Rethinking Free Markets, Free Trade & Growth

Thursday, January 8, 2015
Betsy Bowman

As we contemplate the possible passage of theTrans-Pacific Partnership (TPP), we might reconsider the ideas of free trade and free markets and where these ideas came from. We should also take another look at the idea of growth, indeed endless growth. These are the issues Betsy Bowman will examine in a talk sponsored by the Center for Global Justice

Free trade, free markets and growth are repeated like a mantra — a bit of catechism that we all know by heart and that we all think to be beneficial goals in and of themselves. However, Adam Smith, writing before the French Revolution, and economic thinkers from the Middle Ages through the Modern period, all argued for free markets and free trade that were free not from government regulation but that were free from inherited privileges, monopolies and what economists call “economic rent” — unearned income. Neo classical economists such as Adam Smith did not argue for free markets where the strongest wins as seems to be the current view. He argued for markets and trade free from God-given privileges, rights and monopolies of the monarchy, aristocracy and the Church who all unfairly benefited from God- iven, unearned, structural, systemic advantages. We also know that today’s “wealthy” countries became wealthy not through free trade, but through protected trade and high tariffs, not to mention colonial rule. So let’s stop kidding ourselves that free trade is anything but big businesses pushing the smaller ones into bankruptcy.

Growth has been trumpeted as the great panacea — a solution for poverty and underdevelopment. We imagine that the 6% growth of those heady post WWII years is normal. Anything less than 5% per year growth is viewed as anemic. But Thomas Piketty shows in his widely aclaimed book Capital in the Twenty-First Century that growth has averaged only 1.5% over the last two centuries. The abnormally high growth of the post WWII period was abnormal, and it was due to the destruction of most of the world’s productive capacity i.e. all the factories of Europe and Japan. And this abnormally high growth only occurred in the US which exited WWII with its industrial base intact. The norm for normal growth is actually very low growth or stagnation as Marxist economists have pointed out for decades. But no one wants to believe that the natural rhythm of capitalism is stagnation instead of booming growth that lets the good times roll. Just 1.5%. Setting a realistic goal such as 1.5% growth could be enormously beneficial and helpful in reaching the real goal which is not profit regardless of all else and at any cost but instead the real goal is reducing carbon emissions and satisfying the needs of the world’s population.