Reader Tony Scanlan has sent one of those emails which brings me back to the purpose of Webdiary and makes me wonder if I’m still fulfilling it.
A big aim of Webdiary is, as I say in its charter, “to help meet the unmet demand of some Australians for conversations on our present and our future, and to spark original thought and genuine engagement with important issues which effect us all”. This is why I love getting perspectives outside those of most of my readers and invariably publish them. But maybe my passions on refugee policy, children overboard and terrorism laws are setting back this aim.
Still, I reckon the Third Way debate is getting somewhere. Now its instigator, Tim Dunlop, has written another piece on the assumption that `free trade’ would be a great thing if the inverted commas could be dumped. I hope Kieron Convery, who in How many economists does it take to …pleaded for some constructive ideas rather than just cutting down other people’s theories, gets some hope from it.
Today Tony Scanlan and Tim Dunlop lead this entry, then Dr Aaron Oakley, Paul Walter and James Woodcock respond to yesterday’s TW discussion.
The TW debate has spread beyond these pages, to David Morgan’s Elitist weblog http://elitist.blogspot.com, elitist. David replied to Tim’s opening salvo in Third Way: Window dressing for capitulation (May 7), and Tim and he got into extended discussions thereafter. David writes:
“I’m no economist, but I’ve also tussled with Tim and lived to tell the tale. It all started at TWelitist1 and continued at TWelitist2 and TWelitist3 before concluding (I hope) at TWelitist4.”
So Tony Scanlan, Webdiary readers are having a go at the genuine engagement thing, I reckon. Do you agree?
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Tony Scanlan
Having lived out of Australia for 2 years, I occasionally tune in to the Herald to fill up on news from home and I occasionally read your articles. I am really struck by how you and a number of other writers on both sides of the left-right divide always tend to boil down complex issues into the fact that the Coalition/right or ALP/left are responsible for all the troubles in the world or at least Australia.
What I find really amazing is that sitting outside Australia with the benefit of some distance is how pointless and of little relevance this kind of debate is. Both sides of this divide are really quite similar.
What really matters for Australia is a debate on how best to secure a better future for Australia in a world where creativity and innovation are paramount; rather than this worn-out old debate based on an increasingly irrelevant ideological divide.
I used to do my best to ignore you and other left-right warriors, hoping you would eventually get over your issues and move on. But lately I have come to realize that this doesn’t seem to be happening – you and your brethren are so noisy you’re drowning out what Australia really needs to debate. So PLEASE take a deep breathe and emerge from your blinkered ideological ways and move on. Start talking about some things that are really relevant in the 21st century.
It might be hard just as its hard for the old warriors in Northern Ireland or the Middle East who have learnt to make a living through perpetuating needless division – but I have have faith in you and in your humanity and in humanity in general. I know you can do it.
PS: Please feel free to send this e-mail to anyone you really despise on the opposite side of the left-right divide and tell them that this message applies equally to them. Then invite them to dinner to discuss all the things you have in common. .Go on do it! I know you can! It will be good for your soul.
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Tim Dunlop wrote the piece below before reading yesterday’s Webdiary. He wrote later: “I really liked Kieron Convery’s criticism of me and John Wojdylo and others. I understand his craving for answers to specific problems like the ones he mentions. I stand by my answer that it is okay just to criticise, but I’d like to move in the direction he asks for. (The piece I just sent you is a step in that direction.) I’m now working on a piece that tries to offer some “answers”? I’m happy for Kieron to contact me in the meantime (tinota@starpower.net). I’ll probably do it in the form of something like “10 things we should think about to improve the way things are”. It’s a bit of a tall order to offer a fully formed alternative view of the world, but we can at least throw up some positive ideas for discussion. That’s what I’ll try and do.”
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Free trade and why it would be nice to have some
By Tim Dunlop
The discussion of the third way and related matters prompted by my recent article on the topic suggests to me the need to take a few steps back from where that analysis started and deal with a couple of more basic questions. Chief amongst these is our understanding of what is commonly called “free trade”.
