Today’s New York Times has several letters critical of Steve Landsburg’s recent op-ed, in those pages, on trade. Here’s a letter that I just sent to the Gray Lady in response to one of these letters:
To the Editor:
Taking
Steven Landsburg to task for showing no "compassion" for those "who
have fallen victim to the deleterious side of free trade," Alan Ross
completely misses Mr. Landsburg’s point (Letters, January 20). Free
trade, as Mr. Landsburg eloquently explains, has no victims. In the
long run, it benefits everyone – even those who today lose their jobs
to foreign rivals. The vitally important insight is that almost every
job that Americans today worry about losing was made higher-paying, and
even possible, by trade. For any worker to complain that he is
victimized by trade would be akin, say, to Elvis Presley complaining
that he was victimized by radio because that medium did so much to make
the Beatles more popular than him.
Sincerely,
Donald J. Boudreaux
I might also have ended my letter with this alternative question: Suppose that the rise of Internet news sites causes the New York Times to lose market share. Could the owners and editors of that newspaper then justifiably complain about being victimized by freedom of the press?
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{ 26 comments }
I would be a bit more sanguine about the fate of those who lose their jobs due to free trade if their creditors had a similar optimism and were willing to take the long term view when it came to being paid.
Recommended: "Free Culture" by Lawrence Lessig (Penguin Press, 2004). Although its focus is copyright, its use and abuse, there is plenty of food for thought for all free market activity.
Could the owners and editors of that newspaper then justifiably complain about being victimized by freedom of the press?
Yes. Do you deny that they are worse off because of their competition? One can recognize that trade makes some people worse off and still believe that free trade (and freedom of the press) is good on net.
There are certainly those who do not benefit in the long run. I live in NC; there are a number of people here who grew up in the textile industry. Many of those people have handled the transition quite well. Others, such as those who were nearing retirement and who had worked in, e.g., a sock mill since they were 14, did not. They lost their jobs and found themselves unemployable.
Their problem, of course, is that they have no "long run" — they've run the race and the rug was pulled out from under them close to the end. They had no real chance to make a correction. Their children and grand-children will be better off due to trade, but they won't be.
Sure, they get some benefits from trade — now they can buy cheaper socks than they ever could before. But, on net, they're worse off than they would have been without all the treaties that opened the US market up.
Now, that's a poor reason not to expand trade. But, let's not kid ourselves — there are losers.
Stolper-Samuelson would suggest a bit more modesty, professor Boudreaux. This theorem suggests that that although aggregate welfare is greater with trade than with out, scarce factors are worse off, abundant factors are better off, and the gains to the abundant are greater than the losses of the scarce.
Why do you disregard this?
I'm please you stuck with the Elvis example. You might argue print media like the NYT would be made permanently worse off by the rise of the internet. Society, on the other hand, does very well out of it.
Let's be clear: even IF the print media are made permanently worse off — in part because of freedom of the press — by the rise of the Internet, the deep point is that the very same freedom of the press that is partly responsible today for the NY Times's loss of market share was responsible yesterday for its good fortune — that is, for enabling the NY Times to amass the market share that (in this hypothetical example) it is today losing. If the NY Times today, when seeing its market share decline with the rise of Internet sites, complains that it is a victim of freedom of the press, most of us (I think) would understand that the very freedom of the press that today enables Internet news sites to take away the NYT's market share was crucial in the past to allow the NYT to become the news-supplying leader that it was for so long.
Puzzled – true, owners of scarce resources made abundant by trade is going to make those former oligopolists worse off. But that isn't why Landsberg was being criticised. He was being criticised for ignoring those who lose their jobs. Stolper-Samuelson isn't about that.
Chris,
Are they losers because of free trade? Or because they worked in a sock mill and expected that doing so would provide cradle to grave security?
@chris
No one had the rug pulled out from under him. Forecasting the future is something we want to encourage so that our economy can remain dynamic and responsive.
If I were employed as a customer service representative right now and was not searching for new employment, I don't think I could rightly call foul when my job is shipped overseas, claiming that I was caught unaware.
Chris,
I disagree that they are "losers". Whether from free trade, domestic competition, or just plain progress, some people with long standing jobs aren't going to have them. Why aren't we bemoaning all the incandescent light bulb makers who are going to have to find other jobs because of Congressional mandate? And how about those old Apple ][ developers who've had to move on to other pastures? Protectionists are afraid of competition, period. Really. How crappy does your company have to be to lose out to a foreign firm that has to stick its widgets in a container, ship them on a boat, have them wait in line at a port of entry, etc.? If the term loser applies at all in this discussion, that's where.
Randy and Matt –
I completely agree that if these people had been wise, they would have seen what was coming down the pike and would have prepared for it. But, nobody's omniscient, especially folks who have been working in s factory since dropping out of high school.
Those people are a predictable outcome of a pro-trade decision. Now, it would be foolish to make trade decisions based on the small minority of people who actually get hurt. But, we shouldn't kid ourselves that those people don't exist.
Of course, it all depends on your baseline — Don seems to be asserting, approximately, that the mill workers should be happy that they survived as long as they did; after all, had trade been properly free all along, they never would have had those jobs to begin with. But, "well, you're better off than you would have been in this theoretical world that never actually existed" is hardly a convincing argument.
