Excerpt from A World to Win

Free Trade:
Engine of Growth or Plunder?

Part 1: Links in the Chain of Dependency

Revolutionary Worker #1095, March 18, 2001, posted at http://rwor.org

The following is from an article that appeared in A World To Win #26, a journal inspired by the Revolutionary Internationalist Movement:

For 50 years, the multilateral institutions that have monitored and regulated the functioning of the post-World War II international capitalist economy worked discreetly in the shadows. The International Monetary Fund (IMF), the World Bank and the recently created World Trade Organization (WTO) met in comfort and quiet, yet their decisions regularly sent shock waves around the world. Even a slight movement in interest rates or exchange rates could set in motion gigantic forces that jolted whole economies and shattered the lives of millions. Yet all this took place out of the sight of the people whose lives were so dramatically affected.

In the last year this situation has changed. The increasingly rapacious attacks of the imperialist countries on the economies of the oppressed nations and peoples, along with serious crises, such as in Russia and East Asia, have awakened a cry of resistance, including from a new generation of youth in the imperialist citadels themselves. Mass protests have rocked recent meetings of the lords of finance capital and cast a spotlight on their criminal deeds.

The counter-attack has been rapid and loud. Globalization is good for you, lectures U.S. President Bill Clinton. However bitter-tasting it may be, it is, as he proclaimed in his 2000 "State of the Union" address, "the central reality of our time"; taking the medicine of free trade and the free market is said to be the only way to growth and prosperity.

In fact, whether globalization and the promotion of increased trade is "good for you" depends very much on who "you" are; while it has been excellent for a few wealthy owners, for the masses everywhere, particularly in the poorest countries, the last decade of imperialist globalization has been one long nightmare. This article will examine the argument that the promotion of "free trade" brings growth and prosperity, in particular the idea that the only way the oppressed nations can achieve growth is by hooking on to the "locomotive" of the imperialist economies, and it will look at the role of the World Trade Organization in this process.

"Doing What Each Does Best"

At the heart of the conventional argument that trade liberalization will give rise to widespread benefits and promote economic growth in the oppressed countries is the idea of developing economic specialization, based on the concept that each country should do more of what it does best (called "comparative advantage" in bourgeois economic theory). The different countries will then trade what they each produce most efficiently, unrestricted by "unfair" tariffs and other protectionist practices, to the general benefit of all, with the most efficient sectors in each country in turn stimulating growth in other sectors.

The global reality concealed behind these egalitarian phrases is that a handful of multinational corporations in the imperialist countries own and control the vast majority of the world's productive forces and trade, whilst the oppressed nations serve essentially as sources of cheap labor and raw materials. In this situation, "doing more of what each does best" means that the oppressed nations should consolidate even further their subordinate role in the global imperialist division of labor.

Consider the impact for the oppressed nations of WTO-style trade liberalization policies in the area of agriculture. These policies are aimed at strengthening integration into the global marketplace, reducing tariffs on agricultural products, encouraging specialization and production for export and easing restrictions on massive investment flows. The result is the increased penetration of global markets by Western agribusiness corporations, greater trade in food products, and most especially, the ruin of so-called inefficient production units, which basically means small and medium-sized farmers, particularly those growing food for local markets. Some farmers shift to producing for export, others are driven off their farms; every week around the world one million people migrate to the cities. Removing trade barriers to open the floodgates to cheap U.S. grain, for instance, has a particularly ruinous effect on the oppressed countries, where a much greater percentage of the labor force is dependent on agriculture. (While spending on food in the U.S. accounts for only 0.5 percent of its Gross Domestic Product (GDP), the corresponding figure in Tanzania is 18 percent, amplifying the effect of rapid changes in the foodstuffs market.)1

Take the case of a single country, the Ivory Coast, long hailed as a development model for Africa. Based on capitalist trade logic, agriculture there shifted from local food production to export-oriented cocoa production, until the country came to grow almost one-half of the world's total crop. When the government price stabilization program was eliminated, as part of the global process of reducing trade barriers, this, combined with the general trend towards lower raw material prices, led to a 40 percent fall in the prices the country's small farmers received. Many went under. For the big multinationals, however, this was a welcomed opportunity. Led by the U.S. giant Cargill, they launched a storm of mergers and acquisitions. When the dust settled, the number of big cocoa companies had fallen from 50 to 10, and now it is the companies that set the prices, not the government's stabilization program.2

This is typical of the trade-led economic development model. First, removing trade barriers and encouraging specialization inexorably leads to the con- centration of production in ever larger units, internally and internationally; in other words, trade fuels the growth of the big global monopoly corporations. The brisker pace of world trade has in fact been accompanied by an unprecedented wave of corporate mergers and acquisitions in sector after sector.