The central question is not about free markets-v- planned economies or some variation on it. It is about who gets to decide the rules and the way in which the rhetoric of “free trade” sits with the practice. In other words, it’s about power.
Consider the reality of international commerce. Far from seeking to open up trade between countries – especially between the developed and the developing world – the international instruments and the powerful governments that support them, embodied in organisations like the WTO, the World Bank, the G7/8, and the EU, constantly renege on their commitments. A recent report by Oxfam lays bare the deceit:
* Developing countries lose $US100 billion a year because of trade barriers put up by the developed world.
* The tariff barriers in rich countries are four times higher for poor countries than for industrialised countries.
* Rich countries have increased agricultural subsidies instead of cutting them, costing developing countries $US20 billion a year.
* Rich countries continue to restrict the international trade in textiles and garments, trade items that are amongst the most important to developing countries.
* Industrialised countries reinforce trade liberalisations in their favour through the loan conditions applied to money provided by the World Bank and the IMF – one recent IMF review of 23 of its programmes found that they included 186 loan conditions related to trade. Many of the allowances made for protection of national industries that were available to the Asian countries, and that had some measure of success in promoting growth there, have been withdrawn in agreements with other developing nations.
This information comes from a report called Eight broken promises: Why the WTO isn’t working for the world’s poor. A more complete report, also by Oxfam, is Rigged rules and double standards: Trade, globalisation and the fight against poverty. Read it, especially if you support free trade. You might wonder what’s being done in its name.
Under IMF and World Bank financing arrangements it is less global integration that is being pursued than a modern form of colonialism. For example, IMF documents show 167 loan conditions (as they are called) attached to a finance package for Ecuador. They included orders to raise the price of cooking gas by 80 percent; to eliminate 26,000 government jobs; to cut real wages for the remaining workers by fifty percent in a four-step timetable drawn up by the IMF; and to transfer ownership of its largest water system to foreign operators.
Another example is Tanzania. World Bank and IMF documents show that “assistance” to that country required 157 conditions including demands that the government charge for hospital treatment, charge for school attendance and a general requirement to sell off state-owned industries, which basically means the transfer of ownership of utility and communications industries to foreign multinationals.
The results have included a 53 percent drop in the number of people being treated in hospitals (in a country where 1.3 million people have AIDS) and school enrolment dropping from 80 percent to 66 percent and still declining. Also, over fifteen years, the GDP rate per capita in Tanzania dropped from $309 to $210 and poverty now afflicts 51 percent of the population. When reports showed that there was some hostility to these measures, the World Bank noted sadly that, “one legacy of socialism is that most people continue to believe that the State has fundamental role in promoting development and providing social services”.
These examples come from a book by journalist and lawyer, Greg Palast. He has plenty more just like them, but all with the same theme – the imposition of draconian trade and financing conditions on developing countries. All result in massive social dislocation and civil unrest, death and impoverishment, a net transfer of wealth from the poor countries to the rich – all in the name of “free markets”, “free trade” and “globalisation”.
If you actually believe in free trade and you think these international organisations are fighting the good fight in the name of open markets, the book is probably worth a read.
Palast relies on leaked documents from the IMF and World Bank which are rather more blunt than the ones that usually see the light of day. For those who prefer their facts from more pure sources, Joseph Stiglitz is your man. As a former US government adviser and chief economist at the World Bank, not to mention a Nobel laureate in economics, they don’t come any more reputable.
Stiglitz is clear: “The issue that is commonly debated – namely, whether we should be “for” or “against” globalization – is not the salient one. As a practical matter there is no retreating from globalization. The real issue is the conduct of the international economic organizations that steer it.” Stiglitz cites the example of Ethiopia, where the IMF suspended its aid program. The reasons for that suspension were unfathomable if your criteria is standard economics, a little more transparent if you apply the logic of power politics.
