Saturday, November 24, 2018


398. A paradox of international trade

There is a long tradition, since Plato at least, to reach for pure, fixed universals that transcend the messy, shifting variety of particulars experienced in the world.

On the other hand, since Aristotle there is an appreciation of the variety of particulars that appear in reality, emerge, realize their potential and decay.

The opposition between the two is reflected in a long line of contestation within religions: in Catholicism, Protestantism, and the Islam, between two streams: the strict, orthodox, intolerant universalists, and the more lenient, tolerant, liberal particularists.

The opposition is also reflected in a difference between relatively lenient, tolerant cultures in cities that are based on international trade, and more rigid cultures in internally oriented, craft based communities. The rationale for this difference seems clear: tolerance of variety is needed to conduct international trade. An example of a port culture is Amsterdam, which has been a hub of trade for four centuries. One would expect something similar in other port cities.

However, current globalisation is borne by a universalist market fundamentalism, an ideology of the market as a pure universal, the same everywhere, that will automatically establish itself if only one abolishes all the obstacles of intervention by states.

In reality, markets require institutions to work, and markets vary greatly between industries, due to differences in factors that shape markets, such as economies of scale, degree of concentration, monopolisation, technological change and resulting uncertainty, entry barriers to markets, transaction costs, including different degrees to which users can judge the quality of products, switching costs between products from different producers, separability or complementarity of products and production processes.

The focus of the development of the EU lay on the internal market as a universal good that would develop automatically as soon as different government rules were dismantled, in what has been called ‘negative integration’. The expectation was that this would eradicate complexities of rules and regulations, and that prosperity and goals of employment, living conditions, labour conditions, and the abolishment of exclusion would automatically follow.

It did not work out that way. As markets spread across different sectors of society, in drives of liberalisation and privatisation, complexity of rules and regulations did not decrease but increased, because of the imperfections of markets and differences between those sectors.

This unexpected complexity became one of the sources of irritation and opposition towards the EU as an excessive regulator, constraining freedom.

Meanwhile, the dream of the market as a magical source of prosperity and quality of life and society also was not realised. The exclusive focus on the internal market was seen not to fulfil social goals but to thwart them, and now the EU belatedly has to take a more socially oriented turn.

In sum, there is a paradox of universalist ideology versus particularistic reality of markets, and society has suffered again from the illusion of universalistic dreams.       

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