In Defense of Free Trade


The Context

Recently there was a discussion about free-trade on a mailing list of Caltech alumni that I subscribe to. Part of the discussion actually got me riled up for a rant which I forwarded to the list, and thought I’d post here for good measure as well to spread the debate.

My response was to an e-mail suggesting that “unilaterally violating the WTO treaty” may be the only example the writer could think of where doing that would actually be good for the US (versus unilaterally violating the ABM and Kyoto treaties for example).

The Rant

I’m not convinced that “unilaterally violating” the WTO would be “good for the planet”.  As you mention, there is some evidence that “WTO-related programs have been good for the standard of living in” parts of the world that are less well off than the US on average.  There is also evidence that the free-trade programs have resulted in a “rising-tides raise all boats” phenomenon where the AVERAGE world citizen has seen their lot improve under the regime.  In fact, you are right to state that for the first 200 years the US levied tariffs, but it was with the US’s gradual loosening of tariffs and integration and promotion of free-trade that led to the meteoric rise of the US economy on the world stage (starting the in the early 1900′s and accelerating through Breton-Woods and the 60′s).

But as you point out here’s the rub: While the AVERAGE world citizen has seen their lot improve in the most recent spat of globalization (post 1960), there are some who were previously many standard deviations above average who have seen their lot fall, and yes, those people are the folks predominantly in OECD countries, especially with a focus on unskilled labor.  In other words, US manufacturing and farming workers (a.k.a Hillary’s core demographic).  And without change of some sort, it increases the likelihood that “our kids” will be less well off than us; a first for the US.

Yikes.  What are we to do?

Well, I see essentially four options:
1) Roll-back the free-trade regime under the cover of “it’s unfair to US workers”.

I question the moral correctness of this.  I can just as validly state this option as “continue to support policies that promote huge global inequity in order to ensure US economic dominance.”  Yes, it’s politically popular, but that doesn’t make it right.

2) Keep your pro-free-trade rhetoric but soften it by saying “we need to make sure other countries are fair to their workers by ensuring that other countries have to adhere to the same strict labor, environmental, and anti-monopolistic rules we have.”

This at the surface level deals with the moral problems of #1, but has the same effect, as it allows us to penalize free-traders who don’t run by those rules.  Labor rules in the US took years to evolve and are very US-specific.  Labor relations in other countries tend to develop their own local methods in order to be effective.  It’s naive and wrong to expect our rules work for other countries, and frankly the labor rules that WILL evolve in foreign countries are far more likely to be effective when promoted and fought for by the lower and middle-classes there.  This argument is usually promoted by interests in developed countries purely as a way to protect the developed country, not in the honest desire to improve the lot of the underdeveloped.

Both these options are in the roll-back the free-trade trends of the past fifty years, the second being much more subtle about it.

However, there are powerful forces pushing for free-trade, even if they don’t know they are.  The singles biggest force is not Walmart, or the WTO, or large multi-national-companies.  It’s the folks (like you and me) who, regardless of how much we talk about hating free-trade, continue to look for the cheapest goods we can find and hence do business with those entities.  It’s the folks who have come to accept that clothing should be such a small part of our yearly budget (while clothing prices may appear expensive, as a % of household spending, clothing has fallen drastically over the past 30 years).  It’s the people, some of who make loud noises bashing the era of globalization, but then vote with their wallets to keep breaking down trade barriers.  Now, you should say we should start a movement convincing people to not do this, but I think that’s doomed to fail.  I grew up on a small poor farm in a remote part of Ireland, and I know how much every $ matters when you’re trying to make ends meet.

That’s not to say that going all-free-trade all-the-time is the way to go.  Now the pro-free trade options I see are:

3) Keep going with free-trade as is, recognize that the US will decline from average, but just accept that because it’s morally right.

On this stance, I agree that, if the US went along with it, it would lead to lower income inequality in the world.  And I firmly believe lower income inequality is a good thing.

However, there are many legitimate reasons to suspect the US would not just accede.  You can see already the US starting to pull back from free-trade through increasing protectionist rhetoric and thoughts (much like Jacob’s starting idea).  To me this is worrying for the world but not necessarily frightening.

No what frightens me about this option is that left as is, the US’s relative economic-might would decline in a free-trade world (already happening) but it’s military might would not decline at the same time and in the same proportion.  Much like the Roman empire’s economic-power began to be less Italy-centered around the time of Caesar, it’s hard for me to expect the US to not react by using it’s military might to maintain control of resources of other people   I don’t think this outcome is that unlikely, and it just takes a series of relatively small individual political recalibrations to end up there.  I’ll point out that the Roman people considered that their army was helping spread the rule of law and moral rightness when they invaded countries, similar to our view that a US invasion of Iraq would lead towards “freedom” and “democracy” just taking root.

Which brings me to my fourth option:
4) Recognize that free-trade is overall good for the world, that economic incentives will continue to push us towards that, but that left to the free-hand of the market would likely lead to a less stable world in the short term.  Therefore a more controlled “freeing” is required.

