Jeff Madrick

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Straight Talk on Trade: Ideas for a Sane World Econ­omy by Dani Ro­drik

Straight Talk on Trade:

Ideas for a Sane World Econ­omy by Dani Ro­drik.

Prince­ton Univer­sity Press,

316 pp., $29.95

In 1997, when Dani Ro­drik, a Turk­ish­born pro­fes­sor at Har­vard’s Kennedy School of Gov­ern­ment, pub­lished his brief book Has Glob­al­iza­tion Gone Too Far?, pro­gres­sive econ­o­mists widely em­braced his ar­gu­ments that many free trade poli­cies adopted by the US, which re­duced tar­iffs and other pro­tec­tions, also weak­ened the bar­gain­ing power of Amer­i­can work­ers, desta­bi­lized their wages, and en­cour­aged so­cial con­flict. “The dan­ger,” Ro­drik wrote pre­sciently, “is that the do­mes­tic con­sen­sus in fa­vor of open mar­kets will ul­ti­mately erode to the point where a gen­er­al­ized resur­gence of pro­tec­tion­ism be­comes a se­ri­ous pos­si­bil­ity.” I re­mem­ber that Robert Kut­tner, the coed­i­tor of The Amer­i­can Prospect, was par­tic­u­larly en­thu­si­as­tic about the book. Al­most twenty years later, he again praised Ro­drik for his con­tin­ued de­vo­tion to an em­pir­i­cally grounded skep­ti­cism of what Ro­drik now calls “hy­per­glob­al­iza­tion.” Has Glob­al­iza­tion Gone Too Far? chal­lenged a main­stream eco­nomic be­lief that in 1997 was ac­cepted with in­creas­ing fer­vor: that re­duc­ing tar­iffs to en­cour­age trade al­most al­ways re­sulted in a health­ier, more rapidly grow­ing econ­omy for all na­tions. If some work­ers in in­dus­tries that di­rectly com­peted with ris­ing im­ports lost their jobs or had their wages re­duced, it was as­sumed that the econ­omy would cre­ate enough new jobs to com­pen­sate. Free trade had been a prin­ci­ple of mod­ern eco­nomic the­ory since Adam Smith. But an es­pe­cially in­tense al­le­giance to it had grown out of the Amer­i­can drift to­ward lais­sez-faire eco­nom­ics that be­gan in the 1970s with Mil­ton Fried­man, who ad­vo­cated min­i­mal gov­ern­ment and the dereg­u­la­tion of mar­kets. Best sell­ers like The End of His­tory and The Last Man (1992) by the philoso­pher Fran­cis Fukuyama and The Lexus and the Olive Tree (1999) by the jour­nal­ist Thomas Fried­man in­sisted that a re­duc­tion in pro­tec­tion­ism and the de­vel­op­ment of free mar­kets across the world would lead to pros­per­ity and greater in­come equal­ity. In 1991, Lawrence Sum­mers told a reporter that in eco­nom­ics “one set of laws works ev­ery­where”—that is, the ben­e­fits of free trade ap­plied to all mar­kets, big and small.

Ro­drik is no pro­po­nent of Don­ald Trump’s re­cently im­posed tar­iffs, how­ever. He thinks we need a bal­anced new trade pol­icy, and for him Trump’s bravado has no place in for­mu­lat­ing one. We can re­duce in­come in­equal­ity and re­tain the ben­e­fits of free trade with in­tel­li­gent ne­go­ti­a­tion among na­tions, he ar­gues, not grand­stand­ing. Among other things, a new pol­icy should in­clude sub­stan­tial fund­ing and train­ing for those in the US who lose jobs. One of Ro­drik’s most im­por­tant points is that the na­tion needs a gen­er­ous safety net if free trade poli­cies are to suc­ceed. Paul Sa­muel­son, the No­bel Prize– win­ning ad­viser to John F. Kennedy and Lyn­don B. John­son, wrote that the the­ory of com­par­a­tive ad­van­tage, the the­o­ret­i­cal foun­da­tion of free trade, was the one tenet in eco­nom­ics that was both non­triv­ial and in­con­tro­vert­ible. Ac­cord­ing to this the­ory, de­vel­oped by the early-nine­teenth-cen­tury Bri­tish econ­o­mist David Ri­cardo, even if Coun­try A makes ev­ery­thing more ef­fi­ciently than Coun­try B—that is, pro­duces more with less la­bor—both coun­tries would ben­e­fit be­cause Coun­try B would also en­joy rel­a­tively lower prices on the goods made by Coun­try A. The beauty of Ri­car­dian free trade, as Sa­muel­son de­scribed it, is that it should gen­er­ate pros­per­ity for most coun­tries. Gains for the na­tion should ex­ceed the com­bined losses of in­di­vid­ual in­dus­tries and work­ers.

