A lengthy defense of NAFTA and free trade generally from Bradford Delong in Vox is here. Delong is hardly a disinterested party: he was Under-secretary of Treasury under Robert Rubin.
This does not mean he is wrong.
His piece is 8,000 words, but here is a summary:
By and large, the jobs that we shed as a result of NAFTA and China-WTO were low-paying jobs that we did not really want. Because of NAFTA and China-WTO, we have been able to buy a lot of good stuff much cheaper — which means we have had more income to spend on other things and to pay people to do other, more useful things than work on low-productivity blue-collar assembly lines. Skeptical? I understand. But leave me space to make my argument, and I will return to this point later.
We have not done our proper job in cushioning the incomes of and providing opportunities to those people and communities that have found themselves behind the eight-ball, in sectors flooded by imports as other countries industrialize (especially China). But NAFTA and China-WTO look, to me, like things that have been broadly good for the American economy.
I have highlighted the portions for a reason, because it in a way avoids the entire debate because:
- Many of these jobs were in fact union jobs and not low wage jobs as he suggests,
- It assumes that if is POSSIBLE to cushion incomes.
As I have posted here before, substantial money was set-aside in the tobacco settlement to help communities hurt by the decline in Tobacco planing. It was not successful. So in this sense Delong is playing a double game: on the one arguing it didn’t hurt, and on the other that it didn’t need to have hurt.
Dani Rodrik makes the relevant argument in surveying the literature:
The most detailed empirical analysis of the labor-market effects of NAFTA is contained in a paper by John McLaren and Shushanik Hakobyan. They find that the aggregate effects were rather small (in line with other work), but that impacts on directly affected communities were quite severe.
Anyone who has taken economics at a graduate level will tell you Free Trade is accepted wisdom access the ideological spectrum. But it is always accompanied with the following proviso:
“The winners will compensate the losers”
Which is basically nonsense. Winners never compensate losers. Hence the term “winner”. It is one of those ideas that show the gap between academic thinking and reality.
Tim Duy has a piece worth reading as well, his a response to Krugman.
He noted in part:
Sometime during the Clinton Administration, it was decided that an economically strong China was good for both the globe and the U.S. Fair enough. To enable that outcome, U.S. policy deliberately sacrificed manufacturing workers on the theory that a.) the marginal global benefit from the job gain to a Chinese worker exceeded the marginal global cost from a lost US manufacturing job, b.) the U.S. was shifting toward a service sector economy anyway and needed to reposition its workforce accordingly and c.) the transition costs of shifting workers across sectors in the U.S. were minimal.
He notes further:
It was a great plan. On paper, at least. And I would argue that in fact points a and b above were correct.
But point c. Point c was a bad call. Point c was a disastrous call. Point c helped deliver Donald Trump to the Oval Office. To be sure, the FBI played its role, as did the Russians. But even allowing for the poor choice of Hilary Clinton as the Democratic nominee (the lack of contact with rural and semi-rural voters blinded the Democrats to the deep animosity toward their candidate), it should never have come to this.
The transition costs were not minimal.
In some ways there is no greater challenge for Progressives than understanding just what is meant by transition costs. Because among economists it is a rather simple concept.
But transition costs are about the destruction of communities. The problem is when jobs leave, they do more than destroy incomes. As Zeynep Tufecki wrote: “Jobs are identity”.
The Sociologist Michele Lamont wrote:
Morality is generally at the center of these workers’ world. They find their self-worth in their ability to discipline themselves and conduct responsible yet caring lives to ensure order for themselves and others. These moral standards function as an alternative to economic definitions of success and offer them a way to maintain dignity and to make sense of their lives in a land where the American dream is ever more out of reach.
This is precisely what Trump trapped into and why the collapse among those making under 50K was so severe for Democrats.
Chris Arnade describes transaction costs in concrete terms:
But the results, and disruption from free trade, was even messier than what they knew or, given their world view, could know. The winners used their winnings to hoard more power, and to write rules making sharing even less likely to ever happen.
But the bigger mistake came in understanding the impact on the losers, who lost a lot more than just jobs. Their communities were devastated, and for many in those places self-worth wasn’t just about the job, it was about their town. About the land and people around them.
For many, their entire sense of value was destroyed. Their loss were beyond anything that could measured in numbers, or mitigated with hand outs. The loss of factories and good jobs set off a magnifying cascade of additional losses: Families broke up, drugs entered, suicides spiked.…
We built a world that demanded you either buy into this culture of efficiency, things and science, or you were demeaned. For many it has been humiliating.
The result, Arnade argues:
Now many people who feel screwed over by this system are more and more trafficking in conspiracy theories. That is partly push-back against a rationality that viewed by them, has destroyed their communities sense of worth. A rationality that often views any other forms of meaning, as irrational and worthless.
This is the piece Democrats just do not get. PEOPLE ARE MAD. They feel betrayed. As Tim Duy suggests, in fact THEY WERE PURPOSELY BETRAYED.
Since the election I have thought most Democrats are just in complete denial over what was behind their loss.
I will post this again:
I do not think people have yet come to grips with the swings in the Midwest, which are enormous. In some ways unprecedented: it is very rare to see swings this large confined to particular groups in exit polls.
One might say there are the wages of transaction costs.
For whatever reason, these groups felt Obama heard them, and Clinton did not. My belief is that this was because Obama was never viewed as part of the establishment in the way Hillary Clinton was.
It is worth noting that the betrayal here was in some ways bi-partisan.
