Free trade is not what it is supposed to be

The latest Nobel Prize for economics was given to Angus Deaton for his decades of careful investigation of the poor, particularly of their shortage of food, not just energy food as such (carbohydrates), but the sort of nutritious food that’s necessary for an adult to carry out a day’s normal activity on a permanent basis.

He came to the conclusion that the only way the lot of the poor could be alleviated was by massive economic growth all round the world. The problem about this is that international aid to the Third World has been trying to achieve this for over 60 years and has not succeeded. The cultural gap between the First and the Third World is simply too great for the simple adoption of the institutions of the advanced countries — hitherto regarded as necessary.

But this is due to a fallacy regarding ‘free trade’. Free trade is not what it seems to be — a fair voluntary exchange between two parties. It may have been that to start with early in mankind’s trading history when relatively trivial items were exchanged, but no longer applies in the modern world.  Once an advanced trader has enough of any staple items he may require — such as food or metal resources — he’s not interested in any more trade with the junior party unless high value goods or services are involved, and that’s usually unlikely.

In other words, if we maintain the fiction that countries have to trade from behind territorial boundaries in order to maintain or improve the standard of living of its citizens then, for the most part, it will only exchange its goods and services for others of equal or similar value — that is, upwards, not downwards.  Countries aspire to trade upwards in exactly the same way as individuals aspire upwards to reach a higher social level.

In short, trade is hierarchical, not equally motivated in both parties. This is why today most high value trade is still as much confined to a relatively small number of advanced countries as it was well over 100 years ago.

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