|Montréal, 28 avril 2001 / No 82||
by David MacRae
Well, the Battle of Quebec is finally over. The politicians have issued their platitudes to the modern equivalents of motherhood and apple pie – democracy, the environment and suchlike. The professional agitprops have managed once more to get themselves into the headlines. The kids had fun on the barricades, self-righteously campaigning for social justice. Bernard Landry got another chance to manufacture humiliation. The cops, to their credit, seem to have operated with admirable restraint.
Yet, the question remains: What were they all doing there?
The agitprops claim that free trade represents exploitation of the poor by the multi-nationals and that the environment will be adversely affected. Both claims are so wrong as to be, if not outright lies, then at least a wilful refusal to examine the facts.
So far as the environment is concerned, the simple fact is that rich nations have clean environments and poor nations do not. The reason is obvious enough: the poor have greater worries than whether they might possibly die from smog-engendered cancer fifty years from now. They are too busy looking for their next meal. Yes, they would prefer not to have to look for it in someone else's garbage but still, any meal is better than no meal.
As countries get rich, they clean up their backyards. How many people know that the famous pea soup fog of Sherlock Holmes' day was really smog, smog so thick you couldn't see the ground? Places like Pittsburgh and Manchester were even worse than Holmes' London. Not to mention the other environmental problems of the period. Dysentery was endemic, even among the rich. The streets were so covered with horse manure that it could be dangerous to attempt to cross them. Toronto still has a law on the books forbidding people to drag dead horses through the town on Sundays. We might laugh about it today but the obvious intent of the law was to provide a respite once a week from such unsanitary practices.
Today London Fog is a sort of a cliché for the good old days and we obsess about environmental problems whose impact is barely measurable, if indeed there is any impact at all. Remarkably, we seem to think things have gotten worse, Yet in the last thirty years, Lake Erie has come back to life and automobile pollution has declined by 95%. Today Canadians plant more trees than we cut down, so many that we take more carbon out of the atmosphere this way than we put into it by burning fossil fuels.
Poor countries will clean themselves up as well. Just give them the chance to become rich enough to afford the luxury of doing so. Those on the verge of wealth, such as South Korea, have already started to do so.
The issue of the environment is a canard. Wealthy is healthy. The real question is how best to bring wealth to poor countries. If we can make the rich even richer at the same time, this would be a nice bonus.
Is Free trade exploitation?
That we are still discussing this issue today merely demonstrates the astonishing resourcefulness that so-called intellectuals reveal when trying to find ways to hide from the truth. Nearly two hundred years after David Ricardo proved definitively that free trade benefits both sides (and that the poorer country gains more), self-deluding pseudo-intellectuals still insist that free trade is exploitation. The stupidity of their stance should be obvious. Free trade is – well – free. Voluntary. Both sides think they will benefit from the exchange. In the long run, it is almost certain that they both will be right.
Part of the problem with these over-educated idiots is that they make some magical distinction between national economies and the kinds of economics you and I use to run our own lives. Let me tell you a little secret that most economists, still less other intellectuals, never stumble over: there is no such thing as a national economy; it is simply the sum of the actions of individuals, each of whom is acting in his own self-interest, whatever he may believe that to be.
Free trade is really about freedom of association, the right of each individual to work with and to trade with people of his own choosing. If I choose to buy my clothes from some Chinese peasant who I never have met and almost certainly never will meet, that is my right. I have the right to do business with him instead of some first-generation immigrant in Montreal. When the peasant sells to me, an anonymous Canadian, through a sequence of equally anonymous intermediaries, that is his right. If some functionary in Beijing should want the clothes instead, this has – or rather should have – no bearing on the matter either. Aside from the issue of rights, the power of our working together for our mutual benefit is so strong that ultimately everyone wins, even the Beijing bureaucrat and the Montreal immigrant.
That the poor gain more than the rich from free trade is less obvious than the undeniable fact that both gain. Ricardo supplies a mathematical proof. It's simple enough, a bit of elementary arithmetic, but let me illustrate the point with an anecdote instead.
