- Cafe Hayek - https://cafehayek.com -

Free Trade and Its Alleged “Losers” (Again)

Tweet [1]

Kenneth Regas e-mails me (link added):

Dear Professor Boudreaux,

On the EconLog blog Professor Caplan recently opined that voter ADHD is fortunate [2], because if protects us from popular bad ideas, including resistance to free trade. On that point I commented to demur, hoping to get a free trader like you to engage. I wrote:

“‘Never mind centuries of economics classes on the wonders of comparative advantage; the masses are convinced that cheap foreign products make us poorer.’

Actually, they believe that those cheap products make them poorer. And to the extent they’re near the bottom of the socio-economic ladder, they’re right. Cheap shirts are a boon to you and me, not so much for the one who, absent the cheap imports, would have been the shirtmaker.

“The average standard of living in my country and in the shirt exporting country both increase due to free trade. But in my country, that increase amounts to a gain for me but a loss for the erstwhile shirtmaker, who already had a lower standard of living.”

I saw your response to another commenter. Could I get you to engage my point?

Sincerely,
Ken

I’ve written often on this very topic here at Cafe Hayek.  See here [3], here [4], and here [5].  (This last link has links to yet other Cafe posts on this topic.)

In addition to offering the above links to earlier posts, let me add two additional substantive points here – points which are perhaps repetitive but, if so, hopefully also worthwhile.

First, to say that someone is harmed by trade is, in fact, to say that someone is harmed by freedom of contract, private property rights, and economic competition.  That is, if you show me someone who today suffers economic harm because some fellow citizens have increased their purchases of imports, I’ll show you someone who, economically and ethically, is in a position no different than are the thousands of other people who today suffer economically because some fellow citizens exercised their freedom to contract with their own private property within a competitive economy.  I’ll show you someone who, economically and ethically, is in a position no different from a person across town from that someone who lost her job at the bakery because fellow citizens now choose to spend fewer dollars buying donuts and muffins. I’ll show you someone who, economically and ethically, is in a position no different from a person who lost his job installing telephones in homes because people choose to switch to mobile phones.  I’ll show you someone who, economically and ethically, is in a position no different from fellow citizens who lose their jobs as retail clerks because consumers more and more choose to shop on-line.

So unless you believe it to be questionable that the economy grows as a result of economic change that occurs in response to changes in patterns of consumers spending – changes which themselves are prompted by entrepreneurial innovation and economic competition – you have no reason to question the economic benefits of freer, or more, international trade.  Put differently, if you insist on pointing to the “losers” from international trade as potential justification for forcibly restricting such trade, then you should also point to the “losers” from intranational trade as potential justification for forcibly restricting such trade.  There is no economically or ethically relevant difference between economic change that is the result of more foreign-made widgets and economic change that is the result of more domestic-made zidgets.

Second, identifying someone as a “winner” or “loser” from trade (that is, from economic change) requires an appropriate time horizon.  If the time horizon we use is “today” – or “now” – then, yes, the economy is filled with losers from trade, both domestic and foreign.  But so, too, is the economy filled with with losers from contract law.  If I bought a car yesterday and contracted to pay for that car today, then if we look only at today, I’m a loser: I’m obliged today to fork over money to my creditor while, today, I receive nothing in return from that creditor.  But does anyone other than Bernie Sanders’s fans think that I should appropriately be called an economic “loser” because today I pay the price for a benefit that I gained yesterday?  Does anyone (again, other than Bernie Sanders’s throng of ignorant fan-boys and fan-girls) think that government would promote a fairer or a more prosperous (or more both) economy if it today “protected” debtors from paying debts for goods and services that these debtors acquired yesterday?

Everyone today in America – and I do mean everyone – is a huge beneficiary of an extensive global market.  Nearly everything that each American today consumes contains materials and labor inputs that originated outside of the geographical region called “the United States.”  This fact means that no American could afford to consume on a daily basis as much as he or she consumes were it not for the international trade that makes today’s consumption possibilities possible (not only by creating many goods and services physically, but also by reducing the prices of “American-made” goods and services).

Likewise, nearly every job today in America – including those that are today being destroyed by changes in the pattern of international trade – is, to one degree or another, itself the result of international trade.  Many jobs simply wouldn’t exist if there were no foreign trade (or fewer such jobs would exist if foreign trade were less frequent or voluminous).  I speak here not only of jobs in industries that produce goods for export, but also of jobs whose economical existence requires complementary inputs imported from other countries – imported goods such as the low-priced Indonesian-made clothing inventories stocked and sold by workers at Target and Macy’s; the Japanese-made construction cranes operated by hard-hat-wearing workers in St. Louis and Santa Fe; or the Chinese-assembled cell-phones that justify Apple employing at good wages software engineers in Cupertino and retail clerks in Chattanooga.  Restrict these and other imports, and the costs of inputs used by producers and other employers in America rise and the productivity of American workers falls.  In some cases, the effect would be lower pay for American workers; in other cases, the effect would be the absence altogether of certain jobs.  In nearly all cases, American workers would be made worse off.

So, over time – that is, over an appropriately defined span of time – there are no losers from international trade.

….

Note that it is possible for any American who wishes to stop participating in the global economy to actually do so.  All that person need do is to refuse to buy or consume anything that contains any foreign materials or labor and to refuse to sell anything that is ultimately destined to be bought by someone living abroad.  Of course, to so remove oneself from the global economy would be both practically difficult (“How can I tell if this hammer that I’ll use to build my house contains iron ore only from America?”) and deeply impoverishing.  But it can be done.  Indeed, the very fact that it is so difficult (and unpleasant) to remove oneself completely from the global economy is further, strong evidence that no American today – even one who loses his or her jobs to imports today – is a net loser from international trade.  No one has a moral right to rake in the benefits of an economic process while refusing to bear the ill-consequences that come along with those benefits.  If you don’t want the ill-consequence, fine; reject also the benefits.  But never do protectionists wish to protect themselves from the benefits of trade; they selfishly seek to protect themselves only from it’s ill-consequences.

Comments