Tuesday, November 12, 2013

624 Investment Treaties & TPP: instruments of Empire by 1%

Investment Treaties & TPP: instruments of Empire by 1%

Newsletter published on 18 November 2013

(1) Investment Treaties & TPP: instruments of Empire by 1%
(2) TPP puts Companies above Governments; it's World Empire, the
opposite of World Government - Paul Craig Roberts
(3) TPP favours offshore data centres, raising Snowden/NSA surveillance
concerns
(4) Countries turn against Investment agreements: South Africa Breaks
Out, by Joseph Stiglitz
(5) Protectionist Economists defy Free Trade dogma - Eamonn Fingleton
(6) Obituary: John M. Culbertson, economist who defended Protectionism
(7) U.S. 'Free Trade' with Mexico, by John Culbertson

(1) Investment Treaties & TPP: instruments of Empire by 1%

Gary G. Kohls <gkohls@cpinternet.com> 8 November 2013 06:12

The item below comes from my internet whistle-blower friend Peter Tocci,
of the Boston area, who has a keen eye for corporate and governmental
corruption, military misadventures and malfeasance of all types.

He writes about the TransPacific Partnership, which was well exposed on
Bill Moyers’ November 1, 2013 show, entitled, the “Top Secret Trade Deal
You Need to Know About” and which is archived at:
http://billmoyers.com/episode/full-show-the-top-secret-trade-deal-you-need-to-know-about/

Peter says: “If you need further evidence of the global
fascist/surveillance state, see this piece (from Nation of Change at:
http://www.nationofchange.org/trash-tpp-why-its-time-revolt-against-worst-trade-agreement-history-1374584845)
  on the "TPP," a 'trade agreement' now being secretly negotiated due
its nasty ramifications. A small taste:

Some of the most heinous parts of the TPP are provisions to set up
rigged trade tribunals. In these tribunals, corporations can sue
governments for the loss of “expected future profits.” This means that
if a country passes an environmental or a health law that will cost the
corporation money, the corporation can sue for the expected profits it
stands to lose. The suit will come before a trade tribunal where a
three-judge panel, made up mostly of corporate lawyers on temporary
leave from their corporate jobs, will decide the case.

The takeaway from the tribunals is this: they will dissuade countries
from putting in place public interest laws because those governments
will be sued and forced to pay millions to corporations. We've already
experienced something like this, though on a less sweeping scale. Global
Trade Watch reports that under previous trade agreements, “over $3
billion has been paid to foreign investors under US trade and investment
pacts, while over $14 billion in claims are pending under such deals,
primarily targeting environmental, energy, and public health policies.”

By the end of 2011, corporations like Chevron, Exxon Mobil, Dow
Chemical, and Cargill had launched 450 investor-state cases against 89
governments, including the US, to fight regulations that protect the
environment. Among these cases were bans of toxic chemicals,
hydrofracking, timber and mining regulations, and programs that
incentivized green jobs and renewable energy programs.

http://www.nationofchange.org/trash-tpp-why-its-time-revolt-against-worst-trade-agreement-history-1374584845

Here is Peter’s comment:.

In fact, the 'expected future profits' scam is already a part of "free
trade." It's easier to see the scams when you know the central principle
behind the Elite MO: Things done to advance the Agenda are always
presented as 'good' for us or for the country. Or a necessary evil at
worst. Anything advanced to 'solve' a major problem, most of which are
created or lied about, should be automatically suspect and fully
scrutinized. For some reason, the Illuminati fear widespread awareness
of their game. Their control of the news media is strong evidence of
this. Of course, the media is also used to program the mass mind and
reinforce self-defeating belief systems.

(2) TPP puts Companies above Governments; it's World Empire, the
opposite of World Government - Paul Craig Roberts


http://www.foreignpolicyjournal.com/2012/07/04/trans-pacific-partnership-corporate-escape-from-accountability

Trans Pacific Partnership: Corporate Escape from Accountability

by Paul Craig Roberts

July 4, 2012

Information has been leaked about the Trans Pacific Partnership, which
is being negotiated in secret by US Trade Representative Ron Kirk. Six
hundred corporate “advisors” are in on the know, but not Congress or the
media.  Ron Wyden, chairman of the Senate trade subcommittee that has
jurisdiction over the TPP, has not been permitted to see the text or to
know the content.

The TPP has been called a “one-percenter” power tool. The agreement
essentially abolishes the accountability of foreign corporations to
governments of countries with which they trade. Indeed, the agreement
makes governments accountable to corporations for costs imposed by
regulations, including health, safety and environmental regulations. The
agreement gives corporations the right to make governments pay them for
the cost of complying with the regulations of government. One wonders
how long environmental, labor, and financial regulation can survive when
the costs of compliance are imposed on the taxpayers of countries and
not on the economic activity that results in spillover effects such as
pollution.

Many will interpret the TPP as another big step toward the establishment
of global government in the New World Order.  However, what the TPP
actually does is to remove corporations or the spillover effects of
their activities from the reach of government. As the TPP does not
transfer to corporations the power to govern countries, it is difficult
to see how it leads to global government. The real result is global
privilege of the corporate class as a class immune to government regulation.

One of the provisions allows corporations to avoid the courts and laws
of countries by creating a private tribunal that corporations can use to
sue governments for the costs of complying with regulation.
Essentially, the laws of countries that apply to corporations are
supplanted by decisions of a private tribunal of corporate lawyers.

The TPP is open to all countries.  Currently, it is being negotiated
between the US, Australia, Brunei, New Zealand, Singapore, Vietnam,
Chile, and Peru.  Australia, according to reports, has refused to submit
to the private tribunal system.

What are we to make of the TPP?  It is perhaps too early to have all the
answers. However, I can offer some ways of thinking about it.

I doubt that the TPP is a New World Order takeover. If anything, the TPP
reduces the scope of global government by exempting corporations from
government control. Also, global government, unless it is government by
the American Empire, is inconsistent with the neoconservative insistence
on US hegemony over the world. Powerful US ideological, private, and
government interest groups have no intention of losing the power that
they have acquired by being rolled into some New World Order unless the
New World Order is a euphemism for American Empire.

In the criticisms of the TPP, much emphasis is placed on the costs that
corporations of foreign members of the agreement can impose on the US.
However, US corporations gain the same privileges over those countries,
as the agreement gives every country’s corporations immunity to the
other countries’ laws.

It could be the case that US corporations believe that their penetration
of the other countries will greatly exceed the activities in the US of
Brunei, New Zealand, Peru, et al.  However, once Japan, Canada, China
and others join TPP, the prospect of American firms getting more out of
the agreement than foreign firms disappears, unless from the US
perspective the definition of foreign firm includes US corporations that
offshore the production of the goods and services that they market in
the US.  If this is the case, then US offshoring firms would be exempt
not only from the laws and courts of foreign countries, but also exempt
from the laws and courts of the US.

