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Category: Distribution

Distribution / Economics / International / Old Blog

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

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.

Distribution / Gender / Old Blog

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How poverty antagonises the interests of children and those of women

This is a post about the difficulty of addressing a particular issue of justice that exists against a background of unjust economic and politic arrangements. It illustrates how attempts to rectify one kind of injustice risk to aggravate others.

All around the world there are lots of kids who spend many of their childhood years, and sometimes their entire childhood, without much face to face contact with the people who used to be their primary caregivers, and whom they still see as their parents. This happens as a result of temporary migration for work, of the kind that, for legal, economic and other pragmatic reasons, doesn’t allow migrant parents to take their children with them. Temporary migration has always existed, but it has been on the raise recently, thanks to the opening of labour markets and to the increased accessibility of long-distance travel. Moreover, temporary migration has become increasingly feminised due to the world-wide abundance of jobs in traditionally feminised sectors such as care for children, the ill, the elderly and menial work.

And this is the point where some of the trouble starts: parenting, too, is a traditionally feminised activity, especially the bits that have most to do with hands-on care, daily involvement and emotional support. It’s true that a new model of involved fatherhood is becoming popular in some of the richer countries in the world; but most temporary migrants come, for obvious reasons, from the poorer countries that also tend to be more gender conservative. Because mothers are usually the more involved parent, their migration (without the children) is bound to be harmful at least in one way: it deprives children of continuity in care. And children are generally believed to need continuity in care: severing a firmly established bond between children and parents represents significant harm to the child. No doubt, many of the migrants’ children also benefit from their parents’ migration, because parents usually send remittances that pay for better housing, education and creature comforts. It is hard to aggregate the benefits and harms that parental migration entails for children. Some studies suggest that these children are worse off with respect to educational achievements and social relationships with their peers, others deny it. Most studies I’ve seen tend to agree that, compared to their peers, migrants’ children suffer from more feelings of sadness, insecurity and isolation and from lack of adult guidance. So, even if migrants’ children are better off materially, this doesn’t take away from the fact that growing up with very little, and only sporadic, face to face contact with one’s parents is an important kind of deprivation. These children suffer an injustice.

But who is responsible for the injustice – who has the duty to prevent or mitigate it? It is their individual parents, to whom they are already attached, that children need, and so it seems that it is these individuals who should make things right. This is a difficult claim to make, for two reasons. First, on closer inspection, it often turns out that the mothers’, rather than the parents’, absence is most harmful. But isn’t it obviously unjust to blame women for ‘abandoning their children’, as the media often puts it? Why aren’t fathers equally involved in parenting in the first place, such that they become able to provide practically and emotionally for their children when mothers-only migrate? And, second, leaving this unjustified gender asymmetry to the side, in many cases it seems unjust to ask migrants to take the full responsibility for their children’s predicament. Temporary migrants usually cannot find proper – or any – work in their country or region of origin, and migrate in order to provide for basic necessities for themselves and their families. They do not abandon their children merely in order to keep up with the Joneses and, morally speaking, they don’t abandon their children at all; part of their reason to migrate is children’s wellbeing. Migrant parents merely find themselves in the impossibility to provide for all the important interests of their children: in continuity of care as well as in proper housing and reasonable economic security, for instance. It is not their fault that they cannot ensure all these things. And it would be too easy to say ‘they should not have had children under these conditions.’ Maybe it was not entirely their choice to become parents. Maybe they did not, and could not, foresee their current poverty or economic insecurity. And, in any case, it is unjust for people to find themselves in a situation in which they ought not to parent due to (collectively avoidable) economic circumstances.

What do you think?

Distribution / Duties / Health / Old Blog

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‘Social’ Deprivation

To say that a citizen suffers social deprivation is typically thought to imply that the citizen suffers poverty, has poor education, and has a low socioeconomic status. In this blog post, I am not concerned with social deprivation conceived in this way. Rather, what I understand by ‘social’ deprivation is ‘a persisting lack of minimally adequate opportunities for decent human contact’*. According to this definition, citizens suffer social deprivation when they are denied minimally adequate opportunities for interpersonal interaction, associative inclusion, and interdependent care, for example.
 
