One of the chief supporting arguments of globalization is that, in an era in which war between great powers is no longer conceivable, free trade between all countries is now desirable, in as great a quantity as is possible, because trade is a positive sum game that generates gains for everyone.
Within its confines, this logical argument isn’t refutable. But when the sub-component facts change, so does the validity of the overall argument. If war between great powers actually is conceivable, even likely and ongoing in a covert manner, then open trade between possible enemies is a great danger: you could simply be feeding in to the economic development of your own enemy, selling him the guns and bullets with which he will use to shoot you tomorrow.
In such an environment, trade is still absolutely necessary, just as it has been necessary since the dawn of civilization. However, promiscuous trade becomes much dumber than it was before, and maintaining some measure of autarky as a fail-safe for times of war begins to make more logical sense.
In effect, the United States has accepted as logically and permanently true that war between great powers is over thanks to the theory of mutually assured destruction. It considers the record since 1945 as proof of this theory, and especially the record since the early 1990s as further ratification of its solidity as a guide to action.
Most of the arguments around free trade in the United States are of a torpid quality, because they either rest on impossible assumptions (a war-free world for the foreseeable future) or logically invalid propositions (like arguments against the positive-sum nature of trade). In modern America, as with everywhere else, there’s a tendency towards going after lazy solutions that can be simplified for the TV audience. Why international diplomacy has always been so complicated is because of these complex needs to balance the goods of trade with the risks of war.
In a magically perfect free-trade world, there is no reason to worry about the balance of trade. In a world in which war is always a risk to be calculated, then the balance of trade and what goods are traded suddenly takes enormous importance. For example, Japan’s dearth of oil supplies once the US began to cut its trade routes shortly before WWII was critical enough to encourage the former country to ambush Pearl Harbor. The lack of that particular good, and the diplomatic incapacity for Japan to secure adequate substitutes, changed the course of history. Perhaps if they had known about the existence of the Daqing field, not discovered until the late 1950s, they would not have needed to bother with the US. But they didn’t know, and they didn’t have a network of strong foreign allies to fall back on.
In a world of theory, you could ask why Japan didn’t simply trade for oil. The answer is that they tried, but Yankees embargoed all their boats, and most of their previous existing trade relationships were with Americans.
As we enter into an era of renewed conflict between great powers, the stuffy pre-Globalization concerns about free trade must begin to loom larger. One can argue for world peace as much as one likes, but maintaining it isn’t possible given the many conflicts that divide the human species.
The computerized fiat money system which encourages de-industrialization in the West becomes much weaker when it must go up against competition through gold-backed monetary systems. An empire can force the use of its coin upon its subjects. A shadow of a former empire is not capable of such a thing.
Whereas for generations now, the American financial elite has reaped profits by dismantling domestic industry, collecting an exorbitant privilege of being the first-users of the inflationary global money supply, that exorbitant privilege is likely to reverse into a horrible disadvantage, as those with the actual physical stock of productive capital equipment will have a trump hand to play against those who only own paper claims to symbolic capital.
While I agree with your analysis, I don’t think all sectors of the American State believe that free trade guarantees world peace. Rather, I suspect many facets of the state, intelligence agencies foremost, view free trade agreements as a kind of quiet constitutional modification of foreign countries. More often than not those treaties force the two countries into legal coordination for the purpose of facilitating said trade, and inevitably the world’s minor nations follow America’s laws, not the other way around.
Thus the mass-creation of free trade agreements around the world allows the USA to create a variety of beneficial legal structures. These structures are then rapidly employed by their large cohort of multinational corporations and NGOs, which enter as extensions of the intelligence apparatus.
The corporations can then apply pressure to further modify the country, all with plausible deniability for the American state itself. After all, the large corp just wants to do business and that’s true. Basically, free trade agreements operate as backdoors for powerful economic and political pressure on behalf of the Americans. Most people don’t think of them that way, but that’s a very convenient result in practice.
Remember also that such free trade agreements are a nightmare to repeal, and are often unaccountable. Consider the Canada-US Softwood lumber dispute. Canada got shafted by it, courtesy of the framework established by NAFTA. NAFTA continue to screw a variety of Canadian industries today, most notably power and electricity production.
Not all American think this way, but I’m betting the higher IQ ones do. They can’t be so naive as to think World War was ever off the table. They certainly don’t act like it, with American provocations in Georgia and the Ukraine, and in the Taiwan Strait. Some group in the American state both forsees war, and yet pursues free trade anyways, and I think the above explanation explains why.
“beneficial legal structures” — also financial structures. China being an example of one that’s not entirely compatible, financially, whereas Japan is, being occupied territory.
“These structures are then rapidly employed by their large cohort of multinational corporations and NGOs, which enter as extensions of the intelligence apparatus.”
Overlap often being complete, as many corporate officers, and entire NGOs, operate under NOC. Less James Bond, more collecting two paychecks for exercising soft power.
“I don’t think all sectors of the American State believe that free trade guarantees world peace.”
