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Monday, March 28, 2016

Paul Krugman: Trade, Labor, and Politics

Why have Republican been more protectionist than Democrats?:

Trade, Labor, and Politics, by Paul Krugman, Commentary, NY Times: There’s a lot of things about the 2016 election that nobody saw coming, and one of them is that international trade policy is likely to be a major issue... What’s more, the positions of the parties will be the reverse of what you might have expected: Republicans, who claim to stand for free markets, are likely to nominate a crude protectionist, leaving Democrats, with their skepticism about untrammeled markets, as the de facto defenders of relatively open trade.
But this isn’t as peculiar a development as it seems. ... It’s true that globalization puts downward pressure on the wages of many workers — but progressives can offer a variety of responses to that pressure, whereas on the right, protectionism is all they’ve got.
When I say that Republicans have been more protectionist than Democrats, I’m not talking about the distant past... Reagan, after all, imposed an import quota on automobiles that ended up costing consumers billions of dollars. And Mr. Bush imposed tariffs on steel that were in clear violation of international agreements, only to back down after the European Union threatened to impose retaliatory sanctions. ...
But protectionism isn’t the only way to fight that downward pressure. ... Consider, for example, the case of Denmark... As a member of the European Union, Denmark is subject to the same global trade agreements as we are... Yet Denmark has much lower inequality than we do. Why?
Part of the answer is that workers in Denmark, two-thirds of whom are unionized, still have a lot of bargaining power. If U.S. corporations were able to use the threat of imports to smash unions, it was only because our political environment supported union-busting. Even Canada, right next door, has seen nothing like the union collapse that took place here.
And the rest of the answer is that Denmark (and, to a lesser extent, Canada) has a much stronger social safety net than we do. In America, we’re constantly told ... we can’t even afford even the safety net we have; strange to say, other rich countries don’t seem to have that problem. ...
And there’s a lesson here that goes beyond this election. If you’re generally a supporter of open world markets — which you should be, mainly because market access is so important to poor countries — you need to know that whatever they may say, politicians who espouse rigid free-market ideology are not on your side.

    Posted by on Monday, March 28, 2016 at 06:54 AM in Economics, International Trade, Politics | Permalink  Comments (200)


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