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Free trade
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[Please ... please post you message as pure text, this message took lot of
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This is with reference to N Arvind Kumar's article on misconceptions
about socialism. I think being liberal means developing the ability to
see different viewpoints and to allow different ideas to compete and
experiment. In this sense, I have felt absence of a similar piece
highlighting common misconceptions of the notion of free trade. Attached
is my attempt to balance the picture.
skilled person to offer his or her services to them, whether the person is
from Asia or Africa or Europe. Why are ceilings put, if not to protect the
domestic manpower within their own countries? Similarly the bogey of child
labor is invoked when it means protecting domestic carpet industry.
Free trade symbolizes democracy What is democracy?
If we take Abraham Lincoln's definition of it being a government 'of the
people, by the people and for the people', will free trade really fit into
this definition? If new multistoreyed mega-supermarkets or shopping mals
come up and if large number of people are excluded from entering those
mals, not by display of any board like the one used at the entrance of
clubs during the colonial rule, but by sheer lack of purchasing power, can
it be called government for the people? If power is not decentralized but
the villager is left almost entirely at the mercy of world market forces,
can it be said to be government by the people? If elections continue to be
increasingly influenced by money power, can it be said to be government of
the people? Democracy does not mean just holding elections every five
years, but it means enabling people to participate in governance in a
number of ways. If the ability of government to intervene is increasingly
eroded,because of various entities like WTO, globalization, so-called
reforms and so on, how can ordinary people participate?
Free trade is in line with Darwin's theory of survival of the fittest
Society comprises of people who are
inter-dependant. When minimum basic human needs are not fulfilled for
animal existence by majority of poor people, not to speak of Meslow's
theory of needs,do we really need luxury goods and services for a few? Does
it require too much intelligence to note that poverty anywhere can be a
threat to prosperity everywhere? Is there nothing to distinguish human
civilization from animal kingdom? Is there nothing called justice? Is it
not an intellectual challenge to the combined wisdom of mankind at the
threshold of 21st century to be able to wipe out abject poverty and
deprivation from this planet and lead to sustainable development? To
persuade oneself that there is no point in addressing issue of poverty
because the poor are destined to die... would be an attitude which could
have perpetuated slavery. But history shows that mankind has evolved
through various phases and the innate urge for a better society has been
the reason for many epoch-making changes in the past. Why cannot the same
principles operate now and lead to better changes towards a more
egalitarian society? Why is it insisted that man should not use his brains
and has necessarily to live like animals, by taking cue from Darwin? Man
can surely live with hopes, aspirations, values of good and bad, values of
justice, equality and be different from rest of the animal kingdom. It
reminds to me a newspaper clipping some time back when a tiger in Nehru
Zoological park at Hyderabad was skinned alive by an intruder who entered
the cage and committed the ghastly act. After the event, the remaining
tigers in the neighbouring cages, who were helpless witnesses to the event,
refused to have food for a few days! They were so outraged at the
injustice. If this could be the level of compassion which a tiger can show
towards his brethren, why should not human beings have moral values and
work towards a society which does not deprive basic needs to its people?
Free trade is a practical concept based on fundamentals of Economics:
There is no evidence to
support that free trade is practically possible. Fundamental economics
talks about demand and supply equilibrium, which is supposed to be brought
about by the invisible hand spoken of by Adam Smith. But the essential
assumption for such equilibrium is the existence of several buyers and
several sellers. Unless you have many players, equilibrium will not arrive.
Now in real world, there are not 'many players' actually playing the
game. For example, see UNDP Human Development Report 1999, which estimates
that top 10 pesticide companies in the world control 85% of the $31 Billion
market. Top 10 telecom companies control 86% of the $262 Billion market.
Similar point can be noted about top computer companies.Mergers are a fact
of corporate life, which leads to monopolies or oligopalies, which are not
characteristics of free trade. In my native village farmers can sell their
paddy to only one miller agent and at most to two.
Free trade leads to efficiency This is almost
taken as a tautology. But if we see a little carefully as to how efficiency
is actually defined in adopting this view, things will be clear. Efficiency
is seen strictly with reference to costs or input as compared with income
or output. This output is defined in the narrowest possible sense by
referring to the particular industrial unit or enterprise. If the unit
transfers its costs by passing on to others, it automatically becomes
efficient by this definition. For example, a unit reduces its costs by
discharging industrial effluents into a river. It may lead to much more
social and environmental costs. Mostly it does. But the cost transferred to
society is not considered in such analysis. Another example of how waste is
encouraged in the name of free trade is the way advertisements affect the
whole business. There are certain products where the cost of advertisement
is more than 50% of the price. Cost of packaging is more than 50% of price.
