Free trade, as practiced, is designed to destroy local autonomy by making nations dependent on foreign goods, and by removing decision making from democratically elected bodies and pushing them to transnational tribunals, secret courts and laws which cannot be changed without opting out from treaties, something most countries are reluctant to do, because they need the trade once they are enmeshed.
Keynes believed that most production of basics should be local: you should manufacture most of what your country needs, in your country. You should also, ideally, be able to feed your own population.
If you can’t make what you need or what your people (and more importantly, elites) really want, then you’re screwed. In the modern world you need hydrocarbons, you need food, and you need the machinery which turns hydrocarbons into the industrialized lifestyle.
Your prosperous citizens probably want food your country doesn’t produce: summer vegetables in winter, possibly meat you can’t provide in large enough quantities, and so on. They want electronic goods like smartphones that due to patents are quite expensive, and which you probably can’t make domestically.
Your elites want a vacation in Paris, a home in London, a German car, a French mistress, a New York Apartment, and a variety of luxuries that their own country doesn’t make.
If you want or need these things; if you do not have a taste for what your country can produce, in terms of basics and luxuries; if you do not ensure your country can feed itself, generate electricity and make cars or other forms of transit, you MUST do what those who control the trade regime want you to, or you will find yourself cut off from all these things.
Distributed production of necessities (which includes basic lifestyle goods and luxuries and machine goods) is anti-democratic and anti-national control in a world where the primary decision making units which are amenable to pressure from the commons, whether democratic or not, is exerted almost entirely on national and local units.
If you want to not do austerity when the Troika demands it, you must be in a position to tell the Troika to go stuff itself. If you have made yourself vulnerable, by losing your ability to feed yourself; by not developing local industry or exporting it; by your citizens acquiring a a perceived or real need for foreign goods; or by your local elites wanting to be “transnational elites” who want foreign luxuries and who feel as at home in Paris, New York and London as in their own country, then you cannot refuse to do what those who control the trade and international monetary regime tell you to do.
This is always the devil’s bargain offered in international regimes: “you can get all the stuff we have if only you open up”. It’s true, and for many countries it works for a while. The less you had, the shorter period it works for (countries who only have to be convinced to give up their ability to feed themselves by switching to cash crops and forcing subsistence farmers get a few years), but once you’ve given away your autonomy, the deal will, at some point, always turn bad. Those with the whip hand, will always eventually drive you down unless you have as much power over them as they have over you.
And knowing that your elites are no longer yours, but theirs, they will always find someone to do it for them, because your elites will be eager to sell you out for the flat in New York, the vacations in the south of France, the German automobile, the French mistress, the Swiss boarding school for their children, and for the fine luxury goods their own country cannot make.
If you get yourself into this position, you must overthrow your elites, and you must figure out how to become independent again. You must make deals with other blocs: the Russians and the Chinese, for the transition period, and figure out how to move your production of what matters back to local, and if you no longer can, how to feed yourself. You must inculcate in your elites and peoples a desire for what you make locally – local lovers, the food of your nation, the luxuries you can produce.
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pond
I would angle this somewhat differently: nations go for free trade, and subsequently austerity, because multinational corporations want these things, and national governments are captives of these corporations and the wealthy that profit from them. The reason is that free trade results in labor arbitrage, pitting the poorest peasants (and governments eager for factories) against the workers of richer industrial nations. Austerity comes into play after free trade has done its work: a wealthy nation, fat from producing its own goods for sale to its well-paid citizens, offers generous welfare programs it can well afford, being wealthy. Once the good jobs go overseas to starving peasants eager to work for pence, the citizens of the onetime wealthy nation are out of jobs, the tax revenues dry up, and the nation can only afford those welfare programs by depriving funds from the wealthy. But the wealthy own the government, so that is a non-starter.
Another, deeper process is at work currently, however. The world is no longer able to extract larger and larger (and cheaper) energy supplies, and indeed supplies of all raw materials including food. With a still-growing global population, we are fairly up against it in this respect. The global economy will, in all likelihood, be contracting for the foreseeable future — say the next 100 years at least. All things being equal, we will all be poorer, in jagged legs down, going forward. But the rich who own the national governments use their power and influence to hold onto their wealth for just as long as they can, accelerating the downward speed of the rest of us.
