Handling Debt Relief
August 12, 2005
At the same time that the Fair Trade community strives to develop strongly so we see pressure from manufacturers, farmers and their labour organisations to increase protectionism, to offer subsidies and thus undermine free trade. It is a road which I believe will lead to impoverishment and more mise…
At the same time that the Fair Trade community strives to develop strongly so we see pressure from manufacturers, farmers and their labour organisations to increase protectionism, to offer subsidies and thus undermine free trade. It is a road which I believe will lead to impoverishment and more misery across the globe and put a brake on more opportunity.
An open, democratic and civil society is the ideal to which countless millions outside the free world aspire. Alongside the rule of law, protection of individual property rights and the maintenance of personal liberty stand the capacity ? for both nations and individuals ? to trade freely across the world.
Today global trade enjoys an increasingly high political profile and as a result of technological advance, large-scale migration and progressively liberalised markets, we live in a world that is ever closer both physically and in public perception. I believe that there is greater compassion for those in today’s developing world and much of this has been due to the British media, often directed to far flung areas of difficulty by people from agencies such as Christian Aid and Oxfam.
However there is much disappointment that this wellbeing is not progressing as quickly and uniformally as it should or we would wish it to be. Because of that failure of progress I sense there is a growing trend towards protectionism, subsidies and ill-considered “trade and social justice” as a means to bring more welfare to everyone.
The way forward should be the way of free and fair trade where the word free (or perhaps I should say, open) is as important as the fair. There is a strong ethical case for supporting trade in preference to aid in promoting development in poorer countries because it makes each nation sustainable. However, I believe that where aid is the right solution, we should support direct, locally distributed aid, such as micro-finance, that preserves incentives for the citizens of those countries to achieve self-sufficiency.
The US and parts of the EU are still protecting their markets and their failure to remove agricultural subsidies is undermining developing nations being able to compete on a level playing field. This is the twenty-first century and we need to promote market-based approaches to ensure that environmental costs are also taken into account in the trade process.
Aid still has an important part to play especially where it is still impossible to develop a market-based approach. Quite simply we must refuse to allow people to suffer where there is a crisis or in the transition to a more developed society.
But it is my belief that for the best effect this aid should be as locally controlled and direct as possible. It should also be structured to avoid destroying long-term incentives. An example of this is the concept of microfinance, which is a means of poverty alleviation through small-scale credit. Currently the World Bank funds less than 1% of its budget for microfinance, a concept that was begun by a Bangladeshi philanthropist some 20 years ago. It enables millions in the developing world to become stakeholders of their own businesses. The loans themselves are normally no more than US$800 and unlike classic forms of aid, they actively seek to break down a dependency culture and ongoing cycle of poverty.