Sunday, 20 November 2016

The Free Trade Delusion

Since the UK Brexit referendum result and Trump's win in the US Presidential election, the liberal polity on both sides of the Atlantic have been wringing their hands and pronouncing on the surprise (to them) of both results. The cause, they have repeatedly declared, was the anger and ignorance of the "left behind", the detritus of society they hadn't noticed from the confines of their comfy, evidence-based neoliberal bubble until the ingrates turned up and spoilt their party.

Liberal democracy, of course, is about little more than the unwashed turning up every four or five years to confirm the Great and Good's right to rule via very flawed ballot box processes. Democracy should validate the status quo, maybe with a little nudge leftwards here and rightwards there, especially under the mind-numbing post-ideological consensus in place since the fall of the Communist bloc.

So, when the electorate goes off-script, we soon see just how thin-skinned liberalism truly is: the voters were misled, didn't know what they were voting for, are bigotted racists/sexists/homophobes, etc. They have voted against their own interests as well as wider society because of their moronic stupidity and so in Britain we should rerun the Euroreferendum, or find some variant that will ultimately let us stay in the EU, while in the USA, liberals are fantastically speculating about California seceding or joining up with Canada.

Yes, Trump will do nothing to help most of the people who, disillusioned with the US capitalist system, voted for him in response to his divide and conquer tactics of blaming foreigners and migrants for their lost jobs and deep poverty. And Brexit may well mean that British workers lose some of the meagre employment protections conferred by the EU. But neither a Clinton Presidency nor a so-called soft Brexit would do anything to resolve the deep-seated inequality and accompanying alienation that has led us to this pass.

At the heart of western economics in the post-war era and codified in the institutions created by the 1944 Bretton Woods conference, the rich nations have pursued an aggressive commitment to so-called free trade and movement of capital. As globalisation has take grip over the last two and a half decades, this ideology, often called neoliberalism, has been applied as the orthodox economics across virtually all the planet. The G20 summit in 2009 explicitly stated that it remained committed to these principles and to rooting out all forms of protectionism wherever these are found. Indeed, in recognition of this dubious aspiration, many free trade agreements, including the recently passed CETA between Canada and Europe, have included Investor-States Dispute Settlement mechanisms. Under this, multinationals could sue national governments and their taxpayers for any measures that reduce or deny them profits, from health and safety rules or environmental legislation through to any refusal to privatise public services.

Proponents of free trade repeatedly argue that its advantages can be seen by a rise in wealth around the world and claim that removal of trade barriers, quotas and tariffs creates a virtuous circle of economic growth and prosperity. The International Monetary Fund has put this central to its rescue packages to developing nations when they have needed financial assistance - in return for loans, they have had to remove any protections on or subsidies to domestic industries. This has been done while ignoring the fact that the rich economies all have long histories of protectionism when they were growing their own early industrial infrastructure. Indeed, many rich nations still run a range of protectionist measures - and trade blocs such as the European Union do a fine job of keeping any manufactured goods from poorer states out of their domestic markets, but they of course are far less likely to be in thrall to the IMF or World Bank.

Yet even within rich states, free trade has had massively damaging effects, especially where the ideology has been adopted as part of an international trading system such as the North American Free Trade Agreement (and more recently the Trans-Pacific Partnership Treaty aggressively pursued by the Obama administration) and within the European single market. Removal of trade barriers and tariffs certainly makes international trade more profitable for companies and being able to relocate their manufacturing and service bases to poorer areas with a lower paid workforce makes their products cheaper (and their profit margins bigger).

However, this has come at a huge cost to the workforces laid off in developed economies as part of  corporates' pursuit of competitive advantage via cheap labour abroad, while in developing states it has favoured big business at the cost of the destruction of small scale local enterprises. As a self-employed textile trader in Lima told the BBC World Service this week, "They talk about Peru growing, but it is just the rich growing richer." Economists such as Paul Krugman cite the obsession with trade liberalisation as central to this.

