Resource-rich but Poor Nations - Why?

WHAT WE FILIPINOS SHOULD KNOW: (Note: Underlined words are links to other related postings, point and click your cursor on a link to open. Please note that anonymous comments will not be posted).

When fellow Filipinos from then Senator Gloria Arroyo, one of the early,enthusiastic proponents of us joining or signing on the WTO Agreements (1995), to our influential native technocrats - all probably with vested interests in the perpetuation of WTO Agreements/Rules, and brainwashed with the "free-market" economic system of Adam Smith-- talk of a "level playing field" in the global trade, I try hard to humor myself because I find these traitors to our native people disgusting and enraging.

These fellow Filipinos continue to fool and keep the native majority ignorant. They continually mislead us into believing that we, an impoverished people of an underdeveloped country, are in a horizontal or equal relationship with the rich, powerful and advanced industrialized nations, all supposedly friendly competitors in the globalized market.

Common sense shows us that the 10-year results of WTO in the Philippines signed into by our homeland's leadership since the Fidel Ramos presidency, continued by then Estrada and current Arroyo regimes have only hastened our national de-industrialization (whatever industries, however light and little we had) and agricultural deterioration in production; and their combined consequence in the loss of work for millions of native Filipinos and thus, worsening and expanding poverty.

A serious study of the national histories, or more precisely, of the national economies of rich/developed nations, will demonstrate that they did not believe nor practice "free-market/free-trade economies." All of them started by cheating to succeed. England, the United States, Japan --if looked at under their now proselytized model of"economic globalization" or "economic liberalism" aka "free-trade" via WTO rules (more aptly, neoliberalism or neocolonialism).

For 150 years, England practiced economic protectionism in agriculture and industry; so did the United States after Alexander Hamilton wrote that America should encourage national industrialization with subsidies and tariffs; Japan did so for 100 years. And they continue to do so since "they", the developed/rich nations with their transnational corporations (TNCs), define and lay down the WTO Agreements. They do it to us via their arm-twisting enforcers, i.e. the IMF and WB
As the saying goes: "He who has the gold, makes the rules."

Native Filipinos, especially the so-called educated and the majority in the homeland, need to learn, understand and realize that the present and popularized "free-trade" aka globalized economy will not lead to their own and their children's long-term betterment. They need to know that our economic deterioration, especially in the last 35 years or so, has been facilitated by religiously following developmental rules (which condemn nationalism and protectionism) formulated by the rich and strong nations. Global economics is not about friendly countries fairly doing business, it is about the strong countries screwing the weak countries.

The following article provides a good introduction on how the strong nations enriched themselves and how they now continually do so at the expense of the weak (thus continually poor) ones.

I have linked a website for a Filipino NGO, i.e. Fair-Trade Alliance that promotes the re-imposition of higher tariffs for imports that compete with local products and lower tariffs for imports not locally produced. However, such efforts need to have the native majority educated for nationalism to be successfully realized.

“There is no literate population in the world that is poor; there is no illiterate population that is anything but poor.” – John Kenneth Galbraith (1908-2006)

“One of the major errors in the whole discussion of economic development has been the tendency to look at the United States or Canada and say that this has worked here, and therefore it must work in the poor countries.” – John Kenneth Galbraith (1908-2006)

"The selfish spirit of commerce knows no country, and feels no passion or principle but that of gain" - Thomas Jefferson, 1809

"You show me a capitalist, I'll show you a bloodsucker" - Malcolm X, 1965

""Capitalism and altruism are incompatible; they are philosophical opposites; they cannot coexist in the same man or in the same society" - Ayn Rand, 1961

"The chief business of America is business" - President Calvin Coolidge, 1925

"The glory of the United States is business" - Wendell L. Willkie, 1936

"What else do bankers do -- walk-in and turn-off the lights in the country." - William Slee, 1978

“Nations, whose NATIONALISM is destroyed, are subject to ruin.” - Colonel Muhammar Qaddafi, 1942-, Libyan Political and Military Leader

"Upang maitindig natin ang bantayog ng ating lipunan, kailangang radikal nating baguhin hindi lamang ang ating mga institusyon kundi maging ang ating pag-iisip at pamumuhay. Kailangan ang rebolusyon, hindi lamang sa panlabas, kundi lalo na sa panloob!" --Apolinario Mabini, La Revolucion Filipina (1898)

“The first priority for any underdeveloped country, before it can begin the economic and social development most appropriate to the needs of its people, is the seizure of power by the masses and the total destruction of the control and influence of the foreign power and local exploiting elite. Without this, nothing is possible.” – Felix Green, British Author, 1970
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Resource-Poor Wealthy Nations, Resource-Rich Poor Nations

