Free Trade Agreements and Underdevelopments

Formalizing Capitalist Relations, Informalizing Labor Conditions

Bonn Juego
Postdoctoral Researcher
Development & International Cooperation
University of Jyvskyl, Finland
bonn.juego@jyu.
Presentation for the International Seminar on
Shackles of Liberty? - Free Trade Agreements and the Future of Work
Organizers: Finnish AEPF Network, TTIP Network Finland, Attac Parliament
The Little Parliaments Visitors Center
Arkadiankatu 3, Helsinki
25 September 2014

Agenda
How would FTAs impact on work relations?

1. Recall our historical, theoretical, empirical, and moral
bases to challenge the free trade project and discourse

2. Reect on the implications of FTAs for global capitalism
and the condition of labor

3. Understand the realpolitik of vested interests behind free
trade ideology

4. Remind about the mode of production question
Free Trade and Underdevelopments
History of successful development strategies
against free trade doctrine
rst, emulation; then, comparative advantage
4
Development of
Underdevelopment
(metropolis-satellites)
Paul Baran (1957):
What is decisive is that
the economic
development in
underdeveloped
countries is profoundly
inimical to the dominant
interests in the advanced
capitalist countries.
Andre Gunder Frank
(1969): The metropolis
expropriates economic
surplus from its satellites
and appropriates it for its
own economic
development.
World-Systems
Theory (core - semi-
periphery - periphery)
Immanuel Wallerstein
(1974a): Capitalism
and a world economy
(that is, a single division
of labor, but multiple
polities and cultures)
are obverse sides of
the same coin.
Capitalism is a mode
of production,
production for prot in a
market.
Wallerstein (1974b): It
is a world system, ...
because it
encompasses the
whole world. And it is a
world economy
because the basic
linkages between the
parts of the system are
economic [i.e. trade/
exchange]....
Classic Theories of Capitalist Development:
No Free Trade, but Colonialism and Imperialism
Theories of Capitalism
and Imperialism
(capitalist development in
backward nations)




Marx and Engels (1848):
capitalism as a historically
progressive
system (modernity through
primitive accumulation like
colonialism and free trade)
Hilferding (1910);
Luxemburg (1913);
Bukharin (1915); Lenin
(1916): structural constraints
due to imperatives of the
monopolistic stage of the
world capitalist system

Theory of Unequal
Exchange
(Ral Prebisch; ECLAC/
CEPAL)







ECLACs Manifesto (1949):
The Economic Development
of Latin America and its
Principal Problems

Ral Prebisch (1959):
Historically the spread of
technical progress has been
uneven and this has
contributed to the division of
the World economy into
industrial centers and
peripheral countries
engaged in primary
production, with difference
in income growth.
Free Trade:
Towards Equalisation or Polarisation?
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US economist Paul Samuelson
(Nobel Prize 1970)

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Swedish economist Gunnar Myrdal
(Nobel Prize 1974) [F.A. Hayek]

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5
6
INTRA-TRADE:
Rich-to-Rich, Poor-to-Poor

Third Worlds integration to the World Economy:
The Case of Peru*

7
-100 %
-75 %
-50 %
-25 %
0 %
25 %
50 %
75 %
100 %
1960 1970 1980 1990 2000
0
1
2
3
4
5
6
7
White collar wages
Blue collar wages
Export
Increasing Exports, Falling Wages
*Research by Erik S. Reinert

FTAs: Formalizing Capitalist Relations#
(as has been and currently conceived)
Goals Impact on Labor
Convergence and
Coordination
Proletarianization
(an exploitable global proletariat)
Competitiveness and
Competition
Race-to-the- bottom
(low wages and poor labor standards)
Capitalism Capital over labor
(real subsumption of labor under capital)
FTAs: Informalizing Labor Conditions
Full / formal employment: not an FT goal

Reserve army of labor
FT Effects on Domestic Labor Structure
Developing Economies

De-industrialization
De-agriculturalization
De-skilling / de-servicing
What is left? Informal economy!!!
Developed Economies
flexicurity (flexibility for business,
insecurity for workers)
Migration (as a conflict-ridden
sociopolitical and economic issue)
FTAs under conditions of
Uneven Development
For the free movement of capital, money,
goods, and services;
But no free movement of labor (especially
on the issue of migrant workers rights and
welfare)
FTAs and Taxation
Taxing labor but not capital
taxes on wage income earners

Poor and middle classes thru VAT
Productive workers: contractual, regular, professionals, freelancers,
celebrities
Creative enterprises: SMEs, e-entrepreneurs, informal sector, wage
laborers
Working class in general: insecure, exploited

Not taxing capital
useless rich: non-creative, non-innovative
FIRE sector: nance, insurance, real estate (i.e., wealth from capital
gains, not from productive labor)
rentier capitalists: the rent-seekers, the takers
Realpolitik:
Vested Interests and FTAs
alliances and conicts between stakeholders and
interest groups coexist in the FTA processes

FT ideology as an instrument to advance the vested
interest of particular faction of the economic and political
class

Understand the domestic political calculus vis--vis
FTAs

States as authors of FTAs and concentration of capital
Importance of state-level perspective and resistance,
coordinated at regional and international levels
Timing and the FTA Strategy:
When to open up?


Joseph Dorfman (1946 [1966])
The Economic Mind in American Civilization, 1606-1865,
Vol. 2, p. 581
13
Trade Agreements reduce barriers to U.S. exports, and protect U.S.
interests and enhance the rule of law in the FTA partner country
[and] make it easier and cheaper for U.S. companies to export their
products and services to trading partner markets.
Atlantic Crisis and the Resurgence of Nationalism
Buy American Buy European
EU to trade aid for raw materials
Politiken News in English, 4. Nov 2008
16

Europe needs raw materials for its
growing hi-tech industry.
The EU Commission wants to use aid as
leverage for supplies.

Gnther Verheugen
Former EU Commissioner for Enterprise and Industry
A single mobile phone requires some 40 different raw
materials - some of them particularly rate.
Many of the raw materials are found in Africa - a continent
that thanks to foreign and aid policy has Europe as its most
important partner....
We must use these instruments to ensure that we have
secure access to raw materials ....
17
FTAs and Global Capitalism:
Contemporary Geo-Political Economy

China is a
Technology.
Europe is a
Museum.
US is a Wall
(Wall Street).
Trading and the Mode of Production Question
Who are the trade partners?
unequal exchange and uneven development
South-South may be a good alternative

What is being traded?
Qualitative differences in different economic activities
and specializations
How is production organized?
It is in the point of production where exploitation
occurs, but it is also where democracy may be
practiced.
Kiitos.
Salamat.
Thank you.

Bonn Juego
bonn.juego@jyu.