Free Trade and the Credit Crunch

Note: This blog post was originally posted in February 2009.

The credit crunch might be the immediate cause of the economic crisis engulfing western countries, but most of the damage from which we are all suffering can be laid at the door of the doctrine of "free trade".

All western countries, and many other industrialised countries as well, are well and truly into a full blown recession, and this is blamed on the credit crunch, which in turn is blamed on the activities of leading western banks in recklessly extending credit to uncreditworthy borrowers who then defaulted.

The value of the houses and other assets taken as security for these loans plummeted as the crisis took hold and money dried up, thereby leaving the holders of those securities effectively with nothing.

The holders of the securities had by then come to include investment and pension funds, hedge funds, and many other kinds of investment vehicle, all of which had purchased these "assets" from the wily bankers, and as a result the whole mess has affected nearly everyone throughout most of the industrialised world.

All this would have been bad enough, but the crisis has been made much worse by the policy of free trade that has been pursued by most western countries over the last 60 years or so.

Free Trade The Modern Holy Cow

Free trade is one of the sacred pillars of economic liberalism that has held sway in all western countries in that time. All the universities, all the media, all the policy making institutions believe unquestioningly in free trade. Anyone raising concerns about it is universally attacked and condemned as a parochial country bumpkin who wants to raise trade barriers, impose unnecessary tariffs that will raise prices and penalise the less well off, and pull up the drawbridge to cut ourselves off from the rest of the world.

Thoughtless politicians and newspaper editors on the make quickly grasp which way the wind is blowing on this, and trumpet the usual claims of free trade advocates. Free trade, they say, will bring disparate peoples closer together and make for international understanding and co-operation, and thereby international peace.

In fact the opposite is true. Free trade benefits nobody except the global elite who control the international banks and the money power. Unless it is challenged quickly it will lead to worldwide wage slavery, whereby all workers have to compete with each other to work for the lowest wages. So workers in advanced industrial countries will have to work for the same wages as sweated labour in south east Asian sweat shops, if they are to survive.

What "Free Trade" Really Means For Us

Just think what free trade has brought us here in the UK over the last 60 years (and this has been largely mirrored, even if not to such a large extent, in most other western countries).

Back in the 1950s and 1960s, we were still benefiting from the large scale destruction of much of our international competition in the wake of the Second World War. We might not still have been the "Workshop of the World", as we had been throughout the nineteenth century, but we made most of the manufactured goods we needed, and exported plenty more. Foreign cars were seldom seen on our roads. Televisions, radios, all electronic and consumer goods, white goods (washing machines, etc) and almost every other kind of manufactured consumer goods were made here in our own factories.

Unemployment was low and the economy boomed. We were still saddled with the parasitic debt based economic system we have had since 1694, but nevertheless we could support that and still have a generally high standard of living with comparatively little poverty. Our balance of trade was favourable as we exported in value more than we imported, and the pound (our currency) was strong and commanded a high level of purchasing power overseas. The country was generally regarded as still being a rich country.

It was easy for anyone to say that we were thriving in a free trade environment. But that would not have been completely honest, because the environment was still distorted from the effects of the Second World War. Over the years the economies of other countries grew stronger as they recovered from wartime damage and invested heavily in modern factories and production methods.

In particular Germany and Japan recovered as they finished rebuilding their infrastructure that had been ruined in 1939-45. Gradually, through free trade, more and more UK industries came under pressure from imports that were priced below their own products. The downward pressure on wages caused industrial strife as unions fought to keep wages high for their members.

Industrial Decay

Capital for investment in new technology dried up as sales fell. More and more we saw foreign made cars and motorbikes on our roads. Foreign made goods came to dominate in our shops and showrooms. Our factories became outmoded and struggled to survive before eventually closing down, with all the redundancies and human tragedies which that always brings.

Now we produce hardly anything. Our industrial production is confined largely to specialised, capital intensive manufacturing, such as aero engines and specialist heavy weaponry, that the rest of the world has neglected in its pursuit of markets that return quick profits. Virtually all the consumer goods in our shops are imported from abroad. And the few car factories we still have are almost completely owned by foreigners, such as Toyota, Honda and Nissan.