1) The Origin of Plunder-by-Trade
In their classics, Henri Pirenne, Eli F. Heckscher, and Immanuel Wallerstein describe the origin of the modern market economy through the monopolization of the tools of production and proto-mercantilist trade imposed and controlled through violence:

Up to and during the course of the fifteenth century the towns were the sole centers of commerce and industry to such an extent that none of it was allowed to escape into the open country.... The struggle against rural trading and against rural handicrafts lasted at least seven or eight hundred years.... The severity of these measures increased with the growth of ‘democratic government.’... All through the fourteenth century regular armed expeditions were sent out against all the villages in the neighborhood and looms and fulling-vats were broken or carried away.2

The problem of the towns collectively was to control their own markets, that is, be able to reduce the cost of items purchased from the countryside and to minimize the role of stranger merchants. Two techniques were used. On the one hand, towns sought to obtain not only legal rights to tax market operations but also the right to regulate the trading operation (who should trade, when it should take place, what should be traded). Furthermore, they sought to restrict the possibilities of their countryside engaging in trade other than via their town. Over time, these various mechanisms shifted their terms of trade in favor of the townsmen, in favor thus of the urban commercial classes against both the landowning and peasant classes.3

With primitive industrial capital—looms, fulling vats, leather making tools, forges, et al.—the city could produce cheaply and trade those commodities to the countryside for wool, food, timber, et al. But it did not take the countryside long to copy those simple technologies and produce their own cloth, leather, and metal products.

The comparative advantage of the countryside of having both the raw materials and the technology meant impoverishment for any city that formerly produced those consumer products. Superior military force eliminated the comparative advantages of the outlying villages and enforced their dependency upon the city. Through monopolizing the wealth-producing-process by superior military power, the city laid claim to both the natural wealth of the countryside and the wealth produced by technology. From that obscure beginning, throughout history, the powerful and crafty continually restructured property rights to transfer all wealth (above production costs) produced on, or with, that property to themselves.

The powerful face the same problem today. To maintain the standard of living of their citizens and their wealth and power, powerful nations lay claim to the wealth of weak nations through inequalities in world trade. One becomes a popular leader by protecting and increasing the well being of one's followers. But any sincere economic proposal to better the lot of impoverished nations would instantly and correctly be seen by all in an imperial-center-of-capital as an immediate loss to themselves. (This is true only under the current subtle-monopoly structure but not under democratic-cooperative-(superefficient)-capitalism.)

Thus for a leader to propose a sincere economic policy for the periphery is rare. Reality requires leaders to take care of their own even as millions—no billions—of people on the periphery are impoverished by economic, financial, covert, and overt warfare due to grand strategies containing any economic consolidation that would compete for world resources and control of the wealth-producing-process.4

Lewis Mumford provides a historical analysis of this process: The leading mercantile cities [of Europe] resorted to armed force in order to destroy rival economic power in other cities and to establish a [more complete] economic monopoly. These conflicts were more costly, destructive, and ultimately even more futile than those between the merchant classes and the feudal orders. Cities like Florence, which wantonly attacked other prosperous communities like Lucca and Siena, undermined both their productivity and their own relative freedom from such atrocious attacks. When capitalism spread overseas, its agents treated the natives they encountered in the same savage fashion that it treated their own nearer rivals.5

This policy is still in full force yet today. Title to industrial capital (the tools of production) and control of trade are today the primary mechanisms for claiming the wealth of the weak on the periphery of empire, the countryside, just as it has for the past millennium. Plunder-by-raids has been transformed into plunder-by-trade.

Although unacknowledged, the destruction of capital on the periphery of empire today protects the control of the wealth-producing-process by the imperial centers yet today. Witness the violent devastation of the industry of Yugoslavia and Iraq and the containment of Iran, Libya, North Korea Nicaragua, Chile, and Cuba, all of whom were denied control of their destinies.

2) Never did a Nation Develop under Adam Smith Free Trade
Trade was felt to be the bloodstream of British prosperity. To an island nation it represented the wealth of the world, the factor that made the difference between rich and poor nations. The economic philosophy of the time (later to be termed mercantilism) held that the colonial role in trade was to serve as the source of raw materials and the market for British manufacture, and never to usurp the manufacturing function.6 (Emphasis added)

Adam Smith’s own words exposes free trade as only a cover for the same past mercantilist policies: "The ultimate object ... is always the same, to enrich the country by an advantageous balance of trade. It discourages the exportation of the materials of manufacture [tools and raw material], and the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations in all foreign markets: and by restraining, in this manner, the exportation of a few commodities of no great price, it proposes to occasion a much greater and more valuable exportation of others. It encourages the importation of the materials of manufacture, in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities.7

In her early development, Britain structured her laws to protect her industry and commerce. The British Enclosure Acts of the 15th, 16th, and 17th centuries were sparked by the labor shortage created by the Black Death and the need for sheep farming to produce for the wool market created by the Hanseatic traders.

