The Political Economy Review 2017

Free trade not only applies to goods but also to expertise. Within the EU the freedom of movement of labour allows the smartest people to access the best jobs suited towards their expertise. This increased ‘brain power’ contributes to technological development within economies. One of the major effects of the ‘Brexit’ vote, where Britain would pull out of the low-tariff EU, is a ‘brain drain’, where experts in their fields leave the UK for work elsewhere. It is estimated that in the past year 1,300 EU academics have left British universities 8 . Not only does it help further technological progress but it also helps other problems such as increasing the flexibility of labour markets, when more qualified foreign workers are able to quickly move into professional roles, such as nurses and teachers, if there is a dearth of home grown workers to fill those roles. However free trade is being increasingly criticised for having a more negative effect on people than previously realised. One of the biggest criticisms of NAFTA is the outsourcing of jobs to Mexico. While the federal minimum wage in the US is $7.25/hour, the minimum wage in Mexico is $3.94/day. As companies look to cut costs in order to increase their profit margins, jobs are moved elsewhere to save money. Between 1994 and 2010 an estimated 682,900 jobs went to Mexico 9 . Not only does this contribute to increased unemployment in the US itself, but also lower wages. Furthering the argument that free-trade has led to job outsourcing, 1992 US presidential candidate Ross Perot described how there would be a ‘giant sucking sound going south’ due to NAFTA moving American jobs to Mexico. No longer can workers bargain for higher wages if jobs are moving elsewhere, meaning firms can pay whatever wages they want. Workers are also forced to search for work in different, lower-paying sectors, as there are little to no jobs left in their preferred sectors. The effects are not only negative economically but also politically. More extreme politicians, such as Donald Trump and Marine Le Pen, have used the effects of globalisation in order to gain votes from traditionally blue-collar workers who have lost jobs and income due to free trade policies of their respective countries. This has led to politicians who hold extreme views on religion, civil rights and free trade to gaining either election or a large proportion of the popular vote. Donald Trump has threatened German car-manufacturer, BMW, with a 35% tariff on imports from its factory in Mexico 10 , signalling increased opposition towards free trade and movement towards protectionism. There is also the argument that free trade has led to an increase in inequality around the world. While trans- national corporations’ (TNCs) profits have grown, workers’ wages have not risen as quickly and increasingly this is blamed on free trade’s elimination of semi-skilled jobs and the increasing exploitation of workers in developing nations. Firms such as Nike and H&M have been accused of using ‘sweatshops’, where workers work in terrible conditions for low pay. This exploitation of workers for low pay creates a vicious cycle. As these people often live hand-to-mouth there is very little money saved in banks, which means there is reduced capital that can be loaned out and therefore investment in business and infrastructure decreases. This combined with the lack of investment in infrastructure from TNCs mean workers continue to receive low pay while also losing out in terms of their countries’ development. This is exemplified by the fact that eight men have the same wealth as 50% of the planet11. Economist Ha-Joon Chang argues that the ‘liberalisation of

8 The Guardian (2017) ‘Fear of Brexit brain drain as EU nationals leave British universities’ 9 Economic Policy Institute (2011) ‘Heading South: US-Mexico job displacement after NAFTA 10 The Financial Times (2017) ‘Donald Trump threatens 35% tariff on BMW imports’ 11 Oxfam (2017) ‘An Economy for the 99%: It’s time to build a human economy that benefits everyone, not just the privileged few’


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