Indeed, "free trade" is itself a hollow watchword today--this is the era of imperialism, where big monopolies bestride the globe and dominate every major sphere of economic life. The 500 top multinational corporations, most of them based in the U.S., control 70 percent of all cross-border trade, and 60 percent of trade in agricultural products is controlled by U.S. agribusiness firms.3 In practice, expanding trade strengthens the ability of those able to take advantage of worldwide production and marketing networks by stripping away the mechanisms different countries have set up to protect the smaller home-grown industries and agriculture. Bringing small enterprises in particular in the Third World into more direct unfettered rivalry with the Western-based giants is a guarantee that the larger firms will gobble up the smaller ones and extend their penetration and domination of the oppressed countries.

Second, whether a country produces mainly raw materials, like the Ivory Coast, or has a few export-oriented enclaves of industrial production, like parts of East Asia, the dynamics of trade-led development generally strengthen the dependence of the oppressed countries on the global marketplace, the imperialist countries and the big multinationals. The growth of the multinationals goes hand in hand with the deepening dependence of the oppressed countries. These countries become increasingly vulnerable to sudden changes in the prices of one or a few products or even to calculated imperialist blackmail, should the imperialist powers decide to use their domination to bring a recalcitrant comprador regime in the Third World to heel. This is exactly what they have done to the Saddam Hussein regime in Iraq, by closing off the Iraqi oil tap.

This situation is especially alarming with regard to food security. When, as in the Ivory Coast, substantial numbers of farmers are ruined or shift production to export-oriented cash crops, the country becomes more dependent on food imports. Unlike the imperialist countries, however, where the more highly developed and balanced character of the economy means that fluctuations in the global marketplace can be absorbed more easily, in these countries changes in the global market can spell disaster and make it difficult, if not impossible, to pay the food bill. The result is increasing debt and poverty, and the looming spectre of famine.4

Modern Enclaves--Links in the Chain of Dependence

Proponents of free trade argue that, however wrenching it may be, this kind of development nonetheless puts the country on the path to modernization, that these modern enclaves will pull ahead other sectors in the economy. But there is a qualitative difference in the impact this kind of development has in the oppressed countries compared with what has taken place in the imperialist countries. In the semi-feudal and backward conditions that generally characterize the former countries, the development of larger, more modern agricultural farms is not linked to the development of an integrated national economy. The big modern enclaves of agricultural production (such as the banana plantations in Central America) are almost exclusively oriented for export, to serve foreign, mainly imperialist, markets. In addition, they are built on, and conditioned by, larger areas of semi-feudal agricultural production. The attractiveness of cheaper inputs, like labor, in the oppressed nations is dependent on the perpetuation of these semi-feudal conditions. For instance, Central American banana plantation workers are lowly paid in part because much of the cost of maintaining and reproducing future generations of these workers is based on semi-feudal subsistence agriculture. Developing commodity production in these imperialist-sponsored "modern" enclaves does not set the oppressed nation's economy on a path that will lead to the kind of relatively more integrated and balanced development seen in the capitalist countries. Instead, it binds the country even more firmly to imperialism, with these modern enclaves functioning as an integral but subordinate part of the world imperialist market, links chaining the country to imperialism, while semi-feudal relations are simultaneously propped up in large sections of the economy.

The same basic dynamics characterize trade-led growth in sectors besides agriculture, such as the high-tech sector in India's Bangalore. Globalization advocates like to tout Bangalore as proof of the "success" of the trade-led model, India's "Silicon Valley"--yet, is it a harbinger of the coming modernization of India? Not at all. The tens of thousands of software engineers working there are overwhelmingly linked to, and serve, giant Western corporations, rather than the all-round development of the Indian economy. Moreover, their labor greatly depends on the existence of the same kind of impoverished semi-feudal conditions that underpin the development of the modern agricultural enclaves described above.

