Does free trade cause development?

Length: 1329 words

Free trade is a buzzing concept in modern times, with all 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 laizzez-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. The rest of this essay will look into how free trade causes development and also scrutinize the nature, merits and demerits of such development.

At the outset, let us take a look at the historical development of the idea of free trade. By the start of 1970s, currents of change were detected in the global economic order, with nationalism and protectionism being replaced by

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neo-liberalism and free flow of capital. Even as American elites promoted this new economic order, the process was facilitated by respective participant elites from nations across the world. The irony lies in the fact that communist China was also at the forefront of the global neo-liberal program, despite claiming its socialist credentials. If the ideological gates of the authoritarian and highly protectionist China could be broken open for free-market capitalism, then it was only a matter of time and strategy before other power bastions of the world are broken through. And this is precisely what had happened. With the collapse of the Soviet Union in the late 1980s and the shift in policy framework of several developing countries, the nature and complexion of geo-economics has taken a different form. Needless to say, America’s position as the sole superpower has been strengthened by this change. 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 are emerging as the economic and political leaders of the social transformations underway in their respective societies.” (Buchanan, 2000, p.1)

One of the criticisms leveled against free trade as it exists today is itsaffect 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. 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. Those who support free-trade capitalism, on the other hand, have a different take on the subject:

“As for employment, accepting the best (or only) offer available, as unattractive as it might be, is not the equivalent of slavery-a situation in which actual violence, or the threat of it, is used to compel people to labor without pay and without the option to seek other work. That circumstances limit one’s choices do not prove that one has neither the capacity nor the opportunity to choose, since everyone’s choices are limited.” (Levite, 2002, p.32)

There is copious evidence to support the view that global free trade has made major industrial cities across the world prosperous and well developed. In other words, free trade across nations can be credited for McDonaldization of the world, which can be seen as a sign of development. For example, the McDonald’s restaurant chain, which was started in the United States, is now ubiquitous in all major cities of the world. The same could be said about other major consumer brands such as Coca-Cola, Pepsi, Nike, Reebok, KFC, etc (Rogers, 2003, p.1184). On the flip side, the unique architectural style that is associated with different regions of the world is covered or replaced by displays of above mentioned brands, making the city lose its uniqueness and visual identity. This trend could be observed in capital cities of countries such as India, China, Taiwan, Thailand, Singapore, Bolivia, Venezuela, Chile and others (Rogers, 2003, p.1184). On the positive side, these developing countries also seem to have benefited from globalization in certain other ways. For example,

“During the early 1970s, more than half its population was defined as poor; average life expectancy was 48 years, and only 40 per cent of the adult population was literate. Today, the percentage of the poor has decreased to about one fourth of the population, life expectancy has increased to 65 years, and about 70 per cent of adults are literate. This unprecedented decline in poverty in Asia and the Pacific has been described as one of the largest decreases in mass poverty in human history. Of all the world’s regions, according to report, Asia also ranks lowest in almost all types of crime.” (Foreign Policy, 2008, 70)

India and China are key cases in studying the effects of free trade. With abundance of cheap labor, India and China are primed to assume leadership position in another 10-15 years. India has a huge pool of skilled workers who have the added advantage of proficiency in English language. The re-election of Manmohan Singh as the Prime Minister is also a positive development from an economic perspective, for it was he who initiated India as a participant in globalization in 1991 (Winters & Yusuf, 2007). China, on the other hand, started participating in the process of globalization much before India did. As a result, their economy is more than twice that of India and is catching up fast with that of the United States and Japan. Some of the South American countries such as Venezuela and Russia (rich in oil resources) and Brazil (rich in natural resources) also pose a threat to American domination of global economy. In fact, American media believes that the threat will come from BRIC countries (Brazil, Russia, India and China). The South East Asian region also poses a collective threat.

Talking of China, ever since the communist revolution of the late 1940s, and the subsequent formation of the Chinese Communist Party (CCP) in 1949, many positive developments have taken place both within the party as well as for Chinese citizens. The CCP has to be credited for bringing about a degree of economic and political stability in the half century of their reign. From its early days, when the party and its members were still learning the ropes of governance it has now become a sophisticated and well coordinated political machine. The integration of the erstwhile closed and protectionist Chinese economy with that of the larger global economy in the last three decades is the pinnacle of the CPC rule (Mcmillan & Powles, 2009).

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