OK, it is good news for the packaging and advertisement sector. But if you
see the society as a whole, surely it is a waste to have such high costs
incurred in style rather than substance.
Free trade is practised throughout the western world Nothing can be
farther from truth than this statement. When it comes to the
inter-relationships between exports and imports, there is always
doubletalk. There have been several instances when the west has tried to
impose tariff barriers on products that are considered threatening to
domestic industry. Just examine why they have limit on number of H-1 visas
in the USA. If free trade is the objective, why not allow evunism all over
the world, there is no alternative to free trade
Of course it is true that Eastern Europe underwent major upheaval and
China has embraced market reforms. But these countries have started
traversing the new path, after taking firm and decisive steps to increase
the standard of living of general masses, not withstanding aberrations like
famine of the 1940's in China. Of course, it was done at a great deal of
social cost and violation of human rights. A useful lesson could be that
human rights should not be trampled upon. But, it does not follow that free
trade is the only solution. The solution is to explore avenues of
increasing participation by the people and prevent human rights violations
like the ones in Soviet Russia. Any real economy is basically a mixed
economy with certain areas controlled by State and certain areas given over
to markets. It is a matter of degree, rather than something fundamental,
when one looks at the extent of control the state has. It is possible to
work for a model of economy based on participatory democracy and aiming at
fulfilment of basic human needs of all and which respects human rights.
Anybody who opposes free trade is a communist and has been proved wrong by
history History has not come standstill
and the course of history has not pronounced any final verdict ever.Two or
three decades of history is too small in comparison with the march of
civilization. It would be juvenile to presume that there are only
capitalism and socialism. There are many variations and many kinds of ideas
at various dimensions. Many people have opposed free trade on the grounds
of long term sustainability. Mahatma Gandhi has said 'the earth has enough
for everybody's need, but not enough for everybody's greed'. Mahatma Gandhi
has also said he preferred violence to cowardice. He was of the firm view
that the tiller of the soil is entitled to as much remuneration as that of
a lawyer. There are people like Baba Amte and Medha Patkar who have been
inspired by Gandhi and are opposing construction of large dams at the cost
of displacement of poor people and total ruination of their livelihoods.
The President of India made a mention of these issues in his Address to the
Nation on the eve of Republic Day, 2001. Surely all these people are not
communists. After all, who is a communist? If we take the basic view of
socialism as defined by Karl Marx meaning a society ensuring 'from each,
according to his ability and to each, according to his need', most people
have nothing prima faci against this concept. But the word 'communist'
brings out notions of arbitrariness, or state monopoly or human rights
violations or corruption to some. They can be rest assured that this
writer is not supporting such notions. But if some people think the word
symbolizes justice,egalitarianism, fulfilment of basic needs, concern for
fellow human beings and concerted efforts to bring a better society that
could produce human beings with a more humane character, I do not find any
reason to oppose the label. But instead of getting bogged down with labels,
one could examine whether free trade model can be sustainable at all. By
compelling people to do only those things at which they have so-called
comparitive advantage, the free trade model enforces mono-cropping in
agriculture and leads to extraordinarily high doses of chemical fertilizers
at long term costs to the soil fertility. Afterall, Nature prefers
diversity. Increasing world trade leads to greater transporation costs and
faster depletion of fossil fuel or non-renewable energy sources. And of
course, it expects ordinary people to interact with world markets, thereby
giving additional strength and undue advantage to the developed countries,
who have already reached a stage of industrial progress with a major input
by way of raw material from the third world countries in the initial days
of industrial revolution. By concentrating on GNP, it ignores
environmental, public health and other social factors. Let us note a simple
fact to illustrate this point. A village has been protecting its forest
over thirty years by concerted efforts of people. They may use firewood or
twigs for various purposes but other than that, they do not fell the trees.
They add nothing to the GNP in the free trade model. On the other hand, if
a smuggler breaks the village unity and starts felling the forest and
supplies to timber industry, then it gets counted in our national accounts
statistics and GNP increases! When we do not trust the government officials
for running our policies, how do we trust mechanism and treaties signed by
the same people, under the same limitations, which will limit our sovereign
ability and subordinate it to world bodies?
