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 Chalmers Johnson on the Myth of Free TradePosted on Jan 24, 2008
(Page 3) Chang argues that culture simply does not work as an explanation for economic success. Extremely broad categories such as “civilization,” “Christian,” or “Muslim” obscure more than they reveal, and the modern histories of Germany, Japan, China, and many other countries suggest that Protestant-work-ethic-type cultures are the results of economic development, not their cause. In the early 19th century, the British endlessly generalized about Germany and Germans, calling them “a dull and heavy people” and “indolent,” saying “the Germans never hurry,” they are a “plodding, easily contented people ... endowed neither with great acuteness of perception nor quickness of feeling,” they are “not distinguished by enterprise or activity,” they are “too individualistic and unable to cooperate with each other,” they are “overly emotional,” and “the [German] tradesman and shopkeeper take advantage of you wherever they can, and to the smallest imaginable amount rather than not take advantage of you at all. ... This knavery is universal.” It is discouraging to see this kind of thought rampant again in economic discourse, this time directed against the poor people of Africa, Latin America, and elsewhere. Commentators who denigrate the Philippines as East Asia’s only Catholic and therefore Latin American-type culture forget that only a half-century ago it was the second richest country in Asia (after Japan). Cultural explanations offer powerful support for the List/Chang proposition that economically successful nations are almost pathologically afraid of competitors coming up from below and therefore try to block their progress by kicking away the ladder. It is time to recognize, particularly in the English-language economic press, that a “level playing field” leads to unfair competition when the players are unequal. We have no trouble recognizing that a boxing match between people with more than a couple of pounds difference in weight is unfair. Why should we accept that the United States and Honduras should compete economically on equal terms? One of the strengths of Chang’s new book lies in the half-dozen lucid chapters on particular, often rather technical aspects of development and international trade. These add up to a jargon-free primer on contemporary economic thought leavened with a sound knowledge of history. The best of these are on trade liberalization, foreign investment, public versus private enterprises, patents and copyrights, and macroeconomics. The most interesting of these are on trade liberalization and what today are rather ostentatiously called “intellectual property rights.” We live in an allegedly enlightened age of free trade. Nonetheless, European citizens support their dairy industry with subsidies and tariffs to the tune of 16 billion pounds sterling a year. This amounts to more than 1 pound per cow per day, when half the world’s people live on less. The pattern is repeated with regard to a vast range of agricultural commodities grown in rich, developed countries. The U.S. subsidizes corn and exports it to Mexico, where it is the staple diet of most of the people. These exports, however, drive small Mexican farmers into bankruptcy and encourage their illegal immigration into the United States, where a racist backlash is directed against them. In many cases, the American proponents of farm subsidies are one and the same people who stir up hatreds against Mexican farm workers. Japan is one of the world’s richest countries, with a remarkably even per capita income distribution, but it still lavishly subsidizes its extremely inefficient rice growers and prevents the import of rice that could easily compete on price with domestic rice. This system helps perpetuate the one-party rule of the Liberal Democratic Party by mobilizing rich, protected farmers, who vote for the conservatives. What’s wrong with such practices? All countries have domestic political interests, and successful politicians cater to them. The problem is the hypocrisy surrounding “free trade” and the lies that distort political rhetoric in virtually all economically advanced countries. According to Chang, “Belief in the virtue of free trade is so central to the neo-liberal orthodoxy that it is effectively what defines a neo-liberal economist. You may question (if not totally reject) any other element of the neo-liberal agenda—open capital markets, strong patents, or even privatization—and still stay in the neo-liberal church. However, once you object to free trade, you are effectively inviting ex-communication.” Under the Anglo-American-dominated World Trade Organization, a great deal of trade liberalization has taken place, but it has virtually all come at the expense of infant industries or cash crops in developing countries and has enriched exporters and consumers in rich countries. Not surprisingly, the system allows for protection and subsidies much more readily in areas where the rich countries want them and rejects any exceptions for developing countries. This is the main reason for the current revolt by virtually all Latin American countries against further U.S. interference in their economic policymaking. Reduction of tariff revenues also plays havoc with national budgets in poor countries. Because they lack efficient tax collection capabilities and because tariffs are the easiest taxes to collect, developing countries rely heavily on them. Add to this lower levels of business activity and higher unemployment that results from IMF-ordered trade liberalizations, which reduce income tax revenue. When such countries are then put under further IMF pressure to reduce their budget deficits, falling revenues mean severe cuts in spending, often eating into vital areas like education, health, and physical infrastructure, damaging long-term growth. Neoliberal theorists believe that when it comes to golden straitjackets “one size fits all”—except for those countries rich enough to afford a private tailor. The chief effect of the golden straitjacket has been not to promote growth but to turn healthy countries into basket cases. “In the long run,” writes Chang, “free trade is a policy that is likely to condemn developing countries to specialize in sectors that offer low productivity growth and thus low growth in living standards. This is why so few countries have succeeded with free trade, while most successful countries have used infant industry protection to one degree or another.”