As opposed to today’s industry fleeing from high-priced skilled labor and moving to cheap labor, skilled artisans of almost every product in world commerce were brought to England from all over the world to train British labor in those skills. Bounties were given to promote exports of manufactures. And custom duties were enacted to protect those new industries.

Dutch commerce was undercut by the Navigation Acts requiring British products to be transported in British ships. English warships attacked Dutch shipping and English exports and imports rapidly increased. The Methuen treaty of 1703 with Portugal shut the Dutch off from trade with the Portuguese Empire.

The suddenly idled Dutch capital and skilled labor emigrated to the protective trade structure of England. The trade and commerce of France and Spain were overwhelmed by similar strategies. Every one of these policies under which Britain developed were the yet-unwritten philosophies of Friedrich List. None were the yet-unwritten philosophies of Adam Smith.8

And Adam Smith himself knew this well. Note his last statement in this quote:
A small quantity of manufactured produce purchases a great quantity of rude produce. A trading and manufacturing country, therefore, naturally purchases with a small part of its manufactured produce a great part of the rude produce of other countries; while, on the contrary, a country without trade and manufactures is generally obliged to purchase, at the expense of a great part of its rude produce, a very small part of the manufactured produce of other countries.

The one exports what can subsist and accommodate but a very few, and imports the subsistence and accommodation of a great number. The other exports the accommodation and subsistence of a great number, and imports that of a very few only. The inhabitants of the one must always enjoy a much greater quantity of subsistence than what their own lands, in the actual state of their cultivation, could afford. The inhabitants of the other must always enjoy a much smaller quantity.... Few countries ... produce much more rude produce than what is sufficient for the subsistence of their own inhabitants. To send abroad any great quantity of it, therefore, would be to send abroad a part of the necessary subsistence of the people.

It is otherwise with the exportation of manufactures. The maintenance of the people employed in them is kept at home, and only the surplus part of their work is exported.... The commodities of Europe were almost all new to America, and many of those of America were new to Europe. A new set of exchanges, therefore, began to take place which had never been thought of before, and which should naturally have proved as advantageous to the new, as it certainly did to the old continent. The savage injustice of the Europeans rendered an event, which ought to have been beneficial to all, ruinous and destructive to several [most] of those unfortunate countries.9

3) All Successful Nations Developed under Friedrich List’s Principles of Protection of Tender Industries and Markets
Friedrich List describes the protectionist maxims under which Britain developed:b

Always to favour the importation of productive power, in preference to the importation of goods.
Carefully to cherish and to protect the development of productive power.

To import only raw materials and agricultural products, and to export nothing but manufactured goods.

To direct any surplus of productive power to colonization, and to the subjection of barbarous nations.

To reserve exclusively to the mother country the supply of the colonies and subject countries with manufactured goods, but in return to receive on preferential terms their raw materials and especially their colonial produce.

To devote especial care to the coast navigation; to the trade between the mother country and the colonies; to encourage sea fisheries by means of bounties; and to take as active a part as possible in international navigation.

By these means to found a naval supremacy, and by means of it to extend foreign commerce, and continually increase her colonial possessions.

To grant freedom in trade with the colonies and in navigation only so far as she can gain more by it than she loses.

To grant reciprocal navigation privileges only if the advantage is on the side of England, or if foreign nations can by that means be restrained from introducing restrictions on navigation in their favor.

To grant concessions to foreign independent nations in respect of the import of agricultural products, only in case concessions in respect of her manufactured products can be gained thereby.

In cases where such concessions cannot be obtained by treaty, to attain the object of them by means of contraband trade.

To make wars and to contract alliances with exclusive regard to her manufacturing, commercial, maritime, and colonial interests. To gain by these alike from friends and foes; from the latter by interrupting their commerce at sea; from the former by ruining their manufactures through subsidies which are paid in the shape of English manufactured goods.10

Napoleon knew all this well:

"Under the existing circumstances ... any state which adopted the principles of free trade must come to the ground .... [and] a nation which combines in itself the power of manufacturers with that of agriculture is an immeasurably more perfect and more wealthy nation than a purely agriculture one.”11

The Wealth of Nations does not consider the industrial development of the periphery of empire: “Adam Smith and J.B. Say had laid it down that ... nature herself had singled out the people of the United States [and most of the rest of the world] exclusively for agriculture.”

