The present state of global economies

Free trade is postulated on an absurdity, namely that the world will no longer see wars which will significantly disrupt trade, or at least the trade of the First World. It is a fool’s paradise.

 Those with memories greater than that of a goldfish may recall the help and support Britain received from her supposed EU “partners” in the Falklands. Remember how  France supplied military equipment in the form of missiles to the Argentine during that war. Imagine what would have happened if Britain at the time had relied largely on equipment which was either wholly or partly produced abroad. Suppose, for example,  her  main fighter aircraft had been produced by an EU consortium (as it soon will be), what guarantee could Britain have had of fresh supplies of spare parts and weapons during the Falklands war?

 The dependence on foreign suppliers affects even the greatest states. The New York Times (29 Sept 2005 – “More US weapons have foreign roots”) documents the reliance of the US military on foreign suppliers. This is still small as a percentage of the whole defence budget but it is growing and already encompasses important areas such as bio-chemical warfare protective suits. 

The reality is that what we have does not even fall within the  arbitrary and narrow definitions of “free markets” and “free trade” which most of the developed world’s  elites  espouse under the banner of globalism.   States still protect their economies with state subsidies, favourable tax regimes, quotas and tariffs. Nonetheless, protectionist barriers have been reduced sufficiently to severely damage first world industries through products from the developing world with their absence of labour laws and wages many times less than those of developed economies.

 First World economies have also exported vast numbers of jobs to the developing world. These range from manufacturing to skilled white collar work such many IT functions. The old middle-class belief that they were immune from the effects of globalisation has received a rude buffeting.

At the same time as jobs and industries  have been exported, the industrialised world has increasingly allowed the purchase of native companies by foreigners. Perhaps the most dramatic example of this has been the complete transfer of London merchant banks to foreign ownership.

The fourth strand in the modern “free trade” web is immigration. Since 1945, with the exception of Japan,  the First World  has allowed through a mixture of design and neglect of border controls, vast numbers of immigrants into their territories,  most of whom have been unskilled or low-skilled.

The primary consequences of the slowly evolving post war international economic regime have been two. The first has been the gradual  growth of dependence on the imports of vital goods and services by the developed world and a loss of governmental control of companies within their borders, not least because any large multi-national can hold the threat of upping sticks to another country if a government does not play ball.

The second consequence has been the degradation of the economic circumstances of those whose jobs were most at threat from the internationalisation of trade.  Those effected are mainly the poorer and less qualified workers and their dependents. They have found their opportunities for work much reduced and the pay and conditions for the suitable work which remains eroded by extra competition from both native  workers chasing fewer jobs and immigrants competing for the same jobs.

Those whose jobs opportunities have been degraded have suffered a form of theft. Had mass immigration and the export of jobs been prevented, the wages  for the jobs taken by immigrants would have been higher than they are when subjected to the additional competition of immigrant labour and the exported jobs would not have been exported, which in itself would have tightened the labour market. In societies of rising aspiration, this could result in jobs considered menial being  better rewarded than those which enjoy high status under  “free trade” circumstances. It might be necessary to pay a sewage worker as much as a doctor. Doubtless many would throw their hands up at this. But there is no logic to such a response, because in a society with a large private enterprise component a wage is simply a response to the value the market puts on a job. Unskilled workers may not earn as much as the average  doctor or lawyer at present, but skilled tradesmen such as plumbers and builders often do.

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  • By Jutia Group on January 10, 2011 at 5:51 pm

    Memo from Washington: We’re going to borrow, print, and spend no matter what!…

    Jutia Group found your article to be similar to ours. Do you agree?…

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