This point is possibly moot as the agreement requires all governments
that are parties to the TPP to harmonize their laws so that the new
corporate privileges are equally reflected in every country. To avoid
discriminatory law against a country’s own corporations that do not
engage in foreign trade, harmonization could mean that domestic
corporations would be granted the same privileges as foreign investors.
If not, domestic firms might acquire the privileges by setting up a
foreign subsidiary consisting of an office.

As  the TPP is clearly an agreement being pushed by US corporations, the
implication is that US corporations see it as being to their relative
advantage. However, it is unclear what this advantage is.

Alternatively, TPP is a strategy for securing exemption from regulation
under the guise of being a trade agreement.

Another explanation, judging from the unusual collection of the initial
parties to the agreement, is that the agreement is part of Washington’s
strategy of encircling China with military bases, as the US has done to
Russia. One would have thought that an agreement of such path-breaking
nature would have begun with Japan, S. Korea, and the Philippines.
However, these countries are already part of China’s encirclement.
Brunei, Singapore, New Zealand, and especially Vietnam would be valuable
additions. Are the special privileges that Washington is offering these
countries part of the bribe to become de facto outposts of American Empire?

Yet another explanation is that Ron Kirk is caught up in the
deregulatory mindset that began with the repeal of Glass-Steagall and
financial deregulation. If financial markets know best and are
self-regulating, requiring no government interference, then so also are
other markets and businesses. [Editor’s note: Glass-Steagall was not
repealed in full; the separation in the Glass-Steagall Act of
commercial from investment banking was repealed while the Federal
Deposit Insurance was not, meaning that taxpayers would ultimately be on
the hook for any risky activities of the banks necessitating bailouts.]

Some ‘free market’ economists view regulations as “takings.” The
argument is that regulations take corporate property—profits, for
example, by making corporations comply with health, safety, and
environmental regulation—just as government takes private property when
it builds or widens a road.  Therefore, corporations should be
compensated for takings that result from regulation. As the argument
goes, if government wants corporations to protect the environment, the
government should pay the corporations for the cost of doing so. This
argument gets rid of “external costs” or “social costs”—costs that
corporations impose on others and future generations by the pollution
and exhaustion of natural resources, for example. The argument turns
social costs into compensation for takings.

The TPP is likely serving many agendas.  As we learn more, the motives
behind the TPP will become clearer.  From my perspective as an economist
and former member of government, the problem with Ron Kirk’s TPP is that
the agreement is constructed to serve private, not public interests.
Kirk is a public official charged with serving and protecting the public
interest. Yet, he has conspired in secret with private interests to
produce a document that exempts private corporations from public
accountability.

There is a paradox here. While financial corporations and now all
corporations are being made independent of government, US citizens have
lost the protection of law and are now subject to being detained
indefinitely or murdered without due process of law. Corporations gain
an unimaginable freedom while citizens lose all freedom and the rights
that define their freedom. Similarly, foreign countries, which as
members of TPP can be exempt from US law, are subject to “pre-emptive”
US violation of their air space and borders by drones and troops sent in
to assassinate some suspected terrorist, but which also kill citizens of
those countries who are merely going about their normal business.

Perhaps one way to understand TPP is that the US government is now
extending its own right to be lawless to corporations. Just as the US
government today is only answerable to itself, the TPP makes
corporations answerable only to themselves.

Public Citizen’s analysis of TPP can be found here and the leaked
document here.

This article was originally published at PaulCraigRoberts.org and has
been used here with permission.

(3) TPP favours offshore data centres, raising Snowden/NSA surveillance
concerns


http://www.afr.com/p/technology/dark_cloud_over_privacy_in_tpp_negotiations_7MpUMeN49FgHTuvCDQScKN

Dark cloud over privacy in TPP negotiations

PUBLISHED: 05 NOV 2013 00:05:18 | UPDATED: 05 NOV 2013 00:07:13

JAMES HUTCHINSON

The secretive Trans-Pacific Partnership agreement is heading towards a
privacy row, after it emerged that organisations could be prevented from
mandating that personal and critical data be kept within Australia.

The multilateral treaty, under negotiation by 12 Pacific Rim countries
including Australia and the United States, includes provisions that
prohibit states from mandating where companies store or transact data.

Privacy experts say that, if ratified, the provision would mean that
Australian government agencies and major enterprises would not be able
to ensure personal and private data is stored in onshore data centres.

“Trans-border data flows have been subject to protections since about
1980; it’s always been recognised that any country has got to be able to
exercise judgment on behalf of its citizens in order to provide
protections against data flow into places where that data will be abused
.?.?. the United States being one of those countries,” said Roger
Clarke, chair of the Australian Privacy Foundation.

“The idea that any country should give up on that and say ‘We’re
citizens of the world now; we don’t believe in privacy any more’: that’s
a completely unacceptable position to adopt.”

Australian negotiators say they and other member countries are pushing
against the provision, first introduced by the United States. They
specifically want to include exemptions in the treaty to keep existing
Australian health and privacy laws, which forbid some data being stored
or transmitted offshore.

The state of the provision, however, is unclear due to the overt secrecy
of the TPP negotiations, a point of criticism for many stakeholders.

Electronic Frontiers Australia executive officer Jon Lawrence said the
push to restrict data sovereignty laws through the TPP was largely a
commercial one, in a bid to keep US-based cloud service providers such
as Google and e-commerce giant Amazon as major online storage providers.
Such providers have lobbied Australian enterprises and government
agencies to drop restrictions on offshoring data but, at the same time,
have established their own local data centres to win millions of dollars
worth of storage and computing contracts for critical data.

A former US ambassador to Australia, Jeffrey Bleich, championed the TPP
provisions last year, citing the need to end “cloud protectionism”.

“In Australia, such restrictions would undermine the economic benefits
the [national broadband network] would deliver by cutting off access to
the highest quality, lowest price and most secure cloud services for
businesses, government and consumers,” he said at the time. “While some
local providers may get a windfall, everyone else would lose out.”

He said arguments that local data centres would provide better
protection from surveillance and hacking were futile due to the global
nature of the internet. “Like keeping money under the mattress, keeping
data ‘at home’ not only deprives you of all the benefits the global
cloud offers, but it is probably far less safe as well,” he said.

But recent revelations surrounding US surveillance programs and
infiltration of ongoing monitoring of data transmitted to Google and
Yahoo! have exacerbated concerns over whether individuals and companies
should store data within national borders or wherever is most convenient.

A survey for the Office of the Australian Information Commissioner found
79 per cent of people surveyed thought companies offshoring private data
a misuse of their information.

