« The Labor Market Continues to Improve | Main | Fed Watch: Another Positive Employment Report »

Friday, March 09, 2012

Rodrik: Free-Trade Blinders

Dani Rodrik on free trade and the distribution of income:

Free-Trade Blinders, by Dani Rodrik, Commentary, Project Syndicate: I was recently invited by two Harvard colleagues to make a guest appearance in their course on globalization. “I have to tell you,” one of them warned me beforehand, “this is a pretty pro-globalization crowd.” ...
[M]aybe they did not understand how trade really works. After all, when I met with them, I posed the same question in a different guise, emphasizing the likely distributional effects of trade. This time, the free-trade consensus evaporated...
I began the class by asking students whether they would approve of my carrying out a particular magic experiment. I picked two volunteers, Nicholas and John, and told them that I was capable of making $200 disappear from Nicholas’s bank account – poof! – while adding $300 to John’s.  This feat of social engineering would leave the class as a whole better off by $100. Would they allow me to carry out this magic trick?
Those who voted affirmatively were only a tiny minority. ... Clearly the students were uncomfortable about condoning a significant redistribution of income, even if the economic pie grew as a result. How is it possible, I asked, that almost all of them had instinctively favored free trade, which entails a similar – in fact, most likely greater – redistribution from losers to winners? They appeared taken aback. ...

Too many economists ... attribute concerns about globalization to crass protectionist motives or ignorance, even when there are genuine ethical issues at stake. By ignoring ... redistributive outcomes that we would consider problematic at home, they fail to engage the public debate properly. They also miss the opportunity to mount a more robust defense of trade when ethical concerns are less warranted.

While globalization occasionally raises difficult questions about the legitimacy of its redistributive effects, we should not respond automatically by restricting trade. ... But democracies owe themselves a proper debate, so that they make such choices consciously and deliberately. Fetishizing globalization simply because it expands the economic pie is the surest way to delegitimize it in the long run.

    Posted by on Friday, March 9, 2012 at 01:10 PM in Economics, Income Distribution, International Trade | Permalink  Comments (56)


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.