Dur­ing the 1990s, ma­jor new trade pacts re­flect­ing the in­tense faith in free mar­kets went into ef­fect. In 1993 Bill Clin­ton, with over­whelm­ing Repub­li­can and some Demo­cratic sup­port, signed the North Amer­i­can Free Trade Agree­ment (NAFTA), which es­tab­lished a free trade bloc among Mex­ico, Canada, and the US. In 1995, the Gen­eral Agree­ment on Tar­iffs and Trade (GATT), which had overseen a broad re­duc­tion in tar­iffs for most of the pros­per­ous post–World War II era, was re­placed by the World Trade Or­ga­ni­za­tion, which im­posed tighter and more strictly en­forced rules that gave na­tions less flex­i­bil­ity than they had en­joyed un­der GATT to pur­sue gov­ern­ment sub­si­dies and other poli­cies that would ben­e­fit their own economies.

The in­ten­si­fy­ing ded­i­ca­tion to the free trade prin­ci­ple also led Clin­ton’s eco­nomic team, un­der Lawrence Sum­mers, to rec­om­mend that gov­ern­ments re­move var­i­ous caps and taxes on for­eign in­vest­ment. These reg­u­la­tions had been in place to re­strict cap­i­tal flows to poorer de­vel­op­ing economies like

South Korea and Malaysia. With­out such re­stric­tions, Amer­i­can fi­nanciers and cor­po­ra­tions were free to chase higher in­ter­est rates, weaker fi­nan­cial reg­u­la­tions, and lower tax rates.

Un­der GATT, pros­per­ity abounded in North Amer­ica, West­ern Europe, and Ja­pan. But Ro­drik be­lieves the new trade agree­ments un­der the WTO were too lim­it­ing, es­pe­cially for de­vel­op­ing na­tions. In his view, many econ­o­mists had be­come ide­o­logues, twist­ing em­pir­i­cal analy­ses to fit their the­o­ries. Ro­drik wrote in a blog post last year about the “wildly op­ti­mistic” fore­casts that re­spected econ­o­mists had given for the ben­e­fits of NAFTA, in­clud­ing the num­ber of jobs it would cre­ate.* The econ­o­mists at the In­sti­tute for In­ter­na­tional Eco­nom­ics, which had pub­lished Ro­drik’s 1997 book in an at­tempt to bal­ance pro­fes­sional dis­cus­sion on glob­al­iza­tion, iron­i­cally pro­duced one of the most op­ti­mistic of these in­flated fore­casts. Clin­ton es­tab­lished *“What Did NAFTA Re­ally Do?,” Jan­uary 26, 2017; avail­able at ro­drik .type­pad.com. a cam­paign led by Wil­liam Da­ley, the Chicago politi­cian and son of for­mer mayor Richard Da­ley, to pro­mote NAFTA. In 1993, on Larry King Live, Vice Pres­i­dent Al Gore had come off well in a de­bate with the an­tiNAFTA fire­brand Ross Perot, whose ex­ag­ger­a­tions only added cre­dence to Gore’s ar­gu­ments in sup­port of the agree­ment.

