Free trade remains the ideology of the age and protectionism the discarded evil. But in the real flesh and blood world of profit and loss bits of both, at one time or another, are essential human devices to organize trade most beneficially.
In the final analysis free trade is less an economic strategy than it is a moral doctrine. It assumes that the highest good is to shop. It assumes that progress is synonymous with increased economic activity. The exchange of material goods and capital takes precedence over the autonomy and sovereignty, and the culture, of local communities. Rather than promoting and sustaining the intricate social relationships that create valuable and vibrant communities, free trade theology relies on a narrow definition of comparative efficiency to guide all conduct.
In a world dominated by free trade theology bigger is better and huge is best – long ago the economist Lester Thurow argued that even giant IBM was not big enough for the global marketplace.
This obsession with bigness leads logically to that great postulate of free trade: the need for global markets. And another tenet of free trade is that each community and, naturally, each nation must specialize in what it does best to the virtual exclusion of otherwise worthwhile activities.
What are the implications of such tenets? That bigger is better. That material self-interest drives humanity. That dependence is better than independence. In sum, we live to trade. We give up sovereignty over our affairs for a promise of more goods in total.
Just when the doctrines of free trade and globalisation seemed so dominant, the absurdities they give rise to have become more evident.
A presumed benefit of free trade is a higher standard of living. Well, whose standard of living is being considered? Inequality between, and in most cases within, countries has increased and is increasing rapidly. In 1930 the per capita GNP ratio between developed and undeveloped countries was 4 to 1, now it is 8 to 1.
Never mind, we are told, vast wealth is being created by unfettered free trade and a rising tide lifts all boats – to use that hideously misleading cliché so often employed by the free-trade cultists. But the share of world trade captured by the Group of 8 (now 20) over the last 30 years has increased dramatically while the least developed countries have seen their share cut. A great many boats are sinking, not floating higher.
Nor is the problem limited to inequalities among nations. Increasingly the dominating economic entities in the world are the huge corporations including the mighty state corporations of China.
Two thirds of international trade now involves such transnationals and one third involves trade within single transnationals. Small and medium-sized enterprises employing the majority of the world’s workers are faring badly against the giant transnationals. In addition, the ever widening gap between the richest 5% and the others in most countries is a tremendous scandal which no government seems able, or willing, to do anything about – America being the prime example.
Free trade is favoured by those who have power. Can there be any doubt that by far the chief beneficiaries of free trade theology now are the developed countries, the rapidly growing giants of China, India and Brazil and the huge corporations? Why on earth then is this theology so unthinkingly accepted by nearly everyone else as well?
As the evidence mounts that globalisation – unbridled free trade and unregulated market forces as supreme arbiters in human affairs – brings increasing misery to a majority of people in the world, still too many of our spokesmen go about in a trance of self-delusion declaring that we must surrender our lives and the future of the world to this awful juggernaut.
The forces unleashed by globalization, including seemingly uncontrollably big banking, will obviously benefit a few thousand billionaires and the large corporations which are increasingly calling the shots in the world today. Some scores, even perhaps hundreds, of millions of people, especially in the already rich or the big “getting rich” countries, will no doubt also benefit. But remember that the world is made up of billions of people, most of them living in poor countries, and the huge majority of these are not going to benefit in the slightest.
The historical evidence from countries that have sustained fast growth and those that have not suggests that trade protection will always be one of a number of powerful instruments for nurturing new activities and higher value-added processes in existing activities, provided it is brought down pari passu with the rise in producers’ production and marketing capacities.
On the other hand, there is plenty of evidence that the people and capital released from activities knocked out by trade liberalization are not always able to be re-combined to make other products saleable in internationally competitive markets, whatever the exchange rate. They may well not be employed at all. That will be the fate of Caribbean countries if we rush pell-mell into out-and-out free trade.
Civilizations do best when they engage in a careful balance between freedom and order. Free trade in certain circumstances in certain areas can be a boon for many people. In others, it will be a disaster and provoke disorder and suffering. On the other hand, carefully and precisely used, protection can promote growth, particularly among the weaker parties in international competition. But used as a general principle it is a recipe for local exploitation. Free trade and protectionism, once stripped of their ideological extremes, are useful tools which can be balanced for general benefit, social stability and community development suited to each nation’s traditions and needs. Finding an ideology in between is the art we have to learn.