Mr Lawrence said: “The whole NSA thing really becomes an own goal in
that perspective because it’s pushing straight back against it. “There’s
a genuine risk, and there’s already .?.?. evidence that people are
voting with their feet and are going to move away from these US
companies because they don’t trust what’s going on.”

(4) Countries turn against Investment agreements: South Africa Breaks
Out, by Joseph Stiglitz


http://www.social-europe.eu/2013/11/south-africa-breaks-out/

South Africa Breaks Out

07/11/2013

by Joseph Stiglitz

International investment agreements are once again in the news. The
United States is trying to impose a strong investment pact within the
two big so-called “partnership” agreements, one bridging the Atlantic,
the other the Pacific, that are now being negotiated. But there is
growing opposition to such moves.

South Africa has decided to stop the automatic renewal of investment
agreements that it signed in the early post-apartheid period, and has
announced that some will be terminated. Ecuador and Venezuela have
already terminated theirs. India says that it will sign an investment
agreement with the US only if the dispute-resolution mechanism is
changed. For its part, Brazil has never had one at all.

There is good reason for the resistance. Even in the US, labor unions
and environmental, health, development, and other nongovernmental
organizations have objected to the agreements that the US is proposing.

The agreements would significantly inhibit the ability of developing
countries’ governments to protect their environment from mining and
other companies; their citizens from the tobacco companies that
knowingly purvey a product that causes death and disease; and their
economies from the ruinous financial products that played such a large
role in the 2008 global financial crisis. They restrict governments even
from placing temporary controls on the kind of destabilizing short-term
capital flows that have so often wrought havoc in financial markets and
fueled crises in developing countries. Indeed, the agreements have been
used to challenge government actions ranging from debt restructuring to
affirmative action.

Advocates of such agreements claim that they are needed to protect
property rights. But countries like South Africa already have strong
constitutional guarantees of property rights. There is no reason that
foreign-owned property should be better protected than property owned by
a country’s own citizens.

Moreover, if constitutional guarantees are not enough to convince
investors of South Africa’s commitment to protecting property rights,
foreigners can always avail themselves of expropriation insurance
provided by the Multilateral Investment Guarantee Agency (a division of
the World Bank) or numerous national organizations providing such
insurance. (Americans, for example, can buy insurance from the Overseas
Private Investment Corporation.)

But those supporting the investment agreements are not really concerned
about protecting property rights, anyway. The real goal is to restrict
governments’ ability to regulate and tax corporations – that is, to
restrict their ability to impose responsibilities, not just uphold
rights. Corporations are attempting to achieve by stealth – through
secretly negotiated trade agreements – what they could not attain in an
open political process.

Even the notion that this is about protecting foreign firms is a ruse:
companies based in country A can set up a subsidiary in country B to sue
country A’s government. American courts, for example, have consistently
ruled that corporations need not be compensated for the loss of profits
from a change in regulations (a so-called regulatory taking); but, under
the typical investment agreement, a foreign firm (or an American firm,
operating through a foreign subsidiary) can demand compensation!

Worse, investment agreements enable companies to sue the government over
perfectly sensible and just regulatory changes – when, say, a cigarette
company’s profits are lowered by a regulation restricting the use of
tobacco. In South Africa, a firm could sue if it believes that its
bottom line might by harmed by programs designed to address the legacy
of official racism.

There is a long-standing presumption of “sovereign immunity”: states can
be sued only under limited circumstances. But investment agreements like
those backed by the US demand that developing countries waive this
presumption and permit the adjudication of suits according to procedures
that fall far short of those expected in twenty-first-century
democracies. Such procedures have proved to be arbitrary and capricious,
with no systemic way to reconcile incompatible rulings issued by
different panels. While proponents argue that investment treaties reduce
uncertainty, the ambiguities and conflicting interpretations of these
agreements’ provisions have increased uncertainty.

Countries that have signed such investment agreements have paid a high
price. Several have been subject to enormous suits – and enormous
payouts. There have even been demands that countries honor contracts
signed by previous non-democratic and corrupt governments, even when the
International Monetary Fund and other multilateral organizations have
recommended that the contract be abrogated.

Even when developing-country governments win the suits (which have
proliferated greatly in the last 15 years), the litigation costs are
huge. The (intended) effect is to chill governments’ legitimate efforts
to protect and advance citizens’ interests by imposing regulations,
taxation, and other responsibilities on corporations.

Moreover, for developing countries that were foolish enough to sign such
agreements, the evidence is that the benefits, if any, have been scant.
In South Africa’s review, it found that it had not received significant
investments from the countries with which it had signed agreements, but
had received significant investments from those with which it had not.

It is no surprise that South Africa, after a careful review of
investment treaties, has decided that, at the very least, they should be
renegotiated. Doing so is not anti-investment; it is pro-development.
And it is essential if South Africa’s government is to pursue policies
that best serve the country’s economy and citizens.

Indeed, by clarifying through domestic legislation the protections
offered to investors, South Africa is once again demonstrating – as it
has repeatedly done since the adoption of its new Constitution in 1996 –
its commitment to the rule of law. It is the investment agreements
themselves that most seriously threaten democratic decision-making.

South Africa should be congratulated. Other countries, one hopes, will
follow suit.

(5) Protectionist Economists defy Free Trade dogma - Eamonn Fingleton

http://www.fingleton.net/?p=1143

Beyond free trade

Posted on April 13, 2011 by Eamonn Fingleton

Meet the heterodox economists challenging globalism. (This article was
first published in the April 2011 issue of the American Conservative.)

"I don't care who writes a nation's laws, or crafts its advanced
treatises, if I can write its economics textbooks." So said one of the
greatest textbook writers of them all, Paul Samuelson.

But even Samuelson didn't live forever—he died in 2009 aged 94—and now
others decide what the rising generation is reading. It is a fair bet
that, on one of the most critical issues of modern economic policy, his
successors' books would not meet with the master's approval. That issue
is trade.

Although Samuelson spent most of his life promoting unqualified free
trade, he came close in his declining years to admitting he was wrong.
In a paper in 2004, he suggested that there might be some circumstances
in which a nation did not benefit from free trade. His analysis was
carefully hedged; but, given his unique status not only as a textbook
writer but as the first American economist to win a Nobel Prize, the
effect on the faithful was as if the pope had conceded there might not
be a God after all.

The interesting thing is that Samuelson's doubts have not merited so
much as a footnote in most of today's top selling textbooks. This is not
an isolated oversight. The textbooks have overlooked many other key
developments, not least the work of Ralph Gomory and William Baumol, who
have posited a much more widely applicable, if equally mathematically
watertight, challenge to conventional trade theory. These omissions are
all the more surprising for the fact that economics textbooks are
constantly revised and updated, the better no doubt to keep sales ticking.

