“Free Trade” Was Never Really About Trade

Published on Thursday, June 20, 2013 by Common Dreams

by Stan Sorscher

We need to think differently about trade.

First, let me say that I am 100% in favor of trade. Trade is when we do what we do best, they do what they do best, and we trade. Trade, done right, will raise living standards.

If trade is good, then free trade must be better, right? So consider this old joke about “free trade.”

  • It’s not free.
  • It’s not trade.

Twenty years after NAFTA we can add that it doesn’t work. It’s bad for millions of workers, families and communities around the world.

“Free trade” is not free. Our free trade policy encourages production to leave the country. We’ve lost millions of manufacturing jobs. More than 60,000 manufacturing plants were closed between 2000 and 2010 as production moved overseas. These costs are real.

“Free trade” is not trade. Basically, trade is when each country makes things of value for export and gets things of comparable value in imports. In modern globalization, other countries manipulate their currencies, use tax strategies that distort exports and imports, and apply effective well-designed industrial policies to build manufacturing capacity. They export more products to us, and import fewer products from us.

Our trade deficits since NAFTA are over $8 trillion. With trade deficits this large, we are not trading. We are letting other countries produce for us. We borrow, de-industrialize, and ultimately fail to capitalize on future production opportunities. That’s not trade. That’s getting picked clean.

Additionally, language in trade agreements is not about “trade,” so much as protecting investors. The most charitable explanation I’ve heard for this is global businesses need strong “rule of law” in countries with weak legal systems. They can’t risk investing in Mexico, Peru or Jordan if their property could be taken from them. Patents and intellectual property must be protected from modern global piracy of one form or another. OK. Sure. Investors need rights.

In America, we solved the problem of protecting investor rights. We created rules for commerce among the 50 states. We innovated and helped investors prosper, AND we protected clean water and clean air AND we made social investments in schools, roads, power, arts and sciences, AND we set labor standards so workers could share in gains from productivity. Well, until recently, arguably.

The European Union also solved that problem, protecting investor rights among their 17 or 22 or 27 countries or whatever that number is, AND they invest in research and development AND educate their children AND promote sustainable energy AND share the gains from productivity with workers. Well until recently, arguably.

Modern democracies built policy solutions over generations of political engagement. We achieved an upward spiral, raising living standards for the most part.

However, free trade agreements pursue a very different political process, driven by global companies, and aimed primarily at investor interests.

Free trade agreements are bad for millions of people because they are not really about trade. More importantly, they limit the political process so investors are relieved of responsibility for protecting the environment OR recognizing labor rights or human rights, OR dealing with public health OR worrying about prudent financial regulation.

The overall result is downward pressure that weakens our political and social values, eroding civil society and public interest in all countries.

My Congressman made a compelling argument for public interest, based on his personal experience as a doctor in Africa. Global pharmaceutical companies use patents to charge prices far above market levels. We expect a public good in return. This goes horribly wrong when millions of people with treatable diseases are denied access to life-saving medicine because trade agreements favor investors over people. This is exactly the kind of question we want elected officials to resolve. That’s why we have democracies.

Instead, under “free trade” agreements, a trade tribunal will make those policy decisions for us and for millions of vulnerable people around the world. These shadowy tribunals will enforce rules written into “free trade” agreements, which are all about investor rights, not about trade and not about public interests.

Show me language in free trade deals that protects the environment. Show me language for worker standards. Show me free trade provisions for human rights, public health.

Here’s an easy one – show me any action to stop currency manipulation, which distorts trade, subsidizes global companies who produce offshore, and makes a mockery of any textbook principles of legitimate trade.

We are negotiating two giant new “free trade” agreements, which are not about trade. They are about global governance. One is called the Trans-Pacific Partnership, or TPP. So far, 11 Pacific-rim countries will be included. The other huge deal is for Europe.

The defining characteristic of these agreements is that investor rights will have priority over public interest. They weaken Democracy. They are not really about trade.

If the TPP and the European deal are signed, we will have locked in this new 21st century colonialism for generations to come.

It was never really about trade.

Stan Sorscher is on staff at Society for Professional Engineering Employees in Aerospace (SPEEA), a labor union representing aerospace engineers, scientists and technical workers, and is President of the Washington Fair Trade Coalition. He is active in trade, economic development, and other public policy issues.  Follow Stan on Twitter: www.twitter.com/sorscher

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Article printed from www.CommonDreams.org