Chris,
I'd say the argument is that only those who have previously won from trade have anything to lose. Human nature being what it is, I don't expect those who suffer setbacks to be "convinced" by the argument that a dynamic economy is best. But its not just "theoretical". Its the truth.
In other news the Gaza Strip has achieve energy independence, and considering the evils of trade, I expect this to be the wealthies of places in the coming years.
http://news.bbc.co.uk/2/hi/middle_east/7198798.stm
How about those workers living abroad who, when protectionist measures are enacted, lose their jobs manufacturing for the American market? No one seems too concerned about them. Why leave them out of the equation?
Chris,
I believe you are totally misunderstanding the point. The textile workers only had their jobs because of free trade. Without trade, we would all be subsistence farmers making our own clothes. The tremendous prosperity we all share in the US is the result of our relatively free trade economy. That prosperity gives even the poor in this country access to luxuries such as television and air conditioning. It also gives opportunities to laid off workers that would not be available in a more protectionist economy. Even low paid jobs in this economy afford a lifestyle that looks extravagant compared to those in much of the world. So even the laid off workers are better off because of free trade than if there were no free trade.
"Their children and grand-children will be better off due to trade, but they won't be."
Except that these individuals do not have to grow their own crops, make their own clothing, or raise their own horses for transportation.
Where is Muirgeo? Celebrating Big Blue's trip to the Super Bowl I hope.
A couple of other considerations to the interesting discussion among Chris, Randy, Brad. First, the wealth of a society with open trade allows it much greater flexibility to create a 'safety net,' such as unemployment insurance, as called for by one of the letter writers. The trick is to do so in such a way as to not reward or sustain dying or uncompetitive businesses, but rather to support the employees' transition to new jobs.
Second, what is the alternative? I actually read the letters in reply to Landsburg’s column. They generally fall in the category of emotional responses. While their good intentions are admirable, there are no rational arguments and no counterproposals. (The exception is a letter from the Alliance for American Manufacturing, which seems to be a union-backed group advocating “strengthen[ing] domestic manufacturing [and] enforce[ing] fair trade laws.”)
Time marches on. People need to understand that trying to block the most efficient solution is, well, inefficient.
Greg –
I think you just set up a straw-man. I was referring to international trade, specifically the removal of trade barriers that prevented other countries from selling clothes into the US–the Landsburg piece was about outsourcing of US jobs. The question isn't whether they benefit from trade, period; of course the answer to that is yes, for the reasons you point out. Instead, the question is whether they benefit from liberalization of international trade. And, on net, I think that answer is no for the specific group I talked about, and for other specific groups.
Don't get me wrong — I favor free-trade policies even though there are losers, because those losses are outweighed by the net benefit of such policies. But, if you pick a "free-trade" treaty (NAFTA, CAFTA, GATT, whatever) or even most unilateral decisions, there will be people in the US who would have been better off without that treaty or decision than with it.
It's such a basic point that I'm surprised that Don even takes exception to it. (Or, maybe I've accidentally set up my own straw man.) I think the stronger argument is, basically, "Sure, there are losers. That's what a dynamic economy is. But, if you constantly go helping out the losers, then you kill their incentive to update their skills and be marketable."
I not sure if I asked this question before so – what about the view with Utilitarianism anyway? A good thing or bad thing? Many free market types, such as Austrians, despise the Utilitarian argument. Humourously it has already been pointed the 'what about the displaced American workers?' can be counterbalanced by 'what about the non-American workers who were barred from making a living thanks to trade barriers?'.
Gil, I think you're spot-on. Economic nationalism is an extremely silly position for academics to hold.
Why is a much-poorer Mexican worker less important than a rich-by-comparison American?
Chris: "Instead, the question is whether they benefit from liberalization of international trade. And, on net, I think that answer is no for the specific group I talked about, and for other specific groups."
Chris, I think everyone in the U.S. has benefitted from international trade in a huge way.
If U.S. consumers had been restricted to goods produced only in the 50 states, the economy would be much smaller.
If U.S. producers had been resticted to only materials available in the 50 states, the economy would be much smaller.
If those U.S. producers had been restricted to only customers residing in the 50 states, the economy would be much smaller.
A much smaller economy would have meant a much lower standard of living for everyone, including the textile workers in NC. Those textile worklers would not likely have had an income sufficient to all them to save for a rainy day. That those workers who benefitted from a strong and free economy for decades – who received much higher paychecks for decades – chose not to save is not due to "liberalization of international trade".
Basically Dr. Boudreaux is trying to argue that the losers would be worse off over the long run in a context of less free trade. That is the argument that the free market types are trying to make. The less free market we are then the less good information we will have, the more we will tolerate inefficient forms of production, the more resources we will waste, and in the long run the less wealth we will have. Im sorry pro-politics types, we cant fake reality.
"Why is a much-poorer Mexican worker less important than a rich-by-comparison American?
Posted by: Grant | Jan 21, 2008 8:28:37 AM"
Mr Grant,
Depends very much upon who is asking the question and why the question is being asked, does it not?
"Chris,
Are they losers because of free trade? Or because they worked in a sock mill and expected that doing so would provide cradle to grave security?
Posted by: Randy | Jan 20, 2008 8:49:38 PM"
Well said Randy, and 100% accurate.