Alex Tabarrok does an excellent job of summing up what Dani Rodrik has been saying about how a movement towards free trade has both winners and losers. Alex tags Dani’s argument – which I have applauded – as the nationalist view. It goes something like this – when Americans like “Peter” trade with Mexicans like “Jose”, there are other Americans such as “Joe” who may suffer a decline in real income. But then Alex reminds me that I’m a liberal internationalist:
I would argue, however, that economists are too quick to take the nation as the relevant moral community. It is quite possible, for example, for Peter to benefit from trade but for Peter’s city to be harmed, for Peter’s state to benefit but for his region to be harmed, for his country to benefit but for his continent to be harmed. Why should we cut the cake in one way, excluding some from the moral community, but not in another? Indeed, geography is not the only way we can define the moral community. Why not ask whether English speakers benefit from free trade or Christians or left handed people? Each of these is just as valid as asking whether the collection of people called the nation benefit from free trade. I understand individual rights and I understand counting everyone equally but I see less value in counting some in and some out based on arbitrary characteristics like which side of the border the actors fall on.
The Lou Dobbs wing of the Democratic Party complain that Joe’s income – which may be seen as somewhere between middle class to working poor – is diminished by free trade pacts such as NAFTA. While this may be true, Jose’s income – which is likely lower than Joe’s – is increased in Alex’s thought experiment. But as one listens to Lou Dobbs – he does not consider Jose’s situation to be at all relevant. This is where I part company with the Lou Dobbs Democrats.