Tuesday, November 13, 2007

all is for the best in the best of all possible worlds

I attended a panel on Jobs, Trade, and American Votes at the NYU Stern School of Business last night. The panel was jointly sponsored by the Economist magazine and the Council on Foreign Relations website. I was hoping to hear more about immigration, but the panelists stuck primarily to trade issues. The moderator noted more than once the lack of disagreement on fundamentals among the panelists: free trade is a net good for the U.S. and its trading partners and efforts to stymie free trade are usually attributable to the inability of the political system to balance diffuse benefits against concentrated costs.

While agreeing myself with some of their assumptions, I became convinced that they must inhabit some fantasy world where the median American voter reads the Economist every week and laughs knowingly at Lou Dobbs over pinot noir on the next expensed Maxjet flight to London.

Matthew Bishop of the Economist thought that recent anti-trade noises from Congress are just so much puffery. Despite expressing antagonism to trade, no significant political faction has passed the Wal-Mart Test, which is to pass policies that would raise prices at Wal-Mart. Democrats perceive they have a lot to gain by “pandering” to interest groups, but when it comes time to vote, they will vote for open trade as they always have.

Amity Shlaes, a fellow at CFR, raised the specter of Chavez, Venezuela’s “Castro with oil,” to argue that the U.S. needs to increase its influence in the region [!] by passing a trade deal with Colombia over protests that trade unionists have been murdered there at an alarming rate.

Stern dean Thomas Cooley expressed concern that the current Doha round of international trade negotiations has been sidelined and wondered why corporate leaders don’t make more public appeals in favor of free trade. The answer that comes to mind is that they are not stupid—business leaders know they are unpopular at the moment and that free trade is relatively unpopular. Also, public appeals of this sort are not how corporations typically operate in the political sphere, instead working behind the scenes to advance their preferred policies.

Bishop lamented the failure of political leaders in the rich countries to stand up for free trade, causing me to wonder whether he has heard any public speech by any politician in the U.S. at any point in the past 50 years. Bishop worried about anti-trade rhetoric he anticipates will be forthcoming from the left during the 2008 campaign, ignoring the recent popularity of Lou Dobbs, Tom Tancredo, and Ron Paul on the right.

Cooley stated matter-of-factly that increased trade inevitably brings increased inequality due to greater rewards to human capital. He argued that this is why we need to invest in education to take advantage of this trend so as not to end up with the short end of the stick. Trade adjustment assistance was mooted as a necessary sop to voters, but the panelists seemed not to place much importance on it.

Bishop pointed out that the U.S. is by far the biggest beneficiary of globalization in the world—its businesses are profit leaders, U.S. corporations are benefiting from outsourcing trends, and there is little evidence of U.S. jobs being lost. Since America is doing fine economically, the problems must lie elsewhere, perhaps in failings in the education, healthcare, and pension systems, as well as post-9/11 angst and fear of outsiders who don’t like us. These factors explain the current malaise and shouldn’t cause us to give up the thing that’s working so well: trade. Bishop stressed that politicians may disparage trade but ultimately won’t mess with it. Bishop's line of argument here was about the most persuasive thing I heard from the panel, but he failed to explore further how policy-makers might implement his prescription with an anxious public. This argument also fails to consider inequality outside the U.S. One might also speculate that the comparatively one-sided benefits from trade accruing to the U.S. might have something to do with low opinion of Americans abroad, and that the narrowly extractive business model the U.S. government and corporations have pursued around the world might have something to do with failings in education and health care inside the U.S.

Shlaes asserted that you don’t see old immigrants fighting against new immigrants as they have during past periods of tension, causing me once again to wonder what country she has been living in lately. According to Shlaes, you don’t hear racial hatred like you used to in the bad old days—things are great now. This was apparently ridiculous enough to give Cooley momentary pause, as he asked, What about Lou Dobbs? before going on to predict that, absent a significant financial meltdown, trade will largely be absent from the campaign next year.

To the panelists, the gains from trade to the American public are so massive and self-evident, that only those blindly opposed to progress or selfish workers with vested interests in outdated sectors would stand in their way.

The long-standing problems of global inequality that the Washington Consensus has systematically failed to address, the rising sense of economic insecurity in the American middle class, the unmitigated migration flows stemming from the pressures of globalization—these issues went largely unaddressed.

Overall this was a remarkably unaware and blinkered assessment of U.S. public opinion on trade. If these are the people charged with explaining the benefits of trade to the American public and convincing politicians that increased trade is a political winner, if these are the people tasked with figuring how to address the very real problems caused by Washington-style globalization, we have much to fear. It would be hard to imagine a less convincing set of arguments less convincingly presented than those I heard last night. I hope they don't next turn to the subject of immigration, or we'll really be in trouble.

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