From: Ian Fletcher Free Trade Doesn’t Work: What Should Replace It and Why ( 2010 ) excerpts from the book-- _Right-of-center Americans generally want to hear that America’s trade problems are caused by unfair distortions of free markets_ (http://freetradedoesntwork.com/blog1/2010/07/15/right-of-center-americans-generally-want-to-hea r-that-america’ s-trade-problems-are-caused-by-unfair-distortions-of-free-markets/) Right-of-center Americans generally want to hear that America’s trade problems are caused by unfair distortions of free markets by our trading partners. To some extent, they are, but even genuine 100 percent free trade would not solve America’s problems. And our trading partners are mostly just ruthless players of the game, as we used to be. The corporate Right (other factions exist, but have no power over Republican economic policy) claims, on ultimately Ricardian grounds, that free trade is in the national interest. But when pressed by contrary evidence, its corporate chieftains fall back on the position that their companies owe no loyalty to the U.S. Indeed, they often say they aren’t even capable of having such a loyalty, so internationalized are their operations and diverse the nationalities of their shareholders and employees. _Skepticism about free trade is often stigmatized with ad hominem attacks_ (http://freetradedoesntwork.com/blog1/2010/07/05/skepticism-about-free-trade -is-often-stigmatized-with-ad-hominem-attacks/) Skepticism about free trade is often stigmatized with ad hominem attacks. These mostly come down to variations on the following: “Protectionists are dummies, losers, incompetents, hippies, rednecks, dinosaurs, closet socialists, or crypto-fascists.” Here’s free trader Barack Obama’s version, delivered to an audience of campaign donors in the exclusive Pacific Heights neighborhood of San Francisco while seeking the Democratic nomination in April 2008: You go into these small towns in Pennsylvania and, like a lot of small towns in the Midwest, the jobs have been gone now for 25 years and nothing’s replaced them. And it’s not surprising, then, they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations. (Emphasis added.) God forbid the unemployed of an old-line industrial state should think trade has anything to do with their problems! But economic logic isn’t even really the issue here, as these arguments are really aimed at people who don’t even try to understand economics, but do care immensely about their social status. The media are saturated with this attitude. Thus magazine articles on trade problems focus on the unemployed, implying that only life’s losers oppose free trade (and that their unemployment is probably their own fault, anyway). The careers of people whose jobs are being lost to offshoring? Mere “drudgery.” Their lives are obviously nothing worth worrying about. They’re not like us here in Pacific Heights. This is largely just a chic veil thrown over class bias. Despite the doc­u­mented center-left preferences of most journalists on social and cultural issues, on economic issues, including trade, they lean right. A late-1990s survey by the watchdog group Fairness and Accuracy in Reporting found, for example, that only on environment-related economic issues were they to the left of the public. But on trade, they were well to the right. For example, 71 percent of editors and reporters supported Fast Track negotiating authority for the North American Free Trade Agreement, while 56 percent of the public opposed it. As 95 percent of these editors and reporters had incomes over $50,000, and more than half over $100,000, this comes as no surprise.
