Why Should You Care?

This is a book about improving global living standards and the standards that need the most help are those found in the developing world. This raises a second question. For those of us living in the developed world, why should we care? After all, there are plenty of important issues facing us here at home. Both US unemployment rates and foreclosure rates are soaring, so humanitarian reasons aside, should we really waste our time working toward an age of global abundance?

The short answer is yes. Our days of isolation are behind us. In today’s world, what happens “over there” impacts “over here.” Pandemics do not respect borders, terrorist organizations operate on a global scale, and overpopulation is everybody’s problem. What’s the best way to solve these issues? Raise global standards of living. Research shows that the wealthier, more educated, and healthier a nation, the less violence and civil unrest among its populace, and the less likely that unrest will spread across its borders. As such, stable governments are better prepared to stop an infectious disease outbreak before it becomes a global pandemic. And, as a bonus, there is a direct correlation between quality of life and population growth rates—as quality increases, birth rates decrease. The point is this: In today’s hyperlinked world, solving problems anywhere, solves problems everywhere.

Moreover, the greatest tool we have for tackling our grand challenges is the human mind. The information and communications revolution now underway is rapidly spreading across the planet. Over the next eight years, three billion new individuals will be coming online, joining the global conversation, and contributing to the global economy. Their ideas—ideas we’ve never before had access to—will result in new discoveries, products, and inventions that will benefit us all.

~ Peter H. Diamandis and Steven Kotler

Crust Punks, Street Thugs, and Gutter Rats?

While in Tucson over the last few days, there were rumblings amidst the locals about homeless youth that are spending time around the university and downtown arts district. Traveling by rail, these kids from the street, have landed in Arizona during the winter. Tucsonans had described these youth as Gutter Rats, Crust Punks, or Street Thugs. These gypsies, say some, have become a blight to the community and a public nuisance.

As chance would have it, upon finishing lunch in a downtown cafe, I was approached by this very group and asked if I could spare a few bucks. “Sure” I proclaimed, ” First, I have a few questions, if that’s ok?” I assured the bunch that I was not a cop but rather a gentleman working on a Project for society’s disenfranchised, misplaced and thrown away. I then began to ask questions about what I had overheard from the citizens of Tucson.

A young girl that was in her early 20′s named Fiona remarked that they are not angry hooligans but instead your ‘daughters and sons’. Kids that will not participate in wage slavery and shall not be chained to a desk for meager pennies while the company CEO lives in a mansion on the hill. She went on to mention that I was the first person since they had arrived in town to treat them like ‘people’ and thought it was “cool as fuck that I asked everyone’s name and presented each with ‘practice compassion’ bracelet”.

I learned Fiona is considering a return to Bloomington, Indiana where she would finish her last year of college, securing a degree in Environmental Science. Her traveling companions, Kenneth and Birkla have no such plans and are at the moment enjoying time on the road.

I couldn’t help but wonder if I would possess the courage to make such a statement at this tender young age. I admired their strength in conviction and pray that we as a country address social and economic issues before we lose more of our precious youth to revolt, the street or worse yet, apathy about what lies ahead.

So, Thugs, Punks or Rats? I think not, these are our kids! 

~ Jon Linton, http://www.socialjusticesolutions.org/2014/04/02/crust-punks-street-thugs-gutter-rats/

Greedy Inhumanity vs Naive Troublemakers

The irony, of course, is that the suffocating labor practices in textile and apparel production, the curfews and locked dormitories, the timed bathroom visits and the production quotas, the forced church attendance and the high fences—all of the factors throughout industrial history designed to control young women—were at the same time part of the women’s economic liberation and autonomy.

(...)

But of all the rallying cries of the anti-globalization movement, the call to “stop the race to the bottom” is both the scariest and the most nonsensical, especially when it comes from rich-country activists who owe their own prosperity to the very race they wish to halt for others.

(...)

In a larger sense, however, global capitalism and labor activism are not enemies but are instead cooperators, however unwitting, in improving the human condition. As much as the CEOs would like to silence the activists and activists would like to silence the corporations, the fact is that the two sides need each other, and, most important, the workers at Shanghai Brightness Garment Factory and the Shanghai Number 36 textile mill need them both.

(...)

The business community in turn scornfully dismisses the skeptics and the activists as a lunatic fringe, a ragtag bunch of ill-informed obstructionists who are blocking the only path available out of poverty. The battle has been put in these terms—greedy inhumanity versus naive and reckless troublemakers—since the first textile factories emerged.

~ Pietra Rivoli

Social Businesses Instead Of Profit-Maximizing Businesses

To make the structure of capitalism complete, we need to introduce another kind of business - one that recognizes the multidimensional nature of human beings. If we describe our existing companies as profit-maximizing businesses, the new kind of business might be called social business. Entrepreneurs will set up social business not to achieve limited personal gain but to pursue specific social goals.

