There Is No "Free Trade" - There Is Only The 'Darwinian Game Of Trade'

Authored by Charles Hugh Smith via OfTwoMinds blog,

Rising income and wealth inequality is causally linked to globalization and the expansion of Darwinian trade and capital flows.

Stripped of lofty-sounding abstractions such as comparative advantage, trade boils down to four Darwinian goals:

1. Find foreign markets to absorb excess production, i.e. where excess production can be dumped.

2. Extract foreign resources at low prices.

3. Deny geopolitical rivals access to these resources.

4. Open foreign markets to domestic capital and credit so domestic capital can buy up all the productive assets and resources, a dynamic I explained last week in Forget "Free Trade"--It's All About Capital Flows.

All the blather about "free trade" is window dressing and propaganda. Nobody believes in risking completely free trade; to do so would be to open the doors to foreign domination of key resources, assets and markets.

Trade is all about securing advantages in a Darwinian struggle to achieve or maintain dominance. As I pointed out back in 2005, the savings accrued by consumers due to opening trade with China were estimated at $100 billion over 27 years (1978 to 2005), while corporate profits expanded by trillions of dollars.

China Trade Surplus: Gusher Profits for U.S. Corporations (August 13, 2005)

In other words, consumers got a nickel of savings while corporations banked a dollar of pure profit as sticker prices barely budged while input costs plummeted. Corporations pocketed the difference, not consumers.

As longtime correspondent Chad D. noted in response to my essay on capital flows, restricting trade may be one of the few ways smaller nations have to avoid their resources and assets being swallowed up by mobile capital flowing out of nations with virtually unlimited credit (the US, the EU, China and Japan).

Protecting fragile domestic industries with tariffs has a long history, including in the US, but the real action isn't in tariffs: it's in the bureaucratic tools to limit trade and the soft and hard power plays that secure cheap resources while denying access to those resources to geopolitical rivals.

The bureaucratic means of restricting imports have been raised to an art in Japan and other export-dependent nations: there may not be any visible tariffs, just bureaucratic sinkholes that tie up imports in red tape.

Then there's currency manipulation, for example, China's peg to the US dollar. What's the "free market" price of Chinese goods in the US? Nobody knows because the peg protects China from its own currency being too strong or too weak to benefit its export-dependent economy.

Those bleating about "free trade" are simply pushing a Darwinian strategy that benefits them above everyone else. US corporate profits have quadrupled since China entered the WTO; is this mere coincidence? No: global corporations arbitraged labor, credit, taxes, environmental/regulatory and currency inputs to dramatically lower their costs (and the quality of the goods they sold credit-dependent consumers) and thus boost profits four-fold in a mere 15 years while tossing the hapless consumers a few nickels of "lower prices always" (and lower quality always, too).

The Neoliberal Agenda trumpets "free trade" because "free trade" is a cover for "free capital flows." Once capital is free to flow from central-bank fueled global corporations, no domestic bidder can outbid foreign mobile capital, as those closest to the central bank credit spigots can borrow essentially unlimited sums at near-zero rates--an unmatched advantage when it comes to snapping up resources and assets.

If we ask cui bono, to whose benefit?, we find the consumer has received shoddy goods and paltry discounts from "free trade," while corporations, banks and financiers have benefited enormously.

Rising income and wealth inequality is causally linked to globalization and the expansion of Darwinian trade and capital flows: the winners are few and the losers are many. Tariffs will not solve the larger problems of reduced employment, stagnant wages and rising income inequality. To make a dent in those issues, we'll need to tackle central bank and central-state policies that have pushed financial speculation to supremacy over the productive economy.

*  *  *

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via


Government nee… Four Star Mon, 03/12/2018 - 09:26 Permalink

The distortive effects of comparative .gov tax and regulation policy appear magnified within the realm of global economic trade.  These magnified distortions contribute, arguably considerably, to the wealth/employment inequality cited at the end of the article.  Winners are nations with comparatively LOW welfare/regulation.  Losers are nations with comparatively higher welfare/regulation.  Whilst one could argue Murrika is low regulation/low welfare, I believe it is the worst of both worlds in terms of jobs lost due to global trade.  Also, what has been vastly under-reported is the disappearance of American Constitutional liberty, and how the global corpocrisy is being used as the tip of the spear in this endeavor.  

