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Thursday, November 10, 2005

It never ceases to amaze me that the idea that trade is good for workers in poor countries convinces no one but economists. I know that many people in rich countries don't give a damn about foreigners, but the weird thing is that people in rich countries who care seem to think that trade is bad for unskilled workers in capital poor human capital poor countries. I really don't get it.

I find the following argument very convincing. Foreign direct investment by multinationals in poor countries followed by free exporting to rich countries is a very good thing for world income and the world income distribution, since it means that people who would otherwise be very poor get jobs at low wages which are much higher than they would get otherwise. This is why I am for free trade. I was not surprised to learn that FDI is controversial, but if the firms were foreign based, I would have thought this would make all lefties pro free trade. I was surprised when I learned (age roughly 18) that the pro free trade view is considered right wing and, in particular, based on indifference to income distribution in rich countries (the idea that anyone cares about poor countries evidently being incomprehensible).

There are some possible explanations of why no one seems to take seriously the claim that free trade is good for not superskilled workers in poor countries. One, mentioned above, is that lots of people frankly don't care about foreigners. Another is that other people claim to care about foreigners but are lying. I am interested in explanations of the no global movement of people who care a lot about the third world poor and have the opposite view on the effects of FDI and trade.

They might be right. For example, I think that child labor is not only bad in the present but also terrible for development and growth. No country has gotten non poor without sending the kids to school. Getting them out of factories is key to this long term growth maximizing strategy. Also, I for one, am not willing to compromise on workplace safety or allow poor workers to do so (and I am still irritated at the Thomas Schelling for explaining the total incoherance of my views). Thus I have some sympathy for imposing child labor and workplace safety regulations as part of free trade agreements (although I suspect that any exception is mainly an opening for concentrated rich country interest groups to game the system to gain protection from trade).

Still this doesn't seem to me to make a case against trade, multinationals or FDI. The reason is that there are child labor and unsafe working conditions in autarkic poor countries too. So no explanation there.

I strongly suspect that a lot of the issue is the assumption that bad motives must lead to bad outcomes and the fact that FDI etc are motivated by greed.

I think the main thing is that people don't feel guilty about failing to help strangers but do feel guilty about benefiting from their misfortune. That is there is the idea that if there are poor people over there and we have nothing to do with them, we can send a few bucks to charity and we are OK, but if we wear clothes they sewed for low pay or something we acquire responsibility for their reduced poverty.

This argument makes no moral sense to me. It seems to me that if you can help someone you should whether or not he sewed your shirt.

OK no real point here. All written much better by others (see especially as always Paul Krugman and Brad DeLong). The only point is that I swear to god that I always thought that pro free trade was the leftist position and remain amazed again and again that the leftist case for free trade is rarely made and hardly ever taken seriously.

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