ECONOMIC JUSTICE IN AN UNFAIR WORLDassets.press.princeton.edu/chapters/s8162.pdf · ECONOMIC JUSTICE IN AN UNFAIR WORLD3 see, some people criticize increasing economic integra-tion

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ECONOMIC JUSTICE

IN AN UNFAIR WORLD

The place of morality in international politics isthe most obscure and difficult problem in the

whole range of international studies.—E. H. Carr

Recent years have witnessed a growing number ofactivists, scholars, and even policy makers as-serting that the global economy operates in a way

that is fundamentally unfair, particularly to developingcountries and to the poor within them. Thus, a Washing-ton-based policy analyst has called the trade policies ofthe United States and the European Union an “ethicalscandal,”1 and a U.S. trade representative has branded Eu-ropean protection of its agriculture “immoral.”2 The Bel-gian foreign minister has proclaimed the need for an “ethi-cal globalization,”3 and the former United Nations HighCommissioner for Human Rights, Mary Robinson, haseven launched an “Ethical Globalization Initiative.” Aspresident of the World Bank, James Wolfensohn lamentedthat “something is wrong” with the global economy, andhis controversial chief economist, the Nobel Prize–winnerJoseph Stiglitz, once glibly remarked, “Of course, no oneexpected that the world market would be fair.”4

In response to the global economy’s alleged inequities,we now find the United Nations regularly publishing re-

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ports with titles such as Globalization with a Human Face,and debates over the international community’s pover-ty-reducing “Millennium Development Goals” makingfront-page news.5 But profound disagreements exist overhow to solve the world’s most pressing economic prob-lems, and who should take responsibility for them.

Despite this lack of common ground, it is probably safeto say that almost everyone agrees that economic transac-tions should be carried out on a “level playing field.” Asa consequence, even the president of the United States,who governs the world’s lone superpower, finds it neces-sary to offer assurances that his international trade objec-tives include “providing a level playing field for Americanworkers.”6

But what does it mean to create a level playing fieldfor international economic transactions? And why is suchleveling even desirable? After all, there are prominenttheories of international relations that dismiss the notionthat world politics can or should be conceptualized innormative terms at all. Most prominently, “realists” assertthat there is no moral authority above states, no centralenforcement agency, and so states are “self-contained”ethical units. This means that world politics is shaped bythe distribution of power rather than by any shared nor-mative culture, and thus a tilted playing field is quite “nat-ural” and perhaps even desirable, to the extent that a greatpower uses its authority to create the international re-gimes that make global economic transactions possible.

Given differing views about what constitutes a levelplaying field and about the sources of unfairness in theglobal economy, this chapter opens by providing three al-ternative lenses for viewing the normative problems asso-ciated with increasing economic integration. As we will

E C O N O M I C J U S T I C E I N A N U N FA I R W O R L D 3

see, some people criticize increasing economic integra-tion because of its allegedly deleterious effects on nationalwelfare and the domestic social compact, or what mightbe called the communitarian model of economic justice.Others, in contrast, are primarily concerned with the ef-fects of greater openness on the “global poor,” or whatmight be called, following Derek Parfit, the prioritarianvariant of cosmopolitanism; this means that internationaleconomic policy should make poverty reduction its prior-ity.7 Finally, still others, including myself, emphasize thepolitical structure of the global economy, its internationalinstitutions and regimes, and how these institutions shapeeconomic relations among nation-states. That is the par-ticular focus of this book, and I label my perspective theliberal internationalist approach to economic justice; elabo-rating that framework is the major burden of this chapter.

Models of International Economic Justice

Even within the institutional setting provided by domesticpolitics, in which a central authority can (at least in princi-ple) set taxes, redistribute incomes, and provide socialsafety nets, there are few public policies that are as contro-versial as those that shape the allocation and redistributionof assets, revenues, and other scarce resources, that is, thepolicies that constitute a society’s definition of economicor distributive justice. (Distributive justice is more accu-rately a broader or “umbrella” term of art, referring notonly to economic goods but to opportunities and othervalued services—e.g., health care—as well, but I will alsouse it in this narrower context here.) Students and prac-titioners of economic or distributive justice are concerned

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with the goods and services that should be subject to allo-cation and distribution (e.g., income, health care), the re-cipient populations (e.g., “needy” individuals, particularethnic or religious groups, or developing countries), thedistributive principles (e.g., equality of resources or of op-portunity), and the specific policy instruments (e.g., pro-gressive taxation schemes or foreign aid transfers).

Naturally, there is significant debate among scholars,public officials, and citizens with respect to each of thesedimensions, that is, what should be distributed, who therecipients should be, what distributive principles shouldbe adopted, and how those allocations should be accom-plished.8 As Thomas Schelling has written, “Among themost divisive issues that policy deals with is the distribu-tion of income and wealth,” and of course he might haveadded other things as well, such as “opportunities.”9

As already noted, common to every domestic theory ofdistributive justice is the assumption of a central author-ity, a government or a state, that is capable of enforcinginitial allocation decisions and any subsequent distribu-tions that a society may wish to make. Thus, RonaldDworkin’s theory of equality of resources “requires gov-ernment to adopt laws and policies that insure that itscitizens’ fates are, so far as government can achieve this,insensitive to who they otherwise are.”10 Similarly, the re-alization of Hal Varian’s theory of fairness depends on astate that distributes property “equally to new genera-tions” and serves “as a watchdog to prevent monopolisticinterference with the market.”11 Even the late libertarianphilosopher Robert Nozick, who viewed the completetheory of distribution as the voluntary exchange of legiti-mately acquired property, recognized the need for a mini-mal “night watchman” state and admitted that an even


stronger central government might be necessary to rectifyhistorical injustices in transfer.12

Despite the fact that states have long been “globalized”in terms of their economic relations, it is only in recentyears that scholars have begun to pursue the problem ofdistributive or economic justice on the wider stage pro-vided by world politics.13 We have already seen that thiseffort is marked by considerable controversy and is re-jected outright by modern realist thought. Can “interna-tional justice” even be said to exist in the context of ananarchic system that lacks a central enforcement agency(recall Hobbes: “where there is no law, there can be nojustice”)? And if we assume it does exist, who are the rele-vant actors in this particular drama? Are they states orindividuals? Resolving these issues is of considerable im-portance if we wish to advance theoretical, much less pub-lic policy, debate.

Stanley Hoffmann has asserted, with considerable rea-son, that “the problems of international distributive jus-tice are by far the most troublesome” within the study ofinternational relations.14 Hoffmann’s point is that even ifwe boldly assumed that states cared about establishing asystem of international justice, it would hardly be astraightforward exercise to determine how they might goabout distributing wealth (and power) in a way that pro-motes public goods such as global peace and prosperity.Some scholars have argued that justice among nationswould require a more or less radical redistribution of theearth’s scarce resources, such as oil and minerals; others,including myself, look askance on policies that would re-duce welfare in a particular state, and instead emphasizethe role of free trade and investment in promoting eco-nomic growth; these differing views are developed in this

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book. Further, disentangling domestic from internationaleconomic justice, especially in light of increasing global-ization, poses a first-order challenge.

To date, scholarly (and indeed, activist) assertions aboutinternational economic justice—or injustice—have takenat least three distinct forms, which reflect contrastingviews about the normative consequences of increasingeconomic openness. Table 1.1 provides a matrix that sum-marizes these frameworks, and the following sectionsprovide brief descriptions of them.