One reason for withholding aid was because Ethiopia had a balanced budget. This wasn’t good enough for the IMF or the USA, according to Stiglitz who, remember, was privy to the negotiations. They wanted Ethiopia to produce a surplus, which would require cutting services or raising taxes, “a difficult action in any country, but especially in a desperately poor one”.
Another reason for withholding assistance was that Ethiopia had repaid a US bank loan early, using some of its reserves. The IMF and the US didn’t like this, and were willing to cut off the funds because Ethiopia hadn’t consulted them before doing it. But as Stiglitz asks, “Why should a sovereign country – one whose policies had convincingly demonstrated its capability – have to ask permission of the IMF for every action it undertakes?” At the time the IMF and the US were chastising Ethiopia and punishing it the country had no inflation, growing output and a Prime Minister, Meles Zenawi, who was committed to economic reform.
For those who think that the IMF, World Bank etc are independent institutions operating outside the realm of base politics and national power tactics, it is as well to remember this description from “free-trade” advocate, Robert Kuttner: “The United States, as the world’s largest economy and as devout believer in laissez-faire, is the system’s special patron.” A more delightful euphemism I dont think I’ve ever seen.
The point Stiglitz and others are making is that those who set the rules for it do not abide by their own rhetoric, not even the “special patron” who is such a “devout believer” in it. They never have. “They don’t care,” says Stiglitz, “if people live or die.”
But the loudest proponents of “free trade” characterise protestors against the World Bank, the IMF, or perhaps the World Economic Forum as being “anti-globalisation”. The media falls for it. Thinking people shouldn’t. The label is an effective propaganda tool but that’s all. Such protestors are not against greater global integration; they just object to the way such measures are enforced by the rich over the poor.
Thus the objections from Oxfam, Stiglitz and other concerned critics are not based on a rejection of international trade but on an increase in it. Only a liar could characterise this as “anti-globalisation”.
What we see, then, is less the weaknesses of neo-liberal policies themselves (which is a whole other story) and more the vagaries of the raw application of power which those in control of it choose to call “free trade”. As was noted with approval by Marc Levinson in Foreign Affairs magazine in regard to the implementation of the North American Free Trade Agreement (NAFTA), a trade treaty between the USA, Mexico and Canada: “The underlying purpose of NAFTA was not to promote trade but to cement Mexico’s economic reforms.” In other words, the idea was to ensure that any future government, a “democracy opening” as Levinson put it, would be “locked into” a series of agreements favourable to the US.
There are other examples where the official literature makes clear the reality of “free trade”. The OECD, in regard to high tech industries, tells us that “Oligopolistic competition and strategic interaction among firms and government rather than the invisible hand of market forces condition today’s competitive advantage and international division of labour in [these industries]”. This quote comes from Who’s Bashing Whom: Trade Conflict in High Technology Industries by Laura Tyson, Dean of London Business School and former US Government economics adviser. It’s another good read.
NAFTA and agreements like it not only serve the purpose of “locking in” countries to terms of trade and economic arrangements favourable to the dominant partner, they also act as disciplinary measure within countries. Again, it is not adherence to the beauty of neo-liberal prescriptions that matter, but how such agreements allow key governments and corporations to exercise control.
One of the tools of this is to increase worker insecurity. No less an authority than Alan Greenspan, head of the US Federal Reserve, has acknowledged the efficacy of such an approach. He told the US Senate Banking Committee in 1997 that “sustainable economic expansion” thanks to “atypical restraint on compensation increases, appears to be mainly the consequence of greater worker insecurity”. In other words, economic expansion is aided greatly by the wage restraint bought about by worker insecurity. Greenspan wasn’t objecting.
