Protection and the free market

Issue 

Protection and the free market

The free market is a myth, as the peoples of eastern Europe and the former Soviet Union are discovering to their cost. The market, which was supposed to bring prosperity and political freedom, is actually producing severe hardship and the prospect of right-wing dictatorship.

In Australia also, we are being treated to a display of the contradictions of the market, this time in the debate over tariffs. The fact is, unemployment would be much worse in this country without the existing tariffs. Paul Keating recognised that in his statement that he would not take steps that would lead to the collapse of existing industries.

This goes very much against the intellectual trend among "rationalist" economists internationally (though not necessarily the trends in government policy). Until recently Keating has been a champion of zero tariffs and the exposure of Australian industry to the full blast of international competition. But in his attempt to pull the Labor Party back from the brink of electoral disaster he has begun taking a little more notice of what is happening to the workers who make up Labor's traditional base. He has also taken note of the views of some unions, which advocate protection to save jobs.

This is in line with the situation internationally. The European Community protects its farmers, particularly in France and Italy, because to do otherwise would be a political and social disaster. Japan protects its rice farmers for similar reasons.

The capitalist market does not measure efficiency and productivity rationally. Is it really more efficient to transport low-technology goods such as clothing and textiles from Taiwan or Europe, when they could equally well be made here? The market says it is, but then it is unable to measure many factors, the most important being the environmental effects of present patterns of production and trade, and the human costs of international capitalist competition in terms of low living standards, poverty, etc.

Free trade versus protection is an argument as old as the capitalist system, and the truth is that neither works. Protection of Australian manufacturing results in higher costs for Australian farmers and other exporters, and similar effects build up internationally. Protection increases the intensity of trade wars, in turn increasing the risk of shooting wars.

Until recently, the dominant capitalist economic notion was that the market could solve all problems if left to itself. Now, reality is dawning and there is a small swing back to regulation; Keating's swing back to protection reflects that change. But regulation had already failed: that's what led to the economic rationalist ascendancy of the past decade. And before the regulationist era, greater laissez faire had produced two world wars and the Great Depression.

In place of the swing between free trade and protection, a more fundamental rethink of economic policy is necessary: one that the aspects and results of economic activity, and one above all that puts the vast majority in charge of the results of their labour. Humanity cannot afford continuing control of vast resources by individuals and corporations ignorant or uncaring about the long-term social and environmental effects of their activities.

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