Wednesday, November 02, 2016

The Movers And Shakers Are Getting Shook

Our movers and shakers are in denial about the affects of globalization. Jim Stanford writes:

The architects of globalization are worried, quite rightly, by both the rhetoric and the reality of recent trade developments. On the rhetorical front, the rise of nationalistic populism -- exemplified by Donald Trump, Brexit, and ascendant hard-right politicians everywhere -- is hammering more nails into the coffin of a trade liberalization agenda that was already moribund.

In real economics, meanwhile, the dynamism of world trade was already fading fast, even before the populists came on the scene. In recent decades, trade has grown twice as fast as global GDP; these days, however, it isn't even keeping pace. Canada's exports, for example, equal barely 30 per cent of GDP today, way down from 45 per cent in 2001. The old idea that trade is the engine of growth is taking a beating, from politicians and empirical data alike.

The powers that be oversold golobalization. -- and they tried hard to ignore its downside:

We must remember that the economic theory underpinning free trade assumes that all resources (including all workers) will be productively employed, that trade flows will be balanced and mutually beneficial, and that the efficiency gains from trade will be shared throughout society. In the quantitative economic models routinely trotted out to "sell" each new trade deal, these assumptions are embodied in mathematical equations imposing full employment, balanced trade, and the existence of a "representative household" (portraying each country as one big family, happily sharing all its wealth). None of these assumptions have any connection to reality; they are all imposed for the mathematical (and ideological) convenience of the economists.

In the real world, entire industries and communities have been dislocated by the unbalanced investment and trade flows which the theory denies. Enormous trade imbalances (from China and Germany's huge surpluses, to chronic deficits in the U.S., the U.K., and Canada) correspond to the migration of capital, work and income in favour of free trade's "winners." And these costs are not temporary or transitional. Large swaths of societies have been effectively cast aside under modern free trade -- left to face lasting unemployment, non-participation, or low-productivity service jobs.

After thirty-five years of "free trade" those who have been left behind have figured out that they have been played for suckers. Something to think about in the wake of Brexit and the rise of Donald Trump. The movers and shakers are getting shook.



Rural said...

The whole 'economist' mantra that trade and the 'economy' must constantly expand in order for a country's population to have a 'good life' is a bit like those pyramid schemes of old, Owen. For those at the top to get what they want (as opposed to need) then those at the bottom must pay in some manner, nothing is limitless unless it is perhaps the greed of the multinationals that are driving these 'free' trade deals. Constant expansion of finite resources is unsustainable!

Owen Gray said...

Agreed, Rural. There is such a thing as a sustainable economy -- one that doesn't expand but operates as a virtuous cycle. However, it will only work if wealth is shared. What we have had -- for a very long time -- is a Ponzi scheme.

The Mound of Sound said...

Ralston Saul's 2006 book, "The End of Globalism," is yet again corroborated. Globalism is one powerful facet of neoliberalism. JRS does a brilliant job of unpacking neoliberalism as just another in an endless trail of economic ideologies, soft sciences, that are akin to religion in that they're belief-based, not fact driven. This was a perfect ideology to set in during the confluence of Reagan, Thatcher and Mulroney. It was something they could take "on faith" and proceed to implement with grandiose promises of more jobs and better wages for everyone. Even Milt Friedman was honest enough that, before his death, he rejected the ideology he had been so instrumental in spreading as an experiment that had utterly failed.

Oddly enough our political caste still flock to the revival tent to worship this ideology. They're obsessed with its promise, or what remains of it, of constant growth which means a steady increase in tax base, free money to cover their spending. It's the ultimate low hanging fruit and they'll keep going for it even as it has turned to rot on the tree. It's the very people we elect to govern who prevent our societies from getting out from under this failed ideology.

Owen Gray said...

It seemed so easy, Mound. Free trade meant free money. And free money meant -- in Mulroney's words -- "jobs, jobs, jobs." It was snake oil. And people lined up, certain that it was good for what ailed them.

Toby said...

Like on Easter Island we will keep making obviously stupid decisions until our civilization collapses. In a few hundred years our descendants will dig up our ruins and wonder what we thought we were doing.