Robert Prasch, an economic historian at Middlebury College and a
prominent critic of the free-trade consensus, puts it succinctly: "The
economics profession generally is probably 15 years behind reality, and
the textbook writers are a further 15 years behind the profession."

When will the dismal science catch up with reality? Judging by my
inquiries, probably not anytime soon—and maybe not before its adepts
have vaporized what little is left of American economic prowess.

In the reality-based community, the attitude towards the economics
profession could hardly be more sullen. Thom Hartmann, a talk-show host
and author who ranks as one of the American media's most impassioned
critics of globalism, points out that, in marked contrast to economic
theoreticians, ordinary Americans have long sensed there is something
wrong with trade policy. "To the extent there is a trend, it is at the
grassroots," he says. "People have seen the factories go, and now many
of the jobs that cannot be exported are being filled by illegals.
Ordinary Americans don't understand the theoretical issues but they are
gravitating to a very simplistic nationalism reminiscent of Europe in
the 1930s."

Many even of America's thinking classes are no longer willing to drink
the Kool-Aid. As the most recent presidential administrations have
staggered from one economic debacle to another, economists have found
themselves pilloried not only for failing to offer timely warnings of
the dangers ahead but, in far too many cases, for the erstwhile rapture
with which they endorsed the policies that resulted in the Wall Street
train wreck. The result, as the Washington-based commentator James
Fallows has pointed out, is that there is increasing doubt these days
about almost every aspect of established economic wisdom. Fallows, an
author on East Asian trade who learned his economics as a Rhodes scholar
at Oxford, adds: "I don't think that anything as coherent as a new view,
or systematic critique, has emerged. It's more an inchoate sense that
the established ‘laws' and principles are increasingly mismatched to the
observed realities."

Although the number of economists prepared to question conventional
trade theory openly has steadily risen in recent years, they remain a
small minority—and a marginalized one. Even as evidence mounts that the
profession is presiding over one of the most remarkable fiascos in
intellectual history, many factors discourage waverers from breaking ranks.

Most obviously, the textbook industry's self-censorship makes it
difficult for even skeptical teachers to provide a balanced, nuanced
account. Young teachers aspiring to tenure are well advised to keep
their more heterodox opinions to themselves.

"Change does not come easily in academic life," says Prasch. "For the
most part we will have to await the gravedigger's shovel. Guys in their
fifties rarely admit that what they have been teaching all their lives
is balderdash."

Darker forces may also be at work. Paul Craig Roberts, a principal
architect of Reaganomics who in recent years has become one of the
right's most penetrating critics of globalism, has suggested that many
globalist-leaning economists are "bought and paid for." What is clear is
that academics who aspire to moonlight as corporate consultants have
little choice but to endorse orthodox views on things like offshoring.
And, of course, no analyst flourishes in Wall Street's gravitational
field without toeing the line.

Nonetheless, turmoil is evident just below the surface. The metaphor of
a volcano about to blow is overworked but it well describes the
intellectual pressures that have been building for years.

The earliest rumblings came from economists on the left, some of whom
began focusing on trade's impact on jobs as far back as the 1970s. Most
such skeptics—they included Jeff Madrick, Jeff Faux, Barry Bluestone,
Bennett Harrison, and Robert Reich, and they were soon joined by younger
colleagues such as Dean Baker, Laura Tyson, and Ira Magaziner—were
advocates of industrial policy. That stance almost by definition implied
a wary view of free trade. It also made them easy to marginalize. Such
is the esteem with which free trade theory is viewed by almost the
entire economics profession, in the early days proponents of industrial
policy shrank from an all-guns-blazing assault on the consensus.

As the years have gone by, however, they have not only become more
emboldened but have been joined by some on the right. Hence the sight
today of President Reagan's assistant Treasury secretary Paul Craig
Roberts making common cause with liberal peers such as James K.
Galbraith, Herman Daly, and Ronald Baiman, not to mention journalist
Alexander Cockburn. (It should be noted, however, that Roberts draws a
sharp distinction between traditional free trade and the recent
phenomenon of offshoring. Roberts argues that offshoring is not true
free trade as understood by classical economists. So while he opposes
offshoring, he upholds the classical version of free trade, which
assumed among other things that all a nation's capital would be invested
at home.)

Among the earliest challengers, two names particularly stand out—Robert
Kuttner and John M. Culbertson. They both threw down the gauntlet in
1984. Kuttner came from the industrial-policy school and was then just
starting to make a name for himself as an economic journalist.

Culbertson was a more startling case. Having worked as a young economist
for the Federal Reserve System, he later taught at the University of
Wisconsin-Madison. Previously known for rather staid work on monetary
policy, he crossed a professional Rubicon with the publication of
International Trade and the Future of the West. The profession's
response can be aptly summed up in the Japanese term mokusatsu—"killing
with silence." A search of LexisNexis reveals just two reviews, in
National Journal and Foreign Affairs, and in the latter case his
apostasy was dismissed in just five sentences.

Indeed, so out of step was he with all respectable opinion that he had
to resort to publishing the book himself—a gambit that all but
guaranteed his slightly amateurish-looking effort would be consigned
unopened to literary editors' garbage cans. Such editors are of course
busy people and in reflexively ignoring self-published authors their
instinct is almost always right. But Culbertson has proved a spectacular
exception. With each passing year his challenge to the consensus is
looking more inspired. He predicted that low-wage foreign competition
would precipitate the collapse of the American middle class—the
so-called race to the bottom that has recently been the subject of an
eponymous book by Alan Tonelson.

In a field known for obscure language and ample resort to subordinate
clauses, Culbertson's writing style left nothing to the imagination.
Here is a sample: "In economic affairs, the decades ahead must be a time
of change and challenge, indeed a time of ‘sink or swim.'… Unless
economic change is shifted to a new pattern, brought under intelligent
control, the years ahead could bring cumulative deterioration and
demoralization to the United States, the West, and to much of the world."

He added: "Many economists wear blinders that will induce them to
continue their crusade against ‘protectionism' all the way to the
sinking of the West. … Will the United States and the West … come to
interpret international trade realistically, and respond intelligently
to the situation that actually exists? This question is decisive for the
future of the West."

Like Culbertson, Kuttner issued his challenge via a book. In The
Economic Illusion, he presented an analysis that went far further than
that of other liberal economic commentators in targeting the core of the
free-trade consensus. That core is, of course, the venerable theory of
comparative advantage formulated by the British banker David Ricardo as
far back as 1817.

