Refocusing Economic Thought

Every neo-liberal economic formula is built on assumptions. Those assumptions are a severe distortion of reality. Please do this math yourself:

In direct trades, inequality of wealth through inequality of pay is not a lineal progression, it is exponential. Study how many hours the low-paid nation must work to buy one unit of wealth from the high-paid nation and then consider how many units of wealth the high-paid nation can purchase from the low-paid nation when working those same number of hours.

Capital accumulation advantage increases or decreases exponentially with the differential in pay for equally-productive labor. The equally-productive worker in the poorly-paid developing world produces a unique widget, is paid $1-an-hour, and is producing one widget an hour. The equally-productive worker in the developed world produces another unique widget, is paid $10-an-hour, and produces one widget per hour. Each equally-productive nation likes, and purchases, the other's widgets.

All true costs are labor costs so we ignore monopoly capital costs, which go to the developed world and only increases the advantage anyway, and calculate the cost of those widgets at the labor cost of production, $1-an-hour and $10-an-hour. The $1-an-hour nation must work 10 hours to buy one of the widgets of the $10-an-hour nation but, with the money earned in the same 10 hours, the $10-an-hour nation can buy 100 of the widgets of the $1-an-hour nation. In a homogenized market of many producers (a mixture of high-paid and low-paid equally-productive labor) there is a 10-times differential in wealth gained while in a non homogenized market (this direct trade example)there is an exponential 100-times differential in capital accumulation or purchasing power.

The wealth accumulation advantage of the higher-paid nation over the lower-paid nation is equal to the high pay divided by the low pay squared: (Wr/Wp)2 = A (Wr is the wages paid to equally-productive labor in the rich country [$10 earned for every 1-hour time-unit of production]; Wp is the wages paid to equally-productive labor in the poor country [$1 earned for every 1-hour time-unit of production]; A is the capital accumulation advantage of the well-paid nation [100-to-1 in this example]).[s]

In direct trades between countries, wealth accumulation advantage compounds in step with the pay differential for equally-productive labor. If the pay differential is five, the difference in wealth accumulation advantage is 25-to-1. If the pay differential is 10, the wealth accumulation advantage is 100-to-1. If the pay differential is 20, the wealth accumulation advantage is 400-to-1. If the pay differential is 40, the wealth accumulation advantage is 1,600-to-1. If the pay differential is 60 (the pay differential between Russia when she collapsed and the victorious America [23-cents an hour against $14 an hour]), the wealth accumulation advantage is 3,600-to-1. And if the pay differential is 100, the pay differential between the collapsed Russia and the victorious Germany , the wealth accumulation advantage is 10,000-to-1. Place a trader between those two unequally paid nations to claim all surplus value both through outright underpaying in hard currency or through paying in soft currency and selling in hard currency, capitalize those profits by 10-to-20-times, and you have accumulated capital through capitalized value.

This math is only in trade between nations with a wage differential for equally-productive labor. It does not represent trade within a homogenized market of both high-paid and low-paid equally-productive workers. It does, however, point the way towards correcting today's neo-liberal economic formulas built from faulty assumptions. Anyone who uses this insight to correct those neo-liberal formulas, we would like to publish your work along with ours.[19]

As there is surplus labor and adequate capital, the limitation on the production of wealth is scarce resources. Most of those resources are in the weak, impoverished world, and that natural wealth is transferred to the powerful imperial-centers-of-capital through unequal pay for equal work, as per this formula. In our previous work we have documented that average wage rates in the developing world for equally-productive labor as 20% that of the developed world and since the currency collapses on the periphery of empire may have dropped to 10%.

Through unequal currency values, thus unequal pay for equally-productive work creating invisible borders guiding the world's wealth to imperial-centers-of-capital, Europe is able to consume possibly 14-times the natural resources as are within its borders. Equalize currency values to equally-productive labor values, those capital accumulation advantages disappear, developing world deficits become large surpluses, and the wealth produced from those resources are more equally shared.

