Free trade?

Auditor #9 wrote:

seinfeld wrote:

The irony therefore is that for free trade to succeed, it must be very carefully managed.

I think we have to give quote of the week to that one.

Yep - thats kind of the conclusion I've been coming to over the whole "Free Trade" fandango.

I have always thought of capitalism as what goes on inside an internal combustion engine - capitalism is the energy released as the economy constantly builds itself up and similtaneously tears itself down and is constantly recreating itself.

That is not a good in itself.

Going back to the internal combustion analogy - the energy produced in an internal combustion engine is only useful when it is harnessed by the pistons to power the vehicle or machine.

Thus Free trade works to a degree in the West - where there is a long tradition of civil institutions and democratic and republican traditions which helps ameliorate the worst excesses and direct the energy and resources produced for the common good - this varies from state to state - and a strong gov and judiciary and alert citizenry can regulate free trade and capitalism - in the developing world - where there is an absence of such and proliferation of corruption - free trade is a total disaster.

Not sure if I've been making much sense there - but ultimately unless there were are stong civil institutions refereeing the game - free trade turns into its ultimate end , private monopoly and plutocracy.

The decades of most growth and growth that spread its benefits to the most citizens in the last century were between 1945 and 1970 - ironically were decades of the highest tariffs and most regulated financial systems.

There is a lesson there somewhere.

Communism was a total bummer for those who lived under it - but for my parents generation of workers -the fear of communism happening in the west actually put manners on the capitalist class - with its disappearance I wonder will I and many others be looking forward to quite the same retirement with the massive inequities emerging not seen since 19th century opening up?

Im rambling

Edo wrote:

Auditor #9 wrote:

seinfeld wrote:

The irony therefore is that for free trade to succeed, it must be very carefully managed.

I think we have to give quote of the week to that one.

Yep - thats kind of the conclusion I've been coming to over the whole "Free Trade" fandango.

I have always thought of capitalism as what goes on inside an internal combustion engine - capitalism is the energy released as the economy constantly builds itself up and similtaneously tears itself down and is constantly recreating itself.

That is not a good in itself.

Going back to the internal combustion analogy - the energy produced in an internal combustion engine is only useful when it is harnessed by the pistons to power the vehicle or machine.

Thus Free trade works to a degree in the West - where there is a long tradition of civil institutions and democratic and republican traditions which helps ameliorate the worst excesses and direct the energy and resources produced for the common good - this varies from state to state - and a strong gov and judiciary and alert citizenry can regulate free trade and capitalism - in the developing world - where there is an absence of such and proliferation of corruption - free trade is a total disaster.

Not sure if I've been making much sense there - but ultimately unless there were are stong civil institutions refereeing the game - free trade turns into its ultimate end , private monopoly and plutocracy.

The decades of most growth and growth that spread its benefits to the most citizens in the last century were between 1945 and 1970 - ironically were decades of the highest tariffs and most regulated financial systems.

There is a lesson there somewhere.

Communism was a total bummer for those who lived under it - but for my parents generation of workers -the fear of communism happening in the west actually put manners on the capitalist class - with its disappearance I wonder will I and many others be looking forward to quite the same retirement with the massive inequities emerging not seen since 19th century opening up?

Im rambling

I don't think you are Edo. Globalisation perhaps means that the class system of the 19th century that operated inside the nation state has become a geographical class system. In the west we have all done nicely out of extracting the resources of "undeveloped" countries to the benefit of our economies and personal prosperity. The people who put so much into even very imperfect attempts at communist or socialist systems put us in a situation where to some extent we have been looked after and placated by a decent living standard (albeit paid for by some extent by debts).

Where the bottom is, with no safety net, was reported in the Times today under the heading "Filipino crewmen 'endured appalling situation'.

"A truckload of food was delivered yesterday to 12 Filipino seafarers..at Cork harbour...ITF and SIPTU re Ken Fleming said: "the men were living in some of the worst conditions he had ever seen, with only contaminated water to drink, and no fresh food. "It was empty refrigerators as such. There were vegetables, but they had rotted so much that they had started to regenerate. There was no fresh fruit, there was no proper drinking water and no milk. ... they hadn't had their dietary needs met for about two weeks. Some of them were crying when we came on board. We made sure that provisions were delivered today and their dietary needs met" This is the second time in 2 weeks that dockers have had to take action in similar cases. Its noticeable that is has been the Trade Unions in these case and not the EU that has intervened.

