Peter HoganProfessor PowersGlobal Justice & The EnvironmentFall 2016

Life I n A Glasshouse: Disentangling Agricultural Globalization from Injustice

Economic globalization has insurmountably impacted the global distribution of benefits

and burdens among humans. Especially during the nineteenth century, Western European nations

used colonial coercion and “gunboat diplomacy” to incorporate countries and peoples –

especially in Asia and Africa – into global trade networks.1 Though the institutions mediating

global trade have evolved over time, they continue to exert disproportionately large economic,

political, and social sway over resource-heavy regions. This is especially prominent among the

agricultural primary goods sector that produces cocoa, tea, coffee, and cotton – the economic

backbone of countries like Côte D’Ivoire, Ethiopia, Ghana, and Mali.2

This paper argues for the necessity of a systematic shift in state and NGO global trade

policy goals. The focal trade value should not be global efficiency – the maximization of

comparative advantage and consequently output à la David Ricardo – but rather national

efficiency: trade functionally structured to maximize state economic security. This mitigates at

least three manifestations of structural injustices that disproportionately impact cash crop farmers

in developing countries: allocation of agricultural risk, inferior development, and sustained

domestic institutional weakness. Each of these structural injustices is unacceptable within a

human rights framework of justice, namely that of Henry Shue and Simon Caney. Given this 1 Branko Milanović, “The Two Faces of Globalization: Against Globalization as We Know It,” World Development 31 (2003): 669.2 For purposes of emphasis, I focus on countries in Africa whose commodity agricultural sector yields the plurality, if not the majority, of their export volume. Countries in Latin American and Southeast Asia also fall within the scope of this normative debate, but their economies are generally more diversified among mineral primary goods, petroleum products, and manufacturing sectors, thus making them less prone to agricultural risk. For more information on countries’ export volume breakdowns and global trade flows, see the Harvard University Center for International Development’s Atlas of Economic Complexity. http://atlas.cid.harvard.edu/.

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inequitable distribution, the most effective prescription is to institutionally enable nation-states to

set their own development and trade priorities.

(a) The Ricardian model, hyperglobalization, and observations on trade

The conversation on global efficiency in trade invariably begins with David Ricardo, a

seminal figure in economics. He emphasized the importance of efficient labor distribution “by

each country producing those commodities for which by its situation, its climate, and its other

natural and artificial advantages” it is best suited.3 In contemporary economic discourse, this

foundational idea is known as comparative advantage. To bolster the effectiveness of producing

comparatively advantageous goods, Ricardo proposed that a system of perfectly free commerce

“distributes labour most efficiently and most economically . . . [and] by increasing the general

mass of productions, it diffuses general benefit” among nations around the world.4 The upshot is

that the distribution of global production should accommodate each country’s advantages if

economic agents’ goal is to maximize output and consumption. Therefore, in Ricardo’s model

free trade is a necessary condition for the efficient allocation of labor.

Intuitively, this global efficiency framework makes sense. For climatic reasons, England

will never be a raw coffee exporter. The country could turn that raw product into an intermediate

or final good, but a priori natural constraints on production mean that an efficient English labor

distribution – one that maximizes output and consumption given a fixed capital allocation and

mobile labor – could never allocate workers to coffee plant cultivation.

3 David Ricardo, On the Principles of Political Economy and Taxation (London: John Murray, 1817) 7.6, Library of Economics and Liberty [Online] available from http://www.econlib.org/library/Ricardo/ricP.html.4 Ibid., 7.11.

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However, this ignores Ricardo’s views on the material circumstances implicit in ideal

labor distribution. He refers to the equilibrium labor price as one of subsistence, such that the

labor supply neither grows nor shrinks.5 Moreover, he identifies wage increases as a stimulus

that causes the labor population to increase, once again resulting in lower subsequent future

wages whether at equilibrium or below it.6 If the wage falls below equilibrium, upward pressure

on wage rates only occurs when the population’s insufficient wages causes their numbers to

decrease.7 This is a decidedly pessimistic view on the natural order of life for laboring peoples,

and it makes the a priori assumption that increasing wages yield population increases. While not

unreasonable during his time, this assumption has seen empirical challenge in Vietnam and

Indonesia, where fertility rates have gone down in tandem with falling poverty rates.8

