How Free Trade Causes Development - Research Paper Example

?How free trade causes development? Free trade is a buzzing concept in modern times, with all governments across the world proclaiming to promote it.Indeed, the last thirty years or so of global economic integration is based on free trade principles – also referred to as laizzez-faire capitalism. Definitely, there are many advantages to be availed as a result of free trade arrangements. At the same time, it also has its own set of drawbacks. One should also make discernment in what exactly ‘free trade’ means. This is because, often, politicians use the term for its rhetoric appeal while implementing policies that are protectionist. So, while free trade is beneficent in its purest form, modern policymakers have hijacked the concept to serve the interests of select private businesses at the cost of smaller business enterprises. The rest of this essay will look into how free trade causes development and also scrutinize the nature, merits and demerits of such development. At the outset, let us take a look at the historical development of the idea of free trade. By the start of 1970s, currents of change were detected in the global economic order, with nationalism and protectionism being replaced by neo-liberalism and free flow of capital. Even as American elites promoted this new economic order, the process was facilitated by respective participant elites from nations across the world. The irony lies in the fact that communist China was also at the forefront of the global neo-liberal program, despite claiming its socialist credentials. If the ideological gates of the authoritarian and highly protectionist China could be broken open for free-market capitalism, then it was only a matter of time and strategy before other power bastions of the world are broken through. And this is precisely what had happened. With the collapse of the Soviet Union in the late 1980s and the shift in policy framework of several developing countries, the nature and complexion of geo-economics has taken a different form. Needless to say, America's position as the sole superpower has been strengthened by this change. The unsavory side-effects of free trade in this period includes “the appearance of a nearly feral form of entrepreneurship in which black marketers, drug barons, arms merchants, rackets bosses, Mafiosi, and other profiteers are emerging as the economic and political leaders of the social transformations underway in their respective societies.” (Buchanan, 2000, p.1) One of the criticisms leveled against free trade as it exists today is its affect on workers and consumers. Some believe that under this system, workers become helpless pawns of their capitalist masters, compelled to sell their labor power at sub-optimal costs. The only theoretical alternative they have to evading this exploitation is to become destitute, which is a far greater misery. Multi-national corporations (MNCs), which are the facade of free trade, are perceived as coercing citizens to unwillingly participate in the capitalist market system, while also leaving consumers with no choice but to buy their products. In the book titled Telling the Truth about History, author Joyce Appleby traces how MNCs came to be the dominant institutions of our age. Here, the author makes some scathing observations about the nature of capitalist enterprise that is the back bone of prevailing free trade systems: “One of the distinguishing features of a free-enterprise economy is that its coercion is veiled. . . . The fact that people must earn before they can eat is a commonly recognized connection between need and work, but it presents itself as a natural link embedded in the necessity of eating rather than as arising from a particular arrangement for distributing food through market exchanges....” (Joyce as quoted in Levite, 2002, p.32) The free-trade system is also criticized for promoting 'wage-slavery', whereby human beings are reduced to mechanical automatons as they go through the drudgery of work each day. Here too, the slavery is not so much express as it is veiled. Instead of use of violent force, the threat of employment and attendant destitution serves as the whip. Those who support free-trade capitalism, on the other hand, have a different take on the subject: “As for employment, accepting the best (or only) offer available, as unattractive as it might be, is not the equivalent of slavery-a situation in which actual violence, or the threat of it, is used to compel people to labor without pay and without the option to seek other work. That circumstances limit one's choices do not prove that one has neither the capacity nor the opportunity to choose, since everyone's choices are limited.” (Levite, 2002, p.32) There is copious evidence to support the view that global free trade has made major industrial cities across the world prosperous and well developed. In other words, free trade across nations can be credited for McDonaldization of the world, which can be seen as a sign of development. For example, the McDonald’s restaurant chain, which was started in the United States, is now ubiquitous in all major cities of the world. The same could be said about other major consumer brands such as Coca-Cola, Pepsi, Nike, Reebok, KFC, etc (Rogers, 2003, p.1184). On the flip side, the unique architectural style