If you asked where you can find a regular criticism of anything that looks like a classical-liberal approach to social, political, and economic problems, I could recommend the pieces of Financial Times columnist Rana Foroohar. Her latest column is another good illustration: “America Is Telling a Very Different Story About Trade,” Financial Times, June 18, 2023. Forget the strange title, which, to somebody used to thinking in individualist terms, suggests an anthropomorphic America speaking with our collective mouth; of course, newspaper titles must be short. The “very different story” that the American government is telling us is, the column argues, a protectionist story—as if any US government had ever advocated unilateral free trade, that is, the freedom of Americans to buy and sell wherever they privately find the best available terms.
The Financial Times columnist praises Joe Biden’s US Trade Representative (USTR), Katherine Tai, who said she wanted to “put the US back in USTR.” Despite her protests to the contrary, our columnist also seems to like this sort of Trumpian banter. In fact, it would be as difficult to put the “TR” in USTR. By this, I mean that if Ms. Tai and her boss think that they represent all Americans, they should equally support those who want to freely buy dolls, contra Donald Trump, or deodorant, contra Bernie Sanders, from foreign producers or from any producer.
The Financial Times columnist and the USTR claim to oppose any concentrated power. To pursue that goal, they want to concentrate power in the state, to expand the realm of politics. This ideal state power includes an ideological cartel between the US and the EU governments to fight high-tech companies. More state power means more regulation in general. (See also my post “Forward to the Past: US Regulators Top European Ones.”) The fact that the Financial Times columnist is not a loving user of new technologies, as I pointed out in a recent post, must not distract us too much, although it does suggest some pretentiousness among regulation fans. Ideal state power also includes enforcing trade union cartels against poor-country workers, the poorest of whom are thereby forbidden to compete.
In the same Financial Times column, we read:
Tai put a provocative gloss on this new approach, saying that [quoting Lai] “we are turning the colonial mindset on its head”—by partnering with emerging markets to put a floor, rather than a ceiling, on labour and environmental standards. “The key is to offer economies a spot in vertical integration so that developing countries are not perpetually trapped in an exploitative cycle,” she said.
Offer foreign economies a spot in vertical integration? How nice of us, cognoscenti and rulers of the rich world! The reality is that ordinary people in poor countries started, 40 or 50 years ago, thanks to trade and the liberation of their own entrepreneurship, to escape dire poverty after decades during which Western intellectuals had persuaded their governments that central planning and economic autarky were the panaceas. The dramatic reduction of poverty in underdeveloped countries is the big story of the past few decades.
The Financial Times columnist I am gently criticizing is, I fear, quite attuned to the zeitgeist of our times, a quest for social nirvana through the transformation of the individual into Homo Politicus Perfectus. From this perspective, every problem resulting from voluntary social interaction has a bright political solution. “Of course, the devil will be in the details,” the columnist says. Indeed, intellectuals always curse the actual governments under which they live as enthusiastically as they idolize the perfect state in their dreams.
It is not impossible—and I am saying this seriously—that the Financial Times columnist is right and that I, and all classical liberals and libertarians of the past three centuries, are wrong. Perhaps a most just and prosperous future lies in a fuzzy mixture of dirigiste-authoritarian ideas from the left and the right. Or perhaps, more realistically, some of the currently fashionable ideas, stripped of their worst coercive features—that is, reinterpreted à la Hayek* or à la Buchanan**—have something salvageable. But it seems quite obvious, doesn’t it, that the reign of Homo Politicus Perfectus is a regression toward mankind’s impoverished and tribal or collectivist past.
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* I provide an introduction to Friedrich Hayek’s social and legal thought in my separate reviews of the three volumes of his trilogy Law, Legislation, and Liberty: Volume 1, Rules and Order; Volume 2, The Mirage of Social Justice; and Volume 3, The Political Order of a Free People.
** Again as an introduction, I could recommend my reviews of two books by James Buchanan: his classic The Limits of Liberty: Between Anarchy and Leviathan; and his Why I, Too, Am Not a Conservative.
READER COMMENTS
Craig
Jun 22 2023 at 10:38am
“trapped in an exploitative cycle”
The left simply can’t view trade as mutually beneficial, in their world view it is fundamentally exploitive.
Pierre Lemieux
Jun 22 2023 at 11:25am
Craig: Free exchange is exploitation, coercion is love, and, as Orwell would say, “war is peace, freedom is slavery, ignorance is strength.”
Richard W Fulmer
Jun 22 2023 at 11:16am
Would it be too cynical to observe that increasing environmental regulations and artificially raising wages in developing countries will increase the cost of doing business there and, potentially, deter companies from relocating to those nations?
This seems of a piece with Yellen’s global 15% corporate tax minimum. If we can convince other countries to raise wages and taxes and to increase regulations, then our progressive policies at home won’t hurt our relative competitiveness.