Ricardo’s model of comparative advantage and consequent free trade has seen a revival

in the last three decades, notably in trade bodies like the World Trade Organization (WTO) and

development banks like the International Monetary Fund (IMF) and World Bank. In a historical

analysis, Rodrik points out that the General Agreement on Tariffs and Trade (GATT) had policy

goals that were much more illiberal compared to those of its successor body, the WTO. Rather

than achieve maximal free trade, the GATT “was to achieve the maximum amount of trade

compatible with different nations doing their own thing.”9 It attempted to reduce tariffs and

quotas, but anti-dumping duties, voluntary export restraints, and protections for agriculture and

service industries continued as policy support structures for member nations.10 The GATT

5 Ibid., 5.1.6 Ibid., 5.6.7 Ibid., 5.7.8 Arnstein Aassve et al., “Poverty and Fertility Dynamics: A Comparative Analysis,” Population Review 45 (2006): 16.9 Dani Rodrik, The Globalization Paradox: Democracy and the Future of the World Economy (New York: W.W. Norton, 2011), 75.10 Ibid.

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simplified global trade arrangements while also maximizing economic security for their

citizenries. By comparison, the WTO fully embraced the Washington Consensus policy platform

and utilized strong agreement enforcement powers to coerce compliance with free-trade-

enhancing policies. Thus the WTO rendered “[t]ax systems, food safety rules, environmental

regulations, and industrial promotion policies . . . open to challenge from trading partners.”11

This has provided states with fewer opportunities to offer their citizens sufficient protection.

Rather, the organization has made the Ricardian model of maximized comparative advantage and

uninhibited free trade the de facto global orthodoxy. This system works for some countries, but

not for others.

Contemporary analyses on trade illustrate the implications of globally efficient policy for

commodity-producing nations. Roy Culpeper notes that two results of openness, capital surges

and terms of trade effects – that is, the ratio of export prices to import prices – may be associated

with greater vulnerability to economic shocks.12 Machiko Nissanke and Benno Ferrarini

corroborate this terms-of-trade finding in the context of International Development Association

loan repayment. Between 1980 and 1993, countries both receiving development loans and

exporting primary commodities like cocoa and coffee saw prices decline as much as 70% as they

attempted to bolster export volume growth to beat their loan interest rates.13 And this is not to say

their participation in global trade was less than that of non-commodity focused countries. Nancy

Birdsall notes that commodity dependent countries reduced their tariffs nearly as much as non-

commodity dependent countries during the 1980s and 1990s, but the former have nevertheless

11 Ibid., 77.12 Roy Culpeper, Approaches to Globalization and Inequality Within the International System (Geneva: United Nations Research Institute for Social Development, 2005), 11.13 Machiko Nissanke and Benno Ferrarini, Debt Dynamics and Contingency Financing: Theoretical Reappraisal of the HIPC Initiative (Helsinki: United Nations University World Institute for Development Economics Research, 2001), 10-11.

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failed to achieve substantial economic growth or diversification of exports.14 Finally, Nissanke

and Erik Thorbecke use endogenous growth theory to point out that “a country specializing in an

industry with a larger positive [technological or knowledge capital] externality would experience

a faster growth rate compared with the trading partner that specializes in an industry with a

weaker externality.”15

Why would such detriments emerge in the first place? Kaushik Basu points out that the

gradual moves toward optimal global trade equilibrium includes non-monotonicities, wherein

trading partners approaching equilibrium are not necessarily better off than they would be further

away from optimality.16 Not every path towards ideal-theory free trade comes without

drawbacks, so imperfect movement towards global efficiency results in inequitable policy

imperfections. This prompts a cost-benefit analysis of the imperfect implementation of global

efficiency. I propose that the costs of implementation are not worth the purported benefits of

global efficiency because of the resulting structural injustices low-income developing countries

experience.

(b) Three manifestations of structural injustice

At least three categories of structural injustice disproportionately affect developing

countries’ agricultural workers. The categories are distinct, but there exists some interaction

among them that reflects the multifaceted nature of injustice.

14 Nancy Birdsall, Stormy Days on an Open Field: Asymmetries in the Global Economy (Washington, D.C.: Center for Global Development, 2006), 5-6.15 Machiko Nissanke and Erik Thorbecke, “Channels and Policy Debate in the Globalization-Inequality-Poverty Nexus,” World Development 34 (2006), 1351.16 Kaushik Basu, Beyond the Invisible Hand: Groundworks for a New Economics (Princeton: Princeton University Press, 2011), 182.

