International Trade doesn’t work for poor people

My mind was blown today with a critical fact of Economics.

Returns to scale are a market imperfection in competitive markets.

The entire theory of competition, markets, and trade is based on the assumption of constant or decreasing returns to scale. This concept defines all trade theory, and largely defines the policy that affects entire countries and allocation of the great bounty of the world’s resources.
But returns to scale are a fundamental aspect of international business. Returns to scale, the idea that cost is cheaper as a firm produces more, is what leads to giant consolidated multinationals, concentrated market power (and lobbying clout), and factory agriculture. These are the industries that dominate in foreign countries, the ones that can take advantage of returns to scale. In fact, when we tell developing countries to open themselves to foreign investment, it’s these types of industries that are built.

Governments acting for free trade is acting for industry.

Then we have returns to capital. The people who own more, are more likely to grow. What if allocation of resources is originally uneven? And information is uneven? That might lead to initial conditions being exaggerated in the form of country inequality: rather than poor countries being able to catch up they are already behind on the big scalable high-wage jobs.

What about comparative advantage? Poor people have no comparative advantage. There is no perfect awareness among non-Americans, as Winters et. al write “there is evidence that poorer households are less able to protect themselves or take advantage of positive opportunities by trade reform” (emphasis mine). Who produces these comparative-advantage goods? Savvy foreign entrepreneurs who CAN take advantage of opportunity. For them, they see cheap labor. And bring in technology that raises total country output/head. The poor not only lose what they were doing to import competition, but get unskilled, low wage jobs, the benefits of which go to capital owners and middle men who understand international systems, and their resources are used more intensively, not for them. Inequality is exaggerated (returns to scale, again) and most of the profit is siphoned into foreigners hands or reinvested in growth (capitalists are rarely satisfied to just make a profit). For what end does this growth aim? “Those that do benefit directly increase their input consumption, production, and consumption of goods and services.” The winners get to consume more. But CEOs and developed countries consistently score the saddest on international surveys! By making money, the poor remain a given (their wage will increase once everyone in the world’s does…) and externalize the things that do matter in the name of increased world consumption.

Jobs do not equal growth. Poor are not creators in capitalism. Those who earn more do not know happiness.

All free trade is based on fundamental assumptions. Decreasing returns to scale is one of them. In International Economics, everyone has perfect awareness of opportunities, and access to international demand if your idea is good enough. Unfortunately they’re stuck behind learning curves, and we tell them not to subsidize their domestic industry. This dynamic inequality impacts thousands of millions of people; the international flow of all goods and capital is based on a lie.

How can this fundamental feature be overlooked at phase 1 of Economic theory? How can the concepts of increasing returns to scale and market power be an oversight before any microeconomics graph is drawn? This changes everything.

I don’t know whether to cry or be angry at the institutions we’ve created. Thousands of people are starving, while their countries make exports for rich people. Poor people are told they can’t farm, because rich farmers and plantation owners are better at cutting costs. Poor people are not creators. And helping them isn’t profitable for business. Then we’d have to pay them more for our jobs.

-Eddie Miller
Boston University
A Global Organic Mindset: eddiemill.wordpress.com/

My “Fake” Resume

When I think about this past year, and think ahead to success and what that is going to mean, I inevitable arrive at the conclusion that life experience is critical in forming new expertise. Leaders are created, not born. Up to now I have only one regret: in not taking advantage of an opportunity with Trader Joe’s last year, I have given up a few very real losses that I can only hope to some day rectify. Here, then, is my “fake” resume, as it could be.

1. Trader Joe’s, Crew member and Regional supervisor
Trader Joe’s is a wonder to most people who shop there. How, they ask, can TJ’s afford to price higher-quality, better-sourced food at 30% off of a supermarket? The answer to this involves direct supply chains, and store brand (Trader Giotto’s Italian food?) that cut out that crucial middle man. It also involves catering to amazing customers, and moving twice as much per store area as most supermarkets do. I “worked” here from Fall 2007 to early February, 2008 and was a part of this movement as it quadrupled profits and expansion through that time.

2. The Food Project, Summer trainings supervisor
With my experience at Trader Joe’s and a good understanding of sustainable food chains, I put in an application to be Intern at the Food Project (I actually did, barely missed the opportunity). The Food Project is the best regional example of farms creating thoughtful and productive community, especially with young people as full partners in food creation. This was a summer advising position to local area youth, to grow chemical-free food for markets and local food banks. Gave an understanding of a working farm and market flows.

3. Nourish International, Founder
Nourish International is another application I just missed. This position was head of a club to raise funds towards implementing a sustainable development project in a developing country. Together with peers, we raised $10,000 through school lunches, poker tournaments, and the Equal Exchange fundraiser towards a project that I design in Costa Rica Spring ’09. As a second part of the club, we “travelled” there to actually implement the design and improve the lives of an entire community. As leader and founder, I look forward to next year to implement bigger projects.