Source URL: http://www.commondreams.org/view/2013/06/20-10

It’s not the left that’s changed, it’s the economy

By Harold Meyerson, Washington Post, March 21,2013

Excerpt

Have American liberals moved too far to the left? That’s long been the contention of conservatives contemplating liberal positions on a host of social issues, such as gay marriage and the legalization of undocumented immigrants. But opinion polls on these issues show that yesterday’s far-out liberal positions are quickly becoming today’s conventional wisdom…Gallup released a poll showing that 72 percent of Americans, including a majority of Republicans, would support a major federally financed infrastructure repair program and a federal program creating 1 million jobs… But there’s a bigger problem with the conservative contention that government stands athwart the private sector’s capacity to create jobs and prosperity: It fails to acknowledge that the private sector no longer creates jobs and prosperity like it used to, completely apart from whatever effects governmental policy may have on job creation. Entirely on their own and well before Obamacare was a gleam in anyone’s eye, employers began cutting back or altogether dropping health coverage and retirement benefits for employees. Nor have government regulations compelled employers to increase the share of company revenue going to profits (which is at its highest level in decades) and reduce the share going to wages (which is at its lowest level in decades)…In short, the economy is working for our economic elites…the economy has reached a dismal stability far short of its full employment potential or renewing the promise of widespread prosperity, and government investment is required to make up the difference…

Full text

Have American liberals moved too far to the left? That’s long been the contention of conservatives contemplating liberal positions on a host of social issues, such as gay marriage and the legalization of undocumented immigrants. But opinion polls on these issues show that yesterday’s far-out liberal positions are quickly becoming today’s conventional wisdom.

A more nuanced conservative critique focuses on liberals’ support for a greater government role in the economy. To be sure, New York Times columnist David Brooks argued in a recent column, liberals have traditionally urged government to take up the slack in economic activity during recessions, but now, as the budget proposal of the Congressional Progressive Caucus shows, liberals believe that “government is the source of growth, job creation and prosperity” even when the economy has righted itself. The progressives’ budget, Brooks complains, proposes spending $450 billion on public works and sending $179 billion to the states so they, too, can provide more services and pave more roads. All this and more would be financed by increases in progressive taxation — draining the private sector of the capital it needs to grow, hire and produce prosperity.

Not surprisingly, liberal economists have jumped on Brooks’s arguments. Lawrence Mishel of the Economic Policy Institute argues that the economy is still performing so under par — $985 billion below its potential output if all our factories were going full tilt — that it needs a major boost from government-financed economic activity to increase production, employment and consumption. Coincidentally, the day after Brooks’s column was published, Gallup released a poll showing that 72 percent of Americans, including a majority of Republicans, would support a major federally financed infrastructure repair program and a federal program creating 1 million jobs. Nearly 80 years after Franklin Roosevelt created the Works Progress Administration, it seems the American people would like the government to re-create it.

But there’s a bigger problem with the conservative contention that government stands athwart the private sector’s capacity to create jobs and prosperity: It fails to acknowledge that the private sector no longer creates jobs and prosperity like it used to, completely apart from whatever effects governmental policy may have on job creation. Entirely on their own and well before Obamacare was a gleam in anyone’s eye, employers began cutting back or altogether dropping health coverage and retirement benefits for employees. Nor have government regulations compelled employers to increase the share of company revenue going to profits (which is at its highest level in decades) and reduce the share going to wages (which is at its lowest level in decades).

The U.S. corporations that make up the Standard & Poor’s index of the 500 largest publicly traded companies get almost half their revenue from sales abroad, according to a 2011 S&P analysis, and, despite all the hoopla about bringing manufacturing back to the States, much of their production is going to remain abroad. The rise of machines has, we all know, taken its toll on employment too. U.S. corporations are sitting on $1.7 trillion in cash, with share values and profits that render most of these businesses’ leaders happy campers. Even if the U.S. economy continues to fall far short of full employment, and even if the rate of workforce participation continues to decline, these businesses can still sell their products all over the world. Unlike in the 1930s, the shortfall in domestic consumption does not present them with a crisis but with perhaps nothing worse than a missed opportunity.

In short, the economy is working for our economic elites. The massive changes they would have to make to investment strategies and the division of corporate revenue so that the economy worked for the majority of the American people are nowhere on the horizon. The great growth machine that once was the U.S. private sector ain’t what it used to be — which is one reason each recession since 1990 has been longer, deeper and more in­trac­table than the last. That’s the new economic reality in this country, and that’s what the budget of the Congressional Progressive Caucus responds to. It’s not that liberals have been prompted to move leftward through the readings of ancient socialist gospels or by smoking some stash left over from the ’60s. It’s that the economy has reached a dismal stability far short of its full employment potential or renewing the promise of widespread prosperity, and government investment is required to make up the difference. If anyone is smoking something, it is conservatives who foresee a rebirth of prosperity if only the private sector is left alone.

Read more from Harold Meyerson’s archive or follow him on Twitter.

http://www.washingtonpost.com/opinions/harold-meyerson-its-not-the-left-thats-changed-its-the-economy/2013/03/21/1aa67af8-925a-11e2-9cfd-36d6c9b5d7ad_story.html?hpid=z2

The New Values Voters: The Economy

AmericanProgress.org, October 1, 2012

While helping the poor and the economically disadvantaged has long been a core value for many Americans and their faith communities, some might question whether their concern would persist in unstable economic times—many families, after all, are just trying to stay afloat. Yet recent surges in activism and advocacy indicate that sensitivity to the plight of the less privileged is actually increasing—especially within many faith communities—and is playing an active role in the 2012 campaign.

