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The History of "Free Trade"

By Jonathan Larson (1993)

Opposing "free trade" and its latest manifestation, The North American Free Trade Agreement, is a bit like trying to stop a runaway truck loaded with mom's apple pies. Rarely has anything seemed so inevitable or respectable.

Nevertheless, an organized grass-roots political movement has arisen to oppose NAFTA mostly made up of the victims who have already had their lives destroyed by the policies of "free trade."

Elite opinion scoffs at the opponents of "free trade." The unstated premises are, that NAFTA's opposition is made up of people who don't know what's good for them; that trade matters should be left to professionals; and that whatever pain will result in a long-term gain.

Even though NAFTA was negotiated by Republicans, support for the agreement is also shared by notorious "leftists" such as Michael Kinsley of CNN's Crossfire and The New Republic. Support for NAFTA crosses political party lines. Bipartisan elite opinion is combined with economic clout to give the illusion of NAFTA inevitability.

The battle lines over NAFTA are not drawn between Democrats and Republicans but between economic and academic elites and the populist revolt. The motivations for population in revolt are basicfolks are tired of seeing their living standards decline. An explanation for elite support of NAFTA is far more complex. The question must be asked, "Why, in the face of so much economic distress that a populist revolt has been triggered over trade issues, does elite opinion still believe that NAFTA is a good idea?"

The Happy Birth of Free Trade

With the coming of industrialization came that new species of individual, the economist, whose job it was to explain the rules governing the new world order. In the pantheon of Free Trade Gods, none are more important than Adam Smith and David Ricardo.

Smith's great contribution to human progress was that he recognized that the fewer impediments to trade there were, the richer everyone would become. He blasted them all royal charters, tariffs, cartels, monopolies. His opposition to restraints on trade made Smith free trade's progenitor.

Ricardo expanded on the free-trade idea by stating why international trade is essential. According to him, each nation has a competitive advantage. Portugal has fine wines because her growing season has sufficient sunshine. Britain has steel because she has coal. Everyone has something they do best and if they trade with each other, both parties will live better.

This is the apple pie version of free trade that everyone can agree upon. The reality is not so simple for the free trade argument has been used to justify massive crimes against humanity.

The Perversion of Free Trade

The first time the arguments of free trade were used to sway public opinion occurred with the Opium Wars in China of 1839-42 and renewed in 1856-60. British drug dealers were importing approximately a ton of opium per day from India. The Chinese grew resentful at the damage this volume of addiction was causing their society and tried to close their borders. The Brits were ruthless in suppressing this tiny revolt of drug-hating nationalist Chinese. The Encyclopaedia Britannica estimates that as many as 20,000,000 of them died as a result of the Opium Wars.

When the word leaked out about the extent of this carnage over what was essentially a drug deal gone bad, polite society in Britain scrambled to find an intellectual cover for their actions in China. Free trade, the right of passage of goods between nations, could not be impeded. This war was not about drugs but to secure a greater prosperity for all. Because she lost the wars, China granted Britain a free portHong Kong. Hong Kong was a British demand because it "proved" the Opium Wars were not about drugs but about free trade. With their cultural consciousness soothed, polite Britain returned to the more mundane outrages of colonialism.

Lest one think that free trade as moral cover for drug dealing is the problem of our ancient past, a recent example should suffice. Thailand, citing ample health warnings, decided to ban the importation of tobaccoa dangerous drug more addicting than heroin according to the U.S. Surgeon General. Thailand was forced to repeal their health legislation in the late 1980s to satisfy the requirements of the international trade bureaucrats who ruled that such laws cannot be allowed because they restrain trade.

The appropriation by drug dealers of Smith's ideal of free trade was merely crass. The perversion of Ricardo's ideas, ironically, formed the basis for a real, but poorly executed, protectionism of Imperial Britain.

Industrial Britain had more than the competitive advantage of coalthey had the advantage of being first to industrialize. Industrialization has a iron law which states that it is always more expensive to learn how to mass produce steel, for example, than it is to make the steel itself. Inventiveness was prized in the earlier stages of industrialization because being first meant something.

In order to industrialize after Britain, a nation had to erect trade walls to protect infant industry in the process of catching up. All industrial nations grew up behind trade walls. Abraham Lincoln summed up the sentiment especially well when deciding to purchase railroad track. If we buy the steel from Britain, we have the steel but the money is gone. If we buy the steel in the United States, we have the steel and the money, too. Such an advantage far outweighs a lower price for imported steel.

If other nations industrialized, Britain would lose her competitive advantage. Britain could not do anything about the United States' program for industrialization, but she could keep barriers to British goods from being erected in her colonies. Owing to the longevity of the British Empire, it can be argued that the main historical use for the free trade argument has been to prevent the spread of industrialization. Free trade's historical legacy of preventing colonial development is beyond dispute.