The Communitarian Critique

First, some critics of today’s international economic orderare primarily concerned with the effects of globalizationon domestic social and economic arrangements, or what Icall the communitarian model of economic justice. Thisgroup takes domestic society as the appropriate site ofdistributive justice, for it is only within this political con-text that coercive fiscal and redistributive policies can beintroduced (usually by the state), as a way of reducing in-come inequality, poverty, lack of opportunity, and othercollective “bads” in a manner that is consistent with thedomestic social compact, the “basic bargain” betweenstate and society. In this view, global economic integra-tion is tilting the playing field against the social compact,particularly in “cradle-to-grave” welfare states, which areallegedly threatened by capital mobility and a growinginability to meet collective objectives through redistribu-tive taxation. Questions that are relevant to communitari-ans include: How has greater openness influenced povertyand the income distribution within countries, and particu-


TABLE 1.1Three Models of International Economic Justice

Theory Site Policy goal

Communitarian Nation-state Equal opportunityLiberal Society of states Growth and convergenceCosmopolitan Individuals Poverty reduction

Source: Author

larly within “my” country? Has it closed income gaps orwidened them? Who are the “winners” and “losers” fromglobalization (or market integration) within domestic so-cieties, and can the losers be effectively compensated?What are the effects of greater openness on domestic fis-cal and social policies and on the capacity of the state tomaintain the domestic social compact among its citizens?These questions reflect a predominant concern with theeffects of global economic pressures on domestic societiesand with the capacity of the state to respond in a mannerthat preserves domestic distributive justice.

John Ruggie’s “bargain of embedded liberalism”—thephrase he used to describe the postwar “Bretton Woods”order—provides perhaps the neatest expression of the na-tional welfare or communitarian position.15 According toRuggie, the challenge for postwar leaders was to rebuilda global economy that would be made safe for the welfarestates of Western Europe and North America. A densenetwork of domestic and international arrangements wascrafted in order to ensure that global trade and investmentdid not undermine the goals of nationally based social pol-icies, such as full employment and equal opportunity.

Thus, international trade agreements included “escapeclauses” to protect workers, and particular industries wereexempted altogether. Conversely, the United States andother countries put into place “trade adjustment assis-

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tance” and other compensatory mechanisms to supportthose who were hurt by economic change. In short,greater openness was to be made consistent with and toreinforce the domestic social compact. And for a while,many if not most had reason to remain confident in thismodel, at least in the advanced industrial countries. Theexpansion of global commerce following World War IIwas accompanied by the rise of the “cradle-to-grave” wel-fare state, particularly in Western Europe.

It is the fear that rapid globalization is disrupting thiscommunitarian model of distributive justice that hassparked an intensive research agenda in recent years onthe relationship between greater openness to trade andinvestment on the one hand and, for example, changes indomestic income distribution, employment, and povertyrates on the others.16 As Dani Rodrik has written, “theinternational integration of markets for goods, servicesand capital is pressuring societies to alter their traditionalpractices, and in return broad segments of these societiesare putting up a fight.”17 In an important review of theliterature, William Cline has demonstrated that greateropenness to trade has increased wage inequality in theUnited States, as unskilled workers face competitive pres-sures from imports made with low-wage labor. Reflectingthe communitarian model, he writes that the “basic policyconclusion” stemming for his analysis “is that a commit-ment to open trade needs to go hand in hand with a com-mitment to a whole array of domestic policies that help en-sure that society evolves in an equitable rather than aninequitable direction” (emphasis added). Tellingly, he no-where suggests that international policies might needchanging as well.18


Mainstream economic theory and public policy analysisreflect the communitarian perspective in important re-spects; after all, the state remains the privileged site ofpolicymaking and the actor with the monopoly right touse coercive means over its own territory. Economistscommonly hold that “countries shape their own destiny,”and endogenous growth theory emphasizes the role ofdomestic institutions and policy choices in promoting in-vestment and creating human capital. From this stand-point, globalization offers states tremendous opportuni-ties to increase their technological base through trade andforeign direct investment, and in turn improves theirchances for sustained growth. Yet one question that com-munitarians pose is whether the “rules-based” economicregimes that currently structure international economicrelations are making it more difficult for states to pursuesuch growth-promoting domestic policies, say, throughthe use of “protectionist” instruments or subsidies, be-cause these are now illegitimate. Further, globalizationmay undermine the state’s fiscal capacity to redistributeincome from winners to losers, and thus the social com-pact that binds citizens together.

In short, communitarians emphasize the effects ofgreater openness to trade and investment on the capaci-ties of domestic societies to provide adequate economicopportunities for their members, and particularly for un-skilled workers in industrial nations, whose incomes andlivelihoods may be “threatened” by globalization (includ-ing by immigration of low-skilled workers) in a meaning-ful way.19 To these groups, the potential benefits of global-ization may be elusive, at least over a relevant timehorizon, and particularly if the state is now unable to helpthem adjust through fiscal transfers and education and

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training opportunities. Communitarian critics, then, haveraised significant issues of international economic justice,but through the particular lens of national welfare.

The Cosmopolitan Challenge

The second group of globalization critics we consider iscomposed of cosmopolitans, whose main concern is withthe effects of greater openness on individuals, and partic-ularly the poor, irrespective of national boundaries, sincethese frontiers have no particular ethical relevance. TheWorld Bank economist Branko Milanovic has deftly de-scribed this perspective when he writes, mimicking Dio-genes, “globalization implies that national borders are be-coming less important, and that every individual may, intheory, be regarded simply as a denizen of the world.”20

Cosmopolitanism provides, in fact, a big theoreticaltent. But as one of its leading theorists, Thomas Pogge,writes, “Three elements are shared by all cosmopolitanpositions. First, individualism: the ultimate units of con-cern are human beings, or persons. . . . Second, universal-ity: the status of ultimate unit of concern attaches to everyliving being equally. . . . Third, generality: this special sta-tus has global force.”21

Because it is such a big tent, I focus more narrowly inthis book on those cosmopolitans who might be called“prioritarians,” following Derek Parfit’s term of art.22

The specific question that prioritarian theory raises formodern globalization concerns the effects of economicintegration on the poor and least advantaged, and pri-oritarians argue that public policies should give absolutepriority to their plight. Pogge, for example, has recently


asserted, “the affluent countries and their citizens . . . im-pose a global economic order under which millions avoid-ably die each year from poverty-related causes,”23 and thatthis order should be reformed for that very reason. Thisglobal order and its associated rules influence poverty lev-els and income inequality within nations, by favoring par-ticular interests (e.g., those of multinational firms) overothers (e.g., labor). Indeed, it is notable that although therules governing trade and investment are relativelystrong, the rules governing labor rights—much less basichuman rights—are weak.24 These are stinging accusationsof the international order, for which prioritarians demanda response.

Cosmopolitan thought holds that rational persons mayagree on certain universal moral truths, and it is thesetruths that provide the normative glue, weak as it may be,that holds domestic societies, and eventually the inter-national community, together. They thus perceive thepromise of a “universal international society groundedin the gradual homogenization and globalization ofnorms. . . . This development has manifested itself in avariety of ways . . . most significantly, in the growing ac-knowledgment by states and societies that all individuals,regardless of their citizenship, race, religion, or other de-fining characteristics, are entitled to basic protections oflife, property and contract.”25

The cosmopolitan perspective is not only influential incontemporary political philosophy, but it has become in-creasingly influential in the world of public policy as well.The present-day preoccupation of the World Bank andInternational Monetary Fund with global “poverty reduc-tion,” for example, cannot be neatly explained by refer-ence to the “objective” material interests of powerful

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states. Instead, this emphasis indicates how ideas—spe-cifically new ideas concerning the site of distributive jus-tice in light of economic globalization—have come toshape the priorities of the leading international institu-tions.26 We will return to this theme in later chapters.