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By Joe, January 28 at 6:39 pm # Gregorio post- Gregorio- In its broad Western sense, “federalist” suggests strong central control. Can you clarify?
By Gregorio, January 29 at 3:36 pm # Re: federalism and individualismJoe, Federalism is a form of social organization based upon strong central control, as you note. Free market individualism has long been thought to be antipathetic to federalism. Now look at history. The states’ rights Republicans, the party of Lincoln, have usurped confederalism (states’ rights) in favor of federalism every time, with individuals now including corporate persons; the small federal government getting bigger under Republican presidents than under Democratic presidents; strong federal control over the economy occurring as wage and price controls under Nixon; the pursuit of the dictatorial unitary executive by Republican neocons like Cheney and Wolfowitz whose Department of Homeland Security and Justice Department encroaches upon individual liberties otherwise guaranteed by the constitution; a Defense Department driven by military-industrial pressures and thriving on no-bid contracts - all the trappings of federalism from the states’ rights people. Confederalism, on the other hand, gives precedence to the constitution where the federal government oversees the states to insure they stay within the bounds of the bill of rights that protects individuals. It just so happens that the alleged states’ rights free marketeers push for strong central control, not out of concern for the individual free market of Adam Smith, but to perpetuate and intensify the oligopoly that Lincoln made possible. A confederation would not and could not have a large standing army, a federation can, by resorting to individual income tax over and above anything the individual has to give to the state he lives in.
By Anna Churchill, January 28 at 4:36 pm # Back to Basics PShttp://www.schumachersociety.org/buddhist_economics /english.html
By Anna Churchill, January 28 at 4:12 pm # Back to BasicsAnyone remember EF Schumacher? Buddhist Economics? It is interesting to see that by default the idea of regionalism and all that implies will come home to roost--after the fall, of course. I keep waiting for when it will be proposed that neighborhoods create home kitchen garden clubs utilizing all that unused land that surrounds even the most modest home in the US. In Europe, where land is scarce every scrap of dirt in one’s back garden is often used to grow parsely or a tomato--here it all goes to waste. What does this have to do with the issues in the article? Everything.
By allanR, January 28 at 11:11 pm # Johnson and Subsidies“I’ve always been amazed at how much better the food outside the US is...(they use local ingredients when the price is competitive with shipping factory ingredients)...” I think you support Johnson’s argument for the use of subsidies. The Europeans have subsidized small farmers for a long time, as have the Japanese their small rice farmers, thus allowing those consumers the luxury of fresh, unadultered produce. What the Europeans and Japanese dont do is subsidize gigantic agribusiness. For their subsidies the U.S. taxpayers get plastic food. And there seems to be not end in sight.
By Joe, January 27 at 10:43 pm # You guys are breaking my heart. jackpine savage--for your amusement, here is one duty assigned the Philippines Bureau of the Treasury: Under Republic Act No. 6657: quote from DC’s post: Douglas-- you have once again scared the living fuck out of me. I’m too big to fit under my desk. What to do.