And Friedrich List, who challenged the philosophy of Adam Smith because his native Germany could not develop under a philosophy designed to maintain the supremacy of Britain, was criticized by his staunchest supporters for considering developing only Europe and America.12

William Pitt, British Prime Minister, studied Adam Smith’s Wealth of Nations closely and saw the opportunity to solidify Britain’s control of world trade. If the world could be convinced to follow Adam Smith, he reasoned that no other nation could compete with British industry even if the 12 protectionist policies addressed above were dropped. The British State Department, British intelligence and British industry funded correspondents, columnists, writers, lecturers, and think-tanks mounted a crusade to impose Adam Smith’s free-trade philosophy, as they interpreted it, on the world.13 So long as the undeveloped world could be made to believe this philosophy, they would hand their wealth to Britain of their own free will and it would not require an army:

Such arguments did not obtain currency for very long [in France]. England’s free trade wrought such havoc amongst the manufacturing industries, which had prospered and grown strong under the Continental blockade system, that a prohibitive règime was speedily resorted to under the protecting aegis of which, according to Dupin’s testimony, the producing power of French manufactories was doubled between the years 1815 and 1827.14

As Napoleon understood, unless it is also equal trade, one country’s free trade is another country’s impoverishment. Friedrich List, from whose classic much of this part of our story comes, observed the devastation that British free trade created in France, observed France’s rapid recovery when she protected herself against predatory British industry, and he also observed firsthand the rapid development of the newly-free United States when they ignored Britain's promotion of Adam Smith free trade as interpreted by British mercantilists.15

4) All True Freedom, is based on Economic Freedom
As the revolution approached, America’s founding fathers analyzed that “consumption of foreign luxuries, [and] manufactured stuffs, was one of the chief causes of [the colonies’] economic distress”:16

In the harbor of New York there are now 60 ships of which 55 are British. The produce of South Carolina was shipped in 170 ships of which 150 were British.... Surely there is not any American who regards the interest of his country but must see the immediate necessity of an efficient federal government; without it the Northern states will soon be depopulated and dwindle into poverty, while the Southern ones will become silk worms to toil and labour for Europe.... In the present state of disunion the profits of trade are snatched from us; our commerce languishes; and poverty threatens to overspread a country which might outrival the world in riches.17

An unequal treaty (Peace of Versailles) was forced on the American colonies in 1783 that “permitted only the smallest American vessels to call at the island ports and prohibited all American vessels from carrying molasses, sugar, coffee, cocoa, and cotton to any port in the world outside the continental United States.”18 Not even a horseshoe nail was to be produced in America, export of manufactured products were forbidden to any port within Britain’s trade empire, and the British navy was there to enforce that treaty.

[America] could import only goods produced in England or goods sent to the colonies by way of England. They were not allowed to export wool, yarn, and woolen cloth from one colony to another, “or to any place whatsoever,” nor could they export hats and iron products. They could not erect slitting or rolling mills or forges and furnaces. After 1763, they were forbidden to settle west of the Appalachian Mountains. By the Currency Act of 1764, they were deprived of the right to use legal tender paper money and to establish colonial mints and land banks.19

U.S. statesman Henry Clay quotes a British leader as saying: “[N]ations knew, as well as [ourselves], what we meant by 'free trade' was nothing more nor less than, by means of the great advantage we enjoyed, to get a monopoly of all their markets for our manufactures, and to prevent them, one and all, from ever becoming manufacturing nations.”20

England’s Lord Brougham “thought it “‘well worthwhile to incur a loss upon the first exportation [of English manufactures], in order, by the glut, TO STIFLE IN THE CRADLE THOSE RISING MANUFACTURES IN THE UNITED STATES.’” Britain’s efforts to contain America forced the new nation to establish the Naval War College and a powerful navy.21

Political freedom gives one the right of the vote, free speech, and choice of religion. But political rights without economic rights can leave one cold, impoverished, and starving to death. Thirty-six years after their revolution, with Britain busy battling Napoleon on the Continent, America won the War of 1812 and it was from winning that struggle that Americans truly gained their independence. America was now both politically and economically free. Except for Canada and Australia, no other colony gained both those freedoms prior to WWII.c After that war, many gained their nominal political freedom but only those required for allies to stop fast expanding socialism (Japan, Taiwan, South Korea, Indonesia, and Malaysia) gained their economic freedom.