In addition to thousands of churches, faith-based nonprofits, and activist groups working tirelessly to serve the poor, clergy and laypeople alike are speaking out to eradicate poverty and encouraging elected officials to create economic policies that are fair and just.

Fighting for economic justice

Faith groups in America have always expressed deep concern about economic inequality and poverty. Throughout our nation’s history, churches and faith-based nonprofits have provided essential services to the poor and needy. In addition to providing direct services, they have spoken with a prophetic voice about the government’s responsibility to care for those in need. From Dorothy Day’s Catholic Worker Movement to Martin Luther King Jr.’s Poor People’s Campaign, faith communities have a proud history of advocating on behalf of “the least of these.”

Fast facts

  • 93 percent of Christians express concern for global poverty.
  • 67 percent of Catholics consider helping the poor as central to the Catholic identity.
  • Faith-based charities and other religious organizations provide $50 billion worth of social services to the poor each year
  • In both 2004 and 2008, voters from all religious traditions listed the economy as a top issue that affected how they vote.

As it turns out, this value, like faith, seems to have staying power, and the strong tradition of faith-based activism on behalf of the poor continues today. Faith leaders played a prominent role in the recent Occupy Wall Street movement, for example, marching side-by-side with protesters as they decried corporate greed and called attention to America’s growing income disparity. What’s more, scores of churches and dioceses divested their money from large banks like Bank of America in October of last year, placing their funds in local credit unions that reinvest in community development and are responsible lenders.

Faith groups also made waves in recent years by opposing federal legislation that would harm lower-income households. During last year’s federal budget debate, for instance, many faith leaders denounced the House Republican budget-cutting plan, saying it would slash crucial programs essential to millions of Americans living in or near poverty. In fact, Common Cause—a nonprofit advocacy organization dedicated to holding U.S. political institutions more open and accountable—organized a protest against the budget in which priests, pastors, rabbis, and faith leaders were arrested for gathering in the U.S. Capitol and praying for lawmakers to remember the poor.

Similarly, the U.S. Conference of Catholic Bishops was quick to speak out against a separate House Budget proposal earlier this year because of its draconian cuts to government programs that help the poor and vulnerable. Their critique was amplified by Sister Simone Campbell, a nun and head of the Catholic social-justice group NETWORK, who organized the nine-state “Nuns on the Bus” tour decrying the “immoral” budget while visiting local faith-based service groups that would be drastically harmed by proposed budget cuts.

Advocacy for a fair and just economy extended into this year’s election season, with religious groups working to raise awareness about poverty within both presidential campaigns. Sister Simone Campbell and NETWORK have asked both presidential candidates to spend a day with the poor. And Circle of Protection, an ecumenical Christian activist group dedicated to protecting government services that meet “the essential needs of hungry and poor people at home and abroad,” successfully persuaded both presidential campaigns to release video statements expressing their dedication to eradicating poverty.

Rev. David Beckman, president of Bread for the World—a Christian citizens’ movement in the fight to end hunger—explained that the videos addressed what is truly a spiritual issue:

We are calling on religious leaders and all people of faith to listen carefully to what the candidates have to say and when voting be mindful of the least among us. Voting is a sacred obligation; supporting candidates who have demonstrated their commitment to reducing hunger and poverty is integral to good stewardship.

But concern about economic inequality and poverty isn’t restricted to organization heads or clergy—it’s also important to those in the pews. Polls show that 93 percent of Christians express concern about global poverty. In addition, a 2011 survey found that 67 percent of Catholics consider helping the poor as central to the Catholic identity—by comparison, only 64 percent say the belief in Mary as the mother of God is a core Catholic belief. Another 2011 poll reported that majorities of every major religious group, as well as those who are religiously unaffiliated, think the country would be better off if the distribution of wealth were more equal.

In short, the movement for a fair and just economy isn’t limited to faith leaders and worshippers. In fact, it includes Americans of all faiths—and no faith—united behind the cause of economic justice.

If recent events are any indication, concern for economic inequality isn’t just a political talking point. It’s a deeply held spiritual value shared across faiths and American history that is only getting stronger.

Jack Jenkins is a Writer and Researcher with the Faith and Progressive Policy Initiative at the Center for American Progress.

http://www.americanprogress.org/issues/religion/news/2012/10/01/40112/the-new-values-voters-the-economy/

23 Things They Don’t Tell You About Capitalism: Item #1 — There’s No Such Thing as a Free Market

By Ha-Joon Chang, Bloomsbury Press, Posted on Alternet.org, January 31, 2011 

Editor’s Note: Many books have tackled the great recession of 2008, the second worst economic crisis in history, after the depression. But I doubt there is one book, written in response to the current economic crisis, that is as fun or easy to read as Ha-Joon Chang’s 23 Things They Don’t Tell you About Capitalism. I’d never heard of this Korean economist, probably because he lives in England and teaches at Cambridge, but he is well known in economic circles, and well respected. 

