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Free Trade And fOlly

There is a lot of jabbering going on constantly in the media about how essential “Free Trade” is to our world and how it is bringing prosperity to all participants. The facts about trade between nations as it is currently constituted are somewhat different. Export dependent economies are not very resilient, their internal markets are too weak to sustain growth if the external market stops buying. The USA’s recovery from the recent recession is an example of the difference between trade dependent nations and those that have strong internal markets.

Dependence on exports for a growing economy is a phenomenon that a number of nations could already tell you has a huge potential downside. It is far better to grow a middle class internally through higher wages as we did in the USA, than it is to grow a trade imbalance that raises your nation’s dependence on sales to other nations. You might ask the former Asian “Tigers” how it feels to be on the losing end of that cycle as they were in 1997. It is clear that international trade is a far more complex issue than generally accepted. “Free Trade” comes with both benefits and dangers that are still not fully understood by any of the participants in our current world economy.

First of all “Free Trade” is a heavily loaded phrase and has seldom existed anywhere a border can be constructed. We funded our whole government on tariff revenues of one sort or another before the advent of the income tax. Most of human history has been written about how trade advantages lead to prosperity or war; either is a likely outcome. Balancing trade policies to your own advantage in some way is the goal of every nation playing this game. Like most games without predefined established rules that treat all players equally the rules of “Free Trade” can be rigged.

The laws of “Free Trade” are usually controlled by those who are the most powerful players. This short list includes for the most part only those nations with capital to spare. Are the rules necessarily rigged to the benefit of one nation’s citizens at the expense of another’s? No, they are far more likely to be rigged to benefit the Multinational Corporations that are the true giants of “Free Trade” as it is currently constituted. This may inure to the benefit of the ownership classes in nations like the USA and Europe but it is not necessarily going to provide a long-term benefit to the vast majority of the people in the world. Not that I think that this is based on some vast international conspiracy. Most likely it is largely due to the inherent bargaining advantage that wealth and access to well educated expertise bestows on those who have them.

The question of who will benefit in the end is still uncertain even for those who own a large portion of the shares traded in the multinationals. From ENRON to Parmalat; fraud and failure haunt the investors of all nations. Nor are currencies stable in this picture although manipulation of their values is rife for a lot of geopolitical reasons. More wars are fought with currency values than with guns today. The consuming nations are benefiting today by access to cheap goods. The balance of payments deficit that the United States bears may yet take a heavy toll of the wealth owned by those who live here. The consuming nations will certainly eventually suffer a massive loss in buying power in the long term if the current rush to the bottom in wages and costs continue.

Wealth and ownership should expand when value is added to natural resources like oil and primary products of nature like food. That is happening now only for those corporations who own the means of production and have the capacity to bargain with governments. Their ability to obtain competitive advantages in the world of “Free Trade” are based on their economic power. Wealth and ownership are not expanding for most of the other participants in our new global markets as yet. It is certainly not in the short-term interests of those corporate giants to ever allow that to happen. Where the corporations place their government subsidized production facilities today has more to do with where they remain unregulated and unhampered by labor laws than any other factor.

There are ample workers in many nations willing to work for far less than would be a sustaining wage in this country. Where corporations have no need to bargain with either workers or for the most part with the government their costs are lowest. They should be pursuing the lowest cost for all components of products; their purpose is to yield a profit. Of course workers have little bargaining power under those circumstances and their wages seldom climb much over time in those nations. It is up to society at large to better define the roles that these Corporations play in our world. Unfortunately this is not happening today.
The strategy currently being followed by Multinational Corporations in regard to “Free Trade” will not reproduce elsewhere the middle-class that stabilizes our successful society. A consuming class of workers will not result from moving production every time a producer nation tries to keep its environment from degrading or allows workers to form unions. Furthermore this strategy is impacting our middle-class seriously today and will impact it further in the future. If the value of their work continues to fall based on the “Free Trade” policies pursued by our new Imperial Government their buying power loss will impact the Corporations using this approach too.

Trade-Based Empires do not recognize the rights or needs of their citizens in the same way that Republics must. All Empires are based on trading for things that they find difficult or impossible to produce internally. The urge to expand that generates an Empire comes largely from the need for products or resources not available inside of your borders. From Empires based on slavery to Empires based on sugar to our present Empire based on oil this has held true. Imperial governments cannot support the needs of their citizens in the same way as a Republic because they have to constantly exert control over forces outside of their dominant nation’s borders. Bread and Circuses must be supplied regardless of the cost but beyond that the rise of a middle class may not benefit an Empire as much as it does a Republic. The maintenance costs of a middle class might indeed be beyond the capacity of an empire’s coffers due to the costs of the constant warfare that is required to maintain the Empire itself.

The essential institutional elements of our new Empire’s economy are its giant corporations. Is it any wonder that they try to own our government and our national media? The need for oil is one of the great forces driving our nation toward empire but there are others. Corporations need a stable base of production and consumption for their products. The wage slavery allowed in other nations has long been suppressed here. To expand the Multinationals must have international rules of trade that serve their interests. Since a world government is beyond their reach they must use the resources of the only remaining superpower to obtain that stability and the rule base that supports their advantage. We are thus elected to support their drive toward a world economy dominated by their interests. Unfortunately they have no philosophers or historians on their management staffs who can tell them what results this course will inevitably bring.

We are at a turning point in our history no smaller than that we faced when we fought a war to end Slavery in our nation and refuse the Southern States the right to withdraw from our union. The decision of how far to expand our Empire and what that will do to our Republic is being made today. We need to choose, and it is possible that we have already chosen by refusing to control our corporations in any way. The “Science of Economics” ceases to be a science when we fail to observe what is actually happening around us and repeat beliefs without questioning them.

The Religious belief in “Free Trade” will not serve our nation well in the end if it destroys the foundations of our constitutional Republic. Those foundations are there in a set of documents that focused on eliminating the power of the burgeoning British Empire from our lives. We need to remember that rejecting that Empire was the most important choice made in the history of our nation. When we did that we also rejected the colonial “Corporations” that were chartered with the power to control our lives by the King of England. Is it better to have home grown Corporations assuming the same role in our lives today? Even more than remembering that fact, we need to summon up the courage and conviction to reject this new Empire that is being visited upon us from within our own nation. God bless and keep you all safe and happy in this time of our choice between Empire and Republic.

Posted by Henri Reynard at January 5, 2004 9:29 AM