Wednesday, May 9, 2007

Corn Chips, French Fries,floating.....

As tariff-less trade between *equals* proves that there can not be any leveling to put the nations economically on par with one another in utility, we have seen that taking Free Trade to an underdeveloped- agrarian nation such as Mexico has been catastrophic. Noted is that the Zapitista uprising in the Mexican countryside began the same day that NAFTA became official. Their already precarious agricultural base was totally wrecked with a stroke of a pen. Naturally, the dispersed peasantry of Mexico surged across the Rio Grande in search for work which subsequently kept real wages in the USA depressed, further benefiting the feudal-corporate Overclass of America.

Regardless of what walls are erected on the southern border, as long as that monster of NAFTA continues its ugly tread,the illegal immigrant diaspora will continue. Especially with the *biofuels industry* driving up the price of corn and overall food prices. The staple of the Mexican diet is corn tortillas and for the first time the Mexican people are finding it difficult to pay for their subsistence food. Put another notch on the rebuttal stick that Free Trade "keeps food prices low".

The Free Trade/ agriculture destruction link is nothing new. The first nation to implement Free Trade as policy was Great Britain with the repeal of the Corn Laws in the 1840s. John Bull's shift to Free Trade coincided with the worldwide potato blight of the same decade. The reality is that Ireland was the only country that suffered a famine because of the potato blight. The Spud was also a staple with the peasantry on the European continent, but few starved there during the years 1846-49 when the potato failed globally. Other food stuffs were available for relief, and the nations on the Continent didn't wait for the "market to correct" hunger like England did for Ireland. It would be ludicrous to blame laissez-faire for the potato crop failing, yet the policy of it that Great Britain adopted is what induced the devastating famine of deaths(assessed at one to two million) and evictions that created mass immigration out of Ireland. The famine coupled with the repeal of the Corn Laws drove aggregate food prices higher for the common people of England; wages were depressed because of the influx of lower-skilled Irish laborers flooding the manufacturing labor market.

The myth of the 'horrid' Corn Laws persisted in Great Britain for generations following. At the beginning of the 20th Century, Joseph Chamberlain wanted to scrap Free Trade. Though a Tory, a unapologetic imperialist and a wealthy manufacturer, Chamberlain was a reformer and pushed for a 'imperial preference tariff' to protect English industries and farmers. The laissez-faire Liberals then used the Corn Laws as a scare tactic to convince the English that tariffs would raise the prices of their wheat and other staples. Fear prevailed, the Liberals won a landslide election, and Chamberlain was dismissed as a populist crank. Actually, if they would had listened to Chamberlain, Great Britain could had probably avoided the things that caused their Empire's demise decades later, such as World War 1. Chamberlain also wanted an alliance with Germany, and such an alliance, in theory, would had prevented the Guns of August of 1914 - where the imperial cream of the British human crop was ground into hamburger at Flanders Fields and on the Somme.

Chamberlain's later counterpart in the USA could be H.Ross Perot, who's protectionist message was also dismissed as cranky populism by 'liberals' such as Clinton, Gore, and Jimmy Carter. This demonstrates that even when conservative-capitalists assault the dogma and leveling attributes of laissez-faire,they are scorned and shat upon by forces who label themselves 'progressives'.

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The Bretton Woods System was launched for post-World War 2 recovery of Europe and was based on the gold-reserve, fixed rate Yankee dollar. The designers of Bretton Woods erroneously thought that the Great Depression was caused by trade protectionism, and thus thought balanced trade could be manipulated by raising or lowering the said fixed-rate of the US dollar. This system seemed to work for most of the 1950s but Europe and Japan were still rebuilding and the Leninist States were closed off to international markets. So US global economic hegemony of the Fifties was primarily unchallenged due to circumstances. Further Trade liberalization was pursued by the Kennedy Administration, when if anything, Washington DC should had been alert that the Bretton Woods status qua was breaking down due to the fact that Western Europe and Japan were booming, and Europe developed their own Common Market to compete on par with the USA. Riding the Yankee dollar, they then held a surplus more than the redeemable gold reserve value to cover it. Hence, the floating rate that we have now. Tariffs will not solve all or even most of economic problems, but if one knows the necessity of 'balanced trade', one idea is to develop a floating tariff rate to complement the floating currency rate? When the dollar falls, aggregate tariffs rise, vise versa.

Though I much prefer fixed-rate reciprocation geared to revenue generation, tariffs do not have to be a one size fits all prescription. Protectionists need diversity. The idea of floating tariffs could probably get a few more monetarist oriented economists - who ordinarily detest tariffs - on board protectionism. This idea would also grounded by the 'market principles' that Free Traders think that they have a monopoly on. The Market is older than Ricardo, Adam Smith and Fred Flintstone regardless.

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