A Looming Threat Of Global Trade Wars?
To this effect, I offer the following as additional food for thought:
By Michael Schuman
It is an article of faith among economists that rising global protectionism intensified the Great Depression of the 1930s. History looks back at the infamous Smoot-Hawley Act, which jacked up tariffs in the U.S., as a disastrous step that stymied the international economic cooperation needed to alleviate the worst economic catastrophe in modern history. Even the U.S. State Department says the act "quickly became a symbol of the 'beggar thy neighbor' policies of the 1930s." Between 1929 and 1934, world trade declined by about two-thirds.
Here we are, almost 80 years later, and possibly about to make the same mistake. Although there have been no headline-grabbing Smoot acts to call the world's attention to the threat, there is mounting evidence that, once again, government and business leaders are inching toward the type of beggar-thy-neighbor policies of the Great Depression. "Particularly, I am concerned about the rising dangers of protectionism," World Bank president Robert Zoellick recently said in Singapore. "This financial and economic and unemployment problem is serious enough," he later added. "If we start to trigger a round of protectionism, as you saw in the 1930s, it could deepen the global crisis." (See pictures of TIME's Wall Street covers.)
No one apparently has told Vladimir Putin. Last month the Russian government announced an increase in tariffs on imported cars, sparking angry protests from motorists. The move is meant to support a local car industry that temporarily shuttered factories because of withering demand. "Now that our producers are forced to slash production, I think it is absolutely unacceptable to spend money on acquiring [imported] foreign cars," Putin said. In Indonesia, the government is slapping import restrictions on about 500 items. Importers will require licenses and can only bring in the goods through specified ports. The decree announcing the measures said they were necessary because "the global economic crisis has resulted in uncertainty and caused unbeneficial impact to the economy of Indonesia."
Yet the traditional tariff is not the only tool governments are using these days to influence trade. More important perhaps is the financial support that states are offering to industrial firms to aid them in the global competition for a shrinking pool of consumer demand. Most obvious of these steps was Washington's $17 billion bailout of the U.S. auto industry. Now American steelmakers are lobbying the incoming Obama Administration to include "Buy America" provisions in the proposed government stimulus package, to favor their own steel over foreign imports. A state development fund in Taiwan is raising $6 billion to aid companies in the industries considered strategic for the economy; Taiwan chipmaker Powerchip Semiconductor has already applied for government help. China, meanwhile, has restored or raised tax rebates over the past six months on more than 3,700 export items, including many consumer goods like toys, to assist struggling small exporters. The rebates can help keep the prices of Chinese exports low and more competitive.
It is these types of export-at-all-costs policies that some economists worry will cause a resurgence of 1930s-style antitrade policies.(Keep reading ...)
I believe global capitalists like free trade because they get to play off against one another in a wider pool of workers and countries. As we well know, this is not about "fair trade."
ReplyDeleteIn the future, I see a lot less importation and exportation of goods and services, due to environmental externalizations now be tacked on to these productions. That will be a good thing.
Cheaper goods and products from afar have come with "hidden costs". Many are environmental, as mentioned, but there are social costs which need to also be considered. Not only is there social degradation to people of other countries (think sweatshops, child labour and so on) but also reduction of jobs and production of products in our own countries.
I think I would prefer not using classical economic theory to buy into the "real hidden motivation" of neoclassical economic theory.
I look at African countries, for example, and freer trade and removing protective policies has not lifted these countries out of poverty. Sure their GDP might have improved a little, but in the aggregate, the majority of citizens are and remain poor. The few, once again, increased their wealth at the expense of the many.
Just some of my thoughts.
jan: "I believe global capitalists like free trade because they get to play off against one another in a wider pool of workers and countries. As we well know, this is not about 'fair trade.'"
ReplyDeleteYou pretty much nailed it!
For some time I've pondered when corporate power and political power would finally clash. It was bound to happen eventually.
ReplyDeleteI don't place much reliance on analyses of the Great Depression and application of those principles to the world today. There's simply no meaningful continuity.
At the time of the Great Depression the global population stood at roughly 1.8 billion souls. The world's renewable resources were exhausted at under 4-billion. Today we're at roughly 6.5-billion and eating the seed corn. Add to that nuclear proliferation, climate change, the breakdown of global security and the rise of terrorism and non-state violence and, in trying to use the Great Depression as any sort of useful yardstick, you might as well be talking about Mars.
We are sailing in uncharted waters. We know there are shoals aplenty out there but we have no idea how to navigate through them.
I think we're nearing the point where global capitalism will have to yield to political realities.
