Note: I wrote this long eassay in 2005. The financial crash and recession since provide added grist to my arguments as the rich get richer, most people get steadily poorer, public provision shrinks and the inequality between people swells.
The lessons of economic history tell this story: a strong domestic economy is necessary for sustained economic growth and stability. The freer the trade with foreign states, the less stable and secure the domestic economy.
Post-war economic experience illustrates this nicely. Britain experienced her strongest sustained growth in the period 1945-1972. This was a period of protectionism and much state intervention in the economy. Problems arose in the 1970s, but these were largely due to the oil price spike after 1973, a consequence of globalism. However, even with the oil price spike, unemployment in Britain never went much above 1 million until Thatcher arrived and wilfully destroyed our heavy and extractive industries.
During the period 1945-1979, Britain did not suffer a serious sustained recession. From 1979 onwards, under the Thatcherite ideology we have had three serious recessions: in the early 1980s, the early 1990s and the present recession.
To our post-war experience I would add the fact that England built her commerce then the first Industrial Revolution behind very restrictive protectionist measures such as the Navigation Acts. RH
Robert Henderson 20 4 2012
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“Free markets and “free trade” = elite propaganda”
Robert Henderson
1. Unquestioned ideas
2. The “Free Market” is a state regulated market
3. The “free market” as its proponents conceive it
4. How effective is anti-monopoly legislation?
5. Microsoft and Windows – a natural monopoly
6. The historical trend towards contraction of competition
7. “Free trade”
8. Has “free trade” ever been practised?
9. “Free trade” today
10. Does “free trade” deliver? The lessons of economic history
11. Is society materially enriched by “free markets” and “free trade?
12. What is meant by material enrichment?
13. How the market fails to provide what the customer wants
14. Relative poverty and wealth and happiness
15. Man does not live by bread alone
16. Geopolitics
17. The democratic deficit
18. Does “free trade” increase competition and choice in the long run?
19. The reality of our economic circumstances
20. Why elites are so keen on “free markets” and “free trade”
21. A sane alternative to globalism
22. Free trade as a religion
23. An elite ideology
1. Unquestioned ideas
Because they have the word free in them, the terms “Free markets” and “free trade” have seduced those of all political colours to treat them uncritically as ideas. They are considered good or bad but their intellectual coherence is rarely questioned.
Neo-liberals believe in a childlike quasi-religious fashion in the workings of Adam Smith’s “invisible hand”, which, moved by enlightened self-interest, supposedly creates the best of all possible material worlds through the operation of the market. Socialists see “free markets” and “free trade” as economic “state of natures” which must be ameliorated by the state before a civilised society can be realised. Conservatives in the traditional sense no longer exist as a recognisable political force in the West, but when they did exist they opposed “free markets” and “free trade” primarily on the grounds of national security and the general disruption to society that they caused. Nationalists of the fascistic kind have traditionally opposed the ideas because they see the nation as a single organism which can only be strong if it is master of its own destiny, something which can only be achieved (they believe) through state direction of both the internal market and of external trade.
There are varying quantities of truth in all these ideological responses, but their utility is seriously tainted by the lack of any objective or even properly defined and permanent prescriptive truth in the concepts of “free markets” or “free trade”. The reality of these ideas is that they are arbitrary chosen bundles of behaviours which are excluded or included at the will of their proponents. Moreover, the bundles of behaviours are not static.
The widespread negligence in examining the coherence of these ideas is all the more remarkable because their incoherence as theories and the arbitrary and dishonest nature of their practical realisation is not only readily apparent but fundamentally undermining of the claims made for them by their champions.
2. The “Free Market” is a state regulated market
There is a splendid irony in the objection of the self-defined “free marketeers'” and “free traders” to state intervention for the natural end of a truly free market is monopoly – or at least greatly reduced competition resulting in oligopoly and the rule of cartels. All so-called “free market” societies recognise this by passing anti-monopoly laws. The “free market” is in fact a market controlled by the state in the most fundamental way, that is, to prevent its natural workings. It is one of the great propaganda triumphs of history that “free markets” have been successfully sold as being what happens naturally without state intervention. Call a spade a spade and substitute the truthful “state regulated non-monopolistic market” for “free market” and the psychological shape of the idea changes dramatically. (Some casuistical “free marketeers”might argue that the “free” in free market applies to the workings of the market rather than the market as a natural phenomenon. That explanation falls because “free marketeers” invariably make the blanket claim that markets only work efficiently without government interference. Their honest position would be to state that they want state regulated markets to prevent monopoly. They will not do that because it would be an acknowledgement that state regulation of the market is legitimate and hence remove any general argument against regulation. That in turn would mean any form of state regulation would be potentially reasonable and consequently each form of regulation would have to be argued down individually on the merits of the case, rather than simply empty-headedly dismissed on the grounds of no regulation = good; regulation = bad.
The state regulated “Free Market” is not even a natural phenomenon made somewhat artificial by rules to exaggerate the natural phenomenon in the same way that we breed animals to exaggerate nature. Rather it is just about as far from being a natural phenomenon as anything can be for it goes against all Man’s inclinations, both individual and social.
Economic history is overwhelmingly a catalogue of market regulation, local and national, from guilds to governments. It would be surprising if it were not because human beings, like all other organisms, naturally behave to secure their own advantage or that of their group. Extended to the nation state, this natural behaviour has commonly resulted in domestic markets being protected against foreign competition. Whether this is a good or a bad thing is another matter – a question I shall deal with later – all I am concerned to do at this point is to nail down that the fact that protectionist behaviour is what is natural.
Historically, whether you were anything from a rich merchant to a poor day labourer it was obviously not in your personal interest to allow others free access to your markets to offer the goods or services at a lower price or to work for lower wages. The merchant might be driven to bankruptcy by competition, the labourer from his job. History also tells us that whatever their previous economic station, such people will probably not be able to find equivalent or better paid employment and often may not be able to find any employment at all where structural unemployment arises. What was historically true not only remains true today, but its effect is much magnified because the opportunities for competition are greatly increased by modern communications and the ease of travel and cargo transportation.
Of course, any individual or sectional advantage causes strains in a society and if the material privilege of any person or group becomes excessive, sooner or later there will be a successful revolt and the wealth in a society will either be shared more fairly through a change in the way the society is structured, for example, through the abolition of tolls, the ending of state monopolies or even through a removal of the rich as a class without any increase in the wealth of the majority.
But wherever wealth distribution through social change has occurred it has normally been done with the express intention of benefiting a particular group or even an individual in the case of monarchs. The odd thing about “free marketeers” is that what they ostensibly advocate is not to privilege any particular individual or group but to benefit society as a whole. Whether free markets do so is another matter, but that is their claim.
The “free marketeer” says to a population, do what I say and in time society will become richer. He does not say this person or that group will become richer or even all will become richer, but merely that the society as a whole will become richer. This is an extraordinary thing to ask people to trust in. It is also the most wonderful blank cheque ever written to a politician because not only does it absolve him or her of any need to take the responsibility for regulating the economy, it also means that he or she can never be held to account for dishonesty by any individual if that individual is personally worse off. All a “free marketeer” politician has ever claimed is that his economic way will make society richer. Provided society overall is richer, he has met his met his promise.
It is also telling for their intellectual credibility and honesty that “free marketeers” will oppose government interference in such matters as subsidies, quotas, embargoes, wage rates and working hours and grumble about tax rates and public expenditure, but are generally quite happy to see other gross distortions of the market deriving from government action. They not only tolerate patents, copyright and trademarks, but often defend them as property in themselves and as devices which actually improve economic performance because they encourage invention, investment and expansion. In addition, those who constantly bleat about Adam Smith’s “invisible hand” sorting out the business wheat from the chaff insist that limited liability is necessary. This of course is also a violent interference with the market because it means that the individual shareholder never takes full responsibility for their investment. (It is worth noting that the British industrial revolution – the one and only bootstrapped industrial revolution – took place before limited liability became legally possible (Limited Companies Act 1862) and at a time when patent rights were insecure and in practice limited to the domestic British market.)
