Gains from Trade for Me and Not for Thee?
By Alice Temnick
In this week’s episode, Kimberly Clausing discusses Open: The Progressive Case for Free Trade, Immigration, and Global Capital with EconTalk host Russ Roberts. Clausing identifies geographic regions in the United States where large groups of people struggle from the job displacement consequences of trade for long periods of time. Both Roberts and Clausing celebrate the overwhelming gains from trade – from the American standard of living to the hundreds of millions lifted out of poverty in China. How do we as a society keep the benefits of globalization for all …yet soften the blow to workers who “lose”? What are some politically feasible policies that might better equalize the annual gains in GDP growth?
1- A significant and recurring theme in EconTalk episodes with various guests is the view that the average American standard of living has fallen over the last 30 or 40 years during a time of rising globalization. How does Clausing’s focused argument about the typical American worker differ from other income inequality or “living standard stagnation” discussions? To what extent do you find her argument persuasive?
2- Can the net-gains of the efficiency argument for free trade and associated job losses be reconciled with the reality of the long run generational gains from trade (innovation, opportunities, growth)? Do you agree with Clausing’s assessment that economic optimality arguments limit economists’ thinking? Explain.
3- Why is raising the EITC (Earned Income Tax Credit) favored over a UBI (Universal Basic Income) to address displaced workers? Does it matter that there are a myriad of reasons for worker displacement from catastrophic illness to skill mismatch?
4- Clausing links countries with budget deficits with countries that hold trade deficits and countries with budget surpluses as ones with trade surpluses. How does this fact exacerbate the normative negative view of trade deficits that Roberts and many economists work tirelessly to combat? (See Dan Klein and Don Boudreaux on trade deficits here).
5- Has today’s world of relentless tariffs gifted to rent-seeking firms in the name of “protection” made it more difficult to imagine Clausing’s proposed transition to an effective collection of a progressive tax for high-income earners? What approach do you believe would most effectively “soften the blow” to displaced workers, and why?