The Populist Trade Problem

A recent article in Vox outlines the problem of anti-trade populism:

Bernie Sanders sells himself as a champion of the little guy. But talk to economists and development experts, and you hear something different: Sanders’s policies on trade would hurt the very poorest people on Earth. A lot.

Here is the basic issue. Sanders has, correctly, recognized that freer trade with countries like China has hurt a subset of American workers (while benefiting others). As a result, he opposes most efforts to open American markets to more international competition, and promises to roll back a number of previous trade agreements the US had made.

There’s one big problem, according to development economists I spoke to: Free trade is one of the best tools we have for fighting extreme poverty.[ref]See my SquareTwo article written with Nathaniel for some of the evidence of this claim.[/ref] If Sanders wins, and is serious about implementing his agenda, he will impoverish millions of already-poor people in China and Central America.

What’s worse is that the actual ways Sanders might roll back these agreements could lead to serious reprisals from the affected countries. The nightmare scenario, experts say, is a global slide toward protectionism, wherein China and other countries take cues from the US and impose their own retaliatory tariffs. That would devastate economies in the developing world, dooming many more millions to a lifetime of crushing poverty.

The piece demonstrates how trade has benefited the global poor, while recognizing it may negatively impact some American jobs (though the benefits of increased purchasing power through cheaper goods may outweigh the costs). However, Sanders is not the only candidate with backward policies when it comes to trade. Donald Trump, according to The New York Times, “is bringing mercantilism back. The New York billionaire is challenging the last 200 years of economic orthodoxy that trade among nations is good, and that more is better. He is well on his way to becoming the first Republican nominee in nearly a century who has called for higher tariffs, or import taxes, as a broad defense against low-cost imports.” These positions show why Trump and Sanders are far more conservative[ref]In fact, some recent research in political psychology “suggests that the personality characteristics that make someone culturally conservative will often tend to promote left-wing economic views, favoring redistributive economic intervention by the government.” This is likely due to the protectionist nature of left-wing economics.[/ref] and far more alike[ref]This includes some of their views on immigration.[/ref] than some would care to admit. This is perhaps why some political scientists are recognizing Trump supporters as populists: a label usually reserved for Sanders supporters. “Trump supporters share anti-elitism with only one other group: Sanders’s voters,” write one pair of political scientists in The Washington Post. “But where Trump is a populist, we would argue that Sanders is not. Despite the fact that Sanders often gets called a populist, his voters do not conform to the populist stereotype. They generally trust experts and do not identify strongly as Americans.” This may be true of Sanders supporters in some cases, but when it comes to economics, they reject the expertise and consensus of economists and embrace U.S.-centric protectionist policies.

From Gregory Mankiw’s Principles of Economics, 7th ed. (pg. 32).

A socialist Democrat and a Republican businessman drawing from the same economic playbook. I’m sure most didn’t see that one coming.


8 thoughts on “The Populist Trade Problem”

  1. While I agree with the position that it is economically beneficial the real worry for me is in the food industry China has a lackluster history of safety. We have to be able to guarantee our food resources are safe for consumption and sending them to a country that is increasingly aggressive with it’s territory in international waters this may not be a good thing.

  2. I’m surprised I have yet to see any politician make the case for free trade and strong government assistance for the middle class in exactly these terms. Perhaps Hilary Clinton has; I admit I’ve paid little attention to her rhetoric. But it seems as though free trade genuinely is great for the world, and the only people who really sacrifice for that are the Americans who’ve seen middle-class jobs moving away, to be replaced by lower-paid service work. To me, the natural response to this seems to be to grasp the nettle, admit that, yes, America’s greatness is now (as it has always been) supported by the sacrifices of the middle class, but that these sacrifices are now shrinking the very middle class on which we have always depended. So it is both morally fitting and instrumentally valuable for government to provide free health care to everyone who needs it and adopt non-protectionist policies to support middle-class work. Yes, this might involve higher rates of taxation for the wealthy, but it’s the wealthy who’ve reaped the greatest domestic benefits from globalization.

    To me, that seems like a perfectly sensible pitch. It acknowledges that the middle class really has suffered, and that we chose to adopt policies which we knew would make them suffer because the overall outcomes are so good that it’s worth it. But that means we owe the middle class–we hurt them to help the richest and the poorest, and we’re proud of the good we’ve done. It was worth doing, and it’s worth paying our debts to keep doing.

  3. I haven’t seen politicians make this case, but I have seen others state that *if* the costs to Americans are too great (arguably they are not given cheaper prices for consumers), then one could make a case for certain kinds of governmental social insurance. This is largely a case of rich labor vs. poor labor and, most of the time, rich labor is able to find new work because rich countries tend to be more productive, more innovative, and thus produce more jobs.

    But I agree, Kelsey: that would be a sensible pitch.

  4. I think you make a good point, Walker, and I’m very sympathetic. But here are some thoughts in a counter-argument vein that I think are very important to also consider.

