As one who taught economics for some 30 years, I am quite familiar with the arguments in favour of free trade. As trade barriers come down, domestic manufacturers have the opportunity to expand their operations through access to much larger markets and domestic consumers have available a wide range of imported products. One can marshal statistics to demonstrate the positive economic benefit of freer trade, but the figures almost always focus on the overall impact while ignoring the very uneven results of that impact.
The reality is that while increased free trade benefits some segments of an economy and society, it greatly disadvantages others. What free trade has really meant, in far too many cases, is the hollowing out of the manufacturing sector in developed countries, as companies move production to under-developed countries in search of cheap wages and minimal government regulations. Left behind, in admittedly oversimplified terms, are jobs for highly skilled knowledge workers and “McJobs” in the service sector. Increased automation has also meant fewer jobs with greater skill requirements.
The result has been growing income inequality in developed countries, with increasing numbers of workers uncertain of their job prospects and economic futures, even as they see large businesses and wealthy individuals prospering ever more. Governments have done very little to address this situation even as public unrest has grown as with, for example, widespread protests against “the 1%” and their massive concentration of wealth. Being worried about your future and convinced that “the system” is stacked against you, doesn’t bring out the best in people – as is currently evident.
Unfortunate Consequences
It is regrettable that one consequence has been increasing intolerance of immigrants who, it is claimed, are taking jobs away from the resident population. Immigrants are also, it is argued, demanding various changes to accommodate their particular religious beliefs or value systems, thereby threatening the established way of life. Increased terrorist attacks and the unprecedented wave of refugees streaming across Europe have only served to exacerbate the situation. In response, dangerous demagogues are gaining support as they attack those who are different and advocate hunkering down behind the walls of their country.
Thus we have Trump with his call to ban all Muslims from the U.S. and to tear up free trade agreements, all as part of making America great again. We have a majority in Britain voting to leave the European Union and protect the country’s borders from hordes of immigrants. In both countries, it is older and less educated people who have been most in support of these actions – people who are fearful, insecure and angry. Their decisions may be foolish (I would argue) but they are also easy to understand.
Abuses Have Been Ignored Far Too Long
For far too long those in power and moneyed interests behind the scenes have ignored the growing inequality in the distribution of wealth and the extent to which it has been caused, or at least exaggerated, by the free trade regimes they continue to promote. In addition, very little has been done to counter the impression that the rules are skewed to reinforce the dominance of a small minority of the population. When governments bail out banks and auto companies – considered too big to be allowed to fail – and then senior executives continue to receive lavish bonuses while the wages of workers languish, is it any wonder that public cynicism grows.
Free trade is especially beneficial for a country with Canada’s small population and gives our companies access to much larger markets while also giving consumers increased choices and (often) lower prices. Immigration is not just beneficial but absolutely essential for Canada. Low fertility rates mean that we are not maintaining our current population and this pattern will only intensify since there are more Canadians over 65 than under 15 years of age. It is estimated that net international immigration will be Canada’s only source of population growth by 2030. Any move to restrict immigration would leave Canada with an insufficient labour force and declining economy, as would any move to retreat behind tariff barriers and return to the shortsighted policies that helped to prolong the Great Depression of the 1930s.
Multinationals Won’t Change, but Governments Can
But even if free trade and immigration are beneficial for Canada, they are increasingly under attack for entirely understandable reasons and things are likely to worsen unless more is done to address the growing income inequality that is a very conspicuous side effect of capitalism in a global economy. Multi-national corporations are not about to become altruistic. They will continue to seek out the locations where production costs can be minimized. They will continue to automate operations where possible. Indeed, it is virtually impossible for a publicly traded company to do anything but focus on ways of maximizing profits – such is the pressure to “beat the street” with respect to quarterly earnings statements and expectations of shareholders.
But our governments can, and must, do more if we are to address the growing cynicism and paranoia. Canadians appeared to reject divisive messages from the previous Conservative government, with its attack on the niqab face covering and its loathsome “barbaric cultural practices” tip line. But our new “sunny ways” won’t endure unless the current government can counter the widespread view that those with money and connections get a free pass.
There has been extensive media coverage, for example, of the way Tax Information Exchange Agreements, originally developed to crack down on individual tax cheaters, were converted by the Harper government into a loophole that has legalized corporate tax avoidance. Over the past few years, these agreements have allowed corporations to avoid paying taxes on some $55 billion in profits, with the rationale being that this arrangement was needed for businesses to be competitive in a global economy. One might have hoped for a stronger denunciation by the current Liberal government when this issue became front page news. All the Minister of Finance offered was that this arrangement would be evaluated over the course of the government’s comprehensive review of all tax policy.
Public distrust is also likely to grow as a result of the apparent double standard being pursued by the Canada Revenue Agency. Dozens of individuals are named on its website for not paying small amounts of income tax. But wealthy individuals and businesses caught sheltering millions in tax havens offshore are guaranteed anonymity. While the CRA claims to be cracking down on the big money cheaters, this is impossible to document given the secrecy surrounding this matter. If there is some legal wording that allows the CRA to shame publicly those guilty of minor offences while providing confidentiality for monied interests, that law needs to be changed without delay!
The Time for Action is Now
Canada needs free trade and it needs immigration. But Canadians also need reassurance that our governments will do everything within their powers to address the inequities and abuses that are all too often justified and protected on the grounds that they are needed to be globally competitive. Unless we do, we will see more Donald Trumps and more anti-immigrant rhetoric. We may also see a return to trade barriers and their curtailment of economic growth and consumer choice. “Experts” may decry how foolish or naïve “the people” are, but “the people” have had enough of the dark side of globalization. To paraphrase the famous exclamation in the movie Network, “they’re mad as hell, and they’re not going to take this anymore.”