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BRETTON WOODS, WTO AND THE MARCH TO GLOBALIZATION (PART I)

July 18, 2013

BRETTON WOODS, WTO AND THE MARCH TO GLOBALIZATION (PART I)

In 1944 I was a teenager in the South Pacific on government business (WW II, which is a business for defense contractors but a call to duty for the rest of us). I never heard of Bretton Woods while on such business; I did not know (nor would I have cared) that there was an international economic conference going on at Bretton Woods at that time that would, among other things, set forth rules and regulations for trade and finance between nation states on a global basis. I did not know and would likewise not have cared that out of such conference arose GATT (General Agreement on Tariffs and Trade and the International Monetary Fund). I learned of Bretton Woods and GATT after the war while pursuing a degree in economics and political science before attending law school.

I learned of Bretton Woods and GATT not in an economics course but in a political science course called
“Government Regulation of Business,” a real relic of a misnomer these days with Wall Street’s rich and corporate class calling for little or no regulation of “private enterprise.” (I here note parenthetically that the rich and corporate class has no problem with government laws, rules and regulations when such laws allow carried interest, ridiculously low capital gains rates and other such giveaways of the public’s tax funds which make them more money but add to the deficit you and I have to make up.)

GATT spoke to tariffs and capital flow across borders, but it gave considerable leeway to individual nation states to implement some of their own policies. This makes sense to me, since the economy of, for instance, Greece or Cambodia or Slovenia, have different historical antecedents than ours. Such economies may require different treatment to handle local problems in production and financing. One size (as I have frequently blogged) does NOT fit all. Such countries, as a further for instance, may find it advantageous to institute tariffs against foreign producers in order to protect nascent industries in their country (as Lincoln did in this country). I am going against the “free trade” crowd these days in approving such exercises in sovereignty. Why should our laws and what is in our best interests be sublimated to trade agreements? Answer: Because it makes more money for the rich and corporate class and imports unemployment and recession for the rest of us. Globalization works fine for China (especially with their dumping and currency manipulation). Tell me how it’s working here. . . .

Bretton Woods (as noted by economist Jeff Madrick in his Toward Reglobalization essay) domestically gave signatory governments pretty much the right to do as they pleased, whether it meant adoption of generous public-welfare programs or subsidizing nascent industries or (within limits) imposing tariffs on imported goods. Currencies were fixed against the American dollar to help reduce uncertainty among traders and investors. So far, so good.

Then came Clinton, Larry Summers, Bob Rubin and Alan Greenspan. Then came WTO. Then came Thomas Friedman with his 1999 book, The Lexus and the Olive Tree, in which he sang the praises of free trade and deregulation as the ideal path toward global growth and social progress for poor and rich alike. Then came another of Friedman’s handiworks, his 2005 book, The Earth is Flat (which I have criticized since it came out). Both his books were Alice in Wonderland expressions and divorced from the real world of a rough and tumble system we call international commerce. Both were Cinderella expressions of (per Madrick) “fairy tale optimism based on the crudest interpretation of Adam Smith’s invisible hand.” Both also contained vestiges of the “law of comparative advantage,” a likewise now discredited adage dating from the classical economics era. These “laws” may at the time have had some semblance of reality, but their efficacy depended upon assumptions then made which have no application today. Supply and demand still has some application, though immaterial in such monopolies as the production, refining and sale of petroleum products. With monopolies in markets in oil, finance and pharmaceuticals, old adages such as supply and demand and comparative advantage are plainly irrelevant to how markets really work, and it is disgusting to hear corporate America’s mouthpieces for these corporate monopolies dust them off for modern consumption to fit their own greedy purposes.

Corporate monopolies know full well that they are selling us a bill of goods that is phony. The purpose for their continuing insistence that centuries-old economic principles still have application to their particular sectors of the economy, of course, is not only to divert public attention from their outrageous pricing that only monopolists could pull off (pills and gas and interest on credit cards, for instance), but also to keep our attention away from insisting that our government enforce the provisions of the Sherman Anti-Trust Act.

Any attempt to do so, of course, would be met with howls from the monopolists that that dirty old socialist government is interfering with “private enterprise.” My response – you bet! Government is supposed to interfere with criminal enterprises, like collusive pricing, restraint of trade, bank robbery etc. Why should the financial sector be immune to criminal law, what with banks serving as conduits for drug money from Mexican drug gangs and prohibited financial transactions with Iran when last May a man in Texas got 50 years for stealing a 35 dollar pack of pork ribs? When, if ever, will justice come to the corporate boardroom? Someone tell me how we can reasonably equate the facilitation of hundreds of millions of dollars in drug laundering for Mexican drug gangs to a pack of ribs? I’m waiting. . . .

Part II will develop our transition from GATT to WTO and the horrors that “trade agreement” has visited on working Americans, the poor and unemployed, programs for education etc. I will also discuss why I am opposed to so-called “free trade” as currently practiced, am pro-tariff in some instances and for set periods of time, and for a return to GATT and a return of sovereignty to trading nation states. Stay tuned.  GERALD  E

P.S. The time I spent in the South Pacific and elsewhere from 1944 to 1946 was in a war against fascism and for American sovereignty and the preservation of our precious Constitution and the rights of the people subject to its provisions. I did not know that someday we would have “trade agreements” that overrode both state and federal laws and constitutions and the exercise of our sovereign rights. Had I known then that I was involved in hostilities to establish the supremacy of “trade agreements” over preservation of our Constitution, I might not have been such a willing participant. I feel duped in retrospect and am unalterably opposed to such “agreements” that in any way, shape or form derogate from a free and full exercise of our sovereignty, which belongs to the people, not multinational trading corporations and Wall Street banks. GE

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