As the demonstrations last week in Miami over an effort to establish something resembling free trade in the Western hemisphere show us, those who are opposed to military war or at least this military war conducted by this administration do not always agree on every issue. Our coalition includes people who find the idea of expanding free trade although the hemispheric trade pact they were talking about in Miami is not genuine free trade but managed trade with lower tariffs reprehensible.
Unless this comes from a knee-jerk opposition to anything that resembles inherently filthy commerce, I find the current popularity of anti-trade positions somewhat curious. It used to be that free trade was seen as a liberal or leftist and not only the European understanding of “liberal,” which is closer to what an American would see as mildly libertarian point of pride. Restrictions on trade, most left-liberals believed at least until the early 1960s, served mainly to protect inefficient industries in developed countries from competition and to hold back the progress of poorer countries toward greater affluence and any hope for democratization.
The major dissenters from this left-liberal consensus tended to be union leaders. Having bargained to get wages and benefits that were presumed to be higher than what the marketplace unencumbered by unions would have given their workers, many union leaders saw competition from foreign companies (or multinationals with plants in foreign countries) who could pay workers considerably less than what workers in the U.S. or Western Europe could demand as a threat to those hard-won premium wages and benefits.
Few noted that while the occasional union contract does bring wages somewhat beyond what a non-unionized employer would pay, overall non-union wages have risen pretty much in lockstep with union wages. A company in business to make money might be able to continue while paying union workers a slight premium over prevailing wages and benefits, but it simply can’t afford to pay a union employee a huge premium. So union contracts tend to reflect the prevailing labor market rather than being significantly higher, but union leaders and most union members tend to think otherwise. Thus they want to protect themselves from what is produced by “cheap” foreign workers, even if the more significant beneficiaries of protectionism are the often inefficient and outmoded companies they face across the bargaining table.
MAKING PROTECTIONISM RESPECTABLE
Over the years, however, opposition to what has come to be called “globalization” or “globalism,” sometimes in understandable dismay over the policies and practices of international bodies like the World Bank and the IMF, has come to be more fashionable on the left. The one unquestionable accomplishment of Democratic presidential contender Dick Gephardt, the congressman from Missouri who has long had close relation with organized labor, has been to make opposition to freer trade the default position among Democratic candidates.
This is a switch from the Clinton years, when the president actually negotiated and pushed the NAFTA treaty (although that is more managed trade than genuinely free trade, albeit freer and less encumbered trade than before the treaty) through the Senate. With President Bush imposing steel tariffs early in his administration, the Republicans, although they occasionally pay obeisance to freedom of trade, have become de facto protectionists as well.
There is pressure on the administration to rescind those steel tariffs and various other protectionist measures before the election campaign gets underway in earnest from the peoples’ perspective (the politicians are always heavily into the Campaign Eternal), since they seem to have done more harm than good. But like many people of modest intelligence (and, to be fair, like almost every president from the get-go) he seems to have trouble admitting that a previous decision might have been a mistake. So the likelihood is that in the world of conventional politics, “we are all protectionists now.” Given that protectionism has almost always been more about rewarding friends and allies in certain industries than about “protecting” anything except the profits of the increasingly inefficient or developing a rational policy.
We seem to have lost an insight that was commonplace not so long ago, even to novelists. Mika Waltari, in the novel The Egyptian, noted in passing that since two countries being discussed traded extensively with each other they seldom went to war, as if that were a perfectly obvious commonsensical observation. In fact, it is common sense, but we seem to have lost the understanding that insofar as trade benefits both parties (and if it is genuinely voluntary it wouldn’t happen if both parties didn’t think so) it is a “win-win” situation that contributes mightily not only to prosperity but also to the prospects for peace.
It is especially nice, then, to note a new book, In Defense of Global Capitalism, that forthrightly makes the case for unencumbered international trade. Johan Norberg is a fellow at the Swedish think tank Timbro who used to consider himself an anarchist, his impulse coming from what he now calls “my fundamental urge for liberty.” “I want people to be free, with no one oppressing anyone else, and with governments forbidden to fence people in or to exclude them with tariffs and borders.” Thus his enthusiasm for “the process by which people, information, trade, investments, democracy, and the market economy are tending more and more to cross national borders.”
In a book chock-full of facts and statistics, Norberg takes on just about every objection to freer trade raised from the right or the left. Concerned about hunger and poverty in the underdeveloped world? The best cure is trade. Those countries that have opened their markets to some extend have moved more quickly and surely toward relative affluence than those that have not. In East and Southeast Asia, which have to some extent liberalized their trade policies, hunger has fallen from 43 percent to 13 percent since 1970. In Africa south of the Sahara, where protectionism has been the rule, hunger has increased.
“The greater the degree of economic liberalism in a country,” Norberg writes, “the better that country’s chances of attaining higher prosperity, faster growth, a higher standard of living, and higher average life expectancy. People in the economically freest countries are nearly 10 times as rich as those in the least free, and they are living more than 20 years longer!”
A DEFICIT OF CAPITALISM
What keeps poor countries poor, Norberg argues, is not a plot on the part of rich countries to keep them poor, but a deficit of capitalism and open markets. He argues, and backs it up with statistics, that economic freedom reduces corruption, makes the distribution of wealth in a given country less unequal, raises living standards, brings growth, and increases life expectancy, as well as undermining gender inequality. When a poorer country experiences economic growth, the higher percentage of increases in incomes is experienced by the poorest people in those societies. Countries that have experienced such growth for 20 or 30 years have not yet risen to the living standards of the United States or Western Europe, but they are immeasurably better off than they were.
Those who want to restrict trade, he argues, are really arguing (in terms of what the result will be) for keeping poor countries poor, for making sure that those living in those countries will continue to suffer in grinding poverty and oppression. Why a supposed friend and sympathizer of those people would advocate policies that yield such results is a bit of a mystery.
Norberg writes clearly and concisely, and despite liberal use of facts and statistics he seldom sounds densely academic or incomprehensible. He takes on almost every shibboleth of the anti-free-traders, from the argument that poor countries need to protect “infant industries” to the argument that economic growth increases inequality. He acknowledges that some people who talk about free trade are really for managed trade that benefits corporate interests. But the cure for that is more free trade, not more restrictions.
There is reason to be concerned about political globalization insofar as it increases centralized and unaccountable political control over people. But economic globalization, so long as it is based on unfettered movement of goods and people and on trades that are not forced, is an almost unalloyed benefit. Those who want more protectionism, especially those who believe it will benefit those less fortunate than they, should deal with the facts and arguments in this book.