In reply to by Four Star

Aeonios Government nee… Mon, 03/12/2018 - 09:36 Permalink

Yeah, bullshit. Classical economists supported free trade. Austrian economics supports free trade. Hell even Milton Friedman and his idiotic monetarist crap supports free trade.

Trade wars always hurt the country waging the war. In order to continuously export more than you import you have to give away free shit. There's no two ways about it. Not taking advantage of other people's free shit giveaways is just joining them in their quest for economic suicide.

In reply to by Government nee…

Hail Spode Aeonios Mon, 03/12/2018 - 12:09 Permalink

"In the end we'll have all their shit and they'll be wondering where all the benefits of their trade surplus have gone."

Please shift your focus from what 101 Economics textbooks say should happen in theory and redirect to the actual world where the empirical evidence is strongly against your scenario. The Chinese economy has benefited greatly from their predatory trade policies and currency manipulation over the last four decades. Global corporations nominally headquartered in the US have benefited greatly too. US citizens as consumers have benefited as well, but this must be balanced against what they have suffered as producers in order to get a true accounting of the costs to them. On the net, the gains have gone to China and the global corps and the costs have acrued to US citizens.

Localism, a philosophy of government



In reply to by Aeonios

Boing_Snap Aeonios Mon, 03/12/2018 - 10:02 Permalink

Free trade is the same concept the British(Square Mile) have used for centuries to dominate the world markets.

Control the coastal countries with a strong Navy, occupying Army if need be, and a Reserve currency. Then keep the inner countries weak through internal political struggles and regional wars, so that they are supplying their resources for next to nothing to coastal ports.

The USA kept that strategy in place after the World wars, but now the inner countries (China and Russia) are making moves to remove the coastal trade dominance (Belt and Road). When the Reserve Currency falls this era of Coastal Empire will come to an end that much sooner.

In reply to by Aeonios

FreeMoney Aeonios Mon, 03/12/2018 - 10:25 Permalink

I think Friedman's monetary expansion as the economy expanded was a required due to the length of time it took for transactions to clear through the banking system from party a to party b.

Now that transactions can clear in seconds rather than days we need less money in the system.  I dont think he saw the tech revolution impacts on the banking system.

As for trade...

Long term trade deficit means:

1. Export of jobs and/or

2. Export of capital and/or

3. Accumulation of Debt

All three of those things, over the long run, means export of lifestyle.

So do you see closed factory operations in the US?

Do you see foreign ownership of real asset in the US?

Do you see accumulation of consumer, corporate, and government debt?

If we dont change this trend, you better prepare to serve your Chinese master.

In reply to by Aeonios

JailBanksters Mon, 03/12/2018 - 09:13 Permalink

What Free Trade means:

No being able to Manufacture Goods and sell them to anybody that wants to buy them, and at the price you want to sell it at.

That doesn't sound like Free Trade to me, it's more like the Opposite of Free Trade.

So what does Restricted Trade mean ?

bshirley1968 Mon, 03/12/2018 - 09:14 Permalink

Well what do you expect? The darwinian dumbass apostles have been pumping that shit into the minds of children and university aged children for generations now. Why would you expect anything different.

It never ceases to amaze me how people put flour, salt, crisco, baking soda, baking powder, and buttermilk in a pan, mix it up and put it in the oven, and then expect to pull out cornbread when it's done.

It doesn't work that way, people. Garbage in = garbage out.

Dorado Mon, 03/12/2018 - 09:17 Permalink

Beg to differ vs author here.  Trade benefits both parties when no coercion is involved.  If there were no trade between people in different countries there would be a whole lot more people living at subsistence level in the world.  It also allows people & countries of people to become more efficient through the division of labor.  I don't make my own clothes or forge my own silverware.  There are people & places that make these things far better & at a lower cost than I could myself so I *trade* with them which benefits everyone.


