The Big Questions: Ethics by Julian Baggini

Author:Julian Baggini
Language: eng
Format: mobi, epub
Publisher: Quercus
Published: 2012-10-24T23:00:00+00:00

IS FREE TRADE FAIR TRADE?

The ethics of global business

Around the start of the second decade of the 21st century, a few years after the biggest global recession since the 1930s, Western economies were either teetering along or threatening to slide back into recession. Talk of the failures of the market were not confined to the left-wing fringes but were common among mainstream economists and conservative politicians. The question of whether a market economy can both work and work fairly has moved from the fringes to the heart of political debate.

‘Market failure’ can mean two things: a moral failure to deliver a just distribution of wealth or a practical failure to function efficiently. The two kinds of failure may be related, but they are quite distinct, and it can look like wishful thinking when those who have moral objections to capitalism are quick to claim that it is actually unsustainable.

The key feature of a completely free market is that there are no controls on what anyone pays for anything, including labour. Prices are set by supply and demand. If people want or need something, they will pay for it. But if you try to charge too much, they simply won’t buy, and so you will be forced to bring your prices down. If you charge too little, on the other hand, people will snap it up and you’ll be left with nothing to sell, so you will naturally raise your prices. If people want a lot of something and it is possible to produce more of it, then production will increase as the opportunity to make money is recognized. If people want a lot of something and it isn’t possible to increase production, it becomes very expensive.

Crucially, it is argued that this is not just efficient but fair. There is no ‘natural’ cost of a product or commodity that could be worked out in any other way. Think, for example, of the price of potatoes compared to caviar. Is one more expensive than the other because it is inherently tastier? I don’t think so. I’d wager that if potatoes were rare they’d be the most sought after, expensive foodstuff in the world. Chips are delicious, but because they’re plentiful they’re cheap. Caviar is quite nice, but because it’s rare its flavour is more novel and people are prepared to pay more to eat it less often. (They may often be prepared to pay just because it is expensive, of course, but that’s another matter.)

You might think that the price set by the market cannot be fair for two reasons. First of all, some things are more essential than others and it cannot be right that, if they are scarce, then the poor can’t afford them. Take the market rate for retroviral drugs to combat HIV and Aids, for example. The market price of this is too high for people in the developing world to afford, and so it cannot be fair. The second reason is that people can abuse a monopoly to charge as much as they like for things people really need.

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