5) America chose to ally with its Cultural and Religious Cousins
World Wars I and II, as with most wars throughout history, were battles over control of the world’s resources and markets and thus control over the wealth-producing-process. The old imperial nations of Europe broke themselves in those struggles battling over the world’s wealth and no longer had the power to maintain control of the world. The entire former colonial world saw their chance for freedom and most looked to America as the model for their future.

Control of the wealth-producing-process was what produced the prosperity of the imperial-centers-of-capital. America had enough natural resources to maintain its standard of living and could have chosen to support the world’s break for freedom. But the cultural and religious loyalties outweighed the moral option. The powerbrokers of the old imperial nations of Europe handed the baton to America’s powerbrokers to suppress the world’s break for freedom.

Suppression of most regions required bringing key nations within the wealth-producing, wealth-distribution, process. To stop fast expanding socialism required giving key countries (Japan, Taiwan, and South Korea) on the borders of that ideology access to technology, capital, and markets. This, of course, is Friedrich List protectionism, not Adam Smith free trade, even though free trade was preached in every university classroom and every lecture as the governing philosophy.

Other Southeast Asian countries, and then finally China, moved in under that Friedrich List protection masquerading as Adam Smith free trade. Their success under that protection and their collapse when that protection was partially removed once the Soviet federation collapsed, prove the soundness of Friedrich List’s protection philosophy.

That protection was removed through forced structural adjustments requiring unimpeded access to those markets. Deputy Secretaries of the Treasury Robert Rubin and Larry Summers, and “their henchmen at the International Monetary Fund ... admitted they had made hard choices, and they will even cop to some mistakes.”22 The “hard choices” faced by these “usual suspects”—as described by Professor Stephen Gill, Professor of Political Science at York University in Toronto23—can only be letting others take care of themselves whenever an economic collapse is imminent. Professor Peter Gowan of the University of North London explains that Greenspan, Summers, and Rubin were not worried:

As the crisis spread across the region, the US Treasury and the Federal Reserve were serene about its global consequences. They knew from a wealth of past experience that financial blow-outs in countries of the South provided a welcome boost for the US financial markets and through them the US domestic economy. Huge funds could be expected to flood into the US financial markets, cheapening the cost of credit there, boosting the stock market and boosting domestic growth. And there would be a rich harvest of assets to be reaped in East Asia when these countries fell to their knees before the IMF.24

Removing protection from former allies was little more than turning loose the dogs of speculation through structural adjustments requiring access to Asian markets for speculative capital. The steadily declining commodity prices worldwide proved there was plenty of room to print money—better, more equal, and safer yet, permit other regions and other nations to print their own money for industrial and infrastructure development—and expand the world economy. So the decision to shrink the world economy to provide more for the imperial-centers-of-capital was a very conscious one:

[I]f a society spends $100 to manufacture a product within its borders, the money that is used to pay for materials, labor and, other costs moves through the economy as each recipient spends it. Due to this multiplier effect, $100 worth of primary production can add several hundred dollars to the Gross National Product (GNP) of that country. If money is spent in another country, circulation of that money is within the exporting country. This is the reason an industrialized product-exporting/commodity-importing country is wealthy and an undeveloped product-importing/commodity-exporting country is poor.

Developed countries grow rich by selling capital-intensive (thus cheap) products for a high price and buying labor-intensive (thus expensive) products for a low price. This imbalance of trade expands the gap between rich and poor. The wealthy sell products to be consumed, not tools to produce. This maintains the monopolization of the tools of production, and assures a continued market for the product.25

That the periphery would face a meltdown if protection was removed was well understood. In False Dawn, Professor John Gray of the London School of Economics points out that free trade and true democracy are incompatible:

In any long and broad historical perspective the free market is a rare and short-lived aberration. Regulated markets are the norm, arising spontaneously in the life of every society.... The idea that free markets and minimum governments go together ... is an inversion of the truth.... The normal concomitant of free markets is not stable democratic government. It is the volatile politics of economic insecurity.... Since the natural tendency of society is to curb markets, free markets can only be created by the power of a centralized state ... A global free market is not an iron law of historical development but a political project.... Free markets are the creatures of government and cannot exist without them.... Democracy and free markets are competitors rather than partners .... [just as the disastrous British free market 100 years ago which culminated into two world wars, the current] global free market is an American project.... In the absence of reform, the world economy will fragment, as its imbalances become insupportable.... The world economy will fracture into blocs, each driven by struggles for regional hegemony.26

In short, global capital, backed by the American military, is attempting to deny every undeveloped nation the right to protect its resources, industry, markets, and citizens. This outlines the lock that global capital has upon the world. If any nation attempts to protect itself, capital will flee and create even greater poverty. Not only are those countries doubly endangered, with an example of how to plunder the treasury of a powerful country like Britain, Professor Gowan explains how hedge funds are used to plunder the treasuries of both weak and powerful nations:

The speculator takes out huge forward contracts to sell pounds for French francs at 9.50 to the pound in one month’s time: say forward contracts totaling £10-billion. For these he must pay a fee to a bank. Then he waits until the month is nearly up. Then suddenly he starts buying pounds again in very large volumes and throws them against the exchange rate through selling them. So big is his first sale of pounds that the currency falls, say 3 percent against the franc. At this point other, smaller players see the pound going down and join the trend he has started, driving it down another 3 percent. Overnight he borrows another vast chunk of pounds and sells into francs again, and meanwhile the word is going around the market that none other than the master speculator is in action, so everyone joins the trend and the pound drops another ten percent. And on the day when the forward contract falls due for him to sell pounds for francs at 9.50 the pound in the spot market is down at 5 francs. He takes up his huge forward contract and makes a huge profit. Meanwhile there is a sterling crisis, etc. etc.27

Although Americans have been riding high as free trade profits flow from the South to the North,
a global free market ... no more works in the interests of the American economy than of any other. Indeed, in a large dislocation of the world markets the America economy would be more exposed than many others.... In this feverish atmosphere a soft landing is a near impossibility. Hubris is not corrected by twenty percent.... Economic collapse and another change of regime in Russia; further deflation and weakening of the financial system in Japan, compelling a repatriation of Japanese holdings of US government bonds; financial crisis in Brazil or Argentina; a Wall Street crash – any or all of these events, together with others that are unforeseeable, may in present circumstances act as the trigger of a global economic dislocation. If any of them come to pass, one of the first consequences will be a swift increase of protectionist sentiment in the United States, starting in Congress.28

6) History Validates Friedrich List
The enormous industrial successes of Britain, America, Bismarck, the Third Reich, the Soviet Union, pre-WWII Japan, post-WWII Europe and Japan, the Asian tigers, and now China—all industrialized following Friedrich List's precepts, and no nation in the world ever developing under Adam Smith free trade (the rhetoric that they did, and are, notwithstanding)—prove the sound logic of List's philosophy of protection for tender new industries and markets.

This is only a very short summary. Almost every chapter of this author’s Economic Democracy, updated and expanded 4th edition, addresses some aspect of needed protection for world trade. But the appropriation of the wealth of the weak is not confined to world trade and we address in depth in previous work and in the just released volume, Cooperative Capitalism: A Blueprint for Global Peace and Prosperity, the high need for protection of the weak within domestic economies.29

Protection is the norm for all wealthy nations both for their internal economies and in their trades with the world. Although a requirement under structural adjustment rules for weak nations on the periphery of empire, no powerful nation would ever leave its citizens to the predatory whim of global capital. If they did, their citizens would vote them right out of office.

Conscientious citizens would never tolerate their standard of living being maintained through arbitrarily laying claim to the wealth of others let alone the utilization of wholesale terrorism to accomplish those goals. So foreign policy of powerful nations must be kept secret. We next turn to how that was accomplished, through establishing the greatest propaganda system the world has ever known, to promote the free trade philosophy addressed above that was protecting the claims of powerful nations on the wealth of weak nations.

The exponential expansion or contraction of a nation’s potential for accumulation of capital due to inequality of pay for equally-productive labor, the origins of plunder-by-trade, and the fact that Adam Smith free trade was an extension of plunder-by-trade is missing in both classical and neo-liberal economics. Only by building from a base of true economic history can one write realistic theories of economic development. That true economic history provides its own solutions.
In Confessions of an Economic Hit Man (2004) John Perkins identifies the National Security Agency as the managers of state overseeing the control of resources outside America’s borders; the same job as those overseeing the security of those Free Cities of Europe 800 to 1,000 years ago.

Footnotes
The Subchapter Collapse of the Invisible Borders Between the high-paid Imperial Centers and the low-paid Periphery, pp 124-28, especially the Harbor Freight story, is crucial for a full understanding of this chapter. We invite all with a talent for econometric formulas to expand upon this simple math to prove the errors in neo-liberal formulas

Lets not forget simple luck as to why Britain became the first industrial nation. Britain’s rich coal fields and iron mines were only 15 miles apart and British industries had access to cheap water transportation for both internal and world commerce. The same advantage of rich coal and iron mines and cheap water transportation favored America. It was from those initial natural advantages that Britain expanded by advantageous trade agreements and America is now expanding by structural adjustments imposed upon weak nations that are advantageous to powerful nations.