Many nongovernmental organizations have also ap-pealed to cosmopolitan values in seeking public supportfor their activities. The British charitable organizationOxfam, for example, claims that its members are “globalcitizens” who seek “global equity.” The organization pre-sumes to speak for “poor people,” placing their “rightsand interests” at the center of international power, identi-fied as being wielded by global corporations, multilateralinstitutions, and national governments. Similarly, Savethe Children lobbies “for changes that will benefit all chil-dren, including future generations” (emphasis added).27

In making their normative assertions, prioritariansoften evoke a utilitarian perspective, suggesting thatglobal happiness would be maximized by distributing in-come and wealth away from those who enjoy relativelylittle utility from the marginal dollar or euro to those whowould gain high utility from receiving additional sums.Thus, the marginal dollar of income is probably of lessvalue to Bill Gates than to a smallholding coffee growerin the Chiapas region of Mexico. What this implies is thateconomic justice is found internationally, as it often is do-mestically, through redistribution schemes. As Milanovicasks, “If the political community becomes the world,would it not make sense to define redistribution at theworld scale?”28 Similarly, Pogge has proposed a “GlobalResource Tax,” the proceeds of which “are to be used to-ward the emancipation of the present and future globalpoor.”29 Even Britain’s chancellor of the exchequer, Gor-


don Brown, has proposed an “International Financial Fa-cility” to increase spending on foreign aid targeted at thepoor, and President Jacques Chirac of France routinelyfloats the idea of a “Tobin Tax” on international financialtransactions in order to finance development. Whateverthe practical merits of these proposals, they indicate thecosmopolitan sensibility of treating people, qua ethical“units,” as members of one universal community, each ofwhom has a claim on the world’s resources.

It must be emphasized that cosmopolitans take seri-ously, in a way that many other theoretical traditions donot, the problems of state failure and of unjust states.While recognizing that states could serve the cosmopoli-tan end of a social arrangement in which each individualis treated equally or fairly, they also accept that many gov-ernments around the world lack the will or capability toprovide for the basic needs of their citizens, especiallythose citizens who, owing to income, gender, religion, orethnic background, are most vulnerable to life’s vicissi-tudes. Cosmopolitans simply reject the notion that thebad luck of certain persons to find themselves locked upin states that deny basic human needs, much less basichuman rights, is reason enough for those of us who aremore fortunate to turn our backs on their plight. As aconsequence, “cosmopolitans have argued that efforts tosecure justice should focus on the reform of social ar-rangements beyond the nation state.” In this book, wewill consider some of the proposals along these lines: forexample, the oft-heard calls for tying international tradeagreements to “higher” labor standards.30

The prioritarian view of international economic justiceposes a profound set of theoretical and policy challenges.While not denying the roles and responsibilities of na-

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tional elites in extracting rents from their societies andoppressing the poor, this position forces us to ask whetherthe international arrangements that shape the globaleconomy—which were, of course, designed by these verysame elites—actually help or hinder the life chances ofthe world’s most vulnerable citizens, no matter wherethey live, or whether they simply serve as vehicles for therich and powerful. If the entire story of international in-stitutions can be reduced to the interests of the privilegedfew, then one must be pessimistic about any chances forreform—at least peaceful reform—since these institu-tions’ architects, who represent the dominant interestgroups, are unlikely to have much motivation to sharetheir part of the pie with others.

Although I am sympathetic to the prioritarian model ofinternational economic justice, and appreciate its decisionrule—that social arrangements must promote the lifechances of those who are most vulnerable—it is not aframework that I emphasize in this book, building insteadwhat I consider to be a largely complementary, statist ap-proach. This is because I believe that any discussion ofinternational justice must take seriously the character ofrelations among states, and this has been a weakness inmuch of the normative literature to date. After all, it isgovernments that sign treaties and agreements, imposesanctions and boycotts, and make war and peace, and it isgovernments that—for good or for bad—are ultimatelyaccountable for their actions at home and abroad.

To be sure, much can be done to ease the plight of thepoor and the excluded even in the context of an unjustinternational system, and I have no doubt that individuals,operating alone or more powerfully in groups such asnongovernmental organizations, can make a positive dif-


ference. Having said that, I would assert—indeed, I willtry to show—that governments can feasibly build a fairerworld that improves each nation’s chances for sustainedgrowth, which remains the single best instrument weknow for durably improving the lives of those millionswho are poor and excluded. Demonstrating that proposi-tion—that a fairer international economy is possible—isthe major burden of this book, and in the following sec-tions I develop the theory that motivates my argument.

Liberal Internationalism and EconomicJustice: An Introduction

The liberal internationalist perspective that I elaboratebuilds on a perspective that Charles Beitz has labeled “so-cial liberalism.”31 Social liberals hold that internationaljustice is built upon two distinct social compacts: first, adomestic compact, which provides societies with theirbasic principles of distributive justice; and second, an in-ternational compact, which provides states with the“background conditions” for the pursuit of their nationalwelfare objectives.

At the international level, therefore, social liberalsadopt a “statist” approach, asserting that states have ethi-cal borders, and as such assume duties and responsibilitiestoward one another, however “weak” or “thin” thesemight be, in light of the absence of effective enforcementmechanisms. In this sense, liberals may be distinguishedfrom cosmopolitan theorists on the one hand, who holdthat only individuals can be conceived of as moral agents,or globalization theorists on the other, who claim, “Thenation-state is just about through as an economic unit.”32

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Many social liberals locate domestic economic justice(or injustice) in particular sorts of outcomes, such as risingincome inequality or mass poverty; this type of analysis isoften called “consequentialist” in the philosophical litera-ture, since its main concern is with the consequences ofdifferent public policies. They therefore submit that a justdomestic society would seek to eliminate or rectify suchundesirable outcomes. Similarly, a just international soci-ety would be one that provides its member states with theopportunities to develop their own capabilities for escap-ing poverty and enjoying the fruits of sustained growth,say, through free trade policies or the provision of foreignassistance.

While I certainly agree that international injusticesmay be located in particular outcomes, I also emphasizethe normative stance of libertarian or procedural theo-rists, who find justice (and injustice) in the rules and pro-cedures that shape market relationships and transactions.I do not believe that such rules are always sufficient forestablishing a level playing field—a soccer team from asmall university hardly enjoys a “level playing field” in itscontest against Real Madrid, even though the groundrules are the same for both teams—but they are necessaryto any theory of justice and should not be overlooked.33

I therefore call my theory liberal internationalist be-cause it is primarily concerned with nation-states andtheir interactions.34 Liberal internationalists hold thatsomething like a “society of states” has evolved overtime, with its members—that is, states—gradually as-suming rights and obligations with respect to a set ofgenerally agreed-upon principles, norms, and rules. Thefundamental norm that regulates the international com-munity is respect for state sovereignty and, consequently,


there is a generally accepted right to noninterference indomestic affairs.

These principles imply that the cornerstone of interna-tional justice is equality in the status of states, and thisprovides the basis not only for international negotiationsand agreements, but for world order more generally. Tobe sure, such equality is fictive when placed against thedistribution of power—once again, my soccer team is inno way equal to a professional club, even if we agree onthe rules that define the game—and it is military powerthat gives world politics its fundamental structure. But aswe will see in future chapters, the distribution of powerdoes not necessarily provide a complete account of statebehavior and outcomes, at least in the economic realm.Because states also have an interest in order and stability,they may forgo relative gains today in the interest ofbuilding a robust system that all participants view as beingreasonably fair.

According to liberal internationalists, the few princi-ples of international justice that exist, such as sovereigntyand equality, are vital to world order, even if adherence tothem is often halfhearted and inconsistent. Indeed, theseprinciples define world politics in nontrivial ways andprovide the basis for the articulation of an increasingnumber of rules and ever-deeper interactions, includingthose associated with the global economy. Liberal inter-nationalists therefore tend to conceive of economic jus-tice in terms of the mutually advantageous and noncoer-cive agreements that states reach through the process ofmultilateral negotiations.