It is no secret that the American society is dominated by the super rich, held for hostage by the banks, dominated in the Nation’s Capital by the tens of thousands of lobbyists and their big bucks, as the Republican party and their corporate Tea Partyists provide cover for giant theft of many billions of wealth for the very rich, with of course the cooperation of the Democrats who supported the extension of the Bush tax cuts for the very wealthy(Check out Rachel Maddow’s op-ed, which explains why Dwight Eisenhower, who taxed the rich to balance the budget, which be a radical in today’s political reality). In this very discouraging environment it is hard to imagine scenarios where normal folks, every day voters, the non-rich, who are not represented by lobbyists, can have much influence.

 

On top of that, making change even harder, is an enormously effective propaganda system that perpetuates inaccurate and often destructive myths about virtually every element of capitalism and the US and global economy. And top economic officials in the Obama administration and leading mainstream economists often perpetuate these myths, and the corporate media marches along side repeating them like the gospel.

 

So, as far as I am concerned there never can be too much truth-telling to attempt to pull away the curtain of propaganda and disinformation that shrouds our economic thinking and actions. I am not under the illusion that the facts will set us free. As research has shown, when people connect their opinions to a set of values or leaders, they will not be open to changing their mind, and presentation of contrary “facts,” may make them dig in more clinging their their misinformation. But when it comes to the economy, the propaganda system has been so pervasive, and supported by conventional wisdom that people who need to know better, buy into it, and yes that includes liberals and progressives who have a kind of inertia of the mind of their own. It is hard to change one’s sense of things.

 

AlterNet’s Economics editor Joshua Holland made a nice contribution to this public education effort this Fall with his book: The Fifteen Biggest Lies about the Economy Now we have the funny, and sharp Chang. What follows is chapter one of his book: “There is No Such Thing as a Free Market.” Other chapters are quite revealing such as: ” The Washing Machine Has Changed the World More than the Internet;” “More Education, in Itself, Is Not Going to Make a Country Richer;” “The U.S. Does Not Have the Highest Living Standard in the World;” “Companies Should Not Be Run in the Interest of their Owners.”

 

Chan’s main point is the recent economic disaster wasn’t by accident, that active government can promote economic dynamism, that tax cuts for the rich simply redistribute wealth upward, and that we will continue on the path to economic disaster,with no end in sight, unless the collective wisdom, goes in a different direction. — AlterNet Executive Editor Don Hazen

 

The following is an excerpt from

23 Things They Don’t Tell You About Capitalism (Copyright © 2011) by Ha-Joon Chang. Reprinted with the permission of Bloomsbury Press.

 

Thing 1: There is no such thing as a free market

 

What they tell you

 

Markets need to be free. When the government interferes to dictate what market participants can or cannot do, resources cannot flow to their most efficient use. If people cannot do the things that they find most profitable, they lose the incentive to invest and innovate. Thus, if the government puts a cap on house rents, landlords lose the incentive to maintain their properties or build new ones. Or, if the government restricts the kinds of financial products that can be sold, two contracting parties that may both have benefited from innovative transactions that fulfill their idiosyncratic needs cannot reap the potential gains of free contract. People must be left “free to choose,” as the title of free-market visionary Milton Friedman’s famous book goes.

 

What they don’t tell you

 

The free market doesn’t exist. Every market has some rules and boundaries that restrict freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them. How “free” a market is cannot be objectively defined. It is a political definition. The usual claim by free-market economists that they are trying to defend the market from politically motivated interference by the government is false. Government is always involved and those free-marketeers are as politically motivated as anyone. Overcoming the myth that there is such a thing as an objectively defined “free market” is the first step towards understanding capitalism.

 

Labor ought to be free

 

In 1819 new legislation to regulate child labor, the Cotton Factories Regulation Act, was tabled in the British Parliament. The proposed regulation was incredibly “light touch” by modern standards. It would ban the employment of young children – that is, those under the age of nine. Older children (aged between ten and sixteen) would still be allowed to work, but with their working hours restricted to twelve per day (yes, they were really going soft on those kids). The new rules applied only to cotton factories, which were recognized to be exceptionally hazardous to workers’ health.

 

The proposal caused huge controversy. Opponents saw it as undermining the sanctity of freedom of contract and thus destroying the very foundation of the free market. In debating this legislation, some members of the House of Lords objected to it on the grounds that “labor ought to be free.” Their argument said: the children want (and need) to work, and the factory owners want to employ them; what is the problem?

 

Today, even the most ardent free-market proponents in Britain or other rich countries would not think of bringing child labor back as part of the market liberalization package that they so want. However, until the late 19th or the early 20th century, when the first serious child labor regulations were introduced in Europe and North America, many respectable people judged child labour regulation to be against the principles of the free market.

