Posted February 24, 2017
Free trade among nations benefits the stronger nations, whose companies are more technologically advanced and of greater size, thus giving them a competitive advantage. Therefore, the nation with the strongest economy in the world-system is for free-trade. But the states with weaker economies need to protect their emerging industries, through tariffs on imported goods and other measures. For a weaker nation to defend its sovereignty, the state must act decisively in the economy, seeking to protect national industry, banking, and currency; and it must attempt to attain mutually beneficial trade agreements with stronger nations.
However, the United States at the present time has a relatively strong economy, but in some industries, it is disadvantaged by free trade. This is consistent with the cycles of hegemony in the world-system, in which hegemonic core nations rise and fall. During its rise and at its height, the hegemonic core nation has the economic capacity to pay its workers more than in any other nation. But this becomes a disadvantage, as other core and semi-peripheral nations imitate the productive techniques of the hegemonic nation, but with lower wages, they are able to produce the goods more cheaply.
The United States reached its hegemonic height during the period 1945 to 1968, and it has been declining relative to other core nations since 1960s. During that time, foreign manufacturing companies, taking advantage of lower wages, have been increasingly penetrating the U.S. market as well as U.S.-dominated markets abroad.
As this dynamic unfolded, U.S. corporations did not use their increasing control of both major political parties to establish protectionist policies. Rather, their strategy was to go global: internationalize the productive process, utilizing the cheaper labor of other nations to effectively compete with foreign companies, thereby reducing its dependency on U.S. labor, its organized unions, and its relatively high wages. The strategy was supported by the U.S. government, through a tax structure that lowered taxes for U.S. companies that produced goods, or component parts, abroad and sold them in the U.S. market. And the strategy was supported by most governments of the peripheral and semi-peripheral regions, which were compelled by the United States and international finance agencies to open their labor to direct foreign exploitation, with a minimum of restrictions.
The global strategy of U.S. corporations hastened the relative decline the United States. It reduced the supply of relatively high waged jobs, and thus it constrained the growth of the U.S. domestic market. In addition, it had negative consequences for the world economy. The development of low-wage, export-oriented manufacturing, disconnected from the national economies and in no sense integral to autonomous national development plans, does not improve the development prospects for the peripheral and semi-peripheral nations where the global strategy is manifest.
Thus, the global strategy was in the interests of the U.S. corporations, but it was bad for the nation and for the world. But because the political careers of U.S. politicians depended upon corporate support, no sector of the political establishment emerged to explain the self-interested and treasonous behavior of the U.S. corporate elite to the people. At the same time, U.S. activists and academics of the Left, although not beholden to the elite, developed in the context of a horizon limited by the American experience, and they were not capable of explaining the betrayal to the people. Thus, the people have been unable to understand the dynamic, but they have sufficient common-sense intelligence to intuit that they have been abandoned by the U.S. corporate elite and the U.S. political establishment; with jobs, free trade and factory relocation functioning as buzz words expressing their discontent.
In this context of betrayal and discontent, as well as the failure of the Left to mobilize the people in a politically intelligent form, Donald Trump emerged, declaring himself against the political establishment, against free trade, and for the people. Trump apparently intends to protect U.S. workers by withdrawing from or renegotiating free-trade agreements, imposing a protective tax on imported goods and services, and restructuring taxes so that companies would have an economic incentive to manufacture in the United States.
Coinciding with the relative decline of the United States, the world-economy has been experiencing a sustained systemic crisis, beginning in the 1970s. The global elite responded to its situation of stagnating profits by imposing free-trade and neoliberalism on the nations of the Third World, requiring them to eliminate the modest and limited protections of their economies that they had developed during the period 1955 to 1979, when the Third World project was at its height. During the heyday of neoliberalism, from 1980 to 2001, the banks and corporations of the North profited enormously from the increased value of their currencies relative to the no-longer-protected weak currencies, from the purchase of privatized state industries at devalued prices, from expanding markets resulting from the elimination of tariffs, and from interest payments by Third World governments to northern institutions. Thus U.S. corporations and the corporate elite benefitted from their global strategy, while the nation declined and the people suffered from stagnating wages and less employment opportunities.
Inasmuch as free-trade has been bad for the United States and the nations of the world, the Trump administration is doing the right thing in going against free-trade agreements. But it is not necessarily doing so for the right reasons. Trump wants to place U.S. interests first, without analysis of the impact of U.S. protectionist policies on other nations or the world-economy. Martin Khor, Executive Director of the South Centre in Geneva, maintains that the protections proposed by Trump will have strongly negative consequences for many countries and for the world economy (see Khor article here).