The challenge that these states face in their negotia-tions is how to construct and maintain economic ar-rangements that each one of them views as being in its

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interest. From the realist standpoint, which holds thatstates must be motivated by the search for “relative” asopposed to “absolute” gains, such an arrangement isnearly impossible to achieve, since of course not everystate enjoys relative gains vis-a-vis the others. As a con-sequence, many realist scholars of world politics have as-serted that it impossible to create cooperative economicinstitutions in the absence of a hegemonic power.35 Laterin this chapter I will show why this view is excessivelypessimistic.

In an important sense, the international community hasadopted, if only rhetorically, a variant of the liberal inter-nationalist approach to economic transactions for most ofthe post–World War II era. That is, the system has beenlargely built on the normative foundation of equalityamong states, and most countries have been included inthe major economic regimes, such as the World TradeOrganization and the International Monetary Fund. Butliberal internationalists do not hold, of course, that con-temporary economic arrangements among states actuallycreate a level playing field. As Dani Rodrik reminds us,“Global economic rules are not written by Platonic rulers. . . those who have power get more out of the system thanthose who do not.”36 Indeed, a central normative concernof most liberal internationalist thinkers is to understand,expose, and criticize the exploitative use of power rela-tionships among states.37 As already noted in the preface,a just international system would be inclusive, participa-tory, and welfare-enhancing, meaning that it would givethe smallest and poorest states greater voice in the systemthan they have at present. This theme will be taken upagain in the following chapters.


Charles Beitz has offered what remains the deepestphilosophical critique of our present international eco-nomic order from a liberal internationalist perspective.38

Like other liberal internationalists, Beitz represents theinternational system as a society of states whose represen-tatives are tasked to establish a set of just principles thatare to serve as the basis for the political and economicarrangements that are to govern their interactions. Byapplying certain aspects of Rawls’s conception of domes-tic justice to world politics, and to the international econ-omy more specifically, however, he arrives at some fairlyradical results.39

Drawing on Rawls’s characterization of the “originalposition,” Beitz has us imagine a group of representativesfrom rich and poor countries who are bargaining over theterms of their interactions. Since they are negotiating frombehind a “veil of ignorance,” unaware of their particularresource endowments, he assumes that each negotiatorwould be risk averse and thus fearful about his or her par-ticular condition. He posits that “not knowing the re-source endowments of their own societies . . . they wouldagree on a resource redistribution principle.”40 The re-source redistribution principle is Beitz’s rough analogueto the Rawlsian difference principle, in that its objective isto improve resource endowments in the least-advantagedcountry, providing what he considers to be the backgroundconditions necessary for economic growth. And sincestates have no prior moral claim to the resources locatedon their territory, patterns of inequality and poverty thatresult from an international system that does not redistrib-ute such resources will be unjust. (Ironically, in The Lawof Peoples, John Rawls rejects this by asserting that it is acountry’s institutions, not its resources, that provide the

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necessary background conditions for growth; in support ofthis he cites the literature on the “natural resource curse,”which shows that countries rich in oil and minerals gener-ally have poor economic performance.)

Even if we accept the need for economic redistribution,it does not follow that a coerced resource redistributionmechanism is necessary to provide the background condi-tions that enable states to achieve sustained development.In the interest of constructing a “realistic utopia,” or pro-viding a politically feasible mechanism for building afairer world, we would do well to remember that welfare-reducing policies should be avoided.41 Fortunately, a re-source redistribution mechanism exists that is welfare-en-hancing for all participants, and it is called free trade.

This claim on behalf of free trade as a welfare-enhanc-ing redistributive mechanism is based on the thesis of eco-nomic convergence. Most countries are abundant in cer-tain factors of production relative to other countries.China, for example, is relatively abundant in labor com-pared to Sweden, but Sweden is relatively abundant incapital as compared to China. When China and Swedentrade, they are actually redistributing their relative en-dowments of labor and capital, with Sweden receivingsome labor from China (as embodied in imports of labor-intensive goods) and China receiving some capital fromSweden (as embodied in imports of Sweden’s capital-in-tensive goods). Further, to the extent that China startedtrading with Sweden (and other advanced industrialcountries) from a less-developed economic level, its rateof economic growth should actually exceed Sweden’s overa relevant time horizon, as it reallocates its domestic re-sources to their most efficient use, attracts investmentthat seeks a high return, and imports the latest technology


and management know-how. Indeed, free trade may beviewed as a uniquely suited instrument for promoting in-ternational economic justice, for the very reason that itbolsters the growth of the least-advantaged regions in amanner that is welfare-enhancing for all states.

Unfortunately, there is relatively little empirical sup-port for the proposition that globalization is promotingconvergence in growth rates or incomes among nations.And many economists argue that this is because devel-oping countries have struggled to create the “right” sortsof institutions, say, institutions that protect propertyrights and civil liberties. They therefore lay the blame ondomestic politics and policies rather than on the characterof the international system.

Consider, for example, the assertion that “countries . . .shape their own destiny,” which was often made by Law-rence Summers during his tenure as US treasury secretaryin the second Clinton administration.42 That statementreflected both his theoretical and his empirical under-standing of the development process. Summers haddrawn from modern growth theory the lesson that do-mestic policies and institutions are crucial in providingthe underlying conditions necessary for investment andinnovation, while empirically he knew that the divergencein the growth trajectories of nations during the postwarera has been dramatic, especially when compared to theconvergence that globalization theorists would have pre-dicted. When theory and data are combined in this way,they seem to lead easily to the conclusion that the interna-tional system exercises relatively little influence over thedevelopment process, and thus the assertion that “coun-tries . . . shape their own destiny” appears correct.

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But is this really an accurate depiction of the politicalstructures that shape global economic transactions? Arethey as benign and insignificant as Summers would haveus believe? A liberal internationalist would suggest thatthe answer to these questions is not so obvious, and in aworld where wealth and power shape the terms of inter-national exchange, tilting the playing field in one direc-tion or another, it would hardly be shocking to find thatour public policies are failing to serve the interests ofthose states with the least voice in the economic system.43

The question thus remains as to whether the interna-tional system really presents a level playing field for eachand every state. It is not (I would argue) the end of interna-tional economic justice to equalize economic perfor-mance through coercive resource redistribution—even ifthat were desirable and possible—but rather to providethe background conditions that make it possible for allstates to exercise their comparative advantage and achievesustained growth. Such an approach to justice, I have ar-gued, is welfare-enhancing for all. But as we will see inthe next chapter, the international trade regime remainsfirmly tilted against developing countries in important re-spects. For the liberal internationalist, only once it hasbeen leveled, so that countries that wish to enter theglobal economy are able to do so, can the internationalcommunity claim to have fulfilled its most basic duties injustice to each and every state.

But why should states even care about building a fairerglobal economy? What would possibly motivate them todo so? Why would powerful states not simply exploit theweak to the greatest extent possible, as indeed they havedone throughout history? In the following sections, I willtry to answer these critical questions. But first, I empha-


size why it is that a theory of international economic jus-tice must differ in important respects from a domestic the-ory of resource allocation, since this distinction—whichsome would reject on moral grounds—is absolutely criti-cal to the liberal internationalist perspective that I adopt.

