Fair Trade

Lest the title of this post confuse you, I’m not talking about the fair trade goods that stock the shelves of shops run by well-meaning nonprofits. That movement—to insure that craftspeople abroad are paid fairly for the goods they make—is well intentioned and important, but it isn’t the subject at hand.

The operation of a market economy—capitalism—rests upon a definition of what constitutes a fair trade. It is usually framed as the amount that a willing buyer and a willing seller, both of whom are in possession of all relevant information, agree is a fair price for the goods or services in question.

There are, rather obviously, economic areas where markets don’t work. Health care (no matter what GOP congressmen insist) is one of those, because the buyer and seller do not both possess all relevant information. Economists call this “information asymmetry.” As a practical matter, when one party to a transaction has important information that the other party doesn’t have, the party with the information has an unfair advantage.

There are other situations where markets can be manipulated. One of the most common involves externalities.

Economists use the term “externalities” to refer to the costs of an economic activity that aren’t paid by either party to the primary exchange, but are instead “offloaded” to someone else—typically, taxpayers. The most common example is pollution: a local factory produces a toxic chemical in the process of manufacturing its widgets, but rather than properly and safely disposing of that chemical and including the cost of disposal in the price of the widget, the factory owner dumps it in a nearby river.

The seller makes a bigger profit, and the buyer gets a better deal on his widget purchase. Meanwhile, we taxpayers pay to clean up the river.

Most of us have no problem identifying this as unfair all around. Such practices distort the marketplace, allowing people who break the rules to profit at the expense of the rest of us.

In today’s economy where the lines between public and private are being increasingly blurred, where private-sector companies ask for—and receive—government subsidies and favorable regulations, where the corporations that can afford well-connected lobbyists enjoy privileges that are unavailable to the mom and pop store on the corner, externalities are harder to detect.

America is in real danger of losing real capitalism. Increasingly, what we have is corporatism, and that’s a very different animal.

Corporatism has been defined as the socio-political organization of a society by corporate interest groups. And all signs are that we aren’t stopping there; the words “oligarchy” and “plutocracy” are more frequently heard in American political discourse these days.

Today’s plutocrats and oligarchs are the rich and superrich who effectively dictate economic policy. And they make the widget factory guy look like a piker.

When markets work as they should, where they should, they really do operate as Adam Smith described; the “hidden hand” improves life for all of us. When the system has been corrupted—when, in transaction after transaction, we socialize the risks and costs and privatize the profits—the only people who prosper are the “haves.” And the greedy.

And that’s not fair trade, by any definition.

9 thoughts on “Fair Trade

  1. So, does that apply to HIV infected males who cost us(instead of themselves) something like $3,000 a month in drugs alone to keep them alive? Ought not folks who indulge in risky behavior’s not be covered by “insurance” unless they pay for their known risks? I notice that my policy is voided, for instance, if I race cars or sky dive. Too, while seeking a vaccine to prevent HIV the WSJ notes that the trials suggest HIV drugs to be effective. They were tested on 2,059 young women in South Africa. 123 of them were infected with HIV. I suppose that is an externality…..but i don’t see any tender consciences speaking up for the 123 or the other studies in which young women in South Africa are made to serve the interests of the objectively disordered.

  2. We are transitioning. We just don’t know to what yet. But it’s sure that capitalism has destroyed capitalism. Or, it’s been too successful for it’s own good, a common evolutionary problem. Too many of us. Too much blind consumerism. Too few resources. Too few places to put our waste.

    Evolution has the means to correct all of that. But letting evolution correct our excesses is not the least traumatic way for sure. So we have choices. Lessen the trauma by collaboration or let the chips fall.

    Those who have benefitted from the past would like to maintain their benefit but as limits are reached more and more will be moved from the beneficiary side to the victim side until the power shifts to the victims.

    Then massive change is inevitable.

    A huge opportunity for leadership at a time of leadership vacuum. Obama has emerged as one, but he seems quite unique in the world at the moment.

    I think that anyone not afraid for the future is blind. I’m pretty sure that the generation exiting the stage has earned the moniker the “greedy generation” and booting us from power will be the next story of progress.

    I only wish that I could know the next chapter, but my lament has probably always been the swan song of those running out if the gift of life.

  3. No kidding. Did you see that a course of the Hepatitis C meds is over $48,000? Don’t forget, most of the R&D was provided free of charge by a public university. Plus, why was the ACA written to enshine insurance company profits, and I notice that my new ACA policy rejects every claim. And, no, I didn’t get an Anthem or United Healthcare plan.

  4. Our leaders are the leaders of the wealthiest and thus most influential among us. I have said before that every elected official in Washington or Indianapolis hates having to deal with poor people; their problems are too difficult and seemingly beyond the capabilities of elected officials. On the other hand, it’s so easy to give tax money away to those that need it least and create a list of talking points about all the ways it will benefit “everyone”. Once we’re past the talking and photo op stage, all accountability disappears. It will be the same with Angie’s List, the Soccer Stadium, the Cricket Stadium. If they don’t make money and can’t pay back the “loan”, no problem. Let’s talk about something else.

    The state and city can afford to shower favors on those with the most. At the same time they are waging (no pun intended) on the common wage. It’s warrior proponents have enough money to produce and frequently air their message. The message talks about how working wages for the construction industry is unfair to the taxpayers because it increases the cost of publicly funded projects. It’s unfair to pay skilled trades to work on state funded projects, but it is always fair to give tax money to crony capitalists. It raises questions: How is the campaign funded? Who is producing and funding the tv spots? What is the compelling reason to address this issue now? What’s in it for the supporters? What’s in it for the Chamber of Commerce? What’s in it for the legislature and the governor? You can bet the farm that someone with ties to the republican party stands to benefit – either financially or politically or both. One more labor union defeated, ensuring lower wages across the state and lower tax revenues; one more speech for CPAC, etc.

    I am assuming that the propaganda campaign will be successful and wages on the projects will be decreased – minimum wage(?). I expect that there will be problems and any problems that result from shoddy construction will be litigated at some expense to taxpayers. I also guess that the amount of any future settlements won’t be disclosed and life will go on as before. Oh, unless the contractor is not networked with the republicans; then he will be flogged in the public square.

    Did I go too far?

  5. girl cousin; that $48,000 for Hepatitis C medication would be for 6 weeks. The cost is $1,152.58 PER PILL; Eskenazi Hospital found someone to cover my daughter’s co-pay of $700 PER PILL because she was so near death. The general rule is 30-90 days of treatment, her infection was gone at the end of 30 days but they continued meds to prevent a recurrence of the infection. A miracle drug to be sure; am I glad my daughter’s life was saved and her name moved higher on the liver transplant list – dear God, YES I AM. But I keep asking myself how many people out there suffer from this dread disease but have no health care. Hepatitis C is transferred through blood exchange; because of cirrhosis and liver failure she was tested frequently for Hep C. Suddenly 3 years ago she tested positive. The only needles and blood exchange she was exposed to was in a local hospital through blood draws for testing, IV’s for medication and at times for feeding, blood transfusions and injections. She transferred to Eskenazi from that hospital when they cut back on all of her treatments and just sent her home with prescriptions for pain pills. I also keep asking myself why, in this country, any mediction should cost $1,152.58 PER PILL? What is the trade-off in this situation?

  6. I forgot to mention that the Harvoni dosage is one pill daily. Out of curiosity I checked the cost in Canada; it is ONLY $1,005.58 PER PILL up there.

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