Rethinking Free Trade II

I ended “Rethinking Free Trade” with this:

To put it bluntly but correctly, the national government exists not for the benefit of the people of the whole world or any part of it outside the United States, but for the benefit of the citizens of the United States.

Yes, some Americans benefit from free trade… But not all Americans do. And it is the job of the national government to serve all of the people. A balance needs to be struck. And those who pay the price of free trade … must be compensated in some way.

How and how much? Those are questions that I will grapple with in future posts.

I must first acknowledge some rather good points that I made in “Gains from Trade“, a nine-year-old post in which I address objections to free trade made by Keith Burgess-Jackson (KBJ):

How is “free trade” a “disaster for this country” [as KBJ puts it] when, thanks to the lowering of barriers to trade, but not their abandonment (thus “free trade”), millions of Americans now own better automobiles, electronic gadgets, and other goodies than they had access to before “free trade.” Not only that, but they have been able to purchase those goodies to which they had access before “free trade” at lower real prices than in the days before “free trade.” On top of that, millions of Americans make a better living than than they did before “free trade” because of their employment in industries that became stronger or rose up because of “free trade.”…

… KBJ seems to acknowledge as much in a [later] post … , where he gives a bit more ground:

Free trade is efficient, in the sense that it increases (or even maximizes) aggregate material welfare. The key words are “aggregate” and “material.” As for the first of these words, free trade produces losers as well as gainers. The gainers could compensate the losers, but they are not made to do so. I’m concerned about the losers. In other words, I care about justice (how the pie is distributed) as well as efficiency (how big the pie is). As for the second word, there is more to life than material welfare. Free trade has bad effects on valuable nonmaterial things, such as community, culture, tradition, and family. As a conservative, I care very much about these things.

… KBJ focuses on American losers, but there are many, many American gainers from free trade, as discussed above. Are their communities, cultures, traditions, and families of no import to KBJ? It would seem so. On what basis does he prefer some Americans to others?…

… KBJ seems to ignore the fundamental fact of life that human beings try to better their lot in ways that often, and inescapably, result in change….

Perhaps (in KBJ’s view) it was a mistake for early man to have discovered fire-making, which undoubtedly led to new communal alignments, cultural totems, traditions, and even familial relationships. Methinks, in short, that KBJ has been swept away by a kind of self-indulgent romanticism for a past that was not as good as we remember it. (I’ve been there and done that, too.)…

“Free trade” works because there are gains to all participants. If that weren’t the case, Americans wouldn’t buy foreign goods and foreigners wouldn’t buy American goods. Moreover, “free trade” has been a boon to American consumers and workers (though not always the workers KBJ seems to be worried about). To the extent that “wealthy American entrepreneurs” have gained from “free trade,” it’s because they’ve risked their capital to create jobs (in the U.S. and overseas) that have helped people (in the U.S. and overseas) attain higher standards of living. The “worldwide pool of cheap labor” is, in fact, a worldwide pool of willing labor, which earns what it does in accordance with the willingness of Americans (and others) to buy its products….

If “free trade” is such a bad thing, I wonder if KBJ buys anything that’s not made in Texas, where he lives. Trade between the States, after all, is about as “free” as it gets (except when government bans something, of course). Suppose Texas were to be annexed suddenly by Mexico. Would KBJ immediately boycott everything that’s made in the remaining 49 States? Would it have suddenly become unclean?…

Putting an end to “free trade” would make Americans poorer, not richer. And I doubt that it would do anything to halt the natural evolution of “community, culture, tradition, and family” away from the forms sentimentalized by KBJ and toward entirely new but not necessarily inferior forms.

The biggest threat to “community, culture, tradition, and family” lies in the non-evolutionary imposition of new social norms by the Left. That’s where the ire of KBJ and company should be directed.

There are a few chinks in my argument.

First, there will be in the short run (and sometimes even in the long run) a downward shift in the demand for labor in some sectors of the economy due to actions taken by foreign governments. Those actions consist of direct subsidies to industries that export goods to the U.S., and indirect subsidies in the form of tariffs and quotas on goods imported from the U.S.

I have seen “libertarian” economists justify direct subsidies because they benefit American consumers. (The same economists are glaringly silent about the disbenefits to American workers whose jobs are lost because of the subsidies.) It is jarring to read justifications of that kind from “libertarians”, who are usually quick to put Americans and foreigners on the same plane; for example, by promoting and praising “open borders” despite considerable disbenefits to some Americans. (I am thinking of  those whose neighborhoods are threatened by gangs of illegals. I am also thinking of those who pay higher taxes to subsidize the education, shelter, sustenance, and schooling of illegals — but who, unlike more affluent Americans, don’t engage the services of low-priced nannies and yard workers.)