On Economic Justice, Domestic andInternational

In political practice, as in academic scholarship, it is nota-ble that no single model of distributive justice has yet be-come dominant around the world—even among liberaldemocracies living at “the end of history.”44 To the con-trary, polities appear to maintain significant discretionover their allocative and distributive principles. To sim-plify an extremely rich and complex picture, we might saythat the Anglo-Saxon democracies have adopted a theoryof distributive justice grounded in equality of opportu-nity, in which societies seek to provide the backgroundconditions (e.g., access to education and credit markets)that permit individuals to realize their talents to the bestof their abilities, whereas the Scandinavian welfare statesare closer to providing “equality of resources,” throughwage compression, social policies, labor market institu-tions, and highly progressive tax structures. This rich va-riety of distributive schemes and principles confirm J. S.Mill’s assertion that the “distribution of wealth . . . de-pends on the laws and customs of society. The rules bywhich it is determined . . . are very different in differentages and countries; and might be still more different, ifmankind so chose.”45

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For a theory of international economic justice, this di-versity of national schemes has a critically important im-plication. What it suggests is that a just international eco-nomic arrangement among sovereign states must be supportiveof each of their domestic social compacts. That is, the interna-tional economic system must be constructed so that eachpolity accepts it as operating to its mutual advantage. Tocite once again John Ruggie’s famous phrase, interna-tional economic policies must be consistent with the bar-gain of “embedded liberalism” that each government hasstruck with its own polity, the bargain that globalizationwill be used as an instrument for maintaining and enhanc-ing the social contract.46

The reference to “embedded liberalism” will naturallylead readers to think that I am limiting my discussion ofinternational economic justice to justice among states thatthe late John Rawls would have called “well-ordered.”47

But it is not my intention to be quite so restrictive. Mypurpose is to make the case for the minimal set of eco-nomic arrangements that a diverse collection of statesmight agree to, given very different definitions of whatconstitutes an acceptable domestic social compact.48

As we will see in later chapters, international tensionswill undoubtedly arise between states that define theirsocial compact differently, as in the case of labor rights,which democratic societies may value more highly thanauthoritarian regimes, or in the case of the prohibitionon child labor, which rich countries may value morehighly than poor countries in which children routinelywork. And that leads to the question of how the interna-tional community can resolve such tensions in the inter-est of maintaining an international economic system thatis participatory, inclusive, and welfare-enhancing. One


answer might be to posit the establishment of some trulyglobal or supranational authority with the power to es-tablish minimal social norms for all countries that wishto participate in global exchange (the International LaborOrganization’s “core labor standards” provides a possiblemodel), while another might be to suggest that such con-flicts can be resolved only through the exercise of hege-monic or imperial power that forces a particular set ofsocial norms on others.

The more modest position that I take here, in contrast,is that the members of the international communitywould find justice only in a multilateral arrangement thatenables each of them to maintain their own domestic so-cial compact, in short, that respects their sovereignty withrespect to their social norms. To be sure, there may becases in which states practice such flagrant abuses of whatare widely accepted as fundamental human rights that theinternational community would decide to intervene withsanctions or force, but such situations will be rare, be-cause states would have to be convinced that their inter-vention will be welcomed by the local population and thatit could actually improve the situation on the ground.Less dramatically, states may be tempted to sanction oth-ers because of labor, environmental, or other practicesthey deem unacceptable, an issue we take up in some de-tail in the chapter on justice in labor and migration. Ingeneral, however, states will rarely intervene in order toalter domestic social arrangements elsewhere.

Now the international system has two characteristicsthat are essential to understanding that a theory of eco-nomic justice pitched at the level of the society of statescannot be identical to a theory that presupposes a more orless self-contained domestic polity. First, the international

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system is anarchic, lacking any supranational governmentor superior authority. Second, as noted earlier, the societyof states is characterized by a diversity of national ap-proaches to distributive justice, a diversity of domestic so-cial compacts. This is the environment in which the mem-bers of the international community must seek to find thecommon ground of justice. Thomas Pogge makes thispoint well when he writes, “While the world can containsocieties that are structured in a variety of ways . . . it can-not itself be structured in a variety of ways.”49

In the international setting, where states bring theirown domestic conceptualizations of distributive justice tothe table, their own social compacts, the challenge of cre-ating a system that each one views as being fair or of mu-tual advantage would seem overwhelming, and perhapsimpossible to meet, at least absent a dominant or hege-monic power that imposes its rules of the game on all theactors. Lacking a central enforcement authority that hasthe power to coercively redistribute the planet’s wealththrough tax or resource transfers, so that impoverishedChad can enjoy its “fair share” (whatever that might be)of Saudi Arabia’s oil bounty and Iowa’s fertile farmlands,the society of states must somehow reach agreement onan economic arrangement that each of them accepts asbeing participatory, inclusive, and welfare-enhancing,that is, a system that operates to their mutual advantage.In the next section I try to develop such an approach.

A Theory of International Economic Justice

For international relations theorists of the realist school,cooperation among states is scarce because world politics


resembles a prisoner’s dilemma game. Since states are al-ways insecure, the threat of conflict and war inevitablycasts a shadow over their relations. The result is less coop-eration and more conflict than states would rationallychoose if their sole objective were welfare maximization.Realists therefore assert that a dominant power, a hege-mon, may be necessary to overcome this tragedy by im-posing order on the international system. Conversely, co-operation is unlikely to occur when the distribution ofinternational power is characterized by multipolarity, thatis, when several states possess similar levels of power re-sources. Under the condition of multipolarity, securitywill be in short supply and the logic of relative gains willpredominate. The probability of achieving durable coop-eration in this setting is therefore miniscule.

Does realist logic inevitably lead states toward conflictand war? The surprising answer is no. In fact, states in amultipolar system may be predicted to act in such a wayas to balance power, so that no hegemon emerges amongthem. As Bruce Bueno de Mesquita and David Lalmanhave put it, “If there is any distinctively political theoryof international politics, balance-of-power theory is it.”50

Balance-of-power theory means that any potentially war-like state should have second thoughts about pursuing anaggressive policy against its neighbors, since systemicpressures will lead other states to form an alliance to chal-lenge it. The only rational outcome for dissatisfied statesin the international system is either to redress their griev-ances through negotiation or to accept the status quo,since war or the threat of violence will always cause a bal-ance to form against the aggressor, making its ultimatevictory unlikely. For the policy maker, then, N > SQ > W,where N is negotiation, SQ is the status quo, and W is

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war. This ranking is of tremendous consequence for in-ternational relations theory, since it leads to the conclu-sion that war is not an inevitable product of the anarchic struc-ture of the international system, but is rather due to purposefulforeign policy decisions made within nation-states.

To illustrate this point using the specific example ofeconomic policy, let us suppose, following the theoreticalapproach first developed by Jack Hirshleifer, that statescan generate national income either by producing itthemselves on the basis of their own resources, coupledwith peaceful foreign trade, or by invading other nationsand seizing their resources.51 Knowing that each potentialtrading state is also a potential aggressor, rational govern-ments will seek to minimize the risk of being invaded.They can do this by acquiring weapons and building upmilitary power, but that will lead to a costly arms raceand may actually increase the risk of war, in prisoner’sdilemma fashion. Alternatively, each state can seek tomollify potential adversaries by seeking to negotiate whatHirshleifer has labeled a “potential settlement region”(PSR), or a zone of peace. Within the PSR, the benefitsthat flow from peaceful exchange outweigh the costs asso-ciated with a violent takeover of foreign resources. A cru-cial element in establishing the PSR, the zone of peace, may bethe potential for mutually advantageous trade.

But isn’t the promise of economic cooperation inevita-bly upset by the search for relative gains? How can statesstrike agreements if they are uncertain as to who will gainand who will lose in the bargain? This realist critiqueof cooperation theory again suggests that internationalarrangements must reflect the preferences of a domin-ant power that structures the global economy in its ownself-interest.