To free-market fundamentalists, this might seem blasphemous. The idea of a business with objectives other than profit has no place in their existing theology of capitalism. Yet, surely no harm will be done to the free market if not all business are profit-maximizing businesses. Surely, capitalism is amenable to improvements. And surely the stakes are too high to go on the way we have been going. By insisting that all businesses, by definition, must necessarily be profit-maximizing businesses and by treating this as some kind of axiomatic truth, we have created a world that ignores the multi-dimensional nature of human beings. As a result, businesses remain incapable of addressing many of our most pressing social problems. 

~ Muhammad Yunus

Power Does Corrupt

Which man do you expect to be more honest: the one wearing an Armani suit or the one wearing a sport coat from Men's House? Although clothes might seem irrelevant, research by Paul Piff, a social psychologist at Berkeley, suggests that indicators of socioeconomic status can predict trustworthiness. It turns out that increasing status and power go hand in hand with decreasing honesty and reliability. In one experiment, for example, Piff and colleagues asked participants to play the part of a job recruiter. The participants were told about an open temporary position that would last for no longer than six months, and about a well-qualified applicant who was interested only in a long-term role. When asked to prepare their pitches to woo this applicant, those recruiters with higher socioeconomic status not only neglected to tell the applicant that the job was temporary but also told the study's leaders that they would lie about the job's duration if asked.

From this and other findings, you might think that the rich are simply less trustworthy than the poor, but that's not exactly the case. A person's honesty depends on his or her relative feelings of power - or vulnerability - not on how much he or she has in the bank. Work by University of Cologne psychologist Joris Lammers proves the point. Lammers randomly assigned people to be a "boss" or a "follower" in an office simulation and found that most people temporarily elevated to more-senior roles displayed a higher degree of hypocritical behavior - they were quick to condemn others for unethical, self-interested behavior but judged their own similar actions to be acceptable.

When someone has a higher status than you, or even just thinks he does, his mind tells him that you need him more than he needs you. Consequently, he's more likely to satisfy short-term desires and worry less about the long-term consequences of being untrustworthy. So when deciding whom to trust, you have to consider power differences, including new and temporary ones. If a potential collaborator has just been promoted or has landed a big deal, he might regard some relationships as less important. And although top firms often have great reputations, that doesn't mean they treat their small clients as well as their larger ones.

~ David DeSteno

There Is More To Human Motivation Than Profit-Maximization (Part 3)

If people do things for lunk-headed, backward-looking reasons, why wouldn’t we also do things for significance-seeking, self-actualizing reasons? If we’re predictably irrational—and we clearly are—why couldn’t we also be predictably transcendent?

If that seems far-fetched, consider some of our other bizarre behaviors. We leave lucrative jobs to take low-paying ones that provide a clearer sense of purpose. We work to master the clarinet on weekends although we have little hope of making a dime (Motivation 2.0) or acquiring a mate (Motivation 1.0) from doing so. We play with puzzles even when we don’t get a few raisins or dollars for solving them.

Some scholars are already widening the reach of behavioral economics to encompass these ideas. The most prominent is Bruno Frey, an economist at the University of Zurich. Like the behavioral economists, he has argued that we need to move beyond the idea of Homo Oeconomicus (Economic Man, that fictional wealth-maximizing android). But his extension goes in a slightly different direction—to what he calls Homo Oeconomicus Maturus (or Mature Economic Man). This figure, he says, “is more ‘mature’ in the sense that he is endowed with a more refined motivational structure.” In other words, to fully understand human economic behavior, we have to come to terms with an idea at odds with Motivation 2.0. As Frey writes, “Intrinsic motivation is of great importance for all economic activities. It is inconceivable that people are motivated solely or even mainly by external incentives."

~ Daniel H. Pink

Fair Trade (Part 2)

First, some clarifications. My argument is not against trade or free trade. From the outset I noted the potential benefits and advantages of trade and stressed the perils of protectionism. My argument is that trade liberalisation is not the simple remedy it sounds. Equally importantly, government should aim to do more than ensure an efficient allocation of resources globally. Taken together, these arguments point to the greater urgency of making trade fairer rather than freer.
What is free trade? I think we all agree that free trade is a theory. The theory is that the most efficient allocation of resources, globally, would be achieved if governments were to stay out of trade. If governments did not intervene, by using tariffs, subsidies, or regulations to increase the prices of goods paid by their consumers for things made in other countries, the result would be what economists describe as "Pareto efficient".

We disagree about how this theory translates into the real world and with what implications for policy. For Professor Bhagwati, free trade is the best practical guide we have to policy: if in doubt, liberalise, even if no other government is doing the same. By contrast, I stress that free trade only produces efficient outcomes if other necessary conditions are in place such as (near) perfect competition and information. To this end, governments must intervene to prevent monopolies, negative externalities, and market failures.

At the global level, competition among producers in different countries requires carefully negotiated rules among countries (the GATT, the WTO, exchange-rate rules) and their effective monitoring and enforcement. It requires access to accurate and available information, and genuine competition (as opposed to monopolies, oligopolies, and monopsonies among global producers and intermediaries). Without these conditions, trade quickly becomes inefficient and unfair.

