Should the losers from free trade receive assistance - no

**Shek** · 01-18-2008, 11:12 AM

As always, Landsburg is provacative.

Quote:

http://www.nytimes.com/2008/01/16/op...landsburg.html

What to Expect When You’re Free Trading
By STEVEN E. LANDSBURG
Rochester

IN the days before Tuesday’s Republican presidential primary in Michigan, Mitt Romney and John McCain battled over what the government owes to workers who lose their jobs because of the foreign competition unleashed by free trade. Their rhetoric differed — Mr. Romney said he would “fight for every single job,” while Mr. McCain said some jobs “are not coming back” — but their proposed policies were remarkably similar: educate and retrain the workers for new jobs.

All economists know that when American jobs are outsourced, Americans as a group are net winners. What we lose through lower wages is more than offset by what we gain through lower prices. In other words, the winners can more than afford to compensate the losers. Does that mean they ought to? Does it create a moral mandate for the taxpayer-subsidized retraining programs proposed by Mr. McCain and Mr. Romney?

Um, no. Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?

I doubt there’s a human being on earth who hasn’t benefited from the opportunity to trade freely with his neighbors. Imagine what your life would be like if you had to grow your own food, make your own clothes and rely on your grandmother’s home remedies for health care. Access to a trained physician might reduce the demand for grandma’s home remedies, but — especially at her age — she’s still got plenty of reason to be thankful for having a doctor.

Some people suggest, however, that it makes sense to isolate the moral effects of a single new trading opportunity or free trade agreement. Surely we have fellow citizens who are hurt by those agreements, at least in the limited sense that they’d be better off in a world where trade flourishes, except in this one instance. What do we owe those fellow citizens?

One way to think about that is to ask what your moral instincts tell you in analogous situations. Suppose, after years of buying shampoo at your local pharmacy, you discover you can order the same shampoo for less money on the Web. Do you have an obligation to compensate your pharmacist? If you move to a cheaper apartment, should you compensate your landlord? When you eat at McDonald’s, should you compensate the owners of the diner next door? Public policy should not be designed to advance moral instincts that we all reject every day of our lives.

In what morally relevant way, then, might displaced workers differ from displaced pharmacists or displaced landlords? You might argue that pharmacists and landlords have always faced cutthroat competition and therefore knew what they were getting into, while decades of tariffs and quotas have led manufacturing workers to expect a modicum of protection. That expectation led them to develop certain skills, and now it’s unfair to pull the rug out from under them.

Once again, that argument does not mesh with our everyday instincts. For many decades, schoolyard bullying has been a profitable occupation. All across America, bullies have built up skills so they can take advantage of that opportunity. If we toughen the rules to make bullying unprofitable, must we compensate the bullies?

Bullying and protectionism have a lot in common. They both use force (either directly or through the power of the law) to enrich someone else at your involuntary expense. If you’re forced to pay $20 an hour to an American for goods you could have bought from a Mexican for $5 an hour, you’re being extorted. When a free trade agreement allows you to buy from the Mexican after all, rejoice in your liberation — even if Mr. McCain, Mr. Romney and the rest of the presidential candidates don’t want you to.

**Parihaka** · 01-18-2008, 17:20 PM

Landsburg makes the usual free market mistake: that the rules of the sandpit apply in the rest of society.
Assuming that the carefully constructed rules in what is essentially a hothouse nurtured by society to feed that society can then be used to subvert and destroy the social contract of the society itself is what did my country so much damage in the late eighties and early nineties.
Result? Massive social upheaval, racial tension, intense poverty within low socio-economic groups, increased crime and most especially a 'lost generation' of the children of the poor. No education, malnourished with poor health statistics, violent and with no empathy with the society that created them, they'll be a 'cost' to us for the rest of their lives.
Personally I think the idealogues who broke our social contracts, primarily Roger Douglas, Richard Preeble, Mark Cahill, Jenny Shipley and Ruth Richardson, should be standing trial for treason.

troung · 01-18-2008, 18:06 PM

Let them eat cake.

**Shek** · 01-19-2008, 09:13 AM

I both agree and disagree with the Landsburg piece. I like it because it really gets at the what protectionism is. However, while I agree that jobs lost to protectionism shouldn't receive any special consideration, I think that the approach of what do we do to assist those unemployed (not just those who lost a job to foreign as opposed to domestic competition) is a necessary question, and as Parihaka gets at, I think there is a social contract to provide some assistance as a helping hand (which can benefit all, not just those who are unemployed).