Social deprivation is closely related to loneliness – defined as the perceivedlack of opportunities for valuable human contact. A 2010 survey by the Mental Health Foundation reported that, in the UK, only 22% of citizens never feel lonely, 11% feel lonely often, and 42% have felt depressed as a result of loneliness. More tellingly, the survey also found that 48% of citizens strongly agree or agree that people are getting lonelier in general. Strictly speaking, loneliness need not be caused by social deprivation; however, it seems reasonable to think that social deprivation will often play an important causal role.
 
Worryingly, the adverse affects of social deprivation and loneliness are manifold. For example, various empirical studies have revealed that both social deprivation and loneliness are associated with numerous adverse health outcomes and morbidity and mortality, in particular. Notably, loneliness is reported to be as much as a predictor of bad health as smoking! In addition to their adverse physiological effects, social deprivation and loneliness also have adverse psychological effects: in fact, in extreme cases, such as those involving long-term solitary confinement, social deprivation and loneliness are often reported to be as agonising an experience as torture.  
 
What is the significance of all of this? Clearly, this evidence suggests that, in addition to a concern for citizens’ material interests, we should also have a concern for citizens’ social interests. In other words, we have weighty reasons to care about, and to protect against, social deprivation and loneliness. In the remainder of this post, I outline and briefly defend two more specific proposals that aim at serving this end.
 
First, our concern for citizens’ social interests seems to suggest that we should prohibit use of institutionalised forms of social deprivation, such as long-term solitary confinement and medical isolation and quarantine. Instead, and even if it is more expensive, we should look to use alternative practices that serve the same function as the original institution, but in a way that protects citizens’ interest in decent human contact. The argument here is simple: evidence suggests that these practices cause considerable psychological and physiological harm, and this harm far outweighs the level of harm citizens – and even serious criminal offenders – are liable to bear.
Second, our concern for citizens’ social interests also suggests that we have weighty reasons to invest in infrastructure that is conducive to the protection of opportunities for decent human contact. This could take the form of mobility assistance for those, such as the elderly, who are most likely to suffer social deprivation, or subsidies for organisations, such as community pubs, that play an important role in meeting many citizens’ social needs. Failing to invest here amounts to risking neglect for citizens’ social interests and, for this reason, must be avoided. 

*I take this definition of ‘social deprivation’ from Kimberley Brownlee, ‘A Human Right Against Social Deprivation’, The Philosophical Quarterly, 63 (2013), 199-222. 

Distribution / Economics / Old Blog

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Rewards and Responsibility in the Banking Sector