Britain's imperial monopoly on industrialization was impossible to maintain. By the time her scholars and economic elites noticed the monopoly was gone, it was too late to save the empire. Free trade had not only prevented development in the colonies, it had weakened industrial development at home by making her fat and lazy. When Ricardo wrote, Britain was a colossus astride the earth. Today as country after country has raced past her, she is an irrelevant economy in Europe with living standards below Italy or Spain. Free trade's historical legacy of diminishing industrial development in the mother country is also beyond any dispute.

The Failure of Elite Opinion

With such a rotten track record, one wonders how anyone could stoop to associating with the ideas of free trade, yet to this day we see respectable folks openly defending them. The reasons are many:

1) In spite of the damage wrought to Britain's relative position in the family of nations, her absolute standard of living in 1993 is far higher than it was in 1815a fact free traders take credit for.

2) Free trade is ONLY about trade in products that already exist. The problems of industrial development are another subject. The result is that free traders have never con_sidered development and Anglo-American economics restricts itself to questions of the market. The possibility that questions of development should take precedence over questions of the market is never entertained.

3) Respectable free traders reject the notion that the perversion of the free trade ideals are a problem of the ideals themselves.

4) The academic and economic elites only view the world as consumers--never as producers. Engaging in useful work is considered beneath contempt by British standards so the problems of production are certainly beyond scholarly consideration.

5) The ideals of free trade retain legitimacy because protectionism has been abused as well. The left end of political support for free trade is informed by this fact. When the United States government was mainly funded by tariffs, consumers and small producers were regularly gouged by native industry. If a person is only a consumer and not a producer, he is likely to support the notions of free trade no matter the rest of his political views.

The result is that respectable free traders tend to be highly educated folks who view themselves only as consumers. To them, production is irrelevant compared to merchandising. If they are technologically or scientifically illiterate, that helps, for then they are never troubled by the realities of production. Of course, the modern free trade perverts are simply the descendants of the piratesonly a million times more dangerous.

NAFTA is best understood as an agreement crafted by pirates and supported by technologically illiterate but often well-meaning sycophants. Representing only the interests of merchants and consumers, they merrily press on with their preindustrial agenda while informing the rest of us that WE don't get it! All the while, countries like Germany and Japan that understand that people who make and buy things live better than those countries that merely shop, keep passing us in every relevant standard-of-living category.

Not surprisingly, the Japanese think the ideas of free trade are primitive nonsense. While we preach to them about free trade, they organize their industry. Even the sacred cow of free traders, the stock exchange, is routinely manipulated in Japan for the benefit of their industry. Industrial development is about planning, the antithesis of Adam Smith's "invisible hand" of the market.

Free trade is an historic failure of economic, industrial, and above all, ethical proportions. If production is unimportant, those who produce are irrelevant. Make someone irrelevant and invisible, and it is easy to justify slave wages or dangerous working conditions. Make it easy to exploit fellow humans, and the decision to rape mother nature is easy to make as well.

Free traders may think themselves respectable and their arguments beyond legitimate debate, but they are wrong. Industrialization has passed them by. Every day brings new examples of the failure of the free trade philosophy. There are many but one is most egregious. Jeffery Sachs, a Harvard professor has taken it upon himself to spread free trade's pernicious nonsense. First he went to Bolivia and supervised the destruction of the tin mines which forced thousands in coca production. Then he went to Poland where his economic prescriptions left an unemployment rate of 40% so the shops are full of goods with no one to buy them. Lately, he has been behind the "shock therapy" in Russia that threatens to topple Yeltsin and has already made folks yearn for the "good old days" of Leonid Brezhnev.

And why should not Sachs wreak havoc to the old Soviet Union? After all, the free trade crazies have just about destroyed the economies of the English-speaking world so why not drag down our former enemies with us? Free trade, like communism and the gold standard, has done far more damage than good, is thoroughly discredited, and should be buried in an unmarked grave with a giant stake through the heart. Far from being a benign philosophy of the respectable elites, free trade has been a disaster. Free trade is destroying what good is left in the USA making us a deindustrialized, third world country.

Free trade is a dimbulb British idea and those who believe it should be considered enemies of the countryTorys with an allegiance to a philosophy of a foreign power. From now on, we should spell "traders" as t-r-a-i-t-o-r-s so as not to confuse anyone. Free traitors are in the end, enemies of democracy. If they were not, they would welcome an open debate on the issuesnot try to pass their legislation on a "fast track" in the darkness of secrecy.


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