It is true that none of these things are actually part of what the concept of a “free market” is and that they are inimical to such a market, but the fact that almost all modern “free marketeers” have tacitly incorporated them into their vision of what a “free market” is demonstrates their intellectual confusion (or dishonesty if you prefer).
3. The “free market” as its proponents conceive it
Let us put aside for the moment the fact that “free markets” are state regulated markets and ask the question what is a “free market” as it is conceived by “free marketeers”? A jolly good question. Even if market distortions which appear acceptable to “free marketeers” such as patents and limited liability did not exist, that would leave many other things which prevent unfettered domestic competition. In an advanced modern economy these include:
Taxes
Non tax fiscal measures, for example, control of interest rates
The state of the currency
Exchange controls
Overall Government expenditure
State Subsidies
Industry and trading standards, official and otherwise
Public sector employment
Transport costs
Public ownership
Defence
Direct and indirect Government intervention
Copyright, trademarks and patents
The moral and social climate, for example, a tradition of wWelfare or the feeling of the
people, for example, the national feeling of Japanese Practical cultural barriers
such as the difficulty of a language
Dumping
Transport costs
Working hours
Trading laws
Labour laws
Wage rates
Bureaucratic differences
Company laws – particularly the attitude towards foreign ownership
Banking laws
Banking system
Social policy – welfare, health and so on
Physical infrastructure
Honesty of public servants
Foreign policy
National strategic considerations
Education – The amount spent, school leaving age, curriculum,
Limited Liability
Environmental laws
Some of these things such as subsidies, patents, quotas and limited liability could be obviously and legitimately ruled out of order by a “free marketeer” because they are deliberate state interferences with competition, but what of items such as the provision by the state of education or the physical infrastructure of a country? They are undeniably distortions of competition at some level, but they are not deliberate attempts by the state to distort competition. A purist “free marketeer” could just about say such things were no business of the state and still be intellectually coherent because it is possible to conceive of a society without such state provision. But however purist they might be, sooner or later the “free marketeer” will run into features which undeniably restrict competition but which must exist simply because they are an inescapable part of society. The most obvious is tax.
Any modern state needs a large tax revenue to sustain itself, the only questions to determine being how large should be the revenue and what it should be spent on? Some things such as defence and policing are inescapable expenditures for any state, although even there the amounts to be spent are debatable and elastic. Items such as education and welfare are more subject to variable expenditure. Nonetheless, substantial amounts are as a matter of contingent fact invariably spent on such items by all advanced states. Such countries also engage to a lesser or greater degree in all the forms of regulation listed above.
In theory, and even more in practice, the notion of a “free market” seems to rest on little more than anti-monopoly laws, wages and prices set by the market (although in practice this does not happen purely through the market because of welfare provision, tax regimes etc) and a lack (or at least a minimum) of state interference in such areas as health and safety, employment law and company law.
The inclusion of these narrow criteria are merely a subjective choice made from a much larger menu of man-made distortions of the market. Consequently, there is no objective coherence to the concept of the “free market” as it is conceived by the “free marketeers”. It is an arbitrary ideology based on subjective choice.
4. How effective is anti-monopoly legislation?
Anti-monopoly laws operate within the constraints of the type of social and economic circumstances described above. That alone means they are severely limited in what they can do. They must, for example, tolerate state granted monopolies in the form of patents and copyright.
Anti-monopoly legislation generally only effectively attacks the problem from one end. A company can be prevented from growing its market share by taking over other companies but there is normally no meaningful restriction on a company growing its market share simply by expanding the existing company. Microsoft and the domination of Windows is a classic example.
Where companies try to expand by takeover, experience shows that those charged with applying the legislation allow very large parts of a market – 25% or more – to be held by a single company. The consequence is that a market which would seem to be an obvious candidate for competition, for example, food and domestic supplies retailing, can easily come to be dominated by three or four major players (as is the case in Britain).
There are also those products which are either natural monopolies because of the physical location of their infrastructure – railways, roads, the utilities such as gas – or which are inevitably going to have few entrants in the field because of reasons of cost, for example, aerospace, motor cars, ship building.
Finally, there are those rare markets which are dominated by one company simply because of the nature of their business. The classic example of this is Microsoft and their Windows operating system.
5. Microsoft and Windows – a natural monopoly
In South Park: The Movie, there is a glorious scene where, under martial law, Bill Gates is executed for falsely promising that Windows 98 would be “faster, easier to use and more reliable”. Many long-suffering Windows users doubtless wish that life had imitated art in that instance. Yet despite widespread dissatisfaction Windows remains the overwhelming dominant operating system.
At first glance it might seem that operating systems should be just the type of product which is open to fierce competition because software is a market which potentially has low entry costs. It is true that most areas of programming are competitive – within the constraint of the dominant operating system (OS) – but operating systems are the odd man out. The reason is simple. Once a single OS gained dominance, the chances of any other system effectively competing were very small. This is because the weight of programs available to run under the dominant OS soon became much greater than those which could be run under any other OS. Thus, it becomes inefficient to choose any other OS. That in turn means most of the software is written in a way to make in “friendly” to the dominant OS systems’ users. This further excludes OS competitors and the software to run under them because users, especially employers, do not want to spend the time training their employees on completely new systems, converting data and so on.
The consequence is that Microsoft still has a stranglehold on the pc market. Moreover, if anyone wants to write any other software, they are constrained by the practical need for it to run under the Microsoft OS if they wish to reach the mass computer user market.
The near monopoly has lasted a long time. It has done this despite considerable attempts by both rivals and the US government to diminish their market position. Windows’ dominance looks secure for the foreseeable future.
6. The historical trend towards contraction of competition
As remarked previously, the logical end of a free market is monopoly. The reason is obvious: competition tends to reduce the number of competitors through the natural process of success and failure and the takeover of one firm by another. In some trades this does not create an obvious serious anti-competitive difficulty because the initial capital investment is small and entry to the trade within the reach of many. But entry to a considerable and growing number of areas of manufacturing and service provision is too expensive for all but a few.
In a significant minority of trades starting a business from scratch is practically impossible for any one individual or even a group of private investors. The car industry is a first rate example, the number of companies now being small (and becoming smaller) compared with the number of even 40 years ago. Moreover, many of the car companies which do still exist do so only because of state subsidy and protection.
7. “Free trade”
“Free trade” is frequently treated as synonymous with international trade. In principle it does not have to be restricted to international dealings because the concept may be applied to any market, whether that be within a global, regional, national or even a local context. The United States for example displays considerable differences in local tax rates between not only states but within localities within a state, and, indeed, the ultimate aim of the “free trader” is to create a single world market. However, there are considerable differences in practice between domestic markets and international markets, not least because the criteria which are deemed to fall within the concept of “free trade” are not identical with those which are said to be a necessary part of the concept of a “free market”, for example, laws to prevent monopoly are redundant when it comes to international trade because one country will either supply or not supply goods and services to other countries and a country with a monopoly of an important good or service can as a matter of fact only be persuaded to supply the good or service against its will by extra-legal action, ultimately force or the threat of force. Consequently, it is convenient to treat “free trade” as being economic intercourse between nation states and that is what I shall do.
What does and does not constitute “free” international trading? In times gone by, people would have pointed to those honest workhorses of restriction: embargoes, quotas and tariffs and navigation laws and not much else. But in the modern world things are much more complicated as we discover almost daily during the seemingly interminable EU squabbling and the GATT rounds.
Some things are obviously incompatible with “free trade” such as embargoes or state subsidies, but what of different tax regimes, welfare provision or labour regulations? Why should they be excluded from the things which should not be tolerated in a “free trade” regime? After all, a low company tax regime could be regarded as a form of state subsidy to business and all welfare provision could be regarded as a subsidy to wages.
