Development, globalization and the myths of free trade

DSC00236“The world has become a human laboratory for the momentous social experiment called neoliberalism. Its proclaimed purpose is to reduce global poverty. Its protocols are derived from the orthodox theory of competitive free markets. And its policies are enforced by the full weight of the rich countries and global institutions such as the World Trade Organization (WTO), the World Bank (WB), and the International Monetary Fund (IMF).

…Defenders of neoliberalism make a variety of points. They point to history, to the indisputable fact that the rich countries are market-based economies that developed in-and-through the world market. They point to standard economic theory, to “the virtual unanimity among economists, whatever their ideological position on other issues, that international free trade is in the best interests of trading countries and the world”. They point to empirical evidence indicating that global poverty has been reduced since the 1990s, and that trade liberalization reduces poverty by fostering growth. And they argue that if developing countries have not done as well as they should, it is because they have themselves failed to implement social and economic policies that are sufficiently market-friendly.

Critics of neoliberalism dispute all of these points. They note that rich countries, from the old rich of the West to the new rich of Asia, relied heavily on trade protectionism and state intervention as they themselves developed, and that they continue to do so even now. They claim that free trade theory is irrelevant because it is based on premises that do not hold even in the rich countries, let alone the poor ones. They argue that in the poor countries, trade liberalization has actually led to slower growth, greater inequality, a rise in global poverty, and recurrent financial and economic crises. And they fault the WTO, IMF and World Bank for their cruel and inept actions in the face of such miseries.”

Anwar Shaikh (2007), Globalization and the Myths of Free Trade

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