Vol. VIII, Bulletin No.4.                                                          April 10, 2003 

Harvard Students Pressing Faculty for a Broader Perspective 

Rejecting Dogmatism in Economics

"Neoclassical economics as now taught -- I do not exaggerate -- comes perilously close to being a design for concealing the reality of political and social life from successive generations of students." -- John Kenneth Galbraith.

That quotation introduces a student petition to reform the traditional way that Harvard University teaches economics. "Harvard has a responsibility to provide its 800 introductory economics students with a more balanced perspective than is currently offered," says the petition addressed to the economics department by the newly organized Students for Humane and Responsible Economics.  At latest count, more than 700 students and faculty members have signed the petition.

Occasionally students in the class have distributed handouts with perspectives differing from those of its longtime lecturer, Professor Martin S. Feldstein, his guests, and the class textbook. Now students are doing much more -- they are campaigning for a proposal by another professor of economics, Stephen A. Marglin, to add a new dimension to the curriculum.

Trying To Open Up a Monolithic Program

Marglin has offered to teach an alternative to the first half of the two-semester introductory course, with the second half staying as is. In the first part, according to Marglin's plan, students would benefit from a wider range of discussions and readings that would, for example, challenge some of the assumptions of standard economics and introduce students to behavioral economics, which explores why people often do not follow the conventional economic model of "rational man." 

"I would be delighted," Marglin told the New York Times, "if there was a single [year-long] course with more balance and more critique, but that's not in the cards."  

His limited proposal may not be in the cards either.  He needs the approval of the tradition-bound economics faculty, whose approach has more than theoretical support from Harvard President Lawrence H. Summers, a former U.S. Secretary of the Treasury.  The initial reaction in one departmental committee "was more positive than I expected," Marglin writes in an email. The departmental vote is scheduled for later in April.

Harvard is feeling the effects of a movement that often calls itself "post-autistic economics," which diagnoses standard economics as afflicted with institutional autism, or seriously out touch with reality. The movement sprang up in France two years ago, and has spread to England and, more recently, to the United States, usually minus the "post-autistic" label.

"Most mainstream economists are too proud of their profession to even notice those puny insurgents," an article in a January issue of the Chronicle of Higher Education points out.  But that lengthy feature, "Taking on 'Rational Man'," gave international notice to the insurgents --  "dissident economists fight[ing] for a niche in the discipline," as the article's subtitle puts it. The movement's Web journal, the Post-Autistic Economics Review, shows that the movement has deep intellectual roots and expanding geographical resonance.

Classroom Ideas Have Consequences in the World Outside

But isn't this just a tempest in an academic teapot? After all, the controversy seems distant from what happens in corporate boardrooms and on factory floors.  Not at all, says a mission statement of the Harvard students. And they are right. They point out that

Broaden your horizons, they're telling the economics department.  It is advice that economists in public life, too, ought to heed.

The economy matters greatly, and economics does too. Appreciating that more keenly than most people do, economists usually hold on to their beliefs with fervor and conviction. But why must the ideas of the elite among them be transformed into a religion, a One True Universal Faith having the dominant claim on the thoughts and behavior of humankind?

U.S. Comes to the Aid of Rich Drug Firms

The World Trade Organization's plans for a new round of global trade talks are in deep trouble.  So says a fervent supporter of international trade and investment, the London-based Economist. Don't blame repercussions from the war in Iraq. Explosive internal conflicts are an inevitable consequence of the WTO's trying to manage a global economy of 145 countries with governments that reflect many sharply conflicting interests.

Take the crucial conflict over the desperate need that poor countries have for affordable medicine. Standing in the way of those needs are WTO rules, written by Western governments under the influence of Western companies. Those rules strongly protect "intellectual property rights," notably the government-granted right of pharmaceutical companies to sell their medicines world-wide at substantial profit. Developing countries and their NGO allies in the West at the WTO Ministerial conference in Doha, Qatar, in November 2001, sought a relaxation of the rules, but failed.

U.S. Trade Representative's Veto Provokes Discontent in Developing World

Fearing a breakdown in launching the new, "Doha" round of global trade talks, WTO negotiators did agree in principle on the need for flexibility, and charged a senior WTO council to find a specific solution by the end of 2002 -- a move then promoted as a significant victory for the developing world. It did not turn out that way.  In November 2002 the Council proposed an exemption that served the needs of most developing countries but not the interests of the U.S. pharmaceutical industry. The U.S. Trade Representative, standing alone, vetoed the plan.

Because of the Iraq crisis, the bad news was muffled in the United States, but not in the developing world. Because of this and other setbacks in the WTO, "the sense of disgruntlement among most developing countries has increased," says a new report, "Whither the WTO?", by the Center for Trade Policy Studies of the Cato Institute.  