The Undercover Economist has an interesting post to this effect in response to Landsburg's oped.

FT.com | The Undercover Economist: What do we owe those hurt by free trade agreements?

Albany Rifles · 01-19-2008, 12:06 PM

Additionally, the social contract which follows the thought it is moral to help our fellow citizens also makes the hardnose business case that if the people can receive training to get better jobs then then end up paying taxes....

**Parihaka** · 01-19-2008, 17:04 PM

I'm a pretty strong advocate of free market principles. It's been interesting to watch NZ's development since their introduction in 84. Surprisingly to some, despite dropping virtually all subsidies and tarifs, we've still managed to survive and more recently prosper as a country. Where we went wrong was the government of the time introduced these rules, imposed a goods and services tax but failed to introduce lower personal tax rates as planned.
Because of the dropping of subsidies there were massive lay-offs in unproductive industries, and government assets which had been used as defacto employment agencies were privatised, again with massive lay-offs.
That government was voted out and the subsequent one addressed the unemployment issue with, you guessed it, cuts in welfare, education and social services, along with massive increases in charges for formerly tax-funded services.
After a number of years treading water gdp-wise, another government came in and started spending more on welfare. Interestingly, and it may be coincidental with world-wide improvement in earnings for primary produce, both productivity and tax revenue increased dramatically, and unemployment dropped to an all time historical low as the old training and re-training institutions such as apprenticeships were reintroduced.
The only downside to the current government is that having established both a relatively level playing field for business, and a reasonable social support system, they are loath to lower taxes despite massive and on-going surpluses, but instead continue to search for new and ever more inventive ways of spending our money.
Albany Rifles put it well

Quote:

if the people can receive training to get better jobs then then end up paying taxes....

. They are also a net benefit to businesses by being employable and helping those businesses to grow.

01-18-2008, 18:06 PM	#3 (permalink)
troung A Self Important *Senior Contributor* Join Date: 08-03-03 Posts: 4,236 Country:	Let them eat cake. __________________ To sit down with these men and deal with them as the representatives of an enlightened and civilized people is to deride ones own dignity and to invite the disaster of their treachery - General Matthew Ridgway

01-19-2008, 12:06 PM	#5 (permalink)
Albany Rifles *Defense Professional* *Military Professional* Join Date: 04-27-07 Location: Prince George, VA Posts: 1,021 Country:	Additionally, the social contract which follows the thought it is moral to help our fellow citizens also makes the hardnose business case that if the people can receive training to get better jobs then then end up paying taxes.... __________________ "Always with the negative waves Moriarty, always with the negative waves." TSGT Oddball, Tank Commander

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01-18-2008, 17:20 PM	#2 (permalink)
Parihaka Moderator Join Date: 11-10-04 Location: Te Ika a Maui Posts: 9,466 Country:	Landsburg makes the usual free market mistake: that the rules of the sandpit apply in the rest of society. Assuming that the carefully constructed rules in what is essentially a hothouse nurtured by society to feed that society can then be used to subvert and destroy the social contract of the society itself is what did my country so much damage in the late eighties and early nineties. Result? Massive social upheaval, racial tension, intense poverty within low socio-economic groups, increased crime and most especially a 'lost generation' of the children of the poor. No education, malnourished with poor health statistics, violent and with no empathy with the society that created them, they'll be a 'cost' to us for the rest of their lives. Personally I think the idealogues who broke our social contracts, primarily Roger Douglas, Richard Preeble, Mark Cahill, Jenny Shipley and Ruth Richardson, should be standing trial for treason.

01-19-2008, 09:13 AM	#4 (permalink)
Shek *Military Professional* Moderator Join Date: 02-23-05 Location: Krblachistan Posts: 7,629 Country:	I both agree and disagree with the Landsburg piece. I like it because it really gets at the what protectionism is. However, while I agree that jobs lost to protectionism shouldn't receive any special consideration, I think that the approach of what do we do to assist those unemployed (not just those who lost a job to foreign as opposed to domestic competition) is a necessary question, and as Parihaka gets at, I think there is a social contract to provide some assistance as a helping hand (which can benefit all, not just those who are unemployed). The Undercover Economist has an interesting post to this effect in response to Landsburg's oped. FT.com \| The Undercover Economist: What do we owe those hurt by free trade agreements?

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