Monday, November 22, 2010

Chalmers Johnson on the Myth of Free Trade

a doctrine they call “neoliberalism is a rerun of what economists suffering from “historical amnesia” believe were the key characteristics of the international economy in the golden age of liberalism (1870-1913)

The complex includes privatizing state-owned enterprises, maintaining low inflation, shrinking the size of the state bureaucracy, balancing the national budget, liberalizing trade, deregulating foreign investment, making the currency freely convertible, reducing corruption, and privatizing pensions.

It is called neoliberalism because of its acceptance of rich-country monopolies over intellectual property rights (patents, copyrights, etc.); the granting to a country’s central bank of a monopoly to issue bank notes, and its assertion that political democracy is conducive to economic growth

Economist, Ha-Joon Chang, All of today’s rich countries used protection and subsidies to encourage their manufacturing industries, and they discriminated powerfully against foreign investors. More important than Adam Smith is Daniel Defoe, “A Plan of the English Commerce” (1728) which develops industrial policy of the woolen manufacturing industry which became the most important export industry. Robert Walpole, the chief architect of the mercantilist system. Protectionist policies with average tariff of 45 and 55 percent

By 1820 Hamilton’s 40 percent tariff on manufactured imports into the United States was an established fact. Hamilton provided the blueprint for U.S. economic policy until the end of the Second World War.

The U.S. abandonment of overt protectionism after it became the world’s richest nation still found measures to advance beyond what market forces could have achieved. U.S. government actually paid for 50 to 70 percent of the country’s total expenditures on research and development from the 1950s through the mid-1990s, usually under the cover of defense spending.

During the golden age of capitalism, from the Marshall Plan (1947) to the first oil shock (1973), the United States was a Good Samaritan and helped developing countries

In the 1970s, its position as global hegemon was being undermined and it turned decisively toward neoliberalism. This was to bring the developing countries to heel and slow down economic growth in the Third World. Third World countries were Forced to adopt neoliberal policies, open their economies to more powerful foreign competitors on unequal terms

Because of the shortcomings of neoliberalism it was necessary to find plausible scapegoats. Wolfowitz (now at the World Bank) put forward poor-country corruption
They failed because the didn’t take the good advice of the Washington Consensus

The problem with the explanation today’s rich public life was spectacularly corrupt were that conundrums encountered. Zaire under Gen. Mobutu and Indonesia under Gen. Suharto. Both were flagrantly corrupt. Zaire’s living standards fell. Indonesia’s rose. In Indonesia, the money from corruption mostly stayed inside the country

Free trade, privatization, and the rest of their policies are a historical, self-serving economic nonsense, apologists gave a neo-Nazi explanation, and it was culture. Samuel Huntington’s thesis, clash of civilizations. Francis Fukuyama no trust extending beyond family members, difficult for them to run large firms. It was reminiscent of Max Weber, who in 1904 stated that Confucian/Buddhist countries were backward because they lacked the Protestant ethic

Economically successful nations are almost pathologically afraid of competitors coming up from below.

“Level playing field”? United States and Honduras should compete economically on equal terms? European citizens support their dairy industry with subsidies and tariffs to the tune of 16 billion pounds sterling a year and a vast range of agricultural commodities.

U.S. subsidizes corn and exports it to Mexico. Bankrupt Mexican farmers, who immigrate to the US. Japan lavishly subsidizes its extremely inefficient rice growers and prevents the import of rice that could easily compete. This creates one-party rule by mobilizing rich, protected farmers, who vote for the conservatives.

This is some of the hypocrisy surrounding “free trade”

“Belief in the virtue of free trade is so central to the neo-liberal orthodoxy

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