Corporate “Free Trade” IS Zero-Sum

If right-libertarians have a “comparative advantage,” it’s in writing by-the-numbers puff pieces on “free trade” that borrow the language of Ricardo and Cobden to defend what amounts to a totalitarian corporate lockdown on the world economy. This time it’s Richard Ebeling of the Future of Freedom Foundation (“Free Trade Versus Political Fallacies,” June 15) doing the honors.

Ebeling objects to the negative tone of both American political parties on international trade this election year. Listening to Clinton and Trump, he says, “the average voter would think that international trade and investment is a zero sum game in which there is a ‘winner’ and a ‘loser’. Their economic policy assumption is that other countries are gaining at the international trade game at the expense of the United States.”

At least Ebeling, unlike most right-libertarian apologists for corporate globalization, doesn’t explicitly equate the predominant form of “trade” in the real world with “free trade.” He repeatedly defends the benefits of “international trade” and the like, without ever coming right out and calling it “free trade.”

The problem is, all the stuff he has to say about the positive-sum benefits of trade are true only of actual free trade. But the transnational corporate economy we actually live in has very little to do with free trade. And the global corporate economy is very much a zero-sum game.

The actual nature of the global economy is aptly described by this passage from “Labour Defended Against the Claims of Capital,” by Thomas Hodgskin — an English writer of the 1820s and 1830s who was second to none in his support for genuine free trade.

Betwixt him who produces food and him who produces clothing, betwixt him who makes instruments and him who uses them, in steps the capitalist, who neither makes nor uses them, and appropriates to himself the produce of both. With as niggard a hand as possible he transfers to each a part of the produce of the other, keeping to himself the large share. Gradually and successively has he insinuated himself betwixt them, expanding in bulk as he has been nourished by their increasingly productive labours, and separating them so widely from each other that neither can see whence that supply is drawn which each receives through the capitalist. While he despoils both, so completely does he exclude one from the view of the other that both believe they are indebted him for subsistence.

In one thing Ebeling is right: his criticism of Clinton and Trump for suggesting it’s other countries that benefit at the expense of Americans. In actual fact it’s transnational corporations that are gaining at the expense of working people and consumers in both the United States and other countries. But substitute the global corporation for “other countries” and actually existing international trade is exactly the kind of zero-sum relationship Hodgskin described.

Most “international trade” is not what we think of when we hear the term — that is, companies in America producing for export to other countries, and companies in foreign countries producing goods that are imported for consumption in the United States. Rather, most trade is actually transfers of unfinished goods between national subsidiaries of global corporations, or the importation for domestic sale of finished goods produced under contract by foreign factories, with the trademarks of American corporations. In other words it isn’t really “trade” at all, but an administrative transaction within a global corporate bureaucracy.

And to repeat, it’s very much zero-sum.

A global corporation uses its patents and trademarks to contract out actual production to independent firms, but retains a legal monopoly on disposal of the product. As a result it can bargain unilaterally with foreign sweatshops on a take-it-or-leave-it basis, and sell the finished goods in Western domestic markets at a markup many times the actual cost of production. And it can use the same “intellectual property” to prevent indigenous Third World producers from manufacturing identical goods for their own domestic market at a price near actual production cost. That is a ZERO-SUM game in which the corporations benefit at the expense of both Third World workers and American consumers.

Under the neoliberal regime enforced by the World Bank, IMF, and assorted “Free Trade Agreements,” the “property rights” of extractive industries like oil, minerals and agribusiness in the resources they’ve looted under centuries of colonialism and neocolonialism are protected against reclamation by the Third World peoples they looted them from. That’s ZERO-SUM.

Under neoliberalism, multilateral institutions lend Third World countries the money to build roads and utility infrastructures whose primary purpose is to make the export of Western capital artificially profitable. Then those same institutions use that debt as leverage to blackmail those same Third World countries into crony capitalist “structural adjustment” programs by which they “privatize” those same infrastructures to the very corporations they were built at public expense to subsidize — and privatize them on terms unilaterally favorable to the acquiring corporations. ZERO-SUM.

Under neoliberalism, the cumulative effect of “intellectual property,” massive subsidies to long-distance transportation, and the U.S. Navy keeping the sea lanes open for container ships entirely at taxpayer expense, is to make global supply and distribution chains much longer than would be optimally efficient in a genuine free market. This means that the international “specialization” Ebeling thinks so much of is likewise artificially promoted beyond optimal levels.

“Trade,” as such, is not an unlimited good. Neither is “specialization” or “division of labor.” If they were, Earth would devote its entire economy to producing a particular kind of widget for the rest of the galaxy. They’re all things that reach a level of diminishing returns. And since the primary role of the state under capitalism is to socialize the operating costs of business and enforce monopoly profits, the point of diminishing returns for all those things is artificially raised much higher than its normal value in a free market.

Under genuine free trade, no “intellectual property” would enable corporations to control production and monopolize the distribution of goods while relegating the people of Third World countries to supplying sweatshop labor. Under genuine free trade, the expropriated and enclosed land from which peasants have been evicted under colonialism and neo-colonialism, which is used to produce cash crops or simply held out of use altogether, would be reoccupied by the cultivators who rightfully own it and force sweatshop employers to compete with the possibility of self-employment and subsistence production.

In such a global economy, a much larger share of the goods we consume would be produced in small-scale facilities for local consumption, in integrated local economies — in both the United States and the Third World. The goods produced would be much cheaper absent the embedded rents on patents, trademarks and copyrights, and the enormous overhead from the kind of supply-push distribution entailed in global distribution chains. Workers would have much greater say over the conditions under which this production took place — both here and abroad — absent state interventions on behalf of employers to suppress alternatives to the wage system.

But that’s under free trade — which is a far cry from the capitalist “international trade” Ebeling defends.