 

Thus seen, the “freedom” of a market is, like beauty, in the eyes of the beholder. If you believe that the right of children not to have to work is more important than the right of factory owners to be able to hire whoever they find most profitable, you will not see a ban on child labor as an infringement on the freedom of the labor market. If you believe the opposite, you will see an “unfree” market, shackled by a misguided government regulation.

 

We don’t have to go back two centuries to see regulations we take for granted (and accept as the “ambient noise” within the free market) that were seriously challenged as undermining the free market, when first introduced. When environmental regulations (e.g., regulations on car and factory emissions) appeared a few decades ago, they were opposed by many as serious infringements on our freedom to choose. Their opponents asked: if people want to drive in more polluting cars or if factories find more polluting production methods more profitable, why should the government prevent them from making such choices? Today, most people accept these regulations as “natural.” They believe that actions that harm others, however unintentionally (such as pollution), need to be restricted. They also understand that it is sensible to make careful use of our energy resources, when many of them are non-renewable. They may believe that reducing human impact on climate change makes sense too.

 

If the same market can be perceived to have varying degrees of freedom by different people, there is really no objective way to define how free that market is. In other words, the free market is an illusion. If some markets look free, it is only because we so totally accept the regulations that are propping them up that they become invisible.

 

Piano wires and kungfu masters

 

Like many people, as a child I was fascinated by all those gravity-defying kung fu masters in Hong Kong movies. Like many kids, I suspect, I was bitterly disappointed when I learned that those masters were actually hanging on piano wires.

 

The free market is a bit like that. We accept the legitimacy of certain regulations so totally that we don’t see them. More carefully examined, markets are revealed to be propped up by rules – and many of them.

 

To begin with, there is a huge range of restrictions on what can be traded; and not just bans on “obvious” things such as narcotic drugs or human organs. Electoral votes, government jobs and legal decisions are not for sale, at least openly, in modern economies, although they were in most countries in the past.

 

University places may not usually be sold, although in some nations money can buy them – either through (illegally) paying the selectors or (legally) donating money to the university. Many countries ban trading in firearms or alcohol. Usually medicines have to be explicitly licensed by the government, upon the proof of their safety, before they can be marketed. All these regulations are potentially controversial – just as the ban on selling human beings (the slave trade) was one and a half centuries ago.

 

There are also restrictions on who can participate in markets. Child labor regulation now bans the entry of children into the labor market. Licenses are required for professions that have significant impacts on human life, such as medical doctors or lawyers (which may sometimes be issued by professional associations rather than by the government). Many countries allow only companies with more than a certain amount of capital to set up banks. Even the stock market, whose underregulation has been a cause of the 2008 global recession, has regulations on who can trade. You can’t just turn up in the New York Stock Exchange (NYSE) with a bag of shares and sell them. Companies must fulfill listing requirements, meeting stringent auditing standards over a certain number of years, before they can offer their shares for trading. Trading of shares is only conducted by licensed brokers and traders.

 

Conditions of trade are specified too. One of the things that surprised me when I first moved to Britain in the mid-1980s was that one could demand a full refund for a product one didn’t like, even if it wasn’t faulty. At the time, you just couldn’t do that in Korea, except in the most exclusive department stores. In Britain, the consumer’s right to change her mind was considered more important than the right of the seller to avoid the cost involved in returning unwanted (yet functional) products to the manufacturer. There are many other rules regulating various aspects of the exchange process: product liability, failure in delivery, loan default, and so on. In many countries, there are also necessary permissions for the location of sales outlets – such as restrictions on street-vending or zoning laws that ban commercial activities in residential areas.

 

Then there are price regulations. I am not talking here just about those highly visible phenomena such as rent controls or minimum wages that free-market economists love to hate.

 

Wages in rich countries are determined more by immigration control than anything else, including any minimum wage legislation. How is the immigration maximum determined? Not by the “free” labor market, which, if left alone, will end up replacing 80–90 per cent of native workers with cheaper, and often more productive, immigrants. Immigration is largely settled by politics. So, if you have any residual doubt about the massive role that the government plays in the economy’s free market, then pause to reflect that all our wages are, at root, politically determined.

 

Following the 2008 financial crisis, the prices of loans (if you can get one or if you already have a variable rate loan) have become a lot lower in many countries thanks to the continuous slashing of interest rates. Was that because suddenly people didn’t want loans and the banks needed to lower their prices to shift them? No, it was the result of political decisions to boost demand by cutting interest rates. Even in normal times, interest rates are set in most countries by the central bank, which means that political considerations creep in. In other words, interest rates are also determined by politics.

If wages and interest rates are (to a significant extent) politically determined, then all the other prices are politically determined, as they affect all other prices.

 

Is free trade fair?