Celsius 233
@ pond
April 26, 2014
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That is a fascinating POV and likely true/valid.
Disturbing at best.
We’re not prepared, and will resist preparedness.
Many times many will die…
nihil obstet
If a government tries to say no to enmeshment in the dependency regime, the leaders of that government are disposed of and more cooperative leaders installed. This has been happening since at least World War II. Ask the Iranians, the Chileans, many of the countries of central Africa, and of course, the project for “regime change” wherever any government dares to show symptoms of wanting to make its own citizens secure.
S Brennan
Libya followed your advice Ian.
Libya had the highest standard of living in all of Africa. Gaddafi balanced his trade and had no foreign debt.
While Gaddafi is vilified by the lackeys in corporate media, because he used forceful means to control ethnic factions from ethnically cleansing those not like themselves…and prevented women from being subject to Shari “law”. He was in fact one of the worlds most generous leaders to his people. Gaddafi numbers were over 70% support before US covert actions to destabilize Libya.
Then our Peace Prize Prez [with the full support of his faithful followers], started funding/arming racist elements of local terrorist cells of Al Qaeda.
When that didn’t work, our Peace Prize Prez [with the full support of his faithful followers] upped his game and brought in/armed/funded international terrorist Mujahideen.
When that didn’t work, our Peace Prize Prez [with the full support of his faithful followers] upped his game and brought in MASSIVE bombing of civilians who supported Gaddafi.
For 8 months, our Peace Prize Prez [with the full support of his faithful followers] and without a declaration of war, waged a war of aggression. In those 8 months, 25,000 bombing missions occurred…about 105 bombing missions A DAY.
Finally, after terrorizing the population into submission, Gaddafi was anally raped with a knife…with Hillary Clinton providing the soundtrack of laughter, like some warped Roman Empress. [Soon we will be told to vote for this Caliguless by “liberals” in the Democratic party with the argument, that her monstrous behavior is “less evil” than whatever incompetent the Republicans have on offer].
Our Peace Prize Prez [with the full support of his faithful followers], is at his best when he is murdering innocents while playing golf with his buddies in Oil & Gas [think BP], Financial sector and Pharma. Short of nuclear weapons, or strong ties to those who have them, countries are to be stripped naked and dismembered. This is done with the FULL APPROVAL of people who consider themselves “liberal”…the only time “liberals” in the US oppose war is when a Republican is president. Hell, the US Military is more anti-war than “liberals” in the US.
Mandos
I hope you realize that you mostly will never accomplish this. We discussed this before not too long ago, as I recall. People still wanted Levis in East Germany etc. As soon as someone has access to a surplus of wealth and the knowledge that there is a world beyond their own country and other luxuries to be had, the kind of co-option you’re talking about follows immediately. You can’t educate people into perfect patriotic virtue without a totalitarian state, and even then.
That’s not to mention all the immigrant communities that want the luxuries from back home, which is also pretty much inevitable.
Any solution to the irresistibility of austerity will have to be a global one for as long as there is the possibility of a global economy.
Hilary John Barnes
Look around you and rejoice a) that the world does not follow Keynes’ advice, b) that the world is sufficiently well organised to make this possible.
Ian Welsh
If people want levis, figure out how to make levis. It’s not that damned hard (hint: break the patents or don’t break the patents and just ignore all the indistinguishable copies bootleggers produce). Or figure out how to convince them they don’t: People in Korea, during the time when they were industrializing and NOT buying foreign goods except capital goods with minor exceptions, did not want levis.
As for Libya, Qaddafi gave up his nuke program. ‘Nough said.
Your people must have a taste for what you can produce, or what you can get from nations who don’t want to control your economy. Figure out how, or accept your peonage and ruin.
Mandos
Korea is one of the rare exceptions that don’t last forever anyway (e.g. the Gangnam Style music video…). If you can bottle what made SK SK at that time and distribute it, it would be a mitzvah.