And all in the name of anti-colonialism. Nice touch.
Pierre Lemieux
Jun 22 2023 at 11:32am
Richard: Interesting tactic, isn’t it? In the name of social justice and anticolonialism, let’s persuade them to stop competing with us and to remain poor.
Jose Pablo
Jun 22 2023 at 1:23pm
The key is to offer economies a spot in vertical integration so that developing countries are not perpetually trapped in an exploitative cycle
What Tai seems to want to achieve is pretty easy to get with a little twist (and using actual “subjects” and not “non-existent collective imaginary” ones)
The key is to offer individuals living in these economies a spot in the US so that, individuals living in developing countries, are not perpetually trapped in an exploitative cycle
But, of course, what Tai really wants to achieve is a different objective.
To this other “real” end of hers, the KEY is to appeal, thru, mostly, narratives and virtue signaling to voters that want to feel their “modus vivendi” “protected” from “others” and, at the same time, feeling compassionate about this “poor people” living in developing countries and trapped in exploitation.
She understands just too well, that voters vote as a cheap way of feeling great with themselves thru virtue signaling (in reality, the only difference between Democratic and Republican voters is the virtues they want to signal).
She is eager to offer just that. As everybody in her position will do. Incentives matter.
Pierre Lemieux
Jun 22 2023 at 3:00pm
José: I am not sure that the incentives you describe apply to our FT columnist, though. Her job could not be filled by a remote or actual worker from the developing world, even perhaps if he had studied in a woke Western university. She would fear AI much more. Her editor-in-chief could ask ChatGPT, “Write a 650-word column in the style of Rana Foroohar about social justice and the maple tree.” But I am not sure the result would be acceptable to FT without our columnist still having to edit the piece.
I see Faroohar’s writings as more the product of economic ignorance (she would not be the only one, even in the financial press!) and a naive idealism hooked to the poorly defined moral values shared by the poverty industry, the intellectual establishment, and the Davos crowd.
Jose Pablo
Jun 22 2023 at 8:31pm
Yes, I meant Ms Tai’s incentives.
In Rana Foroohar’s case, what really surprise me is that in our actual world you can make a reasonable living, even out of badly articulated economic nonsense
There is also some “beauty” in the fact that there would be “offer” for any “demand”: if a reasonable small amount of people “wants” to hear a statement (no matter how clearly false the statement) that statement is going to be “produced” by someone
So, the question is, I guess, why enough FT readers are demanding “economic ignorance” to be fed to them? Why does this particular kind of “economic ignorance” make them feel good?
While they keep “enjoying” this, there will be Rana Foroohars writing columns.
Pierre Lemieux
Jun 22 2023 at 11:34pm
José: Sorry for my misunderstanding.
Inspired by the idea expressed in my reply to your comment, I just ask ChatGPT: “Write a 650-word column in the style of Financial Times columnist Rana Foroohar about social justice and the wheelbarrow.” I think we can agree that it would require some editing before it is acceptable to the Financial Times. Here is a copy-paste of ChatGPT’s column:
Pierre Lemieux
Jun 22 2023 at 11:52pm
José: I am also puzzled by the question you raise in your penultimate paragraph.
Sman
Jun 25 2023 at 2:53pm
As an FT subscriber i am continually amazed at the ignorance of Rana F, but the FT seems in recent times to have take a move to the left.
Richard W Fulmer
Jun 22 2023 at 2:30pm
Progressive thought: Monopoly by corporations – which must satisfy their customers to survive – is bad. Monopoly by government – which can use deadly force to survive – is good.
David Seltzer
Jun 23 2023 at 6:19pm
Richard wrote, “Progressive thought: Monopoly by corporations – which must satisfy their customers to survive – is bad. Monopoly by government – which can use deadly force to survive – is good.”
To your point; when corporations want to secure less competition, they engage the feds. Ford just received $9.2 billion in loans from the DOE for three plants that will produce batteries for electric vehicles. After GM was bailed out, I wonder if they will go back to the well once more. The old story of corporate risk management with the feds as their hedge. If the taxpayer is exposed to most of the risk, why would Ford issue more stock or come to market with corporate bonds? And the beat goes on.
Mactoul
Jun 22 2023 at 8:57pm
From your review of Buchanan, there seems a large overlap between him and American conservativism esp what is called Reaganite synthesis. Which is not too surprising since the American conservatives are heir to 1776.
I don’t see clearly what work the notion of perfectiblity is doing. Implicitly Buchanan seems to recognize, though he doesn’t like, the division between the ruling and the ruled classes. The people driven by an ambition to rule others and the majority that lacks this ambition.
And by the notion of a common ethics that should be deferred to, Buchanan takes leave of libertarians who, by definition, admit no communal judgement.
