`Free Trade' Disguises Need for Commitment to Just Social Policies

Article excerpt

The trade debate raging around the North American Free Trade Agreement is mired in a fog of outdated economic ideas. Only a trade specialist could take seriously such vacuous slogan-words as "free trade" and "protectionism" when a third of our "foreign" trade is American companies outsourcing work to off-shore subsidiaries to reap the advantages of low paid labor. Most of the current trade with Mexico represents intermediate products destined for return to the United States or to other markets after they have been enhanced in value by cheaper Mexican workers.

In recent years, the international flow of goods and services has dramatically expanded, but the gap between the rich and the poor has doubled and the assault on natural systems - marine fisheries, tropical forests, top soil, rivers and the protective ozone layer - has dangerously intensified. In this context, the slogan "free trade" misses the point. Instead of wasteful production and frenetic global exchange, we need a national commitment to just social policies, vibrant communities and reduction of our impact on the environment.

Listening to those who argue so dogmatically for free trade, one would never guess that the concept was only invented in the late 18th and early 19th centuries when conditions were totally different.

Perhaps the most famous exponent of free trade was David Ricardo, a 19th-century political economist from England. Modern world trade is based upon his theory of comparative advantage. Rarely remembered is the parallel doctrine of Ricardo: the so-called Iron Law of Wages. Under this infamous theory, the "natural" price of labor was deemed to be just enough to allow a worker bare subsistence, plus enough to produce a child to replace him upon his death or disability.

Today, the modern ideologues of free trade don't say openly that working people should live at bare subsistence levels. Instead, they design algebraic models that "prove" the value of deregulated markets and uncontrolled international trade. Absent from their equations, however, are any moral ideas about social justice or environmental stewardship.

Washington insiders talk as though "free trade" always raises wages and generates good jobs. The facts indicate otherwise. Since 1973, American trade with other nations has doubled, but the value of American weekly paychecks has fallen 18 percent. In the last decade alone, the number of young men working full time who earn only a poverty wage has increased 100 percent.

The U.S. economy expanded - national income per capita grew 28 percent - but the benefits were channeled to those with the highest incomes. …

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