growing refugee crisis. The on-going bloody history of states and pressing international issues present strong reasons to consider a justification of the primacy of the state.

This post is not intended as argument against or in favour of the primacy of the state, rather to make the case that its primacy is not an automatic good and needs to be justified for those (like Rawls) who take it as the prime site of justice. There seem to be three key arguments for the state 1) the identities argument, 2) the justice promoting argument and 3) the pragmatic argument. I will go through these in turn to demonstrate that justification for states as the prime site of justice relies on a pragmatic argument: they exist and so we should make them better. I suggest that this leaves room for important work to consider whether there are other more effective institutional arrangements that would promote justice.

So, let us consider the identities argument. The world has many different communities, who have distinctive cultures, histories and ways of approaching politics. As such, they need their own territorially distinct institution to conduct their affairs. Although there are very different communities across the globe, current borders do not match the boundaries between these communities. A quick glance at postcolonial Africa demonstrates that borders do not follow divisions between existing communities. Redrawing boundaries would not fix this. Identities no longer (and arguably never did) map neatly onto distinct and clearly defined territorial areas. The territorially exclusive state enclosing a coherent political community is not a reality. The state is not a natural political unit reflecting distinct political identities. Therefore justification requires some belief that its existence promotes a particular good.

The second argument is the ‘justice-promoting argument’. It goes something like: “Having nation-states promotes justice. We need localised institutions, such as the NHS, tax redistribution, education to ensure justice. The state is the best organization for this. ” This, unfortunately, is not the reality for much of the worlds population. In the Global South, justice-promoting states are not the norm, and often states can produce a considerable amount of injustice. Moreover the poor environmental practices and unfair trade policies of states in the Global North also harm the lives of those in the Global South. The response may be: Don’t dismantle states rather improve the unjust states! But, on what grounds have we decided the state is the best institution? There are other forms of political organization, be it townships, chieftaincies, kinship networks, cooperatives and charities which also promote justice and in many cases are a more meaningful avenue for providing the necessary services of justice. What makes a state the most valuable form of political community?

I think the crux of the ‘pro-state’ position comes to a pragmatic argument. The overwhelming majority of the globe’s population live under the legal jurisdiction of states. Even where, in practice, the state does not exist or it is is repressive, the trend is to improve state capacity and to make it more functional. Therefore let us not waste time considering alternative political arrangements or a more serious empirical consideration of whether the state is indeed a good provider of justice and rather work on ways to improve what is already there.

I am not totally against this final argument. States do exist, and improving them may be best in the short term. It comes down to a practical judgement call. If, in the short term, it is more effective to improve states – this is something we should do. However this is an empirical question. Given the violent history of states and current pressing international questions. Would it be more effective to improve states or create alternative political institutions, which promote justice better? Both avenues deserve careful normative and empirical consideration.