This is the approach that leads me to my current view of what to do with free-trade.  I would like to find some way to maintain the “rising tide rises all boats” rule, but minimize or slow down the rate of the US’s “race to the average.” 

First, the US should position itself to win in the new free-trade and free-movement of intellect world of the future by cornering the market in high-intellect high-margin services.  This is the work that is less easily commoditizable, and the work that today gives the highest economic margins.  And it’s an area that the US is still well positioned to win in.

And secondly, the WTO should invest in retraining or welfare services for those political classes that are left out (apple farmers in WA come to mind), and other countries, even developing countries, should also contribute to a the WTO-fund to help support this (for political cover).  In this way, there is some way to control, or brake, the pain.  The one important tweak I’d make to this rule is that WTO payments cannot go to the children of people who are disenfranchised through free-trade related job-loss; those folks have time to retrain.

Unfortunately we have taken a step back from leading in this area in a few ways: after 9/11 by severely restricting visa input of the best foreign intellects and by becoming increasingly anti-immigrant; starting in the 70′s by passing laws like Proposition 13 (which effectively reduced school funding) and by promoting “equality” rather than “competitiveness” in our school system; and lastly by the rise (accelerating in the 80′s) of promoting the culture of individualistic gain that encourages our best and brightest to see wall-street and silicon-valley careers as “high achievement” rather than public service such as government and teaching.

These are all reversible, but require brave political leaders in the US who recognize that short term pain, for the sake of world-peace and moral-fairness, must be endured.   It also requires pragmatism and patience from leaders in developing countries to see that the moral rightness of reducing inequality must be balanced against the necessity of “the mighty” feeling they weren’t treated too unfairly.

Alas, as I watch the current election cycle, and as I listen to the rhetoric coming from developing countries in the mostly-dead Doha free-trade negotiations round, I fear the consequences of not dealing with the short term pain are going to be avoided, which increases to me the likelihood of much harsher pain for the world in the decades to come.

On the bright side, I’m often wrong :)

- Art

The Jewish Candidacy

Note: Please read at least to the second photo; this article isn’t quite what it appears at first.

I Don’t Trust Jews

I can’t vote for Joe Lieberman for President, but I admit it’s hard to pinpoint why.

Maybe it’s because he’s changed his position over the years? No, that’s not it. Truth be told, I’ve changed my position on many issues as I’ve matured, and so has any person who grows. Plus his changes in position, for example over abortion, have been attempts to reflect the views of the constituency he is trying to build, and that seems like something I want my politicians to do (especially given the horrible example of G.W. Bush to ignore his constituencies).

Maybe it’s because his economic policies smack of Republicanism; lower taxes and focus on growing the economy but not as much focus on those who are underrepresented and forgotten by our economic machine? No, that’s not it either. I personally believe a focus on growing the economy is the best way to help the underrepresented.

Maybe it’s his views on foreign policy? I’ll admit his hawkish views on terrorism and Iraq do seem a stretch too far, but truth be told that’s not what’s holding me back.

I guess, now that I think about it, it’s his religion. Joe Lieberman is Jewish.

Now, I’m not prejudiced against any faith, but something creeps me out about Judaism. Sure, millions of good people adhere to it. Sure, there is a focus on family and moral values – two things I admire greatly. And I do have some friends who are Jews or converting to Judaism.

But, you know what I mean, right? There is a shroud of mystery around the faith, and an insular nature to it that makes me suspicious.

Judaism may share a heritage with Catholicism (a faith I’m very familiar with), but they also adhere to a series of scriptures and doctrine that is, at best, odd. Their rules require them to do all sorts of weird things in support of their faith (for example, look at what they are not allowed to eat and drink). Plus there was that issue with polygamy – remember Abraham – although the Faith is now firmly against polygamy.

In reality, I don’t think America is ready for a Jewish president, so I will not vote Joe. End of story.

What the …?

Some of you are probably offended by what I wrote above (and confused, because Joe is not running for President). I know I would be (and was) offended if I heard it.

And plenty of people did say things like that in 2004 when Joe did run, but those people were not in my circle of friends, acquaintances and contacts. I could console myself that the anti-Jewish viewpoint was restricted to the uneducated members of Middle America (and a small number of well-educated bigots). I believe Joe’s Judaism was not what prevented him from getting the Democratic nomination.

Yet in 2008 I hear similar things being said all the time, only this time it is being said by people in my social class, my contacts, my acquaintances, and yes my friends!

To see what I mean, just substitute “Mitt Romney” for “Joe Lieberman”, and “Mormon” for “Judaism” in the rant above.

I’ve heard many people say “I can’t vote for a Mormon”, each time with a shy smile saying, “you know what I mean, right…”

Really?

I don’t.

Why is it OK to not vote for someone because they are Mormon but not OK to not vote for someone if they are Jewish, Catholic, Baptist, or Presbyterian (and I’m not even touching on the thoughts of a Muslim presidential candidate)? Isn’t this a country where we are supposed to separate faith from state?

