Wednesday, March 3, 2004

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March Books of the Month

Given February's elevation of trade questions to the forefront of political debate, both of this month's books are devoted to the topic -- from slightly different directions.

In the United States, arguments against the merits of free trade and investment tend to fluctuate with the business cycle. When growth is robust and times are good, the arguments made against globalization are non-economic: it deteriorates labor and environmental standards in other countries, it leads to cultural homogenization, yada, yada, yada. When growth is weak and times look uncertain, the arguments made against globalization are pitched to appeal to material self-interest: free trade causes unemployment, America is losing its "competitive advantage," yada, yada, yada.

This month's two books address divide their labor in terms of defending the merits of free trade. Douglas Irwin's Free Trade Under Fire does an excellent job of demolishing the recession-based arguments made against free trade, while assembling all of the arguments and evidence for why trade is a win-win proposition.

As for flush times, Jagdish Bhagwati's In Defense of Globalization marshalls considerable evidence that globalization does not need a human face because it already has a human face. By lifting people out of poverty, globalization is a cure for many social ills.

Go check them out.

posted by Dan on 03.03.04 at 03:59 PM


“When growth is weak and times look uncertain”

The current economy is not weak. It is actually fairly good, but the liberal media are spinning their reporting to help the Democrats. If Bill Clinton were in office, these same folks would be ceaselessly telling us how great things are. And the harsh fact is that times are always “uncertain” even at their best. Job hopping will forevermore be the norm. We must be receptive to change. This price tag is nonnegotiable. Anyone telling you something different is either a fool or a liar.

I’ve ordered both books via This is my fifth order to the online bookseller since the 26th of February. I may be the sole reason why that company’s stock price is so high. Is it doing me any good? I will let others judge for themselves.

posted by: David Thomson on 03.03.04 at 03:59 PM [permalink]

First of all the first link seems to be broken, at least for the oldman. Second of all, I should point out that books like this are worse than useless. How can I saw that sight unseen? The problem is that too much of pro-free-trade arguments involve hand waving that fails to address specific concerns and criticisms of certain intellectual arguments made.

Free trade enthusiasts would like to argue that complaints are merely caused by ignorance and by cyclical concerns. However, the truth is that there is a seismic and permanent shift going on in the American perceptions of free trade. I will take a look at these books, and read them, but the oldman doesn't think that people who are already tired of having their concerns blown off are going to sit by and allow this trade regime to go on much longer.

As a matter of fact, conservative publications like the Economist have openly questioned America's ability to maintain its trade deficit, and argued that lack of fiscal discipline may threaten the fiat currency or dollar hegemony trade system currently in place. There are serious and deep theoretical and practical concerns about the sustainability and profitability of current practices. Failure to address these points except by loose thinking and rah-rah-rah propaganda is only going to ensure a protectionist backlash.

I think everyone can agree that protectionism would set this country back decades economically, but the choice shouldn't be between blind faith in the current trade regime and protectionism - it should be between current trade practices and the reforms we need to make in order to make it politically and economically viable.

posted by: Oldman on 03.03.04 at 03:59 PM [permalink]

“First of all the first link seems to be broken, at least for the oldman.”

The link to Douglas Irwin’s book on’s website is indeed broken. One merely, though, needs to first order the second book, In Defense of Globalization, and then insert Irwin’s name in the book search. I might also add that is sending me the books delivery free.

“Second of all, I should point out that books like this are worse than useless. How can I saw that sight unseen? The problem is that too much of pro-free-trade arguments involve hand waving that fails to address specific concerns and criticisms of certain intellectual arguments made.”

Balderdash. You simply do not like the arguments. They do not offer utopian solutions and candidly concede that many people will be compelled to seek new employment. The gods of creative destruction are brutal bastards but their price tag must be paid. John Kerry and John Edwards may wish to deceive you, and President Bush often wimps out---but I will tell you the truth.

posted by: David Thomson on 03.03.04 at 03:59 PM [permalink]

The current economy is extremely weak by the standards that matter to the average middle-class American worker: employment and wage growth. Don't point to the unemployment figure - it is so subject to political manipulation as to be worthless. If we calculated unemployment in the same way that European countries do, it would be in double digits. If the unemployment figure was truly below 6%, we would not have had median incomes stagnant for years. David Thomson seems to completely ignore the fact that we live in a democratic republic. He seems to think that it is possible to simply say that people must blindly accept job losses with no cushion and accept a future of job insecurity. News flash: it isn't. It never has been. Part of the grand bargain struck in the free world between labor and capital in the 20th century was that capital would be given a reasonably free hand to run its businesses as it chose, and given a stable infrastructure in which to do so, and in exchange, labor would get a significant piece of the pie so that the majority of Americans would share in the benefits of the system. The current discontent is due to the fact that that bargain has been broken - a break that ideologues have been pushing since the late 70s, but was masked temporarily by good economic policy coupled with the 1990s boom. If this isn't fixed, we will see a return to the labor unrest of the 19th century. Does anyone really think that this is desirable? Thomson refers to "creative destruction". The problem is that this time all the "destruction" is in America and all the "creation" is in India and China. Again, not acceptable.

posted by: Firebug on 03.03.04 at 03:59 PM [permalink]

Whoops! Fixed the link. My bad.

posted by: Dan Drezner on 03.03.04 at 03:59 PM [permalink]

I love David Thomson.

Everytime I think I might jump in to argue something I just scroll down a bit further and there's my guy, already making the point and doing it better than I could.

posted by: David Thomson Fan on 03.03.04 at 03:59 PM [permalink]

tsss tss Frebug then Chinese and Indians can buy Intel, Dell , Chryslers, Ferraris , Ralph Lauren, California wines and tupperware... can u prove that USA or any 1st world country loses?

posted by: lucklucky on 03.03.04 at 03:59 PM [permalink]

Right, because China is so good at playing by the rules and ensuring that products created in developed countries are
1) allowed into Chinese markets, and
2) protected by the rules of patent and copyright that become ever more necessary as America becomes a producer of information and ideas rather than of material goods.

