Free trade means that 3rd world countries never build an indigenous value added industry never raising the value of their labor. It means imperial metropoles buy cheaper goods rather than pay workers more. Lowers value of work. Reduces wages. Concentrate capital in metropoles because all the value added work stays in metropoles or their favorites (BRICS). Extract value from colonies aka former colonies. This is the actual result of free trade.
Purchasing power parity fixes that. The question should be would I rather send a little money to China for food? Or a lot of money to my neighbor for food? I hope that will sort out your confusion. Comparative Advantage Says if Senegal is good at making peanuts then Senegal will become wealthy if it invests in making peanuts. Until an Empire comes up with a battle ship (not made from peanuts) and says give us your peanuts for half price...we need to pay you something for the peanuts so you can use that money to buy our machine guns...which you're going to need because we are going to keep you in a permanent state of war so you never challenge us. There is something I call comparative advantage trap (yes I should receive a Nobel prize in economics for this theory) which answers the question what if a country doesn't focus on comparative advantage? The answer is that country produces everything the countries that focuses on advantages does not. This is the fundamental flaw with free trade. If America followed free trade rules then it would have bought cheap manufactured goods from UK and would have focused on making lumber and cotton. You can't build aircraft carriers from lumber and cotton. So we needed protectionist imperial policies to prevent US industry from being destroyed by UK industry. After this you'll have gone from econ101. To Econ700 level PhD student. Comparative Advantage trap. Learn it...study it. Peanuts vs. Battle ships.
It would export that lumber and cotton in exchange for manufactured goods, or do you honestly think free trade only works one way? The value in an economy is from energy, not human labor. This is why we buy machines and not hire servants or buy slaves, which are *extremely* inefficient at converting energy into useful physical work. You need to understand ERoEI. A human requires around 2.4 kWh/day in food, and can produce 0.72 kWh/day. That's an ERoEI of 30%. Not good. 70% of the energy we use is used to keep us alive. Nearly any other energy source, such as oil, solar, wind, hydroelectric, and nuclear, produces an ERoEI of greater than 100%, which means we use less energy to produce it than we get from it. When the ERoEI of an energy source a civilization is dependent on is less than 100%, calamity looms. Let's say a civilization needs 100 MWh/year of energy to subsist, they use oil to provide all their energy needs, and their ERoEI of oil is 100%. That means they can maintain their standard of living ceteris paribus. If their oil's ERoEI rises to 110%, their standard of living rises because they now need to use less energy to get the same amount of energy from the oil. If their oil's ERoEI drops to 90%, oil now takes more energy to produce than they will get from it. So now they need to either find a more efficient energy source, reduce their energy consumption, or wage a war. When ERoEI declines, maintaining civilization becomes harder. http://ourfiniteworld.com/2013/12/0...nergy-return-on-energy-invested-and-collapse/ This is how empires collapse. This is how Rome collapsed. Rome needed lots of energy to finance it's lavish lifestyle, and was dependent on slave labor, a grossly inefficient form on converting energy into work. So it had to constantly capture territory to grow food for the slaves. Eventually, it ran out of territory to invade, occupy, and manage, and it fell apart. The massive subsidies paid to oil companies is a cover-up for the fact that the ERoEI of oil is declining. You always hear about how "we spent $500 million to make $2.5 billion" not "we spent 70 million barrels of oil to produce 500 million barrels." Talking about monetary returns and losses alone can hide more than reveals. When oil prices rise, people have to spend more on their food and commute than they can spend on other things, this results in layoffs in discretionary spending sectors. Also, goods produced in countries that pay high oil prices are less competitive, resulting in layoffs in the export sectors. All of this causes wage growth to slow or even decline.
