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The Myth of Free Trade
By Warpster
While wandering through a local indie bookstore in a state of terminal
boredom, I happened upon Dr. Ravi Batra's "The
Myth of Free Trade," a title which immediately piqued
my interest. The blurb on the cover, "Read the
book at the center of the Republican debate!" pretty much sealed
the deal.
The doctrine of free trade, initiated under Roosevelt as the mutual
lowering
of barriers between individual countries, has long been accepted
as dogma by
both parties. That the party most given to dogma should be questioning
it
was amazing, and I just had to know more.
Dr Batra spent most of the book pointing out (quite rightly) that
the
doctrine of free trade has benefited every nation on earth, save
one, the
USA. His complaint also covered the degradation of the environment
from the
effort of moving such an enormous volume of trade items from place
to place,
instead of manufacturing them close to the point of consumption,
again quite
true. His prescription for easing the pain include breaking up of
monopolistic industries to spur competition, always laudable; reduction
of
intraindustry trade within multinational corporations, encouraging
those
corporations to swap technologies but produce only for local markets;
and
encouraging the third world to import technology and export raw
materials,
rather than exporting finished products. Good luck to him and the
Red Sox
on that one. He also reluctantly mentioned increasing tariffs to
protect
local manufacturing, something that will lead to an immediate run
of
inflation even as jobs may be saved (or may not, as the following
will
illustrate).
Alas, Dr. Baktra has fallen for the same thing that other great
and famous
economists have done, that is describe the syptoms of the illness
without
describing the root cause. You can't cure an illness by ameliorating
its
symptoms, you have to treat its cause.
Let me explain. We'll take an assembly line worker, Joe Wrench.
Joe
requires about 3000 calories of food daily, plus clothing to wear
to work,
plus shelter from the elements, plus medical care for the injuries
and
infections that healthy young workers are likely to suffer. Because
Joe has
a family, and because his work is semiskilled, he's paid $15.00/hour,
or
roughly $30,000/year. He doesn't own a yacht on this pay, but he
does own a
couple of used cars for himself and his wife, a small house, and
serviceable
appliances.
Let's then go visit Mohammad in Malaysia. He requires the same
3000
calories a day, the same clothing, the same shelter from the elements,
and
the same basic medical care. He also has a family, and his widowed
mother
also lives with them. He's paid in the local currency, and finds
he can
support the three generations of his family and have enough left
over for a
television, a few kitchen appliances, some part time household help,
and a
small used car. However, when his salary in Malaysian currency is
exchanged
for dollars on the currency markets, his paycheck works out to about
$1.00/hour, or about $2000/year.
Here are two factory workers, earning roughly the equivalent pay
in the
goods and services they require, but guess which one is going to
get the new
factory built and which one is going to lose his job to the other
as his
factory is idled.
Although at the beginning of the policy, free trade with a strong
dollar
meant that the US enjoyed a high standard of living on the lowered
costs of
both goods and energy, the loss of good manufacturing jobs and now
well-paid
skilled office work is forcing the American worker more and more
into the
sort of low paid, dead end job that can only be termed economic
serfdom.
American workers have been as victimized by the strong dollar policy
as much
as they have been by free trade and the trend toward monopolization,
and
this is why free trade has been a blessing for every nation on earth
except
the USA, and it's likely to get worse instead of better.
Dr. Baktri was correct in stating that monopolies need to be broken
up, that
some trade barriers need to be reenacted, and that we need to consider
the
cost to the environment of shipping goods which can and should be
produced
locally halfway around the world. His case for the failure of free
trade as
global policy was convincing, and it's good that at least one political
party is beginning to question the dogma. He just failed to address
the
other, deeper and more serious part of the problem.
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Dr. Ravi Baktra, The
Myth of Free Trade, Touchstone, c.1993
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