On Lemon “Free Trade”

There’s a lot of disagreement in American politics — from Berniecrats, to the centrist neoliberal establishment, to right-libertarians, to nationalist reactionaries like Trump and his followers — on TPP and other trade agreements. But there’s one thing they all agree on: calling it “free trade.” And they’re all wrong.

At Reason (“The Neoliberal Era is Over,” Jan. 4), Matt Welch equates neoliberalism and trade pacts like TPP to “free trade,” and contrasts all of those things to the “mercantilism” of Trump’s US Trade Representative nominee — which should be the howler of the century for anyone aware of the mercantilist essence of neoliberal trade agreements. Right-wing nationalists (aka “fascists”) like Trump and Pence regularly claim that “free trade” and “free markets” have destroyed American manufacturing jobs. And center-left wonk Max Ehrenfreund at the Washington Post (“Trump is bringing in the big guns to roll back free trade,” Jan. 4) likewise describes Trump’s USTR pick as “rolling back free trade.”

Bull hockey.

Let’s get something straight: The capitalist state’s primary function is to serve the long-term interests of the economic ruling class. No capitalist state has ever promoted free trade, and no capitalist state will ever do so. At any given time, the capitalist state adopts a package of intervention and non-intervention that optimally serves the interests of capital. Trump is simply replacing one form of mercantilism with another.

TPP, NAFTA, the Uruguay Round of GATT, and all those other “Free Trade Agreements” don’t reduce protectionism or make trade freer at all. They simply shift state protectionist intervention away from forms that no longer serve the dominant capitalist interests, toward forms that better serve them.

What capitalist governing elites call “free market reform” or “trade liberalisation” is really just the counterpart to what was called “lemon socialism” — i.e., state policies like nationalizing industries that were vital to the functioning of the capitalist system as a whole, but that private capital no longer found sufficiently profitable to operate on their own nickel. Examples included nationalizing centrally important infrastructural industries like railroads, telegraphs, and coal. Socializing the input costs of capitalism — vocational/technical education, R&D, interstate highways, airports, supporting the surplus population rendered obsolete by capitalism, etc. — is, as James O’Connor pointed out (The Fiscal Crisis of the State) a basic function of the capitalist state.

Lemon “free market reform” or “free trade” does just the opposite. The state ceases to perform a function that no longer serves the interests of big business.

The classic example of “trade liberalism” touted by right-libertarian commentators — the repeal of the Corn Laws in 19th century Britain — is also the classic example of lemon “free trade.” This so-called “free trade” was adopted only after the British state had conquered and colonized a major part of the world and secured a monopoly on most global trade by the British merchant fleet, and the great Whig landed interests had enriched themselves and used their wealth to fund the industrial revolution. These things having been accomplished, protectionist measures like the Corn Laws no longer served their function for a capitalist class in which industrialists had largely replaced Whig agrarian capitalists as the dominant party, and operated on a global scale.

The same is true today of the neoliberal move to lower tariff barriers at national borders. A hundred years ago, the dominant American manufacturing firms supported tariff protectionism because it was in their economic interest. U.S. Steel wanted the U.S. government to restrict imports of foreign steel,  protecting its steel monopoly in the domestic market. Today, tariffs no longer serve the interests of global corporations with production facilities all over the world, or with global supply chains. They actually impede the transfer of goods between national subsidiaries of corporations, or of shuffling around outsourced production within corporate supply chains.

“Intellectual property,” on the other hand, is a form of protectionism even more vital to American global corporations today than tariffs were to U.S. manufacturers a century ago. “Intellectual property” is every bit as protectionist as the tariff — it’s just enforced at the corporate boundary instead of the national boundary. It’s IP that enables Western capital no longer to actually manufacture anything, to outsource all actual production to China or Vietnam, but still maintain a legal monopoly on disposal of the product.

So TPP is actually a massive net increase in protectionism in trade barriers. It drastically increases the most economically significant form of protectionism that the dominant corporate interests’ business model most heavily relies on, while partially phasing out an obsolete form of protectionism that global capital doesn’t need any more. TPP and other such “Free Trade Agreements” are the Smoot-Hawley of “intellectual property” protectionism.

Free Markets & Capitalism?
Markets Not Capitalism
Organization Theory
Conscience of an Anarchist