By Jo Tavener
Economic Advisor to the President resigns! A slump in the Dow hits Wall Street. Speaker of the House finally breaks his silence and criticizes Trump’s tariff proposal! All this over two new tariffs on steel and aluminum. Economic pundits acknowledge that neither will bring down international trade, so why all the bother?
What drives the uproar is the attack on the very nature of free trade agreements and their international architecture of globalization that favors corporations and investor nations. Both Democrats and Republicans argue that free trade is necessary to build a world of thriving economies and international stability: countries that trade together, stay together.
At the heart of globalization is the G-7, a bloc of industrialized democracies — United Kingdom, USA, Germany, Canada, France, Italy, Japan — meeting annually to discuss issues like international security, energy policy and global economic governance. More infrequently there are meetings of the G-7+5, meaning the advanced industrial democracies plus the emerging economies of India, South Africa, Brazil, Mexico and China.
Those nations left out of consideration are often the hot spots where war continues to rage, most notably the Middle East, Africa and Southeast Asia — where the United States and its client states, Israel and Saudi Arabia, are deeply involved. In these areas the G-7 and their allies assume political power through economic might. Economic consequences and domestic unrest often cause the kind of instability that ends in violence.
Free Trade is an essential element of the globalized market. Free Trade enables capital to flow around the world, out to underdeveloped countries that lack capital to invest but have a large underused labor force. Capital is mobile while labor is not. When laborers attempt to move to better labor markets across borders without papers, they are called “illegals” and have little to no rights or benefits that “naturalized” laborers receive. When possible they are returned to their native impoverished countries to become part of the surplus labor force that helps maintain the low domestic wage.
Free trade increases the returns to capital in the rich investor nations, as profit accrues from lower labor costs and greater market range and saturation. At the same time it decreases the returns to its labor force in the loss of jobs and fewer and weaker unions, followed by low, stagnant wages. While globalization and free trade may create greater international stability between powerful nations, it exacerbates the tensions within nations by the growth of economic inequality, followed by further social stratification and the undermining of democratic norms and practices.
Blind to such negative effects of neoliberal globalization, the Washington consensus holds onto its mantra that free trade is good for all. What a rude awakening awaits many underdeveloped nations as they open their markets to foreign investment and watch the magic of modern alchemy create gold for others at their expense. Case in point, the betrayal of Greece by the EU. It eats even its own — all of this done under the less than benevolent oversight of the World Trade Organization (WTO), the International Monetary Fund and the World Bank.
President Trump’s declaration that he would create tariffs on steel and aluminum of 25% and 10% respectively may hurt both our NAFTA partners, Canada and Mexico. Even more, as a major rejection of standard neoliberal practice, it sends shock waves through the world market that counts on the stabilizing nature of U.S. currency as well as the role it plays in international organizations that help sustain the riches provided by globalization.
Progressives like Lori Wallach of Global Trade Watch dismiss the dire predictions of Washington free traders — both George W. Bush and Bill Clinton attached tariffs to steel and Japanese cars respectively with little blowback. However, the world of 2018 is very different from that of the 1990s. The implications of September 11, 2001 coupled with the Great Recession of 2008, the rise of Chinese state capitalism and the growing bellicosity of Russia destabilize the political economy of actually existing neoliberal nations. The proverbial “last straw” for neoliberalism was the U.S. rejection of TPP (Trans Pacific Partnership).
Progressives had a lot to do with that “straw.” They have long criticized free trade agreements, especially the TPP, for empowering corporations at the expense of labor. What was so revealing about TPP was its open support for multinationals and the power they were given to control the arbitration process — at the expense of a nation’s sovereignty or the ability of its citizens to hold their representatives responsible for the ensuing losses of environmental, labor and consumer protections. As Joseph Stiglitz noted, TPP was less about free trade than about the creation of a stronger and more dominating neoliberal global architecture. And now Trump with his alt-right populism comes along…
A line from the Hindu scripture, The Bhagavad-Gita, comes to mind. “I am become death, the destroyer of worlds.” Only a clueless cartoon president would betray his class by helping to undermine U.S economic hegemony and thereby decrease its political power.
Jo Tavener is a member of the NewPeople Collective who writes about poltical economy and its relationship to media and culture.