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Koeppel---very good points. Thanks for the post; making me think here.
Could you point to the historical examples, specifically? I am having a brain-freeze on that one at the moment.
As a historical example, I usually think of the "robber baron" days here in the u.s., when monopolies and trusts ran the show. It's not capitalism if there's no competition.
Capitalism is sort of like a nuclear reactor. It's very powerful and beneficial, but it can "blow up" and "self destruct" if there aren't some basic "rules of the game" so to speak. Capitalism with no government control turns into aristocracy, plutocracy, or kind of socialism. If the gap between rich and poor gets too large, there could even be revolution into some kind of communism or fascism. Yikes!
Look what happened with the housing bubble / subprime fiasco. Yes, some of it can be blamed on government meddling (i.e. Fannie and Freddie), but a lot of it can be blamed on insane risk-taking and absurd speculation driven by uncontrolled greed (by both borrowers and lenders). And now look what we have: socialism for Wall Street, nationalized banks, etc. Seems to me it would have been better if some basic regulations were in place, like what we had under the Glass-Stegall Act. The republicans (and Clinton), embracing the "no regulation ever, at any cost" ideology repealed Glass-Stegall, and now we have the very thing Glass-Stegall was meant to prevent: uncontrolled speculative fever leading inevitably toward a crash.
Disclaimer: I'm not an economist, so if there are any experts in the audience don't be afraid to correct me.
Most people don't appreciate how extraordinarly complex the issue of free trade really is. Proponents of so-called 'fair trade' would argue that a global system of free trade (which we are slowly moving towards) would only heighten existing global inequality and harm the poorest individuals around the world. The fair traders certainly have legitimate reasons for arguing this, though they often go a bit too far (or are too idealistic).
One thing is certain, complete global free trade would be disastrous if done all at once. Many developing economies couldn't withstand the impact of all protectionism. Even developed countries would see massive unemployment, outsourcing, etc. if total free trade was implemented too quickly. This is not to say that free trade is not worthwhile as an eventual goal and, as I've mentioned, it is the direction the world is slowly moving in, a fact well-illustrated by the importance of the WTO, World Bank and IMF.
As it stands, complete free trade would harm many developing countries, some irreparably. Economies in early stages of development require some degree of protectionism in order to build up competitive industries, particular more advanced ones. If free trade was fully imposed on many of these countries they would be unable to build up and, importantly, diversify their domestic economies because most infant industries are uncompetitive. Free trade, if implemented quickly and without close attention would promote a situation (already pervasive) in which the poorest countries become sources for cheap, raw materials and little else. Trade needs to be regulated to some degree (a fact also represented by the existence of the imperfect WTO) and developing countries need to be allowed some degree of protectionism.
Incremental increases in global free trade need to be implemented in conjunction with development assistance, both financial and advisory. Good governance must be promoted, corruption fought, education and healthcare improved and expanded, the environment promoted and infrastructure expanded if developing countries are to thrive (or even survive) in a world dominated by free trade. Implemented incrementally and in conjunction with these policies, free trade is a worthy long-term goal. Done incorrectly, it could be disastrous in the future.
A final caution: free trade means a more integrated global economy. Recent events illustrate the perils of ineffective (or nonexistent) global economic regulatory regimes. A economic crisis in one country today has the potential to spread like a disease across the globe. This will only worsen as trade becomes more free. However, this isn't an argument against free trade, which I believe has many benefits (interdependence theoretically could promote peace as the original poster suggested indirectly). Rather, it is to draw attention to the need for greater global economic coordination.
Most people don't appreciate how extraordinarly complex the issue of free trade really is. Proponents of so-called 'fair trade' would argue that a global system of free trade (which we are slowly moving towards) would only heighten existing global inequality and harm the poorest individuals around the world. The fair traders certainly have legitimate reasons for arguing this, though they often go a bit too far (or are too idealistic).
One thing is certain, complete global free trade would be disastrous if done all at once. Many developing economies couldn't withstand the impact of all protectionism. Even developed countries would see massive unemployment, outsourcing, etc. if total free trade was implemented too quickly. This is not to say that free trade is not worthwhile as an eventual goal and, as I've mentioned, it is the direction the world is slowly moving in, a fact well-illustrated by the importance of the WTO, World Bank and IMF.
As it stands, complete free trade would harm many developing countries, some irreparably. Economies in early stages of development require some degree of protectionism in order to build up competitive industries, particular more advanced ones. If free trade was fully imposed on many of these countries they would be unable to build up and, importantly, diversify their domestic economies because most infant industries are uncompetitive. Free trade, if implemented quickly and without close attention would promote a situation (already pervasive) in which the poorest countries become sources for cheap, raw materials and little else. Trade needs to be regulated to some degree (a fact also represented by the existence of the imperfect WTO) and developing countries need to be allowed some degree of protectionism.
Incremental increases in global free trade need to be implemented in conjunction with development assistance, both financial and advisory. Good governance must be promoted, corruption fought, education and healthcare improved and expanded, the environment promoted and infrastructure expanded if developing countries are to thrive (or even survive) in a world dominated by free trade. Implemented incrementally and in conjunction with these policies, free trade is a worthy long-term goal. Done incorrectly, it could be disastrous in the future.
A final caution: free trade means a more integrated global economy. Recent events illustrate the perils of ineffective (or nonexistent) global economic regulatory regimes. A economic crisis in one country today has the potential to spread like a disease across the globe. This will only worsen as trade becomes more free. However, this isn't an argument against free trade, which I believe has many benefits (interdependence theoretically could promote peace as the original poster suggested indirectly). Rather, it is to draw attention to the need for greater global economic coordination.
Excellent points. Yes, I do believe it would be disastrous to just try and implement global free trade all at once, without regulation of any kind, and certain countries would undoubtedly have more disastrous consequences than others.
I think gradual growth in that direction, with, as you so eloquently put it, "global economic coordination" could move us in a positive direction. However, as kpoeppel said, I'm not an economist either...just thinking online and enjoying the input.
By encouraging free trade with other countries, a country may develop military alliances, form friendly relationships, help humanity and humanitarian causes, and help itself economically all at the same time.
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