How do NAFTA and trade instruments like it achieve this end? Check out economist Kate Bronfenbrenner’s report, available here. Professor Bronfenbrenner is an economist at Cornell University and she summarised her reports findings in testimony before US Trade Deficit Review Commission (and from which the above Greenspan quote comes). “Under the cover of NAFTA and other trade agreements,” Bronfenbrenner testifies, “employers use the threat of plant closure and capital flight at the bargaining table, in organizing drives, and in wage negotiations with individual workers. What they say to workers, either directly or indirectly, is if you ask for too much or don’t give concessions or try to organize strike or fight for good jobs with good benefits, we’ll close, we’ll move across the border just like other plants have done before.”
She continued: “Our research shows that in NLRB certification elections, more than 50 percent of employers made threats to close all or part of the plant during the organizing drive. This is nearly double the 29 percent of employers who made plant closing threats during NLRB campaigns in the late 1980’s [sic] before NAFTA came into effect.”
Of course all such threats – let alone actually closing down plants in this manner – are illegal under these “free trade” agreements, though, as Bronfenbrenner’s report shows, this doesn’t stop them being made. Threats can be direct or indirect, but when corporations decide on the latter course subtle is not the word that springs to mind. During the “UAW campaign at ITT Automotive in Michigan in March 1995, management removed an entire production line overnight, wrapped it in shrink-wrap, set the equipment on 13 flatbed trucks in front of the plant with hot-pink signs that said, Mexico Transfer Job”.
For those who argue that such “free trade” arrangements represent a “dispersal of power” and opportunities for more worker control over their lives, Bronfenbrenner has this to say:
“The ripple effect of public anxiety over job loss and the effects of NAFTA goes far beyond the relatively small number of companies that shut down plants and move operations to Mexico and other countries. Thanks to a combination of employer threats of plant closings, actual plant closings, and media coverage, a climate of insecurity has been fostered which affects every worker, union or non-union, in every industry.”
Under such circumstances, free trade agreements are nothing of the sort: they are instruments of power, used by corporations and governments to enforce conditions favourable to the wealthy few, not the dependent many. When they don’t work as intended, the more powerful partner can just choose not to play by the rules.
The tomato wars between the US and Mexico illustrate the point. Under the terms of NAFTA, Mexico had increased its exports of tomatoes to the US. (They are more efficient and technologically advanced producers than their US counterparts.) US producers complained, accusing Mexico of “dumping”. The case went to the International Trade Commission (ITC). The ITC voted 4-1 against the Americans, arguing that Florida’s farmers were not being disadvantaged. Still, the farmers continued to pressure the US Government to impose tariffs. The Clinton White House was also involved, well aware of the fact that Florida had switched from George Bush I to Clinton in 1996. They wanted to make sure they stayed switched. Mexico was threatened with tariffs and eventually agreed to a “voluntary” quota system, which in free trade terms is a worse result than a tariff.
Mexican farmers are punished while those from Florida, the ones from the country with “a devout belief in laissez-faire”, are protected. But this is only a worry if you actually believe in free trade. It isn’t so bad if you need Floridian votes. As usual, rhetoric and action don’t match.
We in Australia, then, would do well to keep these matters in mind and to maintain pressure upon our government as it continues to pursue “free trade agreements” with countries in our region and most especially with the United States. Yes we would like something done about the ridiculous subsidies paid to agribusiness in the US that keep our agricultural products out, but we have to be careful of what we are giving away into the bargain. These guys play for keeps.
Ultimately, as Oxfam and other serious critics of international trade practice note, the argument is not just about whether “globalisation is inherently good or bad”, it is about the conditions under which it is being imposed.
We might paraphrase Gandhi who, when asked what he thought about British civilisation, replied that he thought it would be a good idea. So too with free trade. As a principle it may be all very well, but what the record of current “free trade” practice shows is that the agreements and conditions that govern it are less the instruments of genuine trading opportunities designed to integrate poorer countries into the world market place, than disciplinary tools that favour the already wealthy. Proponents of free trade should be outraged.
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Dr Aaron Oakley
Good on you for publishing Gerry Jackson, despite his “incorrect” views.
When Glen Condell challenged me to read Joseph Stiglitz, I pointed out that none of us (Condell and I) were in a position to judge Stiglitz’s work.