No; a lot of the American state is communistic in its mentality and reckless in its actions which undermine trade in the long term. See recent fracas in Germany and in China over pointlessly broad NSA spying — incredibly damaging to trade, virtually no upside to security, but a lot of money for the securicrats.
“NAFTA continue to screw a variety of Canadian industries today, most notably power and electricity production.”
Ron Paul would say that NAFTA is managed trade and not free trade, and he’d be right to say so. I was trying to speak at a broader level than is necessarily applicable in all the details.
Similarly, I’m sure China is very happy that we have all these crazy hippies and the EPA who will make life impossible for you if you try to open a US factory without paying them off. That offshoring phenomena is not entirely due to free trade.
Again we have complex issues that often get dumbed down in public speech, which I’m not entirely innocent of.
Yes, I agree. China is a disaster zone for American Intellectual Property and everything else. Also agree on the overlap. There is a lot of mixing going on, personnel wise.
A side note on the German spying scandal, we shouldn’t forget that much of this spying is industrial espionage. There are very real, very concrete payoffs in the form of advanced technologies for domestic industries.
The major beneficiary of the American financial policies and regulatory disasters is, without a doubt, China. As you noted they now own the physical means of production, they have a beautiful trade surplus, and a great deal of economic independence from America. Furthermore, while not immune to American soft power, they are certainly very resistant to it. With regards to China, American financial policy has been literally retarded. Meanwhile their foreign policy wisely seeks to restrain and encircle China.
Like you said, this is complex. It’s why my China series has ended up taking so long. Everytime I thought I could close off the matter, I realized there were new intricacies that are necessary to explore if we are to have objective understanding of the situation. There are no simply answers in diplomacy.
If you could lift files from the corporate networks of your enemies and hand that to your friends, or pass off tips to traders, that is easy money in incalculable quantities.
Think about how valuable that is in something like an acquisition negotiation, to be able to know what the other side is talking about as they are chatting. Screw listening to camel jockeys jibber about blowing up Americans — there’s money to be made.
Even better if you are NOC with a trump card against any kind of investigation into your activities.
The encirclement of China in foreign policy makes no sense with the cumulative effect of both trade policy and various domestic policies that indirectly impact that.
I mean, great, you have a lot of boats in their area, but when an American businessman wants something fabricated, he gets on a plane to Shanghai, and is liable to be set on fire by barbarians if he tried to do the same thing in Detroit.
I know. With the economic stakes so high, inter-alliance espionage is to be expected, especially against Germany, which remains outside the five eyes agreements and many other American-led clandestine efforts.
The thing about China is that parts of the state department and intelligence apparatus know whats going to happen, so they attempt to encircle. But the departments relating to the financial industry have completely different backers, and are probably more interested in their own wealth in a globalized world than continued American hegemony. So they have no problem butchering domestic industries. They probably think themselves more as ‘Cosmopolitan’ in the literal sense of the world.
But that’s how it has always been. Finances is short sighted. It wants benefits, now. Realpolitik takes the long view and isn’t afraid to self-harm to attain ultimate victory. The problem is that the merchant class has attained far more power than it should have.
China will eventually hit the same problem if they let their merchant class get under control, though no doubt the expression of this greed run amok will tailored to its culture.
If you see more autarky as defecting from the prisoner’s dilemma game, then what do you get if you introduce more third party entities with their own prisoner dillemmas running in parallel?
I guess that’s one of the reasons why empires are unstable: mapping all the relevant relationships begins to become impossible.
Even if there is a ‘selective defecting’ cascade punishing initial defectors?
What guided post war Trade was Trade policies before WW1 and WW2 that stifled Germany’s desire to be prosperous. Germany may have been an Industrial powerhouse but her people were mostly poor by comparison. Exports were so important they continued as a priority, even with Steel into 1944. We should consider not getting in the way of people’s natural desire to be prosperous before playing games. The British paid heavily indeed for keeping Germany down.
Do people suspect the Intelligence agencies of guiding policy, infer it or do they know something? They’re quite the servants and not the master. It might make sense that they would be but that doesn’t mean they are.
Actually policies that keep the Germans down have been a great formula for starting wars since at least the 30 years War, if not the Hussites.
I think it’s way off the mark to claim that free trade is an unmixed blessing even if permanent peace were certain. Wise governments make it a priority to ensure their economies generate lots of middle-class jobs, even if that means some level of protectionism or interventionism. Even if there is some theoretical overall benefit to outsourcing these jobs, the long-term social costs of the resulting inequality will overwhelm it a thousandfold. A country that gets rich but fails to maintain a satisfactory distribution of wealth and opportunity will quickly become a miserable place to live.
A priori it’s an unmixed blessing.
A government can’t “decide” that it wants to have middle class jobs. It can design policies to make it possible, but even an entrepreneur can’t just “decide” to create a middle class job. The profit opportunity must be sufficient to support a particular job. That’s never up to a single person or entity to decide.