But even such items are straightforward compared to others. What of national sentiment which gives a preference to home produced goods regardless of whether they represent the best value when judged purely by price and quality? Should a country be forced to take the cheapest of any particular equivalent good or service, regardless of the wishes of the people of that country, on the grounds that not to purchase that which gave “best value” constituted “unfair competition”? A reductio ad absurdum? Well, consider the fact that public bodies within the EU (which for these purposes includes any organisation drawing part of their income from public funds) must allow any company within the EU to bid for any work put out to contract, and if the lowest bid is not accepted, the public body risks being fined for a breach of the Single Market rules.
Even more problematic are things which are simply effects of economic activity. Take true dumping, not the state subsidized export regimes which often pass for such, but a simple economic practice to maximise profit.
True dumping works like this. Imagine that a company can make 2,000 units a week. It covers its costs for all 2,000 units if each week it produces and sells 1,000 units at œ1 each. The company finds it can sell a maximum of 1,500 units in the home market at œ1. If it reduces the unit price to 75 pence it could sell all 2,000 but that would only produce the same amount of revenue as selling 1,500 at £1 each.
Consequently, it sells 1,500 in the domestic market at £1 each and the other 500 at 50 pence each (carriage paid by buyer) in foreign markets. Total sales are £1,750 instead of £1,500.
That is a very simple model of dumping but something akin to it happens regularly with differential pricing from country to country (the European car market is a prime example of this). No state subsidy has been given, no state intervention of any sort has occurred. Why should it not be considered as reasonable a practice as the toleration of different national wage rates? In fact, why should it not be considered more reasonable because wage rates are directly linked to such hidden subsidies as those of welfare and low company taxation? (in fairness, the economic activity of the dumper would also be linked to wage and tax subsidies, but the connection would be more remote.)
Most contentious perhaps is the question of immigration. Does “free trade” require the movement of people as freely as goods and services? This is generally accepted as self-evident by purist “free traders”. Yet there is no logic to the claim. Economic forms are made for men not men for economic forms. We know as a matter of practical experience it is possible to have the exchange of goods and services without the mass movement of people. If a society decides that the benefit gained from the free movement of people is outweighed by the social disruption caused by such migration, it is a perfectly rational decision. A people may decide that they will have or not have free exchange or movement just as they may decide to have this or that level of taxation or welfare provision. It makes no more sense to say a society which restricts immigration – which all advanced states in practice do – is not a “free trader” than to say they are not a “free trader” because their income tax rate is higher or lower than that of their competitors.
The treatment of human labour as merely a factor of production (along with land and capital) is also incompatible with the liberal democratic tenets of the equal worth of each person and the rights and obligations of citizens. Allowing mass immigration to reduce wages or the exporting of jobs to cheaper labour overseas is treating human beings as being of no more account than inanimate objects. It is inhuman.
So what does “free trade” actually mean? Does it require merely that countries may trade with one another without any formal barriers such as tariffs and quotas? Or should it take into account all those items such as national tax regimes, non-tax fiscal measures, wage rates (where these are set by the state), standards of practice and manufacture (official and otherwise), and the size of the public sector. All of these are controllable either entirely or to some degree by men. In other words, they could be removed or altered.
If a definition of “free trade” is accepted which includes these and other non-traditional elements of market distortion, the ultimate logic of the definition is that “free trade” as a global concept cannot exist until all peoples and countries are reduced or elevated to the same general economic condition.
Those who run the European Union would say that is precisely what is required, at least within the EU. But the experience of trying to create unified trading conditions at a supranational level in the most advanced of supranational political and economic entities, demonstrates just how difficult it is to create a supranational market in which there is a broad uniformity in the trading conditions within its constituent national parts. Despite nearly half a century of trying through treaty after treaty and the covering of the EU members with an avalanche of EU directives, there is no meaningful economic uniformity within the EU, either in the circumstances of private enterprise competition or in the function of the state. The introduction of the Euro has painfully revealed exactly how disparate the economies of even the richer EU states still are with Germany needing low interest rates to re-inflate and Italy requiring high rates to control public spending and the European Central Bank paralysed by their inability to square such an economic circle.
The Holy Grail of “free traders” is comparative advantage. This is a first rate example of a neat and emotionally satisfying (to a certain type of mind) intellectual idea which bears little relation to reality. The idea is that every country concentrates on making what it is best at and the overall global product rises because of increased efficiency. Even in theory this is rather dubious because it ignores every other aspect of society than a narrow view of economic relationships and assumes tacitly that a comparative advantage will last. David Landes in his The Wealth and Poverty of Nations (Little, Brown and Co 1998) cites the instance of the Englishman John Borrow, who in 1840 urged the states of the German Zollverin to concentrate on growing wheat, and sell it to buy British manufactures and comments: “This was a sublime example of economic good sense: but Germany would have been the poorer for it. Today’s comparative advantage…may not be tomorrow’s.”
The truth is that any definition of “free trade” is as subjective as that of a “free market”. It has no natural boundaries because the implications of both ultimately embrace the whole of human material endeavour and there are no true natural variables on which to base a definition – even those which might at first glance appear to be objectively and naturally set, such as wages and prices, are determined by matters other than the market, for example tax regimes and welfare provision.
8. Has “free trade” ever been practised?
Between 1860 and 1914 Britain operated the best approximation to “free-trade” the world has seen. In the period 1840-1870 not only did she by degrees open her markets to all regardless of whether other countries reciprocated, but the size of the British state was so tiny that the distortions of government expenditure and taxation were minuscule compared with the present day. But achieving the best approximation to “free trade” was not difficult to achieve because no other country of any size has ever seriously attempted it for any length of time.
For a quarter or a century or so, Britain got away with the ill-effects of being a reckless “free trader” whilst other major countries remained protectionist to varying degrees. She escaped the consequences for three prime reasons: Britain’s industrial dominance, long distance transport of bulk goods remained cumbersome and expensive and the fact that America and Europe were strangely slow to follow Britain’s example and industrialise.
That all changed in the 1870s. Bulk transport was becoming much easier and cheaper. Railways – ironically more often than not built with British capital and technical expertise – had begun to have a considerable influence on the continent and in America and were beginning to snake across Australia and South America. Perhaps most importantly the age of the practical steamship and refrigeration arrived. Manufactured goods, food and raw materials could now move around the world in volumes which dwarfed anything which had gone before. British farmers were especially badly hit when the Americas and Australasia flooded the British market with food and wool.
To these developments, and arguably in part as a consequence of them, there was a widespread retreat into a deep protectionism in the 1870s, most notably by the USA and Germany. Britain failed to respond to these developments by guarding her own markets.
The period of 1870-1914 saw the predictable results of Britain’s quixotic refusal to guard her markets when all about her were assiduously doing so: she lost her general industrial predominance, well nigh destroyed her farmers and failed to dominate vital new industries, such as the chemical, which at one time she had led – Britain produced the first synthetic dye (Perkin 1856) and the first synthetic plastic (Parkes 1855). Two of the most enthusiastic protectionists, the USA and Germany, became the first to exceed Britain’s GDP.
Bismarck summed up what had happened in a speech in 1882 when he said: “I believe the whole theory of free trade to be wrong…England abolished protection after she had benefited from it to the fullest extent. That country used to have the strongest protective tariffs until it became so powerful under their protection that it could step out of those barriers like a gigantic athlete and challenge the world. Free trade is the weapon of the strongest nation, and England has become the strongest nation in the world owing to her capital, her iron, her coal, and her harbours and owing to her favourable geographical position. Nevertheless, she protected herself against foreign competition with her exorbitant protective tariffs until her industries became so powerful.”
