Exploding the free trade myth

David Sirota's article for the July issue of In These Times isn't one of his trademark rants on the latest outrageous behavior committed by the Washington DC and Wall Street Establishments; instead it is a casual yet illuminating interview with the controversial, heterodox English development economist Ha-Joon Chang, discussing his latest book "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism." The book, and the interview discussing it, does a yeoman's job of dissecting the mythology behind so-called international "free" trade as compared with the more restrictive, protectivist trade regimes that have succeeded in helping transform developing countries into wealthy, developed economies (take, for example, the US) via the implementation of tariffs.

The received wisdom imparted by the "Wise Men" of economics, that is, those pundits, academics, policy-makers and journalists who seek to remind average, everyday folks like you and me every time they open up their mouths that they are the type of "Serious People" who deserve our fealty and unquestioned trust and support, is that free trade somehow benefits all parties in the global marketplace for goods and services. In other words, forget the idea that the very rules established by the global elites for the global elites by design create 'winners' and 'losers'. The winners are those who the rules of capitalism already favor: indeed, it is the existence of a not so subtle institutional bias that creates the dangerous downward spiral of capitalism is the first place.

Sirota's interview with Chang is truly illuminating and I highly recommend reading both the entire article in In These Times - as well as the meticulously researched and brilliantly argued book by Chang (which I recently completed). One of the most important quotes from Chang I think is:

In the present atmosphere, once you say anything positive about protectionism, people dismiss you as a supporter of North Korea or Cuba.

The reality is that few countries practice pure free trade or pure protectionism. Most countries practice free trade in some areas and protectionism in others, with varying mixes across countries. This is basically because policy-makers instinctively understand that different sectors have different needs — sectors that are just emerging or in decline need more protection and subsidies in the same way that children and the elderly need more support than able-bodied adults do.

And one of Sirota's keenest, most important observations is:

Chang shows how the entire debate over trade has divorced itself from history and economic reality. Phrases like “free trade,” in fact, are misnomers unto themselves, leading the world into a globalization debate whose basic premises are inaccurate.

But that’s not all that is inaccurate. Chang says that while the media and political elite lead us to believe industrialized countries achieved their wealth by eliminating tariffs, history suggests it’s exactly the opposite: The strategic use of tariffs is precisely what built the industrialized world into an economic powerhouse. Bad Samaritans shows that wealthy countries’ demands on poor countries to reduce tariffs is a way to keep the developing world in a subservient role — or a means to “kick away the ladder,” as he puts it.

Also, be sure to check out this independent review of "Bad Samaritans" by Jim Miles here, as well as this article, The Globalization of Poverty, by Antonio Juhasz appearing in Tikkun.