The following books lead you to primary sources on nations, especially America, successfully developing and protecting their industries and markets. Though some—because they were needed as allies—developed under others’ protection, there are no nations which successfully developed without protection for their industries and markets.

1. Friedrich List, The National System of Political Economy (Fairfield, NJ: Augustus M. Kelley, 1977):
2. Clarence Walworth Alvord, The Mississippi Valley in British Politics: A Study of Trade, Land Speculation, and Experiments in Imperialism Culminating in the American Revolution ( New York: Russell & Russell, 1959);
3. Bairoch, Economics and World History; Correli Barnett, The Collapse of British Power (New York: Morrow, 1971);
4. Oscar Theodore Barck, Jr. and Hugh Talmage Lefler, Colonial America, 2nd ed. (New York: Macmillan, 1968); Samuel Crowther, America Self-Contained (Garden City, N.Y.: Doubleday, Doran & Co., 1933);
5. John M . Dobson, Two Centuries of Tariffs: The Background and Emergence of the U.S. International Trade Commission (Washington DC: U.S. International Trade Commission, 1976);
6. Alfred E. Eckes, Jr., Opening America’s Markets: U.S. Foreign Trade Policy Since 1776 (Chapel Hill: University of North Carolina Press, 1995);
7. James Thomas Flexner, George Washington: The Forge of Experience (Boston: Little Brown and Co., 1965);
8. William J. Gill, Trade Wars Against America: A History of United States Trade and Monetary Policy (New York: Praeger, 1990);
9. John Steele Gordon, Hamilton’s Blessing: The Extraordinary Life and Times of Our National Debt (New York: Walker and Co., 1997);
10. Irwin, Against the Tide;
11. Emory R. Johnson, History of Domestic and Foreign Commerce of the United States (Washington DC: Carnegie Institute of Washington, 1915);
12. Richard M. Ketchum, ed., The American Heritage Book of the Revolution (New York: American Heritage Publishing, 1971);
13. Michael Kraus, The United States to 1865 (Ann Arbor: University of Michigan Press, 1959);
14. John A. Logan, The Great Conspiracy: Its Origin and History, 1732-1775 (New York: A.R Hart & Co., 1886);
15. William MacDonald, ed., Documentary Source Book of American History, 1606-1926, 3rd ed. (New York: MacMillan, 1926);
16. John C. Miller, Origins of the American Revolution (Boston: Little Brown and Co., 1943);
17. Samuel Eliot Morison and Henry Steele Commanger, Growth of the American Republic, 5th ed. (New York: W.W. Norton, 1959);
18. Sir Lewis Namier and John Brooke, Charles Townsend (New York: St. Martin’s Press, 1964;
19. Gus Stelzer, The Nightmare of Camelot: An Expose of the Free Trade Trojan Horse (Seattle, Wash.: PB publishing, 1994);
20. Peter D.J. Thomas, The Townshend Duties Crisis: The Second Phase of the American Revolution, 1776-1773 (Oxford: Clarendon Press, 1987);
21. Arthur Hendrick Vandenberg, The Greatest American (New York: G.P. Putman’s and Sons, 1921).
    
    Endnotes
    J.W. Smith, Economic Democracy: The Political Struggle of the Twenty-First Century, updated and expanded 4th edition (www.ied.info/cc.html: The Institute for Economic Democracy, 2005), Chapter 1, for labor rates, citing, Doug Henwood, “Clinton and the Austerity p. 628. Colin Hines and Tim Lang (Jerry Mander and Edward Goldsmith eds.) in The Case Against the Global Economy and for A Turn Toward the Local (San Francisco: Sierra Club, 1996), p. 487 say $24.90 an hour for the Germany and $16.40 for the U.S. When benefits are included German manufacturing wages rise to $30 and hour, America to $20 and hour and Britain to $15 (Richard C. Longworth, Global Squeeze: The Coming Crisis of First-World Nations (Chicago: Contemporary Books, 1999), p. 177. Russian wages will increase even greater when benefits are factored in. That increase would have to be factored into prices before it will change the wealth appropriation ratio.
    
    Karl Polanyi, The Great Transformation (Boston: Beacon Press, 1957), p. 277. Quoting the classics: Henri Pirenne, Economic and Social History of Medieval Europe. (New York: Harcourt, Brace, 1937) and Eli F. Heckscher’s Mercantilism, 2 vol. (New York: The Macmillan Company, 1955).
    
    Immanuel Wallerstein, The Origin of The Modern World System, vol. 1 (New York: Academic Press, 1974), pp. 119-20. See also Paul Bairoch’s, Cities and Economic Development From the Dawn of History to the Present (Chicago: University of Chicago Press, 1988). For “plunder-by-trade,” see William H. McNeill, The Pursuit of Power (Chicago: University of Chicago Press, 1982).
    
