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Free Trade: Myth, Reality and Alternatives
In this book Australian economist, Graham Dunkley, explains and critiques the crucial concept of free trade. A policy of free trade is central to today's world-dominating globalization project. The more euphoric globalists uncritically assume that it has universal and unequivocal benefits for all people and countries. And the perpetual negotiations of the World Trade Organization are wholly based on this presumption.
Graham Dunkley shows, however, that leading economists have always been more sceptical about free trade doctrine than the dogmatic globalizers realize. There are more holes in free trade theory than its advocates grasp. And the benefits of free trade in practice are more limited and contingent than they acknowledge.
He also argues that the World Bank's long-time push for export-led development is misguided. A more democratic world trading order is necessary and possible. And more interventionist, self-reliant trade policies are feasible, especially if a more holistic view of economic development goals is adopted.
Graham Dunkley shows, however, that leading economists have always been more sceptical about free trade doctrine than the dogmatic globalizers realize. There are more holes in free trade theory than its advocates grasp. And the benefits of free trade in practice are more limited and contingent than they acknowledge.
He also argues that the World Bank's long-time push for export-led development is misguided. A more democratic world trading order is necessary and possible. And more interventionist, self-reliant trade policies are feasible, especially if a more holistic view of economic development goals is adopted.
278 pages, Hardcover
First published February 1, 2004
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May 29, 2015
Graham Dunkley's "Free Trade : Myth, Reality and Alternatives" firmly puts the Free Trade doctrine in its cross-hairs and fires a salvo of questions powerful enough for even the most die-hard free trader to sit up and take notice. After sufficiently questioning the centrality and importance of trade to growth (as quantified by GDP and GNP, questionable in its own way), Dunkley proposes what a doctrine of growth related policies that fall in line with Gandhi and E.F. Schumacher's ideas on growth. In this sense, the book can be viewed as a version of Small is Beautiful that is beefed up with numbers, facts and studies to make its case.
Starting out with a classification scheme of the different schools of thought in economics that the author revisits time and time again, the book provides a clarification of the ideas of the major economists in history. A notable example is the fact that Adam Smith was not in favour of the flow of capital across borders (trade was supposed to invalidate the need for this). In a step by step fashion, Dunkley concisely explains the assumptions and conclusions of each of these schools of thought (Keynesian, Ricardo-Smith, Human Development and Community-Sovereignty schools), following which he examines studies from mainstream economists of our time that look at economic data on growth and trade.
The message that Dunkley puts across, time and time again, is a clear one - there is little evidence that trade aids growth (in fact, it seems to be the other way around). that free trade does not equalize income and prices, and certainly does not lead to sustainable development in its envisioned form. What I found particularly interesting was the idea of non-consensual change that free trade policies entail - economics changes that force social and demographic changes in an un-democratic fashion. For instance, a strong government dis-incentive for agriculture forcing farmers to seek other means of employment.
I was quite surprised to read of the extensive economic literature out there that questions the very assumptions upon which free trade models and policies are enacted - that not all industries have constant returns to scale, that comparative advantage is shaped by strong socio-political factors, that most trade is between multi-national corporations and "unnecessary" in nature (for instance, Japan and the USA exporting cars to each other). Dunkley uses these points to demonstrate that trade is clearly not as vital as it is made out to be, and that a healthy amount of self-reliance is possible in today's world. Dunkley's ideas of self-reliant and "arm's length" trade are worth noting in this regard.
Finally, Dunkley seriously questions the WTO and its actions in the past in binding and muscling countries into free trade agreements. That the WTO isn't quite the democratic rule-making body it claims itself to be perhaps is not a surprise - but the true extent of its power in quietly undermining a country's sovereignty is quite remarkable. Dunkley provides suggestions to make this body more democratic in nature. Considering that I write this review 11 years after the book was published, these suggestions have fallen upon deaf ears at best.
Much like Schumacher, however, Dunkley's book does not touch upon scientific research and progress. Dunkley worries about technology eroding democracy and being an agent of non-consensual change in itself. However, much of medical research and progress in fighting diseases has hinged on the availablity of large funding, made possible by the obnoxious sums of money stashed up in banks. Whether similar advances in science would have been possible if the Gandhi-Schumacher model of development had taken hold is an interesting thought experiment.
A great read for anyone looking for a critical review of the economic literature out there that is for and against free trade, as well as an explanation of how different schools of economic thought function, the kind of data they use to make their point, etc. That politics has played a role in shaping economics, and should continue to do so, is a take away from this book, making it a rare one that points this out.
Starting out with a classification scheme of the different schools of thought in economics that the author revisits time and time again, the book provides a clarification of the ideas of the major economists in history. A notable example is the fact that Adam Smith was not in favour of the flow of capital across borders (trade was supposed to invalidate the need for this). In a step by step fashion, Dunkley concisely explains the assumptions and conclusions of each of these schools of thought (Keynesian, Ricardo-Smith, Human Development and Community-Sovereignty schools), following which he examines studies from mainstream economists of our time that look at economic data on growth and trade.
The message that Dunkley puts across, time and time again, is a clear one - there is little evidence that trade aids growth (in fact, it seems to be the other way around). that free trade does not equalize income and prices, and certainly does not lead to sustainable development in its envisioned form. What I found particularly interesting was the idea of non-consensual change that free trade policies entail - economics changes that force social and demographic changes in an un-democratic fashion. For instance, a strong government dis-incentive for agriculture forcing farmers to seek other means of employment.
I was quite surprised to read of the extensive economic literature out there that questions the very assumptions upon which free trade models and policies are enacted - that not all industries have constant returns to scale, that comparative advantage is shaped by strong socio-political factors, that most trade is between multi-national corporations and "unnecessary" in nature (for instance, Japan and the USA exporting cars to each other). Dunkley uses these points to demonstrate that trade is clearly not as vital as it is made out to be, and that a healthy amount of self-reliance is possible in today's world. Dunkley's ideas of self-reliant and "arm's length" trade are worth noting in this regard.
Finally, Dunkley seriously questions the WTO and its actions in the past in binding and muscling countries into free trade agreements. That the WTO isn't quite the democratic rule-making body it claims itself to be perhaps is not a surprise - but the true extent of its power in quietly undermining a country's sovereignty is quite remarkable. Dunkley provides suggestions to make this body more democratic in nature. Considering that I write this review 11 years after the book was published, these suggestions have fallen upon deaf ears at best.
Much like Schumacher, however, Dunkley's book does not touch upon scientific research and progress. Dunkley worries about technology eroding democracy and being an agent of non-consensual change in itself. However, much of medical research and progress in fighting diseases has hinged on the availablity of large funding, made possible by the obnoxious sums of money stashed up in banks. Whether similar advances in science would have been possible if the Gandhi-Schumacher model of development had taken hold is an interesting thought experiment.
A great read for anyone looking for a critical review of the economic literature out there that is for and against free trade, as well as an explanation of how different schools of economic thought function, the kind of data they use to make their point, etc. That politics has played a role in shaping economics, and should continue to do so, is a take away from this book, making it a rare one that points this out.
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