A global conscience

We, the people, have the power to make this world one of good. It is the sum and the spillovers of everyone’s actions that can put an end to the world’s ills. As advocated in Rüst’s article, we improve the well-being of our global society by adjusting our behaviour and consumption. I agree with his plan as far as the protection of the environment is concerned. Take the bus not the car, waste less paper, recycle as much as you can… We then save forests, biodiversity, ecosystems and the planet.
Now, in order to reduce poverty, diminishing our consumption is probably not the best idea while the well-meaning intention of “responsible” buying might have destructive effects. I will discuss these two ideas, one at a time.

Demand driven growth
Economic growth, i.e. an increasing GDP per person, lifts people out of poverty ("China is lifting a million people a month out of poverty"[1] with its 9% growth). As recent and not so recent examples of highly successful economic growth teach us, trade is an incredible tool to end poverty and inequality between countries. Take for example, China and India, Japan and Korea, or Mauritius, to give an infrequently cited textile export success story. Openness to trade drives industrialization through export production, which itself is driven by the global market demand, or, to put it simply, by us, the consumers.
Demand stimulates production and industrialization and also further research and development for more efficient technologies and thus creates wealth. We should not lower our level of consumption to help the poor. The anti-consumption, anti-profit approach is dangerous: it destroys demand, production, development, jobs, wealth, life.

Evil Multinationals
The anti-corporate sentiment is a result of some companies' bad behaviour: oil giants bribed African governments, pharmaceuticals groups charged monopolistic prices, Gap and Nike contracted sweatshops… Thanks to the protesters and also to an incredible access to information, resulting from advances in communication technologies, such practices are decreasing. Systematically associating exploitation with capitalism is unreasonable. For example, Microsoft, an often hated giant, now leads one of the most generous and committed foundation to help the poor.
Today, multinational firms (MF) are not the evil of our society. As explained by Bhagwati[2], these firms are most of the time welcomed in African countries, as they create better paid jobs then any other alternative. Among a plethora of unappetizing options such as farming, prostitution and relatively well-paid sweatshop work, workers (often young women) choose to go work in un-unionized sweatshops in the cities. People act as if the third world was a great place to live except for the sweatshops. Well, as for now, not really. Before imagining every MF employing children and destroying the environment, it is important to remember that they may be the best development tool. Sachs[3] shows that Foreign direct investment (FDI), (or the multinationals’ investments) is strongly correlated to higher growth, especially the export-led growth at the basis of the poverty reduction.

Be a responsible consumer, son
“Fair” traded products have bad consequences. Indeed, controlled wages may put an end to trade. Krugman[4] showed that different wages reflect only productivity differences which themselves justify trade. Wannabe responsible consumers render trade infeasible because of the artificial and unsustainable disconnect between wage and productivity fair trade creates. While this ideal intends to increase the welfare of poor country workers, its consequence is to kill trade and development. In fact, Max Havelaar products are so ubiquitous in Switzerland because of its agricultural protectionist policy. The government protects its high cost production against poor countries’ low prices which is their comparative advantage, i.e. reason to export. Poor countries’ farmers need incentives to invest in fertilizer and equipment, not incentives to stay underdeveloped and poor, struggling in farming’s brutal work.
I’m not saying we should support child labour but that continuing to buy products made in Bangladesh, Indonesia or Madagascar will lead to poverty reduction. Not only will it reduce drastically the number of poor people, but it will also strengthen institutions that will enforce environmental and labor standards. States have the environmental and labor standards that their people can afford. Multinationals are part of the solution, not the problem.
What’s left for you, responsible consumer? Buy products from Swaziland, not Switzerland. As for you, international relations militant student, forget about the public policy easy-going career and choose to be an entrepreneur instead. Invest in Africa.

[1] “The Undercover Economist” Tim Harford, 2005
[2] “In defense of Globalization” Jagdish Bhagwati, 2004
[3] “The end of poverty” Jeffrey Sachs, 2004
[4] “Peddling Prosperity” Paul Krugman, 1994