The recent downturn in posting has been due to my upcoming exams. I’ll continue to post links and snippets over the next few weeks, but it’s unlikely that I’ll have time for lengthy pieces. Full-scale Trade Diversion will resume in mid-June. Thanks for reading.
Author Archives: jdingel
Crook on Blinder
Lately, though, Mr Blinder has been emphasising the downside. Perhaps he has found this arouses more interest. At the moment, as the title of his newest article indicates, he is anxious more than excited. “These forces,” he points out, “don’t look so benign from the point of view of an American computer programmer or accountant”, whose job might be at risk from foreign competition for the first time.
That is true, but how benign did those forces look to factory workers 20 years ago? Do accountants have larger claims on our sympathies than steel workers? Mr Blinder used to argue that trade creates jobs as well as destroying them and raises living standards in the process. He used to say that growing imports imply growing exports. He noted the age-old error of thinking that trade raises unemployment and said it was called the “lump of labour” fallacy. Those arguments were correct then and, in Mr Blinder’s view, still are. So, again, what has changed?…
In short, when it comes to policy prescriptions, Mr Blinder’s big new view amounts to nothing. Perhaps understanding this, he defends his grave new stance as constructive from a rhetorical point of view. He says he wants to save free trade from itself. “If we economists stubbornly insist on chanting ‘free trade is good for you’ to people who know that it is not, we will quickly become irrelevant to the public debate.” Yes, that is always a risk. But is it really going to be more effective to chant “you’re right, free trade is bad for you”?
Let me suggest another approach. Keep on patiently explaining why, implausible as it seems to non-economists, liberal trade in goods and services really is good for importers and exporters alike. Explain why, odd as it may seem, offshoring really is no different. Keep arguing for policies that widen the gains and help the victims, to be sure, but never concede those main points, or suppose they do not need defending. No question, it is thankless and repetitive work, but until it can be offshored, we need Alan Blinder to pull his weight.
More along that line here.
Wolfowitz Watch
The World Bank President blog has been brought back to life to track Paul Wolfowitz’s troubles.
World Development
via Johan Norberg: “For the first time, more people worldwide work in the service sector than in agriculture (the biggest employer the last 10,000 years).”
Under one billion
Concentrated Costs, Concentrated Benefits
Reasons to be optimistic about the political economy of trade:
Wall Street. Wal-Mart and Wall Street. Those are the diffuse, weak, politically inept actors benefiting from current trade arrangements. We’d better be very careful to be sure someone stands up for them. Don’t forget the little guy.
The Bottom Billion
Paul Collier, with whom I enjoyed lunch on Friday, has a new book out titled The Bottom Billion
Drawing upon the US experience in helping rebuild Europe after World War II, Collier identifies four relevant mechanisms: (1) foreign assistance, (2) trade, (3) security guarantees, and (4) governance. His policy suggestions are original, interesting, and likely to spur debate. He recommends trade preferences for Africa (pdf) to give them an advantage against Asian developing countries benefiting from agglomeration effects. Perhaps most provocatively, Collier suggests that the West offer external security guarantees to some troubled states — he’d prefer that you think of the British in Sierra Leone rather than the United States in Iraq.
Check out this short article (pdf) for an introduction to the book’s ideas.
Plenty of space under the subsidy ceiling
The Bush administration is taking heat from WTO negotiators for standing by its October 2005 proposal to limit its farm subsidies to $22 billion, as it only paid about $15 billion in subsidies last year. With that much room to spare, the US could easily make a more generous offer in an attempt to restart the WTO negotiations. On the other hand, trading partners are well aware that the first $7 billion in cuts offered by the US won’t actually improve their lot.
Don’t underestimate migrant workers
Michael Clemens:
You might have seen a recent New York Times Magazine cover story (subscription req.) about Filipinos working overseas… The author, Jason Deparle, recognizes the comparatively enormous salaries that Emmet Comodas and all five of his children have earned abroad, but urges us to remember that “competing with the literature of gain is a parallel literature of loss.” Any good journalist lays out the pros and cons of phenomena, inviting readers to reach their own conclusions. But one straightforward fact should stare any reader directly in the eyes: The Comodas family has reached its own decision about whether the gains are worth the losses. They have decided that the losses do not even come close to paralleling the gains, and their conclusion matters infinitely more than yours or mine…
Emmet Comodas’ salary in Saudi Arabia was ten times what he could have earned at home. He and his wife Tita invested the extra pay in food, medicine, and school supplies for their children. Though neither Emmet nor Tita had finished high school, four of their five children now have college degrees. Deparle grimly notes that “Emmet, overseas paying the bills, missed every graduation”. So what? Evidently Emmet and Tita decided that it would be better for their children if Emmet were absent at their children’s college graduations than present to watch them drop out of high school only to perpetuate their family’s poverty. Who are you and I to tut-tut them for this decision?
Do read the full post.
Don't underestimate migrant workers
Michael Clemens:
You might have seen a recent New York Times Magazine cover story (subscription req.) about Filipinos working overseas… The author, Jason Deparle, recognizes the comparatively enormous salaries that Emmet Comodas and all five of his children have earned abroad, but urges us to remember that “competing with the literature of gain is a parallel literature of loss.” Any good journalist lays out the pros and cons of phenomena, inviting readers to reach their own conclusions. But one straightforward fact should stare any reader directly in the eyes: The Comodas family has reached its own decision about whether the gains are worth the losses. They have decided that the losses do not even come close to paralleling the gains, and their conclusion matters infinitely more than yours or mine…
Emmet Comodas’ salary in Saudi Arabia was ten times what he could have earned at home. He and his wife Tita invested the extra pay in food, medicine, and school supplies for their children. Though neither Emmet nor Tita had finished high school, four of their five children now have college degrees. Deparle grimly notes that “Emmet, overseas paying the bills, missed every graduation”. So what? Evidently Emmet and Tita decided that it would be better for their children if Emmet were absent at their children’s college graduations than present to watch them drop out of high school only to perpetuate their family’s poverty. Who are you and I to tut-tut them for this decision?
Do read the full post.
Trade Diversion 