Who Exploits Whom?

Greedy capitalists take advantage of hapless producers in third world countries, paying a pittance to honest tradesmen so rich commuters in expensive suits can swill designer coffee at ridiculously hyperplumped markups. Trade between rich and poor countries can never be fair in any meaningful sense since the desperate poverty of the poorer trading partner will force them to accept the most miserly of all possible deals.

Right?

There's a lot wrong with chronically poor countries. Trade is not on the list. Insecure property rights? Sure. Threat of government expropriation? Yep. Regime uncertainty? Of course. But not trade. Indeed, because trade is by its very nature voluntary, both parties are better off for having participated.

Imagine* that you lived in the Kingdom of Zeal in 12,000 BC. You happen to be one of the lucky people who live on the Floating Continent, and you've got a free trade agreement with the Earthbound folks. One day, along comes a kid with spiky red hair, a princess with a ponytail, and a talking frog. Outraged by your hubris, they steal the Aero-Dalton Imperial and lock your queen in a stasis field that lasts until 1999 AD. The upshot is that the meager surplus earned by the dirtkickers below dries up right away and they're left to harvesting cave mushrooms and eating snow. Gone is any hope of capital accumulation or investment. Crono's good intentions have reduced them to autarky in the short term and a crippled ability to even attempt growth convergence over the long haul.

It's appealing (though facile) to attribute immiseration to capitalism. After all, capitalism appears to nakedly leverage the sin of greed, and government appears to rely on the virtue of noble service, but it's awfully hard to square these pedestrian intuitions with careful scrutiny. Chronic poverty travels much better with weak (esp. informal) institutions than with the ability of folks to trade of their free volition. If there are problems with rapacious capitalists, the first place to look is probably estate collusion. Business folk cannot easily force exchange without state backing. Nor can they pollute unabashedly where strong property rights and a functioning rule of law is in place. Mind the greed of business elites, sure, but mind the greed of political elites yet more. They're the ones with the guns.

At any rate, it's probably more fair to say that it's the poor folks abroad who do the greater exploiting. Trade with the wealthy west allows them to escape desperate drudgery and bothersome BATNAs. All I get out of the deal is cheap shirts and a cup of tasty caffeine in the morning. Sounds to me like I'm the one getting the short end of the stick.

And I wouldn't have it any other way.




*If you're unfamiliar with the classic SNES game Chrono Trigger, I feel bad for you son. I got 99 problems but being a marshmallow ain't one.