Free Trade During Colonialism vs. Globalization - Essay Example

? Free trade during colonialism vs. free trade during globalization Introduction Many people have the illusion that free trade is an entirely modern economic concept which is the brain child of globalization. In reality, free trade existed in numerous forms even during colonialism. Free trade during colonialism and free trade during globalization have lot of similarities and differences in principles and practices. It should be noted that during colonialism, colonial powers encouraged free trade to safeguard their interests alone whereas at present or during globalization period, free trade is encouraged by all countries because of its potentials to rejuvenate the economy of countries irrespective of rich or poor. This paper analyses the major similarities and differences between free trade during colonialism and free trade during globalization. Free trade: Colonialism vs. globalization An unexpected transformation occurred in the aftermath of the economic downturn or depression which began in 1873 in Europe and North America. With barriers to trade rising, production standing still, and new competitors such as Germany and the United States industrializing, the search for new markets and sources of raw materials intensified in the direction of colonial expansion (Saul, n.d.). Colonial powers tried to safeguard their business interests during nineteenth and twentieth centuries rather than thinking too much about the rights of the nations under their control. The concept of free trade was another mechanism for them to exploit the resources of nations under their control. The current free trade which is the concept of globalization promotes neo-colonialism which is sharp in contrast with the principles of free trade implemented by the colonial powers in the past. It should be noted that neo-colonialism is a practice of promoting capitalism, globalization and cultural co-operation between countries. In other words, current free trade has the ability to contribute heavily to the vast sectors of global population whereas the free trade during colonialism was confined within the boundaries of the nations under colonial rule. Current free trade helped “the globalization of a free market economy, the standardization and homogenization of production and the fixing of world prices in economies which are at unequal stages of economic and technological development” (In Opposition to Free Market Globalization and Neo Colonialism, We Say: No to APEC, 2004) Former Nobel Prize winner and renowned American economist Paul Krugman argued that free trade developed as a result of globalization has brought many opportunities to this world. In his opinion, “the view that free trade is the best of all possible policies is part of the general case for laissez-faire in a market economy and rests on the proposition that markets are efficient (Krugman, 1987, p.134). On the other hand, trade scenarios during colonialism were entirely different from the current trade scenario. Current market is extremely efficient and heavily competitive compared to the market in the nineteenth and twentieth centuries. Instead of conflict, co-operation seems to be the principle undertaken by the free trade of modern era. In other words, free trade of globalization is perceived as helpful to all countries irrespective of their socioeconomic conditions. On the other hand, free trade during colonialism suited only to the interests of the colonial powers. Theory of comparative advantage was promoted by free trade of globalization era whereas free trade policies during colonialism were revolved around the interests of the colonial powers. The theory of comparative advantage promotes the view that good of natural environment and industrial abilities of each country should be exported. It also cites that free market is another ideologically based intervention in ways that maintain the economic and political status quo (Gonzalez, 2006, p.65). Free trade evolved out of globalization, helps countries to sell their products in global markets where the demand and prices are higher for that product. For example, a country which is producing surplus commodities can sell excess quantities in any market which offers competitive price. Trade barriers such as tariffs and other import export taxes were reduced or eliminated by the agreements reached by different countries for enhancing free trade between them. Such free trade agreements were not at all the part of free trade in colonial era. Countries under colonial powers had no authority to sell their products in international market against the interests of the colonial powers. Equal wealth distribution is the major principle behind free trade of modern era. It should be noted that global wealth was accumulated in the less heavily populated western countries during colonialism whereas at present it is shifting towards the more heavily populated Asian region. Most heavily populated countries such as China and India are developing rapidly at present because of modern free trade concepts. On the other hand, free trade in colonialism was focussed more on safeguarding the interests of capitalist countries and the western world. The concepts of free trade of modern era are not free from criticisms. “Critics of the free trade doctrine argue that free trade is desirable under 'ideal conditions only”(Skarstein, 2007, p.347). In other words, an ideal world defined by free trade is almost impossible to create. It should be noted that different countries may have different social, political, cultural and economic spectra and it is difficult to cater the needs of such diverse community with the help of free trade concepts put forward by globalization. For example, India is a country in which 28 states are there. The southernmost state Kerala is blessed with coconut trees and therefore coconut oil is one of the major revenue sources for Keralites. As part of the free trade agreements with Malaysia, India has recently imported huge volumes of palm oil from Malaysia. Even though, other Indian states blessed by this import, Kerala suffered a lot because of the destruction of coconut oil price in domestic market. In short, free trade of modern era has the ability to negatively affect some specific sectors. In other words, the efforts to boost one sector as part of free trade may affect other sectors drastically. Conclusions Free trade of modern era or globalization is entirely different from the free trade of ancient era or colonialism. Collective growth is the major objective of current free trade whereas growth of colonial powers was the major motives of free trade in the past. Global wealth is currently shifting from west to more heavily populated east, as a result of free trade agreements of modern era. The concepts of current free trade are also not free from controversies even though it is accepted widely in principle. One of the major criticisms labelled against current free trade is its ability to affect different sectors differently. References 1. In Opposition to Free Market Globalization and Neo Colonialism, We Say: No to APEC. 2004. Asia-Pacific Co-operation meets on 4 -5 June 2004 in Pucon and Villarrica. [Online] Available at: http://www.mapuche-nation.org/english/main/apec/no-apec-01.htm [Accessed 26 April 2012] 2. Saul, S. N.d. Colonialism. [Online] Available at: http://www.globalautonomy.ca/global1/glossary_pop.jsp?id=CO.0046 [Accessed 26 April 2012] 3. Gonzalez, C.G. 2006. Deconstructing the Mythology of Free Trade: Critical Reflections on Comparative Advantage. La Raza Law Journal, Spring2006, Vol. 17 Issue 1, p65-93 4. Krugman P.R. 1987. Is Free Trade Passe? The Journal of Economic Perspectives, Vol. 1, No. 2, pp. 131-144 5. Skarstein, R. 2007. Free Trade: A Dead End for Underdeveloped Economies. Review of Political Economy, Jul2007, Vol. 19 Issue 3, p347-367 Read More