The U.S. Congress quietly passed three “free trade” bills last week, the kind of laws that — though thoroughly characteristic of the structural problems of today’s economy — often seem unremarkable and uncontroversial. Allowing exchange of goods and services across national boundaries appears innocuous enough, permitting all regions of the world to benefit from doing what they do best.
The problem is that the economic principle enshrined in free trade treaties is the preservation of corporate privilege, not the liberation of commerce. One could, with some accuracy, say that the antecedents of contemporary free trade agreements were born of conquest and plunder — that to the political class, “free trade” has forever meant “organized monopolization by elites.”
We can look to the project of colonialism as one among the progenitors of the present day “free trade” that takes place under the watchword of globalization. Commenting on “[a]ll the different regulations of the mercantile system” that obtained in his day, Adam Smith remarked that “[m]onopoly of one kind or another … seems to be the sole engine” of that system.
Smith drew a bright line between genuine free markets and the power dynamics that “necessarily derange” the natural distribution of wealth. In particular, Smith observed that “trade to America and the East Indies” was exceptionally sullied and corrupted by the symbiotic relationship between political and economic power foci.
In and of itself, the interconnection of the globe, taking place through voluntary exchange and the social communication that accompanies it, is of course completely unobjectionable. But when we compare that notion of free trade to the one so keenly imposed upon the world by governments, the differences between the two become apparent.
Today, as in Smith’s time, the state is actively engaged in ensuring that the most powerful corporate actors are protected from “the troublesome competition of such odious and disagreeable rivals.” The U.S.-Colombia Trade Promotion Agreement, for instance, includes an Intellectual Property Rights Chapter “to ensure that American intellectual property rights are efficiently and effectively protected.”
Again, while that sounds relatively harmless, protection of American IP rights translates to handing U.S. big business the exclusive right to control, license and profit from the entire capital base of the Information Age’s “New Economy.” From software to prescription drugs — and everything in between — IP allows the rich to foist extortionate monopoly prices on society, prices that are neither related to companies’ costs nor tempered by the forces of a genuine free market.
The end result of intervention, the aggregate of all distortions created by coercive force, is to allow a small coterie of the indolent wealthy classes to skim off the top of productive activity. The moneyed, political classes of “developing” countries are quite content to betray their natural resources and their poor to the predation of the West, at least as long as they stay on the right side of the raw deal.
Instead of the neocolonialism we’re actually getting, market anarchists would have the free trade and the free markets that we are so earnestly promised by Washington — with real competition and the “level playing field” we keeping hearing about. Only then, when the global markets are truly free from the oppression of the state, will we witness the advertised advantages of free trade.
Citations to this article:
- David D'Amato, The New “Mercantile System”, Dhaka, Bangladesh New Age, 10/21/11
- David D'Amato, El nuevo “sistema mercantil” de los acuerdos de “Libre Comercio”, La Tribuna Hispana USA, 10/17/11
Great column, Dave! IMO anyone who refers to a "Free Trade Agreement" w/o scare quotes could benefit from a bicycle chain across the eyes.
My recent post New Book in the Works
Thanks a lot, Kevin; I appreciate it! But yeah, I always feel like this is a point to keep hammering home, because I know that many, many libertarians I talk to (some more discerning than others) have a kind of knee jerk reaction in favor of so-called free trade and globalization, without really knowing how unlibertarian the full picture is.
My recent post "Integrated Geographies"
It took me quite a while to reconcile a true "free market" with what the statists and corporatists were calling "free market." Once I made a distinction, I saw nothing but red for days! Nothing like feeling lied to your whole life.
I have actually been looking into this area, and interestingly it turns out that free trade is sub-optimal – including not being a gain for both sides – in the presence of certain kinds of externality. Now, some of these are caused by governments; taxes on businesses are in many ways the equivalent of part ownership of firms by governments, only making a free gift or wealth transfer of that equivalent to another country whenever operations move there. But, without government intervention to set up IP property rights, there is a similar transfer of applied expertise whenever operations transfer, e.g. the way the highly effective Soviet MiG jets used in the Korean War tapped into Rolls Royce engines bought from the UK and reverse engineered (likewise, communist China bought aircraft from the west, but only a few to reverse engineer – and the USA stole British antibiotic and nuclear efforts during wartime sharing). The correct course would have been not to sell them in the first place, and similarly today the correct course is to keep operations and expertise from transferring if there is going to be a material give-away externality of that sort (and notice how that phrasing is just what statists run with, supposing it implies a task for states). IP property rights actually function as a kludged patch for a bug, and we should not regard them as wholly negative even though we should not be acting so as to need the kludge – e.g., getting rid of the tax externality would cut operations transfers (outsourcing) considerably, as the market would be much less distorted. The kludge is indeed a partial fix for a real problem, of sorts, even though it is a government fix for a problem that was fostered by other government actions.