The fallacy of free trade

The fallacy of free trade

The conventional wisdom is that prosperity is a function of globalization. However, when the process encounters the imperatives of geopolitical reality and becomes overly politicized, as has happened in this country, it works counter to its objectives. A popular fallacy supported by both Republican and Democratic administrations is so-called free trade.

Contrary to what has been publicized, free trade as it has been promulgated is not a theory of economic expansion and wealth creation in the developing world; it is an economic model emanated from the decidedly pro-Marxist ideology of redistribution of wealth on a global scale and it has been accomplishing exactly what was intended. Over the past three decades, it has led to the de-industrialization of the United States and the loss of millions of well-paying jobs.

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In this new world economy, the United States does not have a competitive advantage by virtue of high productivity based on superior organization and advanced technology. Nowadays, if you know what you want and have the money, practically anything can be bought. Project financing is available to anyone anywhere in the world, provided by multilateral lenders and a syndication of investors worldwide. The technologies are available to anyone willing to pay for them, and information is available to anyone with a computer or an iPhone.

 

In this environment, America cannot compete with the world of developing nations. Saying that an American worker is “the most productive in the world” makes for good rhetoric but has little to do with reality. If Chinese enterprises employing modern technologies do not have to comply with U.S. environmental and health regulations and pay their workers in a day what their American counterparts make in an hour, this country cannot possibly succeed. American industries are under a military-style assault coordinated by foreign governments that includes, but is not limited to, manipulating currency, dumping, stealing technologies and know-how, and counterfeiting American products.

The prevailing mood among the free-marketers is that the imposition of taxes or tariffs on imports, a policy promulgated by President TrumpDonald John TrumpTed Cruz knocks New York Times for 'stunning' correction on Kavanaugh report US service member killed in Afghanistan Pro-Trump website edited British reality star's picture to show him wearing Trump hat MORE, will make imported goods and services more expensive, reduce consumption, and subsequently hurt the economy. This populist argument is based on neither economics nor history lessons.

America needs to stop its job base from imploding and create a more dynamic economy to replace welfare checks with paychecks, and welfare recipients with taxpayers. People who do not make much cannot consume much. This is an economic veracity. 

The history lesson emanates from the destiny of ancient Rome. A millennium and a half before the United States was born, circa the second century CE, there was the Roman Empire. By that time it had begun to unravel from within. The agrarian economy that had been the foundation of the state was falling apart, unable to compete with cheap crops imported from North Africa. The consumers definitely benefited from the arrangement until North Africa’s cheap crops destroyed Rome’s economy, just as cheap imports are destroying America’s industries. The situation is relevant and amenable to the manipulation of trade by China, Japan, South Korea, and many other countries. It is fine to compete with the economies that employ wages and regulations similar to those in this country, but the American trade partners should not expect to profit from a trade that takes advantage of American regulations and high wages and their artificially devalued currency.

Trump wants to stop building the economies of other nations. Saudi Arabia, Kuwait, the United Arab Emirates were all built with American oil money. China’s economy has become a manufacturing plant for American corporations. Profits from the manufactured goods sold on the American market have built China’s economy.

The United States remains the world-dominant economic power, for which international trade — unlike for some of our more “backward” partners — is not a key building block of economic development. We are in a position to design an effective mechanism safeguarding American interests and enforcing a form of trade that reflects long-term strategic interests and restores the American role in the international balance of power. It can be applied in a manner that allows all of the participants, including politically antagonistic entities, to enjoy the fruits of a global economic system. Those objectives should not be viewed as nostalgia for economic preeminence, but rather as an imperative for our economic survival.

Alex Markovsky is a senior fellow at the London Center for Policy Research and author of "Anatomy of a Bolshevik" and "Liberal Bolshevism: America Did Not Defeat Communism, She Adopted It."