June 23, 2007
Free Trade and Inequality III Posted by Fredric Smoler at 01:05 PM EST John Steele Gordon makes several arguments against a recent article in Foreign Affairs that describes increasing opposition to globalization and recommends steps to decrease what the authors take to be evidence of increasing inequality in the United States, as an attempt to defuse that increasing opposition. For now, I’ll address just one of his arguments. He writes that “the ongoing integration of the world economy is unstoppable, whether we like it or not. Trying to stop it would be like trying to stop the Industrial Revolution in, say, 1830. American participation in the process might, at enormous economic cost, be delayed, but, with 30 percent of the world’s GDP, not for long. The last serious attempt to wall off the American economy from global influences was the Smoot-Hawley Tariff of 1930. It was one of the major reasons an ordinary recession turned into the economic catastrophe of the Great Depression, as American exports in particular and world trade in general collapsed.” I am skeptical about the analogy with industrialization in 1830, because while no one ever succeeded in reversing the Industrial Revolution, people did manage to very effectively roll back globalization during and after the First World War. The world economy was much more globalized in 1914 than it was in 1990. There would of course be a great economic cost to such a reversal, but as Mr. Gordon points out, there may have been a very great cost to Smoot-Hawley, and we did it anyway. The evidence for authoritarian and totalitarian regimes persisting in self-destructive economic policies is superabundant, and while democracies may be less likely to persist in self-destructive policies, the historical record suggests that they can do it for quite a while, and opposition to free trade has been impressively tenacious. Europe, which expresses vast sympathy for Africa, persists in protectionist policies that devastate Africans while costing Europeans a lot of money. Australians, now pretty committed free-traders, sought to protect manufacturing for decades, during which time they succeeded in devastating that sector of their economy. India was also protectionist for decades, which cost it vast potential growth. Etc. A web interview with economist Bryan Caplan, the author of a recent book titled The Myth of the Rational Voter: Why Democracies Choose Bad Policies, suggests that American voters are more than capable of making very bad choices about economic policies. I do not share anything like all of the views expressed by Professor Caplan, but I am curious about what Mr. Gordon makes of his position.
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