Free trade ad­vo­cates at Har­vard and else­where did not all take warmly to Has Glob­al­iza­tion Gone Too Far?, though Ro­drik worked down the hall or across Har­vard Yard from many of them. Brad DeLong, a Har­vard pro­fes­sor and fre­quent coau­thor with Sum­mers, damned it with faint praise in a re­view when it came out. He sug­gested that Ro­drik was sim­ply re­peat­ing many of the crit­i­cisms that Karl Polanyi had made in his 1944 clas­sic, The Great Trans­for­ma­tion. Ro­drik and Polanyi both thought that gov­ern­ment in­ter­ven­tion was crit­i­cal to the de­vel­op­ment of West­ern economies. But de Long, who agreed with this broad the­sis, mostly ig­nored Ro­drik’s new ev­i­dence that many work­ers, es­pe­cially the less ed­u­cated, were put at a dis­ad­van­tage as the flow of trade and cap­i­tal loos­ened. Ro­drik’s work did not ini­tially change many minds, as many econ­o­mists con­tin­ued to main­tain that “skill-bi­ased” tech­no­log­i­cal change, which fa­vored work­ers with a col­lege de­gree, was far more re­spon­si­ble for grow­ing in­come in­equal­ity than were trade poli­cies. They had ar­rived at that con­clu­sion in part be­cause trade then ac­counted for too lit­tle of the US econ­omy to seem to mat­ter much.

The Asian fi­nan­cial cri­sis of 1997 was one of the first signs that Ro­drik’s skep­ti­cism about free trade ide­ol­ogy had been jus­ti­fied. Asian economies col­lapsed when in­vestors pulled out their “foot­loose cap­i­tal,” Ro­drik’s term for for­eign funds with­drawn at the first sign of fi­nan­cial trou­ble or a bet­ter op­por­tu­nity. Main­stream in­ter­na­tional eco­nomic in­sti­tu­tions, such as the World Bank and the In­ter­na­tional Mone­tary Fund, im­posed de­struc­tive aus­ter­ity poli­cies on these na­tions in an at­tempt to rein­vig­o­rate free mar­ket forces. What be­came known as the Wash­ing­ton Con­sen­sus—a se­ries of pol­icy rec­om­men­da­tions from the US gov­ern­ment that en­cour­aged de­vel­op­ing na­tions to prac­tice fis­cal dis­ci­pline—made mat­ters worse. They needed to pump up de­mand, not con­tract it with bud­get cuts.

To­day Ro­drik’s 1997 views are in­creas­ingly ac­cepted as con­ven­tional wis­dom. He and oth­ers still rec­og­nize that skill-bi­ased tech­no­log­i­cal change con­trib­utes to in­come in­equal­ity, but a grow­ing amount of ev­i­dence shows

that trade, too, harms many work­ers and that the re­sult­ing so­cial and po­lit­i­cal con­flict can lead to a weaker so­cial safety net. Don­ald Trump gained pop­u­lar sup­port by crit­i­ciz­ing free-trade poli­cies, in­clud­ing the twelve-na­tion Trans-Pa­cific Part­ner­ship (TPP) and the Transat­lantic Trade and In­vest­ment Part­ner­ship (T-TIP), a pro­posed broad agree­ment be­tween the US and the Euro­pean Union. Bernie San­ders put crit­i­cism of free trade at the cen­ter of his pres­i­den­tial cam­paign. Hil­lary Clin­ton orig­i­nally sup­ported the TPP, but said in a 2015 de­bate with San­ders that “it didn’t meet my stan­dards.”

Since

Has Glob­al­iza­tion Gone Too Far? ap­peared, Ro­drik has pub­lished six more books re­it­er­at­ing and up­dat­ing his ar­gu­ments. The most re­cent of these, Straight Talk on Trade: Ideas for a Sane World Econ­omy, ar­rives at a time of con­tro­versy. Trump has pulled out of the TPP (the other eleven par­tic­i­pants in the ne­go­ti­a­tions have signed it) and is try­ing to ne­go­ti­ate changes to NAFTA with Mex­ico and Canada. Trump re­cently sug­gested that he might want to re­join the TPP, then re­verted to his pre­vi­ous po­si­tion. In March, he threat­ened to im­pose tar­iffs on steel and alu­minum im­ports from all na­tions, even those that don’t dump their prod­uct—that is, sell it be­low cost—though he backed off the threat to some na­tions other than China. As of this writ­ing, he is promis­ing to roll out tar­iffs on more Chi­nese goods and China in turn prom­ises to re­tal­i­ate with new tar­iffs on Amer­i­can goods.

