Culled from work by Albert, Elaine Bernard, Peter Bohmer, Jeremy Brecher,
Dorothy Guellec, Robin Hahnel, Russell Mokhiber, Mark Weisbrot, and Robert
Weissman
The logic of trade is simple. Suppose I can make wheat
better than steel and you can make steel better than wheat. If I then focus on
wheat and you focus on steel, we can trade together to exploit our respective
talents to each do better than if we didn’t trade. Similarly, if two countries
have different "comparative advantage" in the production of wheat and steel, and
they each make both wheat and steel for themselves, the total pile of wheat and
steel for the two countries will be less than if they specialized. Of course,
the extra output from specializing and trading has to exceed the costs of
negotiating the trade and sending the items, but if it does, than both sides can
get more from trading than not. Free trade, then, is simply trade without taxes,
tariffs, or other barriers or restrictions. The logic is that since trade is
good in that both parties can benefit relative to not trading, restrictions that
reduce trade are bad.
First, when two parties specialize and then trade to
benefit from comparative advantages, gains could be split to benefit the
worst-off party more, divided equally, or benefit the better-off party more
depending on prices or what is called "the terms of trade." Some prices could
even shuffle all the gains to one side. They could cause one side to be worse
off then if they hadn’t traded in the first place, as in many instances of
colonialism. So in the short-run, who benefits from trade and how much they
benefit depends on prices. One of the ills of international trade is that larger
economies can impose prices while smaller economies generally suffer the
consequences. This doesn’t only mean that the U.S. and Germany can overwhelm
Thailand and Guatemala. Of the 100 largest economies in the world, 52 of them
aren’t countries, they are corporations.
Moreover, with no restrictions on international
investment, firms will force countries to compete against one another. Every
country and community is pressured to lower wages, lower taxes on business, and
reduce environmental regulations if they are to attract and hold businesses.
This is what has been called the race to the bottom.
Additionally, in this system communities can be decimated
if what they have specialized to produce can no longer be sold profitably on the
world market. So, for example, if free trade means that U.S. corn has a lower
price than Mexican corn, U.S.-made corn will be imported into Mexico and those
who produce corn in Mexico may not only lose their land and livelihood, but be
forced to leave their communities in search of employment elsewhere.
Or suppose two countries trade and prices are such that
both enjoy immediate material gains. However, suppose the division of labor
allows one country to develop and diversify its economy, but forces the other
country to focus overwhelmingly on one product, perhaps even a product that has
no future. One country specializes in coffee or sugar and the other specializes
in computer software. As a result, the continual downward pressure on prices of
sugar or coffee as well as limited linkage to other industries causes inequality
to persist and widen.
Similarly, two countries could trade and one moves in
ecologically positive directions, but the other focuses in areas with horrible
environmental, labor, or social consequences. Additionally, whether an economic
policy benefits only from profits rather than from social quality of life and
ecological effects has much to do with domestic agendas in each country. If one
country has death squads to silence opposition (paid for by the government of
the other country), its labor costs can be pushed to rock bottom, children can
be enslaved, toxic waste can be dumped.
Regarding the World Trade Organization (WTO)—its agenda
prioritizes the privatization of education, health, welfare, social housing, and
transport. According to the U.S. trade delegation, "The United States is of the
view that commercial opportunities exist along the entire spectrum of health and
social care facilities, including hospitals, outpatient facilities, clinics,
nursing homes, assisted living arrangements, and services provided in the home."
Salivating in the wings of the WTO talks were U.S. multinationals, including the
pharmaceutical industry, the long-term care sector, and HMOs. The WTO seeks to
create a new privatization bonanza in the health sector, as but one instance of
its overall agenda. Multinational and transnational corporations are lining up
to capture the gross domestic product that governments currently spend on public
services such as education and health. The long tradition of European welfare
states based on solidarity through community risk-pooling and publicly
accountable services is being dismantled.
The WTO is an international organization of 134 member
countries that is a forum for negotiating international trade agreements and the
monitoring and regulating body for enforcing agreements. The WTO was created in
1995, by the passage of the provisions of the "Uruguay Round" of the General
Agreement on Tariffs and Trade (GATT). Prior to the Uruguay Round, GATT focused
on promoting world trade by pressuring countries to reduce tariffs. But with the
creation of the WTO, this corporate-inspired agenda was significantly ratcheted
up by targeting so-called "non-tariff barriers to trade"—essentially any
national or local protective legislation that might be construed as impacting
trade.
