Thursday, March 10, 2016

Free Trade, Globalization And US Politics

Paul Krugman asserts that free trade has finally become an issue in US politics.  Donald Trump has taken a strong position against trade agreements and that has helped him in his campaign against establishment Republicans who are strong supporters of free trade.  On the Democratic side Clinton and Sanders are working hard to convince those affected by globalization that they also want to bring jobs that have gone overseas back to America. 

Economists have a long history of ideological support for free trade going back to David Ricardo who argued that it enabled nations to exploit their comparative advantages such that each nation was better off as a result of free trade.  More moderate economists have taken the position that there are winners and losers from free trade.  Therefore, they support government programs that use income redistribution programs that lessen the negative impact of trade on the losers.  Krugman points out that Republicans are totally opposed to income redistribution unless it works in the favor of those who benefit most from trade.  Consequently, it is not surprising that we have not been able to moderate the negative effects of trade on the losers.

Those who are the losing side of globalization have become more involved in politics.  Consequently, it may be time to do something about it.  It is not impossible but it would be difficult.  Krugman argues that Sanders attack on trade agreements is more complicated than it seems.  He believes that Clinton would be tougher on future agreements, but that she can't tear up those that exist (TPP has not been fully implemented at present}.  Trump is the wild card. If he became President it is not clear what he would do.  He could be more dangerous than he is helpful.

The bottom line is that Krugman, whose specialization has been in international trade, and many other economists, are now aware of the political feedback that is having a powerful impact on US politics.  Globalization has been one of the powerful factors that have contributed to income inequality and there will continue to be powerful resistance to politics as usual. However, we are a long way from agreement on how those issues should be dealt with.  Democrats will have a hard time moving away from its centrist position, and Trump has shown that the Republican positions which have made things worse for those most affected by globalization may not continue to be a winning strategy.  The losers may not be satisfied with Republican efforts to promote religion and other social values as the response to growing poverty.  Trump's success in the bible belt should be giving them some pause.

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