Re: [Pigdog] WTO the rampage!
Thu, 16 Dec 1999 13:05:54 EST

In a message dated 12/16/1999 1:06:13 PM, writes:

>Would you mind explaining
>the case for free trade?

Short answer: If you can produce chairs at for a cost of 5 and corn for a
cost of 3; and I can produce chairs for a cost of 6 and corn for a cost of
2, then we are both better off if I produce corn and sell it to you, and you
produce chairs and sell them to me. Everything ramifies from that, and has
ramified forever. Further, add someone else who can produce chairs of
superior quiality for a cost of 5.5, then you have an incentive to get more

The trade with India of which you speak was managed trade, set up by Indian's
colonial masters so that wealth left the country. Had India been able to
trade freely, in a nonmercantile system, it would have been more prosperous.
The US, when a colony, suffered under th4e same mercantilist trade regime. To
counter it Americans set up the triangle trade--sugar, rum, slaves--whose
profits enable Americans to save enough money to counteract the syphoning off
of profit by England.

The mobility of capital argument is actually grabbed form the wrong end of
the telescope. You have implied that everyone beggars himself in an attempt
to attract capital. Actually, capital goes, where it is mobile, in search of
the highest return: In other words, it's not that pitiful people beg rich
bankers for a bone, but that capital looks for opportunities. It is finidng
them globally--in Thailand, Taiwan, Korea, for example--the Asian finanicial
crisis is a blip in a steadily rising graph of capital moving to get a high
return and DRAMATICALLY raisiing living standards as it goes.

If your version of the capital mobility argument were correct, it would
contradict the rich-get-richer argument that trade's critics also put

What may lie behind this is not understanding the difference between wealth
EXTRACTION and wealth CREATION. If I send investment into Brazil and take out
gold, I am leaving the place poorer than I found it--a colonialist,
extractive mentality. If I send investment into Brazil and build an
automobile factory, arguably the most efficient in the world, I ammake the
place richer than before my capital moved in. That's one reason the
knowledge economy promises to be so good for the developing world--wealth
extraction is less and less important a part of the global economy, and the
developing world's greatest value--its human capital--stands to benefit, in
time (and it DOES take time--the Industrial Revolution took generations, and
there were real, political revolutions associated with it, but it left living
stands immeasurably higher), hugely from the investment spawned by free trade.

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