The idea is simple—instead of only imposing on third
world countries low wages and high pollution due to their weak or bought-off
governments, why not weaken all governments and agencies that might defend
workers, consumers, or the environment, not only in the third world, but
everywhere? Why not remove any efforts to limit trade due to its labor
implications, ecology implications, social or cultural implications, or
development implications, leaving as the only criteria whether there are
immediate, short term profits to be made? If national or local laws impede
trade—say an environmental or health law, or a labor law—the WTO adjudicates,
and its entirely predictable pro-corporate verdict is binding. The WTO trumps
governments and populations on behalf of corporate profits.
There is no denying that someone could oppose the WTO out
of narrow self-interest—saying, in essence, my country ought to be able to do as
it domestically prefers, but other countries should be entirely beholden to this
world oversight on behalf of corporations (sort of the way the U.S. government
relates to international law and the World Court: it’s for everyone else). But
the view of movements against the WTO should be that social, labor, ecology,
cultural, and other concerns take precedence over profit-making everywhere, not
solely in one’s own neighborhood.
The real debate between WTO advocates and their left
critics is not about protectionism, therefore, but about who will be protected
from the ravages of unrestrained competition. The WTO has no rules to guard
those who labor or to protect long-term development or to foster cultural
sustainability or diversity. Without such standards, the majority of people can
actually lose from expanding trade, not only relative to a fair ideal, but
relative to abstaining entirely.
The critic’s theoretical understanding of the WTO as a
vehicle only moved by corporate profit-seeking logic is borne out from the WTO’s
history to date. In every case that has been brought to the organization
challenging environmental or public safety legislation on behalf of
corporations, the corporations have won. When foreign commercial shrimp fishing
interests challenged the protection of giant sea turtles in our endangered
species act, the turtles didn’t stand a chance. When it was Venezuelan oil
interests versus the U.S. Environmental Protection Agency’s air quality
standards for imported gasoline, the oil interests won. When it was U.S. cattle
producers against the European Union’s ban on hormone-treated beef, European
consumers lost. The list goes on.
But don’t we favor regulation of
trade?
Yes, but not the type of regulation proposed by the WTO.
The WTO is about protecting corporate ownership and monopoly over the patenting
of plants, processes, seed varieties, drugs, software, and all capital,
fostering its exchanges of goods despite any ill effects, and breaking down any
protections of labor, the environment, health and safety, that might limit
corporate profit making.
Some critics argue that the WTO trade liberalization
program is fundamentally flawed and we should abolish this dangerous
organization. They urge building global resistance and constructing global
solidarity from below. Other people, in particular much of organized labor,
argue that while the WTO trade liberalization program is deeply flawed, it’s now
well established as a powerful organization and that the concept of negotiated
trade regulation is vital to the health and welfare of the world community. They
argue that if core labor rights, environmental protections, and what the
Europeans refer to as a "social clause" was inserted into the WTO’s mandate and
practice, it could be transformed.
1. The WTO
prioritizes trade and commercial considerations over all other values. WTO rules
generally require domestic laws, rules, and regulations designed to further
worker, consumer, environmental, health, safety, human rights, animal
protection, or other non-profit centered interests to be undertaken in the
"least trade restrictive" fashion possible—almost never is trade subordinated to
these noncommercial concerns
2. The WTO
undermines democracy by shrinking the choices available to democratically
controlled governments, with violations potentially punished with harsh
penalties
3. The WTO
actively promotes global trade even at the expense of efforts to promote local
economic development and policies that move communities, countries, and regions
in the direction of greater self-reliance
4. The WTO
forces Third World countries to open their markets to rich multinationals and to
abandon efforts to protect infant domestic industries. In agriculture, the
opening to foreign imports will catalyze a massive social dislocation of many
millions of rural people on a scale that only war approximates
5. The WTO
blocks countries from acting in response to potential risk—impeding governments
from moving to resolve harms to human health or the environment, much less
imposing preventive precautions
6. The WTO
establishes international health, environmental, and other standards at a low
level through a process called "harmonization." Countries or even states and
cities can only exceed these low norms by winning special permission, rarely
granted. The WTO thereby promotes a race to the bottom and imposes powerful
constraints to keep people there
7. WTO
tribunals rule on the "legality" of nations’ laws, but carry out their work
behind closed doors. The very few therefore impact the life situations of the
many, without even a pretense at participation, cooperation, and democracy
8. The WTO
limits governments’ ability to use their purchasing dollars for human rights,
environmental, worker rights, and other non-commercial purposes. The WTO
requires that governments make purchases based only on quality and cost
