Protectionism, free-trade and neo-populism: interview with Emiliano Brancaccio

by Marco Berlinguer

First published in Pubblico, October 20, 2012
translated and republished by Revolting Europe, October 23, 2012

The mission that  Emiliano Brancaccio – the brilliant Neapolitan economist – has given himself seems difficult. None other than breaking a taboo that has been created around the doctrine of free trade. His thesis is that with the crisis of capitalist globalization, new forms of protectionism and political control are growing. And that that doctrine is in crisis and has become obsolete. And it is time that the Left takes note, if it wants to prevent proposals for a restriction on the movement of capital and goods that are meeting increasing support everywhere, even in Italy, from being monopolised by populist and nationalist forces.

Is protectionism  coming back into fashion?

The European Commission registered 534 new protectionist measures between 2008 and 2012. Not only Argentina, but also giants such as China, India, Brazil and the United States have introduced restrictions. Russia has introduced 80 new protectionist measures, which says a lot about how they plan to manage  their recent accession to the WTO, the World Trade Organization. The only power that still resists the temptation to introduce controls on movements of capital and goods is precisely the European Union. Driving the EU position are the interests of the strongest country, Germany, which derives great benefits from free trade. However, as the crisis progresses, in Europe and in Italy the consensus to increase trade control measures, limits on foreign acquisitions and the restoration of national monetary sovereignty grows. It is an illusion to think of countering this wave with the usual empty European rhetoric.

It is true, there is no shortage of examples of protectionist noises. Even [Fiat CEO] Marchionne, as president of the European Automobile Manufacturers, criticized the indiscriminate opening up to automotive products made in Asia.

Not only that, Marchionne has also asked the European Commission to manage the cuts to production capacity by European car manufacturers, so as to leave market shares unchanged: a genuine piece of public planning of European output. It’s a sensible position, but it reveals a contradiction, however, since at the same time Marchionne demands full freedoms to transfer capital abroad and demands that Fiat workers totally submit to the laws of the market. It is yet another symptom of the crisis of neo-liberalism and its ideology: on the one hand seeking to justify massive public aid to private capital, and on the other hand continuing to demand a free hand in battles with the workers.

And the Left, you argue, stands out for its silence.

For too many years it has been conditioned by neo-liberal ideology, the idea that capitalist globalization was inevitable and an ultimately beneficial thing. When Fiat, or the top management of Alcoa or the [steel magnate] Riva family – which received various forms of state support – have threatened to leave Italy and invest abroad, Berlusconi and Monti gave them a hand, arguing that a private company must be left free to move wherever they please. And I haven’t noticed the Left raise many criticisms of this indiscriminate freedom of movement of capital. Or, when we discover that plants producing aluminium and coal in Sardinia are inefficient because they are also largely under-utilized, I did not hear from the Left any proposals to reduce the large imports of these products from China and Germany. Leaving these issues purely to the national populist movements is a grave error.

Many say that protectionism causes economic damage, dangerous nationalism and even wars.

It is a belief that is as widespread as it it is unfounded. The Nobel Prize Winner for Economics Paul Samuelson, who was not a protectionist, explained that in the presence of unemployment, free trade creates problems, not benefits. And Harvard economist Dani Rodrik reminds us that in the fifties and sixties there were a number of controls on movements of capital and goods, yet the development, employment and income distribution were much better than today, because those controls allowed individual states to pursue domestic objectives, employment and distribution. It could also recall that the maximum liberalization of international capital movements was reached just before the First World War. And so it is unconditional free trade, especially in times of serious economic crisis, which risks feeding the worst nationalist instincts.

You also argue that a’neo-protectionist’ threat by the countries of Southern Europe could help save European unity. It seems a paradox. Can you explain this?

Europe will only find internal cohesion if it puts a stop to the downward wage competition and starts an ‘internal engine’ of economic and social development. Currently, however, we are moving in the opposite direction. Germany has imposed on the peripheral countries of the euro zone a recipe for depression, unemployment and business failure. The European Central Bank itself follows this line. It is ready to defend the peripheral countries from speculation only on condition that they further compress public spending and the cost of labour and are prepared to sell national capital, including banks. This violent German-led restructuring is turning vast areas of southern Europe into industrial deserts that become reservoirs of cheap labour for the stronger areas. Dominant interest groups in Germany know that these processes could trigger tensions that may lead countries to abandon the euro, but this possibility does not bother them. The Germans’ only real fear is that the end of the single currency may also signal the end of the single European market, which underpins their hegemony: that is, they fear that the countries of the South will introduce limits on the free movement of capital and goods in Europe. France has been discussing similar options  for time, but the socialist government seems unwilling to make an open protectionist threat. In Italy, to avoid temptation, we even placed an irreducible free trader at the top of government. But as the crisis progresses, the chickens will come home to roost. If the Left insists in its uncritical stance on free trade it will be dissolved by forces completely foreign to the traditions of the labour movement.