Fair and Equal Trade as opposed to Unequal "Free" Trade

Financial power, economic power, and military power (financial warfare, economic warfare, covert warfare, and overt war) maintain the unequal pay between the powerful imperial-centers-of-capital and the weak on the periphery. As per the wealth-accumulation-process outlined, this unequal pay forms unseen borders that define the well-cared-for protected within those invisible borders and the impoverished outside those borders.

These invisible borders created by legal structures established over the centuries to protect power and wealth can be proven by simple mental exercise: The limitation on the production of wealth is availability of natural resources and most of the world's resources are in the impoverished world. Pay labor on the periphery of empire the same for equally-productive work as labor within the imperial-centers-of-capital, permit those regions industrial capital (technology) to produce for themselves, allow them equal access to world markets, protect the current imperial centers through equal access to resources, and soon all people will be equal within the limits of their own abilities and resources as they build and produce for themselves and the world, not just producing for the wealthy world. Those invisible borders will have disappeared. The periphery of empire, previously a huge plantation system providing resources and labor to the wealthy imperial-center-of-capital, will have gained control of their destiny. All people will have regained full rights to their share of a life-sustaining modern commons.

Plunder-by-Trade has a Long History

In their classics, Henri Pirenne, Eli F. Heckscher, and Immanuel Wallerstein describe the origin of the modern market economy through the monopolization of the tools of production and proto-mercantilist trade imposed and controlled through violence:

Up to and during the course of the fifteenth century the towns were the sole centers of commerce and industry to such an extent that none of it was allowed to escape into the open country.... The struggle against rural trading and against rural handicrafts lasted at least seven or eight hundred years.... The severity of these measures increased with the growth of 'democratic government.'... All through the fourteenth century regular armed expeditions were sent out against all the villages in the neighborhood and looms and fulling-vats were broken or carried away.[20] The problem of the towns collectively was to control their own markets, that is, be able to reduce the cost of items purchased from the countryside and to minimize the role of stranger merchants. Two techniques were used. On the one hand, towns sought to obtain not only legal rights to tax market operations but also the right to regulate the trading operation (who should trade, when it should take place, what should be traded). Furthermore, they sought to restrict the possibilities of their countryside engaging in trade other than via their town. Over time, these various mechanisms shifted their terms of trade in favor of the townsmen, in favor thus of the urban commercial classes against both the landowning and peasant classes.[21]

With primitive industrial capital-looms, fulling vats, leather making tools, forges, et al.-the city could produce cheaply and trade those commodities to the countryside for wool, food, timber, et al. But it did not take the countryside long to copy that simple technology and produce their own cloth, leather, and metal products.

The comparative advantage of the countryside of having both the raw materials and the technology meant impoverishment for any city that formerly produced those products. Superior military force eliminated the comparative advantages of the outlying villages and enforced their dependency upon the city. Through monopolizing the wealth-producing-process by superior military power, the city laid claim to both the natural wealth of the countryside and the wealth produced by technology. From that obscure beginning, throughout history the powerful and crafty continually restructured property rights to transfer all wealth (above production costs) produced on, or with, that property to themselves.

The powerful face the same problem today. To maintain the standard of living of their citizens and their wealth and power, powerful nations lay claim to the wealth of weak nations through inequalities in world trade. One becomes a popular leader by protecting and increasing the well-being of ones followers. But any sincere economic proposal to better the lot of impoverished nations would instantly and correctly be seen by all in an imperial-center-of-capital as an immediate loss to themselves. (This is true only under the current subtle-monopoly structure but is not true under democratic-cooperative-(supercharged)-capitalism.)

