Free Market Principles Worldwide Free

Free Market Principles

Worldwide free market policies have been debated extensively for their help or hindrance in alleviating poverty, particularly in third-world countries. While some hold that the free market exists to provide all countries with the opportunity to compete worldwide and thus improve their economy, others hold that the policies related to this practice are fundamentally harmful for the economic development of specific countries. In principle, the free market philosophy promotes worldwide democracy and an equal opportunity for all countries to participate in the world economy. In reality, however, it appears that the promotion of the free market is merely another tool for the richest to promote their own well-being to the detriment of the poorest. Malawi, as recently reported in the New York Times, seems to be a case in point in substantiating this argument. While both political and economics issues are at stake, the most important in the Malawi case is the focus on ethics. Ethical issues relate not only to the world market and the responsibilities of the rich toward the poor, but also to individual countries and how they are governed.

In the Malawi case, the New York Times report notes that the country has suffered from extreme poverty and hunger for most of the twenty years during which it was obliged to either eliminate or diminish its fertilizer subsidies (Celia W. Dugger). The lack of local government subsidies pushed up fertilizer prices to the point where farmers could not afford it, and hence farmers were unable to fertilize their land. Yet, their personal and family needs obliged the same farmers to continue using their land. Unable to let the land replenish itself, and unable to fertilize, the crops became smaller and smaller, and the country reached the edge of starvation. Indeed, Dugger notes that the problem was so extreme for some that they were obliged to watch loved ones die of hunger.

An interesting fact is that those denying poor countries the right to provide subsidies to their farmers are themselves engaged in extensive subsidy programs within their own environments. The result is that local food prices are lower than any global competitor could hope to meet and still make a profit. Hence the richer countries benefit from their own subsidy programs, even while keeping poorer countries enmeshed in an ever escalating cycle of increasing poverty and hunger.

Ethically, there is clearly a problem with this state of affairs. There is a fundamental imbalance in the resources available to the rich and those that the poor are often deliberately deprived of, as seen above. Ethically, rich countries have a responsibility not only to alleviate poverty by providing resources and opportunities, but also to not provide their own already well-off farmers with further subsidies to the exclusion of such rights for other countries. If the aim is truly to provide poor countries with equal opportunities within the world market, rich countries should implement the same policies for both their own farmers and those worldwide.

In this, Peter Madsen cites the Integrative Social Contracts Theory (ISCT) proposed by Thomas Donaldson and Thomas Dunfee, where both the local and global community operate by means of contractual arrangements to ensure fairness on both scales. According to such a contract then, for example, economic well-being can become a reality or all involved in the world market by imposing the same ground rules for all participants. In such an arrangement, the rule-making party would not be allowed to bend or break the policy in its own favor, but instead the marketplace would be leveled for the benefit of all instead o for just a few. This is the principle according to which the Malawian government made its decision to ignore the existing, unfair policy regarding fertilizer subsidies.

According to Dugger, the government found the extreme conditions in its country unacceptable, particularly as it saw subsidies as a solution to this. Furthermore, the government viewed the well-being of its people as its responsibility, and based its decision upon this rather than upon seeking the favor of world powers. In terms of Donaldson and Dunfee's theory, this is a decision based upon a contract between the government and its people upon a local scale, where the well-being of the country takes precedence over possible future economic benefits on a more global and political scale. Personally, I believe that the Malawian government was correct in its decision. Certainly, it smacks of unethical behavior in the extreme to impose a damaging policy such as that relating to fertilizer subsidies only upon the powerless while the powerful are allowed to do as it sees fit. And indeed the case itself proves the point: Fertilizer subsidies were extremely effective, as Malawi solved a large amount of its economic problems simply by providing its farmers with subsidies.

There could be both negative and positive repercussions of this action. Malawi's beneficiaries for example could refuse their provisions for alleviation to the country's poor. The country could also be isolated from the global marketplace. It is however difficult to see how the country could have effectively competed while languishing in its previous condition. On the positive side, the concrete evidence of the effect of subsidizing on the Malawian economy could also have global repercussions of the subsidy policy for other poor countries.