Clean Hands in the Global Market
by Leif Wenar
The Conversation
May 30th, 2008
So far the conversation here has centered on the principled arguments for ending our support for some of the most oppressive authoritarian regimes in the world, in countries like Burma, Libya, Sudan, and Equatorial Guinea. Because of a flaw in the system of global commerce, money we spend on our everyday purchases goes back to these regimes and helps them to maintain their grip on power. I have argued that these authoritarians are literally stealing the natural resources of these countries, and that the system of global commerce must be revised so as to stop these thefts from occurring. I have set out two methods of using existing market institutions to stop these thefts, and have argued that these methods would work to end the massive transportation of stolen resources across borders.
One of the methods is the Clean Hands Trust. Say that China now buys $3 billion worth of oil from the Sudanese regime in Khartoum. The correct response on a property rights approach is for the U.S. government immediately to announce a Clean Hands Trust for the People of Sudan. This trust is a bank account that the government will fill until it contains $3 billion. The money to fill the trust will be raised from tariffs on Chinese imports as they enter the United States. The money in this Clean Hands Trust will be held for the people of Sudan until the minimal conditions for decent governance in that country are met. At that point, the money will be turned over to the Sudanese people.
The Clean Hands Trust will protect the American people from becoming tainted with the oil that China buys illegally from the regime in Khartoum. The tariffs extract from Chinese imports the value of the oil taken from Sudan, and the trust holds this money in reserve until it can be given back to the Sudanese people. With the tariffs in place, American consumers can buy Chinese goods with clean hands, because the tariffs subtract the value of that element of the goods’ manufacture that comes from the oil sold illegitimately by the Khartoum regime. The trust-and-tariff mechanism protects property rights by retaining the value of the stolen property for the owners of that property: the citizens of Sudan.
Christopher Wellman endorses the argument that we are now directly and indirectly sending money to dictators and receiving stolen resources in return. He believes, however, that the methods proposed to enforce property rights in the global market do not go far enough. With adept analogies he argues that the Clean Hands Trust is insufficient to right the wrongs occurring in the system of international trade — insufficient, for example, to allow Americans a clean conscience when buying Chinese imports when these in turn have been made with stolen Sudanese oil. While Wellman does not explicitly say so, it seems that he holds that only a ban on some Chinese imports would be sufficient to enable Americans to buy Chinese goods without moral taint.
Wellman’s position and my own are very close, and there is every reason to explore Wellman’s suggestion that justice may require more revisions of the system of global commerce than I have set out. Some might have concerns about the political feasibility of partial bans on Chinese imports instead of tariffs as I propose. However this is not a point I would like to pursue here. My only concern is to restate that the Clean Hands Trust mechanism is a method of enforcing property rights, and to show that it would in fact be sufficient to keep the hands of American consumers clean.
Taking a page from Wellman’s book, here is an analogy that may help to make this point. You run a supply store outside a company town. Every month the boss of the company town comes to your store to buy about $100,000 worth of supplies for his workers. You learn that the boss is embezzling from the workers’ pension fund: he takes $5,000 a month off the top. Your correct response on a property rights approach is to tell the boss that prices have gone up: he must now pay an extra $5,000 a month for his supplies. Once he pays the $105,000 you keep that additional $5,000 in trust, until it can safely be given back to its rightful owners, the workers. By doing this you not only keep your own hands clean of stolen money, you act to enforce the property rights of workers. You end up with nothing that has been embezzled, they get back what they own. This solution is much better than refusing to take the boss’s money, in whole or in part, which can be seen by asking the workers what they would want you to do. They want you to raise prices and keep their money in trust: they want you to enforce their rights.
This is merely an analogy, but it shows the moral force of the Clean Hands Trust. This mechanism returns the value of stolen goods to the rightful owners of those goods. It enforces property rights, in just the same way as in the analogy, and in just the same way as when a judge orders a thief to pay to his victim the value of the goods the thief has taken.
In the current world order, no force of law can prevent the Chinese from receiving oil that is stolen from the Sudanese people (and, increasingly, from giving the Sudanese regime armaments in return). What the United States and other countries can do is to extract the value of that stolen oil from the Chinese through trade policy, and keep that money in trust for the Sudanese people. This mechanism not only enforces property rights, it also discourages the Chinese from buying more oil from Sudan, dries up the revenues that support the regime in Khartoum, and gives the Sudanese people all the more reason to unite in replacing that regime with a decent, unified, and at least minimally representative government.
Markets work when resources are secure from predation. Right now we cannot help purchasing goods made with resources that have literally been stolen out from under the feet of some of the poorest people in the world — who are poor at least partly because their entitlements have been massively violated in the past. We can make the global market work for them and for us. The first step, as always, is to enforce property rights.