We freed capital to move from continent to continent but, to facilitate that, we had to take down all trade barriers and allow Nike to make running shoes in Vietnam to sell on the streets of New York.
We, as nations, as societies, demanded no price for freeing capital, for taking down trade barriers, for access to our markets. That was the most enormous gift handed to the rentier class imagineable. They didn't waste it either, proceeding to outsource manufacturing and jobs to any place where they could find the cheapest labour and the weakest labour and environmental laws.
We've treated corporations as though they're omnipotent, an utter and completely pointless fiction.
Corporations are, in fact, enormously vulnerable. That our legal systems recognize them as "persons" is only due to a legal fiction. They exist, they're allowed to hold and amass property, they're able to trade and retain profit, they're able to seek the redress of our courts only at our continued suffrance.
We created them, us. We did it. We did it for a variety of purposes that are now delivered more often in the breach than in compliance.
We talk of "corporate citizens" and require of them none of the incidents or obligations of citizenry. We've indulged this "fiction" for so long we seem to have accepted it as fact.
Mentarch, my friend, we have lost our way by our unwillingness to see the true face of what we've created, by abrogating both our inherent and lasting power and our duty to restrain and direct it. We have allowed this priceless legal fiction to become a freebie for the rentier classes, granting their empty vessels with rights and privileges they never earned.
Democracy will eventually restore balance to this if only because it must if it is to survive. Dramatic as that sounds, there is truth in it.
MoS, I agree. We created this "beast" and we can "slay" this beast. They are only accountable to "making profit" in any way possible, both legal and illegal. Illegal is "just the cost of doing business."
ReplyDeleteMoS: "We talk of "corporate citizens" and require of them none of the incidents or obligations of citizenry. We've indulged this "fiction" for so long we seem to have accepted it as fact.
ReplyDeleteMentarch, my friend, we have lost our way by our unwillingness to see the true face of what we've created, by abrogating both our inherent and lasting power and our duty to restrain and direct it. We have allowed this priceless legal fiction to become a freebie for the rentier classes, granting their empty vessels with rights and privileges they never earned."
I could not agree more with you.
jan: of course, the quaint justification that it is only "the cost of doing business" for any "illegal" means to make profits is nothing more than incompetence (2nd and 4th Principles, to be precise).
ReplyDelete;-)
It is difficult to blame anything on “capitalism” we have not have capitalism or a market economy in most developed nations for 75-100 years. When the USA national debt has gone up every year since 1960 and the USA trade deficit has been constant since 1979 why should the current situation be a surprise? Other developed nations have followed the same failed policies of social democracy; taxing work and thrift while subsidizing debt and sloth. They have been pricing manufacturing jobs out of their nations with unrealistic wage levels and law suits for decades, exporting their labor intensive and polluting production to other nations such as China (also near economic collapse.) http://www.globalresearch.ca/index.php?context=va&aid=11887.
ReplyDeleteThe more politicians meddle in the economy the more corrupt the government and the more inefficient the economy. When every nations fiat money fails them, as it soon must, we will experience the old Chinese cures ”may you live in interesting times.”
PJ, that sounds like the standard Republican fare. Read Kevin Phillips "American Theocracy" for a better grasp of America's woes. The author, a noted Republican, compares America's decline with those of the great economic empires that preceded it - Britain, the Netherlands and Spain. The parallels are astonishing. With the exception of Spain (which looted its wealth from Central America),the others all began as agrarian economies which evolved into manufacturing economies during their ascendancy. Each, in turn, decided to outsource manufacturing (chasing cheaper wages) while switching their own economies to financial services. In other words, each, in turn, invested its wealth into growing its rivals' economies.
ReplyDeleteWhile the dominant economies were manufacturing based, they were resiliant enough to sustain major economic travails such as recessions. It's when they abandoned manufacturing for financialization, their economies turned brittle and unable to bounce back from economic setbacks. By that time they had usually grown their successor's economy to the point that economic, political and even military power transferred, sometimes quite abruptly.
A demonstration of this theory is found in Germany in the 90's. The Germans were following along the American, outsourcing path but they realized they were better off investing their wealth in growing their own economy. In doing that, Germany rebounded and was, until a year or two ago, the biggest exporting nation on the planet - not the largest economy but the top exporter.
All this nonsense about unrealistic wage levels and law suits is patterned to fit the Republican narrative. Coming from the people who decriminalized credit swaps, that's pretty rich.
President Bush took a parting shot at the French by raising the duty on Roquefort cheese from 100% to 300%. This was in retaliation for a French ban on American beef. The French are notorious for protecting their crummy agriculture industry. Many people think President Obama will reverse the decision. He loves the French and they love him back. A cheesy dispute with France
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