Ro­drik is not con­fronta­tional. In both Has Glob­al­iza­tion Gone

Too Far? and Straight Talk on Trade, he some­times bends over back­ward to avoid lev­el­ing harsh charges against ap­par­ent of­fend­ers of eco­nomic good sense. His gen­tle treat­ment of Eu­gene Fama, who jus­ti­fi­ably won a No­bel Prize for his early work but later adamantly defended the ra­tio­nal­ity of the stock mar­ket, is an ex­am­ple per­haps of his bend­ing too far. Such free mar­ket ar­gu­ments, Ro­drik writes else­where, were used to dereg­u­late fi­nan­cial in­sti­tu­tions broadly and thus were in part re­spon­si­ble for caus­ing the 2008 cri­sis. Re­cent stud­ies that Ro­drik cites in his new book pro­vide fur­ther ev­i­dence for his ear­lier claims about the dam­age free trade can cause. In 2015, per­haps the most com­pre­hen­sive main­stream study of NAFTA’s ben­e­fits over more than twenty years showed that it was re­spon­si­ble for only a trivial in­crease in US eco­nomic growth—0.08 per­cent. Mean­while, im­ports to the US from Mex­ico have dou­bled, en­abling it, ac­cord­ing to one thor­ough study, to en­joy far larger gains in GDP per capita from NAFTA than does the US. For those who re­mem­ber the con­tempt that econ­o­mists in the Clin­ton ad­min­is­tra­tion showed to­ward op­po­nents of NAFTA, this must come as a sur­prise.

Even more sur­pris­ing is a 2016 study that found that wage growth had been re­duced by 17 per­cent­age points in mar­kets whose in­dus­tries were most af­fected by NAFTA’s cuts in tar­iffs. Wages were also de­pressed in com­pa­nies from the same ge­o­graph­i­cal ar­eas as those that were di­rectly af­fected by the re­sult­ing Mex­i­can trade, even if they didn’t lose busi­ness to Mex­ico di­rectly. The two trade econ­o­mists who con­ducted the study, John McLaren and Shushanik Hakobyan, found that less ed­u­cated work­ers were most af­fected, since job loss typ­i­cally oc­curred in lower-skilled man­u­fac­tur­ing in­dus­tries and ser­vices. More tra­di­tion­ally pro­gres­sive econ­o­mists, like Josh Bivens of the Eco­nomic Pol­icy In­sti­tute, have found even more wide­spread wage losses from trade in gen­eral.

The rapid growth of im­ports from China since it joined the WTO in 2001 and gained ac­cess to the mar­kets of rich na­tions had a sim­i­lar ef­fect on wages. The MIT econ­o­mist David Au­tor was orig­i­nally among those who ve­he­mently at­trib­uted in­come in­equal­ity in Amer­ica largely to ed­u­ca­tional in­equal­ity in a time of grow­ing tech­no­log­i­cal in­no­va­tion. But in 2016, Au­tor pub­lished a study with David Dorn and Gor­don Han­son show­ing that Chi­nese ex­ports de­pressed wages and caused un­em­ploy­ment to rise in many parts of Amer­ica. This wage de­cline was not off­set by job cre­ation in other in­dus­tries, as main­stream econ­o­mists like Peter Petri and Michael Plum­mer— whose model of the TPP’s ef­fects had found ben­e­fits for all na­tions—had in­cor­rectly pre­dicted. “We should not act,” Ro­drik writes, “as if our cher­ished stan­dard model has not been se­verely tar­nished by re­al­ity.”

