Economic Justice and Global Trade: An Analysis of the Libertarian Foundations of the Free Trade Paradigm

By O'Byrne, Shannon Kathleen | The American Journal of Economics and Sociology, January 1996 | Go to article overview

Economic Justice and Global Trade: An Analysis of the Libertarian Foundations of the Free Trade Paradigm


O'Byrne, Shannon Kathleen, The American Journal of Economics and Sociology


I

Introduction

This paper concerns the emergence of an important, late twentieth-century construct, namely the discrediting of neo-mercantilism in favor of corporate and national competition in a global free market. Within North America, for example, the signing of the Free Trade Agreement between the United States and Canada in 1988, and more recently, the conclusion of the North American Free Trade Agreement amongst Mexico, the United States, and Canada, both signal - though far from consistently - an endorsement of the goal of global economic laissez-faire.

The contention here is that the global free market paradigm has not yet earned a full endorsement. This is because the paradigm is grounded in libertarian political theory and as such, cannot seriously address the pervasive fact of economic under-development and the lack of trading opportunity encountered by much of the world's population. In short, the model ignores too much.

The critique of the free market paradigm is made seriatim. Part II considers the analysis of Professors Michael E. Porter and David Kennedy to illustrate that while liberal political theory tacitly governs domestic policy regarding international trade, libertarian political theory animates the international trading regime. Part III sets the stage for critiquing this incongruity by revisiting the economic reality faced by undeveloped and underdeveloped countries. Part IV directly challenges the global free market paradigm by showing how its libertarian foundations promote an anomic strategy of postponement, exaggerated meliorism and disregard for the likely trading prospects of much of the world. Part V provides a sociological account of why the libertarian analysis is accepted notwithstanding its deficiencies. The paper concludes with an argument against the zero-sum nationalism and laissez-faire cosmopolitanism mandated by libertarian political philosophy in favor of the positive economic nationalism espoused by the U.S. Secretary of Labor, Robert Reich (1992). Definitions of important terms are given throughout.

What is not offered here is an economic analysis of the global market nor a diagnosis as to why so much of the world's population is poor. What follows is an account of the political ideology which informs a standardized view of the global market and, through the work of Hans Kuhn, a sociological account for the prevalence of that view.

II

The Analysis of Michael E. Porter and David Kennedy

The appeal of the global free market and its promise of enhanced national prosperity has been an important theme for, among others, Professor Michael E. Porter of the Harvard Business School. Porter's book, The Competitive Advantage of Nations (1990), offers a pivotal account of why countries are more or less successful in the international marketplace and how the main stakeholders (business, labor, and government) can contribute to a nation's overall competitive advantage.

Porter's analysis assumes that domestic governments would lend a considerable measure of social and economic infrastructural support to their own players in the international marketplace. For example, indirect government subsidies "in areas such as education, research universities, and advanced infrastructure" (640) are successful routes to competitive advantage because they (628)

constitute perhaps the single greatest long-term leverage point available to all levels of government in upgrading industry. Improving the general education system is an essential priority of government, and a matter of economic and not just social policy.

Infrastructural development by government is critical and includes not just facilitating advanced transportation and telecommunications - "also important are cultural and recreational activities that attract talented individuals to a place to live and work" (638). The role of government policy in advancing national competitive advantage is at once refined and significant. …

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