And I must point out that those foreign-government subsidies aren’t free. They’re paid for, one way or another, by the citizens of foreign countries. Why would a “libertarian” transnationalist overlook such a thing? To justify “free trade” I guess.

It’s only fair to note that the U.S. government subsidizes American industries in ways that harm foreigners, that is, through direct subsidies, tariffs on imports, and import quotas. But any gains to workers in the industries thus subsidized do not offset the harm that foreign-government subsidies do to workers in other American industries.

All in all, international trade is a real mess. (So is domestic trade, given the myriad distortions wrought by taxes and regulations.) But it’s fair to say that some American workers are harmed by what can only be called unfair practices in international trade. The harm to them isn’t offset by the gains to other Americans. Only an economist or socialist would think otherwise.

In sum, I have come around to Mr. Trump’s view of this issue. Free trade should be conducted on a level playing field. Given that that won’t happen soon — if ever — what should be done for American workers who are harmed by unfair trade? Stay tuned.

Rethinking Free Trade

I have long supported free trade as beneficial. But I have also long derided utilitarianism, which is the doctrinal basis for claiming that free trade is beneficial. And I have long opposed the idea of open borders, in part because of the utilitarian claims of its supporters. It is time for me to resolve these contradictions.

Which way should I go? Should I sustain my anti-utilitarian position and oppose free trade as well as open borders? Or should I become a consistent utilitarian and support both free trade and open borders?

A digression about utilitarianism is in order. Utilitarianism, in this context, implies a belief in an aggregate social-welfare function (SWF) — a mystical summing of the states of happiness (or unhappiness) of myriad persons over an infinite series of points in time. It is the aim of utilitarians (who are mainly leftists and economists, though the categories overlap) to push SWF upward, toward (imaginary) collective nirvana. In so doing, the utilitarian makes himself the judge of whether an increase in A’s happiness at the expense of B (e.g., income redistribution) will result in an increase or decrease in SWF. An argument for this presumption (which is familiar mainly to economists), is based on the hypothesis of diminishing marginal utility (DMU) — a hypothesis that I have refuted at length. Suffice it to say that if A gains pleasure by poking B in the eye, no one — not even a Ph.D. economist — can prove that A’s pleasure outweighs B’s pain. In fact, common sense — which is embedded in eons of tradition — tells us that the act that brings pleasure to A should be punished precisely because of the way in which that pleasure is gained.

How does all of that pertain to free trade and open borders? Like this: Economists defend free trade and open borders because, in the aggregate, such things — in the long run — lead to greater economic efficiency and thus to greater total output (measured in constant dollars). And they are right about that. I have no doubt of it. But, to paraphrase John Maynard Keynes, in the long run we are all dead, and in the meantime some of us pay for the betterment of others.

Moreover, there are economists and others who like to conjoin the economic truth about the long-run consequences of free trade and open borders with statements about liberty: People ought to be free to exchange goods and services voluntarily. People ought to be free to live where they like.

Only a jejune anarchist will take such pronouncements as absolutes. Murder for hire is almost almost universally disapproved, as are many other crimes, even in this “enlightened”age. And I am unaware of a movement among affluent leftists to open their living rooms to the homeless, nor to repeal laws against trespass.

The question is, as always, where to strike a balance between the interests of those who benefit from free trade and open borders, and the interests of those for whom such things mean loss of income or higher taxes. How do the gains that accrue to some (e.g., less-expensive Lexi and abundant, low-priced nanny services) offset the burdens borne by working-class taxpayers whose jobs move overseas and whose school taxes rise to cover the costs of educating migrant children?

I ask these questions in connection with a broader issue: the purpose of our national government. It exists precisely for the reasons stated in the Preamble to the Constitution:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

To put it bluntly but correctly, the national government exists not for the benefit of the people of the whole world or any part of it outside the United States, but for the benefit of the citizens of the United States.

Yes, some Americans benefit from free trade, and some Americans benefit from massive immigration. But not all Americans do. And it is the job of the national government to serve all of the people. A balance needs to be struck. And those who pay the price of free trade and massive immigration must be compensated in some way.

How and how much? Those are questions that I will grapple with in future posts.


Related posts:
Liberalism and Sovereignty
Utilitarianism, “Liberalism,” and Omniscience
Gains from Trade
Utilitarianism vs. Liberty
Diminishing Marginal Utility and the Redistributive Urge
Utilitarianism vs. Liberty (II)
Not-So-Random Thoughts (XVIII) – third item
Prosperity Isn’t Everything

Liberalism and Sovereignty

Don Boudreaux of Cafe Hayek writes about liberalism:

One of the great tenets of liberalism — the true sort of liberalism, not the dirigiste ignorance that today, in English-speaking countries, flatters itself unjustifiably with that term — is that no human being is less worthy just because he or she is outside of a particular group. Any randomly chosen stranger from Cairo or Cancun has as much claim on my sympathies and my respect and my regard as does any randomly chosen person from Charlottesville or Chicago.