Kuttner argued that the world had changed since Ricardo. While Ricardian
theory assumed a static world in which the structure of trade reflected
mainly each nation's natural endowments—Ricardo famously cited Britain's
advantage in making woolen cloth versus Portugal's in wine—Kuttner
pointed out that, in modern manufacturing, nations can judiciously rig
their markets to conjure up productivity advantages where none existed
before. This is particularly likely—and is particularly consequential—in
high-tech goods. With the help of an elaborate array of industrial
policies, Japan, for instance, has come from nowhere in the 1950s to
achieve dominance almost right across the board in advanced
manufacturing, particularly in capital goods, which though invisible to
consumers are essential for finished-goods producers such as those in
China and other low-wage nations.

Kuttner also pointed out that Ricardo's theory depends on other hidden
assumptions that have become increasingly unrealistic over the years.
The theory works as advertised only if there is no significant
unemployment or unused production capacity, for instance. It is a long
time since those conditions existed in America.

By the latter half of the 1980s, support for trade dogma began cracking
even among the American right. One of the first prominent conservatives
to break with the consensus was Patrick Buchanan. Another notably early
challenge came in 1986 from Pat Choate, an economist who advised TRW,
then a major player in several high-tech industries. Choate, who had
already identified himself as an advocate of industrial policy as far
back as 1980, focused on the practical politics of trade, particularly
East Asian mercantilism, which in its Japanese manifestation was already
a red-hot issue.

Japan's often preposterous excuses for shutting out American goods had
long become notorious. Most memorably, in comments that were clearly
intended to drive a wedge between Republicans and Democrats, Tokyo
blamed trade imbalances sometimes on incompetent American managers, who
allegedly did not try hard enough to understand the Japanese market, and
sometimes on American workers, who allegedly were lazy or uneducated.

Although the instinct in Washington, particularly among mainstream
economists and other proponents of Ricardian doctrine, was to challenge
every jot and tittle of Japanese rhetoric, Choate argued that the United
States should simply accept that Japan did not believe in free trade and
never would. Further efforts to remake Japanese society along American
lines would be a fool's errand and would only foster resentment and
circumvention in Japan. Meanwhile the attempt would delay disastrously
any effective remedy for American manufacturers, many of whom were
already then on their last legs.

Thus, in a recommendation that scandalized orthodox American economists,
Choate, who went on to achieve prominence as Ross Perot's running mate
in the 1996 presidential election, became one of the first proponents of
"managed trade": Washington should, he said, simply set targets for
Japan's imports and ask Tokyo to use its various industrial-policy
levers to meet them.

Of  all the challenges to the consensus, none has created more
intellectual shockwaves than the Gomory-Baumol analysis. Although when
it was first unveiled in 2000 it received far less publicity than Paul
Samuelson's similar later contribution would, within the economics
profession many recognized it as having holed the orthodoxy below the
waterline. Indeed, in the view of Paul Craig Roberts, Gomory-Baumol is
probably the most important development in trade economics since
Ricardo's own theory.

The authors' credentials are hard to shrug off. Gomory is a world-class
mathematician who in a former life as director of research for IBM saw
first-hand how sharply global competition in high-tech industries
diverges from traditional theory. Baumol is a New York University
economics professor who served as president of the American Economics
Association in the 1980s.

The Gomory-Baumol analysis goes further than any other in examining the
assumptions underpinning free-trade orthodoxy. In focusing on the role
of assumptions, Gomory draws an analogy with how objects in the physical
world behave under the influence of gravity. As he points out, in
predicting the trajectory of falling objects, sometimes you have to take
the effect of air into account—in addition to the force of gravity—and
sometimes you don't. If you insist on ignoring air all the time you will
end up predicting that airplanes won't fly—that they will just fall to
the ground.

Similarly with economic models, your assumptions have to be chosen with
care. "The Ricardo model describes pure market forces acting in a world
where production capabilities don't change," Gomory points out. "But
today production capabilities do change. China is a great example."

Using the Ricardo model as a starting point, Gomory and Baumol
considered not just one set of productivities but all possible
productivities in different circumstances and at different times. Using
the Ricardo model that way they could investigate, for example, how your
trading partner's economic development affects you as his productivities
change. They got a very non-obvious answer: your trading partner's
economic development is at first good for you, and then, as your trading
partner becomes more and more developed, bad for you.

And of course, as Gomory points out, market forces are not the only
forces at work. Governments help their industries in many ways, from tax
breaks to making technology transfer a prerequisite for market entry.
These non-market forces are strong incentives affecting what companies do.

"The market forces are still there," says Gomory "and we have to take
account of them through models such as the Ricardo one, but if we don't
also take seriously the non-market forces, we may reach conclusions that
may be as wrong as predicting that airplanes can't fly."

Airplanes do fly, of course. And mercantilism can work. Certainly the
East Asian variety does.

As someone who has lived in Tokyo since 1985, I have long enjoyed a
special vantage point from which to watch the trade debate. I am struck
by how parochial are most Anglophone discussions and how little they
take account of easily documented reality in other parts of the planet.

Certainly the world looks very different from Tokyo, not least because
East Asian leaders are convinced that, in its ever more heedless
commitment to laissez faire, the United States is digging its own grave.
But of course, East Asians are discreet people and, short of being
waterboarded, they are unlikely to ever offer a frank opinion on an
American mindset that happens to have done so much to transfer
industrial leadership to East Asia.

It has long been obvious to Tokyo-based observers that, where trade is
concerned, the world is divided into two economic camps—on the one hand,
nations that generally run a trade surplus and on the other those that
run chronic deficits. The United States, of course, now ranks as the
all-time champion in the latter camp, but it shares its heedlessness
with most of the English-speaking world, including the United Kingdom,
Ireland, Australia, New Zealand, India, and Pakistan.

By contrast, nations that generally run surpluses include not only
virtually all of the East Asians, but Germany, Sweden, Austria,
Switzerland, the Netherlands, and other rich European nations.

Largely overlooked in the Anglophone media, the two camps are polar
opposites in several policy matters, most obviously their approach to
exchange rates. Anglophone nations have generally taken pride in
strong—i.e., overvalued—currencies and have rushed to the barricades
when threatened with depreciation. (This mindset was epitomized most
absurdly by the "defend the pound" antics of a sickly post-imperial
Britain in the 1960s and 1970s.) In contrast, the surplus nations have
rejoiced in low exchange rates.

To be sure, the United States recently has undergone a partial change of
heart with respect to the Chinese yuan. But U.S. policymakers still show
little interest in securing competitive exchange rates for their
exporters against the Germans, the Japanese, and the Koreans.

The dichotomy in mindset between surplus and deficit nations raises many
questions. Why, for instance, do Anglophone economists win so many Nobel
Prizes and their peers in such robust surplus nations as Japan, China,
Korea, and Germany so few? And, conversely, why are Japanese, Chinese,
Korean, and German exporters so much more effective than their American
and British counterparts in world markets? The answers will wait for
another time, but it is a fair bet that there are more things in heaven
and earth than are dreamt of in American economics textbooks.

