Cakeonomics and Free Trade

 

Crumbs!

Not heard of Cakeonomics?

Cakeonomics is a simplified, quick and sometimes fun approach to economics and its connections with everyday life. It uses the metaphor of cake in an effort to make Economics more accessible and attractive, so that more of us can ask better questions about it and be sharper at assessing any answers. We need stronger, more confident knowledge to better analyse and help address the problems of our times, which are also likely to be the problems of our children and theirs.

Your piece of cake depends on various factors. Two crucial factors are the size of your slice and the size of the cake from which your slice comes.

Here’s some data and information about the global economic cake:

The richest 1 per cent increased its income by 60 per cent in the last 20 years (1992-2012) with the financial crisis accelerating rather than slowing the process.

So, with the latest brand of Free Trade, “Neo-Conservative” /“Neo-Liberal Economics”, the very powerful and rich are getting a bigger slice of the world’s wealth and the rest of us are getting a smaller portion.

Other Oxfam information, comments and practical political remedies in this report are also of relevance, especially to those considering Liberal Democrat policies, manifestos, action etc.

We can no longer pretend that the creation of wealth for the few will inevitably benefit the many-too often the reverse is true.

From tax havens to weak employment laws, the richest benefit from a global economic system which is rigged in their favour.

It is time our leaders reformed the system so that it works in the interests of the whole of humanity rather than a global elite.

Politics has become controlled by the super- wealthy which leads to policies benefitting the richest few and not the poor majority, even in democracies.

And the size of the global economic cake?

Here is some data on global per capita growth, along with data on the consequences of the economic approach which preceded it. This previous approach is labelled Mixed Market Trade. Indicative dates are also given.

Per Capita Income   Mixed Market Trade (60s-70s)   (Neo-Con) Free Trade (80s+)
Developing Countries   3.0%*   1.7%**
Latin America   3.1%   c.1.7%***
Africa   1-2%   <0.0%****
Rich Countries   3.2%   2.1%*****

*This growth rate is a huge improvement on growth under “Imperial” Free Trade. It compares favourably with the 1-1.5 achieved by the “rich countries” during the Industrial Revolution.

**Would be lower but for China and India, economic non-conformists, at 12% in1980 and 30% in 2000

** *2000-2005 Per capita growth was at only 0.6% p.a.

**** Most conformist “free trade” group, effectively under the control of IMF and World Bank

***** Have all the “Rich Countries” applied “Free Trade” as much as the other [weaker] groups/nations? Consider the effects of China and India on their group –see above!

So there you have it!

Free Trade results in smaller slices of a smaller cake than Mixed Market Trade.

Why not become the Liberal Democrat cake shop promoting bigger slices of cake from a bigger cake for more people? (Plus possible resource savings)

Mixed Market Trade offers much, much more.

Crumbs!

* Steve Trevathan is chairperson of Lyme Regis and Marshwood Vale Liberal Democrats.

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10 Comments

  • The economic policies of the developed nations in the 1960s and 70s was to try to achieve full employment for the long term and since then it has been to control inflation and let unemployment be set by the market. This is I believe the reason for your figures. The question is can developed nations run their economies to achieve full employment in a global economy?

  • Eddie Sammon 19th May '16 - 2:14pm

    Britain doesn’t have confidence that a party can be anti big business and run an economy properly.

    There’s a lot of people in France at the moment trying to defend their country’s traditional centre left economic policies, but it’s just leading to mass strikes. Mass strikes can’t maintain popular support forever. The right seems outraged not about defending big business but the fact the police are preoccupied with monitoring strikes when they have a terrorist threat and the Euro 2016 Football championship next month and it makes France look bad.

  • Simon mcgrath 19th May '16 - 3:44pm

    Back in the real world the number of people in the direst poverty is falling rapidly while in the last 30 years hundreds of millions of people in China, India, s Korea etc are now living lives comparable to those in the developed world.

    As there is no source given for the dodgy data it’s difficult to know where your misunderstanding of the economic realities has arisen.

  • Nice try Steve, but as you can see from the comments, the Tories Z team is out in force.

    “And what would the benefit to our economy be of bringing back occasional rampant hyperinflation, regular industrial unrest, a wait of months to have a telephone or gas cooker installed, and keeping the majority of women tied to the home and kitchen?”

    when did the UK have hyperinflation? Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless. Never. What would the benefits of being of going back to a time where peope had decent affordabe housing ? Where there wasn’t an underclass of workless people ?

  • Nick T Nick Thornsby 19th May '16 - 4:49pm

    This is not a strong analysis.

    I would be interested to know two things in particular: first, the definition of “mixed market trade” being applied, and secondly where the data comes from.

    The evidence of the link between trade and poverty reduction is overwhelming. It is seemingly true that “the 1%” have grown richer in the same period that rates absolutely poverty have declined significantly. I suspect those who have escaped poverty thanks to trade and economic growth (rather than those of us in the already-developed world who have the luxury to worry about Gini coefficients) can probably cope with that.

  • Joe Otten – the second link goes to H-Joon Chang’s 2007 book ‘Bad Samaritans’. A quick glance at my copy suggests that the data provided is taken from the text. If you prefer other sources any reputable data set will quickly confirm that growth rates AFTER the Thatcher/Reagan revolution of 1979/1980 were very substantially LOWER than they were beforehand as reported in this article.

    The difference between, say, 3.0% per capita annual income growth in the 1960s/1970s and, say, 1.7% subsequently may not sound like much but, sustained over a couple of decades, it is HUGE. Doubly so when you consider that in the later period most of the growth has been captured by the richest 1% so the very concept of ‘per capita’ has unravelled to a large extent.

    You ask or a “closer inspection” of policies. Well, you could do a lot worse than read the book. It’s some time since I read it but, IIRC, it explains how the superstar economies of recent years such as Korea and China emphatically did NOT follow “free trade” policies. In fact, apart from resource-based economies and trading city states (which are obviously special cases), I know of no country that got rich by so doing. Even Britain and the USA only switched to “free trade” policies after they became industrially dominant.

    None of this means we should wind back the clock to the 1960s & 1970s. That was an era dominated by socialist thinking just as the years since 1979 have been dominated by Thatcherite thinking, trickle down and the rest. We don’t have to pick between these two unlovely alternatives; to suggest we do is straw manning. We are supposed to be liberals with our own distinctive ideas on the economy although a visitor from Mars would be hard-pressed to tell.

    What I think all this does tell us is that Thatcherism (including its evolved version, neoliberalism) is even worse than socialism. The, ahem, evidence for that is persuasive.

  • I had a funny feeling this article would flush out the neo-cons (sorry classical economic liberals).

    Perhaps they all ought to go and have a quiet read of Thomas Piketty.

  • Richard Underhill 20th May '16 - 8:37am

    MacDonalds’ burger for exchange rates? as per Economist magazine.

  • Steve Trevthan 21st May '16 - 5:50pm

    Thanks for all the comments!
    The provenance of data and quotations has been given but here it is again: “Bad Samaritans” by Ha-Joon Chang [Bloomsbury Press] and Oxfam via Global Research on the internet.
    What is the point of the criticism of data without that criticism quoting data and provenance?
    “The person who PROVES me wrong is my friend.” [Socrates]

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