Consider what goes into a situation where, as one Swiss computer executive boasted, it is possible to buy three Indian programmers for the cost of one Western programmer. While the globally-minded Swiss computer executive is a happy man, his hiring of the Bangalore computer programmer needs to be situated in the context of average wages there, which are not one-third of those in the West, but more like one-thirtieth (GDP per capita in the Indian state of Karnataka, where Bangalore is located, is roughly U.S. $1 per day). The computer programmer's ability to work is ultimately linked to his family's ability to hire even lower-paid labor, thereby "freeing" the programmer to obtain an education and later to work. Virtually every computer programmer in India has domestic servants to cook, clean, shop and do childcare. In other words, as in the case of agriculture, the functioning of this modern high-tech enclave not only serves imperialism, but makes use of, and props up, the more exploitative conditions of semi-feudal servitude in the broader Indian economy.

Liberal critics of globalization often point to the poorer areas of the world and complain that they are being "left out" of the process of globalization. While it is true that certain areas, such as sub-Saharan Africa, are largely written out of imperialist investment plans, it is also true that the impoverishment of the oppressed countries does not mainly result from their being 'left out" of the imperialist economy, but more fundamentally reflects the very way that they are integrated into it. Expanding trade does not change this dynamic, but heightens the distorted, uneven and fragmented character of the economies of the oppressed nations. But this is hardly surprising--after all, when Western corporations like Compaq and Microsoft set up operations in places like Bangalore, their goal is profits, not development.

Who Owns the Invention of Fire?

WTO-sponsored trade liberalization strengthens the commodity system throughout the world and extends its embrace to include new fields of human activity. Everything has a price, everything is now up for sale on the global marketplace. At the cutting edge of this ugly trend is the recently intensified reinforcement of "intellectual property rights," including such examples as:

One U.S. company has attempted to patent the DNA of a Guatemalan woman who is thought to have immunity to cancer, to be used in marketing a medicine.

The U.S. multinational, W.R. Grace Corporation, has patented the use of a key part of the neem tree (azadirachtin), even though Indian farmers and doctors have used neem tree products for centuries in home remedies. This raises the spectre that they would have to begin paying the U.S. company for the right to continue this age-old practice that their own ancestors developed!

In 1997, over a million Indian small farmers and peasants rallied against a similar threat, that large agribusiness corporations were going to patent seeds indigenous to the Third World countries and then force the peasant farmers to pay for the very seeds that they themselves had used and developed over the centuries, as well as against the threat of "terminator technology." This refers to a genetic engineering technique used to create sterile plants with infertile seeds, so that farmers would be forced to purchase seed every growing season, instead of using the age-old practice of saving seed from one harvest in order to plant the next.

The expansion of intellectual property rights under the WTO is thus legitimizing obvious cases of the private appropriation of the collective labor and knowledge of the masses, in what has come to be called "patent piracy." Indeed, intellectual property rights bear the unmistakable stamp of the workings of the fundamental contradiction of capitalism, between private appropriation and socialized production: a complex division of labor has arisen under capitalism that combines mass labor with the machine system, in a profoundly socialized production process, yet the fruits of this process are appropriated privately, by a small class of owners, the bourgeoisie.

With regard to ideas, no knowledge, from the invention of fire to the present, has ever been essentially an individual product but has always involved a complex interaction of individual effort, collective understanding and social interaction. With the development of capitalism, the production process, including the production of knowledge, was turned into a qualitatively more socialized act, and this is even more the case today. The production of a new computer software program, for instance an operating system like Microsoft Windows, can involve the coordinated effort of thousands of software engineers. It is most definitely not the result of the "genius" of one or two owners like Bill Gates. Furthermore, the "graphical user interface" (GUI) upon which Windows is based, was pioneered not by Microsoft, but by countless other software developers, relying directly on the accumulated experience of an even larger number of users. As Lenin summarized in Imperialism, The Highest Stage of Capitalism, highlighting the immense concentration of technical progress and invention by the giant multinational "trusts," as they were then called: "...the development of capitalism has arrived at a stage when commodity production still 'reigns' and continues to be regarded as the basis of economic life, [but] it has in reality been undermined and the bulk of the profits go to the 'geniuses' of financial manipulation. At the basis of these manipulations and swindles lies socialized production; but the immense progress of mankind which achieved this socialization, goes to benefit...the speculators."