_Free trade is not inevitable_ (http://freetradedoesntwork.com/blog1/2010/07/12/free-trade-is-not-inevitable/) It is often said (or tacitly assumed) that in today’s world, free trade is somehow inevitable. But if so, why do its supporters bother arguing for it so aggressively? The inevitability of free trade certainly does not follow from the apparent inevitability of some form of capitalism, given the long history of protectionist capitalist economies. (The U.S. itself used to be one, as we will see in Chapter Six below.) Contrary to myth, modern history has simply not been a one-way escalator to ever increasing global economic interconnectedness. Instead, this interconnectedness has ebbed and flowed upon larger political currents. It was pushed up by colonialism, but pushed down when former colonies, like the U.S. and India, adopted protectionist policies of their own after independence. It was pushed down by fascism on the right and socialism on the left. But it was pushed up by the Cold War. Prior to the 1970s, the peak of world trade as a percentage of world economic output was in 1914—a peak to which it did not return for two generations. This flux is not an idle curiosity of unrepeatable history: anyone who assumes world trade can only go up in the long run should consider what Peak Oil or tightening environmental constraints may do to transport costs. Neither has increased trade always correlated with increased prosperity and its decline with the reverse: the world economy was actually less globaliz-ed in 1960 than in 1910, but more prosperous. Modern technology does not mandate free trade either. While techno-logy indeed favors the expansion of trade, by reducing shipping and trans­action costs, it does not mandate that this trade be free, rather than subject to tariffs. Indeed, if technology erodes natural trade barriers like distance, and trade barriers are sometimes beneficial (as we will shall see), then modern technology can, paradoxically, increase the justification for tariffs. All inevitability arguments are moral evasions, anyhow, because off-loading responsibility to the free market ignores the fact that we choose whether, and how much, to regulate markets. This is probably what the great protectionist President Teddy Roosevelt was driving at when he wrote that “ pernicious indulgence in the doctrine of free trade seems inevitably to produce fatty degeneration of the moral fiber.” _Free trade is laissez faire, i.e. a ridiculous idea_ (http://freetradedoesntwork.com/blog1 /2010/07/10/free-trade-is-laissez-faire-i-e-a-ridiculous-idea/) One giveaway sign that laissez faire in foreign trade (what free trade is) is wrong is that laissez faire hasn’t been taken seriously in America’s domestic economy for well over 100 years—since before the era of Teddy Roosevelt’s trustbusters around the turn of the 20th century. Despite perennial posturing to the contrary by free-market ideologues, we have, in fact, found reasonable levels of regulation in most parts of our economy to be best: neither outright state control nor absolute economic freedom. It is no accident that regulating international trade was well within the intention of the Founding Fathers: Article I, Section 8, of the Constitution explicitly authorizes Congress “to regulate commerce with foreign nations.” _Free trade squeezes the wages of ordinary Americans_ (http://freetradedoesntwork.com/blog1/2010/07/05/free-trade-squeezes-the-wages-of-ordinary-americ ans/) Free trade squeezes the wages of ordinary Americans largely because it expands the world’s supply of labor, which can move from rice paddy to factory overnight, faster than its supply of capital, which takes decades to accumulate at prevailing savings rates. As a result, free trade strengthens the bargaining position of capital relative to labor. This is especially true when combined with growing global capital mobility and the entry into capitalism of large formerly socialist nations such as India and China. As a result, people who draw most of their income from returns on capital (the rich) gain, while people who get most of their income from labor (the rest of us) lose. This analysis is not some cranky Marxist canard: its underlying mechanism has long been part of mainstream economics in the form of the so-called Stolper-Samuelson theorem. This theorem says that freer trade raises returns to the abundant input to production (in America, capital) and lowers returns to the scarce one (in America, labor). Because America has more capital per person, and fewer workers per dollar of capital, than the rest of the world, free trade tends to hurt American workers. _A borderless world? Not even close._ (http://freetradedoesntwork.com/blog1/2010/07/17/a-borderless-world-not-even-close/) Do we live in a borderless world? Is the national economy now irrelevant? Hardly. Ironically, the enduring relevance of the national economy is clearest in some of the “poster child” countries of globalization, like Japan, Taiwan, South Korea, Singapore, and Ireland. In each of these nations, economic success was the product of policies enacted by governments that were in some sense nationalist. Japan industrialized after the Meiji Restoration of 1868 to avoid being colonized by some Western power. Taiwan did it out of fear of mainland China. South Korea did it out of fear of North Korea. Ireland did it to escape economic domination by England. In each case, the driving force was not simply desire for profit. This exists in every society (including resource-rich basket cases like Nigeria, where it merely produces gangsterism), but does not reliably crystallize into the policies needed for economic growth. The driving force was national political needs which found a solution in economic development. -- Centroids: The Center of the Radical Centrist Community <[email protected]> Google Group: http://groups.google.com/group/RadicalCentrism Radical Centrism website and blog: http://RadicalCentrism.org