considerations. Not only must corporations operate with an open eye regarding
profits and a blind eye to everything else, so must governments and thus whole
populations
9. WTO
rules do not allow countries to treat products differently based on how they
were produced—irrespective of whether they were made with brutalized child
labor, with workers exposed to toxins or with no regard for species protection
10. WTO
rules permit and, in some cases, require patents or similar exclusive
protections for life forms. In other words, the WTO does whatever it can to
promote the interests of huge multinationals—there are no principles at work,
only power and greed
The immediate alternative to the WTO is for international
cooperation to restrain out-of-control global corporations, capital, and markets
by regulating global corporations and markets to make it possible for people in
local communities to control their own economic lives. The alternative is to
promote trade that:
·
reduces the threat of financial volatility and meltdown
·
enlarges democracy at every level from the local to the global
·
defends and enriches human rights for all people
·
respects and fosters environmental sustainability worldwide
·
facilitates economic advancement of the most oppressed and
exploited groups
Rather then the global economy being regulated by small
elites in corporate boardrooms, we should have bottom up commissions to restrict
trade when it is socially or environmentally detrimental. Further short-term
alternatives to the WTO are to:
·
encourage domestic economic growth and development, not domestic
austerity in the interest of export-led growth
·
encourage the major industrial countries to coordinate their
economic policies, currency exchange rates, and short-term capital flows in the
public interest
·
establish standards for and oversee the regulation of financial
institutions by national and international regulatory authorities, encouraging
the shift of financial resources from speculation to useful and sustainable
development
·
establish a tax on foreign currency transactions— known as a
"Tobin tax"—to reduce the volume of destabilizing short-term cross-border
financial flows and to provide pools of funds for investment in long-term
environmentally and socially sustainable development in poor communities and
countries.
·
create public international investment funds to meet human and
environmental needs and ensure adequate global demand by channeling funds into
sustainable long-term investment
·
develop international institutions to perform functions of
monetary regulation that are currently performed inadequately by national
central banks, such as a system of internationally coordinated minimum reserve
requirements on the consolidated global balance sheets of all financial firms.
The alternative to the WTO is to reorient international
financial institutions from the imposition of austerity and destructive forms of
development to support for labor rights, environmental protection, and rising
living standards. The alternative is for wealthy countries to write off the
debts of the most impoverished countries and to create a permanent insolvency
mechanism for adjusting the debts of highly indebted nations. The alternative is
to use regulatory institutions to help establish public control and citizen
sovereignty over global corporations and curtail corporate evasion of local,
state, and national law, such as establishing a binding Code of Conduct for
Transnational Corporations that includes regulation of labor, environmental,
investment, and social behavior. The alternative is to renegotiate WTO, NAFTA,
and all other agreements regulating international trade to reorient trade and
investment to be means to just and sustainable development.
In the aftermath of World War II, besides the United
Nations, the important international economic organizations created at the
conference held at Bretton Woods were the International Monetary Fund (IMF) and
the International Bank for Reconstruction and Development (IBRD), now known as
the World Bank. The IBRD- World Bank was established to help finance the
reconstruction of war-torn Europe and the development of the poorer countries of
the world. The IMF mandate was to regulate an international monetary system
based on convertible currencies to facilitate global trade while leaving
sovereign governments in charge of their own monetary, fiscal, and international
investment policies. Significantly, the effort to establish the International
Trade Organization (ITO) ended in failure, leaving the "minimalist" General
Agreement on Tariffs and Trade (GATT) as its surviving remnant. But all that was
more than 50 years ago. The IMF has now become the "point person" for efforts to
"liberalize," or deregulate the international economic system.
The IMF has prescribed the same medicine for troubled
third world economies for two decades now:
·
Monetary austerity: Tighten the money supply to raise internal
interest rates to whatever heights are needed to stabilize the value of the
local currency
·
Fiscal austerity: Increase tax collections and reduce government
spending dramatically
·
Privatization: Sell off public enterprises to the private sector
·
Financial liberalization: Remove restrictions on the inflow and
outflow of international capital as well as restrictions on what foreign
businesses and banks are allowed to buy, own, and operate.
Only when governments sign this "structural adjustment
agreement" does the IMF agree to lend enough to prevent default on
international loans that are about to come due and otherwise would be unpayable.
Arrange a restructuring of the country’s debt among private international
lenders that includes a pledge of new loans.
The predictable consequences have always been disastrous.
