Free trade »: a tale for unruly children

Il était une fois, au pays de l’expansion commerciale, des gens heureux.

The story takes place at the end of the last century, when several successive events fill the faithful zealots of economic growth with joy. In 1986, the European Union decided to create a single market between its member countries. The official inauguration took place in 1993 with the end of customs controls at the borders, and was completed a few years later with the adoption of a single currency, the euro. In the meantime, in 1989, an ugly wall fell on the Berlin side. While the whole world cries « freedom, freedom » to celebrate the death of the communist ogre, the elites of the Western world waste no time: they hasten to make the former Eastern countries join the legal order of capitalism, in particular through integration into the European Union and its single market. Thus, a very large part of Europe was tipped over into a new order, where the circulation of money, goods and places of production took the place of a constitution, prevailing over any other consideration. The same kind of political philosophy prevails elsewhere in the world. For example, on the other side of the Atlantic, the United States, Canada and Mexico are uniting their destinies in a North American Free Trade Agreement (NAFTA), which came into being in 1994. A year later, the World Trade Organization (WTO) set the same goals for the entire planet. One of its concrete missions is to settle trade disputes between member countries, but its real ambition is to establish global legal rules for the free flow of trade, promoting trade expansion and economic growth. 

happiness is in the « free-market 

In many ways, the 1980s and 1990s were a major cultural shift. While the left and the right had long argued over the balance to be struck between collective and individual rights, between the prosperity due to private enterprise and the benefits generated by public solidarity (such as Social Security), the mental universe suddenly shifted to a race for « free trade ». This became the new civilizing mission, gaining the support of a large majority of opinions in business, political, intellectual and media circles… 

Why is this so? The official reason is well known: if we succeed in breaking down the « barriers to trade », if we eradicate the « artificial obstacles » that the States impose on the economy, it will result in an opening of the markets which will give air and confidence to companies. Boosted by high morale, they will invest and create jobs, pay wages and manufacture goods, sell and make profits, but also innovate and invent products that will create new markets, thus generating the magic mantra that the Western world has been in love with for several decades. A magic mantra that makes the triotechnological innovation
business development 
economic growth the alpha and omega of political life, and this whether one is left or right, liberal or socialist, businessman or journalist…

On closer inspection, these decades of unbridled liberalism resemble a children’s tale: in the name of free trade, kind shepherds set out to find a disparate crowd of sheep (the nation-states) and gather them into homogeneous flocks (the European single market, the American NAFTA, the global WTO…) all agreeing to walk the same path: that of international economic competition that is supposed to lead all of us to an era of unparalleled progress and well-being. 

If it worked, if this political choice was judicious, it would be known: For thirty years that the political world has been imposing and reinforcing « free trade », we should now be living in a prosperous and harmonious world. However, the wealth gap is widening, extreme poverty is conquering new territories (notably in Greece and Spain) while the planetary horizon is covered with dark clouds: forests are retreating, toxic products are proliferating, living species are disappearing, while floods and forest fires outline the gloomy future that awaits us if we do not quickly control global warming From PIP prostheses to horse lasagna, health scandals regularly appear in the media, revealing commercial practices where cheating, lying and the networks of subcontracting companies are so branched and complex that it is no longer clear who does what, nor how, nor why. All these facts do not fall from the sky, but are the result of the « free trade » policies that have been in place for three decades. 

free markeTs do not exiSTenT 

In the tale of « free trade », the first fundamental error consists in separating the state from the market, as if they were two distinct entities. Nothing could be further from the truth. Markets are a creation of government, which puts in place the laws and regulations by which markets can function (e.g., the law stipulates the existence of private property or provides for the formation of a corporation). To be enforced, these laws and regulations must be accompanied by law enforcement institutions (such as police forces or courts) that can arrest a counterfeit manufacturer or a thief in a store. More importantly, markets can be built on the basis of very different legal rules, depending on the dominant values of a society. For example, in the United States, firearms are freely available because the right to « armed self-defense » takes precedence over the right to life… the many deaths that this political choice inevitably causes. 

In short, negotiating a « free trade » agreement is not about removing « state barriers » to trade, but about making radical policy changes in the way markets work. By creating markets that are geographically more and more extensive, encompassing an exponential number of consumers (11 million for Belgium, 508 million for the European market, 820 million in the event of the creation of a transatlantic market…), the political world is opening the door to a dangerous game: that of international mergers and acquisitions of companies In other words, a cannibalistic logic where the question for companies is: who will eat the other the fastest? From mergers to acquisitions, merchant giants are born to organize their activities on a global scale. According to an extremely hierarchical pyramidal logic, an imperial center (the board of directors) deploys its strongholds and fortresses (factories, off-shore bank accounts, research centers, networks to access raw materials…) with a precise ambition: to accumulate as much money as possible in the coffers. This money will be used to maintain the imperial growth logic of the merchant giant, but it will also feed the insatiable monetary appetite of its shareholders and top managers. 

From a social point of view, this birth of merchant giants has a catastrophic effect: it moves the real decision-making centers (boards of directors) away from the production sites. Thus, the creation of the European market was a very hard blow for the workers: if it is already not easy to negotiate working conditions (hours, wages…) with an autonomous boss (managing his own company), it is even more difficult to succeed when the boss facing you is only a puppet obeying orders from London, Geneva, Paris or Chicago. Especially since the multinational giants, if they are clever (and they often are), multiply the factories capable of carrying out the same types of production. As a result, it is easy for them to orchestrate a competition between different production sites to choose the one where the workers offer a magnificent optimum: high production yields for low wages… 

Of course, this anti-social logic is not unrelated to another problem mentioned above: the constitution of a complex network of subcontracting firms, where it is no longer clear who does what, nor how, nor why. This opacity is the source of the health scandals that the authorities promise to regulate, even though they have less and less means to do so. 