Hard to understand what the author has against trade or "free trade" meaning trade not encumbered by government tariffs.  If you are a tomato farmer and have tons of tomatoes you find customers to buy them or with stuff you want/need for barter.  That isn't "dumping excess production".  If there are too many tomatoes and not enough customers guess what?  It works to the benefit of the customers b/c the prevailing market price of tomatoes will go down (more for less).  Works the same way with Chinese steel. 

J J Pettigrew Dorado Mon, 03/12/2018 - 09:30 Permalink

How about when one country borrows the money from the country doing the exporting so that they may import?

How about the country doing the importing buys short term disposable items like clothing and electronics and the country doing the exporting takes the trade balance and buys hard assets within the country doing the importing? Who benefits from that arrangement? 

In reply to by Dorado

Dorado J J Pettigrew Mon, 03/12/2018 - 10:46 Permalink

If you own a bakery and I stop by your store every morning to buy some baked goods than I have a sizeable trade imbalance with you.  The idea that there has to be an equal exchange of goods & services is simply idiotic.  Capital is going to flow where it can get the best return and in a world where people can trade & exchange goods globally it is going to flow from high cost industrialized nations to lower cost developing nations that can produce more for less.  That's how it works and it benefits everyone.


The people working in sweat shops choose to work there. If our businesses stop trading with the people/businesses in these poor countries guess what happens to those children?  In many cases they starve or have to find work selling their bodies.

In reply to by J J Pettigrew

Daddio7 Dorado Mon, 03/12/2018 - 12:40 Permalink

They go back to the farms they left, or better yet, without city factory jobs waiting they would never have left the farm. Every dime the Chinese have an American had to produce first. How much better that dime go into another American's pocket. Without all the free trade "winning" I doubt we would have a twenty trillion dollar national debt.

In reply to by Dorado

Government nee… Dorado Mon, 03/12/2018 - 09:31 Permalink

OMG, someone believes the comparative advantage textbook bullshit.  Now look at the real world, replete with OSHA, ACA, EPA, and the 3-layer cake that is Feral/State/Municipal tax and regulation.  Guess what?  That Laotian working for $0.75 a day is gonna get the worm before an entitiled Murrikan, and it has nothing to do with whether the Murrikan can do the job less well.

In reply to by Dorado

Dabooda Government nee… Mon, 03/12/2018 - 15:30 Permalink

OMG, someone believes that a nation insane enough to cripple  itself with OSHA, ACA, EPA and a 3-layer poisoned cake of government regulation deserves some "protection" from the poor fucking Laotians.  Here's a thought: instead of figuring out new ways to starve the Laotians, work at getting rid of our own steaming piles of bullshit?   Want American businesses to become be great again?  Stop crippling them with taxes and regulations.

In reply to by Government nee…

Kayman Dorado Mon, 03/12/2018 - 09:46 Permalink


Beg to differ. No one is arguing NO TRADE. "Free Trade" can only exist where conditions are the same in both trading countries and only ideas and enterprise grant an advantage. This is never the case, as some countries sole goal is employing their citizens, eg. China.

Chinese steel? For one thing, for the ignorant, there are many types of steel; not the textbook "widgets are widgets" B.S.  

The sweet taste of low price is quickly offset when the bitterness of poor quality raises it's ugly head.

As to "Comparative Advantage". It is virtually a textbook exercise in math, hard to find in the real world.

And speaking of quality, even you must have had some experience in bad quality, even in something as basic as a tomato.


In reply to by Dorado

Dorado Kayman Mon, 03/12/2018 - 10:35 Permalink

If China wants to subsidize goods being sold to the US why stop them?  You don't spit in the face of manufacturer rebates when you're out shopping now do you?  Price deflation is a good thing (which is precisely why nearly everyone in the US regardless of income has a cell phone & flat screen TV).


You think companies don't know the quality differences of what they import?  You think consumers can't assess the quality of the goods & services they consume?  They certainly do and some companies & customers put in their design specs not to use Chinese steel.  An entire industry has risen on consumer reviews of companies & products.

