No Wonder

Cato's Daniel Griswold sings the praises of Virginia Governor Tim Kaine:

In an interview with Bloomberg News that was published this morning, Kaine said he disagreed with members of his party who criticize globalization and trade agreements such as NAFTA. Their attitude displays a “loser’s mentality,” Kaine countered, adding that, “The only way you’ll succeed [in the global economy] is by being an aggressive competitor rather than trying to hoard your dwindling assets.”

I must have heard orthodox free trader economists bemoan the public's lack of understanding of trade issues -- the inability to see that trade is a positive-sum enterprise, not one that pits countries against each other in competition -- but one rarely sees it acknowledged that one reason people don't understand this is that free traders don't state their own case correctly. What Kaine is saying here is nonsense -- mercantalism plus optimism -- not anything that improves the public discourse. Once Kaine calls trade skeptics losers, the next move is to accuse China of "cheating," and around and around we go trapped in the assumption that trade is a game with nation-level winners and losers, as opposed to individual beneficiaries and sufferers.

Comments

"What Kaine is saying here is nonsense -- mercantalism plus optimism -- not anything that improves the public discourse."

How do you figure?

"Once Kaine calls trade skeptics losers, the next move is to accuse China of "cheating," and around and around we go trapped in the assumption that trade is a game with nation-level winners and losers, as opposed to individual beneficiaries and sufferers."

Okay, I guess, but I don't think you've proved the first claim about Kaine, so I don't see how this is valid, either.

Posted by Brian | May 30, 2007 1:35 PM

competition is not the same thing as mercantilism. in fact, mercantilism was all about hoarding assets. i dont see what youre trying to say here.

Posted by cyates | May 30, 2007 1:38 PM

as long as you have nation-level actors making trade policy, you will have, to some extent, nation-level winners and losers. he is arguing that trade policy should be geared towards making the country more competitive (read: open).

Posted by cyates | May 30, 2007 1:49 PM

What Kaine is saying here is nonsense -- mercantalism plus optimism --

Looks to me like the usual "free trade as manliness" shtick. The article won't load, but, from the title, i can't be that far off.

Posted by yabonn | May 30, 2007 1:59 PM

i'm not sure what's so hard to understand about matthew's comment. the theory of free trade is that there are no national losers; the whole pie gets bigger while each country (collectively) works its comparative advantage.

plenty of individuals "lose" under a free trade regime, though, and acting like they don't (or that to acknowledge that they do is to have a "loser's mentality") may well earn you plaudits at Cato but is a stupid position for a democrat or anyone who cares about working people in america.

but here's the deal: if Kaine wants to show that he thinks opposition to any ol' agreement that waves the words "free trade" around is a loser's game, he should support a massive (and i mean massive) increase in allowing doctors, lawyers, and other white collar professionals from other countries to come here and practice. admittedly, some current american white collar professionals might see their income decline, but that's just because they're losers, as i'm sure kaine would be happy to tell them at his next fundraiser.

Posted by howard | May 30, 2007 2:12 PM

howard, i think youre reading too much into what he's saying. he is not implying that there are no losers in free trade, but rather that opposition to free trade is based on the outdated idea that hoarding wealth makes a country wealthy. matt is off base because he claims that kaine is supporting a kind of mercantilist ideology, when in fact he is obviously using 'competitive' in a different sense -- as in, US businesses need to be competitive in the world economy, not as in the US needs to hoard gold to be more competitive than china. essentially kaine is saying that anti-free trade ideas = mercantilism, the opposite of what matt attributes to him.

Posted by cyates | May 30, 2007 2:30 PM

The reality of international trade is that a lot of it is driven by increasing returns and external economies -- which is a fancy way of saying, driven by golden gooses, like Silicon Valley, aerospace and Hollywood.

When those golden gooses do really well, earning large economic "rents", it drags up the rest of the national economy. Because a software engineer at Microsoft does really well, it drives up the value of Seattle real estate, fills the coffers of Seattle non-profits, raises the wages of Seattle coffee shop clerks and barbers and policemen.

The standard models of trade based on comparative advantage do not feature the increasing returns and external economies of the golden goose industries. But, they exist in real life. And, as a result, yes, Matthew, there are national winners. And, Kaine is not an idiot, after all.

