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Monday, May 02, 2016

Political Considerations of Free Trade

by Peter

I think Bret has done a super job with his analysis, particularly in raising questions of diminishing returns and challenging the article of faith among free-marketers that if one trade agreement is good, two must be better and so on. But I'm really not qualified to critique his analysis and I wonder whether it's even possible to disprove or prove his points empirically, because the trade economy doesn't stand in isolation from general economic issues. However, the political zeitgeist is not favourable and it strikes me that the poobahs of both parties are scrambling to defend it and not very successfully.

It's pretty clear from the primaries that we're seeing a revolt of both protectionism and nativism that is blowing up the GOP and fracturing the Dems. A lot of it is based on nostalgia and romantic thinking, but there is no doubt it is born of economic turbulence, distress and pessimism in the bottom half. I don't buy the leftist argument that the general public yearns for economic equality, but I do believe it is essential to maintain equality of opportunity, a level playing field, etc. When the promise of free markets becomes associated with Wall Street corruption (too big to fail and too big to indict), factories fleeing to Mexico and Asia, massive unpayable student debt, an inexplicable decline in investment and a ho-hum response to job losses and other economic distress, there is going to be a political reaction that won't be assuaged by economic theory, dreamy fantasies of 19th century limited government or appeals to what the Founders thought.

Obviously Trump is rocking the GOP with his heresies, but the Dem establishment is in tough straits too. In some ways, Trump and Sanders have more in common than they do with their opponents (starting with bases of angry white men). Thomas Frank's criticisms of the Dems as the party of wealthy liberal urban professionals who have abandoned working people and become preoccupied with environmental and identity issues ("Sorry you lost your job. Maybe you and your family should move to Idaho. Now let's talk about degendered bathrooms.") are worth reading, even if his prescriptions aren't.

It's always worried me how easy it is for doctrinaire free-marketers and libertarians to wash their hands of responsibility for the losers in their winners and losers game. Even the perception of who they are is malleable. Earlier this winter, pundits across the spectrum expressed some degree of sympathy for Trump's supporters, characterizing them as honest working people trying to juggle two low paying jobs while covering medical and educational expenses for their families. The American Dream was leaving them behind. As Trump rolled on and the GOP panicked, that changed. Kevin Williamson for the National Review, who I normally like, led the reaction with a mean-spirited depiction of the typical Trump supporter as an Oxycontin-addled trailer park racist living on a fraudulent disability claim. He kicked the American dream in the privates and wasn't worth defending. If that's the best the GOP can do, no wonder Trump's winning.

So, free trade raises the cui bono question and whether an American worker is entitled to priority over foreign workers. But that question is being asked in a broader context of to what degree we are our brothers' keepers. If conservatives don't get their act together to come up with an appealing answer, we may face a very destructive period of leftist inspired protectionism and autarchy, and it won't matter much to the electorate that those have almost always been recipes for economic stagnation.