Open Thread on Free Trade
The recent House passage of the Central American Free Trade Agreement (CAFTA) got me thinking: where is there any evidence that free trade agreements are good for America?
Obviously a loaded question, its answer based on what you believe America needs. Clearly in the 25 or so years since Keynesian (state-led) development was replaced by what is best defined as global neoliberalism, the United States has seen steady economic growth and increased GDP per capita. But these are aggregate numbers; in this same period of time, real wages have either been stagnant or have declined — meaning that the rich have gotten richer while everyone else has been running in place.
Also, when NAFTA was rushed through Congress in the early 1990s, we were promised that our exports to Mexico would increase while illegal immigration would virtually cease. Neither promise became reality. All that NAFTA seemed to do was to put Americans out of work, or shift them from well-paying jobs to lower pay working in the service sector. Perhaps more Mexicans now have work, but I’m more concerned with the plight of my unemployed neighbor than I am about them.
It is true that we now have $49 DVD players and 99 cent hamburgers, but the price of big-ticket items — houses and cars for example — continue to climb out of the reach of anyone making median wages.
Globally, the issue is the same; it is undeniable that real incomes in developing nations have increased, but relative to local elites they have declined, just as they have in the United States. And every single study of civil violence acknowledges that absolute gains mean nothing when there is a relative loss — meaning that current development programs are actually contributing to instability in the Third World.
I don’t pretend to know the answer here, but it seems to me that the theory of free trade is one thing and the reality is another. I understand Ricardo’s comparative advantage and Schumpeter’s creative destruction, and they look great on paper. The evidence, however, suggests that such theories have not led to appreciable gains for the average American. Globalization can’t be stopped, but do we necessarily want to speed up the process? Are the flaws of the Keynesian state really solved by unfettered transnational capital? Is the purpose of our economy to simply increase GDP, or are questions of equity something to be considered?
Chime in with your thoughts.