 

We see a regulation when we don’t endorse the moral values behind it. The 19th-century high-tariff restriction on free trade by the U.S. federal government outraged slave-owners, who at the same time saw nothing wrong with trading people in a free market. To those who believed that people can be owned, banning trade in slaves was objectionable in the same way as restricting trade in manufactured goods. Korean shopkeepers of the 1980s would probably have thought the requirement for “unconditional return” to be an unfairly burdensome government regulation restricting market freedom.

 

This clash of values also lies behind the contemporary debate on free trade vs. fair trade. Many Americans believe that China is engaged in international trade that may be free but is not fair. In their view, by paying workers unacceptably low wages and making them work in inhumane conditions, China competes unfairly. The Chinese, in turn, can riposte that it is unacceptable that rich countries, while advocating free trade, try to impose artificial barriers to China’s exports by attempting to restrict the import of “sweatshop” products. They find it unjust to be prevented from exploiting the only resource they have in greatest abundance – cheap labor.

 

Of course, the difficulty here is that there is no objective way to define “unacceptably low wages” or “inhumane working conditions.” With the huge international gaps that exist in the level of economic development and living standards, it is natural that what is a starvation wage in the U.S. is a handsome wage in China (the average being 10 per cent that of the U.S.) and a fortune in India (the average being 2 per cent that of the U.S.) Indeed, most fair-trade-minded Americans would not have bought things made by their own grandfathers, who worked extremely long hours under inhumane conditions. Until the beginning of the twentieth century, the average work week in the U.S. was around 60 hours. At the time (in 1905, to be more precise), it was a country in which the Supreme Court declared unconstitutional a New York state law limiting the working days of bakers to 10 hours, on the grounds that it “deprived the baker of the liberty of working as long as he wished.”

 

Thus seen, the debate about fair trade is essentially about moral values and political decisions, and not economics in the usual sense. Even though it is about an economic issue, it is not something economists with their technical tool kits are particularly well equipped to rule on.

 

All this does not mean that we need to take a relativist position and fail to criticize anyone because anything goes. We can (and I do) have a view on the acceptability of prevailing labour standards in China (or any other country, for that matter) and try to do something about it, without believing that those who have a different view are wrong in some absolute sense. Even though China cannot afford American wages or Swedish working conditions, it certainly can improve the wages and the working conditions of its workers. Indeed, many Chinese don’t accept the prevailing conditions and demand tougher regulations. But economic theory (at least free-market economics) cannot tell us what the ‘right’ wages and working conditions should be in China.

 

I don’t think we are in France any more

 

In July 2008, with the country’s financial system in meltdown, the US government poured $200 billion into Fannie Mae and Freddie Mac, the mortgage lenders, and nationalized them. On witnessing this, the Republican Senator Jim Bunning of Kentucky famously denounced the action as something that could only happen in a “socialist” country like France.

France was bad enough, but on 19 September 2008, Senator Bunning’s beloved country was turned into the Evil Empire itself by his own party leader. According to the plan announced that day by President George W. Bush and subsequently named TARP (Troubled Asset Relief Program), the U.S. government was to use at least $700 billion of taxpayers’ money to buy up the “toxic assets” choking up the financial system.

President Bush, however, did not see things quite that way. He argued that, rather than being “socialist” the plan was simply a continuation of the American system of free enterprise, which “rests on the conviction that the federal government should interfere in the market place only when necessary.” Only that, in his view, nationalizing a huge chunk of the financial sector was just one of those necessary things.

 

Mr. Bush’s statement is, of course, an ultimate example of political double-speak – one of the biggest state interventions in human history is dressed up as another workaday market process. However, through these words Mr. Bush exposed the flimsy foundation on which the myth of the free market stands. As the statement so clearly reveals, what is a necessary state intervention consistent with free-market capitalism is really a matter of opinion. There is no scientifically defined boundary for free market.

 

If there is nothing sacred about any particular market boundaries that happen to exist, an attempt to change them is as legitimate as the attempt to defend them. Indeed, the history of capitalism has been a constant struggle over the boundaries of the market.

 

A lot of the things that are outside the market today have been removed by political decision, rather than the market process itself – human beings, government jobs, electoral votes, legal decisions, university places or uncertified medicines. There are still attempts to buy at least some of these things illegally (bribing government officials, judges or voters) or legally (using expensive lawyers to win a lawsuit, donations to political parties, etc.), but, even though there have been movements in both directions, the trend has been towards less marketization.

 

For goods that are still traded, more regulations have been introduced over time. Compared even to a few decades ago, now we have much more stringent regulations on who can produce what (e.g., certificates for organic or fair-trade producers), how they can be produced (e.g., restrictions on pollution or carbon emissions), and how they can be sold (e.g., rules on product labelling and on refunds).