Pierre Lemieux
Jun 22 2023 at 11:48pm
My apologies, Mactoul, but I must say I find your comment utterly incomprehensible, up to and including the “communal judgment.” (And I seriously wonder about the quality of my reviews!) I recommend that you read the actual books. I would start with “Why I, Too, Am Not a Conservative,” which is, I think, less technical and easier as an introduction, although it might still represent a shock. (You are right to suggest that Buchanan is not the libertarian-next-door. But there are many threads in libertarian and classical-liberal thought.)
Mactoul
Jun 23 2023 at 6:54am
My apologies for being unclear. I only meant that your summary of Buchanan would be entirely unobjectionable to National Review conservativism.
The difficulty in nomenclature I remember from Hayek’s Why I am not a conservative. Hayek specifies he is speaking of European conservativism. I think it is important to make this specification.
Craig
Jun 23 2023 at 10:37am
Results
Flesh-Kincaid Grade Level: 15.3
Flesch Reading Ease Score: 18.8
Reading Level: College graduate ( Very difficult to read )
Average Words per Sentence: 18.6
Average Syllables per Word: 2
Sentences: 33
Words: 615
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With that effort I am sure ChattyG will get an invitation to the next DNC convention. Better effort than some sitting ‘senators’ for sure.
“strategically positioned…to go FORWARD!”
steve
Jun 23 2023 at 3:55pm
It’s un-American to not make fun of politicians. I assume this is a counter to the idea of homo economics.
One of the issues with free trade is that I think lots of people sort fo understand and accept that bilateral free trade makes sense. Unilateral free trade makes people uncomfortable. Of all people, Boudreaux has me mostly convinced that unilateral free trade is also a good idea, but I would still be happier if there was some empirical evidence. Boudreaux seems to believe that economic reasoning is all that is needed to justify ideas, but I think that people who favor unilateral free trade need to do a better job including real numbers and examples to bring the case that we should support unilateral free trade.
In particular I think they should also acknowledge the time factor and offer either a remedy or acknowledge people just need to suck it up. (This should be done for bilateral trade for that matter.) Certainly seems to me that in the long term one sided trade could be very positive but large groups of people could face harm in the short term.
Steve
Pierre Lemieux
Jun 23 2023 at 11:39pm
Steve: Good questions. There is a lot of empirical evidence from the choices that people actually make. Most mechanics buy (import) from their butchers more than their butchers sell (export) to them; and vice-versa. A mechanic may continue to buy from his butcher more than he sells him, even if he knows that the butcher’s wife does not like you and has forbidden him to buy from you (assuming that the mechanic does not himself dislike the wife too much). The difficulty to understand this, I think, comes from two main sources. First, many people have learned to think about trade in collectivist, rather than individualist, terms. Second, since there is no way to measure the subjective utility of a person, we have to guess it from his actual choices. That is called revealed preference. If somebody chooses to buy something from a Chinese producer, it must be because he estimated that this was his best choice given his utility function and his budget constraints. It has been proven that, in general, the mere comparison of prices and quantities is not a reliable measure of welfare and that you can’t compare interpersonal utility. Don is a good source on these matters. (It rapidly gets technical. See Paul Samuelson, “Evaluation of Real National Income,” Oxford Economic Papers, Jan. 1950; and also his “Social Indifference Curves,” Quarterly Journal of Economics, February 1956.)
Jon Murphy
Jun 24 2023 at 9:48am
The Dartmouth economist Douglas Irwin also has a lot of evidence on the benefits from unilateral free trade (I cannot give precise cites as my books are in storage, but I believe he goes over the evidence in Free Trade Under Fire).
The economic literature on trade in the academic journals is pretty unamibgious that free trade, whether bilateral or unilateral, leads to improved outcomes for the nation involved.
Don Boudreaux
Jun 24 2023 at 3:30pm
Steve:
Thanks for your remarks about unilateral free trade.
Your request for empirical evidence and examples of the beneficial consequences of a policy of unilateral free trade is fair. It’s unfortunate, therefore, that the world has supplied so few examples of national governments following such a policy. But history does have some. An example is Hong Kong which, under British rule from the 1840s until 1997, had almost no trade restrictions. As Columbia University economist Arvind Panagariya summarizes (on page 163) of his data-rich 2019 book, Free Trade & Prosperity, “Industrialization in Hong Kong took place under a wholly free trade regime, with trade playing a central role in it.” The people of Hong Kong famously prospered.
