Capitalist trade and its discontents

Posted: 17 March 2016 in Uncategorized
Tags: , , , , , , , ,

heights

It doesn’t take a genius to understand that international trade under capitalism creates winners and losers. A few winners and lots of losers.

Generations of heterodox economists have demonstrated exactly that—that, both theoretically and empirically, capitalist trade can and often does have diverging class effects. Mainstream economists, however, persist in arguing exactly the opposite: everyone gains from trade.

They were even warned by one of their own, more than a decade ago. Back in 2004, the late Paul Samuelson, widely recognized as the dean of modern mainstream economists, published an article in the Journal of Economic Perspectives in which he challenged the presumed universal benefits of free trade. It is quite possible, Samuelson argued, that if enough higher-paying jobs were lost by American workers to outsourcing, then the gain from the cheaper prices may not compensate for the loss in U.S. purchasing power. In other words, the low wages at the big-box stores do not necessarily make up for their bargain prices.

But that hasn’t stopped mainstream economists from repeating their story about the benefits to all of expanding trade. In fact, in the midst of the current campaign, in which Donald Trump and Bernie Sanders have recognized and responded to (in very different ways, of course) the insecurities and anxieties of American workers, mainstream economists and their elite allies appear to be even more determined to double-down on their free-trade fantasy.

The latest, in the Wall Street Journal, is from Morton Kondracke and Matthew J. Slaughter.*

Where is the leader with the courage to tell the truth? To say that trade made this nation great, and that trade barriers will destroy far more jobs than they can ever “save.” To explain how trade translates into prosperity and new jobs, and how the disruptions inevitable in a trading economy can be managed for the benefit of those who need help.

There’s nothing new here. Kondracke and Slaughter repeat the usual arguments: the advantage of lower prices for imported goods, the gains from creative destruction, and schemes for those who gain from trade to help the losers.

The fact is, however, workers without jobs and those stuck in low-wage jobs can only afford to buy low-price imported goods; the gains from creative destruction and the shift in the U.S. economy toward services, especially in the financial sector, have been captured mostly by a tiny minority at the top; and, while in principle it’s possible for winners to subsidize losers, it simply doesn’t happen. Capitalists continue to negotiate trade agreements and to offshore jobs while forcing U.S. workers to accept lower wages and fewer benefits—and they continue to capture and keep for themselves most of the gains.

That’s why the ranks of the discontents from capitalist trade have continued to grow.**

*Disclaimer: I supervised Slaughter’s senior thesis on Amartya Sen’s writings on ethics and economics.

**And, to be clear, not just in the United States. Worker unrest is apparently growing in China.

Update

The free traders are certainly under fire but they’re not in retreat. On the contrary. Just as I finished this post, I chanced upon Miriam Shapiro’s flimsy attempt to challenge the “demagogy” of denouncing existing trade details.

Comments
  1. […] mainstream economists, who attack any exceptions to the free-trade mantra with a vengeance (as even Paul Samuelson […]

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