Merit and efficiency can be promoted only by the apparent ruthlessness of
market forces History has denied equal
opportunities to large number of people. Suddenly it is declared that there
is free trade and everybody is free to take part in it. It does not stand
to reason that because governments declare supremacy of market, society
automatically allows merit or efficiency to flourish. As distinct from
State and the markets, we have society. Society has its own characteristics
with different social strata and inter-relationships between them.
Definitely not all are placed in equal position to compete in trade,
considering diverse backgrounds, castes, hierarchy, social position,
variations in self-esteem, variations in objective social conditions,
variations in knowledge or education, differences in power and so on. The
ruthlessness of market is not apparent. It is real. The markets are based
on notion of profit. It can be argued that State is run through government
officials who are corrupt. But we should note that there are always some
government officials who are not corrupt and it is desireable to promote
channels of public participation in order to increase operational space for
good public servants. But market is by definition self-seeking, with profit
as the ever-underlying theme. A society that cannot rely on government
officials in a democratic framework has no logic to rely on markets, which
are by definition, seeking private profit. Entrepreneurship is important
but regulation through people's participation, with due respect to human
rights, will be necessary to see that in the name of free trade, one does
not lead to long term damage of environment, or increase long term social
costs by depriving basic needs of people.
Free trade leads to more choices If I am a poor
woman having problems of collecting drinking water and finding it difficult
to get two square meals a day, it does not really matter if the nearest
city has ten night clubs or five shopping mals. If I am already
marginalized by lack of purchasing power, whatever increased choices
available in towns for those with fat purses are not available to me.
People who talk of distributive justice basically want to distributes
poverty No, there is historical
evidence to show that trickle down theory has never worked in addressing
the scale and kind of income disparities that we have. The logic that
growth-oriented economic policies lead to bigger size of the cake and hence
every one will get a bigger share of the cake has not been proved. Green
revolution took place in India and has helped the country to achieve
self-sufficiency in food grains. But it has not helped to increase food
availability to the poorest of the poor. As Amartya Sen has pointed out,
mere production of food does not mean that everyone got access to it.
Nobody can distribute poverty or compel the rich to live like the poor in
the framework of human rights that has been referred to before. What one is
talking about it a fair degree of distribution of economic benefits and
enhancement of opportunities for all on a sustained basis.
There is no place for centralized planning any longer Yes, I agree
with the statement here. Nobody is talking about centralized planning here.
We are talking about decentralized, people-based participatory planning and
execution. Rather than empowering State or Markets, I am talking about
empowerment of the people at the grass roots level. I am exploring ways and
means of people protecting and enhancing their own natural resource base
and sustaining their livelihoods without being victims of either state or
the markets. State could at best play a supportive role.
Anyone who opposes free trade supports class struggle It is true that
there are several classes in our society. It is also true that not all
situations are 'win-win' situations and not all are 'zero-sum games' and
therefore one cannot generalize it either way. There may be some local
situation where people may be in a position to come together and form a
good cooperative and economically compete with some big vested interest and
win by combined strength. It is also possible that somewhere else, poor
people are not able to stick together and their problems are exploited by
others. All that one is advocating is that government institutions should
play a 'pro-poor' role by taking up schemes, enforcing social legislations
and giving support to the poor in the latter kind of situations. Locus
standi for class struggle can be removed if state institutions perform
roles actually supporting the poor.
All this is alien to indian culture Indian culture had
emphasized the concept of 'vasudhaiva kutumbakam' or treating the whole
planet as one's family. Where is any contradiction? Indian culture has
always emphasized concern to basic values of ecology or sustainability,
whether these words were ever used or not. The tradition has always put
emphasis on voluntary moderate habits. To help the poor was always
considered as a noble cause, be it in Hinduism or in Islamic thought or in
Christianity. Rather it is the culture of 'free trade' that has led to
high incidence of sex trade in south east asian countries, leading to its
concomitant problems. The fact of existence of diverse thoughts and
approaches was widely recognized in indian thoought as can be seen by the
saying, 'ekam sath vipraah bahudha vadanthi',meaning the same truth is
expressed by the learned in various ways. It was Swami Vivekananda who
declared that 'God cannot dare to appear in any other form to a starving
person except in the form of food'.In the name of free trade, let us not
sacrifice our cultural heritage and let us all keep on expressing it, by
imbibing the good in other traditions, in diverse ways including reducing
poverty by targetted approaches, more transparent government,better
participation of public in various institutions, electoral reforms,
research and use of herbal medicines, forest protection, preservation of
tribal music, dance and other cultural traditions,promoting indian
languages, leading a life based on simple living and high thinking.
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