Friday, December 16, 2011

How the economic crisis began with free trade

By Rick Salutin
Rabble.ca
December 16, 2011

Even now, as we speak, 153 august trade ministers from the nations of the World Trade Organization are gathered in Geneva to chant the ancient spells for warding off economic disaster. Beware of beggar thy neighbour (Woooo). Firmly resist protectionism in all its forms (Woooo). Canada's own Ed Fast will join a lively "anti-protectionism" news conference.

This is the time-honoured response to crises: hoary phrases meant to inject wisdom gained from earlier crises. It's the economic equivalent of fighting the last war to avoid thinking about the one now raging. No, wait: it's more like droning a few clich├ęs about the last war to avoid thinking about it too.

Why is this so irritating? One: because the main bullet points used by the WTO in their craftily defined way -- free trade, globalization, anti-protectionism -- pretty much created this mess. Two: because we of all people should know that, since it began, more or less, with the 1989 U.S.-Canada free trade deal. It was a test run for what followed. Let me explain why I say this.

Canada was a trading nation long before "free trade." The real point of those deals wasn't trade. It was to give to ownership, i.e., those with money to hire and invest, an advantage over those they hired, i.e., the workforce. With that "freedom," they shipped jobs and factories abroad to cheaper workforces. Naturally the incomes of those at home declined. There were fewer "good" jobs making things and many more "precarious," ill-paid ones.

But the economy still required the workforce to spend so they went into ever-greater debt: first with credit cards; then, especially in the U.S., using their homes as ATMs. Meanwhile, the financial sector, which expanded as the manufacturing sector shrank, became drunk with its new power and its own "freedom" from control -- another component of globalization -- and invented bizarre financial "instruments" that made them giddily rich. Then it all crashed. But it started with "free" trade.

I grant this is only one way to put it. Any catastrophe can be viewed from many points. This one isn't exhaustive but it isn't wrong, either.

And it's hard to see a way out without dealing with that basic transformation. Costas Lapavitsas, economics prof at the University of London, appearing on The Real News Network, said almost casually: "We need to begin to think of how to restructure the real economy ... rejuvenate production ... reinvigorate real activity, as it were... "

What an amazing concept: the real, as in economy. Why did anyone ever think a country like Canada could thrive without making actual things? A hockey dad I know says he examined the equipment his four kids use and only the helmets were made here -- perhaps, he speculates, because it was a moulded unit needing no assembly. Now the Harper government has "freed" the wheat market so it, too, will be subject to globalization. Will we even bake our own bread?

This virus is international. Bombardier, the Canadian transportation firm, invested heavily in the U.K., at least providing some "real" jobs there. But this week the Cameron government gave a huge train contract to a German firm, and Bombardier will close the last train factory in the U.K. (Puff on that, Thomas the tank engine.) Everyone jumps off the cliff after watching others do it, like the dodos in Ice Age. The U.S., whose real economy is so hollowed out, just pushed through free trade with Panama, Colombia and South Korea. At least the Koreans had the sense to riot. One parliamentarian tossed a tear gas grenade.

I confess I have a dog in this hunt. There were times in the fight against free trade here that I felt my life had been swallowed by it. But it's not just the urge to say Told Ya So. I've been passionately engaged in debates where I can't even recall which side I was on. (Was the existentialism of the German philosopher Heidegger a result of his Nazism, or did his nascent Nazism produce his existentialism?) When you forget what side you're on, it's time to let go. But it's hard to let go of this one: reality keeps tapping you on the shoulder.

This article was first published in the Toronto Star.

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