Another example is Britain itself. In the mid-19th century Britain rid itself of almost all protective tariffs, a policy that remained in place until well into the 20th century. I’m no expert on British economic history, but I know enough to know that per-capita income in Britain grew during the latter half of the 19th century. For example, as shown on page 30 of this 2019 paper (by Solomos Solomou and Ryland Thomas), GDP in Britain per hour worked appears in 1900 to have been at least 50 percent higher than it was in 1860. And pages 34 and 35 show that, in the second half of the 19thcentury, Britain’s real GDP grew by 181 percent. Page 37 of this paper shows that British industrial production over this same time period grew by about 250 percent. (The U.K.’s population appears to have grown, from 1850 to 1900, by about 50 percent.)
This much is certain: The data show that a policy of unilateral free trade did not impoverish the British people or even cause them to economically stagnate.
But would the British people have, during that country’s time as a “Free Trade Nation,” prospered even more had their government instead obstructed their freedom to purchase imports? To answer this question there can obviously be no direct empirical evidence. Anyone who argues such a case – that is, anyone who argues that the British people in the latter half of the 19th century would have prospered even more had the government there not followed a policy of unilateral free trade – must rely on theorizing or on indirect evidence the relevance of which can be established only by theorizing. (Ditto, of course, for anyone who might argue that the people of Hong Kong would have prospered even more had that country not been a free port.)
I have more to say about this matter, but will save my additional ruminations for a later, separate comment.
Don Boudreaux
Jun 25 2023 at 3:54pm
This comment is the second – following the one from yesterday – of my responses to commenter Steve’s reasonable request that I and other supporters of a policy of unilateral free trade supply empirical evidence to justify our support. Here I ask: Why is the burden of persuasion on proponents of unilateral free trade rather than on proponents of some other trade policy?
I genuinely understand and accept – indeed, applaud – the desire to test with empirical evidence all relevant positive claims contained in theories used to justify government policies. But because time is scarce, we can’t test every claim. We use presumptions – priors – to tell us which claims are sufficiently tentative to warrant testing. If we can, we test these claims. But we don’t test claims that are so ludicrous as to be dismissible out of hand. Nor do we test claims that are sufficiently credible that to test them would likely do nothing more than to confirm the obvious.
Economic reasoning can, and should, shape and inform our presumptions and priors. Economic reasoning tells us, for example, that imposing a tariff on imported potato chips will raise the prices that consumers of potato chips confront. And we know this relationship to hold even if potato chips had never before been tariffed. We would regard as blockheaded someone who expressed doubt as to the consequences of a potato-chip tariff on the domestic prices of potato chips, and who asserted that it’s impossible to know if a potato-chip tariff will raise the domestic prices of potato chips until it’s been empirically demonstrated to do so.
So where does the case for unilateral free trade fit into the above?
I’m tempted to say only that the overwhelming empirical reality that voluntary trade is beneficial is sufficient to make the case for a policy of unilateral free trade. Sam voluntarily buys for $100 the gadget that Lily sells. We know that Sam believes himself to be made better off by this trade, and we know also that Sam’s benefit from this exchange doesn’t vanish or even shrink if Lily is in the habit of stuffing all of her dollars into a mattress from which she will never remove them. This unilateral trade redounds to Sam’s benefit even as poor misguided Lily suffers self-inflicted economic harm. Understanding this simple reality goes a long way towards empirically (although not statistically) establishing the benefits of a policy of unilateral free trade.
But I resist this temptation, for good reason. As Steve correctly notes, many people understand that bilateral free trade makes sense, but they believe also that unilateral free trade is harmful to any country that practices it.
As Steve correctly notes, for many people bilateral free trade makes sense, but unilateral free trade – even to fans of bilateral or multilateral free trade – seems harmful to any country that practices it.
Here’s where economic theory is even more useful, especially given that history supplies only very few instances of national governments following policies of unilateral free trade. Correct use of economic theory reveals relevant and telling similarities that often otherwise go unnoticed. Consider Bastiat’s “Petition of the Candlemakers.” That essay by Bastiat is a clever way to point out that we earthlings practice unilateral free trade with the sun despite the sun’s stubborn refusal to purchase anything that we produce.
Are we harmed by accepting sunlight and warmth from the sun free of charge? Of course not. So why would we be harmed by accepting valuable outputs from other countries at no or unusually low cost to us? If many people in Japan or Mexico wish to give us gifts, how are we harmed economically? Why should we accept their gifts only on condition that they accept from us gifts of at least an equal size?
More fundamentally, economic theory also is useful in dispelling a terrible misconception that many people have about trade. Much of the hostility to unilateral free trade arises from the presumption that the gains from international trade are exports while imports are a cost. If this presumption were correct, then indeed a policy of unilateral free trade would be destructive. But once it is revealed that exports are a cost of obtaining the benefit of international trade, which is the inflow of imports, then a policy of unilateral free trade makes so much sense that to demand empirical support for the value of unilateral free trade comes no longer to make sense.
Economic theory, in short, puts the burden of persuasion solidly on those persons who oppose a policy of unilateral free trade.
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