While inequality persists among societies the world over, the market system is extremely efficient at institutionalizing it. Nowhere is this more apparent than in the international marketplace. Some countries possess abundant natural resources and easy access to markets, while others are not so blessed with such beneficial endowments. Globalization only increases the trade relationships between the have countries, while the have-nots find it extremely difficult, if not impossible, to place a foot on the lowest rung of the proverbial economic ladder. As quid pro quo continues to incentivize international markets, the have-not’s access to crucial resources remains grossly inadequate in providing basic sustenance for their populations. More succinctly: they are being left behind.
These initial endowments, what Charles Lindblom calls “prior determinations” (169), decide which countries will successfully navigate the quid pro quo system and which will not. Lindblom states that these initial endowments “at most give participants opportunities to make…decisions on how to use whatever skills and assets have already been allocated them” (172). By applying this concept to our example, we can easily see how countries without these prior determinations fail to compete on equal ground. Given the mechanisms of trade, this inequality becomes perpetual.
The negative outcomes of this are obvious – persistent poverty, lack of infrastructure, etc. But there is an upside; the international development community happily injects millions of dollars in aid every year into these countries’ economies. The consequence of lacking self-sufficient income generation? Free income. However, aid does not equate to sustainable economic development, therefore it is hard to see the benefits of this inequality as outweighing the costs. The development community has implicitly agreed. By engaging in massive aid disbursement, the lending countries are telling the global marketplace that the instability and potential violence stemming from this endowment inequality is more costly than whatever benefits may accrue from inaction.
Of course, it is not as simple as distributing aid to countries in need. Engagements of this sort are redistributions of wealth – policies that run into fierce political opposition. Depending on the priorities and values that guide our foreign policy though, redistribution is one of few economic tools available. For instance, Lindblom states that, “for some tasks the market system is almost wholly out of the picture” (167). Helping a poor country put a foot on the economic ladder is one of those instances. Given the ideological divisiveness of the issue, the amount of aid given, to whom, and through what channels has been restrained.
It is not hard to see how this could be political in other ways as well. For example, Lindblom states that “through redistributive…transfer payments, market societies can… greatly improve the efficiencies of prior determinations” (175). By allocating resources to economies that would otherwise offer nothing of value – in essence, artificially establishing more useful “prior” determinations – rich countries can set up basic infrastructure and then take advantage of extremely cheap labor pools. While individual politicians might have a difficult time explaining to their constituencies why jobs are being outsourced to far away lands, these policies are ultimately supported by powerful special interests and entrenched bureaucratic establishments.
Though aid is somewhat beneficial in helping these countries, it fails to address the root cause of the problem. Like many other policy solutions, it mistakes symptoms for the disease. Treating only these symptoms renders aid grossly insufficient. A similar diagnosis has guided our reconstruction efforts in Iraq. The Coalition Provisional Authority’s method of reconstruction establishes small PRTs (Provincial Reconstruction Teams) that are dispersed throughout the different provinces of the country. Each PRT is given a specific area of infrastructure development they are responsible for, and a congruent degree of autonomy to deal with it. The PRTs are small enough to blend in with individual communities or towns as to not draw undesirable attention that could undermine already fragile security. In working with the local residents, these reconstruction teams both help to rebuild what was destroyed in the initial stages of Iraqi Freedom, and teach the communities how to maintain that development.
A better solution would utilize similar techniques. The main arbiters of aid would set up EDTs (Entrepreneurial Development Teams) and disperse them to individual communities or villages in countries where aid is being implemented. Each team would determine what villages might be good at making and then set up a small manufacturing operation. EDTs would then provide the necessary labor skills training required for the manufacturing of their product, as well the necessary infrastructure development and maintenance.
Instead of the World Bank or the IMF giving aid to these countries’ governments, they would treat these communities as infant industries and fund their development path as necessary. Aid institutions would shop around their host countries in search of businesses or governments that would be interested in establishing exclusive trading contracts with those manufacturing outposts. This could be coupled with micro financing (or other, more traditional loan vehicles) in hopes of creating a self-sustaining middle class. As these villages became self-sustaining, aid would slowly start to recede, costing much less in the long run. Though currently untested at a meaningful level, this is one of the better options the aid community has in becoming more efficacious.
As auxilium pro nusquam (aid for nothing) continues dominating our response to this quandary, hard solutions prove elusive. Ironically, this institutional problem requires anything but an institutionalized response. Each country’s inequality, though stemming from the same lack of initial endowments, is inherently different. Thus, each country requires a differential, localized response. While Lindblom is careful to illustrate both the costs and benefits of quid pro quo transactions, he states that, “in practical application the rule would leave millions of people on the globe destitute unless charity or nonmarket processes…come to their rescue” (120). This it seems has become a hard reality of the globalized marketplace. While this issue stirs up fierce ideological debate, we are nonetheless implicitly accepting Lindblom’s claim. The market system is an extremely powerful force, making our commitment to equality both difficult and costly. Some may point to this problem as evidence the market system is inadequate; others merely see this as another market opportunity.
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