Tom Paine famously said of Edmund Burke that he “pities the plumage but forgets the dying bird.” This accusation applies to many free marketers.
I’m prompted to say this by a post from Simon Cooke. He argues against nativist anti-free traders of left and right that:
Trade - free exchange between individuals - is mutually beneficial. It's not a competition between nations, it's not a 'global race', and it's not a winner-take-all game of international treaty poker. The whole bloody point is that both participants gain.
I largely agree. But Simon is making mistake here common to many free marketers. He’s overstating the threat to free markets that come from politics, and understating the extent to which they come from actually-existing capitalism itself. He's forgetting that capitalism looks like a dying bird that is no longer laying the eggs of freer trade.
My chart, taken from CPB data, shows what I mean: Martin Wolf provides other evidence. It shows that growth in world trade has slowed sharply since the 1990s and early 00s. This has nothing to do with nativists like Trump, Le Pen and Brexiters. It’s because of factors largely endogenous to capitalism.
- The fast growth in trade in the 90s and 00s was due in part to one-off factors that have faded – such as the reintegration of China and former Soviet bloc economies into the global economy and the reaching of easier free trade deals.
- The migration of low-wage work to Asia has slowed, in part because rising wages there have reduced their cost advantage.
- Since the financial crisis firms have feared that even if credit is available now it might not remain so in the next crisis. This has reduced trade, as this is dependent upon finance.
- Companies have learned that long and complex supply chains are hard to manage, with the result that some have begun to re-shore.
I’d add to this that support for anti-globalization policies (such as tougher immigration controls as well as trade restrictions) are also endogenous to capitalism. They arise from the fact that many people in the west feel that capitalism is failing them – and they are drawing an incorrect conclusion from a reasonable premise.
Whatever the reason, the fact is that, as Michael Roberts says, globalization has “ground to a halt.” Granted, this might change: we’ve seen globalization falter and recover in history. But it might not, at least soon.
My point is, though, that the threats to free trade and the prosperity it brings don’t come merely from silly people believing silly things. They are more profound than that.