Edo wrote:

Im rambling

You will be soon - travel is a great education in these matters as you see the different cultures and how things are dealt with in them.

I'd be tempted to make levels or layers for free-tradeable and non-freetradeable goods and services.

Some goods should not be traded freely for moral reasons and others for ecological reasons (introducing animals into habitats where they become destructive) and also for historic or conservation value - people aren't allowed to just dig up rock from the Burren anymore and flog it to anyone - these types of controls are there because we are civilised, moral beings who are conscious of having made some mistakes in our history.

Trading with a corrupt regime however is a little more dubious morally - the likes of Cuba or North Korea or Iraq before Saddam fell - should we really have imposed sanctions on these peoples? Would free trade have helped/hindered them? Certain goods no - uranium or guns or other aggressive military equiptment perhaps not.

Lastly for now, what about the free trade and movement of information, data and knowledge? Shouldn't that have no barriers at all? Well, any unlawful or sensitive knowledge or information gets protected but when do we stop and draw the line at free disemmination of data and information? There are tons and tons of data out there on the dark internet and elsewhere that we will never see for all sorts of reasons.

Again it goes back to seinfeld's point - when do we protect it and when do we not ... and using what criteria... It's an interesting balancing act and brings all sorts of questions into play.

Auditor #9 wrote:

Trading with a corrupt regime however is a little more dubious morally - the likes of Cuba or North Korea or Iraq before Saddam fell - should we really have imposed sanctions on these peoples? Would free trade have helped/hindered them? Certain goods no - uranium or guns or other aggressive military equiptment perhaps not.

There is an argument that the best way to undermine a corrupt regime is to trade freely with it (other than in arms).

One of easiest ways to educate people is to make them better off.

I doubt if Fidel Castro would have been in power for so long if Cuban citizens had been exposed to the full force of US consumerism.

I hope to return to this subject with a contribution of my own in about 6 weeks time. The reason I wont comment on it now is that I am (re)writing a thesis on a subject examining an aspect of the current trade system and I have 6 weeks to complete it. I will return to in then and make a contribution.

Here is a good article on free trade
http://www.newswithviews.com/Roth/laurie112.htm
Policies are usually given names that sound good but on digging a bit deeper the results are not pleasant

The use of regulation to put competitors out of business is not unknown. That doesn't mean that all regulation is bad - clean water, teddy bears with eyes that don't choke your baby and cars that don't kill us with fumes are all worth regulating for.

I'm having a pint with a chap from the WTO in a couple of weeks time, if he doesn't offer me a job I think I might have to kill him.

Before you do it would be a good idea to have a few pints with his boss.

Ok.

An interesting documentary to watch which shows the effects of pushing the concept of 'free trade' on developing countries (well Malawi in this particular documentary.. i don't think it's directly the primacy focus of the documentary itself, but it's well worth the watch to see how WB/IMF/WTO etc are doing their thing)

http://www.teachers.tv/video/17777

It did not focus on these groups so here we have it from the horses mouth.
http://video.google.com/videoplay?docid=6499794293687763489&q=john+perkins&ei=_mwvSOiCDoWyrgK_ra37CQ&hl=en
They are like an octopus. They give with one hand and take with seven

I've harped on about Mali before. There was a lot more to it than the IMF and WTO.

Mali or Malawi?

cookiemonster wrote:

Over yonder I was just called a "neo-convervative" for being an advocate of free trade and the abolition of trade barriers.
That, somehow, free trade perpetuates third world poverty.

So what do the good Burghers of Machine Nation think about free trade?

To find out the merits or not of free-trade, and in particular with respect to development for poor nations, I think it's useful to look at the reality of it's historical use and benefit by the countries that are now developed.

Interestingly you will find that (contrary to received wisdom, and self-interested publicity) no developed nation, became wealthy and developed by using what is recognised as 'free-trade' policies*.

Even more surprisingly, the US (and perhaps the UK) is the most ardent follower of interventionist and protectionist policies in its development.

Unfortunately it is also the most ardent adherent to stopping developing nations from following in it's stead (directly and through the institutions created by it apres WWII - the IMF, World Bank etc) which explains the view above.

"free trade perpetuates third world poverty." This is a just a clear fact, as the strong will continue to get strong at the expense of the weak. I mean you don't put a lightweight fighter in with a heavy weight for a reason.