    Christopher Layne, “Rethinking American Grand Strategy,” World Policy Journal, (Summer 1998), pp. 8-28.
    
    Lewis Mumford, Technics and Human Development (New York: Harcourt Brace Jovanovich, 1967), p. 279; Kropotkin, Mutual Aid, Chapters 6 and 7; George Renard, Guilds of the Middle Ages (New York: Augustus M. Kelly, 1968), p. 35; Petr Kropotkin, The State (London: Freedom Press, 1987), p. 41; Dan Nadudere, The Political Economy of Imperialism (London: Zed Books, 1977), p. 186.
    
    Barbara Tuchman, The March of Folly (New York: Alfred A. Knopf, 1984), pp. 130-31. For early mercantilist theory see Douglas A. Irwin, Against the Tide: An Intellectual History of Free Trade (Princeton, N.J.: Princeton University Press, 1996).
    
    Adam Smith, The Wealth of Nations (New York: Random House, 1965), p. 607.
    
    Friedrich List, The National System of Political Economy (Fairfield, NJ: Auguatus M.Kelley, 1977), pp. 9-33, 40-45, 56, 71-79, 345, Chapters 26, 27.
    
    Smith, The Wealth of Nations, pp. 413, 426, 642. For free trade philosophy before Adam Smith, see Michael Perelman, The Invention of Capitalism: Classical Political Economy and the Secret History of Primitive Accumulation (London: Duke University Press, 2000) and Irwin, Against the Tide, Chapter 3.
    
    List, National System, pp. 366-370.
    
    Ibid, p. 73. Earlier theorists on protection against mercantilists were: Alexander Hamilton, 1791; Adam Muller, 1809; Jean-Antoine Chaptal, 1819 and Charles Dupin, 1827, see Paul Bairoch, Economics and World History: Myths and Paradoxes (Chicago: University of Chicago Press,
    
    Ibid, p. 99.
    
    Ibid, pp. xxvii-xxviii, 368-69.
    
    Ibid, pp. 73-75.
    
    Ibid, p. xxv.
    
    Charles A. Beard, An Economic Interpretation of the Constitution (New York: Macmillan Publishing Co., 1941), p. 46. See also Michael Barratt Brown, Fair Trade (London: Zed Books, 1993), p. 20.
    
    Beard, Economic Interpretation, pp. 46-47, 171, 173.
    
    Richard Barnet, The Rockets’ Red Glare: War, Politics and American Presidency (New York: Simon and Schuster, 1983), p. 40.
    
    Philip S. Foner, From Colonial Times to the Founding of the American Federation of Labor (New York: International Publishers, 1982), p. 32; Smith, Wealth of Nations, pp. 548-49, Book IV, Chapters VII, VIII; William Appleman Williams, Contours of American History (New York: W.W. Norton & Company, 1988), pp. 105-17; Frederic F. Clairmont, The Rise and Fall of Economic Liberalism (Goa India: The Other India Press, 1996), p. 100; James Fallows, “How the World Works,” The Atlantic Monthly. December 1993, p. 42.
    
    Williams, Contours of American History, p. 221.
    
    Williams, Contours of American History, pp. 192-97, 339-40; List, National System, especially pp. 59-65, 71-89, 92, 342, 421-22; Chapter XI; Herbert Aptheker, The Colonial Era, 2nd ed. (New York: International Publishers, 1966), pp. 23-24; Barnet, The Rockets’ Red Glare, pp. 40, 60, 68. 34Dean Acheson, Present at the Creation (New York: W.W. Norton & Company, 1987), p. 7.
    
    “The Three Marketeers,” Time. February 15, 1999, pp. 34-42.
    
    Stephen Gill, “The Geopolitics of the Asian Crisis,” Monthly Review (March, 1999), pp. 1-9.
    
    Peter Gowan, The Global Gamble: Washington’s Faustian Bid for World Dominance (New York: verso, 1999), pp. 104-0
    
    J.W. Smith, The World's Wasted Wealth 2, (www.ied.info/cc.html: The Institute for Economic Democracy, 1994), pp. 244-45.
    
    John Gray, False Dawn (New York: The Free Press, 1998), pp. 210-13, 217-18; see also p. 199.
    
    Gowan, The Global Gamble, p. 96, see also pp. 95-138 and Richard C. Longworth, Global Squeeze: The Coming Crisis of First-World Nations (Chicago: Contemporary Books, 1999), pp. 225, 243.
    
    Smith, Economic Democracy, updated and expanded 3rd edition.