    1. There have been, esp. recently, some really good critiques of important problems with economics as a profession and I think these need to be kept in mind. Thus, instead of saying “consensus,” perhaps it’d be more accurate to say something like the following: “even though economists have notoriously favored neoliberal policies, denying tenure and journal acceptances to views or models that didn’t fit the technical assumptions of the reigning mathematical (and hence Chicago-style/neoliberal) ideology, or the most recent 10-20 years of data (which is a short-horizon when considering macroeconomic business cycles and the risks of crises or deep recessions), an astounding 15% of academic economists have survived, effectively challenging the hegemonic view that free trade is always and in all circumstance the best policy, and that economic measures are the end-all be-all measure of social justice concerns.”

    2. Is Sanders really for protectionism or just supporting aid for displaced workers?

    3. As a Christian, what makes me nervous about free trade arguments is that they are an easy excuse to the living face of my neighbor. Your argument reminds me of a rather cold-hearted claim I once heard from a fellow-Mormon: “I never give to beggars because I pay tithing and fast-offering, and that’s a much better system than helping alcoholic and drug-addicted beggars.” There’s truth in this comment, but I ultimately don’t think King Benjamin would approve, and I similarly worry that King Benjamin would disapprove of efforts to make economic policy that we hope will benefit the global population while we ignore our more proximate poor and disenfranchised.

    Like I said, these are difficult issues and I’m not claiming that these counter-thoughts settle the issue, but I detect more confidence in your argument than I think is warranted. Yes, I know the arguments for free trade, and I have a pretty good grasp of the economic data and models–but I’m still inclined to disagree, and much of the reason is because I know how out of touch most economists are from issues that aren’t captured easily measurable data.

    Also, like I think I’ve mentioned to you before, although I know some good criticisms have been made of Piketty’s book, he makes some really compelling arguments at times that I haven’t seen countered and that I think also challenge the somewhat simplistic view it seems your arguing for here.

    (Namley, that policy which discourages free trade is hurtful to the poor. There’s at least some truth in this argument, but there are some very good “economic” arguments to be made against free trade that traditional economic models simply assume away and that, for example, economic sociologists provide much more insight on. Economic sociologists tend to understand economics *and* to be less persuaded by simplistic pro free trade arguments because they have a better understanding, IMHO, of the other sociological, political, methodological, and normative factors and concerns that contribute to global poverty and that the reductionist/simplistic models which economists like to use and believe in ignore–factors and concerns that underlie what seems to be an ideology among academic economists, esp. in the late 80s and through the 90s which comprises the bulk of mid-career economists, in favor of free-trade….)

  5. (By the way, so that you better understand the tone and context of my overly long comment above: I’m quite unsure of my own view on free trade. The evidence and arguments in favor of free trade are quite strong. I think most of these arguments ignore a lot of important considerations, but that doesn’t mean I think the other considerations tip the scales in the other direction. I’m deeply ambivalent and I’m using these comments as an excuse to try and work out my ambivalence. So, I both apologize and thank you for giving me this excuse….)

  6. Robert,

    1. I guess I’d have to see more about those challenging the mainstream view. Have they been rejected because they challenge the mainstream or because their research isn’t very good? As wary as I am of both the physical and social sciences becoming too locked in a view and dismissing challenging evidence (think Kuhn), I’m especially wary of claims that other opinions are being stamped out simply for having opposing views (think Intelligent Design).

    2. Yes, he strikes me as pretty protectionist:

    3. I didn’t say ignore the proximate poor. I specifically said that gains made from lower prices may outweigh the costs of lost jobs. And, as I said above, rich labor is able to find new work much easier because rich countries tend to be more productive, more innovative, and thus create more jobs. I even conceded that one could make a case for governmental social insurance programs because of free trade (I personally have become more and more intrigued by the idea of a basic income). But I’m not sure why proximity somehow trumps (see what I did there?) *actual* deprivation. Low-income citizens of industrialized Western countries are still some of the richest people on the planet.

    King Benjamin cared about the poor, but our entire country is richer than he was. I can’t say the same about those in third-world countries. Would he suggest that we ignore an entire impoverished people and huddle together, only taking care of our (relatively well-off) own? Now that I think about it, as a king, yes, he probably would. And he’d be wrong.

    But you are correct about the need for humility when it comes to policy. I’m afraid I’ve become snarkier over the last few months. As always, I’m totally down for any economic research you’ve got.

  7. 1. Dani Rodrik’s work is a good place to start–perhaps his Globalization Paradox book, or his blog articles.

    2. Yikes. I agree taking such a hard line against free trade is scary.

    3. I read “care for the poor” as more of a communitarian charge than a utilitarian charge. That is, I don’t think ‘minimizing global poverty using the most effective and/or efficient means necessary’ is really what the scriptures have in mind. Rather, I think scripture encourages the building of Zion communities where in each (necessarily somewhat local) community they encourage an ethic of care, a willingness to care for the underprivileged within their own society. I take this as the central meaning of Christ’s response “the poor will always be with us”: we should prioritize (communal) spirituality over economics, and the problem with free trade (and other facets of unfettered globalization) is that economics can often have devastating effects on communities and communal spirituality.

  8. I just logged in to say: Kelsey, I like your comment! I think we’ve talked about this before, but despite being conservative in general, healthcare is one area where I strongly support socialization along the lines of combined universal/private healthcare (as in Germany). When healthcare costs alone are enough to sink a middle class family (and potentially remove their labor from the labor pool as well due to extended medical absences or caring for a sick family member), we have a problem.

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