Eamonn Fingleton is the author of In the Jaws of the Dragon: America's
Fate in the Coming Era of Chinese Dominance.

(6) Obituary: John M. Culbertson, economist who defended Protectionism

http://www.sfgate.com/news/article/John-M-Culbertson-2839502.php

John M. Culbertson

December 17, 2001 | By New York Times

John M. Culbertson, an economist known for mounting an articulate
defense of protectionist economic policy long after the tenets of free
trade were de rigueur among his colleagues, died Dec. 9 in Madison, Wis.
He was 80.

He had been suffering from Parkinson's disease, according to his wife,
Frances.

Mr. Culbertson began his career as a specialist in monetary issues for
the Federal Reserve System in Washington in the 1950s. He shifted his
focus to trade relatively late in his career, in the 1970s, nearly two
decades after he became a tenured professor at the University of Wisconsin.

He was born in 1921 in Detroit and grew up on a farm in Walled Lake,
Mich. His undergraduate education at the University of Michigan was
interrupted by World War II, when he served in the U.S. Army Air Corps
as an instructor of pilots and a pilot of B-26 Marauders in Europe.

Mr. Culbertson became well known when support for protectionism grew in
the 1980s as concern grew about companies' decisions to shift
manufacturing and jobs from the United States to cheaper countries and
about swelling imports from other nations, especially Japan.

He was a passionate advocate of protectionism, favoring tariffs to limit
imports and other barriers designed to shield domestic industries from
the threat of foreign competition. Mr. Culbertson's ideas were well
received by unions, but he had many detractors in university faculties
and research groups.

"The future of the United States depends on whether we can escape from
the childish dream world in which 'free trade' is The Good Fairy, and
'protectionism' is The Wicked Witch of the West," Mr. Culbertson wrote
in an essay in 1986.

Unable to find publishers for his books and concerned that the
University of Wisconsin Press would not enthusiastically promote his
work, he formed his own publishing concern, 21st Century Press. He
designed the typeface for the press on a personal computer and promoted
books with flyers sent to prospective readers.

Using that strategy, Mr. Culbertson published several books in the
1980s, including "Competition, Constructive and Destructive" and "The
Dangers of 'Free Trade.'

(7) U.S. 'Free Trade' with Mexico, by John Culbertson
http://www.thesocialcontract.com/artman2/publish/tsc1504/article_1328_printer.shtml

U.S. 'Free Trade' with Mexico

By John Culbertson

Published in The Social Contract

Volume 15, Number 4 (Summer 2005)

Issue theme: "Special anniversary issue: highlights from our first
fifteen years"

http://www.thesocialcontract.com/artman2/publish/tsc1504/article_1328.shtml

The topic of 'free trade' is as current as this morning's paper which is
why this article by John Culbertson is as timely today as it was when
written in 1991. Culbertson has long been a doubting Thomas' on the
subject of free trade' to the irritation of the economic fraternity
where such challenges are definitely not politically correct.

Depending on the world-view and vocabulary used to depict it, U.S. free
trade with Mexico can seem anything from an obviously progressive step
to an action ruinous to the United States and damaging to human
prospects. The favorable interpretation now prevailing in both the
political right and left in the United States proves, on consideration,
to reflect a misleading conceptualization of the subject arising from a
fashionable utopian ideology.

Seeking the truth on this subject thus requires first its
depropagandization. The valid name for what is called "free trade" is
"foreign trade not subject to regulation by the nation's government,"
that is, mandatory deregulation of the nation's foreign trade - like
deregulation of its savings associations, banks, airlines. The valid
name for what is called "barriers to trade" is "regulation of trade."
The misleading labels present an image of regulation of foreign trade as
unnatural and inherently destructive, a crime against the ways of the
world. In truth, foreign trade has always been regulated by governments.

The human world always has been made up of many independent, or "free,"
tribes, kingdoms, empires, or nations. Preserving this structure of
human life requires the regulation of foreign trade. Unregulated foreign
trade undercuts the independence of nations, prevents their developing
along different paths. In the absence of effective supranational
government, the deregulation of foreign trade leaves mankind adrift, its
diverse and discordant societies merged into impotence, dropped together
into a single pot, with no government at any level that is capable of
preserving a civilized level of life or preventing the destruction of
the earthly habitat. Far from being obviously correct, unregulated
foreign trade is revolutionary; fashionably but irresponsibly revolutionary.

The free-trade fable exercises its mind-ruling power by exploiting the
human weakness for making issues a struggle between Good and Evil. It
provides a stereotype of regulation of foreign trade as "protectionism,"
depicted as "import restrictions that damage the nation and the world
but are imposed through the power of evil 'special interests'." The evil
"protectionists" are portrayed as acting out of anti-social selfishness
or of racism, an urge to bash some nation, or a show of indifference to
foreign poverty. In the Good-versus-Evil conceptualization of foreign
trade, protectionism/the Evil, commonly is depicted as the only option
other than free trade/the Good. President Reagan's consistent
characterization of his trade policy for the United States as one of
"fighting protectionism" illustrates the pattern.

Is it true that the only options on foreign-trade policy are free trade
or protectionism? The trade policy, through which Japan took over
valuable U.S. markets, industries, and jobs through one-sided foreign
trade, ran huge trade surpluses with the U.S. and become large owners of
U.S. properties is this free trade or is it protectionism? Of course,
the answer is neither neither the answer for Japan nor for most other
nations. In reality, there are many kinds of trade policy available.

Posing the choice as "free trade or protectionism" illustrates a basic
technique in the manipulative use of language, the misstated either-or,
as in Hitler's proffered choice Nazism or Jewish communism; Stalinism's
idealized socialism or Satanic capitalism. The stereotype of
protectionism functions as a contrived Evil to be paired with free trade
as the Good. Given the effectiveness with which such propagandistic use
of language has been analyzed by Hayakawa and others, it is surprising
that self-respecting Americans across the political spectrum, both
Ronald Reagan and the editorial writers of The New York Times, rely on
it to support the deregulation of foreign trade with no consideration of
the actual effects of alternative trade policies. Economists commonly
use the same conceptualization, contrasting the negatively stereotyped
protectionism with misleading examples in which unregulated foreign
trade automatically brings the best of all possible worlds examples that
do not correspond to evidence and experience.

Thus, to consider alternative trade policies in terms of their effects
requires escaping from the whole system of deceptive stereotypes that
dominates U.S. discussion of the subject. A realistic consideration of
the effects of alternative systems of foreign trade can well begin with
the observation of the great liberal economist, J. M. Keynes ("National
Self-Sufficiency," Yale Review, 1933) that the system of foreign trade
must be chosen to fit the political, economic, social, and
international-relations realities of the times. Keynes, deploring his
own zealous earlier support of the free-trade doctrine, pointed out that
it made no sense to attempt to bring about laissez-faire foreign trade
in the political and economic world of the 20th century whether or not
it would have been reasonable in an earlier era.

