Trade and Tribulation: The dying art of a free global market.
Kelly Hughes |
22 November 2017
The neoliberal economic dictum of a global free trade system being a “collective good” is flawed. Watershed events, such as the 2016 US election and the United Kingdom during the Brexit referendum, display an increasing trend geared towards political backlash against free trade from countries with advanced capitalist economies. The last half century has seen neoliberal economic generate a massive shift of wealth from ‘ordinary’ people in the US and UK to elites as a result of free trade, Rennie Short (2016) In theory, free trade may sounds good as it stimulates rapid economic growth, but in reality, workers get exploited, work for lower wages and lose their jobs to automation and outsourcing for cheaper labor. Political discontent, economic insecurity and instability has evidently fueled resentment that has resulted in vulnerable voters aligning to neofascist demagogues ideoligies, Walley (p. 235, 2017.)
FREE TRADE AS A “COLLECTIVE GOOD”
For years, countries have relied on the economic platform of free-trade agreements (F.T.A) to establish the economic elite and populism establishment politicians. However, it has always been argued trade is a double-edged sword that heavily aligns to consumerism rather than production. Countries are better of if they specalise in an industry where that country has the most comparative advantage, allowing countries to trade across a world spectrum and increase global production. The overarching goal of economic activity is not to produce, but to consume and to consume on terms of trade in which both countries will gain. The theory of comparative advantage allows countries to trade with those who are different. Economists will argue free trade opens up the doors in the market for foreign supplies and in turn generates financial incentive to invest and market competition. The Economist (1998.) The expansion of trade has undoubtedly increased the supply of goods and services and meant lower costs for everyday consumers. However in order for this basic trade theory to thrive of connecting prices to wage, the cost of FTA has been the stagnation of wages and rising inequality, Bernstein (2016) The world trade system works on a system of inequality, meaning the benefits of a globalised economy are unevenly spread across countries as well as domestic demographics. The continuous restructuring of the world trade system meant Western industrialised countries experienced levels of high unemployment and slow growth in the early 1970’s. The shift from industrial production to manufacturing goods and services in industralised countries has contributed to the social and economic decline that comes with global free trade agreements. The extensive gap between rich and poor countries has demonstrated an inability to re-order trade agreements that extradite people from poverty demonstrating the shortcomings of current economic orthodoxies, O'Brien, Williams (2016, 240)
The surge of protectionism in the West slowly dismantled the ideological roots of international economic order that were implemented Post World War II under The Bretton Woods in 1944. The foundations for a global economic regime management would see two decades of sustained growth. The foremost institutions; The International Monetary Fund and The World Bank were put in place to exercise international economic order, Kinnock (1994, p. 129)
Recent attempts to increase higher labour standards within the regulations of the World Trade Organisation have time and time again failed. The body’s policies have sparked global controversy by anti-globalisation spokespeople who argue it favours free trade over worker rights, economic livelihoods and the environment.
The theory remains companies will move their activities to countries where labor costs remain low, meaning job loss on the domestic front and reduced standards of labour in order to maintain those jobs. According to the dictum of free trade the market decides the cheapest and best place to produce products, Melo Araujo (2017)
THE EFFECT: HOW FREE TRADE HAS LED TO A GLOBAL ECONOMIC SHIFT
As the new system of free trade and open markets emerged onto the economic scene post WWII, the seeds of discontent and insecurity were planted. The belief of installing bodies such as the International Monetary Fund, the World Trade Organisation and the World Bank, global assimilation and peace would trump protectionism and economic nationalism. As China came on board in the late 1970’s, profound changes were being made on global capital and the free trade market.
The redistribution of economic power saw a revolutionary shift from an industrialised West to a rapidly growing Pacific Asia, after the collapse of the Soviet Union and the Cold War. This international transformation sparked a global debate on what was to become of “the new world order.” Players such as Japan emerged on the economic platform and birthed the rise of the Asia Pacific and China, who were to become huge international, economic influences. The idea of a liberal global economy was challenged along with trade liberalisation and the dictation of a free international market, O'Brien, Williams (2016, 154.) The turn of the economic globalization era in the early 1980’s saw a transition from a state-dominated world to a market-dominated world. What was predicted to be a prosperous, open economic and political democracy of globalization, experienced harsh backlash from advanced capitalist and industralised countries such as Western Europe and the United States. Opponents to globalisation argue, economic problems that surfaced in the late 1990’s where a consequence of free financial flow where nations were bound by a global world order and had little to no control over globalisation forces that hurt nations. Globalisation was dubbed the primary cause for rife wealth inequality in nations and rapid levels of unemployment, Gilpin, Millis Gilpin (p. 245, 2000)
Manufacturing saw the biggest hit, as the freeing up of trade tariffs meant industrial jobs at home were being outsourced to cheaper-wage areas such as East Asia, South Korea, China and India. Economically, this had limited impact on shareholders and their corporations, but labor workers were fixed in place and workers in the US, Europe and Australia were losing their jobs to competitive advantage to countries that could source that labor cheaper.