The repercussions are horrific and are justifiably and logically put at capitalism's door.



* for more on this check out the work of the economist Ha-Joon Chang,

The latest being the book, "Bad Samaritans: Rich Nations, Poor Policies and the Threat to the Developing World"

Also, Prospect article with similar title, which uses the example of Japan.
http://www.prospect-magazine.co.uk/article_details.php?id=9653

Quote :

Almost all rich countries got wealthy by protecting infant industries and limiting foreign investment. But these countries are now denying poor ones the same chance to grow by forcing free-trade rules on them before they are strong enough....

[....]

....The year was 1958 and the country was Japan. The company was Toyota, and the car was called the Toyopet. Toyota started out as a manufacturer of textile machinery and moved into car production in 1933. The Japanese government kicked out General Motors and Ford in 1939, and bailed out Toyota with money from the central bank in 1949. Today, Japanese cars are considered as "natural" as Scottish salmon or French wine, but less than 50 years ago, most people, including many Japanese, thought the Japanese car industry simply should not exist.

______
Edit to add:

Also, the President of Ecuador Rafael Correa (and ex-economist himself) is a great fan of Chang, and Chang recently visited Venezuela. Indeed, Stiglitz also largely agrees with Chang's analysis and Stiglitz recently praised the change in Latin American economic policies and Venezuelan policies in particular.

cookiemonster wrote:

Ard-Taoiseach wrote:

Free trade is great, it reduces production costs, increases economic out-put, reduces racism, reduces the likelihood of war and improves the efficiency of the global economy.

Please sir, can we have some more?

Indeed. I didn't want to mention David Ricardo to the poster who made those comments and no doubt I would have brought on a fit of apoplexy had I mentioned what Smith or Mises had to say on the matter...
almost ALL economists for that matter.

Well actually the US ignored Smith's free-trade route in their development, as did most developed nations in fact. I mean Smith saw America's future in argiculture! He was Japan's equivalent of those who said Toyota should die, and they should stick to what they knew best. Instead they went with Alexander Hamilton,
the first Secretary of the Treasury of the United States (1789–1795), infant industry protectionist model*

So I'd hardly recommend to poorer nations a 'free trade' which is evidentially not the way other countries went. Any apoplexy is based on the repercussion from such an approach. Justifiable apoplexy in this case.


*

Kicking Away the Ladder:
How the
Economic and Intellectual Histories of Capitalism Have Been Re-Written to
Justify Neo-Liberal Capitalism
Ha-Joon Chang (Cambridge
University, UK)
http://www.paecon.net/PAEtexts/Chang1.htm

Quote :

In protecting their industries, the Americans were going against the advice of such prominent
economists as Adam Smith and Jean Baptiste Say, who
saw the country’s future in agriculture. However, the Americans knew exactly
what the game was. They knew that Britain reached the top through protection
and subsidies and therefore that they needed to do the same if they were
going to get anywhere. Criticising the British preaching of free trade to his
country, Ulysses Grant, the Civil War hero and the US President between
1868-1876, retorted that “within 200 years, when America has gotten out of
protection all that it can offer, it too will adopt free trade”. When his
country later reached the top after the Second World War, it too started
“kicking away the ladder” by preaching and forcing free trade to the less
developed countries.

The UK and the USA may be the more dramatic examples, but almost
all the rest of the developed world today used tariffs, subsidies and other
means to promote their industries in the earlier stages of their development.
Cases like Germany, Japan, and Korea are well known in this respect. But even
Sweden, which later came to represent the “small open economy” to many
economists had also strategically used tariffs, subsidies, cartels, and state
support for R&D to develop key industries, especially textile, steel, and
engineering.

http://www.fpif.org/papers/03trade/history.html

Quote :

3.2. United States of America


As we have just seen,
Britain was the first country to successfully use a large-scale infant
industry promotion strategy. However, its most ardent user was probably
the U.S. ; the eminent economic historian Paul Bairoch once called it
“the mother country and bastion of modern protectionism” (Bairoch,
1993, p. 30). This fact is, interestingly, rarely acknowledged in the
modern literature, especially coming out of the United States . However, the importance of infant industry protection in U.S. development cannot be over-emphasized.
From
the early days of colonization, industrial protection was a
controversial policy issue. To begin with, Britain did not want to
industrialize the American colonies, and duly implemented policies to
that effect (e.g., banning of high-value-added manufacturing
activities).

