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DEMOCRACY AND THE DEFENCE OF FREE TRADE

08-10-2019
by 
in 

These are strange days in which we live. So many of the great trading nations of the world have begun to “shut up shop” that the accepted global economic paradigms are beginning to have a very hollow ring.

The post-WWII acceptance that free trade does more to bring nations together and to generate wealth and prosperity for all seems to have been thrown out the window. What has replaced it is a profound mistrust: one that says “this is unfair… we are clearly being ripped off by (insert name here)”.

So whether it’s the US President complaining about unfair practices from China or a succession of UK politicians making imaginary cases for how the country would be better off if it didn’t have to deal fairly with the rest of Europe, nations have begun to look inwards.

The classical economists would talk about the law of comparative advantage. This is a very sensible concept. It says you do what you’re good at and you trade what you’re good at with others who are doing what they are good at.

Australia has been very successful in embracing this concept. We’re good at things like mineral resources, but not so good at (say) producing consumer electronics. So we trade.

Of course, where this whole concept can fall down is at the point where we find out that another nation has stolen our clothes, and has become comparatively better at doing one of those things we thought was our own.

At this point, you either adapt and improve – as Australia’s manufacturing industry has been doing for the past decade - or you throw your toys out of the pram and shout “unfair competition”.

So what has this got to do with democracy?

Well, as one who comes originally from one of the world’s supposed great democracies (with the mother of parliaments) I cannot go past the simple statistics that while the UK did vote in favour of Brexit by the slimmest of margins (51.9% to 48.1%), the turnout of voters was only 72.2%.

Similarly, while a majority of the US electoral college voted for Trump over Clinton in 2016, just 60.1% of those eligible to vote did so.

That both these narrowly elected factions find themselves with the keys to dismantle free trade is worrying in the extreme.

Meanwhile, Australia’s government comes with a mandate from an election in which we all vote because we have to (OK, 90-95% of us do).

We understand that world prosperity and even world peace is based on trade. Some, it seems, have forgotten those simple truths.

 

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