In reply to by Kayman

Hail Spode Dorado Mon, 03/12/2018 - 10:10 Permalink

Dorado said "Trade benefits both parties when no coercion is involved"

Problem: In modern governments coercion is always involved. Does each government demand the use of their brand of force-backed fiat instead of (for example) gold and silver for transactions? Coercion is involved. Does each side have a central bank connected to the government than can issue titanic amounts of credit to some players and not others, such credit being backed by a promise to extract wealth from citizens later whether they like it or not? Coercion is involved. Do the Chinese keep 90% of their citizens from leaving so that they have in effect a giant captive labor force? Coercion is involved. None of that even considers that these "trade agreements" have multiple layers of coercion or that the Big Boys induce government regulators to add on new regulations as barriers to entry for small competitors.

So however true your statement may be on some theoretical level, it does not apply to the world which we live in, except between individuals or in economic textbooks.


And oh yeah, Localism, a philosophy of government.

In reply to by Dorado

Dorado Hail Spode Mon, 03/12/2018 - 10:39 Permalink

Government operates solely through coercion, yes.  Does that mean that when I buy products from overseas (import products from China to sell locally & online, buy spices from India, etc) that this is bad?


The fact that the Chinese government oppresses their people is awful.  No doubt.  The lives of everyday Chinese are improved however by the fact that folks in the US buy Chinese goods.  US consumers benefit from the lower prices. 

In reply to by Hail Spode

Kayman Dorado Mon, 03/12/2018 - 12:22 Permalink

Economics textbooks and their disciples somehow like to have the "consumer" and the "worker" as if they are not the same people.

Without economy and family supporting jobs, consumption of foreign goods must be paid for in debt. Exactly what we have today.

The loss of core jobs, especially in manufacturing, is the death of the nation.  Nations whither away and atrophy when they give up private sector primary jobs, upon which secondary jobs and governments depend.

The United States' economy is of such a size that there is very little that we cannot produce ourselves.

Smart trade vs the BS "Free Trade" line is crucial. I have read every name Economist, but none of them ever had to run a business or a country.

In reply to by Dorado

gmak Mon, 03/12/2018 - 09:22 Permalink

5.  Encourage controlled FDI so that excess global capital can be used to create 'weapons' for their own trading demise.

new game Mon, 03/12/2018 - 09:23 Permalink

the key to this article is central bank low rates and unlimited liquidity. it is nothing short of monopolized control of the supply of raw materials. china is the biggest violator. this country has squandered earths resources in a bring it forward regime of expansion beyond the pale. 

Australian iron ore is a perfect example. what is even moar important is the complete waste of resources by this credit creation and the living for today mentality of the game of thrones being played out for the ultimate possession of control of the planet earth whilest the planet earth is trashed. darwin will indeed have the final say. Charles, please respond to the big pic of this travesty by humans of humans. stupidty has no bounds when nationality trumps reality.

Hail Spode new game Mon, 03/12/2018 - 10:15 Permalink

Upvote for you. It is central banking coupled with fiat money and 'central planning' which puts people in a position where tariffs make sense. It is a defensive measure to counter the games played with fiat money and central banking. If Charlie does not deal with it, this does, along with the other doorways to centralization which take control of our lives further and further from us.

In reply to by new game

passerby Mon, 03/12/2018 - 09:37 Permalink

Multinational corporations through the small print in trade agreements seek to replace the laws of nations with the decisions of international councils. This puts them in a position where they don't have to follow the laws of countries and do not have to pay the money from lawsuits they loose to individuals providing an individual can find the ways and means to hold them at all accountable.

Catullus Mon, 03/12/2018 - 09:43 Permalink

For once I agree with this guy. It's neo-mercantilism.

The "free trade" people are for "managed trade". Meaning they manage it. Through their processes. Their councils. Their approvals. Their fines.

You don't need a 4-5 bureaucratic organizations and tomes of regulations and laws for free trade. It's one statement alone "you may exchange goods and/or services through this [municipality]"

But to be completely free trade, you'd have to be an anarcho-capitalist, which the "free trade" people in the press are most certainly not.

green dragon Mon, 03/12/2018 - 09:55 Permalink

As the article states the savings in labor costs and avoiding regulations did not translate into major saving for USA customers. However, Globalists always shout about the savings. The billions saved never made up for the jobs lost and the income and taxes that went with it.