Thus for a leader to propose a sincere economic policy for the periphery is rare. Reality requires leaders to take care of their own even as millions-or even billions-of people on the periphery are impoverished by economic, financial, covert, and overt warfare, their Grand Strategy to contain any economic consolidation that would compete for world resources and control of the wealth-producing-process.[22] Lewis Mumford provides a historical analysis:

The leading mercantile cities [of Europe ] resorted to armed force in order to destroy rival economic power in other cities and to establish a [more complete] economic monopoly. These conflicts were more costly, destructive, and ultimately even more futile than those between the merchant classes and the feudal orders. Cities like Florence , which wantonly attacked other prosperous communities like Lucca and Siena , undermined both their productivity and their own relative freedom from such atrocious attacks. When capitalism spread overseas, its agents treated the natives they encountered in the same savage fashion that it treated their own nearer rivals.[23]

This policy is still in full force yet today. Title to industrial capital (the tools of production) and control of trade are today the primary mechanisms for claiming the wealth of the weak on the periphery of empire, the countryside, just as it has for the past millennium. Plunder-by-raids has been transformed into plunder-by-trade.

Although unacknowledged, the destruction of capital on the periphery of empire today maintains control of the wealth-producing-process by the imperial center yet today. Witness the violent devastation of the industry of Yugoslavia and Iraq and the containment of Iran , Libya , North Korea , Nicaragua , Chile , and Cuba , all of whom are denied control of their destinies.

Never did a Nation develop under Adam Smith Free Trade

Trade was felt to be the bloodstream of British prosperity. To an island nation it represented the wealth of the world, the factor that made the difference between rich and poor nations. The economic philosophy of the time (later to be termed mercantilism) held that the colonial role in trade was to serve as the source of raw materials and the market for British manufacture, and never to usurp the manufacturing function.[24] (Emphasis added)

Adam Smith's own words exposes free trade as only a cover for the same past mercantilist policies. The

ultimate object ... is always the same, to enrich the country by an advantageous balance of trade. It discourages the exportation of the materials of manufacture [tools and raw material], and the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations in all foreign markets: and by restraining, in this manner, the exportation of a few commodities of no great price, it proposes to occasion a much greater and more valuable exportation of others. It encourages the importation of the materials of manufacture, in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities.[25]

In her early development, Britain structured her laws to protect her industry and commerce. The British Enclosure Acts of the 15th, 16th, and 17th centuries were sparked by the labor shortage created by the Black Death and the need for sheep farming to produce for the wool market created by the Hanseatic traders.

As opposed to today's industry fleeing high-priced skilled labor and moving to cheap labor, skilled artisans of almost every product in world commerce were brought to England from all over the world to train British labor in those skills. Bounties were given to promote exports of manufactures. And custom duties were enacted to protect those new industries.

Dutch commerce was undercut by the Navigation Acts requiring British products to be transported in British ships. English warships attacked Dutch shipping and English exports and imports rapidly increased. The Methuen treaty of 1703 with Portugal shut the Dutch off from trade with the Portuguese Empire.

The suddenly idled Dutch capital and skilled labor emigrated to the protective trade structure of England . The trade and commerce of France and Spain were overwhelmed by similar strategies. Every one of these policies under which Britain developed were the yet-unwritten philosophies of Friedrich List, none were the yet-unwritten philosophies of Adam Smith.[26]  And Adam Smith himself knew this well. Note his last statement in this quote:

A small quantity of manufactured produce purchases a great quantity of rude produce. A trading and manufacturing country, therefore, naturally purchases with a small part of its manufactured produce a great part of the rude produce of other countries; while, on the contrary, a country without trade and manufactures is generally obliged to purchase, at the expense of a great part of its rude produce, a very small part of the manufactured produce of other countries. The one exports what can subsist and accommodate but a very few, and imports the subsistence and accommodation of a great number. The other exports the accommodation and subsistence of a great number, and imports that of a very few only. The inhabitants of the one must always enjoy a much greater quantity of subsistence than what their own lands, in the actual state of their cultivation, could afford. The inhabitants of the other must always enjoy a much smaller quantity.... Few countries ... produce much more rude produce than what is sufficient for the subsistence of their own inhabitants. To send abroad any great quantity of it, therefore, would be to send abroad a part of the necessary subsistence of the people. It is otherwise with the exportation of manufactures. The maintenance of the people employed in them is kept at home, and only the surplus part of their work is exported.... The commodities of Europe were almost all new to America , and many of those of America were new to Europe . A new set of exchanges, therefore, began to take place which had never been thought of before, and which should naturally have proved as advantageous to the new, as it certainly did to the old continent. The savage injustice of the Europeans rendered an event, which ought to have been beneficial to all, ruinous and destructive to several [most] of those unfortunate countries.[27]

Friedrich List describes the protectionist maxims under which Britain developed:[t]

[1] Always to favour the importation of productive power, in preference to the importation of goods.

[2] Carefully to cherish and to protect the development of the productive power.

[3] To import only raw materials and agricultural products, and to export nothing but manufactured goods.

[4] To direct any surplus of productive power to colonization, and to the subjection of barbarous nations.

[5] To reserve exclusively to the mother country the supply of the colonies and subject countries with manufactured goods, but in return to receive on preferential terms their raw materials and especially their colonial produce.

[6] To devote especial care to the coast navigation; to the trade between the mother country and the colonies; to encourage sea fisheries by means of bounties; and to take as active a part as possible in international navigation.

[7] By these means to found a naval supremacy, and by means of it to extend foreign commerce, and continually increase her colonial possessions.

[8] To grant freedom in trade with the colonies and in navigation only so far as she can gain more by it than she loses.

[9] To grant reciprocal navigation privileges only if the advantage is on the side of England , or if foreign nations can by that means be restrained from introducing restrictions on navigation in their favor.

[10] To grant concessions to foreign independent nations in respect of the import of agricultural products, only in case concessions in respect of her manufactured products can be gained thereby.

[11] In cases where such concessions cannot be obtained by treaty, to attain the object of them by means of contraband trade.

[12] To make wars and to contract alliances with exclusive regard to her manufacturing, commercial, maritime, and colonial interests. To gain by these alike from friends and foes; from the latter by interrupting their commerce at sea; from the former by ruining their manufactures through subsidies which are paid in the shape of English manufactured goods.[28]

Napoleon understood this well:

Under the existing circumstances ... any state which adopted the principles of free trade must come to the ground ... [and] a nation which combines in itself the power of manufacturers with that of agriculture is an immeasurably more perfect and more wealthy nation than a purely agriculture one."[29]

The Wealth of Nations does not consider the industrial development of the periphery of empire: "Adam Smith and J.B. Say had laid it down that ... nature herself had singled out the people of the United States [and most of the rest of the world] exclusively for agriculture." And Friedrich List, who challenged the philosophy of Adam Smith because his native Germany could not develop under a philosophy designed to maintain the supremacy of Britain , was criticized by his staunchest supporters for considering developing only Europe and America .[30]

William Pitt, British Prime Minister, studied Adam Smith's Wealth of Nations closely and saw the opportunity to solidify Britain 's control of World trade. If the world could be convinced to follow Adam Smith, he reasoned that no other nation could compete with British industry even if the 12 protectionist policies addressed above were dropped. The British State Department, British intelligence and British industry funded correspondents, columnists, writers, lecturers, and think-tanks mounted a crusade to impose Adam Smith's free-trade philosophy, as they interpreted it, on the world.[31]

So long as the undeveloped world could be made to believe this philosophy, they would hand their wealth to Britain of their own free will and it would not require an army:

Such arguments did not obtain currency for very long [in France ]. England 's free trade wrought such havoc amongst the manufacturing industries, which had prospered and grown strong under the Continental blockade system, that a prohibitive règime was speedily resorted to under the protecting aegis of which, according to Dupin's testimony, the producing power of French manufactories was doubled between the years 1815 and 1827.[32]

