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


2 thoughts on “Free Trade and the Credit Crunch”

  1. Agree 100%. I have always believed the Free Market to be wrong, what has happened has borne that out but, as you say, our politicians are none to bright so we are stuck with it. Still, I am so relieved to have found this site, it is a thankless task – as I am sure you well know – trying to get the message across!

    1. Hi Richard and thanks for your comment. Yes, it’s hard getting the message across, especially as nearly all the mass media is under the control of people who need to keep us hooked to the free trade system. But we must keep at it. I plan to make more regular posts to this blog shortly, and invite all readers to do the same by submitting articles for posting or by commenting on posts.

      Keep spreading the word.


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