This in turn, saw an explosive redistribution of global wealth. Factories and companies moved overseas, and living standards of working class, Rust Belt states in the West declined rapidly as their safety net of social and economic security fell underneath them.
The argument, made by economic and political elites that free trade agreements would improve global living standards and a surge in jobs and growth was little hope to those without economic stability. Lower costs, limited environmental protection fees and cheap labor in China meant multinational corporations were moving money elsewhere.
Low-skill workers in the US suffered the most after the transition from domestic manufacturing jobs were outsourced to China. It created mass dissatisfaction and discontent between blue-collar workers and elites as they saw no upside to the promised turn of economic globalisation. On top of job loss, US Rust Belt states were struggling with a weak government safety net, unaffordable healthcare and a growing middle class who felt ignored by elites in the White House who were out of touch and uninterested in their plight, Rennie Short (2016)
RUST BELT STATES IN US ELECTION 2016
Image Source: The New York Times
The 2016 US presidential election unleashed a typhoon of prejudice, bigotry and dissatisfaction. Donald Trump was able to tap into middle class workers discontent, due to growing economic instability and insecurity in America. Neoliberalist academics refer to the economic fracture in blue collar workers security as “flexible accumulation.” In the 1970’s and 1980’s, the roots of economic uncertainty married with increased inequality can be traced back to political and economic shift towards an intensified capitalist system. Trump, early on in his campaign, identified a key constituency as white working class people. He promised to renegotiate trade deals and bring back domestic manufacturing jobs in Rust Belt states, blaming immigrants and foreign nations for stealing US jobs, which fueling widespread resentment and racism, Walley (2017)
Trump tapped into nationalist populism which stemmed from decades of rising inequality. Economic uncertainty played a major role in Trump flipping Rust Belt states, which Hilary Clinton fatally ignored during the election. Trump had a discontent, fractured electorate at his mercy during the campaign with key Rust Belt states of Wisconsin, Pennsylvania and Michigan who had traditionally voted Democrat for generations, throwing their support behind a Republican candidate for the first time. Exit polls at the time showed sweeping cultural divides as well as a deep gender, racial and economic split nationally that drove his success in Rust Belt states. The economic populist dictum that won Trump the election relied heavily on his promise to bring back factory jobs to the Rust Belt states, Barrow (2016)
At the centre of Trump’s political campaign was the anthem of anti-immigration and anti-international trade agreements. However the attention on this topic became a smoke screen for the intolerance of middle-class Trump voters with structural racism that benefited the elites. The exit polls after primaries show the “working class” who voted for Trump were earning an average of $72,000, well above the median US income of $56,000. The “white working class” and discontented voters in Rust Belt states were actually far better off conservatives in the South and other states. Trump was able to portray Hilary Clinton as a political elite who sold out on working class Americans during the election, causing a fatal blow to her popularity, Walley (2017)
BREXIT REFERENDUM 2016
Image Source: The Economist
There has been major backlash against globalisation over the years with Britain exiting the European Union as the most recent examples. Similar to America, voters have genuine concerns and angst over their current economic system that they feel has failed them time and time again. Nationalist protectionism was the forefront concern driving voters to leave the European Union. The move to disarm themselves from the forces of globalisation was a bid at freedom, to act outside the EU membership, Blockmans (2016, p. 182.)
The European single market was an economic model devised in 1992 which entitles the free movement of people, money, services goods, people and jobs to move anywhere they want within the EU. It was instituted in hopes of promoting what is known as a “level playing field” boosting trade, lower prices and job stimulation and growth, Hunt, Wheeler (2017)
Those opposed to the EU believed the economic body was dysfunctional and failed to take into account the swelling economic issues since The Global Financial Crisis in 2008, with unemployment in southern Europe at 20%. As well as growing unemployment, EU opponents were driven by nationalist ideologies anti-immigration sentiments. The gap between the upper class rich and poor was growing rapidly alongside a political elite who were out of touch and did not understand or represent the working class in Britain, Freidman (2016)
Experts argue people felt abandoned by the economic benefits of Britain’s half a century involvement in the EU. Issues surrounding broader questions of national and cultural identity appealed to lower income voters who were pro-Brexit. Economic globalisation played a key role in leave votes, with the displacement of manufacturing jobs in Britain successive governments failed to identify and compensate the losers of globalisation’s force, Colantone, Stanig (2016)
CLASS OF ELITES IN WESTERN SOCIETIES PROSPER AS WORKING CLASS SUFFER
Countries that source goods from other countries that make those goods on low-wages, low-environmental protection costs and low-working conditions are a comparative advantage. Some economists argue it’s a tactical and intellectual method of trade for countries to take advantage of countries whose governments exploit the environment and their labour as they offer lower costs for product manufacturing, fueling rapid Western consumerism demand.