Ro­drik be­lieves that some econ­o­mists were again ir­re­spon­si­ble in back­ing Pres­i­dent Obama’s ad­vo­cacy of the Trans-Pa­cific Part­ner­ship. The widely dis­trib­uted study by Petri and Plum­mer con­cluded that the TPP would cause a mod­est gain in US GDP, some in­crease in wages, and, the re­searchers proudly claimed, no job losses at all. But Ro­drik points out—and I de­tect some anger in his oth­er­wise mild-man­nered writ­ing here—that the study had built into its fore­cast­ing model an as­sump­tion that un­em­ploy­ment would not rise. This sort of tau­to­log­i­cal as­sump­tion is com­mon, even re­quired, in such mod­els. A study that loos­ened its premises found that the TPP could in­deed cause se­vere job losses.

Ro­drik’s con­cern over new trade deals goes well beyond the neg­a­tive ef­fects of free trade it­self. The TPP, he writes, was a case of “cor­po­rate cap­ture.” It was de­signed both to in­crease pres­sure on China to adopt free trade poli­cies and to counter that gi­ant na­tion’s grow­ing eco­nomic power. If it had been rat­i­fied, how­ever, it would have pro­tected the in­tel­lec­tual prop­erty and reg­u­la­tory rights of Amer­i­can big busi­ness, no­tably banks, drug com­pa­nies, and tech­nol­ogy com­pa­nies. Mean­while, by tight­en­ing re­stric­tions on the sorts of trade poli­cies coun­tries could adopt, it would put de­vel­op­ing economies at a sig­nif­i­cant dis­ad­van­tage.

Na­tions that de­vel­oped af­ter World War II, such as Ja­pan, South Korea, China, and Tai­wan, Ro­drik ar­gues, did well when siz­able Amer­i­can trade bar­ri­ers were still in ef­fect and cap­i­tal flows were con­trolled by such mea­sures as “sub­si­dies, do­mes­tic-con­tent re­quire­ments, in­vest­ment reg­u­la­tions, and, yes, of­ten im­port bar­ri­ers,” all of which “were crit­i­cal to the cre­ation of new, higher-value in­dus­tries” in, for ex­am­ple, China and Viet­nam. “There is noth­ing in the his­tor­i­cal record,” he in­sists, “to sug­gest that poor coun­tries re­quire very low or zero bar­ri­ers in the ad­vanced economies in or­der to ben­e­fit greatly from glob­al­iza­tion.” On the con­trary: “Coun­tries that rely on free trade alone (Mex­ico comes im­me­di­ately to mind) have lan­guished.” Mex­ico ben­e­fited from trade, says Ro­drik, but didn’t in­vest do­mes­ti­cally in in­dus­tries that would im­prove its pro­duc­tiv­ity and broadly raise wages.

Un­der the TPP, de­vel­op­ing coun­tries would be forced to de­pend on some­thing closer to free trade alone. The poli­cies on which China and Viet­nam re­lied as their economies grew in the 1980s and 1990s, ac­cord­ing to Ro­drik, “vi­o­late cur­rent trade rules,” which would have re­stricted the pro­tec­tive mea­sures they could use. Viet­nam, for in­stance, “would have had some as­sur­ance of con­tin­ued ac­cess to the US mar­ket (ex­ist­ing bar­ri­ers on the US side are al­ready quite low), but in re­turn would have had to sub­mit to re­stric­tions on sub­si­dies, patent rules, and in­vest­ment reg­u­la­tions.” China, un­der sim­i­lar rules, “would not have been able to pur­sue its phe­nom­e­nally suc­cess­ful in­dus­tri­al­iza­tion strat­egy.” Ro­drik is equally con­cerned about the Transat­lantic Trade and In­vest­ment Part­ner­ship, which would have some of the same lim­i­ta­tions. In his 1997 book, he pre­dicted that “the most se­ri­ous chal­lenge for the world econ­omy in the years ahead lies in...en­sur­ing that in­ter­na­tional eco­nomic in­te­gra­tion does not con­trib­ute to do­mes­tic so­cial dis­in­te­gra­tion.” He doesn’t say enough in Straight Talk on Trade about how specif­i­cally this is to be achieved, but he does of­fer some guide­lines worth fol­low­ing. His most im­por­tant sug­ges­tion, I’d ar­gue, is to write new agree­ments that leave space for in­di­vid­ual na­tions to adopt the poli­cies they be­lieve they need, which are now of­ten limited by WTO rules. These could in­clude la­bor poli­cies such as min­i­mum wages and paid fam­ily leave, busi­ness sub­si­dies, and trade pro­tec­tions for some com­pa­nies and in­dus­tries, as well as en­vi­ron­men­tal pro­tec­tions and strong fi­nan­cial reg­u­la­tions.