The protection of intellectual property rights reflects and reinforces the basic social divisions marking the world, including between the class of owners and the class of laborers, as noted by Lenin above, as well as between the imperialist and oppressed nations. With regard to the latter, intellectual property rights are an effort to safeguard the imperialist countries' monopoly of science and technology, to reinforce their position as the "brains" of the global economic system. In this way, for example, the multinationals ensure that they can relocate production processes to the oppressed nations, so as to benefit from lower wages and production costs, whilst not risking their control of the technical know-how involved in the process. Of the 3.5 million patents held worldwide, only 200,000 of these, about 6 percent, are held in the Third world, whereas multinational corporations directly hold 85 percent of all patents. WTO policies will only reinforce this uneven and oppressive division of labor, wherein the imperialist countries seek to further centralize their control over the nerve centers of the world's economic activities.

The list of areas targeted by the WTO for trade liberalization is extensive. Services like health care are a top priority; U.S. "negotiating objectives" in Seattle included "encouraging more privatization" and "allowing majority foreign ownership of health care facilities." Patent protection, an application of intellectual property rights, has already been indicted as being responsible, in part, for the criminal situation in the Third World, particularly southern Africa, with regards to AIDS victims. The exorbitant prices the pharmaceutical multinationals demand for their patent-protected AIDS medicines make treatment prohibitively expensive. This means that millions of Africans have died and are continuing to die without treatment and many thousands of HIV-infected mothers are transmitting the disease in childbirth, which can often be prevent by the proper drugs.

The expansion of WTO regulations will also result in further degradation of the environment. It shifts the burden of proof with regard to health risks, rejecting the "precautionary principle" that the burden should be on the multinationals to prove their products are harmless, instead requiring consumers to prove that they are harmful. This logic underpinned the recent decision to require the European Union to accept hormone-treated U.S. beef, even though the EU panel had found that some of the hormones could cause cancer. The WTO will also reinforce the existing policy of treating concerns like people's health as "externalities"; since they do not directly enter into the commodity-producing process under the ownership and control of the corporation, and are thus "external" to it, such concerns do not figure into "free trade" considerations. The anarchic process of trade-driven globalization is fueling the rise of sprawling, heavily polluted megacities in the Third World, like Mexico City and New Delhi, where it is estimated that one-third of the children are afflicted with allergic bronchitis--an "externality" for which of course no capitalist bears any responsibility, according to the rules of the "free market" system.



1. Arthur Dunkel's final repot on GATT, cited in Pratap Chatterjee Aajkal, GATT, 1993.

2. "Bitter Cocoa", Libération, Paris, 13 April 2000.

3. Larry Elliott and Dan Atkinson, The Age of Insecurity, Verso, London, 1999, p. 223.

4. Obviously other factors are also involved. For instance, in the mid-1990s, 12 of the 16 IMF structural adjustment programs in Africa led to cuts in education spending. This is in countries where millions of adults, particularly women, lack basic literacy skills, and despite the fact that bourgeois experts widely hold that education is the single most important factor favoring development. In one of these countries, Ethiopia, up to 50 million people face the specter of famine ("The IMF on Trial," Guardian, London, 15 April 1999).

5. Here, in the area of health care, is another tragic example of the limitations of this formal equality--masking real inequality--with which WTO policy treats the imperialist and oppressed nations. While public health systems are key components of health care delivery in all the rich countries (with the exception of the U.S., where private health insurance plays this role), in South Asia only 20 percent of drugs are dispensed through the public health care system, while 80 percent are purchased directly by individuals. What will be the effect of the seemingly egalitarian WTO enforcement of patent protection and the consequent support for global drug prices? Not only will it become more difficult for South Asians to buy medicines because of their much lower incomes, but, in addition, unlike in the West, most of them have to pay directly out of their own pockets. Seemingly "equal" trade policies have a profoundly unequal impact. Even fewer South Asians will be able to afford life-saving medicines, while drug company profits are at an all-time high.

6. The Global Trap, Hans-Peter Martin and Harald Schuman, p. 27.

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