David Chapman writes: The fundamental reason that "Free Trade" will end, and end badly, is that while movement of capital, goods and services is substantially free, and exchange rates are substantially floating, labour is imprisoned; creating massive imbalance.

This radical distortion is the reason western countries can't produce cheap enough goods and have a declining manufacturing sector and it is the reason the "BRICS" have to accept declining value US dollars to keep their export markets open.
It is the reason for currency wars. It is also the longer term reason that consumption will decline in western countries and is rapidly growing in developing countries. Unsustainable longer term imbalances, and one way flows!

Whether Capitalism, as we know it, will end as an outcome of the current world crisis remains to be seen.
However, the idea that one part of the equation of capitalism, labour, should have substantially different rules to production and capital is flawed; because labour, in contemporary times, is also "the market."
This “imprisoned” labour distortion will end Free Trade as we know it; it's only a matter of time, however it will probably happen sooner rather than later due to the world crisis.

The massive imbalances and bubbles we have seen since the onset of globalism are a natural side effect of imprisoned labour in an otherwise global economy. Global capitalism freed of this flaw would be able to react to market forces and change much more efficiently. Production and consumption would eventually become more localised, by natural market adjustment, with exports becoming mainly corrective addressing imbalances and shortages. Exports, in a nutshell, would cease to be the main game, as would international finance. These two huge drags on capitalism would then decline leaving capitalism itself much more efficient, vibrant and healthy (The losses to big banking and big shipping would profit the rest of us). Significantly, national politics would also be liberated from unsolvable problems.

However "free migration" which is required, will probably never happen because the keepers of capital are too bloody minded to see the bigger picture; being typically captive to their own ultra right winged anti-labour, anti-foreigner, rhetoric. Ironic don't you think, given that the owners of capital have a huge amount to gain by correcting this distortion; as do all of us. Correcting the flaw may even prevent the dreaded "end game" of capitalism.

As I see it, we have the choice of either 1) fixing the fundamental flaw of international capitalism by liberating labour, requiring removal of migration controls; or 2) regressing to traditional trade barriers and small time nationalism. Either will work just fine for capitalism. Either reduces the role of big banking and big shipping. Only the former moves us forward to a more liberated world view in which most people might be served rather than limited by capitalism, in which the achievements of capitalism might become universal. Unfortunately the latter will most likely be the outcome, and will probably lead to international conflict as it previously has in history.
Down to the fear of competition, power, and prejudice of the ultra right; down to workers buying into the fear and prejudice of racism instead of asserting themselves as equal partners to capital.

David Chapman

dave.chappo(at)yahoo.com.au

© 2011 Copyright David Chapman- All Rights Reserved
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