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FOR most of its history, the economics profession has mostly been inherently conservative, and those economists inhabiting the "mainstream" have almost inevitably been so. Of course, the past century saw some prominent exceptions of major economists who were able to break the bounds of traditional thinking and question the fundamental axioms of the subject as it then existed - Joseph Schumpeter, Michal Kalecki and John Maynard Keynes spring to mind as examples. But for the most part, economists involved in research, teaching or policy advice have been rather unquestioning of the current orthodoxy, regardless of its actual relevance.
This means that what are essentially no more than dogmas or shibboleths achieve such respectability through repetition that they are no longer considered implausible or even questionable within the profession as a whole. A prime example of this must be the attitude towards "free trade". This particular concept had been sanctified in economics as generally creating greater welfare and good for all, despite the more recent theoretical arguments and mounting empirical evidence of its limitations and the particularity of the conditions that made it relevant.
For at least the past half-century, the role played by the powerful academic establishment in the United States has been very significant in creating this conformity. It has correctly been stated that "few tenets are so widely shared among economics Ph.Ds as the belief in the positive impact of free trade". This overwhelming acceptance meant that those economists who did disagree, or who tried to point out that the argument for the universal benefits of free trade rested on a number of assumptions that were not always fulfilled in reality, were derided or simply ignored.
So policymakers in developing countries have been constantly told that more liberal policies towards trade and investment would deliver more growth, employment and poverty reduction for them. This was hammered home by the International Monetary Fund (IMF) and the World Bank, which typically made it part of the conditions associated with loans. The World Trade Organisation (WTO) institutionalised such a perception as the fundamental underlying principle for its very existence.
But the hegemony of this understanding did not stem only from persuasion and pressure exercised upon policy makers. It was made more effective by systematically indoctrinating economists in the developing world who could be in a position to influence policy. The supposedly inevitable benefits of "free trade" therefore became an automatic response among economists across the world, who did not even stop to consider the assumptions behind the argument, and whether the argument would hold in all conditions.
This was odd, especially since the case for free trade is substantially undermined by the actual experience of most developed economies. All the currently developed industrial countries have relied on major doses of trade protection to build their own infant industries, to ensure the desired economies of scale in production, and to move up the ladder in the international division of labour. The denial of that experience cannot be ascribed to temporary forgetfulness; it must have less benevolent causes, such as wanting to ensure that their position in the world economic pecking order remains unchallenged.
It is even odder because theoretical developments that have examined the impact of international trade under conditions of increasing returns to scale and oligopolistic competition (which are the most likely in the current world economy) have generated very different and often opposite results on the potential gains from trade in different conditions.
It is not even the case that today the developed countries are strict upholders of the free trade regime that they seek to impose upon the developing world. Thus, while U.S. governments (Bill Clinton and George W. Bush alike) have paid lip-service to the notion of free trade, they have been conspicuously lax in practising it themselves while imposing it relentlessly upon other countries.
Unilateralism remains the most significant trade instrument for the U.S. administration. The U.S. government signs "free trade agreements" with less powerful countries that force huge concessions upon them and provide major protection for its own large companies, while continuing to provide protection to agribusinesses and other vested interests and large capital originating in the U.S.
Further, even the mainstream economists in the U.S. who most prominently argue the case for free trade and open competition across borders have not consistently held to this position. Most such economists support many forms of protectionism and creation of unfair monopolies, most obviously through imposing patents and copyrights. In general, these economists have also been untroubled by forms of protection that are intended to protect powerful special interests.
For example, very few economists in the U.S. objected to the restrictions that the U.S. Congress has placed on the number of foreign medical residents allowed to enter the country since 1997, a measure that costs consumers tens of billions each year in higher medical expenses. As a rule, these mainstream economists have objected mainly to forms of protectionism that have the effect of benefiting blue-collar workers within their countries. And they have insisted that all citizens in developing countries be subjected to the impact of free trade, even when this involves deindustrialisation, huge job losses and agrarian crises, on the grounds of "greater efficiency".
BUT much of the enthusiasm and vigour with which free trade was propounded in the developed world has recently dissipated. One of the more amusing changes in thinking among mainstream economists in the U.S. has been the shift in attitudes towards free trade, such that it is now seen to be potentially dangerous for developed economies like the U.S. that have earlier been able to use it as an instrument to prise open markets elsewhere in the world.
The advances in information technology that now allow all sorts of service activities also to be traded across borders have meant that even fairly skilled jobs in the developed world are now at risk from cheaper skilled workers in developing countries. It is not just in software and IT-enabled services like back-office work that such a process is evident. There is a strong tendency towards relocation of work in publishing, computer animation, banking and financial services, design and a whole range of other activities without involving the movement of people across borders.
So the rapid growth of outsourcing in the past few years has brought home the possibility that many more jobs in some of the highly-paid and professional activities can be performed elsewhere, and that these more privileged workers are not immune to the possibility of being adversely affected by free trade. So it is not just blue collar workers in traditional manufacturing industries, but professional workers (similar to economists themselves) who can face greater job insecurity and potential unemployment.
So we now find a sea-change in the attitudes of many mainstream economists. All of a sudden, they are discovering that free trade need not always be beneficial, that it can lead to job losses and that there is need for countries to ensure some trade protection. Establishment economists who stick by the earlier position are now the ones being reviled, while more and more articles in the mainstream press point to the disadvantages of liberalising trade.
Of course, even these new criticisms miss the point, just as the earlier acceptance of free trade did. The reason that not enough jobs are being created all over the world today is because macroeconomic policies to ensure full employment are no longer possible in a world of mobile finance. The way to ensure that governments can get back to policies that provide full employment and basic services to their citizens, is to put limits on the mobility of capital and ensure that it does not create crises and unemployment.
But those economists who are caught in the web of servile acceptance of most of the existing order, cannot even begin to make these points. That is why they are now trying to pose a completely false contradiction between skilled workers in the U.S. versus the skilled workers in parts of the developing world.
All this brings home the point that the mechanics of trade have never been the real concern of imperialism. After all, imperialism has used controlled and forced trade when it has suited it, and supposedly free trade when it suits it, without any problem. The tragedy is that it has always been able to find economists who will willingly justify the chosen strategy of the moment.
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