> (EW) > >As to your main point, I too favour free trade. The problem I see is that > >it has rarely if ever existed. Historically, trade has been anything but > >free.
> (KH) > I think it was almost certainly totally free between about 30,000BC when > man was beginning to colonise the world (and needed to trade essential > resources with the adjacent traibe) and about 5,000BC when the beginnings > of state-like cities and empires were starting as agriculture developed. > But from then onwards we had increasing state interference. I don't know if I would put dates on it, but I would agree with the general point that the more complex the society, the greater the span of its needs and the less able it is to fill them, the more complex the relationships with other (complex) societies, and the less likelihood that trade will be "free". It is not only the trading partners themselves who add complexity, middlemen appear as do powers that dominate trade routes. > >> >>(EW) > > Much of the wealth of today's rich world is based on the colonization > >and systematic exploitation of the poor world. Empires were founded on gold > >from the Americas, spices from Asia and slaves from Africa. > >>>> > (KH) > No, I don't think you can say that. True, all the above were significant > activities and some city-ports, such as Bristol, a few miles down the road > from here, did very well out of this sort of trade. But, confining > ourselves to the economic growth of the UK (and some European countries) > and its (undoubted) exploitation of the poor world in the last 250 years or > so, I think most economic historians would agree that the 'benefits' (to > us) were relatively mild compared with the real lift-off of the late 18th > century when agriculture was industrialised with iron implements and then > other innovations. The domestic market in each of these countries was the > initial engine of growth. (I believe that most historians would agree that > the British Empire, for example, was probably more of an economic drain > than gain throughout most of its history.) > Once the domestic lift-offs had occurred in England, America and other > European countries then the huge rise in the export trade that quickly > followed was mainly confined to these countries. At that time (circa 1800) > the average standard of living in India was just as high, if not higher > than in England. At the same time, China had a much more advanced iron > technology than the English. It was the relatively easy shipping routes up > and down the European and Baltic coasts, and across the Atlantic between > between Europe and America, which actually accelerated economic growth. > Trade with the rest of the world was a small fraction of this -- mainly > because more distant countries didn't want to trade or their industrial > centres were not near coastlines and their goods were too costly to > transport. If you go to http://members.eisa.com/~ec086636/coping.htm on my website, you'll see that I do recognize the tremendous impact which indigenous invention and industrialization had on Europe. Nevertheless, I would maintain that the contribution of the colonies to European wealth was also huge, and the reverse impact, that of Europe on colonized people, was often devastating. The costs to the colonies were enormous. Lines were drawn on maps dividing peoples. Indian populations in the Americas were decimated (that is, reduced by a factor of ten). Large numbers of people were moved from Africa to the New World as slaves. Forests were cleared and huge plantations established. Wars were fought over access to trade. The process continues. It is difficult to imagine where America and Europe would be today without access to Middle East oil. Chris Reuss posted something a few days ago that suggested that the conflict in Afghanistan was founded on pipeline routes and access to the oil and gas reserves of Central Asia. I would not doubt that this is a factor, though one of many. > (EW) > >It is true that > >trade goods also flowed from the rich world to the poor, but the bargains > >were highly unequal, like obtaining Manhattan Island for a few beads. > >Currently, large multinationals are not interested in free trade, but in > >obtaining cheap resources and cheap skilled labour. While it is true that > >poor countries benefit, as southern India has from high tech, the objectives > >nevertheless remain exploitative. > (KH) > Yes, of course, large multinationals want to exploit countries with cheap > labour -- in exactly the same way that each one of us will try to buy goods > at the cheapest possible price. But it's rarely the sort of excessive > exploitation that opponents of free trade talk about. It's usually the case > that if the low wages of multinational workers in poor countries is > multiplied with other factors of production (high transport costs, poor > infrastructure, low educational levels, etc) in those countries then the > resultant productivity is not a great deal lower than if production is done > in the high-wage parent countries. There's a margin, and it's large enough > enough to be attractive to a multinational of course, but it's not as > excessive