Down With Free Trade

Supporters of cheap-labor “free trade” policy like to argue that the cost-savings of manufacturers paying Chinese or Cambodian factory wages instead of American factory wages will put money in the pocket of American workers. This theory works perfectly in a seminal economic text by David Ricardo, considerably less so in the real world. Since the 1970s, the wages of the bottom 90% of American workers have not budged.

Supporters of free trade policies like to argue that those lower wages in Asian factory towns represent a gain economic efficiency, resulting in higher overall growth. But governments like the one in Cambodia frequently use violence to suppress union organizing, negotiations for higher wages and safer working conditions, and labor-oriented politics. This gives the employer a great deal of power over the workers in those so-called negotiations, causing downward pressure on wages. To the extent those wages are lower than market rate because of state violence – which is to say, a huge extent in many of our would-be TPP partners – the wage savings are actually anti-efficiency. But, then, the people who laud free trade never do seem to incorporate the idea of below-market wages from power imbalances between individuals workers and wealthy corporations into their thinking. Many people who devote themselves to denouncing government intervention on behalf of working people or environmental quality turn a blind eye to the most brutal anti-worker oppression by governments in supplier nations, even as they define the shifting of more economic capacity to such conditions as a blow for freedom.

The reason that last point matters is not because of the hypocrisy charge, but because it goes directly to the heart of the argument for “free trade.” At its Ricardian core, neoliberal trade theory’s claim that the lower wages overseas are a gain in economic efficiency – hey, an input went down! You need to take Econ 101! – is used to justify policies that grease the skids for giant multinational corporations to offshore American jobs. These are the policies that have devastated many Americans communities and driven down the wages of American workers. There is supposed to be a gain to GDP growth that justifies this cost, but the “free trade” advocates’ uncomplicated belief is built on a studious denial of an important economic reality – that if Hun Sen’s soldiers stand behind each garment worker in a factory and beat them if they try to stage a walk-out during wage negotiations, the lower wages that result from crushing the labor movement aren’t a gain in economic efficiency at all, but are actually a loss. In addition to the human cost.

You can see the consequences of the drag on American wages in this in the sluggish GDP growth since we began down this path under Reagan. Cheap-labor economic policy is literally eating this country alive from the inside. The American economy depends on the great American middle class and their collective consumer spending, and we spent decades pursuing a policy that has driven down there wages. Henry Ford understood 100 years ago that American workers needed to earn enough to buy his cars or he would not sell enough cars to justify mass production. The same is true today, and the free trade gospel’s promised efficiency returns have not come close to making up the difference, largely because they aren’t actually efficiency returns at all. In 2017, the American worker needs a good job at a good wage; not another 17 cents off undershirts from Pakistan. Enough!

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1 Comment

  1. But, then, the people who laud free trade never do seem to incorporate the idea of below-market wages from power imbalances between individuals workers and wealthy corporations into their thinking. Many people who devote themselves to denouncing government intervention on behalf of working people or environmental quality turn a blind eye to the most brutal anti-worker oppression by governments in supplier nations, even as they define the shifting of more economic capacity to such conditions as a blow for freedom.

    Quoted for truth. Libertarian ‘freedom’ is slavery. It’s literally the freedom of corporations to do what they want to their workers.

    Like

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