Keynes recognized the all-important point that unregulated foreign trade
implied "economic entanglement among nations." Unregulated foreign trade
subordinates the goals, standards, powers of the nation to the interests
of private parties in all nations. Deregulating its foreign trade costs
a nation its freedom of action, its effective independence, its ability
to chart its own course and to learn its own lessons from its successes
and its failures.

The nineteenth-century vision of world-wide deregulation of foreign
trade in the context of universal economic laissez-faire thus had no
applicability to the political and economic world that arose from the
First World War, in which nations explicitly adopted different theories,
ideologies, and policy goals. The political and economic situation of
the 20th century required policies that could bring about constructive,
mutually beneficial patterns of foreign trade among independent nations
operating under different political and economic agendas and goals. "We
do not wish, therefore, to be at the mercy of world forces working out
... some uniform equilibrium according to the ideal principles, if they
can be called such, of laissez-faire capitalism. We wish ... to be our
own masters and to be as free as we can make ourselves from the
interferences of the outside world," wrote Keynes.

{quote}
I sympathize, therefore, with those who would minimize, rather than with
those who would maximize, economic entanglement among nations. Ideas,
knowledge, science, hospitality, travel these are the things which
should of their nature be international. But let goods be homespun
whenever it is reasonably and conveniently possible, and, above all, let
finance be primarily national. For these strong reasons, therefore, I am
inclined to the belief that ... a greater measure of national
self-sufficiency and economic isolation among countries than existed in
1914 may serve the cause of peace rather than otherwise.
{endquote}

Keynes noted that any loss of production efficiency from maintaining a
nation's economic independence was in many cases small or trivial and
that the existence and amount of any such "inefficiency" depends on
circumstances and cannot be inferred from ideologically-biased
"principles" "Experience accumulates to prove that most modern processes
of mass production can be performed in most countries and climates with
almost equal efficiency."

In Keynes' valid conception of "efficiency," for example, shifting the
production of telephones for the U.S. market from a factory in Louisiana
to an identical factory in Thailand does not increase efficiency; it
reduces efficiency but is profitable because it replaces high-income
labor with low-income labor. Shifting world manufacturing production
from high-wage to low-wage nations does not increase efficiency and
world output. An increase in the volume of world trade of this type is
not progress; it may be ruinous.

Foreign trade of genuine efficiency would provide the means of
permanently benefitting both nations rather than temporarily benefitting
one nation at the expense of the other. In real-world conditions, such
efficiency-based and mutually beneficial patterns of foreign trade are
ordinarily attainable only on the basis of a set of constructive trade
policies. That the basic distinction between efficiency-based,
beneficial trade and level-the-nations-downward trade has been lost in
recent discussion, even by most economists, perhaps must be explained by
the dominance of propaganda in the discussion of foreign trade, which
has hidden even the most basic causal relations.

Keynes thus favored a system of regulated foreign trade that would work
constructively in a world of free and independent non-globalized
nations. That is, he favored a system of constructively regulated
foreign trade, which is not so-called "free trade" and is not so-called
"protectionism." But historical accidents put the path of opinion and
events since the 1930s under the domination of a massive U.S. attempt to
implement a peculiar version of world-wide "free trade."

The intellectual and political father of this movement was Cordell Hull,
the U.S. Secretary of State from 1933 to 1944. The rationale of Hull's
pursuit of deregulation of foreign trade differed from the now-dominant
one. Having conceived as early as 1916 that "unhampered trade
dove-tailed with peace; high tariffs, trade barriers, and unfair
economic competition with war," Hull and his U.S. State Department
developed the concepts and the program that still underlie the U.S.
campaign for the deregulation of foreign trade to attack not an alleged
economic inefficiency of "protectionism" but asserted war-causing
effects of international economic rivalries and "trade wars."

Hull was able to gain acquiescence in his version of foreign-trade
deregulation during the temporary U.S. dominance of the world at the end
of the Second World War. Keynes never supported Hull's approach,
referring to "the lunatic proposals of Mr. Hull." Had Keynes' view
governed the postwar arrangements for foreign trade, international
economic and political developments would have taken a quite different
course. It was not the inexorable march of progress but a curious set of
circumstances that brought the world-trade situation to its present crisis.

Patterns of trade that benefit both of the nations involved do not arise
naturally from the profit-seeking dealings of private parties of all
nations. Mutually beneficial foreign trade requires a constructive
framework of national trade policy that (1) prevents out-of-balance or
one-way trade that shifts industries, jobs, and economic ownership from
a trade-deficit to a trade-surplus nation, (2) prevents the shifting of
the industries with bright futures to one nation thus leaving to the
other nation only the declining and low-pay industries, (3) prevents
nations from being damaged by instability imposed by the trade, such as
the "dumping" of goods in a foreign market below production cost to
weaken its industry and take over its market, (4) prevents the pattern
of trade from unduly undermining the independence and defense
capabilities of the nation, and (5) avoids the one-sidedness of trade
benefit that arises when the trade on one side is arranged on behalf of
the nation by its government and on the other side is handled by firms
that are competing against one another in pursuit of private profit.

The foreign-trade arrangements arising from the Hull approach were not
aimed at these goals. They proved to thwart their achievement. Hull's
effort to reduce average tariff levels and trade "discrimination" (in a
peculiar sense) through the "most-favored-nation" policy prevented the
development of managed, mutually beneficial patterns of trade between
nations in different circumstances. In this approach, if the United
States, say, made a certain trade concession to Mexico in order to work
out a balanced and mutually beneficial pattern of trade with Mexico, the
United States (to avoid "discrimination") would have to offer the same
concession to Japan and other countries that already had large trade
surpluses with the U.S.

One epoch-making "side effect" of the Hull-structured trade policy was
to cause the United States to acquiesce year after year after year in a
ruinous pattern of one-sided, one-way-benefit foreign trade that
permitted its all-important home market for the rewarding-to-the-nation
industries of the times to be taken over by other nations, largely on
the basis of their low-wages, minimal regulations and social standards,
and government management of their foreign trade. The economic decline
of the United States would not have occurred as it did under a
foreign-trade system that paid attention to the effects of the patterns
of trade and provided means for nations to arrange mutually beneficial
patterns of trade.

The Free-Trade/Good - Protectionism/Evil view of foreign trade thus has
caused enormous mischief. It has the world headed for worsening
problems. Low-wage and low-labor-standards nations around the world
expect to advance themselves by taking over rising shares of the U.S.
market, which is shrinking as a result of the trade-caused economic
decline of the United States and its standard of living. The
foreign-trade system is headed for crisis a crisis that should have been
easy to predict, but will be far from easy to cure.