Boudreaux is correct in saying that what is now called “liberalism” is not liberalism; it is a virulent strain of statism. Boudreaux’s strain of old-fashioned or “classical” liberalism is nowadays called libertarianism. But Boudreaux is one of those holdouts who insists that he is a liberal. There is much error in libertarianism but it is on the side of the angels by comparison with the modern, left-statist jumble of dogmas that goes by the names “liberalism” and “progressivism”.

Returning to Boudreaux’s post: He also states a (truly) liberal value, namely, that respect for others should not depend on where they happen to live. But it is prudent to put more trust in those who have proven their affection and support for you, than it is to trust those not-so-close to you — whether they live next door, in the inner city, or in Timbuktu.

And that is where Boudreaux, most self-styled libertarians, and all pacifists go off the rails. As Boudreaux says later in the same post:

[L]iberalism rejects the notion that there is anything much special or compelling about political relationships. It is tribalistic, atavistic, to regard those who look more like you to be more worthy of your regard than are those who look less like you. It is tribalistic, atavistic, to regard those who speak your native tongue to be more worthy of your affection and concern than are those whose native tongues differ from yours.

For the true liberal, the human race is the human race.  The struggle is to cast off as much as possible primitive sentiments about “us” being different from “them.”

The problem with such sentiments is the implication that we have nothing more to fear from people of foreign lands than we have to fear from our own friends and neighbors. Yet, as Boudreaux himself acknowledges,

[t]he liberal is fully aware that such sentiments [about “us” being different from “them”] are rooted in humans’ evolved psychology, and so are not easily cast off.  But the liberal does his or her best to rise above those atavistic sentiments,

Yes, the Boudreaux-like liberal does strive to rise above such sentiments, but not everyone else makes the same effort, as Boudreaux admits. Therein lies the problem.

Americans, as a mostly undifferentiated mass, are disdained and hated by many foreigners. (Aside: Conservative Americans, whether “deplorable” or not, are hated as a mostly undifferentiated mass by leftists, who are extreme tribalists.) The disdain and hatred arise from a variety of sources, ranging from pseudo-intellectual snobbery to nationalistic rivalry to anti-Western fanaticism. When the hatred leads to aggression, that aggression is aimed at all Americans: liberal, “liberal,” conservative, libertarian, bellicose, pacifistic, tribal, or whatever.

Leftists like to deploy the slogan “We’re all in this together” to justify their economically and socially destructive schemes. But when it comes to defense against foreign aggression, Americans truly are “all in this together”. The bitter irony is that leftists are generally uninterested in that crucial aspect of togetherness.

The Framers of the Constitution, being both smart and realistic, “did ordain and establish” a new form of government “in Order to . . . provide for the common defence” (and a few other things). That is to say, the Framers recognized the importance of establishing the United States as a sovereign state for limited and specified purposes, while preserving the sovereignty of the several States and their inhabitants for all other purposes.

If Americans do not mutually defend themselves through the sovereign state which was established for that purpose, who will do so? That is the question which liberals (both true and false) often fail to ask. Instead, they tend to propound internationalism for its own sake. It is a mindless internationalism, one that often disdains America’s sovereignty, and the defense thereof.

One manifestation of mindless internationalism is “transnationalism”:

“Transnationalism” challenges the traditional American understanding that (in the summary, which I slightly adapt, of Duke law professor Curtis A. Bradley) “international and domestic law are distinct, [the United States] determines for itself [through its political branches] when and to what extent international law is incorporated into its legal system, and the status of international law in the domestic system is determined by domestic law.”Transnationalists aim in particular to use American courts to import international law to override the policies adopted through the processes of representative government. [Ed Whelan, “Harold Koh’s Transnationalism“, National Review (The Corner), April 6, 2009]

Mindless internationalism equates sovereignty with  jingoism, protectionism, militarism, and other deplorable “isms”. It ignores or denies the hard reality that Americans and their legitimate overseas interests are threatened by nationalistic rivalries and anti-Western fanaticism. “Transnationalism” is just a “soft” form of aggression; it would erode American values from the inside out, though American leftists hardly need any help from their foreign allies.

In the real world of powerful international rivals and determined, resourceful fanatics, the benefits afforded Americans by our (somewhat eroded) constitutional contract — most notably the enjoyment of civil liberties, the blessings of  free markets, and the protections of a common defense — are inseparable from and dependent upon the sovereignty of the United States.  To cede that sovereignty for the sake of mindless internationalism is to risk the complete loss of the benefits promised by the Constitution.