On the 10th of April 2016, Dhaka Tribune published a piece “Bangladesh feels the Bern” by Shafiqur Rahman on their opinion page. There the writer opines that Bernie Sanders as a president of the united states will prove harmful for the economic development of Bangladesh, because he is an anti-free trade policy person, whereas Bangladesh, as the Mr. Rahman claims, “has been an overwhelming winner in the global free trade economy […].” In addition, Mr. Rahman also suggests that the Bernie’s presidency would hinder the progress of the world economically, because, as Mr. Rahman thinks, “the post-war international free trade regime has been sustained by the leadership of the US, a dramatic U-turn will hurl trade relations everywhere in disarray. Countries everywhere may turn protectionist, and while that will harm everyone economically, small countries will be hurt disproportionately.” The core of Mr. Rahman’s argument comes from his understanding that “[t]he theory of ‘comparative advantage,’ which is the foundational theory of free trade, is regarded by economists as the most elegant and effective theory in the whole economics subject; free trade’s ability to raise overall productivity is undeniable.” I find Mr. Rahman’s understanding of world economics in terms of development through free-trade vs. development through protectionism stated here highly problematic, and would like to tell you why.
Let me begin with a couple of questions, here. Mr. Rahman fears that protectionism is “will harm everyone economically.” Where did he get that idea from? And, who are these economists that regard the theory of “comparative advantage” as “the most elegant and effective theory in the whole economics subject”? Answer to both questions is the neoliberal/ free-trade economists. They are the ones who re-wrote the history of World Economics according to whatever fit their own interest. Based on that re-written history, people like Mr. Rahman uphold their claim that “free trade’s ability to raise overall productivity is undeniable”, and at the same time market this propaganda that protectionist as well as nationalistic economic policies are counter productive to world economic development. To prove how wrong Mr. Rahman is in his understanding of world economics, here, I present Ha-Joon Chang, a distinguished professor in the Faculty of Economics at the University of Cambridge, who in his book Bad Samaritans The myth of Free Trade and the Secret History of Capitalism (2008), debunks such claims of free-trade orthodoxy. Professor Chang critically studies the world economics, and presents a contrarian history of the economic development of the world that Professor Noam Chomsky entitles as “Economics in the Real World.”
In his book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, Professor Chang, shows us that “[…] the two champions of free trade, Britain and the US, were not only not free trade economies, but had been the two most protectionist economies among rich countries- that is, until they each in succession became the world’s dominant industrial power.” He also shows us that “practically all of today’s rich countries used nationalistic policies (e.g., tariffs, subsidies, restrictions on foreign trade) to promote their infant industries, though the exact mix of policies used, as well as their timing and duration, differed across countries.” Now, Mr. Rahman’s economists claim that in this current world, free trade is good for the developing countries, and present countries like Bangladesh as examples. But the real case is, the rich countries are forcing these FTAs on poor countries to keep them poor by letting them grow in a certain way, because, as Professor Chang maintains, “already established countries do not want more competitor emerging though the nationalistic policies they themselves successfully used in the past.” He also maintains that “[i]f any developing country can succeed with free trade, is should be Mexico.” But, Mexico is doing miserably bad compared to what it was doing before it embraced neoliberal economic policies in 1980s. On top of that, “[w]ide-ranging trade liberalization in the 1980s and 1990s wiped out whole swathes of Mexican industry that had been painstakingly built up during the period of import substitution industrialization (ISI)” [Chang, 2008].
Now, what about Bangladesh? Mr. Rahman claims, “Bangladesh has been an overwhelming winner in the global free trade economy because of its abundant, dirt-cheap, unorganised labour and a laxity of standards.” Well, there is some truth in it. Yes, Bangladesh has some “comparative advantage” here. But look carefully, Bangladesh’s economy here is growing in terms of exporting RMG and Seafood only. But Mr. Rahman, how long you want the West to exploit our dirt-cheap labor or slave labor which it really is? How long you want to these two sectors destroy your environment? You are afraid, because “[w]hat Mr Sanders is proposing could not be more directly against our interests”, because he will shut down the trade with us unless we meet the minimum wage standard that will benefit the poor, and environment standard that will benefit the world. Well, forget about Mr. Sanders, you will not be able to keep on thriving at the cost of slave labor even if you want to. It is because, as Professor Chang finds in his critical study of the history of neoliberal economics, that “[i]in the long run, free trade is a policy that is likely to condemn developing countries to specialize in sectors that offer low productivity growth and thus low rough in living standards. This is why so few countries have succeeded with free trade, while most successful centuries have used intact industry protection to one degree or another. Low income that results from lack of economic development severely restricts the freedom that the poor countries have in deciding their future.” This current “comparative advantage” will shatter into pieces as you do not have a “perfect factor mobility”, which is an adjustment pathway through which you can accommodate the capital and labor from a decreasing industry to an increasing industry. What is your “perfect factor mobility”, sending the cheap labor to Middle East countries as domestic slaves?
Faculty member at the University of Texas at Austin, and
PhD researcher at the City University of New York.
12 April 2016