But even the “free-trade” Britain practised was far from complete. Government contracts were generally given to British companies. Ditto municipal contracts. Moreover, there was a strong sense of patriotism in the country which, as with the present day Japanese, mitigated the effects of free-trade. Nor, of course, was there a WTO, EU or any other body to question and interfere with the internal economic workings of Britain such as taxation, interest rates or working conditions.
British “free trade” was further complicated by the existence of the Empire and a widespread imperial sentiment which created the opportunity and the desire to trade with members of the Empire rather than the rest of the world. It does not do to over-egg the effects of this because British trade with the world outside the Empire, especially the USA, always remained strong, but it undoubtedly significantly distorted British trade.
9. “Free trade” today
If “free trade” was a gigantic gamble for an industrially, commercially and politically dominant Britain in 1850, it is vastly riskier for any country now. Transport even after the arrival of railways and the steamship was still expensive, slow and cumbersome compared with now. The electric telegraph was the height of sophistication. Most parts of the world could not engage in international trade on their own terms because they were colonies, under the practical control of foreign powers or unindustrialised.
Today physical transport is fast and cheap. In place of the telegraph, we have the internet. Many countries have industrialised. The age of formal empires is over.
But there is more than political and technological change which makes a difference between our own time and the last outbreak of “free trade” mania. The “free trade” being advocated now is doctrinaire to the point of idiocy, namely the god of comparative advantage (the idea that each nation should concentrate on those products which are most profitable and forget the rest) is to be applied to everything, even (in the EU) to all public contracts, including those for weaponry. Childishly doctrinaire as they were as they played with their untried intellectual toy, even the most extreme “free traders” in the 1830s and 1840s saw that some parts of the economy could not be reasonably opened to competition for strategic reasons, military supplies being the prime case.
Let us suppose that we had a perfect “free trade” world now, a world in which there were no tariffs or quotas or embargoes or “standards” to meet; that all the artificial restraints on trade were removed; that no government subsidized productive employment in any way and all that remained to differentiate countries were market decided labour rates, carriage costs and the cost of nonproductive public works such as justice and the army. What then?
The consequences would be extremely dangerous for the West. Farmers in the First World would be on their knees and mass production of virtually anything in general demand would quickly become impossible because whatever a company’s efficiency, it simply would not be able to compete with labour which was a tenth or less of the cost of its own native workforce. All such countries could do is try to make high-value goods,
Even if the redundant working populations of the First World could find alternative employment, which is dubious, their countries would be left utterly at the mercy of those who now produced their food and most of the manufactured goods they consumed.
10. Does “free trade” deliver? The lessons of economic history
Free traders base their case primarily on the increase in prosperity which they believe will only come through increased global trade. The general answer to that claim is that Man does not live by bread alone. Moreover, even if there is a general rise in the global product at present, it does not necessarily follow that the same or better result could not be achieved by other means. The experience of all industrialised countries to date is that industrialisation is best achieved – perhaps can only be achieved by protecting the national economy. Indeed, there is a powerful logic in the idea that developing nations today require protection more than the early industrialising states because the early industrialising nations had little competition.
But even if it could be shown indubitably that the global product is increased more by “free trade” than by protection, it does not follow that it is in a particular country’s interest to adopt free trade. Consider the position in a national market which operates “free trade” within that market, but protects its trade and industry from foreign competition. Companies go bust if they do not compete. But successful companies take their place and continue to provide employment at broadly similar rates of pay. The logic of global “free trade” is that countries which cannot compete will go bust and not be replaced by others in the domestic market. There will be no replacement jobs within the bankrupt country because the successful competitor is abroad.
The most lethal ammunition to discharge at “free traders” is the fact that no country in the history of the world has industrialised successfully without very strong protectionist measures being in place. That includes the first industrial nation, Britain, which spent a couple of cosy centuries behind the Navigation Acts, the first of which was passed in 1651, before becoming a free trader. Not only that, but Britain only adopted “free trade” principles after she had become heavily industrialised and did so at a time when the country was still the dominant industrial power in the world by a long chalk and her exports were more or less guaranteed to sell in foreign markets.
Before Britain dropped her old colonial protectionist system in the mid 19th Century, she had industrialised in the modern sense from scratch and expanded her GDP massively. Perhaps most impressively she had managed to continue to largely feed herself without the price of corn going sky high, despite the fact that the UK population almost doubled between 1801 (the first Census) and the repeal of the Corn Laws in 1846.
As described above, Britain’s experience during her most committed “free trading” period was one of declining market share and commercial and industrial dominance while rigid protectionists such as Germany and the USA experienced massive growth. Of course, Britain could not hope to remain so dominant but her decline was remarkably rapid. In 1870 Britain was the richest country by GDP in the world: by 1914 both Germany and the USA had larger GDPs. Moreover, by religiously adopting open markets, for capital as well as goods and services, Britain seriously distorted her economy. Vast capital exports resulted in underinvestment in Britain and foreigners manufacturers and traders took full advantage of Britain’s open doors. The result was that by the Great War in 1914 her farmers were on their knees and modern industries such as the chemical and pharmaceutical were sadly undeveloped because of foreign competition (this distortion of the economy was soon to be a great national embarrassment during wartime when many industries were found to be inadequate to replace imported goods).
Here is a German voice from 1913: “By its free trade policy England has been more useful to us than its numerous political machinations have been harmful to us. Where would our sugar industry – one of the first items to help us in our economical rise – have been today, or our textile and iron industries, had it not been for the free markets of England? Nowhere: we should have been entirely without our new German capital, our financial resources. On the back of free trade England we grasped at and secured our economical world-power….Industrial and political supremacy go together. Warships are machines, and the nation which succeeds in attracting the centre of capital is the nation that can afford to build most. The present rulers of England represent the fourth generation of dictators to the world. It will not be easy for them to give up the role of ‘primus inter pares'”. (Prof von Schulze-Gaevernitz quoted – p347 -in The fall of protection 1840-50 by Bernard Holland)
Britain limped on with “free trade” after the Great War until 1931 when the secular religion was abjured, at least temporarily, during the Great Depression. Although unemployment remained high by historical British standards until WW2, the British economy behind protectionist barriers recovered quickly compared with most of the rest of the world. Most interestingly, the newer high-tec industries such as the motor, chemical and electrical recovered and grew fastest following their protection.
From 1945 to the mid eighties of the last century at least, Britain continued in an essentially protectionist system, as did the rest of the world. The world economy grew strongly during the period despite the protection. Even within the EU the “free market” mania did not really get under way until the Single European Act of 1985.
It is true that since protectionist barriers have come down over the past 20 years economic growth has been strong in the First World, but then it has been strong behind protectionist barriers and, indeed, with state direction of the domestic market. Germany under Hitler in the 1930s recovered amazingly quickly, despite the fact that the Nazis pursued an economic course which was probably as close to autarky as it is possible for a major modern state to bear. Imports and exports were regulated according to what was perceived to be necessary to make Germany strong through self-sufficiency. What Hitler did not do was attempt to run industry directly. Instead, the Nazis allowed private enterprise to run commerce and industry whilst directing what was produced and supplied.
All that tells us three things: that “free trade” is not necessary for rapid economic growth, that state regulation of the domestic market and international trade is not a recipe for disaster and that being a “free trader” when the rest of the world is not reciprocating is a mug’s game.
11. Is society materially enriched by “free markets” and “free trade?
This is an impossible question to answer categorically because there is no way knowing what would have happened if protectionism had remained full blooded throughout the last century and a half. One can compare growth rates under stronger or looser protection regimes, but they really say little because the other determining factors such as public expenditure have varied so greatly. These variables also blur judgement about the comparative merits of controlled and “free” domestic markets.
The most certain thing one can say from the economic experience of the developed world is that governments running commercial industries such as coal and steel directly is generally a mistake. (Governments are the natural suppliers of universal services such as healthcare only because private provision of such things is never adequate.)