By Joe, January 27 at 4:43 pm # Chalmers Johnson has a grasp of the connectedness of events and policy, a reality few US economists or lawmakers have incorporated into their thinking. Just by example, imagine Johnson signing legislation he has not even read..a common practice, I believe, in Washington. Pride in the usefulness of his mind would prevent my example, Johnson, from ever committing such a sin. HJ Chang, whose approach is the focus of this article, is one of a rare breed and is a blessing to this world. I have some problems with a few of the notions promoted here, though, mostly by author Johnson. Unless I am misunderstanding his argument, he encourages the heavy old-school hand of protectionism with such devices as tariffs on imports, this as one means of handling one’s economic problems. The problem with this is that manufacturing is never coming back to the US, so why burden consumers with more expense? Simply controlling spending and going back to a currency based on tangible commodities, say metals, would be far more effective and simpler to administer. It would also avoid the reprisals other nations would feel compelled to impose if only because they already feel the US is an overbearing member of the world community. As for his disdain for the patent process, simply improve it. Have it protect individuals only, not corporations. The 50-70% of R&D;research funded by the federals here is money wasted because, simply, our kids are stupid. They generally know nothing about history, math or writing. Our schools are, due to incompetent teachers, disasters overall. They demand conformity K-12 but offer no compelling reason for learning, no enthusiasm. The choked flow of technical and industrial knowledge to Africa, the example above, is not due to the patent system. It is due to individuals unwilling to share wealth or influence. Chalmers Johnson calls this class of individuals “neoliberals.” This is a confusing term for anyone trying to figure out the situation described. I feel easier calling it what it is: racist elitism. Finally, I just don’t understand the statement, “Commentators who denigrate the Philippines as East Asia’s only Catholic and therefore Latin American-type culture forget that only a half-century ago it was the second richest country in Asia (after Japan).” This is baffling to me on several levels, since I lived there for a time. The Philippines was occupied for maybe 300 years by the Spanish, then Terrorized by Pres. McKinley and his nutty hatchet man, Teddy Roosevelt (yes, the guy up on Mount Rushmore).
By GW=MCHammered, January 27 at 9:05 am # This reckless greed of the few harms the future of the many Never in human affairs have so few been allowed to make so much money by so many for so little wider benefit. Across the globe, societies and governments have been hoodwinked by a collection of self-confident chancers in the guise of investment bankers, hedge and private equity fund partners and bankers who, in the cause of their monumental self-enrichment, have taken the world to the brink of a major recession. It has been economic history’s most one-sided bargain. Last week’s financial panic was further evidence of the extreme foolhardiness with which global finance has been organised and managed. The staples of a settled life - jobs, pensions and house prices - are all under threat. The remuneration structure is a disaster. Hence the casino character of many new financial markets, which essentially operate as bookmakers accepting differing bets on future prices. Underneath their technical names - monoline insurance, derivatives, debt securitisation - lies little more than bookie principles and practice. Thirteen years ago, I tried to blow the whistle on financial market liberalisation in my book The State We’re In. It was obvious then what is even more obvious now: financial market freedom embeds short-termism, guarantees lower investment, works against business building and innovation, generates booms and busts, inflates house prices, creates system-wide risk and excessively rewards those who work in them. We need the financiers to serve business and the economy rather than be its master. http://www.guardian.co.uk/commentisfree/story/0,,22477 31,00.html
By al734, January 26 at 7:59 pm # Economics then cultureMarx is smiling: “...suggest that Protestant-work-ethic-type cultures are the results of economic development, not their cause...”
By Gregorio, January 25 at 2:34 pm # Winds of change coming too late?The intellectual atmosphere is incrementally changed by ‘little articles on blogs’ that tell people like you and me there are those in the rarified atmosphere of academia who question what is taken for common wisdom. These people should be celebrated. The nineteenth century notion of social Darwinism upon which libertarian, free market thinking alleges to be based, a notion that has endured for over a century and is part of neoliberalism, is increasingly discredited by biologists as both un-Darwinian, but also conflicting with nature and evolution as they are increasingly understood. Stephen J. Gould tried to point this out in the 1990s, that the predominant ethic in nature is symbiosis in the struggle with the physical world by nature’s creatures. Parasites and microbes that kill their hosts imperil their own future.
By Pathman25, January 25 at 1:03 pm # Expat: Did you see this article? Very sad. US and Thailand: Allies in torture
By Alex, January 25 at 12:16 pm # Multi-national not necessarily ImperialI agree with Chang and Johnson, that the “protectionism” of the early US economy helped foster and develop the business community within US borders. I don’t agree that the change is a function of imperialism as much as a function of multi-national corporations (MNC). Free trade is a boondogle promoted by the MNCs for the benefit of MNCs. By GW=MCHammered, January 25 at 9:21 am |
Newsroom Carnage Continues at The Washington Post
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