 

Furthermore, reflecting its political nature, the process of re-drawing the boundaries of the market has sometimes been marked by violent conflicts. The Americans fought a civil war over free trade in slaves (although free trade in goods – or the tariffs issue – was also an important issue). The British government fought the Opium War against China to realize a free trade in opium. Regulations on free market in child labour were implemented only because of the struggles by social reformers, as I discussed earlier. Making free markets in government jobs or votes illegal has been met with stiff resistance by political parties who bought votes and dished out government jobs to reward loyalists. These practices came to an end only through a combination of political activism, electoral reforms and changes in the rules regarding government hiring.

 

Recognizing that the boundaries of the market are ambiguous and cannot be determined in an objective way lets us realize that economics is not a science like physics or chemistry, but a political exercise. Free-market economists may want you to believe that the correct boundaries of the market can be scientifically determined, but this is incorrect. If the boundaries of what you are studying cannot be scientifically determined, what you are doing is not a science.

 

Thus seen, opposing a new regulation is saying that the status quo, however unjust from some people’s point of view, should not be changed. Saying that an existing regulation should be abolished is saying that the domain of the market should be expanded, which means that those who have money should be given more power in that area, as the market is run on one-dollar-one-vote principle.

 

So, when free-market economists say that a certain regulation should not be introduced because it would restrict the “freedom” of a certain market, they are merely expressing a political opinion that they reject the rights that are to be defended by the proposed law. Their ideological cloak is to pretend that their politics is not really political, but rather is an objective economic truth, while other people’s politics is political. However, they are as politically motivated as their opponents.

 

Breaking away from the illusion of market objectivity is the first step toward understanding capitalism.

 

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Ha-Joon Chang teaches in the faculty of economics at the University of Cambridge. His books include “Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism” and “Kicking Away the Ladder.”

© 2011 Bloomsbury Press All rights reserved.
View this story online at: http://www.alternet.org/story/149688/

Obstruct and Exploit by Paul Krugman

New York Times, September 9, 2012

 

Does anyone remember the American Jobs Act? A year ago President Obama proposed boosting the economy with a combination of tax cuts and spending increases, aimed in particular at sustaining state and local government employment. Independent analysts reacted favorably. For example, the consulting firm Macroeconomic Advisers estimated that the act would add 1.3 million jobs by the end of 2012.

There were good reasons for these positive assessments. Although you’d never know it from political debate, worldwide experience since the financial crisis struck in 2008 has overwhelmingly confirmed the proposition that fiscal policy “works,” that temporary increases in spending boost employment in a depressed economy (and that spending cuts increase unemployment). The Jobs Act would have been just what the doctor ordered.

But the bill went nowhere, of course, blocked by Republicans in Congress. And now, having prevented Mr. Obama from implementing any of his policies, those same Republicans are pointing to disappointing job numbers and declaring that the president’s policies have failed.

Think of it as a two-part strategy. First, obstruct any and all efforts to strengthen the economy, then exploit the economy’s weakness for political gain. If this strategy sounds cynical, that’s because it is. Yet it’s the G.O.P.’s best chance for victory in November.

But are Republicans really playing that cynical a game?

You could argue that we’re having a genuine debate about economic policy, in which Republicans sincerely believe that the things Mr. Obama proposes would actually hurt, not help, job creation. However, even if that were true, the fact is that the economy we have right now doesn’t reflect the policies the president wanted.

Anyway, do Republicans really believe that government spending is bad for the economy? No.

Right now Mitt Romney has an advertising blitz under way in which he attacks Mr. Obama for possible cuts in defense spending — cuts, by the way, that were mandated by an agreement forced on the president by House Republicans last year. And why is Mr. Romney denouncing these cuts? Because, he says, they would cost jobs!

This is classic “weaponized Keynesianism” — the claim that government spending can’t create jobs unless the money goes to defense contractors, in which case it’s the lifeblood of the economy. And no, it doesn’t make any sense.

What about the argument, which I hear all the time, that Mr. Obama should have fixed the economy long ago? The claim goes like this: during his first two years in office Mr. Obama had a majority in Congress that would have let him do anything he wanted, so he’s had his chance.

The short answer is, you’ve got to be kidding.

As anyone who was paying attention knows, the period during which Democrats controlled both houses of Congress was marked by unprecedented obstructionism in the Senate. The filibuster, formerly a tactic reserved for rare occasions, became standard operating procedure; in practice, it became impossible to pass anything without 60 votes. And Democrats had those 60 votes for only a few months. Should they have tried to push through a major new economic program during that narrow window? In retrospect, yes — but that doesn’t change the reality that for most of Mr. Obama’s time in office U.S. fiscal policy has been defined not by the president’s plans but by Republican stonewalling.

The most important consequence of that stonewalling, I’d argue, has been the failure to extend much-needed aid to state and local governments. Lacking that aid, these governments have been forced to lay off hundreds of thousands of schoolteachers and other workers, and those layoffs are a major reason the job numbers have been disappointing. Since bottoming out a year after Mr. Obama took office, private-sector employment has risen by 4.6 million; but government employment, which normally rises more or less in line with population growth, has instead fallen by 571,000.