What is certain is the fact that the material effects of “free trade” are far from uniform. It is no consolation to those who suffer along the way that others may benefit from their disadvantage. The next generation or the generation after that may be richer but why should their benefit be brought at the cost of disadvantaging a prior generation? Certainly no politician or political party standing at an election would dare to do so on a platform of “we shall make many of you poorer to make future generations richer.” Those living at any point in time have their own moral context and needs.
The constant economic turmoil caused by “free trade” and its inevitable concomitant, the supranational corporation, undeniably leads to circumstances which greatly disadvantage large swathes of the population in the First World through the removal of First World jobs to the rest of the world. At worst, these people become the perpetual victims of structural unemployment (try getting a job in an area where the main employer closes and you have no scarce or easily transferable skills or you are middle-aged or, indeed, try opening a new business or becoming self-employed in a depressed economy): at best they are driven into ill-paid and uncertain employment.
12. What is meant by material enrichment? Britain as a case study
The assumption is that the material conditions for most have improved considerably over the past two hundred years. Any economics textbook will plot economic improvement in terms of rising real wages. But those supposedly rising real wages are based on measures which are often questionable, incomplete or derived from very narrow data such as corn prices. Even modern measures such as the Retail Price Index (RPI) are not static, their content and weighting being regularly revised. Nor do such measures fully represent the true costs of necessities, the most notable distortion in Britain being the failure of the Retail Price Index (and its successor index the Consumer Price Index) to reflect housing costs fully. Any comparison between different times based on such measures needs to be treated with caution.
Of course no one in their right sense would question whether there has been massive material advance in the past two centuries. A more interesting question in our context is whether most people are materially better off now than they were in 1960s, by which time a fully fledged welfare state was bedded in, housing, both owned and rented, was reasonably priced, social housing was being built in massive quantities, university education was not merely free but students subsidized with grants, unemployment was tiny and inflation low.
Today the welfare state is constantly under attack by the British political elite and in some areas such as NHS dentistry already seriously inadequate, while the state pension is much reduced as a fraction of the average wage following two decades of increases linked to the cost-of-living pegging rather than increases linked to the average national wage.
Housing of all sorts in most parts of the country is presently absurdly costly and social housing is greatly reduced through Right-To-Buy and minimal new building since the 1980s.
The cost of university education is rocketing and grants are a distant memory.
Unemployment remains high today (2005) even by the official figures – approximately 950,000 by the claimant count and around 1.5 million by the most widely used international measure – figures which most probably severely understate the real unemployment level because it ignores the considerable disguised unemployment within the 2 to 3 million people currently on long term sick benefit payments (the 1980 figure for such people was 600,000). The increase in those staying on at school after the age of 16 and going on to university has also reduced the present figures by taking hundreds of thousands out of the jobs market for years. From 1945 to the late seventies unemployment never rose above a million on the official claimant count and for most of the time was considerably lower even with little disguised unemployment and far fewer people staying in education after the school-leaving age (which was only 15 until the mid sixties).
There are other fundamental social changes which bear upon the material state of the nation. Many more people today have to travel long distances to work than they did forty or fifty years ago. That is costly both in terms of fares and time. More generally, it is increasingly difficult for someone on the average wage to support a family on that wage. That often means both parents have to work not from choice but necessity.
Taxation bears much more heavily on the poorer part of the population now than it did in the past. Direct taxation – income tax, national insurance, inheritance duty – applies to many more people now than it did in 1960, primarily because a failure to maintain personal allowances and tax bands at a reasonable level. Direct taxation is also broader in scope, for example VAT compared to purchase tax. Such taxation takes proportionately more of the income of the poor than the rich.
It is a moot point whether overall people are generally materially better off than they in 1960. They may own more trinkets such as TVs and computers and some imported goods such as clothes may be at least much cheaper, but those are small advantages to set against the great increase in housing costs and commuting fares and the diminishment in social provision. Doubtless a section of society has benefited, but it would be a brave man who wanted to argue that the condition of the vast majority has improved, especially the poorest third of the population.
Many will read this with astonishment, saying but we have so much more today, dazzled as they are by the many new products. It is important not to confuse technological advance with “free markets” and “free trade” or general material wellbeing. People are undoubtedly better off in 2005 in terms of being able to purchase such things as cars or electronic goods then they were in 1960. But people in 1975 were also better off in those respects than those who had lived fifteen years before. That improvement was long before “free markets” and “free trade” had become the elite ideology. It is worth adding that new products often result in additional expenditure regardless of whether the individual really wants the product – any product which becomes widely used is difficult to resist. Technological innovations are particularly prone to induce reluctant purchases.
13. How the market fails to provide what the customer wants
There is no better modern example of the market failing to provide what the customer both needs and wants than the computer industry. If it was driven by the customer, the computer industry would produce hardware and software which was easy to install, had continuity of use, was simple to use and was supported by adequate help lines and manuals. The industry signally fails to do any of these things.
Hardware and software are of course purchased in ever greater volume and computer services, including maintenance, continue to swell. But that is not an indication of customer satisfaction. Rather, it is simply a reflection of how computers have become an inescapable part of our lives, not only as obvious computers but also in the guise of so many of the other machines we use – everything from phones to intelligent clothes. Business and public administration have become so dependent on their use that they cannot do without them. That being so, whatever is on offer, however unsatisfactory, is bought out of sheer necessity. The computer companies have the modern world over a barrel.
It might be objected that although most people cannot completely escape computers at their work, they do not have to bring them into their private lives. Yet increasing numbers buy computers for private use.
Why do they do that if the machines are so unreliable and demanding? Simple: once a significant minority have private computers and business uses them very widely, it becomes very difficult for the rest to resist, not least because businesses and government increasingly require those dealing with them to do so by computer. But there are other pressures as well.
We have long passed the point where a handwritten document is likely to be read by most people in business unless it is an order or payment. Now, except between social contacts, everything must be word-processed to be acceptable. A word processor or access to one has become a sine qua non for anyone who wishes to be taken seriously. Even amongst private individuals a letter is increasingly seen as unusual or even quaint.
With emails, we have not come to the stage that telephone ownership reached a quarter of a century ago when not to have a phone became considered eccentric, but we are rapidly moving towards it.
Employers increasingly wish to contact employees by email wherever they are and this means the choice is often between having a computer and email at home or not having a job.
Those with school age children, whatever they think of computers, find it next to impossible to deny their children not only a computer but access to the internet, both because the children want it to match their peers and because they have been brainwashed into believing that a computer is essential.
In short, people are increasingly being driven to become computer owners and users not because they actively want to, but because they feel isolated and excluded if they remain computerless. Again, as with the analogy between telephones and emails, within the foreseeable future, someone without a computer is in danger of becoming in the eyes of the majority as much as an oddity as someone without a TV is now considered.
14. Relative poverty, wealth and power
Even if most people or even all people were in absolute terms better off as a consequence “free trade”, that does not mean that their general situation has improved in power terms.
Wealth is not merely an advantage for what it can directly buy but also for the power it brings. The poor are doubly disadvantaged by their poverty by their restricted ability to purchase what they want and their subordination to those who can purchase anything they desire. Consequently, the ordinary man or woman may well be happier and freer in a society which is materially poorer overall but which is less oppressive through the absence of great differences in wealth. Charles Darwin in the Voyage of the Beagle describes a port in South America which suffered an earthquake while the Beagle was there in harbour. The town attached to the port was virtually destroyed and its inhabitants were reduced at least temporarily to the same material level. Darwin noted the happiness, almost gaiety, of the population after this happened.
The example of Britain is instructive when it comes to relative wealth. Until the 1970s inequalities in wealth were narrowing. Despite all the puffing of the “trickle down” of wealth which supposedly results from Thatcherite “free market” practices, wealth distribution has not changed dramatically over the past quarter century of “free market” policies by successive British governments.