A factor curiously neglected in recent trade-policy discussion is the
radical effect on the process of rise and decline of human societies
that would be caused by the entanglement, amalgamation, or merger of
nations resulting from the deregulation of foreign trade. It now is
widely understood that the basis of constructive organic,
organizational, and societal evolution is diversity, variety, copious
experimentation, multiple trials in the trial and error of the
evolutionary process. Advancement perhaps even survival requires enough
variety of experiments to generate some successes. Of the human
societies of the present era, many have recently conceded failure and
others seem to be headed for it. But human civilization has a future so
long as there are some successes some societies that meet the short-run
and long-run requirements of their environments, providing patterns that
can be copied or adapted by the failing societies.

Biologists argue that the survival of even an obscure species of owl may
be important for mankind because it affects the earth's biological
diversity. How much more important it must be that there exist a large
and diverse set of human societies, exploring different developmental
paths, demon-strating "what happens if...," providing patterns of
success that can be used to repair failures and potential
extinguishments of other societies. But because trade policy is
discussed within misleading verbal stereotypes, these profound
implications are not recognized to exist.

It is clear as, again, Keynes took for granted that nations that give up
their power to regulate their foreign trade, in general or with
particular nations, give up their independence of action and control of
their future course of development. The actual implementation of "free
trade" would replace many, diverse, nation-guided societal experiments
with a single global experiment that presumably would be guided by no
effective government.

One critically important consideration is that under a "global economy,"
"one world," or the rule of "free trade," the effects of
overpopulation-caused poverty and joblessness would fall not on the
society that causes the problem but on all nations, as competition
shifts capital and production to the nation with the lowest labor-cost.
In a world of independent societies, the failure of any one does not
drag down the others. The failures can turn themselves around by copying
the successes. In a world of one "global economy," failures anywhere
drag all downward. The expected result is universal failure and
degradation. On a planet critically threatened by human overpopulation,
habitat destruction, and governments too weak or delusion-based to
preserve the habitat and standard of living, the prospects of mankind as
one single, globalized experiment are dismal.

Most recent discussion depicts the "the global economy" or "one world"
not as bringing all-eggs-in-one-basket human failure, but as fighting
"nationalism" which is stereotyped as based on bigotry, racism, hatred,
selfishness, or anti-progressiveness. Once again, the purported choice
'aggressive, bigotry-based nationalism,' (the Evil) or 'global economy,'
(the Good) - misstates the options that are available. Neither
"aggressive nationalism" nor "the global economy" is a course that
merits serious consideration. Success can be gained only by escaping
from such misleading stereotypes (which seem rooted in their own
bigotries) and realistically defining the available policy options and
their expected outcomes.

The economic merger of, or free trade between, two nations makes these
nations subject to the downward-levelling effect of unregulated foreign
trade, diminishes national independence and diversity, and undercuts the
capabilities of both national governments while providing no new forms
of government to take their place. In such cases, the first-stage
outcome depends on the compatibility of the two societies that enter
into the economic-political merger or partnership. The more alike they
are the less there is to be lost in world societal diversity and in
detrimental effect on one or both nations. Thus, economic merger of the
U.S. and Canada is much less threatening than that of the U.S. and
Mexico, or the U.S. and China, or India.

The U.S. and Mexico differ widely in political tradition, ideology,
government structure and performance, severity of overpopulation and
excessive population-growth, unemployment, low-wage production,
worker-protection standards, child labor laws, environmental protection
attitudes and policies, cultures, values, viewpoints and language. Free
trade and economic, political, cultural, social merger between two
countries as different and disharmonious as these cannot be justified on
the basis of an experience-based, cause-and-effect analysis of the
likely effects. The conceivable gain is, at best, trivial in relation to
the conceivable loss, which is almost beyond imagining. Any real
potential gain from trade between the nations could be tapped through
managed and mutually beneficial trade that preserved the independence of
the two nations and threatened no ruinous outcome.

The damage done by a trade-deregulation merger of two nations need not
fall on them equally. Nations with bright prospects have more to lose
than those with dismal prospects. Mexican workers might seem certain, at
least temporarily, to gain (at the expense of American workers, and of a
rising role of American capital in Mexico) from the shift of production,
jobs, industries, capital from the U.S. to Mexico because of
cost-savings from lower wages and less stringent regulation of child
labor, worker protection, and working conditions. But when the
discordant nations sat down to, as it is put, 'harmonize' their laws and
policies in a way that is satisfactory to their diverse constituencies
and found how little agreement and how much conflict exists, it would
become clear that while each nation alone had a chance of finding a path
to success, in their joint harness they could not agree on any path that
would meet the requirements of the times and achieve success.

As the United States, despite its recent lack of realism and its
self-destructive policies, still must be counted among the nations that
might generate patterns of success that merit copying by other nations,
it would diminish the hopes of mankind for the U.S. to enter blindly
into nation-mergers that would remove it from the potential contributors
of patterns of societal economic success. From the viewpoint of
Americans (except perhaps of some capitalists) U.S. merger with Mexico
or with almost any other nation would be insane.

Thus, the pursuit of "free trade," "a global economy," and U.S. "free
trade" with Mexico seem (1) a grand and inspiring program for progress
when viewed within the stereotypes now dominating U.S. discussion but as
(2) a uniquely destructive human folly when viewed within the framework
of cause-and-effect analysis.

Where are the voices of those who understand the second view? Is the
Congress to commit the nation's future without even an awareness that
this view exists?

Extricating nations from the collapse of an ideology-based,
deeply-embedded economic structure that proves a failure is being shown
by the cases of collapsing Marxist communism to be very difficult and of
uncertain outcome even when models of success are available to be
copied. If the United States, beguiled by its misleading stereotypes of
utopian individualism and anti-nationalism, blind to the effects that
actually will follow (and have followed) from its actions, commits
itself, and pushes other nations, to an ungovernable,
all-the-human-eggs-in-one-basket structuring of mankind in a rapidly
deteriorating and increasingly overpopulated earthly habitat, the
prospects of recovering from the collapse of this structure will not be
favorable.

About the author

John M. Culbertson, Ph.D., is emeritus professor of economics at the
University of Wisconsin-Madison.

His most recent book on the topic of free trade is The Trade Threat and
US Trade Policy. In this article he encourages us to use, and think in,
different terms when discussing globalization and foreign trade.

Copyright 2007 The Social Contract Press, 445 E Mitchell Street,
Petoskey, MI 49770; ISSN 1055-145X
(Article copyrights extend to the first date the article was published
in The Social Contract)

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