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Monday, April 07, 2008

"Why Embrace Economic Change?"

Lane Kenworthy explains why he believes Democrats should embrace economic change:

Why Embrace Economic Change?, by Lane Kenworthy: I suggested in an earlier post that it would be good if leading Democrats encouraged Americans to embrace economic change. Doing so would increase the political feasibility of putting in place a policy package that enhances economic security and promotes mobility.

I want to try to spell out the argument a little more clearly and elaborate a bit.

The argument

  1. Economic globalization tends to benefit Americans as consumers. ...
  2. Economic globalization also benefits some Americans as workers. ...
  3. Economic globalization hurts some Americans as workers. ...
  4. Access to the U.S. market tends to benefit citizens in poor countries...
  5. It is economically and politically wise to have government policies in place that help those hurt by globalization to adjust. ...
  6. Technological advance has properties similar to globalization...
  7. The policies described in #5 are just as appropriate for those hurt by technological change or internal economic movement as for those hurt by globalization. ...
  8. These policies are likely to be easier to sell politically if framed as a response to all forms of economic change, including globalization.
  9. We already have most of these policies, but they are inadequate in coverage, funding, and coordination.
  10. Part of the reason these programs are inadequate is that debate ... tends to get stuck on the question of free trade vs. managed trade. ... Far less attention, if any, gets devoted to the adjustment and cushioning side. As a result, the political constituency and momentum for these policies tend to be far smaller than they could be.
  11. For Democrats, it might not be harmful politically to shift toward a position that embraces economic change...
  12. This does not mean Democrats ought to rule out trade restrictions altogether. ...

A couple of examples Barack Obama and Hillary Clinton. ...

Okay, but … They don’t really mean it. Neither Obama nor Clinton is likely to press for serious restrictions on trade or offshoring if elected president. This holds for most Democrats running for Congress too. But that isn’t the point. Even if they did follow through on a managed trade agenda, it probably wouldn’t have much impact on actual import levels. Pacts such as NAFTA seldom dramatically alter the degree of cross-border trade; had it not passed, imports from Mexico would not be much lower than they are today. The problem isn’t that managed trade rhetoric might lead to actual trade restrictions; it’s that it distracts from efforts to advance the scope and generosity of adjustment and cushioning policies.

Are there really net gains to Americans from globalization? I think the evidence leans heavily in favor of believing so, but some reasonable analysts are skeptical. Even if this skeptical view were correct, though, I doubt that trade restrictions would do nearly as much good for Americans as a generous set of cushioning and adjustment policies. ...

I might be wrong about the impact of restrictionist rhetoric on the politics of social policy. My argument rests on a hypothesis that Democratic leaders’ trade rhetoric has a significant effect on the political feasibility of more generous and extensive social policies. I could be wrong about this. But given that any trade restrictions they might actually put in place would probably do little to stem globalization, it seems to me the potential costs of abandoning managed trade rhetoric are likely small.

More reading ... [...link to full post...]

    Posted by on Monday, April 7, 2008 at 12:24 AM in Economics, International Trade, Politics | Permalink  TrackBack (0)  Comments (21)

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