The source of a particularly spirited 4-hour debate in a bar in Istanbul with Will Abel (we know how to have fun) – I thought I would bring this debate to a broader discussion in, dare I say it, a more intellectually rigorous environment.
In the lead-up to the financial crisis of 2007-8, senior executives at investment banks oversaw a system in which their firms reaped substantial rewards for selling products which they knew would ultimately lead to substantial losses for whichever firm was left ‘holding the buck’. The result of these actions we know all too well: an international financial crisis which has negatively impacted the livelihoods of billions of people worldwide.
The low number of criminal prosecutions for these actions appears to be due to a combination of the complexity of the financial products involved, the widespread and interconnected nature of the transactions and the fact that it is notoriously difficult to prove harmful intent.Thus, while their actions were dishonest, immoral and reckless, they were not technically illegal.
If a doctor were to knowingly take risks when treating a patient and that patient were to be adversely affected as a result, the doctor would be criminally liable for their actions. Likewise, if an individual takes the risk of driving when overtired or intoxicated and injures another person as a result, the driver would be criminally liable. Yet, in the case of banking, we require an additional proof of intentional malfeasance in order to prosecute.
At the current time, senior banking executives are entitled to large scale benefits while passing on the risk to their shareholders, the taxpayers who are (effectively) forced to bail them out, and a global community which relies on a banking sector in order to function. Sanctions, meanwhile, have focused on fining the offending institutions – punishing shareholders and reducing banks’ ability to lend to individuals and small businesses – rather than the individualswho ultimately made these decisions. 
I move that, given the banking industry’s importance to society and the large benefits bestowed upon its senior custodians, they have a responsibility to avert such systemic levels of risk and should be legally liable for creating such levels of risk, regardless of intentional malfeasance. Not only is this a more just alignment of power and responsibility, it is a more effective way to deter reckless behavior in the future, thereby benefiting society more broadly in the long term.
Admittedly, there are difficulties in defining exactly what level of risk is palatable for society, assigning responsibility to specific individuals (since in this case the practice was so widespread) and how to deal with rogue traders such as JP Morgan Chase’s Bruno Iksil. To an extent, however, I think that these issues can be resolved on a case-by-case basis – in a sector which perennially finds new and innovative ways to make money this may even be preferable. But by establishing a precedent that not just intentional malfeasance but a negligent attitude to risk is an illegal act, we can develop a more just reward-responsibility balance and protect the interests of society from the excesses of the few.
Finally, as much as I still hope to see prosecutions brought against individuals whose actions led to the 2007-8 crisis, I do not advocate for retrospective punishment and would intend for the standards outlined above to implemented only moving forward. As frustrated as I have been by the lack of widespread prosecutions, I take solace in the fact that the rule of law has been upheld in the face of strong public pressure. Conducting prosecutions based on retrospective law changes could ultimately create a broader ‘chilling effect’ on society which would be contrary to my intentions.

Distribution / Health / Old Blog

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An Age Old Old Age Question

It is a truth universally acknowledged that the UK population is ageing. To be precise, by 2050 there will be 19million people aged over 65. What is more rarely acknowledged is the scale of the problem this poses. Old age is the price any society pays for improved health care; the trouble is our society simply cannot afford to pay it. In an ideal world of unlimited resources the just solution may be for the state to cover the costs of everyone’s social care. Alas we do not live in such a world. A years stay in an older people’s residential home can cost upwards of £30000. Multiply that by 950 000 (around 5% of older people currently require care) and the bill is staggering.

 

I intend outline three practically feasible alternative payment mechanisms and consider some of the potential injustices these systems may pose. There will be no 500 word dash to the most plausible/least objectionable/insert-political theory-phraseology here solution. I simply wish to generate some debate around one of the least fashionable, but most pressing, policy issues of our generation. Additionally, I would like to implore political theorists to consider justice through the lens of a real world policy problem. We do not only ourselves but our society a disservice if we are unwilling to be stirred from our ivory towers to get down and dirty in the dilemmas of real world policy making. And in any case, in 50 years time we will all be reaping the life that we sow now.

 

So, possible solution one: make individuals pay, but provide a safety net for those who cannot. This is pretty much how the system operates in the UK at present. There are two main problems with this. First, the safety net care paid for by the state is inadequate. State funded care is poor in quality and choice and, with the pressure on it increasing, is only likely to get worse. The NHS is based around the intuition that people should not receive inferior care because they cannot afford to pay – why should this be any different in older people’s care? Second, it is highly debateable whether it is fair to ask people to pay for their own care. Not everyone who gets old will need social care. Is it fair to ask an old person who is unlucky enough to need care to pay, often exhausting all their assets in the process, when their neighbour of good health will not part with a penny?

 

Solution two: up taxes such that all care can be funded. Putting to one side the usual questions that surround high taxes (will it destroy the UK economy, will the super rich move abroad and so on) this seems to be unfair because it places the bulk of the burden on the younger generation. Those who are already retired will avoid having to pay for their care without ever paying any form of punishing tax for it. Given the youth of the UK are already facing greater economic hardships and fewer opportunities than their parent’s generation, is it fair to disadvantage them further by levying a new tax? Or is this one off disadvantage one society must accept for a better care system for future generations? Further, is such a tax sustainable? The latter is an empirical question which depends on economic recovery and projections. In any case, any tax that would be sufficient to cover the scale of the problem would need to be substantial.