Interestingly enough, economist Dr Frank Shostak, who also writes for The New Australian, sank the following boot into Stiglitz in newaustralian. I would advise Mr Condell to read Dr Shostak.
Also, it is worth clarifying my position re The New Australian. I was once an environmentalist, and wilderness society member. I opposed the Franklin dam, the Wesley Vale pulp mill, and other developments.
As a science undergraduate at the University of Tasmania, I gradually came to realise that the green movement had lost the plot. I now believe that the movement has been hijacked by fanatics who are prepared to use any argument, no matter how badly thought out, no matter how unscientific or wrong, to frighten the populace into supporting their agenda.
I write for The New Australian (fee gratis!) on environmental issues – mainly exposing green bias in the press and on the ABC, and exposing falacious claims made by Greens. I feel my scientific training allows me to do so.
I do not write on economic matters, feeling that I am not qualified to do so. When I say qualified, I do not mean in the sense of formal qualification, but in the sense of having the depth and breadth of knowlege.
It is worth stressing that I receive no funding from industry to support my work. I am a junior academic at an Australian university. I write for the New Australian in my own time and at my own expense.
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Paul Walter in Adelaide
Reading an article by Tim Colebatch in The Age crystallised thoughts I have had lately reading Webdiary. The really good political/economy writers(Grattan, Steketee, Gittins, Davidson and the like) are able to write economically and get a point across by, paradoxically, confining themselves to an aspect or fragment of the wider discourse they wish to elaborate upon. They use that as a means for illuminating some more universal point involving “the system” that may not be working too well at the time, rather than trying to produce a “unified theory of everything” using incomprehensible words of six syllables or more and employing convoluted language, and a patronising exclusive tone in the exegesis.
I have done the above myself repeatedly as a low level arts student. Examiners of my essays constantly warn me about the perils of this “Post-Doctoral Thesis” tendency, and I often incur mediocre marks for my pains.
Last year, when Webdiary tended to be crisp, short and sweet, involving any voices and more diverse subject matter, the reader benefited from this sharp editing. Unfortunately people pushing particular barrows seem to have decided that the time is ripe for colonisation of these spaces, and Webdiary is suffering for it.
I am NOT saying that attempting to deal with deeper subjects in greater depth has been wrong.They are complex subjects sometimes involving much professional expertise and specific jargon which must be understood at the basic level if a reader is to progress to a deeper understanding of underlying issues of control and distribution of wealth, meaning and power, and hidden agendas.
It just seems that some contributors have seemingly almost deliberately tried to complicate issues rather than explain them or expose their real significance.We know “Academic” writing is an art, and required for the transmission of ideas between experts in given fields. But if Webdiary is to remain accessible – a people’s page – then at least a few contributors would need to alter their styles(but not substance) in order to successfully elaborate on the issues that concern them for a wider community audience.
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James Woodcock
A quick observation from a economic non-expert leftist.
Gerard Jackson’s reply proves that if you give an economic rationalist enough verbal rope they will eventually hang themselves. In defending economically correct Hong Kong against interventionalist Singapore Jackson states:
“Wojdylo’s accusation that the British didn’t try to alleviate the housing problem is just not true. By 1964 about 20 per cent of the population were living in government re-settlement blocks, shanty towns were being cleared and old tenements torn down.”
Whoops! Twenty percent of the population living in government housing hardly sounds like a “value-free” market setting its own levels. Sounds downright Socialist to me.
In the spirit of John Wojdylo’s Rousseau piece, people may like to read or re read John Ralston Saul’s Voltaire’s Bastards. His main thesis is that often systems of thought (like current economic theories) are internally logical or consistent yet when subjected to external metrics like history or raw human experience, they fall hopelessly apart.
This does not however stop people in power imposing these self-fulfilling realities on us all. With great style and wit he manages to tie together French public health policy, the arms trade and economic rationalism. and shows how by moving beyond these constructs there is a better way out there.