More on Steeling Jobs

by Don Boudreaux on October 31, 2006

in Trade

Faultolerant says in a comment on this post

You touch on one issue which is ALWAYS overlooked in econ/lib circles:
The people who are most affected by these changes [more international trade] (as you say, fair or
not). Econ/Libs are happy to toss them out like yesterday’s trash – and
say these people should be thankful for it. I love it when folks in
this forum argue FOR job losses in the US and then primp and pose that
we should be happy for it. It’s fine to have such high-and-mighty
morals when it’s not your ass on the line – and when there’s no skin in
the game. (Or in the case of a lib, when you can still get your cheap
chinese crap at wal-mart). But let someone say that there are BOTH
short and long-term consequences and you get lots and lots of feedback
– all of it negative.

Faultolerant misunderstands the argument.

No part of the argument for free trade celebrates job losses per se.  No one I know — not a single soul — denies that losing a job is typically an unpleasant experience, and often a very difficult one.  And no one I know — again, not a single soul — is happy to toss workers out "like yesterday’s trash."

The argument for free trade is that over time, more and more persons are benefitted by a regime of open trade.  Some persons suffer in the short-run, it’s true.  But those who suffer do so only because they are part of an economy made prosperous by free markets.  That is, the very benefits such persons lose when trade works to their disadvantage are benefits that these persons have in the first place only because these persons are employed in market economy.

The steel-worker, for example, would never have been a steel worker — and would never have had the opportunity to consume so abundantly out of his steel-worker’s wages — had he not been part of a market economy.

"But ‘market economy’ doesn’t necessarily mean an economy with free trade," someone might reply.  True (although, in fact, many of the jobs lost today in the U.S. to imports would never have existed had America been closed to imports).

The crucial point is that for Joe or Suzy to be part of a market economy is for Joe and Suzy each to accept the enormous gains that come from continual entrepreneurial innovation, from consumer sovereignty, and from a free labor market in exchange for Joe and Suzy each agreeing not to prevent these forces from working when these forces happen to go against the short-run interests of Joe or Suzy.

Whenever consumers change their spending patterns, and whenever producers find new ways of producing some output, some jobs will be eliminated while other jobs will be created.  Imagine how many jobs were lost when consumers, enthrall to the Atkins Diet, reduced their purchases of donuts, beer, pasta, and other foods loaded with carbohydrates.  Imagine how many jobs were lost when medical researchers discovered an effective vaccine for polio.  How many house painters have been put out of work by vinyl siding?  How many persons who worked in film-developing labs are today not working in those labs because of the widespread use of digital cameras?

And this train of thought then points us to another important feature of the argument for free trade: because any change in consumer spending patterns and producers’ production practices will create some jobs and elminate others, there’s nothing at all special about that particular change in consumer spending patterns that comes about when consumers voluntarily purchase more goods and services from abroad.  There’s simply nothing economically relevant about the fact that a supplier happens to live on one side of a political border and many of that supplier’s consumers live on another side of that border.

The only thing relevant about the political border is political.  The greedy, unjustified quest of every producer to be excepted from the rules that make markets work so productively for the benefit of all is easier to justify, it seems, if these producers present an "us" versus "them" horror story, alleging that there’s something nefarious about foreigners offering to sell things to us.

Finally, an important part of the argument for free trade is recognition of human deceitfulness — recognition that making exceptions to a policy of free trade whenever someone alleges that foreigners are behaving "unfairly" too easily is abused.  Who knows if Chinese steel producers are behaving fairly or unfairly?  These terms have no hard and fast meaning in such a context.  But let’s say that some Chinese firm is indeed (say) selling its steel to Americans at a price below that firm’s cost of production.  Well, good for us.  We get cheap steel.

Oh, but what about U.S. steel workers who lose their jobs?  They are in the same boat they’d be in if the Chinese steel producer enjoyed a genuine comparative advantage over American steel producers.  If a foreigner insists on selling things to us at a discount, it is not the government’s place to prevent Americans from accepting such generosity.


64 comments    Share Share    Print    Email

Previous post:

Next post: