Free trade is a buzzing concept in modern times, with most governments across the world proclaiming to promote it. Indeed, the last thirty years or so of global economic integration is based on free trade principles – also referred to as laissez-faire capitalism. Definitely, there are many advantages to be availed as a result of free trade arrangements. At the same time, it also has its own set of drawbacks. One should also make discernment in what exactly ‘free trade’ means. This is because, often, politicians use the term for its rhetoric appeal while implementing policies that are protectionist. So, while free trade is beneficent in its purest form, modern policymakers have hijacked the concept to serve the interests of select private businesses at the cost of smaller business enterprises and the majority of the electorate. (Dunkley, 2004, p.53) The rest of this essay will look into how free trade, despite strong arguments in its favor, has not always been adopted in economic policy making.
It was by the start of 1970s that currents of change were detected in the global economic order, with nationalism and protectionism being replaced by neo-liberalism and free flow of capital. But there were also concerns that this new economic paradigm can lead to excesses and decadence. For example, the unsavory side-effects of free trade in this period includes “the appearance of a nearly feral form of entrepreneurship in which black marketers, drug barons, arms merchants, rackets bosses, Mafiosi, and other profiteers were emerging as the economic and political leaders of the social transformations underway in their respective societies.” (Buchanan, 2000, p.1) These developments acted as a disincentive for a few governments to draw up free trade policies.
Another reason why free trade practices are not uniformly accepted is due to the effect it has on workers and consumers. Some believe that under this system, workers become helpless pawns of their capitalist masters, compelled to sell their labor power at sub-optimal costs. The only theoretical alternative they have to evading this exploitation is to become destitute, which is a far greater misery. Multi-national corporations (MNCs), which are the facade of free trade, are perceived as coercing citizens to unwillingly participate in the capitalist market system, while also leaving consumers with no choice but to buy their products. (List, 1997, p.51) In the book titled Telling the Truth about History, author Joyce Appleby traces how MNCs came to be the dominant institutions of our age. Here, the author makes some scathing observations about the nature of capitalist enterprise that is the back bone of prevailing free trade systems:
“One of the distinguishing features of a free-enterprise economy is that its coercion is veiled. . . . The fact that people must earn before they can eat is a commonly recognized connection between need and work, but it presents itself as a natural link embedded in the necessity of eating rather than as arising from a particular arrangement for distributing food through market exchanges….” (Joyce as quoted in Levite, 2002, p.32)
The free-trade system is also criticized for promoting ‘wage-slavery’, whereby human beings are reduced to mechanical automatons as they go through the drudgery of work each day. Here too, the slavery is not so much express as it is veiled. Instead of use of violent force, the threat of employment and attendant destitution serves as the whip. (Levite, 2002, p.32)
While free trade has led to development in some countries, they have led to economic instability in others. This is another reason why free trade is treated with skepticism by some governments. What is most worrisome about free trade in the modern world is the vacuous nature of the term, as it is stripped of its substantive meaning. In other words, where there is conflict between the execution of this system in its ideal form and the consequences for major business corporations, it is always the interests of the latter that is looked after. This is nowhere more clearly visible than in the history of NAFTA (North American Free-Trade Agreement). The terminology can be a little deceptive here, for despite claims of being a ‘free-trade’ agreement, it has many protectionist provisions in it. A brief survey of the effects of NAFTA on the general population reveals that American, Mexican and Canadian elites have seen most of its benefits. Despite initial promise of creating more jobs for Americans, under the NAFTA regime many industries were moved to Mexico, due to cheaper labor there. (Ciccantell, 2001, p.57) The key long term goal for the U.S is not so much the establishment of free-trade practices in the neighborhood as it is to reconstruct its hegemony that was formerly seized by Japan and Europe. In the last two decades, the manufacturing sector in the United States has virtually collapsed, leaving tens of thousands of workers unemployed. Similarly, the effects of NAFTA can be partially attributed to the problem of illegal immigration from Mexico to the United States. A salient question at this point is whether such a steep social/national cost worth bearing for the sake of American hegemony? (Worth & Kuhling, 2004, p.31)
In this context, it is apt to say that global free trade arrangements have failed to lead to uniform development. It is for key failures in many human development areas that the doctrine of laissez-faire capitalism is not accepted without contestation. While there are obvious success stories like India, China and South East Asian bloc, much of the rest of the world has not benefitted. It is in response to these failures that the global solidarity movement has arisen, which protest the prevalent norms of free trade. Centered on universal human challenges like poverty-reduction, access to basic healthcare, free education for all children, social welfare for the disadvantaged, etc, the global solidarity movement presents an alternative operative framework to the United States led global capitalist project. In a few decades time, it is plausible that this more pragmatic form of social organization might have quelled American hegemony in economic, cultural and political domains and might have eliminated the need for economic globalization. (Zakaria, 1999, p.9) The brewing discontent with the excesses of capitalism has spawned a new ideological alternative – consistent with the Hegelian notion of the dialectic. This promising counter-current has Marxist underpinnings to it, but it would be simplistic to term it as a throwback to the failed experiment with communism or socialism. While retaining the essence of socialism, Third-World solidarity movement attempts to cater to humankind’s basic necessities in an atmosphere of co-operation and collaboration as opposed to exploitation. (Dunkley, 2004, p.53)
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Ciccantell, Paul. “NAFTA and the Reconstruction of U.S. Hegemony: The Raw Materials Foundations of Economic Competitiveness.” Canadian Journal of Sociology 26.1 (2001): 57.
Dunkley, G. (2004) ‘A Confederacy of Heretics: Two Centuries of Free Trade Dissent’, in Free Trade: Myth, Reality and Alternatives, Zed, London and New York, pp 48-62
Levite, Allan. “Capitalism and Coercion.” Ideas on Liberty Feb. 2002: 32+.
List, F. (1997) ‘Political and Cosmopolitan Economy’, in Crane, G.T. and Amawi, A. eds, The Theoretical Evolution of International Political Economy, Oxford, Oxford University Press, pp 48-54
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Worth, Owen, and Carmen Kuhling. “Counter-hegemony, Anti-globalisation and Culture in International Political Economy.” Capital & Class (2004): 31+.
Zakaria, Fareed. “The Challenges of American Hegemony, Then and Now.” International Journal 54.1 (1999): 9+.