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Advancing Austrian Economics, Liberty, and Peace

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Making Economic Sense
by Murray Rothbard
(Contents by Publication Date)

Chapter 88
Is There Life After Nafta?

The great historian Charles A. Beard used to talk about the vital gulf between "appearance" and "reality" that pervades our politics and our political system. Rarely has that gulf been as striking and as revealing as in the bitter and intense struggle over Nafta. On the surface, Nafta dealt with a few puny tariffs covering a small fraction of American trade. So why the fuss and feathers? Why did the Clinton administration pull out all the stops, throwing caution to the winds by openly and shamelessly buying Congressional votes? And why the coming together of the entire Establishment: Democrats, Republicans, Big Business, Big Finance, Big Media, ex-Presidents and Secretaries of State, including the ubiquitous Henry Kissinger, and the last but surely not least, Big Economists and Nobel Laureates? What was going on here?

Perhaps the most shocking performance was that of America's self-styled free-market economists, periodicals, and think-tanks. Surely it would have been legitimate for them to say, in response to those of us who denounced Nafta from a free-trade perspective: "Your concerns are legitimate, but taken all in all, we think that Nafta cuts more in favor of free trade than against." Surely that would be the behavior one would expect from one free-market economist to a colleague who differed on the issue. But with only one or two exceptions, this was not the response of the Nafta forces.

From the time when Lew Rockwell first laid out the free-market case against Nafta in the Los Angeles Times (10/19/92), the reaction has been hysteria. Consider what happened when the excellent analysts of the Competitive Enterprise Institute, Jim Sheehan and Matt Hoffman, proved in meticulous detail that Nafta was a statist mockery of free trade. Instead of being persuaded, or considering their views soberly, other and larger free-market think-tanks inside the Beltway played vicious hardball, suitable for a political brawl rather than for a discussion of ideas. They put tremendous pressure on CEI, not only to suppress the Sheehan-Hoffman Report, but also to fire its authors. Fortunately, Fred Smith, head of CEI, firmly resisted these pressures.

So what was the frenzy all about, from Clinton and Kissinger down to Beltway think-tanks? It was indeed not about trade, certainly not about "free" trade. As the Clinton administration and their Republican auxiliaries stressed as the vote went down to the wire, the fight was about foreign policy, about the globalist policy that the United States has been pursuing since Woodrow Wilson, and certainly since World War II. It was about the Establishment-Keynesian dream of a New World Order. Nafta was a vital step down the road to that order. 

Politically, such an order means a United States totally committed to a form of world government, in which US/UN "police" forces dominate the world, and impose institutions to our liking around the globe. Economically, it means a global system devoted not to free trade but to managed, cartelized trade and production, the economy to be governed by an oligarchic ruling coalition of Big Government, Big Business, and Big Intellectuals/Big Media. On the vital currency front the New World Order is slated to fulfill the Keynesian dream: of a World Reserve Bank issuing world paper money ad lib, to make sure that all countries can inflate and enjoy easy money together, with no country's currency inflating more than the others, and thereby suffering declines in exchange rates or outflow of a reserve currency. Internationally coordinated fiat money inflation is the Keynesian goal.

As for the shibboleths about "free trade," the "freedom" is strictly Orwellian. The Establishment's concept of "free" trade, since World War II, is exports subsidized by the taxpayers. The idea is to privilege American exports, either by foreign aid or by the international inflation which will pour more buying power into the hands of foreigners who will purchase American products. The U.S. business Establishment is willing to accept imports only as a bargaining chip to pressure foreigners into buying American exports.

Within American business, the war over Nafta was a war between exporters, and the bankers who finance them, as against business firms that suffer from import competition. It was a contest which the domestic-oriented firms and their union supporters were doomed to lose, since their arguments, by denouncing competition and "loss of jobs," were clearly both special pleading and economically ignorant. As a result, the exporters and their financiers came across as wise statesmen, and their opponents appeared as both dumb and narrow-minded.

The truth is that the exporters were simply more sophisticated and better con artists; for one thing, they had in their camp the articulate economists and self-proclaimed champions of the free market. Well, the exporters and their bankers have, and have had for decades, the money and the power. And, unfortunately, in this world, if they have the money and the power, all too often the Big Intellectuals and Economists and Free-Market Champions will follow in their wake.

The good news, on the other hand, is that Nafta is only the beginning of the struggle. The New World Order is a Utopian project. Not only is it statist and cartelist and opposed to genuine free trade and free enterprise; it cuts against the interests and the freedom of the broad mass of the people. Furthermore, it also cuts against the rising and rampant nationalisms that have been reawakened throughout the world upon the collapse of Communism and the Soviet Empire. The broad public in the U.S. and in other nations, coupled with renascent nationalisms, could well be enough to put the boots to the New World Order. All that is needed are intellectuals and leaders courageous enough to tell the truth.

The truth can make us free; and the panic of the entire Establishment in the weeks before Nafta shows that they know what they will be up against once the public is on to their game.

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