Yet there are several problems with a theory of cooper-ation based on the logic of exploiting only relative gains.First, the terms of trade are often uncertain. They maybe in favor of Country A today, but tomorrow they couldfavor Country B. Indeed, the terms of trade exhibit a fairdegree of stochastic or random behavior over time, mak-ing it difficult for countries to be certain that they will be“winners”—at least in a mercantilist sense—over a politi-cally relevant time horizon.

Second, the logic of relative gains overlooks the prob-lem of opportunity cost. Let us imagine that the UnitedStates is fearful of striking a trade agreement with Chinabecause it believes this will enable China to grow at afaster rate, making it wealthier and more powerful as aresult. Although policy makers in Washington might betempted to reject the agreement for that reason, theywould also recognize that leaving China outside the eco-nomic system may have political costs as well. If rejectedby Washington, Beijing might be tempted to focus its at-tention on regional arrangements in Asia, and to ally withothers who are dissatisfied with the American-led traderegime. Over time, this trade rivalry between the UnitedStates and China could spill over into other issue areas,making the international system less stable as a result. Incontrast, by locking China into the global economy andthe international institutions that govern exchange, thechances for maintaining a more peaceful and prosperousworld would increase.

We are now getting closer to an ethical theory of inter-national relations, one that is grounded in the policychoices that states make. If governments know, for exam-ple, that peace is more likely when trade expectations arehigh, and that war is more likely when they are low, this

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suggests that they can shape the international environ-ment in which they exist, for better or for worse.52 Theycan act in such a way as to promote a peaceful world, byincreasing trade with one another. As Robert Keohanehas written, “Without altering the basic structure of anar-chy, governments can make the world safer, or more dan-gerous, through the strategies they follow.”53

On what basis would this expansion of commerce takeplace? Traditionally, trade agreements—and internationalagreements more generally—have relied on what Keo-hane has called “specific reciprocity,” referring to “situa-tions in which specified partners exchange items of equiv-alent value in a strictly delimited sequence.”54 In tradenegotiations, for example, countries offer up tariff con-cessions of equal value in the quest for a deal, with theEuropeans opening their markets to one billion dollars ofAmerican exports if the United States does exactly thesame. The game-theoretic strategy of “tit for tat” pro-vides an example of specific reciprocity, and its power inpromoting cooperative outcomes should not be underes-timated. As Robert Axelrod demonstrated in The Evolu-tion of Cooperation, tit for tat maximizes payoffs to theplayers in an iterated as opposed to a one-shot prisoner’sdilemma game. Since trading relations are likely to be it-erated, specific reciprocity would appear to be a soundstrategy for the players to adopt, and indeed it figuresprominently in the international trade regime that is in-stitutionalized in the World Trade Organization.

But cooperation based on specific reciprocity should notbe confused with an international arrangement that is nec-essarily considered just or fair or of mutual advantage. AsKeohane has written, “Because reciprocity implies re-turning ill for ill as well as good for good, its moral status


is ambiguous.”55 An equivalent nuclear exchange may pro-vide a good example of specific reciprocity, but it couldhardly be considered an arrangement of mutual advantage.

Further, and of greater consequence from our perspec-tive, equivalent exchange may simply be unfair in a worldof unequal state actors. Imagine a trade regime based onlyon specific reciprocity. Country A will offer up, say, onehundred million dollars of tariff reductions to its tradingpartners in the World Trade Organization if Countries B,C, and D do the same. But if Country A is, for example, theUnited States of America, and Country B is Bangladesh,specific reciprocity will either fail as a formula or providefewer benefits to each party than would be the case underan alternative arrangement. Following Keohane, I call thatalternative approach to negotiation “diffuse reciprocity.”In the multilateral trade rounds, it is generally known as“relaxed reciprocity,” or the provision of benefits to devel-oping countries that are not fully reciprocated.

Keohane explains that under “diffuse reciprocity . . . thedefinition of equivalence is less precise, one’s partnersmay be viewed as a group rather than as particular actors,and the sequence of events is less narrowly bounded. Obli-gations are important. Diffuse reciprocity involves conformingto generally accepted standards of behavior” (italics added).56

In policy terms, the notion of diffuse reciprocity couldmean that countries exchange concessions on the basisof their relative economic size, as opposed to equivalentexchanges of equal value. In short, diffuse reciprocity sug-gests that “special and differential” treatment for certainstates, particularly those that are relatively poor andunderdeveloped, may be required as part of a just tradingorder, as I will elaborate in the next chapter, on justice intrade. But it is only by incorporating some notion of dif-

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fuse reciprocity that a global economy can be built that istruly inclusive and participatory; under strict tit-for-tatreciprocity, in contrast, some countries will simply be ex-cluded from the negotiations (even if they might enjoybenefits from it).

Keohane stresses that unbalanced economic relationsneed not be considered “an unsatisfactory basis for long-term relationships.” In support of this view, he cites thework of the anthropologist Marshall Sahlins, who hasshown that among “primitive” tribes “a measure of imbal-ance sustains the trade partnership, compelling as it doesanother meeting.”57 In a similar vein, Keohane suggeststhat “in the world political economy, international re-gimes make temporary imbalances feasible, since theycreate incentives (in the form partly of obligations) torepay debts.”58 Again, it is the iterated nature of the socialarrangement that helps promote rules and outcomes thatare viewed as just by the trade regime’s participants.

Why would great powers adopt a policy of diffuse orrelaxed reciprocity in which they negotiate with and pro-vide a level of benefits to smaller, weaker states that maynot be returned in full? The answer is because the re-sulting international structure is likely to be more robust,more stable, as a result. World politics is full of uncer-tainty, and at some point small, dissatisfied powers mightseek to alter the status quo. Psychological studies of vio-lent behavior have asserted that “the idea of justice or fair-ness may be more centrally related to attitudes towardviolence than are feelings of deprivation. It is the per-ceived injustice underlying the deprivation that gives riseto anger or frustration.”59 Relatedly, Donald Puchala andRaymond Hopkins have written, “The degree of bias maymake a considerable difference in a regime’s durabil-


ity. . . . ‘Fairer’ regimes are likely to last longer, as arethose that call for side payments to disadvantaged partici-pants. . . . Furthermore, it can make a difference whetherthe norms of a regime permit movement between the ranksof the advantaged and disadvantaged” (italics added).60

The legal theorists Francesco Parisi and Nita Gheiprovide, from a game-theoretic perspective, a rationalefor why the norm of diffuse reciprocity can provide a sta-ble basis for cooperation. They examine a game settingin which players “undertake repeated transactions in astochastic game.” What this means is that there is an ele-ment of randomness attached to possible outcomes, or“role reversal” in which, say, State A might be a winnerin one round of play but a loser in a subsequent round.This is not to argue that world politics is stochastic inexactly the same sense—most states that are “on top”today will still be there tomorrow—but the uncertaintythat resides with the system leads states to act prudently,particularly when the price associated with prudent be-havior (e.g., by incorporating small nations into the traderegime) is fairly low.61

Under these stochastic or random conditions, “a highprobability of future interaction is more likely to increasethe expected payoff from cooperation.” Specifically, sto-chastic reciprocity suggests that “an agent cooperates,not in expectation of a specific reciprocal reward, butsome general reciprocal return in the future.”62 Examin-ing the international trade regime, Keohane recognizeda similar pattern when he asserted, “States in reciprocalrelationships with one another often do not have identi-cal obligations.”63

As already mentioned, stochastic uncertainty causesstates to act prudently, to behave cautiously with respect

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to the future course of world politics, and it encouragesthem to buy options against the possibility of future con-flict. If a group of states is dissatisfied with the status quo,they might at some point seek to revise or overthrow it. Aprudent state will therefore try to ensure that potentiallydissatisfied states also view the status quo arrangementas being to their mutual advantage. Instead of adoptingmaximizing behavior in their international relations,great powers may come to recognize that the strategic useof coercion or force carries its own risks, particularly as itcould catalyze a backlash by smaller states. We will see inthe next chapter, on justice in trade, that the outcomes of inter-national trade negotiations are not neatly explained with refer-ence to the distribution of power. There is a significant “resid-ual” that seems to emerge from a concern with achievinga “fair” or “equitable” outcome, in which each memberstate believes that the deal that was struck took its particu-lar interests into account.