Because on the democratic level, the existence of international « free trade » also produces deleterious effects. On the one hand, we have « local » public authorities, attached to a particular territory. On the other hand, we have multinational giants free to move (with their investments, their production sites and the jobs they generate) wherever they want in a space encompassing very different countries. Countries that are distinguished by their culture, the tastes and skills of their populations, but also by their requirements in terms of corporate taxes, financing of social security and seriousness (or not) in the definition of environmental, health and social legal standards… Obviously, the multinational giants are neither neutral nor benevolent when faced with such legislation: in their eyes, social, fiscal or environmental issues are all financial constraints that hinder profit optimization. However, thanks to the « free trade » which allows them to move from one country to another, the multinational giants have only the embarrassment of choice between all the existing legislations (constraints)…

The rest we know well. On the one hand, the multinational giants are relocating (or threatening to do so) if governments do not lower their environmental, fiscal or social requirements. On the other hand, national governments compete to offer tax breaks, flexible workers and minimal environmental constraints to delighted investors. And the fairy tale of « free trade » leads us to a nightmare: a nightmare of relocations and company restructurings, of job losses and public finances at half-mast, a nightmare in which we fall out of bed to hit a reality that hurts! 

private creativity can be toxic 

And yet, the descent into hell is by no means over. Because the international competition between companies does generate one of the expected effects: increased technological creativity (latest generation flat screens, increasingly powerful computers, multifunctional smartphones, latest touch tablets, etc.). Amazed by these modern jewels, adults are like children: they sleep without worries because nice companies take care of creating the products and the desire to own them that they need to feel good. And we close our eyes. And we let ourselves be lulled into sweet illusions. And we work, happy to get the money to satisfy the crowd of new needs, commercial chimeras expanding in our hearts and heads… 

In this daydream, a devious monster escapes us: far from always being a blessing, commercial creativity can be extremely toxic. Thus, the financial crisis of the « subprimes » is closely linked to the engineering of the big American banks: to earn more money, they found it convenient to build huge financial towers, where each « apartment » contains a different credit (student loan granted by a local bank in Florida, loan for the purchase of a car granted by a local bank in Washington, real estate loan granted by a bank in Missouri…) Thanks to this bank securitization, many different credits could be agglomerated into one financial security. According to Wall Street, the advantage was that it offered greater security to potential investors: by mixing entirely different loans, the risk of all payments defaulting at the same time was greatly reduced. But Wall Street did not say a word about how it built its financial towers: the main idea was not to make a safer product, but to hide ugly black sheep (rotten loans) behind wonderful white sheep (reliable loans). To put it another way, Wall Street managed to make a lot of money by passing off poor quality squats (insolvent financial loans) as high-end luxury apartments. An art of concealment that lasted a few years, saw the banks compete in ingenuity to convince insolvent people to take out new loans, until the day when everything collapsed… and it took massive help from public finances (4,600 billion euros for European countries alone) to save the banks from bankruptcy. 

Examples of toxic merchant engineering also exist in the agri-food, chemical, energy and pharmaceutical sectors, etc. From the creation of leaded gasoline (in the 1920s) to the addition of carcinogenic additives in tobacco, from the worldwide promotion of asbestos to the planetary diffusion of innumerable toxic substances (PCBs, pesticides, endocrine disruptors?), the history of the Merchant Giants is unfortunately littered with shameless lies ranging from simple propaganda to the most vile scientific manipulations in order to promote the exponential sale of products that make people sick.), the history of the Merchant Giants is unfortunately littered with shameless lies ranging from simple propaganda to the most vile scientific manipulations in order to promote the exponential sale of products making plants and animals sick (or killing them slowly), including humans. 

This is why, far from leading to better days, the tale of « free trade » is dangerous. It gives multinationals incredible power to compete with workers and governments, while deploying technological engineering that can be extremely toxic to people’s health and public finances. And when a major catastrophe occurs (such as an American financial crisis or a nuclear accident in Fukushima), the response of the public authorities is to make the population assume the damage generated by the Giants of the commercial world (by saving the banks from bankruptcy, or by nationalizing the Japanese energy multinational Tepco). 

Alas, this is not even the most serious. The most serious problem is the fact that we are unable to admit that it is a failure: « free trade » is not a promise of a bright future, but a path to chaos and destruction. In the absence of such a statement of failure, we continue to vote for political parties that are like children in a nightmare. They shout and shake their heads: « it’s the crisis », « unemployment is rising », « investors have lost confidence », « social security is too expensive »… Unable to think, fearful, like children who love to be told the same story over and over again, these elected politicians lack wisdom and opt for the stupidest solution. 

They tirelessly repeat the magic mantra that is inexorably destroying us: once upon a time, in the land of trade expansion, happy people dreamed of transforming a European market into a transatlantic market… 

B.P.


health

« Given the global growth in demand for medical care over the next decade, and provided the right policies are adopted, the health care sector can be the trigger for a sustained increase in U.S. exports, while the European Union is a particularly appropriate region for a major trade initiative. » 

Alliance for Competitive Medical Care (includes insurers, health care providers, pharmaceutical industries and other companies involved in health care in the United States)
February 3, 2012 


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