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(1) Agricultural risk: Global efficiency yields inequitable allocation of agricultural risk

in three forms: natural risk, terms of trade risk, and investment risk. Natural risk arises from

susceptibility to environmental phenomena like droughts, unseasonal weather, natural disasters,

or crop disease. On the individual level, the lack of agricultural diversification inherent to cash

crop specialization lays inequitable burden on farmers compared to other professions. Should the

crop go bad, farmers would have little if any recourse for sustaining their livelihoods. On the

aggregate level, cash crop specialization creates inequity among countries by tying the

specializing country’s export volume to fortunate environmental conditions. Holding constant

differences in agricultural capital and other human inputs, good crop years and bad crop years

could determine the fate of the country. Terms-of-trade risk arises from the collective action

problem of commodity production for global trade. For instance, if Ethiopia, Uganda, and Kenya

all engage in export drives as in Nissanke and Ferrarini’s study to maintain terms of trade in

coffee, they drive the world market price of coffee down, thereby weakening all their terms of

trade. Comparative advantage may help producers individually, but collectively it can result in

mutually degrading supply shocks. Finally, investment risk arises when farmers cannot engage in

growth-enhancing investment activities due to the risks to wellbeing. Farmers may want to

purchase a new variety of high-yield coffee plant, but uncertainty and the additional expense

causes them to doubt its worthwhileness given their already meager earnings. Nissanke and

Thorbecke note this as a case of asymmetric information, where the knowledge gap between

individual farmers and transnational corporations at work in developed country agriculture

causes a skew in the distribution of gains from trade.17

(2) Inferior development: Global efficiency results in divergent development paths

depending on the country’s item of comparative advantage. In aggregate, cash crops suffer from

17 Ibid., 1352.

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limited capacity to generate innovative externalities compared to sectors like manufacturing

where research and development is an integrated element. To quote Nissanke and Thorbecke,

“comparative advantage in ‘non-dynamic’ sectors” can result in stagnation of growth.18 Provided

that developing countries’ agrarian sectors have limited access to capital investment

opportunities, cash crops yield lower growth prospects. Moreover individual farmers face

limitations in implementing new farming mechanisms on account of their already constrained

budgets. In 2003, food expenditure alone constituted 44.32%, 45.82%, and 53.27% of total

household expenditures in Côte D’Ivoire, Kenya, and Mali respectively.19 Spending the money

necessary to pursue growth becomes itself a form of unconscionable risk in these circumstances,

further reinforcing Nissanke and Thorbecke’s point that non-dynamic sectors can fall into growth

stagnation. Additionally the risk inherent in agricultural activities poses a threat to potential

creditors, making cash crop reliant developing countries less able to seek capital investment

necessary for development.

(3) Sustained domestic institutional weakness: Global efficiency threatens state

institutions in developing countries by subordinating them to international trade regulations.

Such is the situation with pursuing WTO trade policy infractions. Doing so undermines the

ability of the state to effectively address the economic needs of the citizenry. Global efficiency

can also propagate domestic institutional weakness by undermining enforcement of domestic

regulations. This weakness stems from a lack of institutional funding accounted for by the

country’s low-income status. This dovetails with inferior development injustice, as the pursuit of

globally efficient comparative advantage would disadvantage the state’s administrative abilities

18 Ibid., 1351.19 Manitra A. Rakotoarisoa, Massimo Iafrete, and Marianna Paschali, Why Has Africa Become a Net Food Importer?: Explaining Africa agricultural and food trade deficits (Rome: Food and Agriculture Organization of the United Nations, 2011), 24.

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by plausibly reducing GDP and therefore tax revenue. Inferior development thus feeds into

sustained domestic institutional weakness. Agricultural risk also creates a scenario for

institutional weakness to occur, as governments cannot collect tax revenue on anticipated crop

yields that ultimately do not materialize. The yield uncertainty in agricultural good supply

chains, when compared to manufactured goods supply chains, presents a scenario in which

government revenues fluctuate. Lacking consistent revenue streams, weak state institutions

persist. Moreover these weak institutions cannot provide social safety nets to farmers that would

enable them to engage in risk-based investment without fear of losing their livelihoods. In this

way weak institutions exacerbate the threat of agricultural risk.