Free trade, as we see it, isn't really free trade. Free trade is just the removal of tariffs, an agreement made with another nation, so that they don't tariff your goods, nor you theirs. But these free trade agreements were not so much of that, but a means to offshore production, of the US to places like china that had a billion dirt poor people who would work for pennies on the dollar. So, our corporations who created these trade policies, kept full access to our markets, no tariffs, and then didn't have to use americans to make what we consume. This also allowed in, tariff free, goods made by the nation of china, after we gave them our manufacturing technology in exchange as being able to exploit their poor for their labor. China in turn bought mostly scrap from us, instead of much of anything. So, it aided china, and it aided our corporations, and of course wall street, while the working americans got the shaft. Free trade, globalization, is nothing more than a new term for something very old. A form of feudalism, or Neo Feudalism, which is designed to benefit greatly a few elites at the top. With a little bit trickling down to everyone else. This sort of thing is as old as civilization, and we just find more efficient ways to pull it off.
You also need to understand that the price of cheap food is going to come in only slightly lower than expensive food, and that would be only for a short time. Why would the producer of cheap food sell it for any less than just slightly below the expensive food?
I support voluntary trade between individuals and collections of individuals worldwide without interference in any form whatsoever - no tarrifs, no trade barriers, no taxation or regulation of any sort. I support immediate, unilateral abolition of protectionist policies. If people can't deal with competition that's their problem. They do not have the right to obstruct trade between consenting adults. [hr][/hr] The opposing view seems to me to misplace sovereignty in nation states rather than with the individual.
The trouble arises, when you are trading, or selling what someone makes for you, as you sit on your ass, and you are exploiting your worker so you can undercut someone else who isn't exploiting his worker quite as much as you are. Now, you might say that the worker you are exploiting, by not paying him enough to survive on, so that others have to take up your slack with welfare, can always go to where he is not being exploited. Except that other place may not exist, because that other place has a man sitting on his ass, exploiting his own workers as you are. You just want the right to exploit others, so you can sit on your ass, and not do any of the labor. You are the cause of the problems, not the solution. Most people like this are simple sociopaths.
Comparitive advantage is just a fancy term for having a cheaper widget by not paying your workers enough to live on. It sounds better when you can say comparative advantage. Capitalism only works for the middle class when you charge enough for your widgets in order to paying your workers living, or middle class wages.
This is short sighted and misses the inherent advantages that industry provides to impoverished nations in my opinion. The move from the 3rd world to prosperity requires economic growth and development. If all industry is horded by the established industrialized nations, there is no prospect of mobility. If relatively cheap labor isn't tapped as an incentive to woo industry, then what prospect is there? The introduction of industrial development doesn't equate to immediate creation of wealth or a middle class, but it is necessary to implement the foundation of wealth and a middle class. Innovation is a by-product of disposable income and free time, both of which only occur in places where significant production of goods and services facilitates it. The growth of strength in labor is only viable where there is enough industry and development to empower the worker. In the infancy of industrial development pay and compensation are poor, but they are still significantly better than the status quo for people who live on incredibly meager wages and to whom these jobs are an immediate rise in their quality of life.
What is interesting to me in the current debate over trade is that every single developed nation has a history of protecting nascent industry until it could reach scales of manufacture and productivity that made if competitive in world markets. Now those same nations are refusing to even recognize that developing nations might need the ability to adopt protectionism to embark on the same path to industrial development. There is no evidence of any nation becoming industrialized without protectionist policies as nascent industries were developed. India fought off free market pressure for decades as it protected its native steel industry, always saying it would open its markets when its own industry was able to compete in world markets. Once it was determined that Indian steel manufacturers had reached world competitive standards India opened its steel industry to world markets and now Indian steel companies are among the leading steel manufacturers worldwide. Following in the footsteps of the UK, Germany, US, Japan, Korea etc etc. The WTO makes this sort of activity illegal. It has become quite obvious that the developed nations do not expect the developing nations to develop native industry and the indigenous economic growth that comes with it. They prefer to keep them as they are, impoverished suppliers of raw materials and cheap labour, with all but pennies on the dollar of their economic output exported by foreign owners.