Jordan VS Jimmy
To illustrate the advantages of the division of labour, Milton Friedman likes to point out that Michael Jordan doesn't mow his own lawn. Obviously he could do it. Strong as he is, he would probably do a better job than just about anyone around. Yet he doesn't. He can make better use of his time by playing basketball for some obscene amount of money and hiring a neighbourhood kid instead. Equally, the kid, let's call him Jimmy, is better off with this job than by indulging some Quixotic attempt to forge a career in professional basketball.
The government and their hacks, the media and the rest, could come along and argue that this is unjust and exploitative. While Jordan makes $57,000/hr (or whatever), he himself hires poor Jimmy at a mere four dollars and fifty cents. We have to stop this abusive treatment of our children, they yell. So they pass a law forbidding the practice. From now on, His Airness will mow his own lawn, like it or not.
Note that the real loser is not the multi-millionaire but the indigent young man. Jordan can still play basketball, except on Saturday afternoons. He has lost something, but not all that much.
Jimmy, though, just lost his job. He might have hoped, though careful hoarding of this little bit of money, to better himself, to pay for college. Perhaps one day, he might even be wealthy enough to own his own lawn and to hire someone else to mow it. Or he might invent a lawn-mowing robot, thus ensuring his own success and the enduring thanks of everyone who has ever sweated behind a mower. None of this could happen unless he is given a chance to start out.
The same thing happens when some multi-national opens up a plant in the third world. Let's say that Lawn Boy moves into Tijuana. The agitprops scream exploitation because of the obscenely low wages they pay. They never bother to mention that the downtrodden third-world workers have chosen to work for these companies of their own free will. The reasons are not hard to find. Multinationals pay wages which are typically 50%-75% above prevailing rates in the host countries – and the work is almost always safer to boot.
Multinationals are closer to heroes than to villains. The people they employ certainly welcome them. But they're not heroes either. They don't pay these wages out of the generosity of their hearts. They do it because they have to. By using first-world technology, they can set up modern plants in remote places despite the lack of infrastructure in the host country and the lack of education of the local people. If Lawn Boy is going to open its Mexican factory, it may have to build roads and power generators and to train its own workers. In view of these extra costs, the workers are clearly worth less than Americans and Canadians.
But – and this is the crucial point – these workers are also worth more than the average Mexican because of the very improvements which Lawn Boy brought to Tijuana. Effectively, by adding to the Mexican capital base, the corporation has trapped itself into paying salaries well above the general level in the country. Otherwise these newly-valuable workers are liable to go elsewhere. Furthermore, Tijuana has obtained infrastructure and knowledge which will enable it to support still more industry, at still higher salary levels. Undoubtedly, former Lawn Boy employees will build some of these new businesses.
A process feeding on itself
This process feeds on itself, leading to more and more wealth. This simple scenario has repeated itself over and over during the last two hundred years. The United States was built on British investment. The Americans followed with investment in Japan. The Japanese in turn moved on to Malaysia, spreading wealth and prosperity across the planet.
Hong Kong is the classic example. Fifty years ago it was one of the poorest places on the globe. Half of the people living there were refugees from the recent communist take-over of the mainland. Yet, by dint of hard work and by embracing free trade and foreign investment, the people have lifted themselves out of their poverty to such a point that today they are, by some measures, the richest on Earth.
The agitprops scream about the terrible conditions of child labourers in the third world. They are hypocrites. How exactly does it help homeless children to take away their jobs? Forcing Nike to throw them on to the streets isn't going to hurt the company much. But it could be the difference between life and death for the kids. They won't have a home, nor will they be going to school. Count on it. No, their choices will now be between begging and prostitution – or worse.
If you want to do something about child labour, take a child under your arm. It's curious that this brand of do-gooders would never consider this, sneering instead at the churchgoers who do. These same do-gooders banned DDT on spurious grounds, condemning millions of African children to die from malaria every year.
While not abandoning their argument about exploitation of the third world, the agitators often turn things around and argue that the real problem is at home. In Ross Perot's words, it's about
Denying the poor a chance
To come back to our Lawn Boy factory, the multinational did not choose to set up in Mexico in order to service the local market. Most Mexicans don't have lawns and those that do use sheep to mow them. No, Lawn Boy built the factory in order to sell the mowers back home. Well, how does this affect us?