The powerful weapon that the U.S. and other Western pharmaceutical giants have on their side is a global legal document crafted by trade lawyers and rubber-stamped by governments. Officially called the Agreement on Trade-Related Intellectual Property Right, or TRIPS for short, it lays down the law protecting patents, trademarks, and copyrights for all WTO members, present and future, no matter how rich or poor or they may be.  In fact, according to the Cato report, TRIPS is "perhaps the strongest agreement coming out of the [1994] Uruguay [trade] round" -- strongest, that is, in enforcement procedures, including strong sanctions against violators.

Leading WTO Down a New Path -- 'Akin to Protectionism'

TRIPS is of major significance for another reason.  It moves beyond the traditional area of trade policy, as carried out for half a century by the WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), with its focus on reducing tariff and  non-tariff barriers to goods and (more recently) to services. The Cato report sees this focus as the WTO's "ideal constitutional function."  

Agreements such as TRIPS move the WTO in a new direction "akin to classic protectionism," says the report's author, Razeen Sally of the London school of Economics.  Briefly, here is his critique of TRIPS:

"It differs fundamentally from classic GATT-type market access rules, for its short-term effect is to close, not open markets: strong patent protection in particular increases prices and transfers rents [profits] from poorer developing countries to multinational enterprises headquartered in the West, especially in the pharmaceuticals sector....

"The main point to bear in mind is that TRIPS takes WTO rules in a new direction -- not further in the direction of market access, but elsewhere, toward a complex, regulation-heavy standards harmonization agenda.....Let us be clear: these are not negative, proscriptive, classical liberal -type general rules of conduct to protect property rights in international transactions, that is, rules that tell actors what not to do but otherwise leave them free to do as they wish....

"In stark contrast, TRIPS contains harmonized regulations, with detailed prescriptions on how they should be enforced within domestic. jurisdictions. The actual and potential effect is to hinder, not promote, market access....The effect is the same as classic protectionism."

In Sally's analysis, "the WTO suffers from creeping standards harmonization" [his italics]. TRIPS is its "Trojan Horse," in that it "sets the precedent for artificially raising developing-country standards in a range of other areas, such as labor, environmental, food safety, product labeling, and other technical standards, armed with...trade sanctions in case of noncompliance."

Labor Rights Rules Would Be Minimal, Unlike Those on Property Rights

So Sally sees a connection that most other free trade enthusiasts miss or dismiss.  After all, since WTO sets enforceable global rules to protect capital, it reasonably could also do so for labor. But is the WTO-imposed burden the same in the two cases?  Would labor require the same "complex, regulation-heavy" standards that multinational commerce has gained for capital? The clear evidence is that it does not.  The need is only for the minimal rules that Sally praises: "rules that tell actors what not to do but otherwise leave them free to do as they wish."  Here's a real-life example.

By law Bangladesh suppresses the rights that workers in its Export Processing Zones (EPZs) have to freedom of association and collective bargaining. This action not only suspends Bangladesh's own laws and violates agreements it has signed with the UN International Labor Organization. The suppression should also, under U.S. law, disqualify Bangladesh from receiving certain duty-free trade benefits from the United States.

Thirteen years ago the AFL-CIO first petitioned the U.S. Trade Representative to withdraw those benefits, unless Bangladesh failed to restore the rights of the EPZ workers, most of them poor women producing goods for the U.S. and other Western countries. In another words, the AFL-CIO was not asking for the adoption of the complex rules that TRIPS imposes on poor countries. Rather, it was pressuring Bangladesh leaders on "what not to do, but otherwise leaving them free to do as they wish."

Over the years since 1990, Bangladesh government has repeatedly promised to cancel those restrictive laws, but has repeatedly not done so. For its part, the AFL-CIO has filed a series of petitions -- the latest in December 2002 --  asking the U.S. Trade Representative to restrict those tax-free benefits, but the U.S. government agency has not done so.

This is the same Office of the U.S. Trade Representative that, prodded by rich pharmaceutical companies, vetoed a WTO plan to give poor countries greater access to the affordable drugs they desperately need. Fortunately, Bangladesh is one of the few developing countries with the capacity to produce its own medicines without paying huge licensing fees to foreign multinationals.  

As a result, according to a friend of mine who lives there, the same medicines cost far less in Bangladesh than they do in the United States -- from a tenth to a hundredth less. People in most other poor countries aren't that fortunate.  

 Misplaced Faith in Free Trade

Under the headline "Trade Brings Riches, but Not to Mexico's Poor," a Washington Post article on March 22 laid out grim facts such as these:

"Despite the assurances of four presidents that Mexico was moving up from its Third World status, and a landmark free trade agreement with the United States [the North American Free Trade Agreement, or NAFTA] that was to have enriched the country, the number of people living in poverty has soared over the past two decades....About 19 million more Mexicans are living in poverty than 20 years ago, according to the Mexican government and international organizations.....

"While a boon to the maquiladoras, or factory workers [in export industries], and a blessing to certain bigger farmers, NAFTA has inflicted more pain on already ailing small farmers, most economists and analysts here agree."