(c) Caney and Shue’s human rights framework

The most effective way to normatively evaluate these instances of structural injustice is a

human rights framework. The reason for this is twofold. First, as Shue points out, human rights

“specify the line beneath which no one is allowed to sink.”20 Setting minimally decent standards

of life that all states are accountable to uphold directly addresses the needs of the most

vulnerable – in this case, farmers – across states. Second, as Caney points out, the human rights

framework rests upon universal protection and rejects the utilitarian summation of social good in

cost-benefit analysis. A sacrifice of any enumerated human right is categorically unacceptable,

no matter its purported benefit.21 This is necessary in order to, as Shue puts it, “cooperat[e] with

20 Henry Shue, Basic Rights: Subsistence, Affluence, and U.S. Foreign Policy, 2nd ed. (Princeton, N.J.: Princeton University Press, 1996), 18.21 Ibid., 165.

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others in solidarity to create social institutions and practices that provide protection to others

when they face dangers they cannot handle on their own.”22

Shue’s human rights framework is built upon the notion of working in tandem with other

people to achieve common goods, particularly against the individually insuperable forces of

climate change. Some may argue that this global efficiency target is not an appropriate analog, as

it lacks the systematically urgent need for collective action that climate change requires.

However, the economic injustices resulting from global efficiency constitute a problem of

similar scope and thus a similar justice framework applies. Kaushik Basu characterizes it

succinctly:

“We worry about individual decisions that are on their own tiny and imperceptible, but increase

aggregate pollution to intolerable levels and lead to global warming. Something similar is true of global

inequality and mass poverty. And like environmental degradation, they can cause political degradation,

leading to insurgencies and violence that make civilized life impossible.”23

Though he does not directly reference this global efficiency problem, Basu targets

economic injustices in pinpointing inequality and poverty. Injustices of agricultural risk, inferior

development, and weak institutions individually affect unknown, anonymous farmers in

developing countries, but in aggregate the victim is the state itself. Political instability and state

collapse present an overwhelming danger to both the international trade order and the state’s

citizenry that must endure ensuing hardship. As such, the injustices of global efficiency can

prove detrimental to both the state and the world if the burdens of agricultural specialization

actualize in short order.

22 Henry Shue, “Human rights, climate change, and the trillionth ton,” in The Ethics of Climate Change, ed. Denis G. Arnold (Cambridge: Cambridge University Press, 2011), 295.23 Basu, Beyond the Invisible Hand, 164.

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In describing climate change, Shue himself emphasizes that the scope of globally

reaching problems are foundational to his belief in the need for “coordinated international

action.”24 He also draws attention to climate change’s time sensitivity, both in the potential for

immediate impact and that on future generations. Given these pertinent features, he stresses the

importance of rights-protecting institutions’ ability to account for intergenerational effects and

the immediacy of the issue at hand.25 These features both provide substantial responses to the

economic injustices of agricultural risk, inferior development, and sustained domestic

institutional weakness.

There is sufficient reason to believe rural workers growing commodity cash crops need a

human rights support structure. According to the World Bank’s PovcalNet statistical database,

Ethiopia’s 2014 rural population makes up approximately 81% of its total population; 33.54% of

the country’s total population also lives on less than the World Banks’s $1.90 per day poverty

line. While exact information is not available on rural incidence of absolute poverty, lack of

infrastructure limits farmers’ ability to bring their product to markets throughout Africa, and

wholesalers collect high margins on products they buy from farmers.26 Given these market access

difficulties and the high proportion of total individuals living either in rural areas affected by

lack of access or poverty, the rural population faces a crisis in meeting subsistence levels of

living.

Caney addresses this with a theoretical “human right to subsistence,” a negative right

whereby people cannot act such that they deprive people of their ability to subsist.27 This right

24 Shue, “Human rights, climate change, and the trillionth ton,” 297.25 Ibid., 298-301.26 Rakotoarisoa, Iafrete, and Paschali, Why Has Africa Become a Net Food Importer?, 43.27 Simon Caney, “Climate Change, Human Rights, and Moral Thresholds,” in Climate Ethics: Essential Readings, ed. Stephen M. Gardiner, Simon Caney, Dale Jamieson, and Henry Shue (Oxford: Oxford University Press, 2010), 168.

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protects all people from falling below the basic threshold of human functioning. It also cushions

people from the distribution of burden they may feel in a global economic system, whether

striving for global efficiency or not.