The deceit of rightwing populists like Trump and UKIP of course is to blame foreigners and migrants, attacking one of the symptoms rather than the true cause - something these buddies of big business will never honestly do - and very much designed to buttress rather than challenge the elite. At most, they are "Opposition by Appointment to the Establishment" -  a tool to neuter the anger of the public and incorporate it into the continuing narrative of a hierarchical, globalised economics. Labour leader Jeremy Corbyn has railed at Trump and UKIP's Nigel Farage as voicing nothing more than "the fake anti-elitism of rich white men".  Like in the old Czarist Empire, pogroms will come long before any genuine reforms.

All the more reason then for the Left to articulate genuine change, to advance a vision of a very different world and the economics needed to achieve it. And yet, on this, quite the opposite seems to be happening.

While Labour's Chancellor John McDonnell called Brexit an opportunity for Britain rather than a threat this week, he neither developed what  opportunities he foresees, nor was he speaking to the prevailing mood among British socialists and progressives. Corbyn himself has set continued access to the European single market as a priority for Brexit negotiations, and Green co-leader Caroline Lucas echoed this sentiment when she attacked McDonnell for apparently giving succour to hard Brexiteers.

Yet, rather than blindly clinging to some sort of soft Brexit which continues to focus on free trade arrangements, isn't this precisely the time for greens and socialists to challenge the status quo? Why would we want to cling onto a single market, removing as it does the ability of a democratic government to protect its industries and the well-being of its people where and when it chooses? Why cling to something that removes the revenue from tariffs on imports, reduces the public purse and bans the ability to subsidise enterprises which may be commercially unprofitable but socially or environmentally beneficial? How can we build a fairer, sustainable world on a template carved out to enable the very worst of capitalism?

Given the racism that has accompanied both Trump and Brexit, there is clearly a need to counter the nationalism and xenophobia of their faux revolts. But we can have freedom of movement and culture without embracing free trade: indeed, perhaps ending free trade would be the best way to ensure continuing cultural diversity around the world, given multnationals' drive to commodify and homogenise the entire planet.

Lucas and Corbyn have both said they accept the UK is leaving the EU. Yet, while the silent secrecy from the Tory Bexiteers is clearly frustrating and undemocratic, their insistence on making such a totemic issue of access to the single market is baffling and a major strategic error. For if there was ever a time to be forging a path to a more sustainable world founded on a fairer, co-operative and localised economics, it is now. That inevitably means a rejection of free trade and embracing instead economic intervention by the state, new forms of community and mutual ownership, regulation and, yes, protectionism.

The vast majority in our rampantly unequal societies across our troubled planet face ever greater difficulties to make ends meet and live their lives as they might have hoped in a world of great abundance. If the Left does not rise to the challenge to show how we can create a different paradigm and instead leaps to knee-jerk reactions to populists' lies, only tragedy awaits us. To quote Gramsci, writing of a similar age of chaos in the 1920s, "The old world is dying, but the new one struggles to be born. Now is the time of monsters."


  1. An excellent piece Adrian, well argued and written as always.

  2. I want to agree, but what about the fact that protectionism makes things more expensive, which in turn means consumers can't afford to buy so much stuff, which makes the economy shrink so companies lay off staff - more unemployment, poorer consumers, and so the cycle goes on. Doesn't it?

    1. That can very much be the case in our current type of economy Andrew. But the argument is to switch to a more socialised form of economics, with localised production, sustainable reindustrialisation and the gradual removal of the market from areas of activity such as education, health and transport. By creating jobs that don't currently exist, we could have a heathier and happier society without being at the mercy of profit-seeking multinationals that temporarily undercut to destroy competition. This isn't an argument to ban all trade - but to foster sustainable trade that will benefit people and planet.

  3. Couple of issues with this 1) the aim of neoliberalism is to drive and increase globalisation and a) Brexit, was in part a reaction against globalisation and b) Trump is an anti-globalist who seeks to cancel the transatlantic trade pacts and implement protectionist policies to support local job markets i.e. 'bringing industry home' to make [USA/Britain] 'great again' (hence FORD and Apple announcing they would bring manufacturing back to the USA again). 2) Protectionist policy & manipulating trade tariffs is a key plank of socialism and is nothing to do with a 'free market'. Hence the answer proposed to reduce poverty in the developing world is to help create a 'freed market' & stop these protectionist trade policies that are leaving places like Africa to starve. Creating freed markets is different to supporting this brand of capitalism practiced currently.

    ref: Trump quiting the Transatlantic Trade Investment Pact - so