This has been a vision of what could have been. It’s painful to see an alternative less than this visionary path, and know that it was within reach. Rather than continue to lament the loss, I had to write this down. Research can somewhat make up for lost opportunity, but I have to question what could have been if there hadn’t been a casually dismissive comment one fall day from a friend I really value…

Enough of what’s wrong.

We all know the problems. The only way out now is to implement constructive solutions. That’s why today I’m making the pledge to only write positive on this blog: that’s right you will not find complaints, issues, or negativity here.

I hope that my ideas and experiences can be a light for those who haven’t awakened to the power of thought yet, and be utilized as you see fit. As always, if something makes you think be sure to leave a comment. Disputes are welcome (ex: the world really is a sad place) same format or facebook.

-Eddie Miller
eddiemill.wordpress.com

The “Next Big Thing”: Bioregional Organic for international community and development

As you may know, food has been the main focus of my life now for some time. Improving the inefficiencies that exist has been a priority since my journey to Costa Rica one year ago. Tonight I had a moment unlike many others, a vision of what’s next and my role in it: a transitional role to a new market optimal.

First a brief overview, then the idea.
How conventional food systems work (I’ll use coffee for the example) is that farmers produce the crop, sell to a local intermediary who then arranges for it to be picked up, processed, and sold through various [anonymous] supply chains. Essentially, before the coffee is brought to a supermarket it is combined into some “least-common-denominator-quality” brown grind and then set into cans that can compete on lowest price (think big Maxwell House tin). The farmer gets almost nothing for his crop (while in exchange not much is expected of him) and is subject to the price variability of the free market, not to mention the mercy of nature on his plot. Unorganized producers selling to intermediaries is the worst, and has resulted in many small farmers going out of business to larger plantations. It’s simply too inefficient.

Fair Trade can be seen as a direct response to that. Its goals are to a) ensure a more constant price for farmers b) raise awareness through consumers about the product they buy, and c) encourage cooperative selling and investment among small farmers. On these scales it performs very well in providing a more just cup of coffee. Unfortunately it requires that farmers already be organized, which excludes most smallholders.

Organic production is another step up. It is certified for its a) gains to farm and crop biodiversity, b) soil health and sustainability, and c) minimized reliance on external inputs which are energy-intensive, unessential, and harm the environment. If a farmer is fair trade and organic, he gets a better price. In the US, an organic farmer is likely a happier one that sells locally. It’s also a beloved industry that has been growing 12-20% per year for its [perceived] benefits to food quality, freshness, health, and safety. Take a minute to look at these goals, until you see a farm system that is advantageous to the abomination of factory farming.

…if it’s feasible..

My reactions to change, the election, and Barack Obama

As a “mongerer of hope” myself, I see a lot of myself in Barack Obama.

In his practicality, vision, and opportunity this amazing campaign.

I hope that Americans understand what this means, this thing that
we’ve all done. The next 4-8 years of our country is in the hands of
Barack Obama and the democrats now– I feel, though, that He may be
the only one who truly knows what that change means. I realized that
this was possible on realizing that all eras must end.

The only doubt is that everyone might not be ready for this. It just
takes one racial bigot with a gun to cause a national tragedy, a
possibility that seems all too real to me.

Dark thoughts aside, its been great to be a part of our democracy.
From here out, anything is possible. we did our part!

Here on the pulse of this new day
You may have the grace to look up and out
And into your sister’s eyes, into
Your brother’s face, your country
And say simply
Very simply
With hope
Good morning.

For Obama’s acceptance speech:
http://www.dailykos.com/storyonly/2008/11/5/0510/83437/390/653543

Good morning.
-Eddie

The Organic Development Paradox

There’s something happening in Latin America.

Somehow, our solutions for growth and trade and food have not worked for poor people.  The land is used by big foreign companies, to grow food to sell here in our supermarkets that are big and beautiful.  As plantation-factories grow bigger and more capital-intensive, there’s really not much advancement in wages for the workers!  And they’re still exposed to harsh chemicals and long daily hours of machete work.

Organic farming can be much better for farmers and the environment. Fundamentally, it denies the use of chemical fertilizers, pesticides, and GM seeds.  What it means is that the mindset of the farmer is very different- rather than try to minimize the costs to produce as much as possible, it’s more about managing the land.  It’s more “labor intensive,” which means more skilled jobs that the family can help out with. And you can use “crop rotation,” which is just not planting the same thing every year.  The interesting part is that you can actually get a “higher yield” from this small-holder, labor-intensive, ecological agriculture.  The plants grow better when cultivated for health, beauty, and permanence surrounded by other plants of different types.  Foodfirst backgrounder on organic yields: sustainable-ag-can-feed-the-world

AND consumers are taking a liking to this more natural crop.