Most people are employed in industries that trade only locally. How much a school teacher makes, or how well a truck driver lives, depends a lot on what country they live in, and how well that country does in international trade. In Japan, Switzerland or the U.S., those people do well; in India and Nigeria, not so well.

Success in trade is success in high-productivity industries, which earn large economic "rents". Some countries are given their golden gooses by God in the form of mineral or petroleum deposits, but most countries must build them. It helps to get lucky, but as Japan has amply demonstrated, sheer pulling the country up by its bootstraps can be made to work.

Posted by Bruce Wilder | May 30, 2007 2:40 PM

Yglesias definitely reads Kaine wrong.

Kaine was only attacking protectionist mentality.

Free trade is about open competition, success in which is the product of hard work.

Posted by David | May 30, 2007 3:09 PM

the theory of free trade is that there are no national losers; the whole pie gets bigger

Who gets the biggest increase in pie share is totally up for grabs.

Just look at the way electronics manufacturing has moved from the US to Japan&Germany to Taiwan&Korea to China&Malaysia.

Posted by David | May 30, 2007 3:15 PM

Free trade is about open competition, success in which is the product of hard work.

Are you sure it also doesn't have to do with things like child labor laws, worker safety laws, that sort of stuff?

Posted by Steve | May 30, 2007 3:29 PM

This discussion brings to mind a an old Margaret Thatcher quote to the effect that "There is no such thing as society. There is only an aggregate of families." Funny, you never hear those rugged individualists quote it in this context.

Posted by ask | May 30, 2007 3:54 PM

Are you sure it also doesn't have to do with things like child labor laws, worker safety laws, that sort of stuff?

Yes. I'm pretty sure.

Not being flip, but the reality is A: There isn't really much Child labor, especially compared to as recently as 20 years ago, and the reason why these areas are attractive to foreign firms, Stopler-Samuelson wise, is not the worker safety laws. but for greedy capitalists that's always a plus.

You have labor & environmental, & work health standards in all the trade agreements you want. It won't make a dent in the pattern of trade so long as unskilled labor in relatively abundant in the third world & the real wage is still lower than the developed world.

Posted by DRR | May 30, 2007 4:09 PM

I agree that Matt seems to misread Kaine. The loser mentality is we need to block our borders because we cannot compete - the Mexicans will take our jobs, etc.

In fact, if we bring in 100,000 new lawyers, for example, that makes existing lawyers supervisors, or increases case loads in courts (helping out native lawyers doing defense work).

We should not assume that the new citizens or aliens will "break our rice bowls" as opposed to promoting us into higher roles than we had before.

It may be like expanding the US Army from say 200,000 troops to 7 million during WWII - the non-losers of the 200,000 became the more senior officers and NCOs.

Kaine is saying, I think, why can that not be the most likely scenario if we pursue globalization.

Posted by cfw | May 30, 2007 4:22 PM

There is no such thing as free trade.

Posted by Adam Smith | May 30, 2007 6:26 PM

"the theory of free trade is that there are no national losers..."

That's not exactly accurate. If the economists I've read are correct, there are losers, such as people who lost their jobs because of trade deal. The policy comes in when we figure out how to distribute the gains from trade, from the winners to the losers, such as compensating those who are now unemployed in some way.

Of course, your next line also seems correct, in that the pie does get bigger, but like I said, the concern is distribution of said pie.

In some ways, it seems like a lot of people agree on the very general merits of trade, but get boggled down in semantics.

Posted by Brian | May 30, 2007 6:51 PM

brian, we're dealing with the aggregate question here; in theory, every country benefits, but that's right, how those benefits are distributed is most assuredly a political question.

but that's why it is perfectly legitimate to question what are billed as free trade deals; not all of them are. much of what has been sold as "free trade" is really "increased competition for blue-collar workers and a relocation of manufacturing," which is why people do indeed talk about "losers" (and why bruce wilder does correctly note that theory and practice are not always the same, although i don't think that bruce has undercut the theory).

i've reread kaine's comments, and i still think he is saying that any criticism of a bill that has the "free trade" label consists of having a "loser's mentality," but as i noted above, he can convince me by coming out strongly at his next fundraiser for lower income for doctors, lawyers, and other white collar professionals by the lowering of barriers to access to the american labor market by foreign-educated white collar professionals.

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