Free Trade: Myth, Reality and Alternatives (Global Issues)

Graham Dunkley

Language: English

Pages: 288

ISBN: 1856498638

Format: PDF / Kindle (mobi) / ePub


This book takes a fresh look at this issue in economic policy. Graham Dunkley provides a critical history of international trade and an alternative analysis to orthodox doctrines about trade policy. He argues that trade, although a natural economic process, has today become much more complex, deregulated and divorced from development than is desirable. He concludes by suggesting elements of a new approach to development and an alternative world trading and economic order.

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Mill () the ‘infant industry’ and ‘terms of trade’ (Box . ) cases were also being widely acknowledged, though the latter was not formally proven until the work of Charles Bickerdike in  (Irwin, : ff). By the late nineteenth century leading Neo-classical economists such as Edgeworth and Marshall were describing free trade as uncertain in theory but the best policy in practice because governments could get their protection policies wrong (now called ‘government failure’) or resources could be wasted in lobbying efforts (now called ‘rent seeking’ – see Chapter ).

In general, as noted above, trade and power are more closely linked than Free Traders realise, so that trade will always be a potential cause of conflict (see Hirschman, ; Sediri, ). Political scientists are equally undecided, some confirming a positive link between trade and peace, some saying it depends on the state of power balances, some surmising that trade may spark conflict by threatening national security, or help fund rearmament by inducing prosperity. One survey found war more associated with periods of hegemony, openness and prosperity than with eras of non-hegemony, protectionism and recession (Mansfield, : ).

Secret No.  is that this structural change is ‘non-consensual’, with few people having a say in it, and the social or other ‘non-economic’ adjustment costs can be high. Secret No.  is that the benefits of free trade, or the ‘gains from trade’, arise not as direct cash-in-hand but in the form of an indirect, theoretical, concept called ‘consumer surplus’ whose real value can be questioned (Box . ), and so these gains, as Krugman has admitted, are probably small, unless the even more uncertain ‘dynamic gains’ (below) are invoked.

A. n. a. n. a. n. a. n. a. n. a. n. a. .  – .  .  .  .  .  n. a. .  .  .  .  .  .  .  .  .  .  .  .  – .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

Both issues have long been contentious, the latter since the early s, but the World Bank, the WTO, Free Market scholars like Anne Krueger (quoted above) and most governments now proclaim the debate to be over – trade is best for growth, and EO via trade liberalisation has been proven best for everyone, the Global Free Trade Project being heavily posited upon this alleged ‘victory’. However, in this chapter I dispute such claims as misleading, perhaps dishonest. I argue, contrary to Free Market assertions and parallel claims regarding nineteenth-century development (see Chapter ), that EO and trade liberalisation do not clearly produce better growth rates or other superior outcomes; that IS can work, though it is often bungled; and that state-led industrial policy is effective.

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