The other argument is when countries source goods from other countries with cheap labor and low environmental concerns, it means those goods aren’t being made on domestic soil anymore. The comparative advantage means its better economics to trade and source those goods on terms which both countries gain. That means factories at home close, workers get laid off their jobs, mounting wage pressures and general economic demand declines.
Elites convince countries a free-market is a good market and protectionism is a threat to growing consumerism and globalisation. Once upon a time, countries would protect their countries manufacturing facilities from being undermined and sold off to low-wage countries that have limited worker rights or environmental protection. In reference to America and Britain, their jobs were no longer protected and their democracy was sold to comparative market advantage.
Multinational, juggernaut corporations are responsible for dictating trade policies that favour stakeholders and vested interests. Voters, as seen in US 2016 election and Brexit are pushing back against corporate and political elites who advocate for free trade policies that sell out on Rust Belt states whose wages, jobs and middle class population are at risk, Johnson (2017)
Aware of anti-trade angst amongst voters, Bernie Sanders and Donald Trump stuck out in the 2016 US election because they advocated as candidates who spoke to every-day, “working class” American people, a group of voters left behind by party elites. Both candidates opposed current and past international trade agreements, such as the North Atlantic Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TTP) to align themselves with Rust Belt voters. Working class symbolism was a pivotal election tactic Clinton cashed in on too late.
Rust Belt voters believed GOP establishment politicians had ignored their concerns, and gave rise to Trump’s success, as he used their anger to pin blame on immigration and dodgy international trade pacts that were selling out workers and weakening America, Skocpol (2016, p. 4-6)
RISE OF WHITE NATIONALISM IN THE WEST FEED ANTI-GLOBALISATION AND ANTI-FREE TRADE RHETORIC
Image Source: The Guardian
Nationalist, alternative right wing groups whose sphere of influence has generally been on the political fringes of society came to centre stage after the rise of political figures such as Donald Trump in the US, Marine Le Pen in France and Pauline Hanson in Australia. The influence of these groups can be cited from the anti-immigration, anti-establishment, anti-globalisation discourse campaigned during the 2016 US election. The nationalist factions in Western society aim to preserve traditional values in civilization, including the preservation of white nationalism, liberalisation, mens rights and convservatism.
The language used throughout the election campaigns was driven by sensationalism, fear, shock, hatred and emotion. Rationality tossed aside, speaking directly to the public’s fears and uncertainties on globalisation, job insecurity and immigration incited moral panic. Trump appealed to bigotry, racism, misogyny and fascist ideology to create a culture of fear mongering and media sensation, feeding a hungry group of right-wing populists. The famous “Make America Great Again” slogan paints the picture of a fractured political, social and economic environment that needs upheaval.
Trump’s appointment of Steve Bannon, a white nationalist, as Trump campaign CEO, demonstrated the cabinet appointments of neo-liberal elites, reinforcing corporate interests, financial institutions with very strong ties to anti-Semitic sentiments. Going back on his promise to Rust Belt state voters who were led to believe Trump wasn’t part of the established elite and was in fact in touch with working class Americans, Giroux (2017, pp. 889-891)
Bannon campaigns only for an alt-right platform, both online and in real life. Alt-right supporters like Barren, are in favour of “white identity politics” blaming “globalists” for selling white America out to a free market with open borders. The rise of his career into conservative politics was a result of his skills in brining fringe, white supremacist ideologies to the centre of American politics, Beauchamp (2016)
It can be argued from both sides of politics that the neoliberal economic dictum stating the global system of free trade is a “collective good” is only true to benefit the elite. Countries with the most to gain from a free market will advocate the system of international trade is beneficial as it stimulates economic growth and prosperity between nation states. However, this essay outlines the winners and losers of a free market, with reference to events such as the US 2016 election and Brexit, which emphasis anti-globalisation and anti-free trade sentiments, Walley (p. 232, 2017.) The global system of free trade has not always worked for the so called “collective good” as it comes at the expense of worker exploitation, unemployment and the massive transfer of wealth to “ordinary” “working class” people to the “elites.”, Gilpin, Millis Gilpin (p. 146, 2000)
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