Monday, July 28, 2008

The Trade Algorithm

It seems that recently (regardless of when recently is) there is a lot of international hoopla about some evil government hurting it's people, or building a weapon, or otherwise shaking the boat; and then the U.S. or the U.N tries to pass sanctions (usually vetoed by Russia or China), or threaten military intervention if said country persists. But then again, this only happens to countries in the current political spotlight. Nevermind the horrible governments in Africa or South America, keep your eye on Iran and Korea.

Doesn't it seem like these sorts of threats and incentives are a little primitive for the international stage at this day and age? Well here is an idea I had a little while ago. But mind you, it is extremely experimental, and I'm not absolutely sure it would work. But then again, the system we have right now isn't working, so what have we got to lose? Here it is.

We should create an algorithm for international trade taxes and tariffs, to continuously and consistently give incentives for countries to act morally. And if they don't act morally, we hit them where it hurts, their wallet. So here is how it would work. Every country is basically given a rating which decides how much taxes and tariffs are going to be levied on their imports to our country, and our exports to their country. This rating would have several scores factored into it such as arms proliferation, political freedom, environmentalism, working standards, minority rights and many more. These ratings would be professionally updated continuously by teams of international inspectors. We would no longer have to pass sanctions in the U.N.. As soon as a country did something bad, every country that really cared about that issue would already have it's financial relationship with that country automatically strained by the algorithm. When a country fixes a problem it had, they are automatically rewarded financially by every country that cared about that issue.

Let me give you an example, the fictitious country of Latovia. If we have a ten point scale Latovia gets 8.5 for political freedom, 9.2 for working standards, 4.1 for environmentalism, 7.8 for fair trade and 8.2 for minority rights. Now our algorithm is not going to be a straight multiplier (8.5 + 9.2 + 4.1 + 7.8 + 8.2) / 5 = 7.6 (pretty good, so they'll get about average taxes), more likely in todays political climate would would have more emphasis on environmentalism and political freedom. So it might looks like ((1.2 x 8.5) + (0.7 x 9.2) + (1.3 x 4.1) + (0.8 x 7.8) + (1.0 x 8.2)) / 5 = 7.3 where Latovia get dinged for it's poor environmental stance but somewhat makes up for it in political freedom. Make sense so far? I understand if it doesn't.

But you might be asking who gets to decide how these ratings and ratios are set up? Why does environmentalism get more emphasis than arms proliferation? Who does the actual rating? well, I would say that each country should set up it's own system that relates to what its people care about. Here in the U.S., I think Congress should vote on the ratios every year so that what our government thinks is an immediate issue will have more weight for the short term. Changing the actual categories should be voted on by Congress and then signed by the President. This might also give us a better idea of what specific politicians really care about, because there will be hard numbers of what they voted for.

I think the expert inspectors should be hired by the international community, and there should be several teams rating each category, having their numbers averaged to reduce personal bias. Even countries such as Iran and Korea will want to allow the inspectors full access to their facilities, because refusing access will dangerously reduce their score in the given area. If a country does not allow inspectors in, they will be in a sense putting sanctions on themselves.

Hopefully the widely dispersed nature of this program will make corruption extremely difficult. It would also continuously hold countries accountable for their actions, and promote political and economic progress for all countries. It will be hard for a dictator to stay in power, when everyone around him knows they are poor directly because of his actions. If done well, this system could also be applied to corporations, encouraging them financially to use good business practices.

If you see any holes in my theory, please let me know.


Chad said...

welcome back! I agree that this would be a step in the right direction, but wouldn't it be more effective if the UN or some other organization gave the ratings instead of the countries themselves? Perhaps a new trade organization aimed at bringing up the worldwide standards. Wouldn't each nation skew their own numbers?

Spartacus said...

Ya, the idea is that several groups would be hired internationally for everyone. Countries wouldn't have their own numbers unless they had a unique factor (such as "use of birth control", which the US might use. It does seem like something the UN would be in charge of.

dfollett76 said...

I new the creator of "the message boards" would have a weblog. Where are the posts about sock drawers?

Yeah, the math teacher says: Using math to solve a political issue, what!? They don't even use math to figure your taxes.