That communities and nations abandon self-reliance and embrace dependence. That we abandon our capacity to produce many items and concentrate only on a few. That we import what we need and export what we produce. Bigger is better. Competition is superiorto cooperation. Material selfinterest drives humanity. Dependence is better than independence. These are the pillars of free trade. In sum, we make a trade. We give up sovereignty over our affairs in return for a promise of more jobs, more goods and a higher standard of living. The economic arguments in favor of free trade are powerful. Yet for most of us it is not the soundness of its theory, but the widely-promoted idea that free trade is inevitable which makes us believers. We believe that economies, like natural organisms, evolve from the simple to the complex, from the lower to the higher phyla. From the Dark Ages to city states to nation states to the planetary economy, and soon, to space manufacturing, history has systematically unfolded. Free trade supporters believe that trying to hold back economic evolution is like trying to hold back natural evolution. Trying to take another developmental path is viewed at best as an attempt to reverse history and at worst as an unnatural and even sinful act—the economic equivalent of sodomy. This kind of historical determinism has its own corollaries. We not only move from simple to complex economies. We move from integrated economies to segregated ones, separating the producer from the consumer, the farmer from the kitchen, the power plant from the appliance, the dump site from the garbage can, the banker from the depositor and, inevitably, the government from the citizenry. In the process of development we separate authority and responsibility. Those who make the decisions are not those affected by the decisions. Just as homo sapiens is nature’s highest achievement so the multinational and supranational corporation becomes our most highly evolved economic animal. The planetary economy demands planetary institutions. The nation state itself begins to disappear, both as an object of our affection and identification and as a major actor in world affairs. The planetary economy merges and submerges nations. Yoshitaka Sajima’ vice president of Mitsui and Company, USA asserts, “ the U.S. and Japan are not just trading with each other anymore—they’ve become part of each other.” Former Republican Governor of Tennessee Lamar Alexander agreed when he declared the goal of his economic development strategy was “ to get the Tennessee economy integrated with the Japanese economy.” In Europe the Common Market has grown from six countries in the 1950s to 10 in the 1970s to 12 today and barriers between these nations are rapidly being abolished. Increasingly there are no Italian or French or German companies but only European supra-corporation. The U.S. and Canadian government just signed a free trade agreement to merge our two countries economically. Northern Mexico is all but integrated into the U.S. economy. Promotion of exports is now widely accepted as the foundation for a successful economic development program. Whether for a tiny country like Singapore or a huge country like the United States, we come to see exports as essential to a nation ’s economic health. Globalism commands our attention and our resources. Our principal task, we are told, is to nurture, extend and manage emerging global systems. Five nations now patrol the Persian Gulf to protect our oil pipelines. Trade talks are on the top of everybody’s agenda, from Gorbachev to Reagan. Political leaders strive to devise stable systems for global financ ia l markets and exchange rates. The best and the brightest of this generation use their ingenuity to establish the planetary financial and regulatory rules that will enable the greatest flow of resources among nations with the least instability. This emphasis on globalism rearranges our loyalties and loosens our neighborly ties. “The new order eschews loyalty to workers, products, corporate structure, businesses, facto r ie s , comm un it ie s , even the nation” , the New York Times announces. Martin S. Davis, chairman of Gulf and Western declares, “ All such allegiances are viewed as expendable under the new rules. You can’t be emotionally bound to any particular asset.” We are now all assets. Even IBM with $50 billion in sales is not big enough in the global marketplace. Jettisoning loyalties isn’t easy. But that is the price we believe we must pay to receive the benefits of the global village. Every community must achieve the lowest possible production cost even when that means breaking whatever remains of their social contract, and longstanding traditions. Listen to Walter Joelson, chief economist at General Electric, “ Let’s talk about the difference in living standards rather than wages. What in the Bible says we should have a better standard of living than others? We have to give back a bit of it.