Does free trade — really — make us richer?

11 March, 2016 at 07:50 | Posted in Economics | 3 Comments

 

gung-ho-the-story-of-carlsons-makin-island-raiders-movie-poster-1943-1010545148Another obstruction comes from the mainstream economics profession that strongly influences public understanding of and discourse about globalization. The economics profession has been a gung-ho supporter of neoliberal globalization, using the rhetoric of free trade. It advocated the policies of the Washington Consensus that were implemented by the IMF and World Bank in the 1980s and 1990s, and it remains one-hundred percent intellectually committed to neoliberal globalization. However, because globalization inevitably creates global imbalances which are potentially politically challenging, it is necessary to sanitize them by arguing they do no harm and do not undermine the benefits of neoliberal globalization … The profession promotes hypotheses that sanitize the imbalances, while ignoring those that paint the imbalances as the product of a toxic form of globalization.

Moving a globalization reform agenda requires getting the narrative and understanding right. That is the practical political economy significance of the arguments presented in this paper.

Thomas Palley

3 Comments »

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  1. The materialists says no. Trade makes no one richer, only production creates. Trade is in a dialectic conflict with production. Production can only increase profits by increased production, trade makes money from limiting access. The swedish housing bubble is the perfect example of how trade makes money from limiting access to products and production. Had it followed the idea in mainstream economics that ignores the conflict between trade and production, there would have been a building boom in Stockholm the past 20 years instead of a pricing boom.

    Economic theory who cannot understand the dialectic conflict between trade and production cannot explain bubbles and cannot avoid them.

  2. Economic policy, has social and political consequences. When it is based on ideology rather than science, then the social and political results may not be as advertised as we are presently seeing.

    Trade supposedly “makes the world richer.” But distributional effects count when the goal is prosperity rather than growth measured in GDO per capita. Free trade ideology is based on trickle down that never happens.

    Workers don’t care that “the world is richer” if they are getting poorer. Angry workers have not seen any trickle down and but rather cram down as they compete with immigration by way of importing embedded labor and exporting jobs.

    American workers may be about to give Trump a mandate to put an end to it. If Donald Trump is elected president of the United States, “free trade” and neoliberal globalization will be one of the major reasons.

    Maybe we should resurrect the term “political economy.”

  3. Economics and politics are autonomous, otherwise there could not be state intervention. So, there are political consequences on the economy, and economic feedback effects on politics. Ideology is not an economic policy or practice, ideology is the masking or illusion that covers up an actual economic practice or a political intervention on the economy. An example of a political intervention is protectionist tariffs or a tax policy including subsidization. An example of ideology would be claiming that corporate taxes are too high and should be cut when the actual tax is only on profits following innumerable deductions and tax breaks. Another example of ideology is calling refugees and illegal aliens immigrants!


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