Ain't Nothing Free

Not that this will come as a surprise or anything but; Bush Wrong at UN on Benefits of Free Trade

“In the long run, the best way to lift people out of poverty is through trade and investment,” Bush said. “During the 1990s, developing nations that significantly lowered tariffs saw their per capita income grow about three times faster than other developing countries. Open markets ignite growth, encourage investment, increase transparency, strengthen the rule of law, and help countries help themselves.”

As in so many of his other pronouncements, he’s wrong.

In the past few decades, as the gospel of free trade has spread, growth in the developing world has actually slipped. Mark Weisbrot, Dean Baker, and David Resnick of the Center for Economic Policy and Research (an organization that does great work in demolishing conventional shibboleths) have done research that reveals quite the opposite of what Bush contends.

“Contrary to popular belief, the past 25 years (1980-2005) have seen a sharply slower rate of economic growth and reduced progress on social indicators for the vast majority of low- and middle-income countries,” their paper says.

In a little-noticed portion of his speech to the United Nations on September 25, President Bush repeated a favorite hymn of his.

“Overall, in the 1990s gross domestic product (GDP) per capita grew by 1.6 per cent a year in developing countries,” says the United Nations Population Fund, buttressing the CEPR analysis. “But these slow gains were unevenly distributed. The per capita GDP growth of the poorest countries in the 1990s was slower than in the 1980s.”

Bush doesn’t believe the folks over at the Center for Economic Policy and Research? How about Joseph Stiglitz, Nobel Laureate in Economics, onetime chief economist at the World Bank, and the former chair of the Council of Economic Advisers?

“The sad truth, however, is that outside of China, poverty in the developing world has increased over the past two decades,” Stiglitz writes in his 2006 book, “Making Globalization Work.” “Some 40 percent of the world’s 6.5 billion people live in poverty (a number that is up 36 percent from 1981), a sixth—877 million—live in extreme poverty (3 percent more than in 1981).”

So, what works? Ha-Joon Chang, an economist of Korean origin teaching at Cambridge, provides some answers. In books such as “Kicking Away the Ladder” and “Bad Samaritans,” Chang demonstrates that what will succeed best for the developing world are strategies that helped the West in the past: an activist state engaging in a mix of policies to protect and encourage infant industries, rather than orthodox free trade.

But to listen to people like Chang, Bush would have to stop repeating, zombie-like, the free-trade mantra he carries around in his head.

Ouch.