Owen Gray said...

A legacy not to be proud of Toby.

John B. said...

Should we leave the last words on the subject to "evidence-based" consideration undistorted by rhetoric?


"I am very concerned by the protectionist rhetoric we are hearing in the United States. ... The protectionist backlash we're seeing in a lot of the world, including in Europe, is dangerous. In being able to get CETA signed ... Canada has done something very powerful and very strong in the world to push back against that."

- Chrystia Freeland

That's right. I concur. No more rhetoric. Let's keep Post-National Canada free of the protectionist backlash that is infecting so many other western democracies. So, just to keep it totally straight, after Minister Freeland has given an examination to her own contributions on this file, maybe she could have a word with this guy:

Professor Ian "Evidence-Based" Lee, weighing on the CETA hiccup in a short interview by CTV's Merella Fernandez on 29 Oct 16


"I'll be right straight out with you Merella. The European Union showed - revealed a lot of weaknesses. Let's put this out there straight out. This was not a failure. The problems and the hiccups involving the CETA in the last two-three-four weeks was not a fault of the previous Harper government; it was not a fault of the Trudeau government. We did everything right in the past and in the present government in negotiating it and trying to close the deal. These were problems intrinsic to Europe in terms of the way they have created the governance system that relates to the approval of trade agreements. I think that Mr. Junckers [sic], the president, made an enormous mistake when he said that all twenty-eight countries had to vote on the trade agreement when normally it's the national sovereignty or the national level that has the exclusive domain over negotiating treaties. Only the US government can negotiate treaties; only the Canadian government; and so on. So I think they're going to have to get their house in order because they want to negotiate with the United States, which of course is the largest economy in the world. And I don't think the Americans will put up with these kinds of shenanigans that we went through at the eleventh hour. And that's why I think that Europe is going to really have to get their act together before they start negotiating with the Americans."


Wait a minute. I have to remember that we did everything right. The professor is simply exposing the Europeans for their mischievous model of governance and providing a good example of how to bury within a monologue "evidence-based" assumptions that have already been baked-in to public sub-consciousness through the absence of opposing argument. What's the point of having a European Union if we can't bring them all down with one bullet? How's that for making the case!

Odd that I haven't heard any protectionist rhetoric or backlash from Gus Van Harten on CTVNN or any other of the providers that cater to the drive-by public acquisition of information and misinformation. But of course, I may have missed it. Anyway, it's better to restrict that stuff to the alternative lefty media and better yet to leave it beyond the borders of the Post-National realm.

Owen Gray said...

The problem with all of these trade deals comes down to the Investor Dispute Settlement Mechanism, John. Whether it's a federation or one national government, the bone of contention is always about the degree to which corporations can override legislation which has been duly passed by elected bodies.

Lulymay said...

Aw, Owen, that's what I love about you. Didn't have to write an essay on what the essence of the problem is. It is mostly the dispute mechanism that is full of wiggly worms invading what we always perceived as our "democracy" complete with legislative authority to support it. Bravo!

Owen Gray said...

That's the downside in a nutshell, Lulymay.

e.a.f. said...

What we in Canada might want to ask is: is this country better off now than prior to NAFTA? I DON'T THINK SO.

Are we the working class better off now than prior to NAFTA? Not so much.
Young people to day are still making what I made when NAFTA was signed. That is not a good thing

It has taken people a long time to come to grips with this and some still don't believe. Canadians have faired slightly better because we have social programs and we have a national health care plan. If it weren't for that, we would be as badly off as the U.S.A. is.

Many americans believe Trump will fix it all, but they don't seem to realize Trump himself didn't pay much in the way of taxes, sent work to be done over seas and used "illegal" migrant workers.

Money looks after money regardless of their party. Its time working people started looking after themselves as a group and when I say working people that includes all those professionals who like to think they aren't "working" people.

Owen Gray said...

Social programs like medicare have made it a little easier for us, e.a.f. Unfortunately, union membership has declined. So the ability of working people to push back against capital has also been severely limited.