A Stalemate Caused by a Bad Case of Myopia

"Faith in global integration as inevitable and beneficial is eroding."  That assessment was not in the article but in an editorial, "United by Free Trade," that appeared two days later. Much concerned about the "stalemate" in the World Trade Organization as it nears a top-level meeting in Cancun, Mexico, September 10-14, the Post called on the United States, Europe, and Japan "to press forward with the trade liberalization that has been proven to increase prosperity."  Prosperity, yes, but for whom?  There was no mention on how the fate of Mexico might have helped erode faith in free trade.

Faith is a great virtue, but perhaps nurturing the two other virtues -- hope and love -- would be more useful to solving the complex trade issues facing policymakers before, during, and after Cancun.
(For information on some issues coming up at Cancun, check the Website of the Center for International Development at Harvard at http://www.cid.harvard.edu/cidtrade/cancun.html.)

Honing Tools for Progress on Rights

Multinational corporations generally do not permit their subsidiaries and agents in a foreign country to be involved in gross crimes such as torture, extrajudicial killing, or forced labor. It does happen, however, and more than a dozen lawsuits are pending in U.S. courts to nail those found responsible. In one of those complaints, filed in federal court in Miami nearly two years ago, Coca-Cola and its bottlers are charged with hiring paramilitary units to terrorize and assassinate union leaders at its plants in Colombia.

Last month a U.S. District Court Judge in Miami had good news for the Food and Bottle Workers Union of Colombia, the victimized union at the Coca-Cola plants. He ruled that the civil lawsuit could proceed against the two bottling companies, but dismissed Coca-Cola Co. and Coca-Cola Colombia from the case on the ground that the companies' bottling agreements did not explicitly grant Coca-Cola control over labor relations policies of its bottlers.

"We are absolutely convinced that one word from Coca-Cola would stop the campaign of terror against trade union leaders in the Colombian plants," said Dan Kovalik, assistant general counsel for the United Steelworkers of America and co-counsel for the plaintiffs.  Kovalik and Terry Collingsworth, executive director of the International Labor Rights Fund (ILRF) and co-counsel for the families of the murdered Colombian workers, announced that they would appeal Coca-Cola's separation from the case.

Coca-Cola Denies Having a Hand in Colombian Crimes

Coca-Cola does not deny that murder and terrorism occurred in its bottling plants, but argues that it cannot be held liable in a U.S. court for what happened in Colombia. There are, however, precedents under the Alien Tort Claims Act and the Torture Victims Protection Act to allow such lawsuits to come to trial in federal court. Which is why business groups all the way up to the International Chamber of Commerce seek to repeal or weaken the two U.S. laws.

In this instance, the litigation is part of a campaign to persuade Coca-Cola to take a new tack by publicly denouncing the recurring anti-union violence in Colombia, agreeing to cease all formal or informal relations between the paramilitary and the bottling plant managers, and permitting trade unions to monitor compliance. Major U.S. participants in the campaign are the United Steelworkers, the International Brotherhood of Teamsters, and the United Food and Commercial Workers Union, as well as the Labor Rights Fund and the U.S. Labor Education Project..  

In an article titled "The Key Human Rights Challenge: Developing Enforcement Mechanisms" published in the spring 2002 issue of Harvard Human Rights Journal, Collingsworth wrote: "The weakness of most campaigns is that they lack teeth -- they do not have real leverage except for the often remote possibility of media interest. Using litigation in tandem with a campaign could provide this necessary element."

U.S. Supreme Court Eyeing Nike Code

Are the promises that Nike makes in its corporate code of conduct "political" speech, that is, protected by the First Amendment?  Or are they simply "commercial" speech, subject to civil lawsuits if they're proved false?  After the Supreme Court of California last year came down on the commercial side of the dispute, Nike appealed to the U.S. Supreme Court, which is scheduled to hear the case on April 23. (Check "Judgment Day May Be Near for Nike.")

In a timely new book, "Setting Global Standards: Guidelines for Creating Codes of Conduct in Multinational Corporations," S. Prakash Sethi, professor at the Zicklin School of Business, Baruch College, New York City, writes:

"Companies have been all too willing to make promises in the form of codes of conduct whenever they're forced to respond to public concern, but they have treated those promises as harmless paper exercises that they will not need to put into practice anytime soon -- if ever....Most companies have been entrapped by their own misstatements and false promises."

Comments Jeff Ballinger, longtime worker rights activist and specialist in monitoring Nike: "'Free Speech' protection carries with it a certain responsibility -- Nike's file is loaded with demonstrably false statements, and these were clearly intended to mislead consumers."

Human Rights for Workers
: Bulletin No. VIII, April 10, 2003
Robert A. Senser, editor
Copyright 2003
robert@senser.com. (Send e-mail)

Back to Home Page