In fact East Germany went to some lengths to create its own fashion industry. A visit to the DDR Museum in Berlin (quite small and entertaining) is instructive and worth it. They had fashion magazines and designers, etc. It’s really quite fascinating. It also didn’t work. Because they weren’t especially good, but worse, they weren’t plausibly made by Levis.
See, it doesn’t have to be any good. It just has to be made by Levi’s. It has to appear that at least some of your neighbours can’t get it. Same with Russian conspicuous consumption, which limits to some extent how far Putin can go.
As I said on that thread, folks need to think harder about the one thing that global capitalism does well, which is to productively channel anti-social wishes into trivial things.
Ian Welsh
China did the same thing, actually, back when they didn’t want to spend money on foreign non-capital goods–in a different way–just don’t crack down on piracy, at all.
Or you can figure out how to want what you’ve got. The French, historically, were great at it. Not saying it’s the easiest problem in the world, but it has been done.
Want your prosperity, if you’re not a core nation? Better figure it out.
This problem soon coming to core nations too.
Besides, what you’re really talking about is cultural hegemony. People wanted American branded goods and some European ones. For a while, Japan got in on that action, too.
You push your culture hard, go super-vibrant, and people want what you sell. The Warsaw Pact was a walking corpse for decades, in terms of culture, because of all the purges.
But even if you don’t, you convince your own nation that you’re the Bees Knees. The Japanese did it too, they thought that most foreign goods were crap, even when they weren’t. Even if you could get the goods in, in most cases, they wouldn’t buy them. Some exceptions, of course, but they were niche.
Culture is not separate from economics. If you don’t have a strong cultural identity, you’d better whip it up. And then you need to make it vibrant.
(See Bollywood)
Mandos
Well, we’ll have to agree to disagree. What you’re basically arguing is that it’s possible to maintain an affluent industrial society in which people with surplus wealth don’t (eventually) start competing on access to goods that their neighbours don’t have, and not just for a short period in development, but for the long term.
Bollywood is a bad example of this. The Indian elite have long felt that London and NY are their second homes, even if they’ve never been there, and Western consumption is lionized…sometimes even in Bollywood films.
I think consuming domestically is important, and as you know I am a long-time opponent of the free trade dogma, but it doesn’t seem like a very…resilient solution. On the matter of austerity, you have situations like Greece, where membership in a union they should not have joined is in itself a matter of national prestige, not just personal consumption…
Ian Welsh
The Japanese sustained it for 80 to 90 years. Few things last that long.
The Greeks think they are Europeans: they identify as classic Greeks, the root Western civilization. They don’t get that the rest of Europe doesn’t see them that way.
Mandos
So, uh, if you take Japan as your model, how much do you think it might depend on the other, somewhat retrograde cultural characteristics that Japan is alleged by some to have? How compatible is a widespread economic and cultural nationalism with liberal values of tolerance, openness, democracy, etc.?
And at what point is an international economic interaction even possible and desirable? Do we ascribe absolutely no merit to comparative advantages (as opposed to much less than it is given now)?
My point with Greece is simply to remind that there are other ways that one can get tangled in the austerity web.
Ian Welsh
The post-war nationalist period of local production under Bretton Woods was pretty liberal in socioeconomic terms and is when Jim Crow etc… was forcibly ended.
Comparative advantage is a rounding error absent full employment. So close to meaningless as to be indistinguishable. This comes out of the math, it is not “my opinion”.
Mandos
But as I understand it, the post-war period of local production was abnormal in a large number of ways, being post-war. We live now in a world in which the nations of Europe and rebuilding and the USA is no longer the grand source of everything good */irony*, and we don’t have the immediate trauma (unless you live in certain ME countries…) of a world war.
I’m not trying to be difficult here. I know it *has* been done, but *where* it has been done are either places that are somewhat illiberal in temperament, or when they are liberal, contain some of the seeds of their own destruction. The end of segregation in the USA, for example, is unfortunately also the harbinger of the Reagan revolution and the very illiberal white backlash that has paralyzed US politics for 30 years or more and allowed a certain portion of the elite to piggyback bad economic policies on top of the white revolt. (This proposition is roughly congruent to the idea that social democracy is fragile under conditions of cultural diversity, that gets proposed from time to time.)