-” Stanley J. Mihelick, executive vice president for production at Goodyear is even more explicit, “ Until we get real wage levels down much closer to those of the Brazils and Koreas, we cannot pass along productivity gains to wages and still be competitive.” Wage raises, environmental protection, national health insurance, l iab i l ity lawsu its —anything that raises the cost of production makes us more uncompetitive—threatens our economy. We must abandon the good life to sustain life itself. We are in a global struggle for survival. We are hooked on free trade. The Undersecretary o f the Treasury proposes creating 5 to 10 giant U.S. banks. The Doctrine Falters At this very moment in history, when the doctrines of free trade and globalism are so dominant, the absurdities of globalism are becoming ever more evident. Consider the case of the toothpick and the chopstick. A few years ago I was eating at a Saint Paul restaurant. After lunch I picked up a toothpick wrapped in plastic. On the plastic was printed the word, “ Japan” . Now Japan has little wood and no oil. Yet it had become e f f ic ie n t enough in our g loba l economy to bring little pieces of wood and barrels of oil to Japan, wrap the one in the other and send them to Minnesota. This toothpick may have travelled 50,000 miles. But never fear, we are now retaliating in kind. A Hibbing, Minnesota factory now produces a billion disposable chopsticks a year, for sale in Japan. In my mind’s eye I see two ships passing one another in the northern Pacific. One carries little pieces of Minnesota wood bound for Japan; the other carries little pieces of Japanese wood bound for Minnesota. Such is the logic of free trade. Nowhere is the absurdity of free trade more evident than in the grim plight of the Third World. Developing nations borrowed money to build an economic infrastructure in order to specialize in what they do best and thus expand their export capacity. To repay these debts Third World countries must increase their exports. One result of this situation has been a dramatic shift from producing food for internal consumption to producing food for export. Take the case of Brazil. Brazilian per capita production of basic foodstuffs (rice, black beans, manioc, and potatoes) fell 13 percent from 1977 to 1984. Per capita output of exportable foodstuffs (soybeans, oranges, cotton, peanuts and tobacco) jumped 15 percent. Today some 50 percent of Brazil suffers malnutrition. Yet one leading Brazilian agronomist still calls export promotion, “ a matter of national survival.” In the global village a nation survives by starving its people. What about the purported benefits of free trade such as higher standards of living? It depends on whose standard of living you’re talking about. Inequality between and in most cases, within, countries has increased. Two centuries of trade has exacerbated disparities in world living standards. According to Swiss economist Paul Bairoch, per capita GNP in 1750 was app rox im a te ly the same in the developed countries as in the undeveloped ones. In 1930 the ratio was about 4 to 1 in favor of the developed. Today it is 8 to 1. Inequality is both a cause and an effect of globalism. Inequality within one country is a cause of globalism because it reduces the number of people with sufficient purchasing power. Thus a producer must sell to wealthy people in many countries to achieve the scale of production necessary to produce goods at a relatively low cost. Inequality is an effect of globalism because export industries employ few workers who earn disproportionately high wages and because developed countries tend to take out more capital from Third World countries than they invest in them. Free trade was supposed to improve our standard of living yet even in the United States, the most developed of all nations, we find that living standards have been declining over the last fifteen years. Most dramatically, according to several surveys, we are now working almost half a day longer today for lower real wages than we were in 1970. Less leisure time, less family, less community time. If the present trend continues we may have less leisure time in the 1990s than we had in the 1790s. A New Way off Thinking It is time to re-examine the validity of the doctrine of free trade and its corollary, the planetary economy. To do so we must begin by speaking of values. Human beings may be acquisitive and competitive but we are also loving and cooperative. Several studies have found that the voluntary, unpaid economy may be as large and as productive as the paid economy. There is no question that we have converted more and more human relationships into commercial transactions but there is a great deal of question as to whether this was a necessary or beneficial development. We should not confuse change with progress. Bertrand Russell once described change as inevitable and progress as problematic. Change is scientific. Progress is ethical. We must decide what values we hold most dear and then design an economic system that reinforces those values. Reassessing Free Trade’s Assumptions Let me review the basic assumptions of free trade that I described at the beginning of this talk, only this time critically. If price is to guide our buying, selling and investing then price should tell us something about efficiency. Efficiency should refer to the amount of real world resources used in making a product. We might measure efficiency in terms of natural resources—that is, by measuring the amount of waste produced in converting a raw material into a consumer or industrial product. Or we might measure efficiency in human terms, that is, by measuring the amount of hours it takes for a person to make a product. But price is no measure of efficiency. In fact price is no reliable measure of anything. The prices of raw materials, labor, capital, transportation and waste disposal are all heavily subsidized. But today wage rate inequities among comparably skilled workforces can be as great as 30 to 1. This disparity overwhelms even the most productive worker. An Clinton St. Quarterly—Spring, 1988 29
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