What is fair trade? Fairer trade is not necessarily an argument against free trade (although doubtless it is sometimes used as such). "Fairness" has two dimensions. The first is procedural: are the rules fair, and are the processes used to monitor and enforce the rules fair? The second dimension of fairness is substantive: are the outcomes of trade fair? I will deal with each in turn.

For Professor Bhagwati the current state of the rules is "fair enough" for free trade to unleash efficiency-maximising global competition. On this I disagree. Taken as a whole the trading system has been shaped by the mercantilist interests of the largest and wealthiest countries. Liberalisation has taken place in a series of agreements, originally among a small group of industrialised countries who opened their markets to one another in a reciprocal way, creating a premier league of trading nations. Relegated to lower leagues, developing countries were long denied access to markets for their textiles and garments. The MultiFibre Agreement and its successor were finally phased out in 2005. Developing countries are still denied access (except through special discretionary agreements) to markets for their agricultural goods and commodities. This does not make freer trade a bad idea, it forces us to consider practicalities.

Our moderator, Saugato Datta, says surely I am arguing that the solution is to remove the protectionism in industrialised countries—to make trade freer. Yes, but the nub of this debate is how is this most likely to occur? Two means have been proposed. First, Professor Bhagwati argues that developing countries should liberalise unilaterally. My retort is that this will not induce industrialised countries to dismantle their protectionism. The invisible hand of free trade will not displace the deeply rooted lobbyists and agri-business interests in Brussels, Washington DC, and Tokyo.

~ Ngaire Woods, http://www.economist.com/debate/days/view/515

Fair Trade

The world expects trade outcomes to be somewhat unequal. But when Oxfam reported back in 2002 that 97% of the income generated by international trade benefits rich and middle-income countries, while 3% flows to poor countries, it made a stir. Standards of fairness had been breached.

Fairer trade rather than freer trade could change some of these outcomes. A persuasive case is made by my Oxford colleagues, Paul Collier and Tony Venables. Carefully deployed special preferences and protectionism could be used intelligently to help to catalyse growth in African countries, and to improve the lives of the bottom billion. Conversely, the dismantling of special preferences has levied some high costs.

Fairness is also important in the governance of trade. International trade negotiations have resulted in rules which open up markets mostly for the goods and services exported by rich and emerging economies, while keeping markets closed in agriculture and other goods which are the main produce of poorer countries. The rules are made in negotiations in which the powerful call the shots, and do not always do so in good faith. In the Uruguay Round of negotiations industrialised countries were perceived to have exacted precise and far-reaching commitments from developing countries, in exchange for vague promises, such as to liberalise agriculture, which they have not kept. The Doha Round keeps failing to restart, in large part because there is too little trust in the fairness of its likely outcomes, as well as the fairness of the negotiating process, something Pascal Lamy, Director-General of the WTO, is trying valiantly to change.

The enforcement of trade rules is also unfair. When countries break trade rules, they are not systematically policed. They will be caught when their actions affect countries in which business groups are organised and well resourced enough to play a key role in gathering information and financing the preparation of the case against the offender. For most small countries, bringing a case against an important trade partner is unthinkable. They could lose discretionary trade access, aid or geostrategic assistance. Were they to win, they would secure the right to apply retaliatory measures which might have little effect—a pyrrhic victory for many.

Trade needs saving. But freer trade will not do the trick. The perceived unfairness of trade leads people to press for less trade not freer trade. Fairer trade, by contrast, would bolster public support, allow a better reconciliation with national priorities such as environment and development, and could offer a more level playing field to ensure more open and vibrant competition.

~ Ngaire Woods, http://www.economist.com/debate/days/view/508 

There Is More To Human Motivation Than Profit-Maximization (Part 2)

The trouble for our purposes is that Motivation 2.0 assumes we’re the same robotic wealth-maximizers I was taught we were a couple of decades ago. Indeed, the very premise of extrinsic incentives is that we’ll always respond rationally to them. But even most economists don’t believe that anymore. Sometimes these motivators work. Often they don’t. And many times, they inflict collateral damage. In short, the new way economists think about what we do is hard to reconcile with Motivation 2.0.

~ Daniel H. Pink

There Is More To Human Motivation Than Profit-Maximization

In 2002, the Nobel Foundation awarded its prize in economics to a guy who wasn’t even an economist. And they gave him the field’s highest honor largely for revealing that we weren’t always rational calculators of our economic self-interest and that the parties often didn’t bargain to a wealth-maximizing result. Daniel Kahneman, an American psychologist who won the Nobel Prize in economics that year for work he’d done with Israeli Amos Tversky, helped force a change in how we think about what we do. And one of the implications of this new way of thinking is that it calls into question many of the assumptions of Motivation 2.0. Kahneman and others in the field of behavioral economics agreed with my professor that economics was the study of human economic behavior. They just believed that we'd placed too much emphasis on the economic and not enough on the human. That hyperrational calculator-brained person wasn't real. He was a convenient fiction.

~ Daniel H. Pink