A Royal Commission (1976-79) on the distribution of income and wealth found that in 1976 the top 1 per cent of the population owned 25% of all personal wealth, the top ten percent raked in 60% and the bottom eighty per cent had a measly 23% (Penguin Dictionary of Sociology p72). The Inland Revenue figures for wealth distribution in 2002 are show the top 1 per cent own 23% of national wealth and the bottom fifty per cent of the population have a staggeringly small 6% (Office of National Statistics (ONS) website – published 2004). Those figures, eye-opening as they are, conceal the fact that wealth inequality in 2002 would be much greater than 1976 were it not for the increase in home ownership and the rise in house prices.
Another ONS report (2005) entitled “The long shadow of childhood” (TLSOC) based on research by the London School of Economics concludes that there has been remarkably little change in social mobility in Britain over the past 30 years. The study was based on census records between 1971 and 2001.
TLSOC also demonstrated how the social and economic status of children is very much tied to that of the parents. For example, more than two thirds of those with parents in professional or managerial jobs managed to take a degree: of those with semi-skilled/unskilled parents, 14 per cent had a degree.
15. Man does not live by bread alone
Even if the “free traders'” claims of an overall increase in the wealth of a society were true, there would still be strong arguments against the policy because a society is more than its crude economic relationships.
Human beings do not like too much uncertainty. A certain amount of stress is good for them, but only so much. Like masochists and physical pain, human beings are comfortable with stress only in so far as they feel it is within their control. Manifestly, for many people the uncertainty they experience is utterly outside their control. This widespread insecurity leads not merely to individual suffering but damages the social fabric by generally diminishing confidence in the future and the ability to cope in the here and now.
A 2005 study (Molly Watson Western Mail 31 9 2005) by a Cardiff University Department of Psychology team led by Prof Aylward Mansel suggests that the general level of happiness in the Depression was greater than it is now (the team analysed data from surveys of assessing happiness and contentment from the past 70 years.) This conclusion might seem absurd to most people living today who, if they have any conception of the Depression, it is one of a dire time packed with the most horrendous stress. Yet the findings of the report have a certain plausibility because in the 1930s there was undoubtedly a greater sense of social solidarity, especially amongst the working class, than there is now and civil society was far stronger then – the working class not only lived in close-knit communities which offered support to those who fell on hard times, but they were woven into supportive institutions such as the co-operative movement and unions. They were anything but socially isolated whereas today people are often isolated. Social involvement, the Cardiff University study found, was the single most important cause of happiness or unhappiness.
One must be cautious with such studies because however scrupulous the researchers a degree of subjectivity is inevitable. Nonetheless the equation of isolation with unhappiness will, I think, strike a strong chord with most.
There is also the question of a people’s self-confidence. If a nation’s visible and everyday manufactures are predominantly foreign, it tends to produce a sense of dependence in the individual. A man looks around and can find next to nothing he can identify as produced either in his own country or made by companies owned by his countrymen. Not unnaturally he begins to lose confidence in the ability of his own country to stand alone. Peoples throughout history have allowed themselves to be conquered simply because they believed themselves to be generally inferior to those who confronted them and slaves have been routinely controlled by owners who deliberately attempted to reinforce their sense of inferiority.
16. Geopolitics
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.
17. The democratic deficit
“Free trade” emasculates democracy. It does this by confining politics within narrow limits. The present “free trade” agreements mean that no political party can easily stand on a platform of extending state intervention, whether by nationalisation, trade restrictions such as embargoes or the subsidy of its own industries. A party which wished to do any of these things could of course propose to withdraw from the treaties, but that would be in practice a very difficult course to follow, especially where the treaty obligations go beyond mere trade such as those involved in membership of the European Union.
Loss of democratic control is obviously to the disadvantage of the masses. However, it also has implications for competition. The prevention of the formation of monopolies and cartels can be done at the national level, but it is impossible when companies become supranational. You offend against America’s anti-trust laws? No problem, you remove your manufacturing abroad to countries which are happy to have you (or at least their clients are) regardless of what arrangements you may have made with competitors or the any monopoly position.
18. Does “free trade” increase competition and choice in the long run?
In the industrialised world at least, the experience of less restricted trade since 1945 is that competition has reduced not merely in the capital intensive industries and occupations but in those which are not obvious. The numbers of farmers has greatly contracted, but so have the number of storekeepers as chain stores and supermarkets have overwhelmed the individual proprietor. In fact, it is difficult, perhaps impossible, to find a mature field of economic activity, that is , one which has not sprung up since 1945, which has not displayed reduced competition within the post-war period.
Some of this reduction in competition is simply due to the working of the domestic market towards monopoly, for example, the growth of chain stores, but much of it is directly related to the removal of protection for First World economies.
It is true that large parts of the world have industrialised and increased the number of international competitors, but the overall number of businesses in the developed world has been reduced. multinationals control much of the economic activity of the Third World and, in some industries, dominate the national markets of the First World.
The car industry is a wonderful example of the squeezing of competition. All over the world car companies are being taken over by the giants and many car companies which do exist rely on state aid and favours. The number of companies now being small (and becoming smaller) compared with the number even 40 years ago. Moreover, many of the car companies which do still exist do so only because of state subsidy and protection.
Other traditionally important industries where competition is greatly reduced are aerospace, aviation, shipbuilding, oil, chemicals, steel and farming.
19. The reality of our economic circumstances
What we have does not even fall within the arbitrary and narrow definitions of “free markets” and “free trade” which most of their adherents espouse. 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 affected 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.
20. Why elites are so keen on “free markets” and “free trade”
“I just think that a lot of modern corporate capitalists — the managerial class basically — has no loyalty to any country anymore, or any particular values other than the bottom line.” (Pat Buchanan quoted by Daniel Brandt in his article “Class Warfare” in issue 13 of Namebase Newsline -http//www.namebase.org/news13.html).
Buchanan is grasping a demon which he only dimly apprehends. What is happening is vastly more significant. We are presently witnessing the creation of an international class of plutocrats who care for nothing but their own class. They have the potential to form a true international aristocracy. If that happens, the imperfect democratic control the masses have been able to exert over their elites in the past century will end. The prime tool for the creation of such an international aristocracy is “free trade”.
There are parts of Western elites which are more or less reluctant to embrace “free markets” and “free trade”, but the general economic trend is clear: the internationalist, globalist creed is the dominant philosophy when it comes to trade and increasingly the idea of “free markets” in the domestic sphere is being accepted in practice if not in overt political policy.
Why have these elites moved from their previous socially oriented nationalism to internationalism? The answer to this question reveals the nature both of elites generally and the particular philosophy they currently support.
In most circumstances throughout history the wishes of the mass of a population have been of little or no account in any formal sense. The masses made their presence felt through rioting and social disturbance or as pawns in the service of elite members who wished to rebel. An elite took note only when they were frightened enough – the creation of a form of national public assistance by the Poor Law of 1601 is a classic example of such behaviour.
Eventually, representative government evolved to the point where the masses began to have a direct say in the political process through the vote. The elite as a group did not welcome this but felt it could not be resisted. It was not democracy to be sure but elective oligarchy, which was buttressed by elite constructed devices to exclude new entrants into the political process such as first past the post voting, election deposits and a very strong party system. Nonetheless, once the franchise was broadened the masses were able to exercise a large degree of democratic control because politics was still national and a political party had to respond to the electors’ wishes. The elite resented this control over their behaviour as all elites do and looked around for a way to diminish democratic influence. They found the means to do it through internationalism.
In a sovereign country elected politicians cannot readily say this or that cannot be done if it is practical to do whatever it is. That is a considerable block on elite misbehaviour. So elites decided that the way round this unfortunate fact was to commit to treaties which would remove the opportunity for the electorate to exercise control. The most notable example is the Treaty of Rome and the subsequent treaties which have tied Britain into the EU.
Vast swathes of policy are no longer within the control of the British Parliament because of these treaties. Add in the treaties tying Britain to the UN and the WTO and the commitment of every mainstream British party to them, and democratic control has essentially gone.
