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The Myth of Free Trade: The Pooring of America

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SMU Professor Ravi Batra's significant work outlines
why America could become a debtor nation. The main
cause is free or unlimited trade. This policy might
create real wages to fall for 80% of the work force
despite increased productivity because of manufactured
goods falling relative price. This phenomenon is known
as "agrification". This term means total or agragate
declining economic conditions in the market.

Moreover, poor leadership has allowed foreign nations
such as Japan, South Korea, and China to sing free trade's
praises while following protectionist policies as tariffs,
quotas, exchange controls and the like at home. The post
WWII General Agreement on Tariffs and Trade negotiations
resulted in a lack of reciprocity for American exports.
Before GATT lowered tariffs, to permit imports to flood
U.S. markets, the country was largely a closed, self-sufficient
economy. However, if we become an open economy the country
can become awash with red ink in the current or trade account.

To remedy this potnetial situation, Dr. Batra suggests
a national policy of "competitive protectionism". This solution
entails raising the average tariff from 5% to 25% while promoting
domestic competition to spur innovation by prohibiting most mergers
and monopolies. The result might be an improved living standard for
Americans. The standard of living once declined for most workers as
measured by the real wage in 1973. The year the U.S.A. would have
became an open, free economy.

Batra has done a fine job of pointing out the problem. Some want more figures, but the key here is the concept of "averaging". For that, I wish Batra had given us a simple example like the one below:

With some 6 Billion People on the planet, 5 Billion earn less than $1,000 per year (say $5 Trillion) - only about 1 Billion earn around $25,000 or more ($25 Trillion) - with 300 Million those in the USA. So, if 6 Billion people "share" the $30 Trillion total World GDP, that means an "average" of $5,000 for each person.

While a peasant in China might be temporarily better off, it would mean the economic end of the USA, Japan and Europe, then total collapse for the West. If China's current goal is to conquer the West, they can do it without a shot fired - just keep exporting while we keep importing and closing factories.

I only hope that Batra writes a follow-up book quite soon and offers up an overview that all of us can internalize. My further hope is that he can present his comments on CSPAN, CNET and CNN before the US election in November.

Well done. It's a shame however that Batra doesn't follow through on this topic in his later books, and gets side-tracked instead by other factors which at best have secondary impact on global economy and ecology. After suffering an entire generation (30 years) of decoupling of per capita productivity and per capita real wage, one wonders how much more stress the US economy can take before it collapses. Then again, what are the limits of human ingenuity and resiliency? Can these factors reverse the damage done by the Free Trade policy? Batra's addressing this factor would have been extremely helpful.

If you want to understand the reasons behind the economic meltdown in the U.S., then this is the book for you. Send to everyone in your immediate family as a great gift. One that will educate!!!!!! The best gift of all!

The Myth of Free Trade, by Ravi Batra

The 'Introduction' explains the effects of "free trade" policies on falling real wages, lost jobs, and environmental destruction (p.3). Prosperity comes from manufacturing, not services of agriculture. Both Democrats and Republicans have stood idly by, Trade liberalization has enriched the American elite and impoverished most Americans by falling real wages. This can be reversed by higher tariffs (protectionism) but only if businesses are forced to compete via anti-trust laws (p.5). Wages, productivity, and real incomes would increase, and deficits and energy prices would drop when tariff rates are increased. This would reverse the economic decline since 1973.

Ten reasons are given to explain falling productivity (pp.12-15). Batra says they are incorrect and misleading. Economic statistics are extremely misleading when inequality is growing (p.23). Real wages show the true picture (pp.24-25). Page 30 shows this impoverishment. Poverty, both absolute and relative, has increased since 1973 (p.31); its a "silent depression" (p.34). The corporate media lies about the real facts. Chapter 3 links the low tariffs of "free trade" to the poor economy that followed. Productivity rose and real wages fell (p.47) because of the break in the links (p.51). This is explained on pages 56-57. Huge government subsidies to agriculture caused falling farm earnings (p.63). Falling industrial prices since 1973 ended millions of manufacturing jobs (p.67). This is by design, not accident (p.71). De-industrialization is explained on pages 72-73. Free trade alone caused slower productivity and reduced real earnings (p.84). The enormous domestic competition in Japan resulted in superb goods at low prices. Taiwan's domestic rivalry created prosperity (p.111). Monopolies hinder economic development (p.122). Australia's real earnings stagnated after tariffs were cut (p.125).

Chapter 7 is a history of tariffs in America. The Embargo Act of 1807 created domestic manufacturing (p.131). This new class of manufacturers was opposed by shipping interests and Southern planters. High tariffs before the Civil War produced more industrial output, declining consumer prices, and great technical innovation (p.133). Later this created "the preeminent economic power in the world" (p.135). The multitude of small businesses competed (p.137). But the economic recessions and depressions resulted in fewer and larger firms. The lower tariffs of "free trade" was to allow corporations greater access to foreign markets.