As Napoleon knew, unless it is also equal trade, one country's free trade is another country's impoverishment. Friedrich List, from whose classic much of this part of our story comes, observed the devastation that British free trade created in France, observed France's rapid recovery when she protected herself against predatory British industry, and also observed firsthand the rapid development of the newly-free United States when they ignored Britain's promotion of Adam Smith free trade as interpreted by British mercantilists.[33]

True Freedom, is based on Economic Freedom

As the revolution approached, America 's founding fathers analyzed that "consumption of foreign luxuries, [and] manufactured stuffs, was one of the chief causes of [the colonies'] economic distress":[34]

In the harbor of New York there are now 60 ships of which 55 are British. The produce of South Carolina was shipped in 170 ships of which 150 were British.... Surely there is not any American who regards the interest of his country but must see the immediate necessity of an efficient federal government; without it the Northern states will soon be depopulated and dwindle into poverty, while the Southern ones will become silk worms to toil and labour for Europe .... In the present state of disunion the profits of trade are snatched from us; our commerce languishes; and poverty threatens to overspread a country which might outrival the world in riches.[35]

An unequal treaty (Peace of Versailles) was forced on the American colonies in 1783 that "permitted only the smallest American vessels to call at island ports and prohibited all American vessels from carrying molasses, sugar, coffee, cocoa, and cotton to any port in the world outside the continental United States ."[36] Not even a horseshoe nail was to be produced in America, export of manufactured products were forbidden to any port within Britain's trade empire, and the British navy was there to enforce that treaty.

[ America ] could import only goods produced in England or goods sent to the colonies by way of England . They were not allowed to export wool, yarn, and woolen cloth from one colony to another, "or to any place whatsoever," nor could they export hats and iron products. They could not erect slitting or rolling mills or forges and furnaces. After 1763, they were forbidden to settle west of the Appalachian Mountains . By the Currency Act of 1764, they were deprived of the right to use legal tender paper money and to establish colonial mints and land banks.[37]

U.S. statesman Henry Clay quotes a British leader as saying: "[N]ations knew, as well as [ourselves], what we meant by 'free trade' was nothing more nor less than, by means of the great advantage we enjoyed, to get a monopoly of all their markets for our manufactures, and to prevent them, one and all, from ever becoming manufacturing nations."[38] England 's Lord Brougham "thought it "'well worthwhile to incur a loss upon the first exportation [of English manufactures], in order, by the glut, TO STIFLE IN THE CRADLE THOSE RISING MANUFACTURES IN THE UNITED STATES.'" Britain 's efforts to contain America forced the new nation to establish the Naval War College and a powerful navy.[39]

Political freedom gives one the right of the vote, free speech, and choice of religion. But political rights without economic rights can leave one cold, hungry, and impoverished. Thirty-six years after their revolution, with Britain busy battling Napoleon on the Continent, America won the War of 1812 and it was from winning that struggle that Americans truly gained their independence. America was now both politically and economically free. Except for Canada , Australia , and for a while Argentina , no other colony gained both their political and economic freedom prior to WWII.[u]After that war, many gained their nominal political freedom but only those required for allies to stop fast expanding socialism (Japan, Taiwan, South Korea,) gained their economic freedom and the later allies (South Korea, Thailand, Indonesia, Malaysia) gained their freedom only temporarily.

America chose not to Support the World's Break for Freedom

World Wars I and II, as with most wars throughout history, were battles over control of the world's resources and markets and thus control over the wealth-producing-process. The old imperial nations of Europe broke themselves in those struggles battling over the world's wealth and no longer had the power to maintain control of the world. The entire former colonial world saw their chance for freedom and most looked to America as the model for their future.