Put it this way: When Republicans took control of the House, they declared that their economic philosophy was “cut and grow” — cut government, and the economy will prosper. And thanks to their scorched-earth tactics, we’ve actually had the cuts they wanted. But the promised growth has failed to materialize — and they want to make that failure Mr. Obama’s fault.

Now, all of this puts the White House in a difficult bind. Making a big deal of Republican obstructionism could all too easily come across as whining. Yet this obstructionism is real, and arguably is the biggest single reason for our ongoing economic weakness.

And what happens if the strategy of obstruct-and-exploit succeeds? Is this the shape of politics to come? If so, Americawill have gone a long way toward becoming an ungovernable banana republic.

http://www.nytimes.com/2012/09/10/opinion/krugman-obstruct-and-exploit.html?_r=1&nl=todaysheadlines&emc=edit_th_20120910

What voters are really choosing in November by Fareed Zakaria

Washington Post, July 18, 2012

The presidential campaign has gotten so heated over the attacks and counterattacks from the Obama and Romney campaigns that it’s easy to forget that larger issues are at stake in November. That’s unfortunate because, beneath the froth, there is an important ideological debate to be had about America’s future.

The attacks are, I suppose, inevitable. But let’s be honest: They’re largely untrue or irrelevant. Whatever the paperwork shows, Mitt Romney was not running Bain Capital after February 1999. Even if he had been, outsourcing jobs to lower a company’s costs — and ensure its survival — is not sleazy; it’s how you run a business efficiently. (Is President Obama suggesting that we put up tariff barriers to prevent outsourcing in the future?) On the other side, Romney’s recent claim accusing the president of shoveling government grants to his political supporters was so twisted it earned the Fact Checker’s highest score for distortion — “Four Pinocchios.”

Below all the mudslinging lies a real divide. Obama has been making the case that the U.S.economy needs investment — in infrastructure, education, training, basic sciences and technologies of the future. Those investments, in the president’s telling, have been the key drivers of American growth and have enabled people to build businesses, create jobs and invent the future.

Romney argues thatAmericaneeds tax and regulatory relief. The country is overburdened by government mandates, taxes and rules that make it difficult for businesses to function, grow and prosper, he says. He wants to cut taxes for all, reduce regulations and streamline government. All this, in his telling, will unleashAmerica’s entrepreneurial energy.

Both views have merit. It would make for a great campaign if our nation had a sustained discussion around these ideas. Then the election would produce a mandate to move in one of these directions.

In both cases, the candidates would have to explain how they would square their ambitions with long-term deficit reduction. If Obama plans to invest government funds in infrastructure, or if Romney intends to cut taxes, each needs a serious strategy of fiscal reform. Obama has been more specific than Romney, but neither has been entirely honest about what the numbers show are necessary to getAmerica’s fiscal house in order: cuts to entitlement programs and higher taxes (whether through higher rates or the elimination of deductions such as the one for mortgage interest).

On the broader economic strategy, I think that Obama has the stronger case. We need a tax and regulatory structure that creates strong incentives for businesses to flourish. The thing is, we already have one. The World Economic Forum’s 2011-12 Global Competitiveness Report ranks the United States No. 5 — and first among large economies. There has been a little slippage in this ranking the past few years, but it is modest and can be rectified. Overall, however, whether compared with our own past — of, say, 30 years ago — or with other countries, the United States has become more business-friendly. That’s why, just last week, the Economist magazine predicted an American economic renaissance.

Americais worse off than it was 30 years ago — in infrastructure, education and research. The country spends much less on infrastructure as a percentage of gross domestic product (GDP). By 2009, federal funding for research and development was half the share of GDP that it was in 1960. Even spending on education and training is lower as a percentage of the federal budget than it was during the 1980s.

The result is that we’re falling behind fast. In 2001, the World Economic Forum ranked U.S.infrastructure second in the world. In its latest report we were 24th. The United Statesspends only 2.4 percent of GDP on infrastructure, the Congressional Budget Office noted in 2010. Europe spends 5 percent; China, 9 percent. In the 1970s, America led the world in the number of college graduates; as of 2009, we were 14th among the countries tracked by the Organization for Economic Cooperation and Development. Annual growth for research and development spending — private and public — was 5.8 percent between 1996 and 2007; inSouth Korea it was 9.6 percent; inSingapore, 14.5 percent; inChina, 21.9 percent.

In other words, the great shift in the U.S.economy over the past 30 years has not been an increase in taxes and regulations but, rather, a decline in investment in human and physical capital. President Obama has real facts and a strong case — which makes it all the more depressing that his campaign has focused on half-truths and weak arguments.

comments@fareedzakaria.com

http://www.washingtonpost.com/opinions/fareed-zakaria-romney-and-obamas-relevant-debate-over-americas-future/2012/07/18/gJQAjVhSuW_story.html?wpisrc=nl_headlines