The inner sanctus of trade, stopping unfair practices

The inner sanctus of trade, stopping unfair practices

Yanuar Nugroho, Director, The Business Watch Indonesia,
Surakarta, yanuar-n@unisosdem.org

Business nowadays is no different than what it was before,
except that it is now so widespread and is such a powerful force.
And what lies at the heart of business? Trade.

Mainstream economics teaches that the more a country trades,
in particular, exports, the greater the well-being of its people
should be. Even by some very traditional measures, e.g. economic
growth, this is very far from always being true.

Russia in 1997 rapidly exported most of its commodities like
oil, but its economy only grew by 0.4 percent. Wages fell by
almost half in that year, after seven years during which
inequality had doubled and life expectancy declined by more than
four years.

And as in other countries, the wealth of trade disappeared
into the pockets of the elite (much of it criminal) that is
plugged into the circuits of economic globalization.

Globalization is supported by three pillars. First, the
working of business and trade across boundaries. Second, the
trans-national and multi-national corporations. Third, the
underlying ideology -- consumerism. Hence the term "free"
(whether put before "trade" or "business") gets its legitimacy
regardless of whether it would be practiced fairly or otherwise.

OXFAM last year reported that developing countries with lowest
incomes made up more than 40 percent of the world's population,
but only had access to 3 percent of the world's market. The rich
countries export goods and services valued at US$6,000 per
capita, while that value in developing countries is only $330 and
in low-income countries only $100.

Even though the history of business -- mainly the history of
trade -- is mostly that of inequality, their proponents keep
persuading us to worship the only mode of trade: Free trade, as
this is very much in line with the spirit of neo-liberal
economics which believes in two basic ideas. One, that all humans
are homo economicus, that the economic motive is the only one
which drives humans. And, two, that to seek and accumulate
profit, financial capital must be separated from the survival
process of a community.

This is consistent with the logic of the current practice of
free trade; it attempts to be released from rules that take into
account production location, capital sources, environmental
concerns, technology, public participation, etc.

It roams from country to country with few restrictions in its
search for the lowest wages, the loosest environmental
regulations, the most docile workers. The result is the
destruction of livelihoods, cultures and the global environment.

By 1997, the income gap between the richest 20 percent and the
poorest 20 percent of the world was 74:1 according to studies of
globalization. One-fifth of the world's people living in high-
income countries produced 86 percent of the world's gross
domestic product (GDP), whereas the one-fifth in poor countries
only produced 1 percent.

The average income of a person in one of the richest 20
countries is 37 times more than a person living in one of the 20
poorest. This ratio has doubled over the past 40 years, mainly
because of a lack of growth in the poorest countries, according
to last year's data from the United Nations Development Program
(UNDP).

In addition to the very low wages and an "instant
gratification" life-style, the environment suffers as a result
of the survival of the economically fittest, the orthodox
economists would say. But the free traders interpret "fit" as
"the marketable", "the profitable", "the global" and "the
growth".

It is the perversion of Darwin's survival theory which is
pathetically inadequate since only the "financially fit" will
survive. Those that do not fit -- people, communities, nations
and environment -- are bled dry.

Theodore Levitt (1958) and Milton Friedman (1962) were
probably correct when noting that the main and only
responsibility of business -- and therefore trade -- is to
accumulate profit. Thus it is the dynamics of trade transactions
which may at their whim choose to nurture or strangle us.

Today, free trade is evidently a destructive machine that can
bear no variation and it will not build the kind of world most of
us want. Thus, it is now the time to say "stop" free trade and
start to go beyond it -- to trading that is fair.

Firstly and mainly, although business is all about "buying and
selling" -- it is also about a different kind of bottom line. The
bottom line of trade is not necessarily always just profit. It
means we have the option to put some heart into the economy.

We need not leave morality or ethics at home when conducting
business. We should not have to leave behind the understanding,
sympathy, humanity or fun that is essential for business, just as
it is essential for life.

Secondly, it is impossible to detach economic orthodoxy from
the current character of wealth, power and self-interest. We can
then understand why fair-trade is now desperately needed.

The power of global trade must be democratized for the sake of
our shared life. This shows that the market system in which trade
is involved is a system of power and, of course, one that has
become very real in the political economy structure.

But "market" simply means an exchange mechanism, barter or
monetary. A "market system" is quite different -- it is a
mechanism for sustaining and reproducing an entire society based
on the logic of profit and loss.

The essence of the fair trade movement is about promoting
agency, reasserting human control over a system and mechanism
that claims to be in the best interests of everyone but no longer
even bothers to prove it.

The very idea of fair-trade movements is the democratization
of business practices which have a hold on the trade system and
the control of capital flow. Fair trade must no longer entail a
belief in the "magic of the marketplace" in this world captured
by economic power. It has to be very critical since the workings
of the market are manipulated by capital and its interests.

Nevertheless, although the fair trade movement has been going
on for the past four decades, it is still too small compared to
overall global free-trade. Of $3.6 trillion of all goods
exchanged globally, fair trade accounts for only 0.01 percent.

So, as we celebrate World Fair Trade Day, it is worth
rethinking the battle. Yet, it is not a battle between the
community and the market; rather, it is between a bottom line
that includes communities, ethics and the environment and one
that sees nothing but profit. Unfortunately the battle is still
imbalanced -- like an infant trying to survive among the giants.

The writer also lectures at the Sahid University in Surakarta
and is a researcher at Uni Sosial Demokrat, Jakarta.