I haven’t decided who I’ll vote for in 2008, and I tend to lean Democratic these days. My decision will be based on policies, past record, and my thoughts on their ability to work effectively with other branches of government.

But it greatly disturbs me to hear Mitt Romney’s electability being dismissed because of his Faith.

We should be better than that.

- Art

A Plea for Purple Voters

Demographics, Democracy and the Blues

Here’s a map of the US with population density graphed in the z-axis (from Time magazine):

And here’s how people voted in the 2004 presidential election with number of winning votes by county graphed in the z-axis:

The more densely populated the area, the more likely they were to vote democratic in the 2004 election.

Another view can be seen below. In this one, the color scale changes between red and blue in each county. If a county voted 100% Democrat, it’s blue. If it voted 100% Republic, it’s red. If a county voted 50% Democrat and 50% Republican, it’s purple. Again, higher density areas tended to vote democratic in the 2004 election.

The Color Purple

I have two theories about why the pictures look the way they do.

The first theory is that living each day in close proximity to lots of people (with competing interests), where you can’t possibly get to know them each personally, forces people to compromise more on a daily basis than those who have the luxury of knowing all their neighbors. This tends to encourage social-liberalism (or social laissez-faire) where you agree to stay out of someone’s business with the expectation that they in turn stay out of your business. For example it’s very easy to be rapidly pro-gun (a position generally correlated with social conservatism in the US) if you personally know and trust each and every one of your neighbors. It’s much harder if you don’t know everyone you see every day. This causes most highly dense urban areas to vote Democratic (the large party in America more associated with social liberalism).

My second theory is that if you live in a highly dense area that is also highly culturally diverse, you are forced to interact with people with opposing points of view, and are likely to be more accepted if you have less extreme views. For example, it’s very easy to be rapidly pro-choice and believe that late-term abortions need to remain legal (to avoid “a slippery slope” where abortion eventually becomes illegal) if you live in Berkeley, CA (an extremely homogenous liberal enclave) where everyone takes pro-choice for granted. Try being rabidly pro-choice in a multi-ethnic neighborhood in the Bronx, NY, see the moral pain on a very religious Muslim’s or Christian’s face at the prospect of a late term abortion, and it’s much harder to maintain the extreme. This forces dense urban areas with heterogeneous populations to be more trend more bluish-purple than pure blue.

Perhaps the key to moving elections and candidates back to the middle in the 2008 election is to relocate all the people who live either in sparsely populated areas of the country or in culturally homogenous areas to a densely packed 100 square mile area of the country (I hear Billings, Montana has space). If we did that I suspect all the graphs above would get much more bluish-purple and we’d end up with candidates who are much more reasonable than the current set of Democratic and Republican candidates (who are all veering to the far left and far right).

Spending Purple Money

But we’re not likely to relocate everyone with extreme views to live next to each other (I am firmly against forced relocations of anyone, although I’d love to see Al Franken and Bill O’Reilly share an apartment). However, there is one thing I believe we can do to move American back to the middle ground.

If you are a Purple Voter, always vote in every primary election! Especially the small ones.

For example, New York has a (very unpublicized) local primary election on Tuesday. I’ll be voting in it. I consider myself (currently) a socially liberal, fiscally conservative, internationalist. In other words, I’m a bluish-purple voter, and I’ll vote for candidates as close to that as possible.

You might not think it matters, but the people we vote for in primaries are very influential. They choose the rosters of candidates that we’re presented with for many higher offices. They form the staff of national campaigns. They are listened to by the national parties when drafting policies, candidates and platforms.

Somehow in America many purple voters (like me) believe that if the candidate they voted for didn’t win then their vote didn’t count. And often in primary elections today, the middle ground (purple) candidate loses. But our votes do matter; politics, like business, runs on a market economy. Only in politics, votes are the currency. The mere fact that someone got our vote will cause other politicians to veer in our direction to try to woo us the next time we spend our vote (see how John Kerry veered left in 2004 to try to recapture the voters that went for Nader in 2000).

Purple voters have become convinced that our voting dollars are worthless, and therefore we don’t spend them in the elections where they are actually worth the most – small local primaries.

As a result, purple voters don’t vote in primaries, right and left extremists do. Then our low-level politicians run to the edge of the political spectrums and they nominate candidates for higher offices who also pander to the edges. And that’s how we get the crap national candidates and crap policies they spout (all but one Republican presidential candidate views the Theory of Evolution as suspect; all but one Democratic presidential candidate is firmly against the concept of free-trade). What do we expect? The politicians, like good businessmen, are responding to the market that spends money!

If middle-ground people are consistent about spending our purple money and voting in primaries, the local candidates will eventually notice us voting, and they will start having to pander more to the middle. This will lead to more purple candidates for higher offices. And as the map above shows, America is a lot more purple than red or blue, so if we consistently vote purple in all primaries, we will take back this country.

- Art

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