We've been following a regime of trade liberalization for most of my lifetime, and I would be curious to know to which formerly 3rd world nations our exports have increased more than our imports have.

Ralph Lauren may wave the flag, but that doesn't mean that his goods are produced by American workers. The same can follow for computers, cars and Tupperware.

I don't believe in legislation that actually blocks the movement of jobs overseas. To some degree, it's just Hyderabad Vikram vs. Chicago Vikram, and what makes the latter more deserving than the former?

But it's absurd to assume that people who have lost their jobs will be compensated by the lower price of goods and services. You don't enjoy the lower price of shoes unless you have the money to buy them, or the lower price of radiology unless you have insurance.

Free trade is going to lead to the elimination of nearly every job that can be exported overseas. Presumably jobs that have to be done on the spot -- construction, agriculture, hands-on health services, government work, most teaching, prostitution, legal services requiring a courtroom appearance -- will remain in the U.S., but anything that can be shipped, like cars and clothing, or done electronically, like X-ray reading and answering service calls -- will be produced overseas. People who have been doing jobs in the second category need to be re-trained for the jobs in the first.

posted by: PG on 03.03.04 at 03:59 PM [permalink]


Actually, I agree with you that the economy does resemble the economy of 1994. All the indicators are up, but there isn't a whole lot of evidence of it on the ground in professional America. Lot of my friends are out of work right now, and finding the jobs they will take isn't easy. (No, they won't take the "Want fries with that" jobs.) Since I number a fair number of reporters among my friends, it wouldn't surprise me that this kind of climate, rather than some Democrat master plan, is generating the hurting economy stories.

This is the same climate that generated the Angry White Male Gingrich "revolution" in 1994. Wouldn't surprise me if there turns out to be an "Angry White Liberal" vote in 2004.

posted by: Appalled Moderate on 03.03.04 at 03:59 PM [permalink]

I would be interested in comments from people attacking current trade practices as to what specific policies (other than outright protectionism which I assume they don't favor)would be effective in preventing job loss. I hear a lot of rhetoric from Kerry and Edwards but no specific policies. Are there specific legislative or policy proposals that would protect US jobs without instituting a protectionist regime?

posted by: Marc on 03.03.04 at 03:59 PM [permalink]

Dear Marc,

Good question. Something we can push for that is a positive trade policy is agreements that protect and create realistic enforcement of intellectual property rights. The "free trade" enthusiasts can hardly claim that we will creatively invent and manage ideas, while other countries produce them, if those other countries are free to steal our ideas after we've put in the sweat and blood to invent them!

Second of all, I think that the pushing for equal environmental and worker rights in other countries is a nice idea but basically unworkable. The problem is that the lowest bidder will attract the capital. There will always be an incentive to either have no such rules or to conveniently ignore them - and companies will find those that do.

The key is to put worker and environmental rules in on companies seeking to export to consumer countries, not the producer countries. This can only work as a coordinated group effort, where the developed world nations agree to only allow imports that conform to minimum standards.

Thirdly we can work against market barriers such as subsidies, and work for equal liberalization of markets. If we systematically open our markets more than other markets do, then can we have anything other than a trade deficit? If they are not ready to open their markets beyond an "X" amount of value, then they aren't ready to export beyond that. I believe that the export-led model of growth is deeply flawed, and has shown itself historically to be flawed. If free trade proponents are right, then both sides can benefit still in a win-win fashion from market liberalization parity.

1) Intellectual property rights agreements and enforcements.
2) Coordinated environmental and worker rights standards for importers in consuming/developed countries to put the shoe on the other foot - whomsoever wishes to export to us must meet these rules, and those who do will reap the profits.
3) Removal of market competition barriers such as subsidies.
4) Market liberalization parity - only liberalize our markets to the same negotiated degree as reciprocal economies are ready to have us penetrate their markets. If free trade theory (comparative advantage, etc.) is correct, then this would still produce mutually beneficial win-win trade specialization.

Those are just four ideas off the top of my head. In addition, we have to promote a new foreign aid phased development scheme. Other countries can't reach structural economic purchasing parity with us unless they have robust domestic consumption markets. A way to do this would be to cheaply invest in low-cost schemes to help provide them with sustainable clean water, electrical distribution, cell phone communication, and micro-lending initiatives that would help overcome their lack of a developed financial capital lending infrastructure. A small business bureau lending to the poor of the world, so that they can start businesses to buy our products and services! Finally we have to solve the Mexico immigration problem.

5) Phased foriegn aid development targeting economic infrastructure.
6) Solve Mexican immigration problem.
7) Improve education domestically.

There is much that can be done that is pro-trade. Unfortunately, apologists for the current "free trade" regime are so much captured by their ideologies, so blind to the loss of political viability of their programs, and so obstinate in their refusal to admit that there could be anything done to improve trade matters, that they are about to drive the American public into rampant protectionism!!!

Which would impoverish us all, but historically time and time again this is what has happened when free trade theory meets proletariat unrest!!!

posted by: Oldman on 03.03.04 at 03:59 PM [permalink]

Joy. A coherent response that lacks references to yourself in the third person.


posted by: Brennan Stout on 03.03.04 at 03:59 PM [permalink]

Free trade is going to lead to the elimination of nearly every job that can be exported overseas.

So, the trick is, then, to make workers here competitive.

posted by: Bithead on 03.03.04 at 03:59 PM [permalink]

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