(d) Rejecting Structural Injustices within a Human Rights Framework

Agricultural risk, inferior development, and sustained domestic institutional weakness all

prove incompatible with this normative formulation of justice through Caney’s illustrated right to

subsistence. Agricultural risk comes from a cost-benefit analysis in which maximization of

agricultural output is worth the risk placed on low-income developing countries. The human

rights formulation of justice rejects this conclusion due to its disproportionate impact on both

individual farmers and on low-income developing countries. Sustained subsistence is the goal,

but neither individual nor aggregate subsistence is possible when commodity volatility leaves

farmers prone to economic shocks. Thus the allocation of risk is impossible to reconcile with the

human rights framework. In similar fashion, inferior development contradicts human rights

justice criteria by constraining a country’s ability to sustain minimally adequate quality of life for

all. Given the comparatively high fertility rates of low-income developing countries, perpetual

low growth bodes poorly for future generations’ ability to achieve subsistence income, especially

given the current persistence of absolute poverty in low-income developing countries like

Ethiopia. Thus inferior development does not satisfy human rights moral thresholds related to

subsistence income. And sustained domestic institutional weakness fails on the grounds of its

complicity with sustaining agricultural risk in line with global efficiency goals. In this case, the

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interaction between agricultural risk and sustained domestic institutional weakness is what

violates human rights.

(e) Two solutions: institutionalization of human rights and basic income guarantee

In proposing an alternative to global efficiency, I aim to balance multiple values that

address differing elements of the global efficiency problem. Rodrik endorses a national

efficiency framework, in which organizations like the WTO have less sway over countries’

ability to define domestic policy, noting, “Trade officials and technocrats become tone-deaf to

other economic and social objectives when the pursuit of globalization develops a life of its

own.”28 He wants to ensure that globalization does not become an overriding policy value in

governance, because governmental institutions must balance multiple values in order to persist.

Basu laments the lack of “horizontal equity” within international institutions – especially the

“green room” politicking that sets the agenda for the WTO.29 To eliminate the green room is a

step towards the global democracy he sees as necessary to counteract the decay of governmental

institutions’ individual authority. Shue calls for the implementation of institutions that are

international, intergenerational, and immediate in their scope of action. And Caney provides a

powerfully minimal normative tool through his illustration of the human right of subsistence.

Together, these goals tow the line between maintaining state sovereignty in defining the

boundaries of citizens’ welfare and empowering international bodies to protect the human rights

of individuals within states.

28 Rodrik, The Globalization Paradox, 83.29 Basu, Beyond the Invisible Hand, 181.

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One potential solution that incorporates all of these valuable insights is a reformed WTO,

taking cues from the Bretton Woods-era GATT in policy while also doing away with behind-the-

scenes agenda setting that currently exists. Additionally, participation in the WTO should

incorporate a new Low-Income Developing Country Basic Income Guarantee (BIG) scheme.

The BIG would take a fixed proportion of tariff revenues generated by member countries and use

it to dispense a universal basic income subsidy to agricultural workers in member countries that

engage in comparative advantage-driven trade specialization. This would serve as insurance

against the inherent risks of agricultural export dependence on individuals, while also

incentivizing farmers to engage in investment risks they may not otherwise see as worthwhile to

counteract inferior development traps.

In such a trade regime, countries would have much greater freedom to set political-

economic policy goals as they see fit to advance state interests, which can even include global

efficiency since its effects are offset by the BIG. Thus it aligns with Rodrik’s prescription. The

regime also would also have greater transparency thanks to collective agenda setting, thereby

addressing Basu’s criticisms. The WTO is already an international body, but the BIG

encompasses both of Shue’s outstanding conditions of intergenerationality and immediacy by

offering relief to farming families inadequately burdened at present and for the foreseeable

future. Finally, the trade regime fulfills Caney’s human right of subsistence by guaranteeing a

minimally decent income. This requires a slight modification from Caney’s original formulation

of the human right of subsistence, as the BIG would function as a materially provided positive

right rather than a proscriptive negative right. Though they differ in functional form, both

preserve the moral threshold of subsistence for every human being.

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In summation, the hegemonic sway of global efficiency goals yields structural injustice

in countries specialized in agricultural commodity production. This global paradigm does so by

burdening these countries and their citizens with agricultural risk, inferior development, and

sustained domestic institutional weakness. These injustices are incompatible with human rights,

and global institutional reform is necessary to secure a minimally decent, subsistent human

existence for agricultural workers.

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