Political scientists have long hypothesized that, in manysettings, noncoercive arrangements are likely to be morerobust and less costly to maintain than policies that relyon the use of coercion or force.64 Henry Kissinger put thissentiment well when he wrote that “agreement on sharedvalues inhibits the desire to overthrow the world order.”65

Andrew Hurrell makes a similar point when he argues, “Agreat deal of the struggle for political power is the questfor authoritative control that avoids costly and dangerousreliance on brute force and coercion.”66 As usual, E. H.Carr said it best when he wrote, “Those who hope toprofit most by [a political] order can in the long run onlyhope to maintain it by making sufficient concessions . . .to those who profit by it least.”67 In other words, there ispower in moral reasoning.68


Again, a central finding of this line of analysis is that, farfrom discouraging international cooperation, uncertaintyabout the future course of world politics may actually en-courage it! That is hardly an original observation;Thomas Schelling made it years ago when he describedhow agents use “focal points” in the presence of uncer-tainty.69 As Barbara Koremenos, Charles Lipson, andDouglas Snidal have pointed out, states face “uncertaintyabout the state of the world,” and they correctly intuitthat this uncertainty “may . . . make cooperation easier.”70

Modern game theory, building on models such as the“ultimatum game” (UG) and the stochastic game citedearlier, has made increasing use of uncertainty as an expla-nation for observed behaviors and outcomes. Under theone-shot, two-person UG, a Proposer (P) and a Respon-dent (R) have the opportunity to divide a sum of money.P makes an offer to R, who can either accept it or rejectit. If R accepts the offer, P and R divide the money ac-cording to P’s proposal. If R rejects the offer, however,both P and R must walk away from the table empty-handed, so that neither of them wins any money at all.

The classic, rational actor model of homus economicuswould lead us to predict that P would make R a lopsideddistributive offer of, say, 99/1; that is, P would offer R 1unit, while keeping 99 units to herself. For the profit-maximizing agents in this one-shot game, 1 > 0 so both Pand R are made better off even by this “egoistic” division.Maximization strategies, therefore, lead to very unequaldivisions of the pie.

But experimental economists, repeating the UG in avariety of countries and under a variety of conditions,have observed a puzzling result. As Nowak, Page, andSigmund report, “Obviously, rational responders should

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accept even the smallest positive offer, since the alterna-tive is getting nothing. Proposers, therefore, should beable to claim almost the entire sum. In a large number ofhuman studies, however, conducted with different incen-tives in different countries, the majority of proposers offer40 to 50 percent of the total sum; and about half of allrespondents reject offers below 30 percent.”71 The experi-mental economists Ernst Fehr and Simon Gachter de-scribe R’s rejection of P’s offer as an example of “negativereciprocity”; that is, an offer that is perceived by R to beunfair is answered with rejection.72 In contrast, fair offersby P and their subsequent acceptance by R provide anexample of what they call “positive reciprocity.”

Researchers have drawn several significant findingsfrom the ultimatum game, each of which finds supportin the present study.73 First, Ps adopt moral reasoning orother-regarding behavior out of their self-interest. Pro-posers who do not care about what others think mustnonetheless fear rejection of an “unfair” offer by R andthe absence of any payoff whatsoever. The adoption ofother-regarding preferences is therefore efficiency en-hancing to the extent that it leads to an agreement andthus an increase in welfare for both of the agents.

Second, the Proposer’s concern with achieving an equi-table or fair result arises in part from uncertainty abouthow R will respond to its offer. If P knows that R willwillingly accept a greedy offer, P will be much more in-clined to propose a lopsided division. Not knowing R’sresponse ex ante, P offers the amount it intuitively consid-ers to be fair; more on this later.

Intriguingly, the game-theoretic setting described ear-lier, in which agents must make decisions about their eco-nomic interactions in the face of stochastic uncertainty,


also reminds us of the Rawlsian model of decision makingwith respect to a society’s “basic institutions” or socialcontract. It will be recalled that Rawls’s “original posi-tion” imagines a group of representative individuals whomeet from behind a veil of ignorance, only knowing thatthey are expected to create enduring principles for theirsocial interactions and institutions. These self-interestedindividuals may be expected to reach agreements that areultimately in the collective interest because they imaginethe changing life circumstances that could confront themor their children; in short, they must confront stochasticuncertainty and the possibility of role reversal, whereby ahealthy person becomes ill or a rich person becomes poor.Keohane does not cite Rawls but makes a similar pointwhen he writes of cooperation under diffuse reciprocity,“In such international regimes, actors recognize that a‘veil of ignorance’ separates them from the future but nev-ertheless offer benefits to others on the assumption thatthey will redound to their own advantage in the end.”74

The concept of diffuse reciprocity, of unequal ex-change, is also consistent in important respects withRawls’s “difference principle,” or the notion that just soci-eties should maximize the life chances of those who areleast advantaged. As Rawls says of this principle, it “ex-presses a conception of reciprocity. It is a principle of mu-tual benefit. . . . The social order can be justified to every-one, and in particular to those who are least favored; andin this sense it is egalitarian.”75 Notably, for Rawls the dif-ference principle is crucial to social stability. Similarly, theconcept of diffuse reciprocity in the global economy musttake into account the resources and capabilities of eachand every state, including those that are least advantaged.

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By drawing on the concept of diffuse reciprocity we cansee how it is possible that rational egoists, in the absenceof some external enforcement mechanism, may nonethe-less be able to establish among themselves “conventions,”which are “forms of agreement that . . . depend upon thegeneral consent or recognition of the society at large,rather than the formal recognition of a sovereign author-ity.”76 As David Lewis famously argued, conventions arebuilt through the establishment of precedents. That is,the way in which agents behave toward one another inperiod 1 will influence their actions in period 2.77 If agentsbehave well in period 1, we may expect that they will be-have well in period 2. If they behave badly, we may expectmore of the same and respond accordingly. Exchangebased on diffuse reciprocity thus becomes the basis forinternational economic interactions, as states recognizethat strictly equivalent exchange does not provide a ro-bust basis for mutually advantageous agreements, espe-cially in the face of stochastic uncertainty.78

Nations that interact on the basis of diffuse reciprocityand that view their transactions as being repeated or iter-ated, will enjoy a much wider scope for mutually benefi-cial international cooperation.79 And unlike the interna-tional setting suggested by realist theory—in which statesare always tempted to cheat on the agreements they havemade and thus need an outside enforcer—this coopera-tion need not be imposed by a dominant power. Instead,it may be established by self-interested actors that seek tomaximize their joint surplus, in the same way that earlyinstitutions designed to support long-distance trading—which proved quite durable—were established based on anongovernmental system of sanctions among the tradersthemselves.80


International Economic Justiceas Equality of Opportunity

International justice is “thin” at best. Its terms are gener-ally vague, and to the extent it produces obligations,these are difficult to enforce. Governments routinelymake pledges of all kinds—to increase foreign aid, to re-duce pollution, to limit arms sales—that they fulfill onlyhalfheartedly, if at all. Still, we have seen that even inthis hostile environment, states may, out of self-interest,seek agreements that are generally viewed as “fair” or“other-regarding.”

