WASHINGTON, May 26, 2015 – The free market is a foundation of a free society. To trade with whomever one chooses is a fundamental freedom. Free trade has been a boon to humanity since we first learned to specialize and trade.
Any attack on free trade is an attack on the free market and ultimately an attack on freedom. Who is anybody to tell another where to spend his money?
What is trade? Trade occurs when one society produces more of a product than it needs and exchanges it with another society for a product it wants more badly. If one society produces a surplus of beef and another produces a surplus of steel, they trade beef for steel and are both better off.
Societies take knowledge (technology) and resources to create goods and services to satisfy their communities and trade the surplus for other goods and services that others produce more cheaply.
The key variable here is knowledge. For a society to fully utilize its knowledge, it needs free markets.
Free markets themselves generate knowledge; market prices tell us how much society values resources and the goods that are produced, thus allowing producers and consumers to make correct decisions about what to produce. If you take steel worth a thousand dollars and turn it into ugly furniture that has value only as scrap, the invisible hand forms itself into a fist that punishes you for wasting steel and your time. If you make it into art that sells for several thousand dollars, the invisible hand pats you fondly on the back.
You didn’t have to know the relative values of steel, steel furniture and steel art. The market generates that knowledge, sends out price signals and punishes or rewards you according to how well you listen to the signals.
Free markets work efficiently only when government and laws are neutral. That is, they do not discriminate in favor of elites, insiders and businesses with good lobbyists, and they don’t discriminate against the small, the weak and the unpopular. Markets work only when winners and losers aren’t chosen ahead of time by political means.
Everyone wants laws that favor themselves; it is human nature. That is why laws are so often anti-competitive.
Why would reasonable people oppose free trade with all the evidence of its benefits? The Trans Pacific Partnership, TPP, has been criticized from both sides of the political spectrum in Washington. According to Conservative HQ, Rand Paul said the TPP agreement “is being held under lock and key by the Obama administration because they’re afraid that if the public knows what we are going to vote on, that somehow that would destroy the republic.”
Elizabeth Warren says on her website, “Giant corporations have had an enormous amount of access to see the parts of the TPP trade deal that might affect them … But the doors stayed locked for the regular people whose jobs are on the line.”
Many believe that past agreements sold as “free trade” have benefited corporations more than they have average citizens. Is this “insider trade” still free trade? Whom do governments serve? What is a society anyhow? Members of a society care first about their society. Your society is those you care about through your actions. Is the relevant society to government the wealthy class?
Free trade today is based on cost cutting; it is negotiated for the benefit of corporations. Paul Krugman justified this idea through ideas economic geography, even winning a Nobel Prize for his efforts. Today he styles himself a man of the people, a caring economist who thinks that government should involve itself more in the economy for humanity’s sake. People like Krugman form an immensely lucrative industry themselves, selling advice to countries on how to attract giant corporations—”foreign direct investment” (FDI).
Classical economic thought on trade respects knowledge. Its ideas were formed in an age when ideas of civic responsibility flourished among the educated. They believed in enlightened self-interest, and that people in other societies would respect knowledge, create goods and bring them to the market.
Now economic thought on trade is biased to corporations. It argues for maximization of profit as a good end in itself, assuming that maximum profit will create the maximum good for society. With jobs moving away, there will be calls for bigger government to look after people as real wages fall or remain stagnant while profits soar. Economists like Krugman view government as the safety net to prevent total despair in the general population. Government is a savior for an exhausted people.
FDI is finally running its course as a development tool even for that great land of cheap labor, China. The world will eventually accept the free market, accept that all humans have potential, and reject this corporate fascism that Washington has been selling to the world since 1945. The world will eventually see that these crony capitalist markets are anything but free.
Crony capitalist, FDI-type phony free markets are attractive to brutish dictators who wish to enrich themselves and their friends while maintaining a façade of development. That has been good enough for Washington and Europe. Global incomes have risen; instead of earning 50 cents a day, people now earn $1 a day. How much more would global incomes have risen if markets were truly free in these fascist allies of Washington and, increasingly, Beijing?
“Free trade” now is governments protecting their elites, not looking out for their “little people.” Get rid of the cronyism, and free markets will finally be free. Only then will free trade be the powerful tool of wealth and job creation for all that its proponents claim it to be.