“Nations don’t trade, businesses do,” says Anwar Shaikh, PhD, professor of economics of the graduate faculty of the New School in NY. In his Smart Talk interview, Shaikh looks at many factors in world economics, including business, exchange rates, imports and exports, and wages. He is eminently qualified to do so as he is the author of Globalization and the Myths of Free Trade (2006) and numerous other publications on international trade, political economy, global inequality and past and present global economic crises.
The interview begins with a discussion of Bretton Woods—“an experiment that proved to be unsustainable.” Disputing many of the classic concepts behind free trade, Shaikh looks at its history: When the U.S. was a developing nation, the argument was that free trade “would absolutely” benefit dominant countries like England, but would not benefit the U.S., which turned instead to “protections and tariffs and industrial policy to develop local industry.” In eventually adopting free trade, the U.S.A. may have thrown away its competitive advantage and jeopardized American employment. Developing countries have taken advantage of free trade to get technology but have not increased wages to the levels in the West. “They understand that if you have the productivity and your wages are much lower, then you have a massive competitive advantage.” Shaikh wonders if these countries “have been clearer in their understanding of how trade works than we have been.”
The discussion turns to inequality, which Shaikh traces back to the “Reagan Revolution” and Thatcher with their focus on “those who have the biggest gains.” He believes that inequality had been “openly celebrated in that era,” but now people are beginning to react. He isn’t optimistic that “politicians will listen and fix things. Shaikh says, “What we’re getting now is what markets do if they’re allowed to go unconstrained.”