So what has all this to do with the credit crunch? Simply that the economic tsunami hitting us right now is much worse than, for example, in the 1930s, when at least we had an industrial base from which we could eventually launch a recovery to bring prosperity back to most of our people. Free trade has destroyed our capacity to produce industrial goods. It means there is nothing to help us find a way out of the mess.

A Revolution In Thought

The solution is simple in theory, though in reality it won't be accepted without a revolution in thought. That is unlikely while the present political system favours establishment politicians who aren't particularly bright and who are easily corrupted into compliance.

But nevertheless what we have to do, all of us in our respective countries, is to work for protection for our own industries, so they can survive and help us towards prosperity. This means imposing tariffs on imported goods that we could and should be making for ourselves. The money raised should then be invested in building our own industries once more so they can provide for the needs of our own people, including jobs and security.

There is not the time or space to go into all the details here. The subject is covered very well in Promise To Pay, by Dr R. McNair Wilson, available without charge from our home page. I urge you to download and read it. And to do all you can to fight this evil system and the monstrosity of "free trade". So . . .

Spread the word . . .

Philip Gegan


The Debt Tragedy

This blog post was first published here on 22 January 2009.

As in most countries, here in Britain the credit crunch is continuing to cause havoc, and it’s now got to the point where the bigwigs are starting to blame each other for the debacle.

In the UK repossessions of domestic homes has risen by 92 per cent on a year ago, and on average one family is evicted every 10 minutes. Two and a half thousand jobs are lost every day. Those figures reveal a national disaster as well as a human tragedy every time a repossession or lay-off happens.

Financial Services Authority chairman Lord Turner announced that finance ministers around the world had failed to heed all the warning signals. We’ll gloss over the fact that Lord Turner himself also failed to issue any warnings, in spite of all the signals he claims to have seen, until it was too late.

Even the Queen is reported to have asked one of her ministers, “Why did nobody see it coming?”

Well, ma’am, with respect, some of us DID see it coming and did what we could to warn everyone. But nobody was interested.

How far will the downturn go? Everyone’s trying to estimate when the “recovery” will start and we can all get back to work and normal life. But if one thing is certain at the present time it is this - if a recovery does come it will be weighed down with even larger debts than we have already. It is the level of debt, more than anything, that prevents trade and industry - all the activities on which we all depend for prosperity - from providing the wealth that needs to filter down so all levels of society benefit.

How can anyone talk of a recovery without also mentioning the debt system that caused the crisis? The national debt of all leading countries, the debt level of all municipal authorities, the borrowing of companies and corporations, big and small, and individual levels of debt, even allowing for bankruptcies and debt write-offs, will all be at record levels. This will require payment of a larger and larger proportion of earnings as interest and repayment instalments to the banks. How can real wealth be created and shared equitably in this kind of economic environment?

This is a burden that will drag down and destroy our whole civilization. So the question is, will this happen now, or after the next cycle of boom and bust? And can we who know what is going on organise a sufficient level of opposition to this gigantic racket to bring it down before it destroys us all?

Start the opposition to this whole evil system by reading “Promise To Pay”, the classic work from Dr R. McNair Wilson, available without charge from our home page.

Spread the word.

Philip Gegan


No Bailouts Can Save This Sick System

This blog post was first published here on 7 January 2009.

It appears now that the bailouts of late 2008 may not have been enough to save the banking systems of the US and the UK, not to mention major corporations like Ford and General Motors.

Major manufacturers in the West have been crippled by the free trade policies of the last sixty years whereby cheaper foreign imports have been allowed to flood the home markets, driving down prices and destroying profits, leading to factory closures and job losses.

The banking system has simply shown itself to be unworkable. Governments can pump all the money in the world into this corrupt setup, but it will never work. Although it is euphemistically called “taxpayers’ money” it is in fact merely fictitious money created by the central banks and lent to  governments at interest so it can be “invested” in the banking system again.

It is a ludicrous merry-go-round and the only winners are the private banking families and their agents. Read what they think of the rest of us and what they plan to do next in David Rothkopf’s book, Superclass. And it you haven’t already, download and read this free Guide to this most pernicious economic system we’re all currently trapped in - Promise To Pay, by Dr R. McNair Wilson. And . . .

Spread the word.

Philip Gegan