Free Trade Isn’t Free

The theory goes that the economic prosperity of a country is best served by having extremely low barriers to goods from foreign countries. A larger, more dynamic market that allows businesses to go where they wish in search of lower costs, and that allows free movement of goods increases profits, and – eventually – lowers prices for consumer goods.

The first part of that happy forecast has largely proven true. Corporate profits have exploded as free trade policies have spread across the world. Productivity has climbed, and the stock market has soared.

And the middle class in the advanced countries has been devastated. Why is that? What’s wrong with the “free” trade system? Why has its human cost proven so high?

The wealthy will always resist any attempt to redistribute wealth to those left behind. And since wealth equals political power and influence, it is almost impossible for workers to get a fair share of the increased productivity that “free” trade creates.

It is worthless, even cruel to tell the workers that they have to “re-educate” themselves for the “new” economy, since they generally have the least economic margin – both in terms of money and time; and political parties that serve the interests of the rich will cut spending on education and relief for the workers as part of “austerity” measures.

This is not theoretical. It is exactly what has happened in any country where “free” trade has become the norm. The concentration of wealth in fewer and fewer hands, along with the concentration of political power that results has led to historic levels of wealth inequality. And in countries where inheritance is subject to minimal or declining taxation, this leads to a death spiral for the working middle class, and a monopolization of political power by inherited wealth.

The solution is to use government, and its ability to tax excess profits to redistribute wealth to re-educate and support the workers as they are forced to retool, re-educate, and relocate themselves.

It is manifestly unfair to expect that the investing class should reap all the benefits of free trade, while the working class must bear all the burdens, risks and sacrifices. But that is not the political environment we currently live in. As wealth inequality continues to climb, and the economic desperation of the working class increases, they will become more, not less susceptible to nationalist demagogues. Increasing pain and increasing political helplessness will not increase the faith of the workers in our political institutions, or the rule of law.

If we wish to avoid a cycle of ever increasing misery, we must turn our efforts to electing politicians who clearly and unequivocally champion committing both money and political capital to the direct interests of the working class. Otherwise, the cost of “free trade” will be more chaos, more human misery, and perhaps in the long run, the Republic itself.

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