Anwar Shaikh, professor of economics at New School University, spoke at Hamilton on April 12, on "Globalization and the Myths of Free Trade." Shaikh addressed the commonly held belief that free trade and the market economy are the best ways to utilize the resources brought together by interaction between nations. He also spoke about the hypocrisy of developed nations in advocating and enforcing free trade for developing nations, when their own economies grew as a result of protectionism.
Globalization is a force not unlike nuclear power, Shaikh said, with great potential for both good and bad. One of the mistakes people make is saying that it can only be viewed as one or the other. There are a great number of resources brought together by the interaction between nations, and the question is how we should use them. The assumption held by most economists, public policy makers and the mainstream media is that the market economy is the best way to allocate resources. However, today the gaps between rich developed nations, with per capita GDPs around $30,000, and poor developing nations with per capita GDPs around $1000, is huge. While we now have greater capacity to deal with problems like poverty, hunger and health care, Shaikh said, the gaps between nations in these areas is only growing. Shaikh called this the "paradox of globalization."
Advocates of the market system say that these gaps result from barriers to free trade, while its detractors say that free trade itself causes the inequities. The neoliberal view advocating the extension of free trade is predominant, Shaikh said, particularly in the rich, developed countries which influence global economic policy decisions, as well as in the educational institutions that train new economists. This is because people have been consistently taught to believe that the market is always the most efficient and fair system. Shaikh, however, disagrees with what he calls "this axiomatic view of the market." The growing tide of opposition to neoliberalism rejects the orthodox view that free trade neccesarily benefits all nations involved, and that free trade is the best way to grow an economy. Shaikh pointed to the most developed nations today, such as the United States, which have always had trade barriers and protectionist policies which have helped them to achieve their current status.
Neoliberal thinkers argue that free trade must benefit all nations, because no one would freely make a trade if it would not be beneficial to them. This argument is deceiving, according to Shaikh, because the participants in trade are not countries acting in the best interest of their citizens, but private corporations acting in the interest of profit. Therefore, the idea that free trade will neccesarily bring about balance of trade and full employment is a myth, he said. In practice, free trade has never established complete trade balance, even between developed economies such as Japan and the United States. Long-term persistent unemployment also exists in these nations. Acknowledging these truths essentially removes the substance of the argument that free trade will lead to prosperity for developing nations, Shaikh said.
Shaikh ended by saying that the world has to make use of globalization in a "thoughtful and realistic" solution, and the first step is to get rid of the idea that free trade is a "miracle drug."
Shaikh's talk was sponsored by the Globalization Sophomore Seminar classes.
-- by Caroline O'Shea '07