as simple comparisons between wage levels would imply. I would agree that it's not intentional or even often excessive exploitation. CEOs don't sit down with their senior staff and say "Let's go exploit people in Pakistan". Nevertheless their behaviour is of that general kind. And I would even agree that the exploitation is often appreciated by the exploitees. They earn wages and perhaps even some benefits. My point, however, remains. It's not free trade that's at issue, but cheap labour and the ability to supply the cheapest product to a competitive rich-world market. > (KH) >Multinationals know that wages in poor countries rise within a few years to > those of developed countries -- usually, other things being equal, within > 10-15 years at the outside. Besides, multinationals usually pay more than > the average wage in the poor countries anyway. Figures from the Institute > for International Economics show that multinational affiliates in poor > countries pay about twice the domestic wage from inception. As the > standard of living of poor countries rise then this ratio gradually reduces > to about 1.5 the domestic wage. Finally when the 'exploited' country > becomes mature then wages are the same as in the multinationals' home > countries. I think you see too rosey a picture here, Keith. Whether the standard of living of poor countries is rising or falling is very unclear. There is no doubt that some people have benefited from the presence of multinationals. Elites and high-ranking officials would probably do well. High tech has apparently done wonders in parts of India, though only a small part of the population has prospered because of it. Statistics I have suggest that the per capita income gap between the rich countries and poor is increasing. Poor countries are not "maturing". They are having to deal with growing populations, accelerating urbanization (escape from the hardships of trying to work the land), falling water tables, and sectarian and ethnic conflict. What you are arguing suggests something like WW Rostow's "Stages of Economic Growth" of a few decades ago, and not the world as it is. > >(EW) >>In order to have real free trade, you would need to define and establish in > >international law that most elusive of all concepts - the level playing > >field. >(KH) > Apart from trying to reduce tariffs all round, I cannot see how one can > establish a level playing field (in terms of wage levels, working > conditions, and a multitude of other factors). Too true it's elusive. It's > impossible to define, as you imply below. >>(EW) > >As one can see from examples like the European Union and NAFTA, this > >is not easy to do even for countries which are similar in form of > >government, standard of living, etc. It would be far more difficult for > >countries as different as those of Western Europe and Southeast Asia or > >Africa. So, good luck in promoting free trade, but please do recognize that > >you are favouring something that may be about as difficult to achieve as a > >world without sin. >(KH) > The basic problem is that the agricultural revolution has caused a huge > overhang of rural populations around the world which either cannot be > sustained by agriculture any longer, or don't want to be sustained by it > and want to share in the standard of living that they have seen on TV or > heard about. So scores of millions all over the world are flocking into the > cities every year (and millions are also migrating illegally into developed > countries whatever efforts are made to stop them). So this is the real > practical problem which is affecting free trade (and its corollary, free > movement of labour). It can't happen until great reductions of populations > take place -- with simultaneous improvements in health and education. I generally agree. When I was in Sao Paulo, Brazil, a few years ago I spent a month among these migrants off the land. Most had come to Sao Paulo one or two decades ago and were relatively well-established "favelados", doing a variety of things, legal and illegal, to keep themselves and their families in daily bread. Others had just recently come in, and lived in clapboard shacks or cardboard boxes. A variety of things had driven them to the city, but among the most important was the mechanization of the huge coffee plantations of the northeast. Once the need for plantation labour was greatly reduced, people had little choice but to move. Some headed to places like the Amazon Basin; most headed to the cities. No doubt the results of mechanizing the plantations was cheaper coffee, which I greatly appreciate, but the costs to the migrants in having to move, having to re-establish themselves, and having to find new ways of keeping themselves and their families alive (if indeed they could) was enormous. >(KH) >Free trade by itself won't solve these problems (though it helps at the > margins) -- only time will -- but preventing free trade only makes the > situation far worse. I agree. > (KH) >I think we'll have free trade one day. I think we'll have to await the second coming. Best regards, Ed > ________________________________________________________________________
