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My (admittedly very limited) understanding is that free trade is seen by most academics and legislatures in the West as an ideal to strive for.

The theory is that if a man in China can manufacture a ceramic cup cheaper than a man in Stoke-on-Trent then the UK government should not protect the Stoke man from the competition. In any way (AFAICT).

The reasoning being that the UK buyers of ceramic cups will benefit from the lower cost of the good from China and presumably that the market remains more efficient.

The societal costs of this approach can be huge. For example, unemployment, lower wages and all the pathologies that are concomitant.

So UK citizens get cheaper ceramic goods on the one hand, but in a socialist system they have to pay for this privilege with the other via taxation to support entitlements and governmental support to mitigate the aforementioned societal effects.

Furthermore the cost of production is often only loosely related to the selling price. So for example hypothetically it is possible that, say, a large UK company, say Debenhams will source ceramic cups from China, but retain the price differential as profit for distribution amongst board members. Thereby making this a redistributively regressive policy.

Why have Western governments pursued so aggressively this free market model between countries with wildly different economies and laws (cf environmental) without appearing to take into account the "price" that has to be paid for this "market efficiency"?

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  • $\begingroup$ Your title says "free market capitalism", but the content is mostly "free trade", isn't it? Perhaps you should rephrase the title. $\endgroup$ – Richard Hardy Feb 19 '17 at 18:22
  • $\begingroup$ This question has an answer to the question you asked in the title:economics.stackexchange.com/questions/1714/… $\endgroup$ – Jamzy Feb 20 '17 at 1:31
  • $\begingroup$ I think it is an interesting question but has a few oversimplifications, particularly with the "unemployment and lower wages" outcome of free trade and the idea that all the benefits of trade go to corporations. $\endgroup$ – Jamzy Feb 20 '17 at 2:28
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    $\begingroup$ I agree with Jamzy: your question already has an answer at: Have there been instances where economists have advocated a trade embargo? , so this question is, by the norms of this site, a duplicate of that one. $\endgroup$ – EnergyNumbers Feb 20 '17 at 6:03
  • $\begingroup$ On the other hand, perhaps it might be more helpful to you, if you were to ask about the difference between free international trade and free market capitalism, as you seem to have conflated the two. $\endgroup$ – EnergyNumbers Feb 20 '17 at 6:06

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