A Tense Problem
Mark Thoma begins with a hilarious typo, but eventually gets to the Quote of the Decade (if not century) from Alan Blinder:
If we economists stubbornly insist on chanting ‘free trade is good for you’ to people who know that it is not, we will quickly become irrelevant to the public debate.
As Rusty can (and will, at length) tell you, the thing that is wrong with that sentence is the tense. We have had free trade agreements for decades, China has had MFN status since the 1990s, and permanently since 2000. The pieces of the former Soviet Union, including the current oligarchy that is called Russia, have had that status since 1992. NAFTA, including its abhorrent Chapter 11, has been in force since 1994.
There has been a generation that has lived under “free trade.” While an economist might successfully argue that the overall social benefit has been great—millions of Chinese parents become estranged from their children to make a better life, as it were—the retraining, redevelopment and all of the other assumptions economists make about ameliorating the transition to a new economy have been eschewed.
The example of Boeing (h/t Felix) bodes large: the valuable work was outsourced, the menial work was kept (or spun off into bankruptcy), and the new “higher-value” jobs and opportunities that were expected by
idiots economists never materialized, replaced instead by growing income inequality and the retraining money lined the pockets of the CEOs who produced (to borrow a phrase used by the brilliant McGarrysGhost on Twitter) “failure masquerading as vision.”
And any microeconomist worth his paycheck can tell you that increasing inequality leads to suboptimal production.
Blinder is wrong in only one thing: the tense he uses indicates that the results are still, somehow, in doubt. The ability of Chinese peasants to eat a bit more is nice, but the externalities—poisoned toothpaste, dog food,* defective tires—make it rather impossible to claim that the “advantages of free trade” have trickled down in any way except as a ureotelic (mp3 link).**
The first thing we were told by our veterinarian about the new puppy is that we need to make certain that any food she eats was made in either Canada or the United States. Fortunately, pet food—unlike its human equivalent—is required to be labeled with origin information.
**You better believe I’m doing The Snoopy Dance on having discovered this site, which saves me from trying to find a way to transfer my old cassette to a usable format. But that’s fodder for Skippy, not here.
Out of town for a family minor emergency but since I was mentioned……
I think the e4conomists association should have its next meeting in Toledo or Flint…..just to see what free t5rade looks like
i don’t know that it’s all free trade. i was raised to believe in free trade. took me years and years to see through the simple minded “proof.”
but along with free trade, I think we had a management problem. Something in some Big Business went wrong. Managers didn’t know very much, and didn’t seem to be particularly honest. Ralph Nader did not bring down General Motors, but he exposed the kind of “thinking” that would lead to its fall.
Not very different from the kind of thinking that pervades Washington and the press.
Millions of Chinese parents have been estranged from their child, not their children (they are only allowed one.)
To parapharase: When someone says “Free Trade” I reach for my gun. Actually I reach for Dean Baker at Beat The Press.
One of my students was intern at a German pet food factory. She had to help design a system which had to enable control of the production process of Pakistani suppliers of ingredients – our pet food has to be safe! The Dutch feed industry does the same when it comes to feed ingredients from South America – they control the way its suppliers produce these agricultural products in great detail.
A. This level of control is enitrely posible, so it shows
B. That’s the market as many economists do not know it: detailed and pervasive, ‘Big Brother’ style control and coercion – ’empire’ in the language of the modern economist
C. We do this (rightly) when it’s about the wrong chemicals in the ingredients of petfood and feed, we do not do it (wrongly) when it comes to slave labor (cocoa beans) or child labor (quite a lot of Ikea style ‘stuff’) – part of the ‘augmented’ product – in the parlance of modern marketeers. Even to the contrary: Xenos, a low price outlet of this Ikea style third world ‘stuff’ in the Netherlands, systematically tries to avoid any designation of origin on the products it sells.
Can you e-mail me at angrybeablog@gmail,com