Some, but only some, of the damage wreaked by the current turmoil in financial markets is visible. Anyone owning a home knows that it is worth less than it once was. Anyone trying to buy a home knows that mortgages are harder to come by. Anyone out of work knows that the banks' problems are his problems. Anyone with a job knows what it is like to wake up in the morning hoping his job will still be there.

But there is one consequence of the upheavals in the credit markets, and now in the "real economy" that is less visible, and will be with us even after the recovery takes hold. The era of ever-free trade has ended. Any lingering hopes that free-trade advocates might have had to stem the rising tide of protectionism are gone: A worldwide financial crisis is not an environment that fosters acceptance of the view that all is for the best in a world in which capital, labor, and goods move freely across borders.

Even before we realized just how toxic the assets on bank balance sheets are, free trade was under siege. Negotiations for the Doha round had been taken off life support and moved to the morgue. Nicolas Sarkozy was not about to surrender the protected position of France's farmers because some long-dead Scot had scribbled something about the virtues of free trade, and a Democratic-controlled congress made it clear that it would bow to the wishes of the trade unions--providers of financial support and field troops in the upcoming elections--and refuse to endorse any new trade agreements. Indeed, Barack Obama promised to make unilateral changes in Bill Clinton's North American Free Trade Agreement (NAFTA) if Canada and Mexico would not go along with tightened labor and environmental standards.

But it would be unfair to blame the backlash against free trade solely on the fears unleashed by the current economic problems or a hunt for political advantage. Defenders of free trade can make a reasonably good case that it increases overall efficiency and aggregate material welfare. What they have failed to do is develop a defense of the way the benefits of free trade have been distributed.

Consumers are the clear winners--imported goods from countries with low labor costs help to keep inflation in check and enable consumers to make their incomes stretch further. But in the short run such goods displace workers in the importing countries, and exert downward pressure on wages, especially the wages of the unskilled who find themselves competing with the over one billion Chinese, Indian and other workers who have recently entered the international labor market. Meanwhile, globalization has increased the opportunities for members of the managerial class: They can spread their talents over larger enterprises. Result: rising inequality, with trade--sometimes called globalization--the apparent villain.

On top of that we now have a global financial crisis and a looming recession. House prices are down, repossessions are up, unemployment is up, retail sales are down as consumers sheathe their credit cards lest they inflict still more damage on household finances. Stock and currency markets are in turmoil. The government is taking on billions in debt that taxpayers know bodes ill for their future tax burdens, and believe will only help over-bonused bankers to maintain their bloated living standards. Hank Paulson has his virtues, but when it comes to communications skills he seems to have studied at the feet of George W. Bush.

None of these recent problems can fairly be blamed on freer trade. The so-called credit crunch is the result of improvident lending to imprudent borrowers, and the translation of those IOUs into instruments that are, to put it mildly, opaque. Perhaps more accurately, they are beyond the understanding of mere mortals, which former masters of the financial universe have discovered they indeed are. No matter: it is the brave politician indeed--John McCain is one of that rare breed--who will tell workers who have lost their jobs that the national interest is served by the free importation of foreign goods.

It will be even more difficult to persuade them that the free movement of people is in their interest. McCain and President Bush tried that--under the banner of immigration reform--and alienated their most ardent supporters.

As for the free movement of capital, wasn't it those teenage traders who brought the financial system to its knees by pushing buttons that moved billions of capital around the world in an ever-riskier hunt for high returns?

Free trade has done more to eliminate and alleviate world poverty than all the aid packages combined. But its future is less than bright. Obama's election would be another nail in its coffin.

Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).

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