A ma­jor con­cern for de­vel­op­ing na­tions, for ex­am­ple, is that start-up in­dus­tries face com­pe­ti­tion from enor­mous in­ter­na­tional cor­po­ra­tions that ben­e­fit from economies of scale—the more they sell, the lower their cost per unit. Tax breaks and sub­si­dized gov­ern­ment loans have sup­ported the de­vel­op­ment of many in­dus­tries, from steel to high tech­nol­ogy, across East Asia and China. Agree­ments that put too many re­stric­tions on the trade poli­cies their mem­bers can adopt could limit the abil­ity of gov­ern­ments to give their in­dus­tries this sort of eco­nomic sup­port. Such in­dus­trial poli­cies may also make sense in Amer­ica, where—as Louis Uchitelle notes in his re­cent book Mak­ing It: Why Man­u­fac­tur­ing Still Mat­ters (2017)—there are so­cial ben­e­fits to strength­en­ing the man­u­fac­tur­ing sec­tor. For a long time, the growth of man­u­fac­tur­ing cre­ated good jobs for black work­ers in cen­tral cities among oth­ers. That is no longer the case, and poli­cies that en­cour­age the cre­ation of man­u­fac­tur­ing jobs can be vi­tal for these and other poor work­ers. There are also eco­nomic ben­e­fits. Sup­port­ive gov­ern­ment poli­cies could help pro­vide smaller man­u­fac­tur­ers with cheap cap­i­tal, tech­ni­cal aid, and an af­ford­able pool of qual­i­fied work­ers.

One of Ro­drik’s more provoca­tive sug­ges­tions is to broaden the def­i­ni­tion of “dump­ing.” The WTO has a muchused pro­ce­dure by which cor­po­ra­tions can chal­lenge the pric­ing of ex­ports if they are be­ing sold be­low pro­duc­tion costs—in­deed, this is one of the rea­sons the WTO was formed. But Ro­drik thinks that other kinds of poli­cies, such as those that pre­vent work­ers from or­ga­niz­ing, are also a form of dump­ing, de­signed to keep costs down rel­a­tive to other na­tions. There should be a mech­a­nism at the WTO, he pro­poses, to chal­lenge such “so­cial dump­ing.” Ro­drik be­lieves strongly that trade dis­cus­sions should be public and trans­par­ent. That the ne­go­ti­a­tions over the TPP were held in se­cret is per­haps the best demon­stra­tion of the ar­ro­gant con­fi­dence of free trade en­thu­si­asts and their in­or­di­nate fear of crit­i­cism. It also raises the ques­tion of cor­po­rate in­flu­ence, which is harder to track when ne­go­ti­a­tions are con­ducted out of the public view. The TPP’s sup­port­ers, Ro­drik ar­gues, “only dis­cred­ited them­selves by de­rid­ing the skep­tics as pro­tec­tion­ists. Open, in­formed de­bate about spe­cific pro­vi­sions is ex­actly what was called for.”

