A political science understanding

In order to complete my business education, I decided to take a concentration in International Relations. I thought that International Relations would help me to better understand how the international economy works. I was really interested by the theorems studied in the introductory class Poli243. However, these theories are always about broad concepts. I would like to clear the bridge between these macro concepts of the world, with more concrete "micro-meaning". One of the striking theory learned in this class is Wallerstein World-Class Theory based on the rejection of the notion of a "Third World". Instead, he claims that there is only one world connected by a complex network of economic exchange relationships, a "world-system" in which the "dichotomy of capital and labor" and the endless "accumulation of capital" by competing agents account for frictions. This approach is known as the World Systems Theory. The described frictions go along Elgin's idea in Voluntary Simplicity that "we cannot expect to live in a peaceful world with such enormous disparities between the rich and poor." Wallerstein reckons that the origin of the "modern world-system" is due to the 16th century slight advance in capital accumation in Western Europe and the Americas. This accumulation itself is due to specific political circumstances at the end of the period of feudalism. As a result, only one global network or system of economic exchange exists, and by the 19th century, every area on earth was incorporated into the capitalist world-economy. However, this "world-society" is not homogeneous in economic terms; it is instead characterized by fundamental differences in social development, accumulation of political power and capital. An inherent feature of the world-system is a lasting division of the world in a core (developed countries with political clout), semi-periphery (developing countries) and periphery (undeveloped countries) organization. There is a fundamental and institutionally stabilized "division of labor" between the core and periphery: while the core benefits from a high level of technological development, the periphery supplies raw materials, agricultural products, and provides cheap labor for the expanding core. As a the core exploits the semi-periphery and periphery, while the semi-periphery exploits the periphery. Economic exchange between core and periphery takes place on unequal terms: the bargaining power of the core will higher over time, and the terms of trade will deteriorate for the periphery, as the core will ask more and more primary products-imports from the periphery against less and less complex products-exports. This state stabilizes itself do to quasi-deterministic constraints, and natural resources, land, and labor are gradually being stripped of their "intrinsic" value.

As a business student, I could try to dig in this theorem by looking at particular business activities involving the core and periphery. We know that business corporations nowadays benefit from global value chains, and outsource their activities in specific areas of the world. As the companies implement their manufacturing plants in Asia, or Africa, they benefit from cheap labor. But, when we say that these corporations "exploit" the cheap labor, what really matters is that core-citizen would still buy the clothes, and indirectly benefit from cheaper prices, than what they should pay for. Therefore, I am partly responsible for Wallerstein description of unbalanced economic relationships between the core and periphery since I wear those clothes made in Asia etc. At the bottom line, the question raised here is the alternatives to buying those unfair products.

Fair Trade is a rising movement. "Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South. Fair Trade Organizations, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade."
However, this movement has its limits. According to Adam Smith Institute estimates, only 10% of the increase in price over a similar non fair trade product ends up in the hands of producers. This paradox shows how today's trade, ruled by liberal institutions such as WTO, is deeply rooted in exploitation schemes. If even the Fair Trade institute struggles to reward the producers for their work, what else could be done?

Moreover, one could think of the many weaknesses of this initiative. The real problem, as described by Wallerstein, is the incapacity by the periphery countries to transition from a stage of primary product producer to a more technologically advanced stage. With such an initiative as Fair Trade, periphery countries are still being locked in by the core in the position of exporting primary products to the core countries, and their revenues for primary goods would depend on the willingness of core citizen to pay a premium.

To be continued...