Adam Smith
Originally uploaded by surfstyle.
Masden Pirie of the Adam Smith Institute was interviewed on the BBC news and current affairs programme "The World this Weekend" today.
He argued that globalisation and giving access to markets were the way to cure poverty. He is more right than those who would argue for protectionism, but implicit in his advocacy of the free market is the idea that wealth will be distributed through the famous trickle-down effect.
Unfortunately, there is no such effect. Surplus value ends up as rent and is claimed by whoever owns the land. This is why the benefits of fair trade can be a delusion. If the farmer gets paid more for his crop but does not own his own land, then the extra he receives will be claimed by the landlord through higher rents. Pirie ruins his sound case by ignoring the effect of land tenure on wealth distribution and needs to address this with appropriate policies, of which land distribution is not necessarily the right one.
Unfortunately, by bringing the idea of free markets into disrepute, he lends weight to those who see protectionism as the solution. But protectionism is equally disastrous for the poor.
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