Let citizens tackle powerful producer lobbies to get free trade back on track
IPN Opinion article
Cape Times (South Africa)
Trade negotiators have abandoned attempts to rescue what little was left of the Doha Round of trade negotiations. In the long history of multilateral trade liberalisation, this is the first time that a negotiation round has failed completely.
But Doha was not defeated by intransigent trade negotiators. Rather, the culprits were self-seeking domestic interest groups on all sides, which hinder national governments from making further trade 'concessions'. These producer lobbies exert growing control over sovereign governments, with the consequence that they prevent other, less well-organised, groups of fellow citizens from reaping the considerable benefits of freer international trade and investment.
Free trade begins at home. Countries that liberalised trade unilaterally, such as West Germany in the 1950s or the East Asian Tigers in the 1970s and 1980s, have reaped handsome gains in terms of more prosperity and self-confidence. But these were also countries in which lobbies were not so deeply entrenched at the time.
However, mere preaching will do little against the powerful trends in most mature democracies towards degenerating from the people selecting their own representatives (bottom-up electoral control over politics) into voter manipulation and branch-stacking (top-down politicking). The late Mancur Olson, an eminent American economist, demonstrated long ago how well-organised industry, farm and union lobbies seek political interventions that go against the interests of the broad public, the consumers and savers, as well as against long-term growth. In return for such favouritism, political parties gain funding and support from their industry and union cronies. Such 'rent-seeking' is pervasive under authoritarian regimes and explains their frequent economic stagnation. But it often also grips democracies, which then become fiefs of political party cartels. The citizens' response to such partitocracy is helpless cynicism. Loyal support for democracy gradually wanes and, eventually, no one raises a hand when democracy comes under attack. In Europe, we can observe what happens when democracies morph into partitocracies. The young get alienated from politics, as economies stagnate and social cohesion crumbles. The political leadership is helpless and clings to more fatal crony support and tighter regulation of the people.
In the face of the tenacity with which the partitocrats of the affluent West and the semi-autocrats of the Third World are now defeating the people's common interest in free trade and global prosperity, one must indeed doubt whether more education and transparency about these matters will succeed in creating breathing space for trade liberalisation, or whether the world is doomed to slide again into a phase of commercial confrontation and slowing economic growth.
Much would be gained if preaching the message were combined with some constitutional innovation that restores the balance between the self-seeking particular interests and the common good.
I am attracted to an idea of the late Jan Tumlir, long-time chief economist of the successful General Agreement on Tariffs and Trade (GATT), which was the predecessor of the ill-fated World Trade Organisation (WTO). He argued for giving citizens actionable rights against political decisions that harm them.
If citizens could go to court to seek damages for a new tariff or foreign-investment control, the cause for openness would be greatly strengthened and political leaders would have a better chance to realise the most useful principle of non-discrimination against foreigners. Tort legislation would give teeth to action against 'rent-seekers' and would incline government agencies to be less biased towards powerful lobbies.
Far-sighted statesmen, who look beyond the next election and have the long-term health of democracy at heart, will not dismiss this idea as a mere academic pipe dream. Nor will politicians who see the need to safeguard their scope for independent action in the face of lobby pressures.
Such a fundamental reform is a means of protecting our democracies from the slide towards stagnation, apathy and cynicism, and of spreading prosperity to the backward parts of the world through open trade and investment.
Dr. Kasper is an emeritus Professor of Economics, University of New South Wales, Australia