On Trade

I wrote a long-ish email to a friend on trade stuff. I thought that I may as well re-post it here too:

I think trade is one of the great mysteries of our day. I was a confirmed free trader as a teenager and undergrad. I learned about Cobden and Bright and the Manchester Radicals, when free trade was considered a left-wing cause against aristocratic farm interests and I enjoyed Krugman’s Pop Internationalism broadsides against Lester Thurow and Clinton’s strategic trade folks. But I think Ricardo’s 2×2 matrix with wine and wool that everyone learns as an undergrad is dangerously simplistic and the distributional and cultural aspect are totally neglected.

One of the best books that I have read in the last few years is “Which Side Are You On?” which is a memoir of a U.S. labor lawyer in the 1980s. It really sums up the mustiness of talking about trade and the kind of Dick Gephardt, hard hat throwback feel of it all, but also the romantic unions of the CIO under Lewis and how he took on Roosevelt and the folk songs and community traditions. On trade, I’ve come to doubt the bien pensant free trade position because of a few things:
i) No country has emerged from poverty by following free trade positions. I remember downloading Ha-Joon Chang’s Kicking Away the Ladder online (it’s a free e-book, I think) and it changing how I thought about the history.
ii) The developmental state stuff made me think about industrial policy and, pace George H.W.Bush, that computer chips were more important than potato chips. The Firewall of China is as much (if not more) about allowing for the development of indigenous Chinese tech companies than limiting free information.
iii) There is a false trade-off which some “internationalist” lefties like to posit saying “you want to protect US workers but at the expense of poor Indians” etc. XXXX [name redacted to not give credit to those who disagree with me!] often uses this line against me. This sums up the case against this view well: http://fredrikdeboer.com/2016/04/06/outsource-brad-delong/
iv) there is also this fact that people with free market economics in their heads say “ah, when factors of production can go anywhere, good things happen”. But labor will never be as free as capital and, even if it was, the mass movement of people from place to place to simply look for higher returns is just… anti-human. We can commodify the world but people have a sense of place, they’re embedded in local communities, they have friends, neighbors, sick relatives to attend to. People say “let Detroit die” and I say “what a miserable sentiment”
v) The free trade argument has always been, yes, you may lose your job but you’ll get cheaper goods and move to another job. Tell that to the 55 year old who has made cars all of his life. Can one not have some sympathy with these folks? https://www.youtube.com/watch?v=Y3ttxGMQOrY
vi) The trade-off for all this costs-concentrate/benefits-diffuse hard-headedness is amazing amounts of economic insecurity for working men and women and the social costs of communities that get devastated. I see little in the way of similar insecurity for attorneys, doctors, accountants etc. Funny that.
viii) and who gains from this all? Those with access to capital. We live, perhaps, in a r>g world. This is politically problematic unless one believes in a Marxist utopia which awaits us all and revolutionary pessimism is the name of the game.
ix) If one conceives of a one-world model for trade and one de-territorializes it for a second, then we’d think that there would be a kind of some who would do high cognitive tasks, things beyond the reach of automation and algorithms, and those who do more manual labor (increasingly automated) and low-level service work. There would be a value chain from rice farmer, to car factory worker, to screenwriter or value investor. OK, maybe trade allows countries to specialize into these roles. But people WITHIN these countries might not have the abilities to adapt to these kind of economies. Not everyone in the U.S. can be a creative director of a marketing company or a systems engineer; not everyone in Sierra Leone wants to (or can) farm cotton. So what is the answer for these people? Burger-flipping, cutting hair, or moving to somewhere with more lower skilled jobs? Leaving for the U.S. to be brain surgeons? We’ve seen with London and San Francisco that the concentration of high wealth has terrible side effects for those outside of the 0.001%. Dani Rodrik and some kind of limited globalization seems like a much more attractive option than this globaltopia still being pushed. We need suggestions for reform that are not greeted by “you’re sailors cursing the sea! Get on board or else!”
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