It appears the USA is very likely to expand it global wars. One cannot fight wars without the ability to produce key goods and services. One only has to look at history and remember how key electronics became a issue in the resent past.

Also, there is a major issue with counterfeits and substandard parts making its way into military supply chain. Then you have the issue of stolen intellectual property.

People forget that American industry was gearing up before WWII. Every war is a come as you are party at the start. Meaning you fight with what you have until you can gear up for war production. We are seeing the beginning of cold war. So it is logical that we would also see economic action to prepare for hot wars.

nicxios Mon, 03/12/2018 - 10:34 Permalink

Free trade is just a trigger term for asshole liberals to tweet about. Consumers (citizens) are like mushrooms: Feed em shit and keep em in the dark. Meanwhile a handful of people become ridiculously rich and power and wealth are consolidated with wicked politicians and infotainment providers.

Zorba's idea Mon, 03/12/2018 - 10:40 Permalink

The "Plate Spinners"...the (over)FED, has been bleeding America dry since fixing the price of gold in 1933 at $35/oz. Add in the longterm effects of the post WWII "Bretton Woods agreement" followed by Nixon closing the gold window and we're left with the Paradox of modern trade to run a balance of payments current account deficit AND surplus at the same time. Today, the Banksters are center stage desperately attempting to extend the game...sustaining our worthless fiat, the US dollar as the worlds reserve currency all the while fleecing the people's back pockets, front pockets, vest pockets. Ha! It aint just oil that the vampire banks lust, its the dream of one Uni-polar world government AND the Uni-dollar, they wish to enslave 99.99% of the global population with. Only one small problem, China and Russia don't want to give up their sovereignty. Imagine that! Put this in context next time you listen to the Presstitute Media and our CONgressional whores. End the FED...Drain the Swamp...Restore our Constitution and our Liberties.

RedDwarf Mon, 03/12/2018 - 10:59 Permalink

"All the blather about "free trade" is window dressing and propaganda. Nobody believes in risking completely free trade; to do so would be to open the doors to foreign domination of key resources, assets and markets."

Yes, some of us do want to risk fully free trade.  Fact is that if America was not mostly Corporatist now, free trade would be in our favor because we'd out-produce everyone by a country mile unless they were also truly Capitalist.

Our current economic system, which is really just Corporatism 1.0 / Mercantilism 2.0 / Feudalism 3.0, favors a handful of elites at the prosperity of the system as a whole.  The growing protectionism is just a band-aid over a structural problem.

Of course trade wars eventually lead to real wars.  Real wars in this day and age between nuclear powers means a loss of life and property that will render moot discussions of economic issues.

LightBulb18 Mon, 03/12/2018 - 11:07 Permalink

The trick is realizing that although the new president claims that only the presidents of the past were signing unfair trade deals intentionally, the most likely situation is that the new president works for the same people as the past presidents. In G-d I trust.

herbivore Mon, 03/12/2018 - 11:12 Permalink

Has there ever been a time when one man or small group of men have not tried to gain a competitive advantage over all other men/people. Thus has it always been. I prefer to view the situation we face in psychological terms. Why is it that people by and large are so easily led astray? Why do people seemingly long to obey the orders of "superiors"? Give them a gun, tell them it's patriotic to kill, and send them to foreign lands to lay waste to the locals. The absence of questioning authority, the eagerness to obey orders, the willingness to sacrifice life and limb in furtherance of objectives for which they have no clue...I wish these were subjects for inquiry by a bright mind like CHS. For it is the case that absent the muscle, in the form of a patriotism-fueled military, many of these concerns would vanish. It's all so very complicated...I don't see how it ever gets understood, never mind unwound.

Demologos Mon, 03/12/2018 - 11:31 Permalink

There are no tariffs for commerce between the states. Some states are using environmental laws to hinder trade between states but that can backfire by making themselves less competitive. The US is an example of what free trade should look like.

skeelos Mon, 03/12/2018 - 12:07 Permalink

I think if you're talking Darwinian, the process is more like:

1.  Find people who have stuff.

2.  Kill the people.

3.  Take the stuff.