I don’t know whether it’s occurred to you but an enormous amount of ideological difference resides in differing views of the most basic form of economic transaction, the purchase. Supporters of things like markets and free trade tend to believe in a fairly conventional neoclassical view of such things. When a buyer and seller agree on a trade, the buyer buys because he or she wants the good being purchased more than he or she wants the money that he or she will pay; the seller wants the money more than he or she wants the good being sold. Consequently, after the trade both the buyer and seller are happier, having what he or she wanted more, and what economists call “the total utility”, the total amount of happiness, is increased.
But there’s another view of a purchase transaction. According to this view unless the buyer and seller are on completely equal footing, one is always exploited, the other the exploiter. A starving man can’t decide freely whether he’ll buy that loaf of bread at the price being asked or work at the wage being offered. He’ll give up everything he owns or work for nearly nothing if that’s what he needs to do to survive. According to this view the total amount of happiness isn’t increased by the transaction. The exploiter is happier; the exploited continues to be desperate.
I don’t know if this view is Marxist because it, along with ideas like the “just price”, have been part of the critique of classical economics since before Karl Marx was born.
Those who hold the first view see merchants from countries like the U. S. trading with people in, say, Africa as a completely good thing since the relatively well off U. S. merchant is happier, the relatively (or absolutely) poor African peasant is happier, the total amount of happiness is increased, and things are made less desperate for that poor African peasant while the U. S. merchant is a little better off, too. Everybody wins.
On the other hand people who hold to the second view see precisely the same thing as wicked because the U. S. merchant is exploiting that poor African peasant. The former’s wealth has come at the expense of the latter’s misery.
One side emphasizes freedom; the other equality. A key point is that neither view is completely right nor is it completely wrong. But it certainly looks to me as though there’s a rising body of data suggesting that the first view has a better track record. It’s hard to look at the changes in a place like China (where many of the most desperately poor people in the world live) without thinking that opening China to trade hasn’t made both the Chinese people and their trading partners better off.
I think you’re missing a very large piece of the puzzle: the fact that in transactions, the parties can approach from entirely different bargaining positions, which can affect not only the negotiated price but also the terms of a transaction.
For example, if one party to the transaction holds monopoly power, that party essentially has the ability to dictate the terms of the transaction to the other party. Additionally, you can also run into problems with collusion between say, a party and parties of a similar nature — say, gas-station owners — to fix prices or to set the terms for dealing with customers.
You also see manifestly unfair bargains — that is, transactions that do not yield pareto optimal results — when one party has an extremely desperate need for the commodity the other provides, and the seller takes advantage of that need to increase prices.
I know that certain areas of the law — including contract law and antitrust law — go a long way toward mitigating these factors, but your entry here seems to depict a rather simplistic dichotomy.
In terms of international trade, it’s worth studying the India model. India kept its markets essentially closed for several decades, which allowed a number of domestic companies to grow as they serviced one of the largest populations of consumers in the world. When India opened up its markets comparatively recently, those homegrown companies were able to compete with international concerns on a relatively equal basis, even to the point where Indian firms eye US firms and product lines for purchase!
–|PW|–
The post was deliberately dichotomous since I wasn’t really trying to present an argument, merely to expose a question and, yes, the difference in power or influence of the parties is highly important. BTW both China and India continue to be rather one-way trading partners. Both wish to export without importing.
In China’s case I think that expanding China’s domestic market and opening China to foreign imports will be an essential component of continuing their economic growth.
I do think that if you have a domestic economy developing at a fairly strong clip, there’s something to be said for protecting your native firms at least for a while — gives them bargaining power they might otherwise lack when confronting global firms.
–|PW|–
China’s case is special. They’re so large and running such a large trade surplus with practically everybody that they’ll be unable to keep expanding unless their domestic market does. If their domestic market grows, their imports will, too.
Back in the 19th century although we had tariffs we also had an enormous free domestic market.
Well, yeah, it’s the exact same as the argument between Liberty and Justice (where social justice is meant by the latter). One view is fundamentally optimistic, the other fundamentally Malthusian. It’s the fundamental difference between the statists and the individualists, when all of its different forms are accounted for. I am a libertarian (small L) primarily because my reading of history suggests that the former view yields better results for all concerned.