Thinking like a planet
Paul Krugman’s recent article in the New York Times expresses concern over growing anti-trade sentiment in the United States. He noted that the push for open trade was a means by which “to bind democratic nations together during the cold war.” Trading nations exchange more than products. They exchange people and ideas, as information flows and human interaction are an essential part of business. After two world wars, we aimed to find our common humanity through economic linkages.
Krugman also touched on the effect broken trade agreements would have on attempts to control human-induced climate change. With our credibility shattered, few countries would be willing to undertake the hard work (and cost) of reduction in carbon emissions.
Frankly, credibility would be the least of our issues. Krugman was far too timid in his defense of the merits of trade. It’s not just a matter of broken trust and reduced likelihood of total war. Trade is a force for global improvement the absence of which makes it very hard for us to achieve shared planetary goals.
Given a choice between poverty and a clean environment, the environment tends to lose. Poor nations care less about old-growth forests or carbon-heavy coal furnaces when their children are starving. It’s developed nations, full of citizens freed from the constraints of basic subsistence, who have the time to focus on climate improvement. South Korea’s air pollution levels once rivaled those of Beijing. It started to change as its growing middle class demanded attention to the problem.
Fairness also comes into play. Western nations were the source of most of the emissions driving global temperatures upwards. Developed nations are essentially being told the “cheap energy” which drove western growth should no longer be allowed…without any compensating benefit. Granted, climate change carries risks for developing nations, but psychologists have proven that people will make excessively reactive decisions when an issue of fairness is involved.
Developing nations aren’t going to cooperate on geopolitical issues, either, if we state (albeit implicitly) that our families matter more than theirs. 350 million Chinese people have escaped poverty as a result of trade. Yes, that success involved a shift in manufacturing from other countries — including the US — but that is clearly a good thing for Chinese people. Telling the Chinese they aren’t allowed to grow via exports, as the United States did, is simply a non-starter.
Poor nations don’t just ignore their environment. They also ignore their politics. South Korea and Taiwan both were military dictatorships until the late-1980s, when a growing middle class, fed by those nations’ strong export economies, started to put pressure on their governments to change. Contrast that with Cuba, a nation a mere 90 miles off the southern tip of Florida that we’ve economically strangled since Castro came to power. Cuba remains controlled by the same group of leaders that wrestled with John F. Kennedy, a function of a poor population with more pressing concerns than freedom of expression or politicians who reflect their interests.
Poor nations composed of unhappy citizens run by leaders with few scruples lead to geopolitical conflict and instability. Cutting off trade, in other words, would lead to more of the conflict that proponents of trade reduction hope to avoid.
What of jobs lost due to foreign competition? Not all of the loss is due to trade. Boeing used to manufacture planes by hiring thousands of workers to assemble every part by hand. Today, many sections are assembled in smaller, easily-attached chunks, and robots do much of the work formerly done by humans.
But, just as Mississippi or Georgia have managed to attract car manufacturing plants away from northern locations, foreign countries will manage to attract work formerly done in the US as economic barriers to cross-border trade are reduced. The advantages don’t just flow one way. Reduced prices make American products more competitive, and skilled work tends to grow in America along with increased access to global markets. Unfortunately, company shareholders and skilled workers are relatively privileged, economically speaking. Most of the benefits end up accruing to those in the top 10% of incomes, leaving those lower down to face stagnating incomes.
Shutting off trade might bring some jobs back, though don’t exaggerate the effect. It doesn’t change the technology component to jobs losses, a component that will only increase in importance over the coming years. It will also have knock-on effects to other industries. Imagine if every iPhone made by Apple, an American company, was manufactured in the US. Prices would be dramatically higher, resulting in fewer purchases of iPhones, fewer jobs related to support of an iPhone (maintenance, software, distribution, etc), and fewer iPhones sold overseas.
Last, it will affect our ability to make progress on issues that affects all humans living on this planet. As noted, international cooperation on issues such as climate change is harder in the presence of trade embargos.
A better solution would be to distribute the benefits of trade more widely. Make sure everyone has baseline health care. Help make education more affordable. Provide transition assistance to those affected by global trade deals. Make sure people have baseline incomes through proper means-tested assistance.
Such an approach ensures that all benefit from the economic improvements of trade. It also benefits us by helping developing nations to create stable political systems. It improves cooperation on geopolitical issues like climate change. Last, it treats foreign citizens as fellow human beings with an equal right to grow economically.
The changes in technology over the past quarter century have made our planet (virtually) smaller. Unfortunately, the nation state still serves as a barrier to our ability to “think like a planet”. Changing that habit may be hard in an election year, but it’s a discussion we need to have. Perhaps if more Americans understood the importance of trade, resistance to it would be as unthinkable as Michigan blocking car imports from Mississippi.