What is required is for nations to practice a form of economic nationalism that is a dimension of a spirit and practice of internationalism, solidarity and cooperation. It is not merely a matter of protecting the economic interests of the nation, but of creatively and cooperatively developing mutually beneficial trade, so that world commerce expands, and both trading partners have their interests protected. A new form of mutually beneficial trade is precisely what the nations of Latin America have proclaimed and have been seeking to develop since 2001, so if the political will were present in the United States, it would be a matter of cooperating with other governments of the Americas, which also are seeking mutually beneficial forms of trade with China and Russia.
Similarly, with respect to the issue of factory location, the Trump Administration is on the right track, but its anti-internationalist nationalism prevents it from a comprehensive approach to the problem. Factory relocation is bad for the nation and the world. But to address the issue of factory relocation in an effective form, not only must strategies be developed for keeping factories in the nation, but there also must be policies designed to promote the development of Third World nations, so that the purchasing power of the world-economy, and the economies of all nations, would be strengthened.
The Trump administration appears to believe that decisive action in defense of U.S. interests is all that is needed, without seeking to address problems in the world-economy as a whole, as though you could somehow fix one part of a system that as a whole is in disrepair. The narrow economic nationalism of Trump stands in opposition to the cooperative internationalism that is necessary for responding to the sustained structural crisis of the world-system in a manner that is based in the common interests of humanity.
With the election of Trump, the United States is moving from a corporate internationalism to a narrow economic nationalism, both of which have negative consequences for the world-economy and for the development of the great majority of nations. It is a case of the declining neocolonial hegemonic power going from one form of bad to another. That this would occur is a sign of the profound structural crisis of the world-system.
In the context of the sustained structural crisis of the world-system, humanity needs responsible and wise leadership. It needs leaders that guide their nations to an internationalist nationalism, which seeks to develop national economies with a long-term and global view, in cooperation with other nations and in accordance with the requirements of the world-economy as a whole. In the nations of the North, whose economies continue to play a central role in the world-economy, the peoples must lift up wise, politically intelligent, and morally committed leaders, leaving behind forever the narrow nationalism of Trump and his team.
Free trade among nations benefits the stronger nations, whose companies are more technologically advanced and of greater size, thus giving them a competitive advantage. Therefore, the nation with the strongest economy in the world-system is for free-trade. But the states with weaker economies need to protect their emerging industries, through tariffs on imported goods and other measures. For a weaker nation to defend its sovereignty, the state must act decisively in the economy, seeking to protect national industry, banking, and currency; and it must attempt to attain mutually beneficial trade agreements with stronger nations.
However, the United States at the present time has a relatively strong economy, but in some industries, it is disadvantaged by free trade. This is consistent with the cycles of hegemony in the world-system, in which hegemonic core nations rise and fall. During its rise and at its height, the hegemonic core nation has the economic capacity to pay its workers more than in any other nation. But this becomes a disadvantage, as other core and semi-peripheral nations imitate the productive techniques of the hegemonic nation, but with lower wages, they are able to produce the goods more cheaply.
The United States reached its hegemonic height during the period 1945 to 1968, and it has been declining relative to other core nations since 1960s. During that time, foreign manufacturing companies, taking advantage of lower wages, have been increasingly penetrating the U.S. market as well as U.S.-dominated markets abroad.
As this dynamic unfolded, U.S. corporations did not use their increasing control of both major political parties to establish protectionist policies. Rather, their strategy was to go global: internationalize the productive process, utilizing the cheaper labor of other nations to effectively compete with foreign companies, thereby reducing its dependency on U.S. labor, its organized unions, and its relatively high wages. The strategy was supported by the U.S. government, through a tax structure that lowered taxes for U.S. companies that produced goods, or component parts, abroad and sold them in the U.S. market. And the strategy was supported by most governments of the peripheral and semi-peripheral regions, which were compelled by the United States and international finance agencies to open their labor to direct foreign exploitation, with a minimum of restrictions.
The global strategy of U.S. corporations hastened the relative decline the United States. It reduced the supply of relatively high waged jobs, and thus it constrained the growth of the U.S. domestic market. In addition, it had negative consequences for the world economy. The development of low-wage, export-oriented manufacturing, disconnected from the national economies and in no sense integral to autonomous national development plans, does not improve the development prospects for the peripheral and semi-peripheral nations where the global strategy is manifest.