Around the time of independence, the southern agrarian
interests opposed any protection, and the northern manufacturing
interests wanted it, represented by, among others, Alexander Hamilton,
the first Secretary of the Treasury of the United States (1789–1795).
In fact, it was Alexander Hamilton in his Reports of the Secretary of the Treasury on the Subject of Manufactures
(1791) who first systematically set out the infant industry argument,
and not the German economist Friedrich List, as it is often thought
(Corden, 1974, ch. 8; Reinert, 1996).

Indeed, List started out as a
free trade advocate and only converted to the infant industry argument
following his exile in the U.S (1825–1830) (Henderson, 1983, Reinert,
1998). Many U.S. intellectuals and politicians during the country's
catch-up period clearly understood that the free trade theory advocated
by the British classical economists was unsuited to their country.
Indeed, it was against the advice of great economists like Adam Smith
and Jean Baptiste Say that the Americans were protecting their
industries......

Very interesting Pax, thanks for that contribution

trade... so important to peace that if somebody doesn't wnat to trade with us we bomb them till they do.

We started this discussion on free trade six months ago. Free trade is under threat at the moment both from the credit crunch, dog-eat-dog bail outs and from protectionism. Obama says he will end supports for US companies who move overseas. The WTO talks ended with a whimper.

Is globalism dying in front of our eyes? Globalism has lead to more division of labour between nations, so that few countries are anywhere near self sufficient - they need our cattle, we need their coal and so on. On the one hand people want protection of jobs and on the other, they can't live without imported food.

cactus flower wrote:

We started this discussion on free trade six months ago. Free trade is under threat at the moment both from the credit crunch, dog-eat-dog bail outs and from protectionism. Obama says he will end supports for US companies who move overseas. The WTO talks ended with a whimper.

Is globalism dying in front of our eyes? Globalism has lead to more division of labour between nations, so that few countries are anywhere near self sufficient - they need our cattle, we need their coal and so on. On the one hand people want protection of jobs and on the other, they can't live without imported food.

What are the real motives behind self sufficiency though? In olden days it was to have al the resources available to make or survive war. Now it might be said that with it we may smuggly survive external crises with impunity.
Globalisation has come with costs but it has also locked the people of this planet in a single venture - the global market - which has the benefit of ensuring peace. The idea of the founding fathers of the EU in teh 1950s was to avert war by making the nations economically interdependent. Theres a lot of truth in that.
Take away the economic interdependency and we might well be opening up a pandoras box of problems and conflicts.
Dont let anyone let you believe otherwise. There aint anything worse than war. Hopefully globalisation can survive.

Respvblica wrote:

cactus flower wrote:

We started this discussion on free trade six months ago. Free trade is under threat at the moment both from the credit crunch, dog-eat-dog bail outs and from protectionism. Obama says he will end supports for US companies who move overseas. The WTO talks ended with a whimper.

Is globalism dying in front of our eyes? Globalism has lead to more division of labour between nations, so that few countries are anywhere near self sufficient - they need our cattle, we need their coal and so on. On the one hand people want protection of jobs and on the other, they can't live without imported food.

What are the real motives behind self sufficiency though? In olden days it was to have al the resources available to make or survive war. Now it might be said that with it we may smuggly survive external crises with impunity.
Globalisation has come with costs but it has also locked the people of this planet in a single venture - the global market - which has the benefit of ensuring peace. The idea of the founding fathers of the EU in teh 1950s was to avert war by making the nations economically interdependent. Theres a lot of truth in that.
Take away the economic interdependency and we might well be opening up a pandoras box of problems and conflicts.
Dont let anyone let you believe otherwise. There aint anything worse than war. Hopefully globalisation can survive.

I agree with you Respvblica. International protectionism in a slump historically was a step along the way to World War. Globalism is the basis on which the present population of the world has grown. If globalism goes, objectively, it is certain that many people will die from war and or/starvation. Millions of people have already slipped into starvation in the last year. I hear a lot of politicians saying they don't want protectionism, but everyone is reaching for a national solution - the Irish bank guarantee was referred to widely as a "beggar my neighbour" measure. There is a real lack of any international capacity to act - the IMF and World Bank are so discredited - it is their philosophy of deregulation that is partly responsible for where we are. Perhaps the UN should have an economic arm?

cactus flower wrote:

Respvblica wrote:

cactus flower wrote:

We started this discussion on free trade six months ago. Free trade is under threat at the moment both from the credit crunch, dog-eat-dog bail outs and from protectionism. Obama says he will end supports for US companies who move overseas. The WTO talks ended with a whimper.

