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Bhagwati on the Morality of Free Trade

Today’s dean of international-trade economists – Columbia University’s Jagdish Bhagwati – explains that the case for free trade is not merely a powerful materialistic one; it’s also a stupendously powerful moral one.  (HT Bryan Riley).  Here’s a key passage:

But then critics shift ground and argue that trade-driven growth benefits only the elites and not the poor; it is not “inclusive”. In India, however, the shift to accelerated growth after reforms that included trade liberalisation has pulled nearly 200 million people out of poverty. In China, which grew faster, it is estimated that more than 300 million people have moved above the poverty line since the start of reforms.

In fact, developed countries also benefit from trade’s effect on poverty reduction. Contrary to much popular opinion, trade with poor countries does not pauperise rich countries. The opposite is true. It is unskilled, labour-saving technical change that is putting pressure on the wages of workers, whereas imports of cheaper, labour-intensive goods from developing countries help the poor who consume them.

If freer trade reduces poverty, it is presumptuous for critics to claim greater virtue. In truth, the free traders control the moral high ground: with at least 1 billion people still living in poverty, what greater moral imperative do we have than to reduce that number? Talk about “social justice” is intoxicating, but actually doing something about it is difficult. Here the free traders have a distinct edge.

As the historian Frank Trentmann has demonstrated, the case for free trade was made in 19th-century Britain in moral terms: it was held to promote not just economic prosperity, but also peace.