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On Dani Rodrik On Trade

Here’s a letter to a long-time Cafe patron:

Mr. B__:

Thanks for sending the recent essay (“The two faces of free trade”) by Dani Rodrik, which I’d missed. I don’t, however, share your good impression of it. He’s mistaken about at least two key facts, and at a critical juncture his language is vague.

Factually, Rodrik is dead wrong to write about “the erosion of the middle class in the United States.” Notably, he presents no evidence to back this claim, for no such credible evidence exists. As has been documented repeatedly by people who took the time to look carefully, the data are clear that America’s middle-class (at least up to the pandemic) is thriving. See the work of Phil Gramm, Robert Ekelund, and John Early – of Michael Strain – of Scott Lincicome – of Scott Winship – of Bruce Sacerdote – of William Cline – of Mark Perry – and even of me.

Rodrik also wrongly treats trade as if it’s a uniquely important source of economic change. It’s not. Yes, trade ‘destroys’ some particular jobs (as it creates others). Trade also changes the fortunes of some locales relative to others. But these are the consequences of all economic change. So will Prof. Rodrik propose to “democratise” all economic change as he proposes to “democratise” trade? Does he wish to subject to political control the introduction of all new consumer goods, all new methods of production, and all new means of transportation and communication? Does he also want government to have veto power over changes in consumer tastes, decisions about family size, and choices of whether or not to relocate across county or state lines – all things that destroy some jobs (as they create others)? If not, his proposal to single out for special control one lone source of economic change – namely, people’s access to imports – makes no more sense than would a proposal to single out for special control any other lone source of economic change, such as people’s access to the Internet or to new sources of energy.

And what does he even mean when he proposes to “democratise” trade? Does Rodrik think that post-war agreements to the GATT, WTO, and other trade pacts by the U.S., Canada, France, Sweden, the U.K., and other democratic countries are undemocratic? Apparently he does. So what’s his alternative? Plebiscitary control over any and all changes in trade opportunities? Who knows? Calling for greater ‘democratization’ of this and that strikes the modern ear as being oh so profound, progressive, and indisputably correct – until one asks “What, exactly, does that mean beyond greater government control?”

I’ve a final note. In the sentence immediately following his call to “democratise” trade, Rodrik writes: “That is the only way to ensure it serves the common good, rather than narrow interests.” Nothing could be more confused. History shows that governments with the power to restrict trade do so to enrich narrow interests at the greater expense of their citizens. Under free trade, in contrast, narrow interests are neutered, thereby leaving every person free to spend his or her income in ways that he or she judges best and, in turn, promoting the common good as well as is humanly possible. Rodrik’s belief that further politicization of trade is a means of diminishing the influence of narrow interests would be comical if its consequences weren’t so awful.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030