Control of the wealth-producing-process was what produced the prosperity of the imperial-centers-of-capital. America had enough resources to maintain its standard of living and could have chosen to support the world's break for freedom. But the cultural and religious loyalties outweighed the moral option. The powerbrokers of the old imperial nations of Europe handed the baton to America 's powerbrokers to suppress the world's break for freedom. The wholesale terrorism addressed in Chapters 8-through-10, even as those emerging nations attempted to emulate America 's break for freedom, is that story.

Suppression of most nations required bringing key nations within the wealth-producing, wealth-distribution, process. Stopping fast expanding socialism required giving key countries ( Japan , Taiwan , and South Korea on the borders of that ideology) access to technology, capital, and markets. This was Friedrich List protectionism, not Adam Smith free trade, even though free trade was preached in every university classroom and every lecture as the governing philosophy. Other Southeast Asian countries, and then finally China , moved in under that Friedrich List protection masquerading as Adam Smith free trade. Their success under that protection and their collapse when that protection was partially removed once the Soviet Union collapsed, both prove the soundness of Friedrich List's protection philosophy.

That protection was removed through forced structural adjustments requiring unimpeded access to those markets. Deputy Secretaries of the Treasury Robert Rubin and Larry Summers, and "their henchmen at the International Monetary Fund ... admitted they had made hard choices, and they will even cop to some mistakes."[40] The "hard choices" faced by these "usual suspects"-as described by Professor Stephen Gill, Professor of Political Science at York University in Toronto[41]-can only be letting others take care of themselves whenever an economic collapse is imminent. Professor Peter Gowan of the University of North London explains that Greenspan, Summers, and Rubin were not worried:

As the crisis spread across the region, the US Treasury and the Federal Reserve were serene about its global consequences. They knew from a wealth of past experience that financial blow-outs in countries of the South provided a welcome boost for the US financial markets and through them the US domestic economy. Huge funds could be expected to flood into the US financial markets, cheapening the cost of credit there, boosting the stock market and boosting domestic growth. And there would be a rich harvest of assets to be reaped in East Asia when these countries fell to their knees before the IMF.[42]

Removing protection from former allies was little more than turning loose the dogs of speculation through structural adjustments requiring access to Asian markets for speculative capital. The steadily declining commodity prices worldwide proves there was plenty of room to print money-better, more equal, and safer yet, permit other regions and other nations to print their own money for industrial and infrastructure development-and expand the world economy. So the decision to shrink the world economy to provide more for the imperial-centers-of-capital was a very conscious one:

[I]f a society spends $100 to manufacture a product within its borders, the money that is used to pay for materials, labor and, other costs moves through the economy as each recipient spends it. Due to this multiplier effect, $100 worth of primary production can add several hundred dollars to the Gross National Product (GNP) of that country. If money is spent in another country, circulation of that money is within the exporting country. This is the reason an industrialized product-exporting/commodity-importing country is wealthy and an undeveloped product-importing/commodity-exporting country is poor (emphasis added). Developed countries grow rich by selling capital-intensive (thus cheap) products for a high price and buying labor-intensive (thus expensive) products for a low price. This imbalance of trade expands the gap between rich and poor. The wealthy sell products to be consumed, not tools to produce. This maintains the monopolization of the tools of production, and assures a continued market for the product.[43]

That the periphery would face a meltdown if protection was removed was well understood. In False Dawn, Professor John Gray of the London School of Economics points out that free trade and secure economies are incompatible:

In any long and broad historical perspective the free market is a rare and short-lived aberration. Regulated markets are the norm, arising spontaneously in the life of every society.... The idea that free markets and minimum governments go together ... is an inversion of the truth.... The normal concomitant of free markets is not stable democratic government. It is the volatile politics of economic insecurity.... Since the natural tendency of society is to curb markets, free markets can only be created by the power of a centralized state.... A global free market is not an iron law of historical development but a political project.... Free markets are the creatures of government and cannot exist without them.... Democracy and free markets are competitors rather than partners.... [Just as the disastrous British free market 100 years ago which culminated into two world wars, the current] global free market is an American project.... In the absence of reform, the world economy will fragment, as its imbalances become insupportable.... The world economy will fracture into blocs, each driven by struggles for regional hegemony.[44]