Clearly the guy with the new mower is better off. In some way, he thought it superior to the alternatives. Perhaps it was cheaper. Perhaps it is less likely to choke on the high grass. At any rate, people who cut grass bring their own equipment, so the direct beneficiary is our neighbourhood kid, Jimmy. He can cut more grass in less time or with less capital investment. Perhaps it is so much better that he can afford to cut his rates, letting MJ become even more obscenely rich (if only by a tiny amount). Hard to see how this hurts consumers. Of course, it doesn't. It comes back to forcing Canadians to support local producers.
So the argument, once again, comes down to arguing that other people should be denied the right to advance their own interests in order to satisfy the hypocrites' need to feel morally superior to the evil multinationals, or the evil foreigners. They deny the poor of third world a chance to improve their lot in order to decry the capitalists. They kill African children in order to (falsely) blame chemical companies for ruining the eggshells of eagles. They throw children into the streets to find a reason to rail against Nike. In the same way, Jimmy is denied his right to better or cheaper equipment in order to supposedly save Canadian jobs.
In view of the way unemployment has decreased since the coming of free trade, you would think that they would learn to shut up. But they never do. Instead they cry
The only people who really lose from free trade, even in the short term, are those who were overpaid in the first place. Sydney steel workers come to mind. By throwing billions of dollars of Canadian taxpayer money at them and by raising tariffs to force Canadian industry to buy overpriced steel from obsolete heavily polluting factories, we have managed to give them well-paid jobs for the last fifty years. Except that we didn't really give them jobs at all. We turned productive citizens into parasites. It would have been far cheaper to simply close the mills and give them the money. The problem with this approach is that it would have exposed the scam.
As Ricardo proved, free trade benefits everyone – at least everyone who is productive. As the case of Hong Kong shows, free trade is good for you even if the other guy doesn't cooperate.
If the Europeans want to give away their wheat below cost, why shouldn't we take advantage of their stupidity? Let's say they go to the logical extreme and give it away for nothing. Wouldn't you take it? Of course you would. You'd take it and laugh at them for being so dense. Then you would go off and use your time and property to do better things with them than growing wheat. You could always go back if the Europeans should ever wise up to their folly.
Instead the protectionists argue that we should do the same thing as the Europeans, fight them in order to give our wheat away to the Chinese. This comes back to the pretense that there is something called a national economy which must be protected from the European lunacy. This is manifestly false. Canadians as a whole will always be better off if someone else wants to give us their stuff. Some small number of Canadians, it is true, may be hurt.
The most we should ever consider doing when faced with other countries' suicidal approaches to their economies is to help those who were directly affected to move into more productive activities. In practice, this is a mistake too. Government is never capable of judging who is in need and how to help them. Any attempt always turns into a form of welfare. In truth, this is what protectionism is – welfare for some special interest groups.
I doubt any of the professional agitators in Quebec understand any of this; they are too stuffed with their self-importance and moral superiority to even consider that they might be on the wrong side, a bunch of idiots who are fighting against the interests of the people and the causes they claim to support. Of course, it's not their entirely fault. They have been subjected to years of propaganda from teachers and the media. It takes a long time to drill the common sense out of a child.
Which comes to my final question, aside from giving a forum to the agitators (actually paying for it!), what were the politicians doing in Quebec? The proper Free Trade Agreement of the Americas is simple. Tomorrow morning we should all say together: from now on all, trade in the Americas is free. No restrictions. Trade what you want so long as you can find someone who wants to trade with you. If other countries won't go along with this, then we as Canadians will have to restrict ourselves to saying that all trade in our country is now free and that we will try to convince others to do the same for our mutual benefit.
What the incompetent politicians are really doing is exactly the same thing as they did in the Canada-US agreement and NAFTA – building a free trade system on top of the old unfree one. Nearly everything crosses the American border without any customs duties. But you still need Customs Officers and Customs Brokers, even for those things that are duty-free. More work for parasites, just like the steel industry.
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