Free Trade and Globalization Designed To Screw Workers

SOURCEBeat the Press

Why are none of the “free trade” members of Congress pushing to change the regulations that require doctors go through a U.S. residency program to be able to practice medicine in the United States? Obviously, they are all protectionist Neanderthals.

Will the media ever stop the ridiculous charade of pretending that the path of globalization that we are on is somehow natural and that it is the outcome of a “free” market? Are longer and stronger patent and copyright monopolies the results of a free market?

The New York Times should up its game in this respect. It had a good piece on the devastation to millions of working class people and their communities from the flood of imports of manufactured goods in the last decade, but then it turns to hand-wringing nonsense about how it was all a necessary part of globalization. Actually, none of it was a necessary part of free trade.

First, the huge trade deficits were the direct result of the decision of China and other developing countries to buy massive amounts of U.S. dollars to hold as reserves in this period. This raised the value of the dollar and made our goods and services less competitive internationally. This problem of a seriously overvalued dollar stems from the bungling of the East Asian bailout by the Clinton Treasury Department and the International Monetary Fund.

If we had a more competent team in place, that didn’t botch the workings of the international financial system, then we would have expected the dollar to drop as more imports entered the U.S. market. This would have moved the U.S. trade deficit toward balance and prevented the massive loss of manufacturing jobs we saw in the last decade.

The second point is political leaders are constantly working to make patents and copyrights stronger and longer. This raises the price that ordinary workers have to pay for everything from drugs to computer games. The result is lower real wages for ordinary workers and higher incomes for the beneficiaries of these rents. It also slows economic growth, since markets are not smart enough to distinguish between a 10,000 percent price increase due to a tariff and a 10,000 percent price increase due to a patent monopoly. (In other words, all the bad things that “free trade” economists say about tariffs also apply to patents and copyrights, except the impact is far larger in the latter case.)

Finally, the fact that trade has exposed manufacturing workers to international competition, but not doctors and lawyers, was a policy choice, not a natural development. There are enormous potential gains from allowing smart and ambitious young people in the developing world to come to the United States to work in the highly paid professions. We have not opened these doors because doctors and lawyers are far more powerful than autoworkers and textile workers. And, we rarely even hear the idea mentioned because doctors and lawyers have brothers and sisters who are reporters and economists.

Addendum: Since some folks asked about the botched bailout from the East Asian financial crisis, the point is actually quite simple. Prior to 1997 developing countries were largely following the textbook model, borrowing capital from the West to finance development. This meant running large trade deficits. This reversed following the crisis as the conventional view in the developing world was that you needed massive amounts of reserves to avoid being in the situation of the East Asian countries and being forced to beg for help from the I.M.F. This led to the situation where developing countries, especially those in the region, began running very large trade surpluses, exporting capital to the United States. (I am quite sure China noticed how its fellow East Asian countries were being treated in 1997.)


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