Thus, the global strategy was in the interests of the U.S. corporations, but it was bad for the nation and for the world. But because the political careers of U.S. politicians depended upon corporate support, no sector of the political establishment emerged to explain the self-interested and treasonous behavior of the U.S. corporate elite to the people. At the same time, U.S. activists and academics of the Left, although not beholden to the elite, developed in the context of a horizon limited by the American experience, and they were not capable of explaining the betrayal to the people. Thus, the people have been unable to understand the dynamic, but they have sufficient common-sense intelligence to intuit that they have been abandoned by the U.S. corporate elite and the U.S. political establishment; with jobs, free trade and factory relocation functioning as buzz words expressing their discontent.
In this context of betrayal and discontent, as well as the failure of the Left to mobilize the people in a politically intelligent form, Donald Trump emerged, declaring himself against the political establishment, against free trade, and for the people. Trump apparently intends to protect U.S. workers by withdrawing from or renegotiating free-trade agreements, imposing a protective tax on imported goods and services, and restructuring taxes so that companies would have an economic incentive to manufacture in the United States.
Coinciding with the relative decline of the United States, the world-economy has been experiencing a sustained systemic crisis, beginning in the 1970s. The global elite responded to its situation of stagnating profits by imposing free-trade and neoliberalism on the nations of the Third World, requiring them to eliminate the modest and limited protections of their economies that they had developed during the period 1955 to 1979, when the Third World project was at its height. During the heyday of neoliberalism, from 1980 to 2001, the banks and corporations of the North profited enormously from the increased value of their currencies relative to the no-longer-protected weak currencies, from the purchase of privatized state industries at devalued prices, from expanding markets resulting from the elimination of tariffs, and from interest payments by Third World governments to northern institutions. Thus U.S. corporations and the corporate elite benefitted from their global strategy, while the nation declined and the people suffered from stagnating wages and less employment opportunities.
Inasmuch as free-trade has been bad for the United States and the nations of the world, the Trump administration is doing the right thing in going against free-trade agreements. But it is not necessarily doing so for the right reasons. Trump wants to place U.S. interests first, without analysis of the impact of U.S. protectionist policies on other nations or the world-economy. Martin Khor, Executive Director of the South Centre in Geneva, maintains that the protections proposed by Trump will have strongly negative consequences for many countries and for the world economy (see Khor article here).
What is required is for nations to practice a form of economic nationalism that is a dimension of a spirit and practice of internationalism, solidarity and cooperation. It is not merely a matter of protecting the economic interests of the nation, but of creatively and cooperatively developing mutually beneficial trade, so that world commerce expands, and both trading partners have their interests protected. A new form of mutually beneficial trade is precisely what the nations of Latin America have proclaimed and have been seeking to develop since 2001, so if the political will were present in the United States, it would be a matter of cooperating with other governments of the Americas, which also are seeking mutually beneficial forms of trade with China and Russia.
Similarly, with respect to the issue of factory location, the Trump Administration is on the right track, but its anti-internationalist nationalism prevents it from a comprehensive approach to the problem. Factory relocation is bad for the nation and the world. But to address the issue of factory relocation in an effective form, not only must strategies be developed for keeping factories in the nation, but there also must be policies designed to promote the development of Third World nations, so that the purchasing power of the world-economy, and the economies of all nations, would be strengthened.
The Trump administration appears to believe that decisive action in defense of U.S. interests is all that is needed, without seeking to address problems in the world-economy as a whole, as though you could somehow fix one part of a system that as a whole is in disrepair. The narrow economic nationalism of Trump stands in opposition to the cooperative internationalism that is necessary for responding to the sustained structural crisis of the world-system in a manner that is based in the common interests of humanity.
With the election of Trump, the United States is moving from a corporate internationalism to a narrow economic nationalism, both of which have negative consequences for the world-economy and for the development of the great majority of nations. It is a case of the declining neocolonial hegemonic power going from one form of bad to another. That this would occur is a sign of the profound structural crisis of the world-system.
In the context of the sustained structural crisis of the world-system, humanity needs responsible and wise leadership. It needs leaders that guide their nations to an internationalist nationalism, which seeks to develop national economies with a long-term and global view, in cooperation with other nations and in accordance with the requirements of the world-economy as a whole. In the nations of the North, whose economies continue to play a central role in the world-economy, the peoples must lift up wise, politically intelligent, and morally committed leaders, leaving behind forever the narrow nationalism of Trump and his team.
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