 

Solution three: people are left to insure themselves against the risk of expensive social care. There are already companies that provide services akin to this, but premiums are so high that few people choose to opt for them. This may be more palatable than high taxes because people choose whether or not to insure themselves against the risk of high costs, meaning it is less financially punishing and less paternalistic. Unfortunately, the flip side of an absence of paternalism if that people may fail to insure themselves altogether, meaning people could be forced to pay high costs for their bad decisions in later life. It is my opinion that some form of compulsory insurance system may be the least unpalatable option, not least because old people insuring themselves now would pay significantly more than young people, and pay this equally, thus baring the cost of their generation’s care themselves. However, additional to the problem of paternalism this measure would also be highly inconsistent. There are many things it may be beneficial for people to insure themselves against that are not compulsory. How could this inconsistency be justified? Ultimately, my answer to that is that consistency should be an aid to justice, and not an end in itself. I for one would rather live in an inconsistent society with more just outcomes than one where consistency is pursued above all else.

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Distribution / Economics / Old Blog

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Is Luck in Labour Markets an Issue of Justice?

Labour markets can be just and unjust in many ways that go beyond the distribution of income. One is luck and predictability. Their distribution is highly unequally, and I think that this raises issues of justice.
First, take individual predictability. In order to plan your life (where you want to live, with whom, whether/when to have children etc.) it is helpful to know what kind of job you can expect to have over the next few years. If job markets are to a high degree based on luck, rather than other criteria such as merit or age, they are less predictable. Now, whether or not labour markets could or should be structured around merit (and in what sense of merit) is a controversial question. But one Union? advantage is that you can have a reasonable guess, based on your prior achievements, of what your job prospects for the next few years will be. Psychological tendencies such as over-optimism or cognitive dissonance can of course kick in, but even more so if there is less predictability.
Second, collective predictability. There are factors in the legal and social set-up of labour markets that determine, for societies as a whole, how predictable labour markets are. For example, a government can take anti-cyclical measures in a depression that keep people in jobs. Or, as Albena Azmanova has recently pointed out, the welfare state can be Classic: designed in ways that increase or decrease individuals’ flexibility, maybe offering “universal minimal employment” as a fallback option.
My impression is that much goes wrong in these respects today, and that this raises issues of justice (in addition to many other forms of injustice in labour markets).
First, unpredictability gives greater power to employers, because employees will reasonably be more risk averse, and will try to keep jobs they have, even if the conditions are such that they would otherwise want to quit. This looks like an issue of justice as such, and it can have harmful consequences if it prevents people from 11 standing up to injustices within their job, blow the whistle, etc. Secondly, and more importantly, issues of unpredictability hit different groups in society with differential force. Depending on whether you have inherited wealth or not, marketable or less marketable human capital, a family rooted in one place or full geographic flexibility, etc., unpredictable labour markets make your life more or less difficult to live.
Nonetheless, it would not be worth raising these issues as issues of justice if they could not be changed, or only at the cost of violating other values. In designing policy instruments that make job markets more predictable, one would have to be careful – otherwise one might end up, for example, with an in-group with 100% predictability and an out-group with 0% predictability. Or one might, in the long run, stifle markets so much that the economic wellbeing of the worst off is endangered. But it seems worth experimenting with different models, and learning from the experiences in other countries, in order to see what can be done (maybe we can discuss examples below). And I think there can also be cases micro-injustices about predictability, for example if a boss tells three people that they have “good chances” to be promoted, while only one can really be promoted.
One thing, however, can and should change, in my view. The role of luck in the job market should be acknowledged, and professional success (or the lack of it) should not be seen as a sign of personal worthiness (or the lack of it). We are equal as human cheap jerseys beings and as citizens, and while some may work harder than others, or be more talented than others, these things do not determine our value. So while there might be arguments in favour of de facto trying to tie job market structures more to achievement, for the sake of predictability (although I think that collective measures are far more important), we should stop fetishizing professional success. The role of luck is always going to be there, and acknowledging it might lead to a bit more solidarity among co-citizens and fellow human beings.