Thursday, July 12, 2007

After twenty years of being treated as the Holy Grail of Economics, Free Trade is finally getting a second look...


After only fifteen years of protesting the theory and its assumptions...

The truth of the matter is that I believe that any great theory has to stand the test of time and that Free Trade doesn't meet that criteria. Nontheless, if you don't agree, you are somehow an apostate. Because how could anyone argue against their holier than thou assumptions.

Certainly, you have to be especially hard headed to attack them at their own game in a game where they hold all the cards, but being brought up a liberal progressive, I believed it was my obligation to offer an opposing point of view. (My cousin assisted Friedman in writing his landmark tome..) It was my simplistic view that in my days, the government could moderate unfair labor practices, establish tariffs against countries who dumped on our shores or followed unfair practices, guarantee fair wages, operate against companies who merged or acquired each other just for the financial gain of the partners and end unfair mergers and acquisitions where competition could be impacted with dire results for the employees.

In other words, my approach presented the arguments for fairness and balance. I was suggesting that we had to get beyond theory to pose economic solutions that met the litmus test for fairness...

However, at that time, the doctrine was free trade and it resulted in trade policies such as NAFTA under the rubric of manufacturing would always move to places where the cost of production was lower—even if it meant slave labor or taking advantage of the worker.

NAFTA was written by lobbyists and no one who voted on it read it.

As it turned out, the legislation was fraught with issues that nobody had anticipated. For example, disagreements were settled in private behind closed doors with no recourse. If it was decided against the party, the taxpayer had to pay the freight. Government and the Constitution seemed removed from the process...

My perspective was that Fair Trade practitioners have a very simple theory but in its simplicity, it was often unfair.

Now, for the first time, some of the leading minds in Economics are beginning to look at their closely held assumptions and a few are agreeing that the whole idea of Free Trade may bear closer scrutiny; that perhaps it wasn’t as perfect an idea as Milton Friedman would have us believe….

On closer scrutiny, something wasn’t working.

American jobs were “off-shoring” and the quality of life was slipping….


Might it be Free Trade assumptions….

Well, nobody’s fleeing full speed away from the theory but at least maverick views are now starting to be heard for the first time since almost Reagan’s day…

In my guide and treatise on how to make democracy work again, I take issue with all of these economists in posing my Twenty Point Program for rebuilding America.

And those who don’t think I’m a socialist are starting to label me as an obstructionist.

I’m actually none of those things.

I just don’t see free trade without supervision and monitoring as something that can function alone as I understand it.

I believe it was a mistake to jettison manufacturing in the expectation of some higher level of work that if it ever existed, transformed into the kind of work that economists felt was better done by India or China.

I didn’t agree.

I believed that in view of the slanted playing field we faced, we were entitled to play hard ball, too.

That while our execs were allowed to make a profit, earning four hundred times more than the worker on the floor was out of line.

I also thought it was out of line to see how Reagan’s doctrine redistributed the assets of this country and militated against the middle class.

I saw no reason why manufacturers could escape their responsibilities on these shores so as to avoid taxes….
And at the same time, benefit from huge tax advantages.

Something wasn’t making sense. Workers who had helped hype productivity were not seeing the benefits of their labors….

Giant oil companies were allowed to merge limiting competition…

Major military subcontractors were joining forces with the result that the cost of weapons systems was increasing 100%, 200% or more…

Something had to be done.

So, I proposed a twenty point program to level the playing field, encourage a return to manufacturing in this country, reduce our foreign trade disadvantage, increase our patent position, commit to more science through grants and small loans to manufacturers.

So far, nobody’s gotten back to me to say that my blueprint for America is wrong.

I, in fact, think it is the kind of imaginative thinking America needs at this time.

And I know the American people will support me when they realize that they have been summarily cut out of the American dream.
In the meantime, I am delighted that in the last two days, economists are starting to rethink free trade and maybe there still is hope for this country after all.

Les Aaron

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