In short, global capital, backed by the American military, is attempting to deny every undeveloped nation the right to protect its resources, industry, markets, or citizens. This outlines clearly the lock that global capital has upon the world. If any nation attempts to protect itself, capital will flee and create even greater poverty. Not only are those weak countries doubly endangered, with an example of how to plunder the treasury of a powerful country like Britain, Professor Gowan explains how hedge funds borrow huge sums to essentially plunder the treasuries of both weak and powerful nations. The speculator

takes out huge forward contracts to sell pounds for French francs at 9.50 to the pound in one month's time: say forward contracts totaling £10-billion. For these he must pay a fee to a bank. Then he waits until the month is nearly up. Then suddenly he starts buying pounds again in very large volumes and throws them against the exchange rate through selling them. So big is his first sale of pounds that the currency falls, say 3-percent against the franc. At this point other, smaller players see the pound going down and join the trend he has started, driving it down another 3-percent. Overnight he borrows another vast chunk of pounds and sells into francs again, and meanwhile the word is going around the market that none other than the master speculator is in action, so everyone joins the trend and the pound drops another 10-percent. And on the day when the forward contract falls due for him to sell pounds for francs at 9.50 the pound in the spot market is down at 5-francs. He takes up his huge forward contract and makes a huge profit. Meanwhile there is a sterling crisis, etc. etc.[45]

Although Americans are currently (2004) riding high as free trade profits flow from the South to the North,

a global free market ... no more works in the interests of the American economy than of any other. Indeed, in a large dislocation of the world markets the America economy would be more exposed than many others.... In this feverish atmosphere a soft landing is a near impossibility. Hubris is not corrected by twenty percent.... Economic collapse and another change of regime in Russia; further deflation and weakening of the financial system in Japan, compelling a repatriation of Japanese holdings of US government bonds; financial crisis in Brazil or Argentina; a Wall Street crash - any or all of these events, together with others that are unforeseeable, may in present circumstances act as the trigger of a global economic dislocation. If any of them come to pass, one of the first consequences will be a swift increase of protectionist sentiment in the United States , starting in Congress.[46]

History supports Friedrich List, not Adam Smith

The enormous industrial successes of Britain, America, Germany under Bismarck, Germany's post WWI Third Reich, the Soviet Union, pre-WWII Japan, the rapid rebuilding of Europe, post-WWII Japan, the Asian Tigers, and now China-all industrializing by following Friedrich List's precepts-outlines the importance of protecting tender industries and markets.. That no nation in the world ever developed under Adam Smith free trade (the rhetoric that they did, and are, notwithstanding)-prove the sound logic of List's philosophy of protection for tender new industries and markets.

Protection is the norm for all wealthy nations both for their internal economies and in their trades with the world. Although a requirement under structural adjustment rules for weak nations on the periphery of empire, no powerful nation would ever leave its citizens to the predatory whim of global capital. If they did, their citizens would vote them right out of office.

The exponential expansion or contraction of a nation's accumulation of capital due to inequality of pay for equally-productive labor, the origins of plunder-by-trade, and the fact that Adam Smith free trade was an extension of that claim upon others' wealth is what is missing in both classical and neo-liberal economics. Only by building from a base of true economic history can one write honest theories of economic development. That true economic history provides its own solutions.

If they knew, conscientious citizens would never tolerate the maintenance of their standard of living through arbitrarily laying claim to the wealth of others let alone the utilization of wholesale (state) terrorism in that process. Thus covert, violent, and oppressive foreign policy of powerful nations must be kept secret.

We next turn to how that was accomplished through establishing the greatest propaganda system the world has ever known to promote the free trade philosophy addressed above that was protecting the claims of powerful nations on the wealth of weak nations.