Because states are unlikely to reduce their own welfarein order to improve the welfare of others, it is dubiousthat a principle of justice qua “equality of resources”—asCharles Beitz, among others, has advocated—would findmuch political resonance among the members of the soci-ety of states, however desirable it might be from the per-spective of moral philosophy. States are often happy totrade their resources to other states, but they are usuallyless willing to give them away for free. What model ofdistributive justice, then, is consistent with a world inwhich little generosity can be expected?

One alternative is provided by the principle of “equalityof opportunity,” specifically, the opportunity to achievethe world’s average rate of growth. Whether a govern-ment chooses to pursue that goal will depend on domesticfactors; some polities, for example, may choose lessgrowth and more leisure. This section elaborates on thatperspective, which will be further developed in the subse-quent empirical chapters.

In order to appreciate the power of an equal opportu-nity approach to international economic justice, we must

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spend a moment recalling growth theory and its import forthe society of states. For generations, economic historianshave proposed that developing countries will grow fasterthan rich countries, with a tendency toward catch-up interms of per capita income levels; “this catch-up phenom-enon is referred to as convergence” (emphasis in original).81

Convergence can occur along several different pathways,but one of the most promising is via technology transfer,which comes through trade and foreign direct invest-ment. As a trio of economists has reported, “virtually allgrowth regressions include a catch-up term that is gener-ally rationalized as capturing international technologytransfers.”82

We will see in the following chapters that internationaltrade and investment provide states with an opportunityto reach the world’s average growth path while increasingsocial welfare, and thus free trade will likely have a promi-nent place in any discussion of international economic jus-tice. To be sure, as already noted, countries may not seekhigh growth rates, choosing instead different social com-pacts with different values and trade-offs, or they may sim-ply lack the political will to build the institutions neededto sustain growth. Still, what the society of states can plausiblydo is to make it possible for each country to achieve the world’sgrowth rate through free trade and other complementary poli-cies. Again, this approach is politically feasible because itis welfare-increasing rather than welfare-reducing, in con-trast to the equality of resources position. It is in this sensethat, following John Roemer, we associate policies thatpromote free trade with “equality of opportunity.”83

It is critical to emphasize that equality of opportunityis fully consistent with the concept of diffuse reciprocitydescribed in the previous section, or an international sys-


tem grounded in maximizing the economic opportunitiesof the least advantaged or poorest states, in the same waythat affirmative action may be viewed as consistent witha domestic notion of equal opportunity. This is becausea trading system based solely on equivalent exchange ofreciprocal “concessions” would simply not be capable ofpromoting equal opportunity; in such a system, smalleror poorer states would have little to offer those that werewealthier or less dependent on international commercefor growth. States, like domestic societies, will adoptequal opportunity policies in part because of stochasticuncertainty about the future course of world politics, orthe concern that someday a dissatisfied country, or groupof dissatisfied countries, could choose to band together tooverthrow the status quo.

As Roemer and his colleague Humberto Llavador put it:

Primary to the conception of equal opportunity is the dis-tinction between two attributes of the “individuals” amongwhom opportunities for some objective will be equalized—their “circumstances” and their “effort.” The circum-stances of an individual (our individuals will be “coun-tries”) are attributes that influence the degree to which itcan achieve the objective in question (for us, a growthrate), and which are beyond its control, or are not change-able in the short run. In contrast, “effort” refers to actionsthe individual takes, which also influence the degree towhich it achieves the objective, but which are deemed tobe “within its control” or are changeable in the shortrun. . . . [T]o equalize opportunities means to level the playingfield, where the troughs and gulleys in the field are the disadvan-tages countries suffer . . . due to poor circumstances. Once theplaying field is leveled by application of a judicious policy, then

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the difference in outcomes will be due only to differences in ef-forts.” [italics added]84

Within the framework of international economic justice,these national circumstances can be offset through thecombination of free trade and foreign aid to promoteopen markets; having done that, domestic policies willthen play a decisive role in determining growth rates.

To be sure, there are many practical difficulties associ-ated with the removal of the economic and political barri-ers to national attainment. Just as individuals may face amultitude of roadblocks to success—their family back-ground, neighborhood, income bracket, and so forth—countries may face barriers in terms of geography, naturalresources, a lack of savings, or a lack of human capital.Under an equality of opportunity theory of internationaleconomic justice, the society of states must seek to removethe barriers to development created by their policies sothat no state believes that the international “system” hasconspired against it in such a way as to deny its growthprospects. Through free trade and foreign aid, for exam-ple, the international community does what it reasonablycan to help countries to attain their highest growth path.

Free trade is essential to equal opportunity because ithelps countries to overcome resource shortages by mak-ing available, in the international marketplace, goods andservices in which they do not hold a comparative advan-tage, or makes available more goods than they can pro-duce domestically. Further, trade, investment, and tech-nology transfer can boost domestic growth rates. Foreignassistance can help countries overcome “bottlenecks” thatmay prohibit them from entering the global economy tothe fullest extent. Conversely, trade barriers or discrimi-


natory customs unions undermine equality of opportu-nity, making it more difficult for states to do as well asthey can. I treat justice in trade and justice in aid in con-siderable detail in the following chapters.

Conclusion: Toward Justice among States

In this book, I endow economic relations among stateswith something like a moral character.85 The approachfollows closely the one taken by Hedley Bull in The Anar-chical Society, and in many respects the present work maybe seen in the context of the “English School” of interna-tional relations theory. Bull wrote, “Because states are themain agents or actors in world politics, ideas of interstatejustice provide the main content of everyday discussionof justice in world affairs. Every state maintains that ithas certain rights and duties that are not merely legal incharacter but moral: it contends that its policy is just inthe sense of being morally correct and demands equality orfairness of treatment as between itself and other states” (italicsadded).86

My position, then, is that justice among nations maybe said to exist and is a relevant category for theoreticalanalysis. Although I do not deny the pull of cosmo-politanism, I believe that this perspective can be madepolicy-relevant only in the context of a more peaceful andprosperous international system. When states deny oneanother the possibility of shaping their own destinies, itbecomes much more difficult to achieve cosmopolitan ob-jectives. In an important sense, cosmopolitan and liberalinternationalist theories must find common cause if theyare to promote greater global justice.

44 C H A P T E R 1

But how can states, locked in the anarchic realm ofworld politics, advance the cause of international eco-nomic justice? And why would they do so when the in-struments of brute force are always available to them?

In this chapter I have sketched a theory of internationaleconomic justice, grounded in the self-interest of statesthat interact in the context of an anarchic and insecurepolitical environment. Concern with the stability of inter-national arrangements, combined with the stochastic un-certainty associated with the global economy (and worldpolitics more generally), makes it prudent for states tonegotiate agreements that all members of the interna-tional community, including smaller and weaker nations,find reasonably fair or just. In the absence of these consid-erations of fairness and justice, states would have greatermotivation to revise or overturn, perhaps violently, thestatus quo. By providing a level playing field on whichstates can do as well as they are able—through trade, in-vestment, and limited access to foreign aid—the membersof the society of states seek to ensure a more stable andprosperous world.

That summarizes the theory of international economicjustice that I defend in this book. In the following chap-ters, we will have a chance to test it against the case studiesof trade, aid, labor, and investment. As we will see, ideasof justice and fairness have crept into each of these issueareas, even in a world where the distribution of wealthand power remains the major determinant of interna-tional relations. The presence of these ideas is suggestiveof the recognition among policy makers that durable androbust systems of international cooperation cannot be re-liably built upon the threat of violence alone.

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ECONOMIC JUSTICE IN AN UNFAIR WORLDassets.press.princeton.edu/chapters/s8162.pdf · ECONOMIC JUSTICE IN AN UNFAIR WORLD3 see, some people criticize increasing economic integra-tion