PHM-Exch> Food for a not meaningless thought (2)

[Claudio Schuftan]

From: .George Kent <kent at hawaii.edu>
.

.When explaining why “it is the current system that produces and
perpetuates ever greater inequality,” it is important to go to
fundamentals. Here is what I say in *Ending Hunger Worldwide*, p. 34:



“When the data show that trade does not substantially alleviate poverty,
devoted trade advocates scramble to find comforting explanations, insisting
that there might have been market failures or non-economic factors at work.
They cannot imagine that the failure might be a weakness in the market
system itself.



Trade widens economic gaps by concentrating wealth in the hands of those
who are better off. The explanation is straightforward. The elementary
transaction of the market system is the bargain, the negotiated exchange.
One's bargaining strength depends on the quality of one's alternatives.
Some people (or companies, or nations) are stronger than others because
they have better alternatives.



In voluntary transactions both parties must get some benefit, since any
party that did not benefit could refuse to trade. In any transaction
between parties of unequal bargaining power, the more powerful party
benefits more than the weaker party. With repeated trading, the gap between
strong and weak steadily widens because the transactions tend to be of
greater benefit to the more powerful party. The powerful have more and
better alternatives, and thus enjoy faster economic growth than the weak.
Both parties benefit from the exchange process, *but unequally*. The rich
get richer and the poor get richer too, but much more slowly.



Thus, over repeated transactions, stronger parties systematically enlarge
their advantages over weaker parties. Bargainers do not move to an
equilibrium at which the benefits are equally distributed, but instead move
apart, with the gap between them steadily widening. Asymmetrical exchange
feeds on itself, making the situation more and more asymmetrical.”





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