Friday, November 26, 2004
Time for the free trade left
David Brooks writes about an important topic in today's NYT: the benefits of free trade for developing nations. He notes that in recent years, growth in developing nations has risen at historic rates. He also cites work by Sala-i-Martin, who finds that inequality globally has fallen, even as it has risen in many nations.
Some thoughts:
1. Partly, this is a reshuffling of inequality, from something that divided rich nations from poor nations, to something that divides middle and lower classes within nations. But because I take the view that an impoverished Congolese is as bad as an impoverished Canadian, I view the net decrease in inequality and poverty as a good thing.
2. Whether higher growth is mainly a result of globalization is an open question. As a friend once pointed out to me, it is very difficult to find any examples of countries that developed without protectionist policies. (I hasten to emphasizes there are many examples of countries with protectionist policies that failed to develop; my friend was wondering if they are a necessary condition, not supposing they were sufficient). Maybe whatever stage of development we're in (late late super late?) allows or even requires free trade development policies. I don't know. But it is an open question.
3. Setting aside the growth question, the changing patterns of inequality do fit with a basic Stolper-Samuelson view of trade betwen rich and power nations, which (put crudely) should make the poor and rich within nations more alike (while producing efficiencies all around, of course).
4. I've always been a free trader, but I've also always been in favor of strong welfare states. And despite American's parochial assumptions that the left is always protectionist, many left-wing parties throughout Europe's smaller countries have long been welfare state free traders. And if you believe point (3), this approach makes a lot of sense: capture the efficiency gains from trade, and use your growing wealth to ensure economic security and an income floor for all your citizens. You can have falling inequality across nations and within nations, if you build up the welfare state even as you tear down tariffs.
5. I simply note (the literature is too large to summarize, and it's late) that welfare states can persist, grow, and even thrive in economies open to world trade, even in today's "era of limits".
6. Institutions involved in globalization, like the IMF, often twist developing countries arms to get them to adopt not just free-trade, but a whole neo-liberal brew of rigid monetary policy and austere public spending, even during recessions. We taint the benefits of free trade when we tie them to this sort of economic blackmail.
7. The American left should pair the welfare state and free trade more often in its rhetoric. If you admit the later is unstoppable, insist on the former.
8. The right should be ashamed of touting the benefits of free trade for the poor as the ranks of the poor grow in the US as a result of their half-assed policies.
9. Finally, a note for David Brooks. Cut the caricatures. The left is more than Bono and Springsteen. There are lots of smart people engaging these issues, but instead of taking on their arguments, you take potshots at singers. Classy.
And spare us homilies like "if you really want to reduce world poverty, you should be cheering on those guys in pinstripe suits at the free-trade negotiations and those investors jetting around the world"? Everyone is involved in globalization. Why single out investors for praise, and not hard-working laborers or farmers? Investor-worship went out of fashion with compulsive Nasdaq watching.
Some thoughts:
1. Partly, this is a reshuffling of inequality, from something that divided rich nations from poor nations, to something that divides middle and lower classes within nations. But because I take the view that an impoverished Congolese is as bad as an impoverished Canadian, I view the net decrease in inequality and poverty as a good thing.
2. Whether higher growth is mainly a result of globalization is an open question. As a friend once pointed out to me, it is very difficult to find any examples of countries that developed without protectionist policies. (I hasten to emphasizes there are many examples of countries with protectionist policies that failed to develop; my friend was wondering if they are a necessary condition, not supposing they were sufficient). Maybe whatever stage of development we're in (late late super late?) allows or even requires free trade development policies. I don't know. But it is an open question.
3. Setting aside the growth question, the changing patterns of inequality do fit with a basic Stolper-Samuelson view of trade betwen rich and power nations, which (put crudely) should make the poor and rich within nations more alike (while producing efficiencies all around, of course).
4. I've always been a free trader, but I've also always been in favor of strong welfare states. And despite American's parochial assumptions that the left is always protectionist, many left-wing parties throughout Europe's smaller countries have long been welfare state free traders. And if you believe point (3), this approach makes a lot of sense: capture the efficiency gains from trade, and use your growing wealth to ensure economic security and an income floor for all your citizens. You can have falling inequality across nations and within nations, if you build up the welfare state even as you tear down tariffs.
5. I simply note (the literature is too large to summarize, and it's late) that welfare states can persist, grow, and even thrive in economies open to world trade, even in today's "era of limits".
6. Institutions involved in globalization, like the IMF, often twist developing countries arms to get them to adopt not just free-trade, but a whole neo-liberal brew of rigid monetary policy and austere public spending, even during recessions. We taint the benefits of free trade when we tie them to this sort of economic blackmail.
7. The American left should pair the welfare state and free trade more often in its rhetoric. If you admit the later is unstoppable, insist on the former.
8. The right should be ashamed of touting the benefits of free trade for the poor as the ranks of the poor grow in the US as a result of their half-assed policies.
9. Finally, a note for David Brooks. Cut the caricatures. The left is more than Bono and Springsteen. There are lots of smart people engaging these issues, but instead of taking on their arguments, you take potshots at singers. Classy.
And spare us homilies like "if you really want to reduce world poverty, you should be cheering on those guys in pinstripe suits at the free-trade negotiations and those investors jetting around the world"? Everyone is involved in globalization. Why single out investors for praise, and not hard-working laborers or farmers? Investor-worship went out of fashion with compulsive Nasdaq watching.