Chapter 8 discusses the bias towards "free trade". The charts on pages 151-152 show a relationship of unemployment rates to the tariffs (a fall then a rise). "Free trade" works to make the wealthy richer but most people poorer. Frequent mergers and acquisitions enabled some companies to a captive domestic market. Domestic competition doesn't harm workers like foreign competition (p.167). Chapter 10 summarizes the preceding chapters. Batra predicted that NAFTA would create unemployment in Mexico (p.190) and lower wages in America (p.191). He urges "Competitive Protectionism" to turn the economy around. Large firms must be broken up (p.193). Raise tariffs to 40 per cent (p.196). Defense spending should be cut drastically to reduce the deficit (p.209). Batra says international trade creates worldwide pollution (Chapter 11). Chapter 12 sums up his ideas for prosperity. Domestic monopolies generate inequality and poverty; global trade damages the industrial base and the environment (p.233). The growth of manufacturing brings prosperity to agrarian societies. Then manufacturing declines and services increase - the second stage of industrialization (p.237). But the third stage is decadence due to a decline in manufacturing (p.238). The fourth and final stage is the elimination of the middle class. Only drastic social and economic reforms can end this stagnation (p.239).
The rest of the book summarizes the specifics (pp.241-245). Global Trade causes Global Warming (pp.246-248).

I Promise I will try my best to sway away from ranting and raving on the sheer uselessness of our Politicians, (cough, cough) I mean our "Public Servants" amidst one of the greatest and most severe economic downturns in our nation's history because the truth is folks, this economy is sliding into a depression; double dip, no double dip, jobless recovery (I just love that one, don't you? hiccups, blips, setbacks or whatever rhetoric double speak pleases you, we are confronting something very dark and quite unlike anything in our nations history. American is literally falling apart at the seams and our leaders still smile and happily trot on the red carpet; rose pedals are dropped and thrown wherever these parasites travel. I won't let the politicians take all the heat because the American people have a responsibility as well and unfortunately these type of parasites are voted in all the time. Honest, hardworking and sincere American people rally around these politicians as if they were the next best thing since sliced bread but the sad reality is that these politicians care very little what happens to America because their interests only lie in themselves; self-promotion and self aggrandizement are the only duties politicians carry out effectively. Everything else rots to the core but they live high and mighty in tax-free benefits, free medical care and life time security. Their benefits are never threatened meanwhile social security and medicaid might have to take a haircut. Sounds like a fair deal.

Dr. Ravi Batra's book, The Myth of Free Trade is particularly interesting because it was published during a time when NAFTA negotiations were running full throttle and all the hype in the media were raving that this was the blue print for American prosperity. Fast forward from January 1994 to the year 2011 going into 2012 we can now make a careful assessment of how much prosperity was generated during the 17 years that have passed since NAFTA's inception: Absolutely None. Prosperity is less than zero. I watch television for one thing and one thing only and that is entertainment, pure and simple. The deleterious effects of Trade liberalization goes completely unchallenged and unspoken of in the mass media. From mainstream economists, to financial talk show hosts, to whatever "Expert" you see on television you will not hear a peep about the erosion of the manufacturing base that has been slowly disappearing for a long time now, even before NAFTA as Dr. Batra correctly points out (1973). The greatest recession has only exacerbated and magnified these effects ten-fold as massive lay offs continue to ensue and more jobs leave this country faster than a politician accepts bribes. We are now dealing with these effects as the status quo is still preserved and more Trade Liberalization negotiations continue under way (Trans Pacific Economic Strategic Partnership) which will make NAFTA look like two innocent children trading baseball cards in a school playground. How can American Prosperity grow, how can businesses invest and how can the American people be put back to work when jobs are being sold out to countries that do not require healthcare; that do not have to adhere to environmental/labor standards; that do not have to pay their employees decent wages ? The American people can't compete with this. As much as I want to agree with Dr. Batra that this path that our leaders have been pushing for many years almost seems irreversible. Reversing globalization seems very unlikely at this point and the American people still willfully remain ignorant on the malignant tumor that has been growing in American for quite sometime.

Dr. Ravi Batra does a fine job in detailing the horrifying effects of Trade Liberalization:

The decline of real earnings and wages (Since 1973); the decline of living standards; the persistent rise in unemployment; the rise and replacement of low paying service jobs; the loss of production; Mega Corporate monopolies; the loss of prosperity. In the year 2011, I can say that Dr. Batra was pretty accurate as we now have a massive unemployed population (9.1% unemployment officially, but probably topping 23 %) not too mention 46 million Americans receiving some form of government welfare and a loss of hope that will not be restored for quite sometime. Is Trade Liberalization the only culprit ? Certainly not as I need not to go into detail. But Just like how the Manufacturing base has been eroded, America's soil is rapidly delving into third world status. Politicians are now having a tougher time pedaling and repackaging their rhetoric as the American people are becoming increasingly hopeless, tired, frustrated and just plain desperate. The only thing that has been "Shovel Ready" was the dirt that has been thrown at the American people with bold face lies and deceit. The leaders in Washington may have just shot themselves in the foot because this problem is going to require something much more than tax cuts, welfare subsidies and a television smile. Undoing over 30 years of damage is going to take sometime especially when all the wrong policies are being implemented at the expense of the American people. The American people want real change they can believe in; change they can actually see with their own eyes; change that brings true hope and true prosperity; change that will bring bread on the table and a roof over one's head.

I wish I could be optimistic but I can't see this happening anytime soon until the American people rise up and pay attention to who is sweeping the rug out from
underneath them because the future is the past and the present is history.

My title is sarcastic.

About 18 minutes into this video, Dr. DiLorenzo starts explaining how the gold standard and Freedom fueled the US economy in spite of the high tariffs of the late 1800's.

Batra's arguments that tariffs are good is pure non-sense. Everyone before Keynes understood that all taxes and tariffs harm those who pay and help those who get paid.

Batra is just another central planner. Someone tell me what he knows that Mao, Lennin and Pol-Pot overlooked. I think Batra's ideas are a recipe for Holocaust.