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Monday, March 24, 2008

Brad DeLong's newest argument for free trade:

After years of denial, NAFTA-supporting Brad DeLong finally admits that free trade with selected countries can create problems when it comes to wages:
The question of trade and wages remains: To what extent are rich countries obligated to open their markets to poor countries when the consequence is falling wages for the poor in the rich [countries] --bearing in mind that the poor in the rich are often wealthier and have more opporunity than the rich in the poor? To what extent do rich countries do themselves well--serve their national interest--by opening their markets to poor countries even when the consequence is falling wages for the poor in the rich?
Of course, internationally-minded Brad has to say that even if the poor in a rich country (e.g. United States) suffer falling wages, hey, don't fret because "the poor in the rich [countries] are often wealthier ... than the rich in the poor", which seems to imply that as long as domestic poor are better off than the rich in Papua New Guinea, everybody should chill out. Try telling that to Rev. Wright!

But that aside, Brad DeLong has a new reason to support free trade even if it causes falling wages for the poor. Get this:
... across the ocean is another country [China] -- a country with more resources in the long-run, a country that looks likely to in the end supplant the current superpower. What should the [current] superpower's long-run national security strategy be?

I think the answer is clear: if possible, the current superpower [the United States] should embrace its possible successor. It should bind it as closely as possible with ties of blood, commerce, and culture--so that should the emerging superpower come to its full strength, it will to as great an extent possible share the world view of and regard itself as part of the same civilization as its predecessor: Romans to their Greeks.
We should have free trade with China, because the trade off, lower domestic wages, is worth paying so that strong ties can be forged with the Middle Kingdom. It's not just economics any more, it's a "security strategy". Spoken like a neocon (we must play ball with middle-east dicators in order to secure the oil supply, etc). Also, does that mean we can raise tariffs for other countries? He doesn't say, although it's probably a good bet that he'd argue that we must trade with India because they control the Palk Strait.

Then DeLong goes on to cite Britain's glomming on to the United States (after it handed the Global Leadership baton to the Americans around 1910) as if that was somehow good for England. That is highly debatable. Britain had an empire which complicates the analysis and in any event, at least today, isn't as well off economically compared to the Scandinavian countries that charted a different path.

In addition, DeLong plays the War Card:
Throughout the twentieth century it has been greatly to Britain's economic benefit that America has regarded it as a trading partner--a source of opportunities--rather than a politico-military-industrial competitor to be isolated and squashed. And in 1917 and again in 1941 it was to Britain's immeasurable benefit--its very soul was on the line--that America regarded it as a friend and an ally rather than as a competitor and an enemy.
More can be said about DeLong's recent post, including discussion the historical realities behind the U.S./Britain economic ties: In the 19th century Britain wanted free trade with the "low wage" slave states (!), the United States labor force was never much poorer than Britain's (and in fact was equal or better in many instances), but that's for another time.



1 comments

Hey now, you obviously have no idea how fricking rich the rich are in Papua New Guinea. There are folks whose land happens to sit on top of vast gold and copper deposits and they get a big cut of the profit. They are loaded, man, loaded.

By Anonymous cymatic, at 6/05/2008 2:11 AM  

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