Tuesday, February 7, 2017

Yes, Rodrik’s Wrong Again

A Don Boudreaux letter to Foreign Policy:

Dani Rodrik argues that restrictions on trade are valid if they stop “social dumping” – and his hypothetical example of “social dumping” is this: “Harry drives John out of business by outsourcing to a supplier in Bangladesh, which employs workers in 12-hour shifts and under extremely hazardous conditions” (“It’s Time to Think for Yourself on Free Trade,” Jan. 27).  According to Prof. Rodrik, allowing trade with producers in countries where workplace standards are far worse than our own serves to “undercut domestic social arrangements.”
But free trade with such countries does no such thing.  American workplace conditions are better than those in Bangladesh because Americans are wealthier than the Bangladeshi.  And while free trade with Bangladesh would surely shutter, or prevent the opening of, American factories that compete directly with Bangladeshi factories in the low-value-added tasks commonly performed in such factories, such trade would not – contrary to Prof. Rodrik’s assumption – oblige American workers to toil under the conditions that today prevail in Bangladesh.  With free trade, Americans – given our greater wealth, different preferences, and generally higher skills – would produce different outputs than are produced in Bangladesh and do so under workplace conditions that Americans find acceptable.
In short, Prof. Rodrik is simply mistaken to assume that Americans who trade freely with people in much poorer countries are obliged to suffer the work conditions that prevail in those countries.  Such an assumption makes no more sense than to assume that if Bill Gates hires a chimney sweep to clean his chimneys that the quality of Mr. Gates’s own workplace conditions must fall to that of the chimney sweep with whom he freely trades.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030
Many other problems infect Rodrik’s essay.  Here are only some (listed in no particular order):
– Why have workplace conditions in free-trading Hong Kong improved over the past 60 years rather than declined (or at least remained unimproved)?
– Given that increased prosperity is key to improved workplace conditions, why does Rodrik not see that trade barriers between developed and developing countries retard the improvement in developing countries of workplace conditions there – and retard also the further improvement of workplace conditions in developed countries?
– Rodrik is extraordinarily naive to suppose that a “social dumping” exception to a rule of free trade would not be abused by protectionists, with the result being more protectionism than even Rodrik thinks proper.
– While he might not have chosen it, the title of Rodrik’s essay is “It’s time to think for yourself on free trade”; it’s a title consistent with his long-running theme that economists (allegedly) mindlessly promote free trade and that, as a result, too many other people follow economists in this (alleged) mindlessness.  But note the delicious irony in the title: it’s of course admirable to think for yourself regarding economic policies, yet it’s no less admirable to think for yourself about how to spend your own money – that is, to not have armed government agents obstructing whatever commerce you choose to do with foreigners.
The above originally appeared at Cafe Hayek.

1 comment:

  1. ─ According to Prof. Rodrik, allowing trade with producers in countries where workplace standards are far worse than our own serves to "undercut domestic social arrangements." ─

    Professor Rodrik's argument is nothing more sophisticated than another iteration of the "race to the bottom" canard the left wields around every time they criticize the unhampered market. If we do not place a minimum wage, then business owners will progressively offer only lower and lower salaries while expecting more and more output from workers until everyone dies of starvation or exhaustion (whichever comes first). And, according to Prof. Rodrik, manufacturers will be inclined to continuously reduce the level of working conditions until no worker comes back home unscathed.

    But leave aside the point that Prof. Boudreaux makes which is an excellent one - that America is far richer than Bangladesh. Let's leave that one aside. The problem is that people like Prof. Rodrik's and other anti-market ideologues seem to believe that people are mindless dolts bereft of the ability to ponder costs and benefits, or completely oblivious to their own opportunity costs. WHY ON EARTH would a worker want to work for a company where working conditions are dangerous without even asking for a higher wage? What makes Prof. Rodrik and others of his ilk think that people would think themselves completely trapped and accept any job presented in front of them regardless of wages and safety? If that were the case, there would be NO UNEMPLOYMENT, EVER.

    Of course you know, we're dealing with inferior mentalities (as Daffy Duck would say). Or at least we're dealing with charlatans and mountebanks.