Thursday 17 January 2008

What to Expect When You’re Free Trading

Steven E. Landsburg, one of my favourite economics writers, has a new article in the New York Times entitled What to Expect When You’re Free Trading. Landburg's basic question is
All economists know that when American jobs are outsourced, Americans as a group are net winners. What we lose through lower wages is more than offset by what we gain through lower prices. In other words, the winners can more than afford to compensate the losers. Does that mean they ought to?
His answer, no. But if compensation doesn't take place why would those who fear losing, at least in the short term, not fight a move towards free trade? If you want defuse the very vocal and dangerous anti-free trade movement isn't an attempt at compensation a sensible and justifiable policy? As Jagdish Bhagwati has pointed out trade liberalization can backfire politically
... as workers in import-competing industries are likely to mobilize against the adjustment being imposed on them. Politicians in democratic countries are also unlikely to be impervious to their complaints, especially as those who lose are more likely to vote to punish you than those who win are likely to reward you, an symmetry that seems to be fairly common.

1 comment:

Paul Walker said...

For additional comments on the Landsburg article see What to Expect When You’re Free Trading: part 2