But internationalism is not simply a bureaucratic elite device to weaken democratic control, it is a sociological event in itself. An elite thinks of itself as a separate group, a group which may in some circumstances extend beyond national boundaries and jurisdictions. The medieval aristocracies of Western Europe thought themselves part of a chivalric whole. When Charles I of Egland was executed in 1649 the monarchs of Europe were horrified because they thought it would set an example for other royal killings.
The ruling elites in the First World today have a class interest which binds them more closely to one another than to the people they rule. Indeed, there is arguably a greater sense of international elite solidarity than ever before. This is because modern communications allow people, goods and ideas to move with an unmatched ease. Because of this the international class can constantly revitalise and extend their group solidarity.
The advantage to the elites of this culturally based international solidarity underwritten by many personal elite relationships across national boundaries, is that it allows them to weaken even further their dependence upon their immediate (native) populations, because not only does a particular national elite have a ready made excuse for not doing something – our treaty obligations will not permit it – but the personal relationships and the growing sense of class solidarity increases the confidence and hence the willingness of the various national elites to act ever more in the international elite class interest.
Indeed, the more they are together and the more they act together, the more natural it will seem.
It is important to understand that elites are not engaged as a group in a conscious conspiracy against the masses. What happens is that the psychological and sociological forces which press upon us all lead the elite to adopt policies which always lead to their retention of power. It is not difficult to see how this happens.
All human beings have a powerful ability to write a narrative in their heads which will persuade them that they act not from self-serving or disreputable reasons but honourable and socially useful ones. The consequence of this is that while individual members of an elite will consciously comprehend the likely effect of their ideology, the majority will simply accept their ideology at face value. This helps to bolster and stabilise the elite’s position because no elite ideology ever overtly states that the masses will be disadvantaged if the ideology is followed, and in the case of formal democracies, the ideology positively claims to materially better society as a whole. This will emotionally reassure most elite members, who will bolster their acceptance of the ideology through inter-elite conversations – if most or all those in a group are positive about something, that is most powerful social reinforcer.
21. A sane alternative to globalism
Economic history suggests that the most effective general strategy to promote economic development in a country is to allow competition within the domestic market (where it does not create serious social discord) whilst regulating international trade through protectionist measures sufficient to maintain the general capacity of a country to point where it can maintain itself in an emergency such as war or blockade and be sovereign in most circumstances.This would require the judicious use of embargoes, tariffs and quotas to ensure that all the vital industries remain as a presence in Britain.
A few industries should be in principle wholly supplied from the British market. These are defence equipment and the various energy sources. The reasons for defence equipment provision being domestic are simple: any foreign supplier can cease to supply goods for political reasons or simply be unable to produce the goods when wanted at all or in sufficient quantities.
Energy supplies should be domestic because if they fail the whole of society is brought to a halt. Self-sufficiency in energy in any advanced country could be achieved in the medium term by nuclear power supplemented perhaps by new sources of energy such as wave and current power and bio-fuels.
A country should also build up a stockpile of essential materials such as metals and the minerals used in the chemical industry. Five years national supply should be a minimum.
A country should be able to feed its population from its own production at a pinch. In Britain this is possible with modern crop yields and animal husbandry. Crop yields are considerably greater than they were even in WW2 and the opportunities for increasing the volume of animal products have multiplied greatly over the past 60 years, for example, in the massive development of poultry farming since 1945.
75% of the market in every other vital industry should be reserved for the domestic market. What is a “vital industry”? Try these for starters: metal (especially steel), chemical, biotech, computers, robotics, motor vehicles, shipping, aerospace, clothing, building, machine tools.
I would also reserve to domestic production at least 25% of the market for goods that are useful but not vital to provide a base for an expanded home production in times of emergency. Trade in wholeheartedly nonessential goods – Christmas trees, pogo sticks and suchlike – could be “free”.
I am not arguing for autarky. What I am advocating are trading circumstances which allow a nation to defend its national interests, particularly in time of war or international crisis. The measures I propose would produce self-sufficiency in food where necessary, the maintenance of the ability to manufacture a complete range industrial goods and most importantly the maintenance of an arms industry which can produce a full range of weapons necessary for the defence of the country.
Such a system would provide the security the state requires and permit very substantial international trade even in essential goods.
Obviously such a regime could not be followed in its entirety by most states. However, all could exist within those parts of it suited to their circumstances, for example, Britain could manage the entire regime, many third world countries could be self-sufficient in food.
22. “Free markets” and “free trade” as a religion
Free marketeers fancy themselves to be rational, calculating beasts. In reality, their adoration of the market is essentially religious. They believe that it will solve all economic ills, if not immediately, then in the medium to long term. Armed with this supposed objective truth, they proselytize about the moral evils and inefficiencies of public service and the wondrous efficiency and ethical outcomes of private enterprise regardless of the practical effects of their policies or the frequent misbehaviour of those in command of large private companies. Their approach is essentially that of the religious believer.
Like the majority of religious believers, “free marketeers and traders” are none too certain of the theology of their religion. (I am always struck by how many of them lack a grasp of even basic economic theory and are almost invariably wholly ignorant of economic history). They recite their economic catechism sublime in the concrete of their ignorance.
The religion has its roots in the first half of the 18th century when there were occasional attempts to suggest tariff reform, but the idea only became a serious political policy in the 1780s with the advent of Pitt the Younger as Prime Minister in 1784 who long toyed with “economical reform”.
The 18th century also provided the religion with its holy book, The Wealth of Nations by the Scottish philosopher and economist Adam Smith. This strongly argued for “free markets” and “free trade”, but Smith also recognised the demands of national security, the need for government to engage in social provision such as road building and maintenance which would not otherwise be done and, must importantly, the nature of a society and its economy. Here is Smith on the Navigation Acts: “…the Act of Navigation by diminishing the number of buyers; and we are thus likely not only to buy foreign goods dearer, but to sell our own cheaper, than if there were a more perfect freedom of trade. As defence, however, is of much more importance than opulence, the Act of Navigation is, perhaps, the wisestof all the commercial regulations of England.” (Wealth of Nations Bk IV. ch ii)
But Smith and his book suffered the fate of all those who found religions, secular or otherwise. As the decades passed Smith’s cautious approach was redrawn in the minds of his disciples to become a surgically “clean” mechanical ideology in which all that mattered was the pursuit of profit and the growth of trade and industry through the application of the “holy edicts” of open markets and comparative dvantage. The disciples, like other religious believers, avidly quoted the passages from their holy book which suited their purposes and ignored those which did not. They also found a further holy text in homas Malthus’ Essay on Population of 1802, whose predictions, although unproven by events, could be used to demonstrate that economic expansion was vital if widespread starvation was not to occur.
The clinical, soulless and inhuman nature of the laissez faire idea as it evolved is exemplified by the English economist David Ricardo. Here is a flavour of his mindset: “Under a system of perfectly free commerce each country naturally devotes its capital and labour to such employments as are most beneficial to both. The pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most economically, while increasing the general mass of the production it diffuses general benefits, and binds together by one common tie of interest and intercourse the universal society of nations”. (David Ricardo in The fall of protection p 174).
The Napoleonic wars largely foiled Pitt’s wish for broad reform and placed “free trade” in suspended animation as a serious political idea until the 1820s, when cautious attempts at tariff reform again were made. But underneath the political elite was a radical class who were very much enamoured of wholesale economical reform. With the Great Reform Act of 1832 they were given their opportunity to become part of the political elite. They took it with both hands, their most notable and extreme proponents being John Bright and Richard Cobden backed by the intellectual power of David Ricardo – all three became MPs.
Within a dozen years of the first election under the Great Reform Act’s passing, Parliament had been captured by the disciples of Adam Smith and the pass on protection had been sold by of all people a Tory prime minister, Sir Robert Peel, an action which kept the Tories from power for most of the next 40 years.
