Economic justice and global trade: an analysis of the libertarian foundations of the free trade paradigm

American Journal of Economics and Sociology, The,  Jan, 1996  by Shannon Kathleen O'Byrne

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Broadly conceived, the international trade regime divides traders and trade relations into the normal and the deviant. It is a distinction at once spatial and temporal. As seen from the trade regime, normal trade is open, structured solely by comparative costs and pursued by private actors without governmental intervention. Normal traders are diversified, developed economies with stable currencies that free private enterprises to participate in trade without abnormal state support or regulation. Everything else - subsidies, dumping, cartels, dependence, instability, state trading, underdevelopment, undue vulnerability to imports, exchange rate instability, and international price supports - is abnormal.

The libertarian political values informing this standard view of the international marketplace include strict freedom of contract; the unfettered right to hold private property; distribution of income - and ultimately wealth - based primarily upon market forces; and a severely limited state presence. Indeed, as Kennedy (1991, 380) notes, private international traders operate under their own rules forged through contract and do so "to a far greater extent than in even the most laissez-faire national system." This consequences of this influence will be explored in Part IV.

III

Global poverty

It is ironic that the "deviant" in the international trading relations model referenced by Kennedy above - particularly underdevelopment, dependence and instability - is nonetheless prevalent. The World Bank's World Development Report 1992: Development and the Environment (25, chapter summary) reports that one billion of the world's people live in "abject poverty." The numbers of poor have increased at approximately the same rate as total population growth (29). Though some improvements in living standards have been experienced in parts of Asia, the World Bank concedes that all "poverty measures worsened in Sub-Saharan Africa, the Middle East and North Africa, and Latin American and the Caribbean" (29). Approximately half of those living in Sub-Saharan Africa live below the poverty line and one quarter of the world's population does not receive sufficient food, (Human Development Report 1992, 14). This kind of scenario is confirmed in the Human Development Report 1994 (1-3) with the acknowledgement that some slow progress is being made. A recent World Bank publication Trends in Developing Economies 1993 notes, however, that growth in developing counties "has been poor since the start of the 1990s and in per capita income terms has actually declined . . ." (at vii).

A summary of disparity in quintile income distribution is set out by the Human Development Report 1992 on its inside front cover as follows:

World Population         World Income

These World Bank and Human Development Programme statistics are not offered as a general indictment of the free market system. It is true that the global free market is a demonstrated route to increased per capita wealth. Singapore, Taiwan, Hong Kong and South Korea, to cite some well known examples, have sustained impressive economic growth due to their enhancement of free markets. Further, and as the Human Development Report 1992 observes, in the decades of economic globalization, world output has tripled, world trade has quadrupled and world commercial bank lending has grown twice as fast as world trade (74). And, according to Fieleke (1994), there is no clear evidence that globalization has contributed in any substantial way to greater inequality.