Is globalism dying in front of our eyes? Globalism has lead to more division of labour between nations, so that few countries are anywhere near self sufficient - they need our cattle, we need their coal and so on. On the one hand people want protection of jobs and on the other, they can't live without imported food.

What are the real motives behind self sufficiency though? In olden days it was to have al the resources available to make or survive war. Now it might be said that with it we may smuggly survive external crises with impunity.
Globalisation has come with costs but it has also locked the people of this planet in a single venture - the global market - which has the benefit of ensuring peace. The idea of the founding fathers of the EU in teh 1950s was to avert war by making the nations economically interdependent. Theres a lot of truth in that.
Take away the economic interdependency and we might well be opening up a pandoras box of problems and conflicts.
Dont let anyone let you believe otherwise. There aint anything worse than war. Hopefully globalisation can survive.

I agree with you Respvblica. International protectionism in a slump historically was a step along the way to World War. Globalism is the basis on which the present population of the world has grown. If globalism goes, objectively, it is certain that many people will die from war and or/starvation. Millions of people have already slipped into starvation in the last year. I hear a lot of politicians saying they don't want protectionism, but everyone is reaching for a national solution - the Irish bank guarantee was referred to widely as a "beggar my neighbour" measure. There is a real lack of any international capacity to act - the IMF and World Bank are so discredited - it is their philosophy of deregulation that is partly responsible for where we are. Perhaps the UN should have an economic arm?

To an extent yes. Theres so many intereferances with free and fair trade its unreal. We all know about the farm subsidies in Europe and how they damage the famers of the 3rd world, but there should be certain rules that we all adhere to in international trade. But whos going to enforce them.
A hundred years ago a joint British-German fleet shelled Venezuela for defaulting on its debt. The power of enforcement of rules is critical, less might dictates right.

Respvblica wrote:

cactus flower wrote:

Respvblica wrote:

cactus flower wrote:

We started this discussion on free trade six months ago. Free trade is under threat at the moment both from the credit crunch, dog-eat-dog bail outs and from protectionism. Obama says he will end supports for US companies who move overseas. The WTO talks ended with a whimper.

Is globalism dying in front of our eyes? Globalism has lead to more division of labour between nations, so that few countries are anywhere near self sufficient - they need our cattle, we need their coal and so on. On the one hand people want protection of jobs and on the other, they can't live without imported food.

What are the real motives behind self sufficiency though? In olden days it was to have al the resources available to make or survive war. Now it might be said that with it we may smuggly survive external crises with impunity.
Globalisation has come with costs but it has also locked the people of this planet in a single venture - the global market - which has the benefit of ensuring peace. The idea of the founding fathers of the EU in teh 1950s was to avert war by making the nations economically interdependent. Theres a lot of truth in that.
Take away the economic interdependency and we might well be opening up a pandoras box of problems and conflicts.
Dont let anyone let you believe otherwise. There aint anything worse than war. Hopefully globalisation can survive.

I agree with you Respvblica. International protectionism in a slump historically was a step along the way to World War. Globalism is the basis on which the present population of the world has grown. If globalism goes, objectively, it is certain that many people will die from war and or/starvation. Millions of people have already slipped into starvation in the last year. I hear a lot of politicians saying they don't want protectionism, but everyone is reaching for a national solution - the Irish bank guarantee was referred to widely as a "beggar my neighbour" measure. There is a real lack of any international capacity to act - the IMF and World Bank are so discredited - it is their philosophy of deregulation that is partly responsible for where we are. Perhaps the UN should have an economic arm?

To an extent yes. Theres so many intereferances with free and fair trade its unreal. We all know about the farm subsidies in Europe and how they damage the famers of the 3rd world, but there should be certain rules that we all adhere to in international trade. But whos going to enforce them.
A hundred years ago a joint British-German fleet shelled Venezuela for defaulting on its debt. The power of enforcement of rules is critical, less might dictates right.

China was shelled by the British for trying to stop the British opium trade into China. Gordon Brown has taken legal action against Iceland to freeze assets that is threatening the country and its people with destitution. The Brits have long memories and don't forget losing the Cod War. Do you think they would be particularly friendly to Ireland if we didn't shell out to the British Banks here that come under the Irish Guarantee?