Does free trade cause development?

Free trade is a buzzing concept in modern times, with all governments across the world proclaiming to promote it.  Indeed, the last thirty years or so of global economic integration is based on free trade principles – also referred to as laizzez-faire capitalism.  Definitely, there are many advantages to be availed as a result of free trade arrangements.  At the same time, it also has its own set of drawbacks.  One should also make discernment in what exactly ‘free trade’ means.  This is because, often, politicians use the term for its rhetoric appeal while implementing policies that are protectionist.  So, while free trade is beneficent in its purest form, modern policymakers have hijacked the concept to serve the interests of select private businesses at the cost of smaller business enterprises.  The rest of this essay will look into how free trade causes development and also scrutinize the nature, merits and demerits of such development.

At the outset, let us take a look at the historical development of the idea of free trade.  By the start of 1970s, currents of change were detected in the global economic order, with nationalism and protectionism being replaced by neo-liberalism and free flow of capital.  Even as American elites promoted this new economic order, the process was facilitated by respective participant elites from nations across the world.  The irony lies in the fact that communist China was also at the forefront of the global neo-liberal program, despite claiming its socialist credentials.  If the ideological gates of the authoritarian and highly protectionist China could be broken open for free-market capitalism, then it was only a matter of time and strategy before other power bastions of the world are broken through.  And this is precisely what had happened.   With the collapse of the Soviet Union in the late 1980s and the shift in policy framework of several developing countries, the nature and complexion of geo-economics has taken a different form. Needless to say, America’s position as the sole superpower has been strengthened by this change.  The unsavory side-effects of free trade in this period includes “the appearance of a nearly feral form of entrepreneurship in which black marketers, drug barons, arms merchants, rackets bosses, Mafiosi, and other profiteers are emerging as the economic and political leaders of the social transformations underway in their respective societies.” (Buchanan, 2000, p.1)

One of the criticisms leveled against free trade as it exists today is itsaffect on workers and consumers.  Some believe that under this system, workers become helpless pawns of their capitalist masters, compelled to sell their labor power at sub-optimal costs.  The only theoretical alternative they have to evading this exploitation is to become destitute, which is a far greater misery.  Multi-national corporations (MNCs), which are the facade of free trade, are perceived as coercing citizens to unwillingly participate in the capitalist market system, while also leaving consumers with no choice but to buy their products.  In the book titled Telling the Truth about History, author Joyce Appleby traces how MNCs came to be the dominant institutions of our age.  Here, the author makes some scathing observations about the nature of capitalist enterprise that is the back bone of prevailing free trade systems: “One of the distinguishing features of a free-enterprise economy is that its coercion is veiled. . . . The fact that people must earn before they can eat is a commonly recognized connection between need and work, but it presents itself as a natural link embedded in the necessity of eating rather than as arising from a particular arrangement for distributing food through market exchanges….” (Joyce as quoted in Levite, 2002, p.32)

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