Market theory lacks social consciousness and tends to treat people as abstract economic units, leaving justice to the indifferent workings of the marketplace. Contrary to the predictions of free market theory, productivity gains in practice lead to a reduction in the number of available jobs but never seem to lead to a net increase in them. Market economics has served a useful function in purging industrialized economies of systemic dysfunctions. However it has reinstalled social dysfunctions that such democracies had prided themselves in overcoming. It is creating unemployment and as a result living standards are being reduced.
The GATT Uruguay Round negotiations, terminating in 1993, were designed to create a global free market in all goods and services, including agricultural products. Binding countries into a global trading system with clear rules and a referee to enforce them is designed to lead to improved trading prospects. It permits tariff cuts up to 38% on more than 20,000 products. In some sectors, such as electronics, tariffs will be reduced by up to 65%. These should lead to a general reduction in consumer prices, although only in sectors where there is some competition will processes drop noticeably once agreement is reached. It is expected that better market access and increased competition will lead to lower prices and increased trade. It has for example been estimated that EEC/EU consumers pay an extra £300 per year to finance the Common Agricultural Policy.
A world of free trade and deregulated markets would generate increased global investment, employment and income. The alternative is the doomsday prospect of 1930s-style trade wars and the collapse of the liberal trading order. Behind the free market smokescreen, the institutionalized proposals of GATT place the strategic interests of powerful governments and corporations above the social and economic rights of vulnerable communities and poor countries. This is not a vision of international trade management which deserves to be termed "multilateralism".
The "economic miracles" witnessed in Japan, the Republic of Korea and Taiwan, Province of China are not entirely the miracle of the market but of extremely effective government intervention. Well-targeted subsidies, collective policies towards foreign direct investment and controls on imports, all were used successfully by these countries at their early stages of economic advantage. These policy regimes should not be seen as deviations from laissez-faire capitalism but as examples of forced-pace advance of industrial capitalism under the auspices of a state that is simultaneously the servant and the master of business enterprise.
True free trade cannot exist in a situation of monopolistic TNC operation. Free trade being promoted now is a sham, a charade made by monopolists demanding more freedom for monopoly. Unless the issue of global monopolies is addressed, true free trade is unachievable and this free trade acts as an instrument to prevent the protection of national and people's interests and to the benefit of TNCs.
While market-based reforms can be useful in boosting living standards in developing countries, they should only be implemented with regard to the wider economic and social context in which they are likely to operate. They only work when they can be supported by a pre-existing institutional, legal and social framework. Contrary to the prescriptions of the more pro-market World Bank and IMF, well-judged economic intervention plays an essential role in maximizing growth.
Jobless prosperity in which corporations announce large profits and forecast even larger profits in the future, whilst laying off workers, makes a mockery of hopes for economic recovery based on market forces alone.
The social dimension of trade liberalization and increased trade competition has been consistently neglected. Competitive industrial efficiency has tended to be sought through the most vulnerable area, namely wages and working conditions. Reductions in working conditions and costs can be imposed on workers intimidated by prospects of unemployment and thus increase the apparent productivity of an enterprise. This is not however a true increase in productivity, rather it is a way to disguise an actual loss of productivity. The society which practices this will eventually pay a price in international competitiveness and social harmony.
There are three inter-related themes that between them make free market truisms untenable. They are: that economic man cannot be assumed to have perfect foresight; that the purpose of work is not to satisfy wants but is a basic source of human wellbeing; and that it is not true that as output expands, cost must necessarily at some stage rise. Put these ideas together and there is nothing left of the body of theory which gave us the market revolution.
Abolition of global trade barriers will lead to a situation in which 2 billion of the the 3.1 billion people in the world working on the land in 1993 will be forced to leave the land for urban areas. They will be displaced by efforts to impose standards of intensive farming and monoculture practised in countries such as Australia and Canada in order to achieve higher levels of productivity. The cities are not equipped to accept them. Vast slums will be created that will facilitate a breakdown of society. Money will only be saved in the short-term in terms of costs per unit of production. The costs of integrating such people into urban infrastructures have not been considered in such unrealistic estimates of benefits.
A global free market, as constrained by GATT regulations, can only enhance the destructive radicalism of market institutions which is the principal danger of the post-socialist age. The globalization of market forces has already undermined local and regional ways of life in many parts of the world, completing the havoc wreaked by communist governments throughout the world. In developing countries this form of global free trade means the destruction of agrarian communities and peasant traditions as local farming practices are undercut by mechanized agriculture. This results in the accelerated migration of impoverished agricultural workers to overcrowded mega-cities whose social and economic sustainability is in question. For the developed world regulated free trade means a massive increase in structural unemployment as workers try vainly to compete with the low-wage economies of the newly industrialized countries.
Economic research confirms the value of removing trade barriers in that this leads to greater trade volumes. What is at issue are not the benefits of freer trade, but their distribution between richer and poorer countries. Major countries have the political strength to make exceptions for their own special circumstances while developing countries do not. Key proposals for regulated free trade have been effectively drafted by multinational corporations, notably those represented by the USA, in order to ensure free access to developing country markets whilst expecting those countries to pay for intellectual property rights.
Tragically GATT and the Uruguay Round have been sucked into a nihilist free market revolution that is careless of human institutions, common morality, and the environment that together now threaten their own future. Questions of equity and fairness have nearly everywhere been thrown aside in the search for economic efficiency and price stability led by free markets and individual choice. The international attempt to extend liberal rules for free exchange has become conflated with national efforts to build market systems without any rules. As a result the world is drifting towards the calamity of the collapse of its trading order.