Such was their religious credulity that the “free traders” advocated not merely opening up Britain’s markets, both at home and in the colonies, to nations who would allow Britain equivalent access to their markets, they advocated opening up Britain’s markets regardless of how other nations acted. The consequence was, as we have seen, disastrous for Britain.
Disraeli in a speech on 1st February 1849 cruelly dissected this insanity:” There are some who say that foreigners will not give us their production for nothing, and that therefore we have no occasion to concern ourselves as to the means and modes of repayment. There is no doubt that foreigners will not give us their goods without exchange for them; but the question is what are the terms of exchange most beneficial for us to adopt. You may glut markets, but the only effect of your attempt to struggle against the hostile tariffs by opening your ports is that you exchange more of your own labour each year for a less quantity of foreign labour, that you render British labour less efficient, that you degrade British labour, diminish profits, and, therefor, must lower wages; while philosophical enquirers have shown that you will finally effect a change in the distribution of the precious metals that must be pernicious and may be fatal to this country. It is for these reasons that all practical men are impressed with a conviction that you should adopt reciprocity as the principle of your tariff – not merely from practical experience, but as an abstract truth. This was the principle of the commercial negations at Utrecht – which were followed by Mr Pitt in his commercial negotiations at Paris – and which were wisely adopted and applied by the Cabinet of Lord Liverpool, but which were deserted flagrantly and unwisely in 1846″. (The fall of Protection pp 337/8″).
Ironically, the “free traders” make the same general errors as Marxists. They believe that everything stems from economics. For the neo-liberal the market has the same pseudo-mystical significance that the dialectic has for the Mar ist. Just as the Marxist sees the dialectic working inexorably through history to an eventual state of communism (or a reversion to barbarism to be exact), so the neo-liberal believes that the market will solve any economic problem and most social ills. Neither ideology works because it ignores the realityof human nature and its sociological realisation.
The one track economic mentality of the early “free traders” is well represented by the father of J S Mill, James Mill:”The benefit which is derived from exchanging one commodity for another arises from the ncommodity received rather than the from the commodity given. When one country exchanges, or in other words, traffics with another, the whole of its advantage consists of the in the commodities imported. It benefits by the importation and by nothing else. A protecting duty which, if it acts at all, limits imports, must limit exports likewise, checking and restraining national industry, thus diminishing national wealth.” (The fall of protection p 174). And to Hell with any social or strategic consideration or changing economic circumstances.
After the Great War and the fall of “free trade” as public policy in 1931, the religion went underground for nearly fifty years. When it re-emerged as a political idea in the 1970s the politicians who fell under its spell were every bit as unquestioning and credulous as those of the 1840s. Tony Blair’ statement on Globalisation, ie, free trade, at the 2005 Labour Party Conference shows that it is alive and kicking today.
Scorning any attempt to discuss Globalisation, Blair said of those who wished to oppose it “You might as well debate whether autumn should follow summer”. (Daily Telegraph 1 10 2005.)
None of this would matter very much now if those who believe in “free markets” and “free trade” were without political power. Unfortunately, theirs is the elite ideology of the moment and the past 25 years. In Britain, the Tories may be more fanatical in their devotion to the market as panacea, but Blairite Labour have caught more than a mild dose of the disease. A good example of this is their response to house price hyperinflation where they desperately and futilely attempt remedies within the constraints of what they perceive to be “free market” disciplines rather than opting for the obvious state generated remedies such as restricting immigration, building a great deal of social housing and forcing developers to release land for building.
Both the traditional Left and Right have been duped by globalisation. The Left initially welcomed globalisation as a dissolver of national sovereignty, but they are discovering by the day just how restrictive international treaties and membership of supra national groups can be. As things stand, through our membership of the EU and the World Trade Organisation treaties, no British government could introduce new socialist measures because they cannot nationalise companies, protect their own commerce and industry or even ensure that taxpayers’ money is spent in Britain with British firms. A British government can have any economic system they like provided it is largely free trade, free enterprise.
The Right are suffering the same sickness with different symptoms. They find that they are no longer masters in their own house and cannot meaningfully appeal to traditional national interests because treaties make that impossible.
But there is a significant difference between the position of the two sides. The traditional Right have simply been usurped by neo-Liberals in blue clothes: the traditional Left have been betrayed by a confusion in their ideology which has allowed their main political vehicles to be surreptitiously by the likes of Blair.
The left have historically objected to “free-trade” on the grounds that it destroys jobs and reduces wages. But what they (and especially the British Left) have rarely if ever done is walk upon the other two necessary planks in the anti-“free trade” platform: the maintenance of (1) national sovereignty and (2) a sense of national cohesion. The consequence is that the Left has been and are still struggling with two competing and mutually exclusive ends: internationalism and the material improvement of the mass of the people.
23. An elite ideology
The best way of judging any political ideology is to ask cui bono? (who benefits?) The obvious answer in the case of “free markets” and “free trade” are those who believe (with good reason) that they nor their dependants will never be amongst those who will suffer the ill-effects of free trade. These people are and will continue to be overwhelmingly drawn from the middle and upper classes for the same reasons that such classes have always maintained their superiority, namely that such people will have inherited wealth, social connections and superior opportunities for education which are denied to the majority.
The new international elite is neither left nor right. Its ideology is simply designed to promote the interests of the elite. It has aspects of right and left, but they are merely the policies which allow the elite to both disguise their true intention and to give a pseudo-moral camouflage to their ends. They speak of the internationalist equivalent of “motherhood and apple pie” with exhortations to “end world poverty” and fund a “war on disease worldwide”. If I had to find a term to describe this elite I think I would settle for neo-Fascist because so much of what is proposed is reminiscent of fascism.
It is also telling that Western businessmen who ostensibly support the idea of the positive effects of competition arising from “free markets” and “free trade” never want it for themselves. They always happily grab a state subsidy or an embargo if it is to their advantage. None of the US airlines had any hesitation in grabbing billions of dollars from the Federal government after 911. Large companies publicly complain of government regulation while secretly welcoming it because they can bear the cost of it more easily than their smaller competitors. Multinationals shamelessly play one country off against another in their search for massive subsidies and other favours before they deign to operate in a country.
Countries play the same game, cheating wherever they can. And the more powerful the state the greater the cheating, both in terms of helping particular industries with direct state aid and in the formulation of the treaties governing world trade. Hence, the USA presents itself as the ultimate champion of free enterprise whilst being both now and throughout its history one of the greatest of protectionists and state subsidisers of its industries – that it is seen widely as an enterprise society is one of the great propaganda triumphs of history. Its behaviour after 911 is symptomatic of the unequal nature of modern “free trade”.
The US not only handed, as mentioned above, billions to its ailing private airlines, but put up protective tariffs to protect its steel produces.
It was ever thus. The two greatest names of the early Industrial Revolution, Josiah Wedgewood and Matthew Boulton, were happy to climb on the Enlightenment bandwagon with its beliefs in the universality of Mankind and advocate lesser tariffs and freer trade -until the proposed freeing threatened their own businesses.
What goes for businessmen goes for the individual worker. Who has ever met someone whose job was threatened by “free trade” speaking in favour of it?
Abe Lincoln’s used to put this question to pro-slavers who said slavery was a boon for the slave because they were provided for and were free of normal responsibilities: “What is this good thing that no one wants for himself?” An equivalent question should be put to the “free traders”.
The truth is simple: “free markets” and “free trade” are simply part of an elite ideology and like all elite ideologies they serve the purposes of the elite first, second and last. Those not of the elite who espouse it act merely as useful idiots to promote the interests of the elite.
Opposition to globalisation should not be a Left or Right issue. The socialist and the Conservative should both resist it because it removes the ability of the electorate to control those with power and the power of their political movements to realise their ends.
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Living In A Madhouse 