I was recently invited by two Harvard colleagues to make a guest appearance in their course on globalization.
“I have to tell you,” one of them warned me beforehand, “this is a pretty pro-globalization crowd.”
In the very first meeting, he had asked the students how many of them preferred free trade to import restrictions; the response was more than 90 percent. And this was before the students had been instructed in the wonders of comparative advantage.
We know that when the same question is asked in real surveys with representative samples — not just Harvard students — the outcome is quite different. In the US, respondents favor trade restrictions by a two-to-one margin. However, the Harvard students’ response was not entirely surprising. Highly skilled and better-educated respondents tend to be considerably more pro-free trade than blue-collar workers are. Perhaps the Harvard students were simply voting with their own (future) wallets in mind.
Or maybe they did not understand how trade really works. After all, when I met with them, I posed the same question in a different guise, emphasizing the likely distributional effects of trade. This time, the free-trade consensus evaporated — even more rapidly than I had anticipated.
I began the class by asking students whether they would approve of my carrying out a particular magic experiment. I picked two volunteers, Nicholas and John, and told them that I was capable of making US$200 disappear from Nicholas’ bank account — poof — while adding US$300 to John’s. This feat of social engineering would leave the class as a whole better off by US$100. Would they allow me to carry out this magic trick?
Those who voted affirmatively were only a tiny minority. Many were uncertain. Even more opposed the change.
Clearly the students were uncomfortable about condoning a significant redistribution of income, even if the economic pie grew as a result.
How is it possible, I asked, that almost all of them had instinctively favored free trade, which entails a similar — in fact, most likely greater — redistribution from losers to winners? They appeared taken aback.
Let’s assume, I said next, that Nicholas and John own two small firms that compete with each other. Suppose that John got richer by US$300 because he worked harder, saved and invested more and created better products, driving Nicholas out of business and causing him a loss of US$200. How many of the students now approved of the change? This time a vast majority did — in fact, everyone except Nicholas approved.
I posed other hypotheticals, now directly related to international trade. Suppose John had driven Nicholas out of business by importing higher-quality inputs from Germany? By outsourcing to China, where labor rights are not well protected? By hiring child workers in Indonesia? Support for the proposed change dropped with each one of these alternatives.
But what about technological innovation, which, like trade, often leaves some people worse off? Here, few students would condone blocking technological progress. Banning the light bulb because candle makers would lose their jobs strikes almost everyone as a silly idea.
So the students were not necessarily against redistribution. They were against certain kinds of redistribution. Like most of us, they care about procedural fairness.
To pass judgement on redistributive outcomes, we need to know about the circumstances that cause them. We do not begrudge Microsoft cofounder Bill Gates or Berkshire Hathaway CEO Warren Buffett their billions, even if some of their rivals have suffered along the way, presumably because they and their competitors operate according to the same ground rules and face pretty much the same opportunities and obstacles.
We would think differently if Gates and Buffett had enriched themselves not through perspiration and inspiration, but by cheating, breaking labor laws, ravaging the environment or taking advantage of government subsidies abroad. If we do not condone redistribution that violates widely shared moral codes at home, why should we accept it just because it involves transactions across political borders?
Similarly, when we expect redistributive effects to even out in the long run so that everyone eventually comes out ahead, we are more likely to overlook reshufflings of income. That is a key reason why we believe that technological progress should run its course, despite its short-run destructive effects on some. When, on the other hand, the forces of trade repeatedly hit the same people — less educated, blue-collar workers — we may feel less sanguine about globalization.
Too many economists are tone-deaf to such distinctions. They are prone to attribute concerns about globalization to crass protectionist motives or ignorance, even when there are genuine ethical issues at stake. By ignoring the fact that international trade sometimes — certainly not always — involves redistributive outcomes that we would consider problematic at home, they fail to engage the public debate properly. They also miss the opportunity to mount a more robust defense of trade when ethical concerns are less warranted.
While globalization occasionally raises difficult questions about the legitimacy of its redistributive effects, we should not respond automatically by restricting trade. There are many difficult trade-offs to consider, including the consequences for others around the world who may be made significantly poorer than those hurt at home.
However, democracies owe themselves a proper debate, so that they make such choices consciously and deliberately. Fetishizing globalization simply because it expands the economic pie is the surest way to delegitimize it in the long run.
Dani Rodrik, professor of international political economy at Harvard University, is the author of The Globalization Paradox: Democracy and the Future of the World Economy.
Copyright: Project Syndicate
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Former president Ma Ying-jeou’s (馬英九) trip to China provides a pertinent reminder of why Taiwanese protested so vociferously against attempts to force through the cross-strait service trade agreement in 2014 and why, since Ma’s presidential election win in 2012, they have not voted in another Chinese Nationalist Party (KMT) candidate. While the nation narrowly avoided tragedy — the treaty would have put Taiwan on the path toward the demobilization of its democracy, which Courtney Donovan Smith wrote about in the Taipei Times in “With the Sunflower movement Taiwan dodged a bullet” — Ma’s political swansong in China, which included fawning dithyrambs