Free trade leads to social Darwinism, greater inequality.

Governments have been putting up barriers to free trade since the global financial crisis, writes Satyajit Das at Bloomberg. When growth is weak governments resort to surreptitious roadblocks to foreign companies, like environmental concerns, give financial aid to their own businesses or direct state companies to buy locally. Countries have tried to weaken their currencies to get cost advantage, by resorting to zero interest rate, or ZIRP, negative interest rate, or NIRP, or quantitative easing. Politicians, such as Nigel Farage and Donald Trump, have been campaigning openly against free trade. The WTO has become ineffective as the 1999 meeting in Seattle was disrupted by workers protesting against loss of rights. Rich countries are looking to bilateral trade deals but even these are being criticized. The WTO meeting at Cancun in Mexico collapsed when African nations walked out in anger at the rich nations refusal to lower trade barriers to African products. Why is it so surprising? Free trade is a Darwinian system of open competition where only the strong can survive, the poor and the weak will always lose out. You would think that in such a system the US, the richest economy in the world, will have a natural advantage but it has not worked out like that, as the powerful multinationals have shifted production abroad to take advantage of lower labor costs, leading to massive loss of jobs. Thus although NAFTA increased north american trade from $290 billion in 1993 to $1.1 trillion in 2016, people in both Mexico and the US have suffered. The US had a trade surplus of $1.7 billion with Mexico in 1993, which turned into a trade deficit of $54 billion in 2014. Around 600,000 jobs were lost in the US. Mexico has fared even worse. Its growth rate has fallen below rates of other Latin American countries, poverty rate is the same as in 1994, at 52.3% in 2012, and there have been massive job losses in agriculture, leading to an explosion of drug gangs. So, on the one hand, poverty has increased as workers have lost lucrative jobs, on the other, the returns on capital have increased dramatically, increasing the wealth of the rich. Prof Thomas Piketty has written a book showing how income has fallen behind returns from financing and recommends higher taxes and greater social support. He would like to see a high growth rate but the WTO is warning that the global economy will grow by only 1.7% this year. Things are going to get worse as robots take over jobs traditionally done by humans. Automation is already taking away jobs in the garment industry and the World Bank reckons that 69% of jobs in India will be under threat. Maybe our government will be forced to take serious measures to reduce birthrate. That will be good.