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OpEdNews Op Eds    H2'ed 8/22/15

Picking Apart One of the Biggest Lies in American Politics: "Free Trade"

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"There are few things that could do more damage to the already battered global economy than an old-fashioned trade war," Friedman opined in the Times. "So we have been increasingly worried by the protectionist rhetoric and policies being espoused by politicians across the globe and in this country."

But South Korea did not ride the "free trade" train to success.

South Korean economist Ha-Joon Chang details South Korea's economic ascent in his 2008 book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.

In 1961, South Korea was as poor as Kenya, with an $82 per capita annual income and many obstacles to economic strength. The country's main exports were primary commodities such as tungsten, fish, and human hair for wigs. That's how the Korean technology giant, Samsung, started -- by exporting fish, fruits and vegetables. Today, it's the world's largest conglomerate by revenue ($173 billion in 2008). By throwing out "free trade" and embracing "protectionism" during the 1960s, South Korea managed to do in 50 years what it took the United States 100 years and Britain 150 years to do.

After a military coup in 1961, General Park Chung-hee implemented short-term plans for South Korea's economic development. He instituted the Heavy and Chemical Industrialization program, and South Korea's first steel mill and modern shipyard went into production.

In addition, South Korea began producing its own cars and used import tariffs to discourage imports.

Electronics, machinery, chemicals plants soon followed, all sponsored or subsidized and tariff-protected by the government.

Between 1972 and 1979 the per capita income grew over five times -- more than 500 percent!

In addition, South Korean citizens adopted new protectionist slogans. For example, it was viewed as civic duty to shame anyone caught smoking foreign cigarettes.

All money made from exports went into developing domestic South Korean industry. South Korea enacted import bans, high tariffs and excise taxes on thousands of products.

In the 80's South Korea was still far from the industrialized West but it had built a solid middle class. South Korea's transformation was, to quote Chang, as if "Haiti had turned into Switzerland." This transformation was accomplished through protecting fledgling industries with high tariffs and subsides, and only gradually opening itself to global completion.

In addition, the South Korean government heavily subsidized many of the larger industries at startup, at least until they were globally competitive. The government carefully regulated the banks and therefore the credit. It controlled foreign exchange and used its currency reserves to import machinery and industrial imports.

At the same time, the South Korean government tightly controlled foreign investment in that nation. Korea focused on exporting basic manufactured goods to fuel and protect its high-tech industries with tariffs and subsides.

Had South Korea adopted the "free trade" policies espoused by Friedman and the New York Times, it would still be exporting fish.

Another favorite Freidman free-trade example is the success of Toyota's Lexus luxury car, immortalized in his book The Lexus and the Olive Tree.

But again, the reality is quite different than what Friedman naively portrays in his book. In fact, Japan subsidized Toyota not only in its development but even after it failed terribly in the American markets in the late 1950's. In addition, early in Toyota's development, Japan kicked out foreign competitors like GM.

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Thom Hartmann is a Project Censored Award-winning New York Times best-selling author, and host of a nationally syndicated daily progressive talk program on the Air America Radio Network, live noon-3 PM ET. His most recent books are "The Last Hours of Ancient Sunlight," "Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights," "We The People," "What Would Jefferson Do?," "Screwed: The Undeclared War Against the Middle (more...)

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