« How to tell apart trade agreements that undermine democratic principles from those that don't | Main | Scholars' letter of support for Ricardo Hausmann »

October 22, 2016



Amen brother...amen !

George H. Blackford

It is not free trade, as such, that is the problem. The problem is unregulated capital flows that lead to trade deficits and the accumulation of foreign debt in exchange for increased consumption.

For a country to accumulate foreign debt as it runs a persistent trade deficit is not, in itself, a bad thing. The United States followed this course throughout the nineteenth century and into the twentieth. But throughout that period we used that debt to import capital goods and foreign technology. We invested in public education and other public infrastructure that led to tremendous increases in productivity in agriculture and manufacturing. We built national railroad and telegraph systems and created steel, oil, gas, electrical, automobile, and aviation industries. Our trade policies protected our manufacturing industries as our economy grew more rapidly than our foreign debt, and as Europe squandered its resources in senseless conflicts, by the end of World War I the United States had become a net creditor nation and the economic powerhouse of the world.

This is not the course we have followed over the past forty years. We have exported rather than imported capital goods and technology, and, in return, we borrowed to import consumer goods. We invested less rather than more in our public education, transportation, and other public infrastructure systems than other countries have invested. While we made huge advances in the electronics and computer industries over the last forty years, our trade policies have not protected our manufacturing industries, and we have outsourced the manufacturing and technological components of these industries to foreign lands. As a result, our economy is not growing more rapidly than our foreign debt, and it is the United States that is squandering its resources in senseless conflicts.

I find this passage from Hobson to be rather prophetic in trying to understand the situation we find ourselves in today:

"Free Trade can nowise guarantee the maintenance of industry, or of an industrial population upon any particular country, and there is no consideration, theoretic or practical, to prevent British capital from transferring itself to China, provided it can find there a cheaper or more efficient supply of labour, or even to prevent Chinese capital with Chinese labour from ousting British produce in neutral markets of the world. What applies to Great Britain applies equally to the other industrial nations which have driven their economic suckers into China. It is at least conceivable that China might so turn the tables upon the Western industrial nations, and, either by adopting their capital and organisers or, as is more probable, by substituting her own, might flood their markets with her cheaper manufactures, and REFUSING THEIR IMPORTS IN EXCHANGE MIGHT TAKE HER PAYMENT IN LIENS UPON THEIR CAPITAL, REVERSING THE EARLIER PROCESS OF INVESTMENT UNTIL SHE GRADUALLY OBTAINED FINANCIAL CONTROL OVER HER QUONDAM PATRONS AND CIVILISERS. This is no idle speculation. If China in very truth possesses those industrial and business capacities with which she is commonly accredited, and the Western Powers are able to have their will in developing her upon Western lines, it seems extremely likely that this reaction will result." Hobson,1902

Free trade is generally sold on the basis of comparative advantage with fixed endowments. There is little discussion of transferring capital in such a way as to equalize the return to labor and increase the concentration of income. When this sort of thing happens as a result of unregulated capital flows imbalances are created in the system that lead to economic, social, and political crisis. See, for example, http://www.rweconomics.com/htm/Ch_1.htm , http://www.rweconomics.com/htm/WDCh3e.htm , and http://www.rweconomics.com/LTLGAD.htm .

Damien Geradin

I fear that Dani's analysis is not entirely correct. The reason why the Walloon Region is trying to block or at least delay the CETA is political only. The Belgian federal government is run by the right wing whereas the Walloon Region is dominated by the socialists. The problem for the Walloon socialists is that there are losing ground to the extreme left. Hence, it is critical for them to show that they are fighting the CETA whose benefits would only to large multinational corporations. All this fuss about the CETA has thus to be seen in the context of Belgian politics. Belgium has an extremely open economy and exports much more than it imports. We are net beneficiaries of free trade.

john vos

As a Belgian resident, I second Damien's clarifications. The Walloon socialist party's resistance to CETA and TTIP has very little to do with what is at stake from an economic perspective. It's all about posturing, about trying (rather desperately) to take back votes from an increasingly popular communist party in the Walloon region. In short: it's motivated by politics, not economics. As has been noted in the Belgian press, the Walloon socialist party (SP) is happy to promote weapons export to Saudi Arabia (you guessed it: rifle producer FN is based in Wallonia). Trade agreements with Vietnam: no objection. But Canada, being close to the US, is a welcome target for anti-capitalist rhetoric.
And of course, that the federal Belgian government, political opponents to the SP, are embarrassed and outraged by Wallonia's veto, is a fine bonus.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.


Post a comment

Your Information

(Name is required. Email address will not be displayed with the comment.)