Ha-Joon Chang debunks the neoliberal myth of free trade spread by Milton Friedman and Friedrich von Hayek. It turns out to be neo-colonialism and neo-imperialism. Alexander Hamilton was wise enough to adopt protectionism for US infant industries to counter the rich and powerful countries of Europe and grow the US economy. In the present case, so-called free trade helps US multinational firms but hemorrhages jobs, further undercutting labor bargaining power and pruning the middle class.
Buzz Flash
Ha-Joon Chang's 'Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism'
Reviewed by Thom Hartmann
people keep saying this, from Jefferson to Hamilton to
ReplyDeletehttp://mikenormaneconomics.blogspot.com/2013/04/free-trade-that-just-means-that-large.html
to HJK
Why are we always one non-merchant short of a quorum?
I love Ha-Joon Chang. Here he is in an LSE podcast from earlier this year:
ReplyDeletehttp://www.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1904
In my 1000 level intro class a couple of years ago, they used specialization to defend free trade. (You know, the opportunity cost/comparative advantage thing.) This was in the micro class, not the macro, in a book written by Mankiw.
ReplyDeleteLooking back on it, it seems that the increase in production that comes about from this kind of specialization & trading is part of what Roger calls the return-on-coordination. Two producers do the same work when they specialize as when they do not, but when a trade can be coordinated, they end up producing more. Who or what is responsible for the increased production? Whatever allows them to coordinate. (Usually a government with a stable units of currency and weights so they can measure product and value.)
But when trading across borders, you are not trading good for good, you are trading currencies, and sometimes this trade happens over time - the Chinese are building up dollar reserves for whatever reason, so they trade stuff for dollars. It seems like when you get currencies being traded, and their values affected by this, you have a macro issue. So why were they bringing this up in a micro class? I think my classmates and I were being hoodwinked.
In economics as it life, there are almost always tradeoffs and part of good decision-procedure is knowing what the costs and benefits are. The myth of free trade mentions only the benefits and not the costs. The importers benefit is goods and resources not produced domestically and cost is employment that would have gone into producing the imported goods and resources, The exporters cost is reversed. The exporter benefits by claims against the importers assets, financial and real, as well as increased employment, while the cost is loss of goods and resources for domestic use and domestic producers working for foreigners.
ReplyDeleteThat's fine as it stands but due to power relationships the costs and benefits may be quite different, with economically powerful developed nations taking advantage of those less economically powerful that are undeveloped or developing.
This is almost never discussed in conventional economics wrt the myth of free trade, since it is power relationship rather than an "economic" one, as it there were a difference. The contention is that resources are being but to more efficient and effective use than they would be otherwise, and so "everyone is better off," which is not necessarily or even usually the case. What's good for a country is not necessarily good for all the countrymen or even a majority of them, and it is often only the elite that receive the benefits and the rest bear the costs.
Gains from Trade? The Net Effect of the Trans-Pacific Partnership Agreement on U.S. Wages by David Rosnick, CEPR
ReplyDeleteRecent estimates of the U.S. economic gains that would result from the proposed Trans-Pacific Partnership (TPP) are very small—only 0.13 percent of GDP by 2025. Taking into account the unequalizing effect of trade on wages, the median wage earner will probably lose as a result of any such agreement. In fact, most workers are likely to lose—the exceptions being some of the bottom quarter or so whose earnings are determined by the minimum wage; and those with the highest wages who are more protected from international competition. Rather, many top incomes will rise as a result of TPP expansion of the terms and enforcement of copyrights and patents. The long-term losses, going forward over the same period (to 2025), from the failure to restore full employment to the United States have been some 25 times greater than the potential gains of the TPP, and more than 5 times as large as the possible gains resulting from a much broader trade agenda.
What if we hadn't had a government-backed counterfeiting cartel, our banking system? Then we'd all probably profit from outsourcing and automation. Why? Because then business would either have to pay honest real interest rates for our savings OR issue more common stock to fund themselves.
ReplyDeleteBut what about the countries we trade with? Would they benefit if the US had ethical money creation? Yes because:
1) Our good example would be followed in some cases.
2) Broadly owned US corporations would tend to be more humane.
3) Less wealth inequality and economic insecurity would tend to make the US population more sympathetic of those in need abroad.
That said, once we have ethical money creation ourselves, we might STRONGLY encourage other countries to do the same via our trade policy with them.
ReplyDeleteBut, of course, we have to repent ourselves first.