… we shared a lectern with each other at an October 2004 Cato University session in Quebec. Dan at that time was working on trade at Cato; he is now, as readers of this blog know, working on trade at the Mercatus Center. He is a marvelous colleague and friend, and one of the most effective champions today for free trade and much more liberalized immigration.
I thank Cafe Hayek patron Kent Early for alerting me today to the on-line availability of the transcript both of Dan’s remarks and of my remarks . (The vanity license tag to which I refer near the beginning of my remarks is:
I still proudly have this tag on my foreign-assembled automobile.)
Here’s a slice from Dan’s remarks:
Ninety percent plus [of Americans polled] will say trade is bad for workers. It’s good for the country, bad for workers. You figure it out. But 90 percent or more will say trade is good, as long as we require minimum labor and environmental standards in poor countries. All sorts of qualifications. So you see this gap.
And this, despite 200 plus years of having “The Wealth of Nations.” And if you haven’t read “The Wealth of Nations,” it’s such a wonderful book, and it’s so applicable to today. Adam Smith’s writing is just so lively and applicable. Frederic Bastiat, I’m not sure how anybody could explain free trade better than Frederic Bastiat. And yet, here we are, 150 years later, still debating, trying to explain free trade.
Why is it such an uphill battle? There are a number of reasons. One, and Frederic Bastiat said this, what is seen and what is unseen. The cost of free trade we see. It’s so visible. It’s that factory in North Carolina that gets shut down. Or that factory in Canada that gets put out of business because of competition. Where the benefits tend to be spread out and harder to see, more of a challenge for a TV news crew to find that.
Secondly, the political scales are imbalanced. Those benefits are diffused. It’s saving $10 when you go to Wal Mart from free trade. You’re hardly aware of it. But the cost, the textile industry in the United States, they have a lot to lose from free trade, or at least they think they do. They will hire the lobbyists. They will fly off to Washington. They’ll buy the ads in the newspaper. Diffused benefits from free trade, concentrated costs. Therefore, the people who benefit from protectionism tend to be more noisy and more influential.
And here’s a slice from my remarks (with the correct spelling of Kathy Gornik’s name):
But as I said, there is nothing unique about changes in trade patterns that cause unemployment. The example I like to use this year is the following: Fifty years ago this past summer, so 50 years ago just a few months ago, Dr. Jonas Salk and Dr. Sabin introduced the first successful — and it was remarkably successful immediately — vaccine against polio. It wiped out polio as a disease that we in the West have to worry about.
Now, that’s an economic change. It didn’t have anything directly to do with foreign trade. But think of the devastation it imposed on the American economy. All those people who worked in wheelchair factories, their jobs were wiped out. People who made crutches, their jobs were wiped out. People who made iron lung machines for severe polio victims, their jobs were wiped out. Nurses and doctors and hospitals who specialized in caring for polio victims, their jobs were wiped out.
Well, it’s true, the jobs were wiped out. Would anybody say, well, we should rethink that polio vaccine thing? We might not want to introduce it now.
The point here is any economic change — any economic change — creates changes in production patterns, because you have new consumer patterns of buying that have to be satisfied by new producer patterns of producing. And you can only produce more here if you produce less here. So when consumers shift their demands from this sector and move it to that sector, workers and firms in this sector will suffer. But workers and firms in that sector will prosper. Over time, because of the dynamism and flexibility of the economy, everybody’s livelihood over time everyone’s livelihood increases.
I’ll give you another example of a devastating change in consumer tastes that is wiping out all sorts of jobs, turning high profits into no profits or losses. The Atkins Diet. It’s just devastating. Because all those workers in high carb factories, workers in pasta factories, breweries, chocolate factories, bakeries, these people are losing jobs because consumers are buying fewer high carb goodies.
Now, you can save those jobs. You can try to freeze the economy, just freeze dry it, and prevent any kind of economic change from disrupting anyone’s life. That’s kind of the ideal that a lot of Social Democrats have. Any threat of any change in your life is somehow the result of unfairness and something being wrong in the world, and it requires government intervention to protect you from that change. I find it difficult to conceive of the amount of tyranny that would have to be unleashed in an economy to protect and to prevent all economic change. I can’t even describe it. But if you think about it, you can see it pretty easily. Okay, Ms. Gornik, you are spending your money in this way today. You must do that for the rest of your life. In fact, don’t die, because that’s going to cause a change in spending patterns.