Free Trade Must Mitigate Effect on Losers by Multinational Corporation Policy

In a perfect world, free trade expands benefits for all who participate.  All countries trade their comparative advantages.  Whether capable of producing their own goods or reliant on export/ imports, each country grows from trade and the size of the world’s economic pie increases “fairly”.  The problem with this concept is how each country defines fair trade and how each financial class within each country defines it as well.

Many in the U.S. define free trade as that which increases our country’s well being while simultaneously increasing the wealth of our trading partners .  However, with the massive differences in per capita wealth that has persisted in this century, much of the world defines fair trade as redistributing wealth of the existing world economic pie to benefit further those countries that have thus far been left out of the equation.

This viewpoint, supported by the developing world , gave rise to entrepreneurial opportunity.  Wherever there exists economic differential, we can count on the American entrepreneur to opportunistically derive wealth from it’s existence.  America’s $800 billion annual trade deficit is a result of that drive.

Combined with the accumulated wealth of America’s wealthy, our opportunists created a job sucking pump that was primed several decades ago and the rush of exiting jobs flowing past us is a river so powerful that we as American consumers dare not wade through it.

What started as a gold rush of infrastructure projects into China (and elsewhere. China is the stand in for my post) soon became in the eighties the first significant transfer of production jobs that would begin displacing U.S products out of American stores.  As more of us bought these lower prices goods, a percentage of U.S. employees drifted away from full time employment. 

As Americans reinforced wealthy investors’ decisions about their initial Chinese ventures, increased wealth made at the expense of U.S. workers was reinvested in China to create even more volume of low cost goods to be sold back to America creating even more job losses and downward pressures on U.S. production labor wages.

Downward price pressures on labor wages soon spread to other fields as China began to supplant white collar jobs, and as lower blue collar wages began to influence the entire wage spectrum.  What had been several decades of barely increasing real purchasing power for the average American family reversed course in the nineties and Middle America found itself ever more reliant on imported low cost goods and credit to make up for lower earnings.  In response, purchases of Chinese goods and job losses accelerated.

As jobs exited and import purchases increased, the circular pump that had been primed by the difference in income levels between Middle America and the average Chinese worker was now in full force with America’s wealthy, MNCs, and China’s sovereignty each extracting a share of the pump’s profit.

We now look out at the flooded impassible streets of cheap Chinese goods flowing past our empty factories and wonder how it all happened.  What’s worse, the average American cannot attempt to shut the floodgate that has been left open by America’s trade policy.  Our understanding of “fair trade” has been circumvented.  To re-establish a sense of free trade, America needs a comprehensive MNC policy.  The pump that is slowly draining Middle America’s purchasing power and reinforcing a global shift of economic power to the East can be mitigated by comprehensive MNC reform.  For this to occur, the desire to resuscitate Middle America must take precedence in the minds of our representatives in Washington over the desires of their benefactors.  

America is not going to put low cost overseas jobs back in the genie’s bottle nor should we.  But we must create a comprehensive policy that gives American businesses the ability to innovate,  and that gives America the benefit of her citizen’s innovation by keeping that innovation in America for a time.  We must create, through policy, a way for Americans to debate the effects of trade policies and to determine potential net benefits.  We must create a way for businesses and employees displaced from policies deemed to be a net benefit to America to be assisted in transition, and for those that gain the most benefit from changing trade policies to compensate those hurt most from the shift.

Globalization is the phrase whispered above the rush of wage equalizing floods.  Comprehensive MNC Policy should be the phrase shouted in the Halls of Congress.

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Filed under American Governance, Free Trade, Multinational Corporations

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