that is associated with different regions of the world is covered or replaced by displays of above mentioned brands, making the city lose its uniqueness and visual identity. This trend could be observed in capital cities of countries such as India, China, Taiwan, Thailand, Singapore, Bolivia, Venezuela, Chile and others (Rogers, 2003, p.1184). On the positive side, these developing countries also seem to have benefited from globalization in certain other ways. For example, “During the early 1970s, more than half its population was defined as poor; average life expectancy was 48 years, and only 40 per cent of the adult population was literate. Today, the percentage of the poor has decreased to about one fourth of the population, life expectancy has increased to 65 years, and about 70 per cent of adults are literate. This unprecedented decline in poverty in Asia and the Pacific has been described as one of the largest decreases in mass poverty in human history. Of all the world's regions, according to report, Asia also ranks lowest in almost all types of crime.” (Foreign Policy, 2008, 70) India and China are key cases in studying the effects of free trade. With abundance of cheap labor, India and China are primed to assume leadership position in another 10-15 years. India has a huge pool of skilled workers who have the added advantage of proficiency in English language. The re-election of Manmohan Singh as the Prime Minister is also a positive development from an economic perspective, for it was he who initiated India as a participant in globalization in 1991 (Winters & Yusuf, 2007). China, on the other hand, started participating in the process of globalization much before India did. As a result, their economy is more than twice that of India and is catching up fast with that of the United States and Japan. Some of the South American countries such as Venezuela and Russia (rich in oil resources) and Brazil (rich in natural resources) also pose a threat to American domination of global economy. In fact, American media believes that the threat will come from BRIC countries (Brazil, Russia, India and China). The South East Asian region also poses a collective threat. Talking of China, ever since the communist revolution of the late 1940s, and the subsequent formation of the Chinese Communist Party (CCP) in 1949, many positive developments have taken place both within the party as well as for Chinese citizens. The CCP has to be credited for bringing about a degree of economic and political stability in the half century of their reign. From its early days, when the party and its members were still learning the ropes of governance it has now become a sophisticated and well coordinated political machine. The integration of the erstwhile closed and protectionist Chinese economy with that of the larger global economy in the last three decades is the pinnacle of the CPC rule (Mcmillan & Powles, 2009). While Mao Zedong was the father of the Communist China, his successor Deng Xiaoping must be credited for the nation’s progress toward prosperity. Under his leadership, the party ratified and implemented the “Four Modernizations” program that would propel China onto the global stage, where it is fast approaching the leadership position. This ambitious program of sweeping economic reforms, which were based on free-trade policies, opened China to the outside world. But the last decade has seen deterioration in such optimism, as “the very limited agricultural resource base and lack of basic rural infrastructure, coupled with a deplorable health status and level of educational attainment, not only constrain the effectiveness of government poverty reduction programs in these areas, but also severely hamper single-sector agriculture and rural enterprise development interventions.” (Herd & Dougherty, 2007) While free trade has led to development in some countries, they have led to economic instability in others. What is most worrisome about free trade in the modern world is the vacuous nature of the term, as it is stripped of its substantive meaning. In other words, where there is conflict between the execution of this system in its ideal form and the consequences for major business corporations, it is always the interests of the latter that is looked after. This is nowhere more clearly visible than in the history of NAFTA (North American Free-Trade Agreement). The terminology can be a little deceptive here, for despite claims of being a 'free-trade' agreement, it has many protectionist provisions in it. A brief survey of the effects of NAFTA on the general population reveals that American, Mexican and Canadian elites have seen most of its benefits. Despite initial promise of creating more jobs for Americans, under the NAFTA regime many industries were moved to Mexico, due to cheaper labor there. (Ciccantell, 2001, p.57) The key long term goal for the U.S is not so much the establishment of free-trade practices in the neighborhood as it is to reconstruct its hegemony that was formerly seized by Japan and Europe. To put things in perspective, “The declining competitiveness of U.S. raw materials supply systems badly damaged U.S. hegemony during the 1970s and l980s. The original U.S. strategy was to create a continental energy market to reduce overseas oil imports, guarantee access to oil and natural gas from Canada and Mexico, and