Ro­drik is not uni­formly pro­gres­sive. He is op­posed, for ex­am­ple, to in­creases in min­i­mum wages well above those re­quired by cur­rent laws. But he is deeply con­cerned about the mis­lead­ing ad­vice that some econ­o­mists—like some of those at the In­sti­tute for In­ter­na­tional Eco­nom­ics—have given pol­i­cy­mak­ers. The wide sup­port among free mar­ket econ­o­mists for end­ing cap­i­tal con­trols in the late 1990s was a dis­turb­ing ex­am­ple of ide­o­log­i­cal group-think—a term that Ro­drik does not use but that I be­lieve is ap­pro­pri­ate. An­other, more cur­rent ex­am­ple is the Repub­li­can ef­fort to roll back some of the bank­ing rules en­acted by the Dodd–Frank Wall Street Re­form and Con­sumer Pro­tec­tion Act af­ter the 2008 fi­nan­cial cri­sis. Some—though cer­tainly no longer all—main­stream econ­o­mists still jus­tify the roll­back us­ing the same ar­gu­ment that led to in­ad­e­quate reg­u­la­tions be­fore the cri­sis: that ef­fi­cient mar­kets will reg­u­late them­selves, min­i­miz­ing ex­cesses through com­pe­ti­tion. This is the kind of the­ory that like­wise as­sumes that work­ers in free la­bor mar­kets are paid what they de­serve and

have no need for unions to bar­gain on their be­half.

Ro­drik also ad­mits he is dis­turbed about what some econ­o­mists are teach­ing their stu­dents:

In their zeal to dis­play the pro­fes­sion’s crown jew­els in un­tar­nished form—mar­ket ef­fi­ciency, the in­vis­i­ble hand, com­par­a­tive ad­van­tage— econ­o­mists skip over the real-world com­pli­ca­tions and nu­ances. It is as if in­tro­duc­tory physics cour­ses as­sumed a world with­out grav­ity, be­cause ev­ery­thing be­comes so much sim­pler that way. Down­play­ing the di­ver­sity of in­tel­lec­tual frame­works within their own dis­ci­pline does not make econ­o­mists bet­ter an­a­lysts of the real world. Nor does it make them more pop­u­lar.

I’d add to that list of “crown jew­els” the be­lief that skill-bi­ased tech­nol­ogy is by far the most sig­nif­i­cant cause of in­come in­equal­ity, which re­mains preva­lent among many econ­o­mists even now that we have ev­i­dence for the ef­fects of trade on in­come and em­ploy­ment. Ro­drik be­lieves that a ro­bust so­cial safety net and a re­in­forced sense of com­mu­nity are what to­day’s econ­omy most ur­gently needs—the op­po­site of the re­cent poli­cies of Trump and the Repub­li­cans. They would also en­able the na­tion to sup­port the more ben­e­fi­cial free trade poli­cies even when they do oc­ca­sional dam­age. The ne­glected for­mer man­u­fac­tur­ing work­ers of Amer­ica’s in­dus­trial heart­land in Ohio, Wis­con­sin, and Penn­syl­va­nia surely helped elect Trump. Man­u­fac­tur­ing jobs were al­ready in rapid de­cline due to tech­no­log­i­cal ad­vances and out­sourc­ing, but this trend might have been slowed by poli­cies sup­port­ing newer tech­nolo­gies and bet­ter-man­aged man­u­fac­tur­ing com­pa­nies and as­sur­ing more aid and train­ing for work­ers who lost their jobs as a re­sult of in­ter­na­tional com­pe­ti­tion. Amer­ica does pro­vide some as­sis­tance to such work­ers, but it is min­i­mal by com­par­i­son with many other de­vel­oped coun­tries.

The pro­tec­tion­ist tar­iffs on Chi­nese goods that Trump has or­dered are in­spir­ing de­struc­tive coun­ter­mea­sures from China. They are also send­ing a mis­lead­ing mes­sage that a so­lu­tion is in the works for those vot­ers in the in­dus­trial heart­land who have lost their jobs. Ro­drik op­poses such blunt pro­tec­tion­ism. Yet he does not say whether he thinks sub­si­dies for Amer­i­can man­u­fac­tur­ing in­dus­tries might at least slow job losses and al­low us to pur­sue more in­no­va­tive tech­nolo­gies. In my view, they seem worth a try.

A cloth­ing mar­ket in Cairo, 2011; pho­to­graph by Martin Roe­mers from his book Me­trop­o­lis, pub­lished by Hatje Cantz in 2015

‘Trump Mask,’ Mex­ico, 2016; pho­to­graph by Phyl­lis Galembo

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