August 20 , 2003

When I was learning economics, almost all economists agreed that trade was a good thing.  Without it, economies were constrained to produce only what the capabilities of their workers and the technology they had available would allow. 

By engaging in exchange, new products would become available.  But what if everyone produced the same things but had different skills and technology.  The rules of comparative advantage said that exchange still was mutually beneficial.  Releasing the doctor from also making the household meal meant that more people received medicine and more resources were available to make meals. 

Furthermore, no one would engage in exchange unless it was mutually beneficial.  Why would you willingly give away more than you got in value?  If there was one principle that almost all economists could accept, it was that trade was good for the world economy.

At every world economic meeting there are thousands of protesters who do not agree.  They see world economic integration as a threat.  At a minimum, they see trade as picking the pockets of the poor and enthralling the working people economically. 

Ross Perot said in his presidential campaign that  freer trade will create a sucking sound as jobs rush from the areas paying higher wages to the world's poor.  Instead of rising up the masses, it will bring down the elite.  The pools of poor will not be filled before the well to do are thrown down into them. 

A little of this thinking is resurfacing as some of the jobs migrating abroad were receiving above average wages here.  Research by Forrester suggests that outsourcing of back office and information technology jobs could rise dramatically in the next decade.  And many of these jobs will go abroad.  Are companies willingly undermining their own future by seeking lower costs for their customers?

Before I argue that the basic economic principle remains valid--trade is mutually beneficial because it is done willingly and helps both sides--I will throw in a few caveats.  If goods are produced with socially undesirable techniques, increasing that trade will create more social problems. 

When the communist world tried to compete economically with the remainder of the globe, they used some of the worst environmental techniques known.  They were willing to trash their own countries to produce the goods that made them appear equal to everyone else.  Because their people could not overturn these policies until they overturned communism, more competition with the communists meant more world degradation. 

More recently, school children making fireworks in China went unnoticed until a tragic accident brought that activity to the world's attention.  If our trade diverts children from education to work, is the world better off?

I would argue that these are not mutually beneficial trades, which is true.  The disconnect between governments and socially acceptable production allows such activity to progress.  Indeed, communism failed only when those societies needed what was being created elsewhere.  The trade that ultimately required those autocratic governments to change initially added to the problems those economies were creating. 

In short, trade could lead to greater problems for some time if socially undesirable conditions are being preserved or strengthened by it.  However, the problem does not lie with the trade but with the disconnect between government and the needs of their people.  The solution is not to keep trade out but to change the rules so that goods produced for trade meet social norms. 

Even here, the problem of transition is not simple.  Over 2 billion people on this globe spend most of their time worrying how they will survive another week.  This is why they let their children pack fireworks, allow polluting enterprises to weaken their health, accept a government that offers little but sometimes helps survival. 

What is child exploitation to us is survival to many African and Asian households.  Refusing to use goods produced by child labor does not lessen the need of those families.  Indeed, it was less than a century ago that Polish children less than 10 years old were digging in the Pennsylvania coal mines.  We find that activity offensive today because households no longer need to abuse their children in that way to survive. 

Dealing with the problems of the people on the edge of extinction cannot be met by free markets alone.  Failure is a part of a market economy.  Where failure is death, they cannot afford such a system, even though the final outcome will be much fewer households suffering such a fate. 

Thus, those protesters have a point.  World trade is disruptive.  Under certain circumstances, it is dangerous.  But they are protesting against the wrong ills.  The problem is not the trade but the community structures (governments) that are at the base of the abuse. 



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