reduce price instability. The evolution into broader agreements reflected the interests of other U.S. industries and the efforts of Canadian and Mexican states and firms to capture benefits from restructuring.” (Ciccantell, 2001, p.57) In the last two decades, the manufacturing sector in the United States has virtually collapsed, leaving tens of thousands of workers unemployed. Similarly, the effects of NAFTA can be partially attributed to the problem of illegal immigration from Mexico to the United States. A salient question at this point is whether such a steep social/national cost worth bearing for the sake of American hegemony? Moreover, as the history of NAFTA succinctly illustrates, the manifestation of U.S hegemony need not have a purpose beyond that of domination and self-interest. Whether it aids or hinders free trade agreements can be incidental to the cause. (Worth & Kuhling, 2004, p.31) In this context, it is apt to say that global free trade arrangements have failed to lead to uniform development. While there are obvious success stories like India, China and South East Asian bloc, much of the rest of the world has not benefitted. It is in response to these failures that the global solidarity movement has arisen. Centered on universal human challenges like poverty-reduction, access to basic healthcare, free education for all children, social welfare for the disadvantaged, etc, the global solidarity movement presents an alternative operative framework to the United States led global capitalist project. In a few decades time, it is plausible that this more pragmatic form of social organization might have quelled American hegemony in economic, cultural and political domains and might have eliminated the need for economic globalization. (Zakaria, 1999, p.9) The brewing discontent with the excesses of capitalism has spawned a new ideological alternative - consistent with the Hegelian notion of the dialectic. This promising counter-current has Marxist underpinnings to it, but it would be simplistic to term it as a throwback to the failed experiment with communism or socialism. While retaining the essence of socialism, Third-World solidarity movement attempts to cater to humankind's basic necessities in an atmosphere of co-operation and collaboration as opposed to exploitation. (Zakaria, 1999, p.9) The leaders of this movement (many of whom are from Latin America) argue that it is not necessary to just have an alternative ideology to eradicate current injustices. Instead, people across the world need to show great resolution to challenge capitalist power structures and concomitant ideologies. What is also needed is a community of like-minded people who are willing to work conscientiously and in the spirit of social solidarity to usher in the changes. The keywords in this project are organization, mobilization, compassion and solidarity – concepts that are antagonistic to the notion of hegemony (American or otherwise). (Tyvela, 2004, p.156) It is encouraging to see that parallel grassroots movements are arising in different countries simultaneously. For example, we are witnessing grassroots organizations in India, Brazil, Argentina, Venezuela, Chile, South East Asia, Bangladesh, etc. The recent uprisings in the Arab world, where autocratic regimes that supported and promoted American hegemony were shaken (and in the case of Egypt, overthrown from power), is very encouraging. It is also hearty to see that anti-American sentiment is being constructively channeled in these countries. References: Buchanan, Paul G. "That the Lumpen Should Rule: Vulgar Capitalism in the Post-industrial Age." Journal of American and Comparative Cultures 23.4 (2000): 1+. Ciccantell, Paul. "NAFTA and the Reconstruction of U.S. Hegemony: The Raw Materials Foundations of Economic Competitiveness." Canadian Journal of Sociology 26.1 (2001): 57. Herd, R., & Dougherty, S. (2007). Growth Prospects in China and India Compared. The European Journal of Comparative Economics, 4(1), 65+. Mcmillan, S., & Powles, M. (2009). China, India and Japan: The Greater Game Stuart McMillan and Michael Powles Consider Relationships That Will Dominate the Asia-Pacific Region's Future. New Zealand International Review, 34(3), 12+. Winters, L. A. & Yusuf, S. (Eds.). (2007). Dancing with Giants: China, India, and the Global Economy. Washington, DC: World Bank. Levite, Allan. "Capitalism and Coercion." Ideas on Liberty Feb. 2002: 32+. The 2008 Global Cities Index: Cities Bear the Brunt of the World's Financial Meltdowns Crime Waves, and Climate Crises in Ways National Governments Never Will. So, When Foreign Policy, A.T. Kearny, and the Chicago Council on Global Affairs Teamed Up to Measure Globalization around the World, We Focused on the 60 Cities That Shape Our Lives the Most. (2008, November/December). Foreign Policy, 68+. Rogers, W. H. (2003). Innovation and the Growth of Cities. Journal of Economic Issues, 37(4), 1180+. Tyvela, Kirk. "Cyrus Veeser, A World Safe for Capitalism: Dollar Diplomacy and America's Rise to Global Power." American Studies International 42.1 (2004): 155+. Worth, Owen, and Carmen Kuhling. "Counter-hegemony, Anti-globalisation and Culture in International Political Economy." Capital & Class (2004): 31+. Zakaria, Fareed. "The Challenges of American Hegemony, Then and Now." International Journal 54.1 (1999): 9+. Read More