Tight monetary policy and skyrocketing interest rates not only stop productive
investment, stampeding savings into short-run financial investment instead of
long-term productive investment, it keeps many businesses from getting the kind
of month-to-month loans needed to continue even ordinary operations. This
fosters unemployment and drops in production and therefore income. Fiscal
austerity—raising taxes and reducing government spending—further depresses
aggregate demand, also leading to reductions in output and increases in
unemployment. Likewise, if any of the government spending eliminated was
actually improving people’s lives, then reductions in those programs eliminates
those benefits. Privatization of public utilities, transport, and banks is
always accompanied by layoffs. Whether productivity and efficiency is improved
in the long run depends on how badly the public enterprises were run in the
first place, and if private operation proves to be an improvement.
One of the most glaring inefficiencies of "structural
adjustment," even on its own terms, has been that in its haste to reduce public
sector budgets, the IMF has seldom taken the time to try and distinguish between
poorly run and well run public enterprises. In its crusade to privatize, the IMF
routinely lumps efficient public enterprises together with "white elephants"
that do provide poor service to the public while paying bloated salaries to
relatives and political supporters of ruling political parties. The IMF never
considers the possibility that private replacement might be even worse.
Hasty removal of restrictions on international capital
flows makes it easier for wealthy citizens and international investors to get
their wealth out of the country, i.e., removal of "capital controls" facilitates
capital flight, further reducing productive investment, production, income, and
employment. Removing capital controls further exposes the local economy to the
vicissitudes of global capital mobility, including the disease of "contagion."
The same way one wins a new stoplight on a busy street,
wins a pay raise, wins an affirmative action law, or ends a war—by raising
social costs that the policy makers find so odious and dangerous that they feel
they must give in lest the costs climb even higher. What do elites care about
even more than they care about these international agencies? Not much—it’s true,
but one thing is the overall stability of their material advantage and power.
Pursuing WTO agendas is something corporate and political elites want to do,
there is no denying that. On the other hand, if doing so polarizes populations
into movements that threaten not only these policies but even the underlying
requisites of profit-making and governing, that is too high a price to pay. They
do not want to awaken a "sleeping giant"—the populations that they govern and
exploit.
So we raise social costs by educating a growing public
regarding the WTO and other global financial institutions and by channeling the
resulting anger and aspirations into social movements that challenge the WTO and
local government’s business as usual. What will make these movements most
compelling is if they clearly embody the threat to grow continuously, become
steadily more militant, diversify in focus from the WTO to international trade
more broadly, to international relations, and finally to domestic economic
policies and arrangements as well.
Capitalism is an economic system defined by private
ownership of the means of production, corporate workplace structure, and market
allocation. These defining features contour much of what can and will happen in
capitalist economies. Some implications are: that those who own means of
production will accrue vast profits and hold most power; that those who manage
and otherwise monopolize daily decision-making will have considerable income and
power as well; and that those who only obey orders and carry out labor defined
by others will be overwhelmingly subordinate in income and in power.
Corporations will dominate economic and social life by creating a virtual
dictatorship of the owners and administrators of workplaces, and by corrupting
political relations with commercial values and pressures in pursuit of profits.
Citizen’s behaviors will be pushed by market competition toward individualist
selfishness and outcomes will bias from collective fulfillment toward private
profit.
Another mark of capitalism is the market-driven
competitive pursuit of profit among capitalists and the use of every means they
can muster to defend and enlarge their advantage relative to workers. To further
both agendas, various institutions are established. In the international realm
these include the WTO, IMF, and World Bank, each a natural outgrowth of the
desire of the most powerful capitalists to (a) dominate their own economies
without restraint and (b) extend their profit seeking as widely internationally
as they are able to, again, without restraint.
Ultimately, if we don’t like international agencies
because they elevate corporate profit over popular well-being, private power
over democratic participation, and short-run expediency for the few over
long-run fulfillment and sustainability for the many, then we should also reject
private ownership, corporate structure, and markets on the exact same grounds.
But what alternatives are there? This is controversial,
of course, but an alterntive economy might include things like: remuneration
according to effort and sacrifice rather than according to private property,
power, or output; jobs balanced for quality of life and empowerment plus workers
and consumers council democracy rather than hierarchical corporate structure and
authoritarian administration from above; and participatory cooperative social
planning rather than individualist, corporatist, competitive market exchange.
Movements for short-run program such as reforming or
eliminating the WTO can benefit greatly from orienting their analyses, program,
and strategies in tune with longer-run aims. This increases the likelihood of
members sustaining hope and commitment; increases the threat that the movement’s
growth poses to elites, making it more compelling and powerful; and helps to
insure that today’s victories lead to further gains tomorrow and ultimately to a
new economy.
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