THOMAS F. BERTONNEAU writes: 

A number of the reader comments in the post on free trade struck me as clear-sighted. Take, for example, this one:

 “[T]he U.S. and other Western countries are importing goods from other countries that are cheaper than we can produce not because of any natural comparative advantage, but because those countries do not have the same laws and regulations regarding such things as environmental regulations, workplace health and safety, minimum wage laws and the like. To the extent that such laws and regulations are morally necessary (some but not all cases, in my opinion), we are getting cheap goods at the moral cost of patronizing companies, which treat their workers and environment in ways that we have deemed wrong and would not tolerate at home.” 

The “Free Trade” argument has always seemed to me grossly reductive. It says, in effect: “Look here, we can manufacture a doohickey for x dollars whereas the Laputans can manufacture it for 1/2x dollars; therefore let us stop manufacturing doohickeys so that we may buy them more cheaply from the Laputans.” The unstated assumption of the “Free Trade” argument is that cheap goods are the ultimate justification of trading arrangements. People who make this unstated assumption – and who argue that we should buy our doohickeys from the Laputans – never ask the question that logically and morally should come after “how cheaply can we get doohickeys?” That next question is, “What price will we pay for getting doohickeys as cheaply as possible?” Of course, the answer to the first question is of a different kind from the answer to the second question. The answer to the first question can be expressed in a quantity prefaced by a dollar sign. It is not discursive; it is a Pavlovian cue. The answer to the second question, far from eliciting a mere Pavlovian response, requires a discussion of morality, culture, the future, and the hierarchy of goods. 

The same analysis seems to me to apply to the subject of illegal immigration, overwhelmingly from Mexico, frequently justified by an argument that goes like this: “If you housewives want cheap lettuce in the supermarket, then you should be thankful for all those undocumented campesinos laboring in the truck farms of the Imperial Valley.” Here again, the train of thinking stops at the dollar sign. The defenders of the illegal immigrants, especially their employers, never ask, “What price will we pay – or what price are we paying – for cheap lettuce?” It might well be that the price of cheap lettuce is higher, infinitely higher, than the price of expensive lettuce. That would be “infinitely higher” in a moral and cultural sense, and in terms of the future and of the hierarchy of goods.

                                                   — Comments —

Anthony Tono-Bungay writes:

I understand Bertonneau’s moral argument, but there is a moral argument in favor of cheap doohickeys which he neglects:

Our labor and environmental laws are a rich nation’s luxury. That’s not a value judgement, it’s an observation: Only rich nations have those things. We didn’t have them ourselves, before we were rich. We were pretty hard then so we took things as they came, and of course nobody had ever heard of humane laws anyhow — and nobody ever did hear of them, until the West invented them, which happened after the West got rich in the industrial revolution. Move forward several decades, and you find the Japanese selling us cheap doohickeys, because they were poor and then we bombed them flat and they were even poorer. It made them rich, too rich to put up with making cheap doohickeys for pennies in lousy working conditions. So they passed humane laws and moved on to building high-quality cars and cameras. So the Taiwanese started took over the cheap doohickey business. That made them rich in their turn, and South Korea took over. South Korea’s rich now. You see where this is going: Industrialization makes you rich, and wealth makes you humane, and then somebody else gets a turn. The more people buy your doohickeys, the faster you get rich. Once you’re rich, you move on to producing higher-value goods at higher margins. Remember when “Toyota” meant “cheap”? Well, now it means “quality”. And I will bet you anything that the quality of working conditions in Toyota’s plants have has roughly tracked the quality of their product.

(This is also an argument against the voluntary poverty preached by the green left: When our wealth goes, the first thing we will lose is our concern for the environment; the next, our concern for human rights. That is not a wild guess.)

What happens if nobody buys poor-country doohickeys? They stay poor, farming for subsistence. That doesn’t keep me awake nights; lots of people are poor. I can’t — I physically cannot — be responsible for all of them. But if we’re concerned about the life we condemn them to by purchasing doohickeys, we should consider that their choice is not between conditions in a humane American factory and conditions in a Chinese factory. Instead, it is between a lousy Chinese factory and a lousy Chinese farm. If we buy their stuff, someday their grandchildren will work in humane factories and offices like we have. If not, they’ll be stuck on the same lousy Chinese farm (unless they immigrate here). I argue that if you buy a cheap doohickey because it’s in your interest to do so, you are doing more good than harm. This is not some abstract theory: See the examples from Asia in my first paragraph. Every single one got rich on trade. That is the moral argument in favor of trade.

Bertonneau’s moral goals would be infinitely better served by what’s being called “Fair Trade”, where first-world customers choose to pay above-market prices for third-world goods, with the surplus going to the producer. Most “Fair Trade” arrangements are run by progressives, who naturally impose terms which require the third-world producers to do business with them “communally”, thus ensuring that the lion’s share of the profits go to some local headman or jefe or oligarchy. That offends me, but other arrangements could be made — and if a much greater share of the profits are at least reaching the producer’s village, that’s an improvement on the status quo.

Of course, “Fair Trade” mostly involves agricultural products and handcrafts; I don’t know if there is any analagous arrangement for more up-to-date sorts of doohickeys.

As for cheap Mexican migrant agricultural labor in the US, I’m as appalled as anybody. It’s wrong, and the above logic does not seem to me to apply. If they’re working in the US, they should be treated as US workers.

Hurricane Betsy writes:

The most stable societies have been those who don’t let free trade get out of hand, or at least that is what I believe without being an economist. If the only way we can have something is to get involved in the downward-to-hell spiral of free trade, then we have to rethink if that thing (“doohickey”) is worth having at all. It may mean downsizing, living less modernly, doing without, even the total restructuring of work in general – but, by God, we will be ourselves and beholden to no one. And isn’t that what “traditionalism” is all about. 

Necessity is the mother of invention, yes? So if we can have various whatevers only by selling our souls, and we’ve decided we don’t want to go that route, we will just have to all put on our thinking caps and find ways around it.

Nothing wrong with unions, ie, collective bargaining. What’s wrong is all members of a workplace having to join when only 60% of them sign a union card. Government tyranny is the problem. 

I am really enjoying this discussion. This is one of your best topics.

Mr. Bertonneau writes:

Given his nom-de-web, I am inclined from the beginning to come to terms, if possible, with Anthony Tono-Bungay, who will perhaps know what I mean when I say, Zzzz, Zzzz.  (I assume that Mr. Tono-Bungay is a fellow Wellsian.) 

I have some questions.  Mr. Tono-Bungay writes: “If you buy a cheap doohickey because it’s in your interest to do so, you are doing more good than harm.”  Doesn’t the phrase “because it’s in your interest to do so” presume what needs to be demonstrated?  Also, isn’t it important to stipulate to whom or for whom one is “doing more good than harm” when one buys a cheap doohickey (or a bottle of Tono-Bungay)?

The notion that in buying cheap electronics from China and cheap cars from Japan we were helping impoverished Chinese and Japanese out of their wretchedness explicitly accompanied our habit, beginning in the 1960s, of buying cheaply from abroad.  Let us say that our buying habits indeed floated foreign economies and salvaged people from wretchedness – but in the long term, from 1960s, say, until now, those habits also inflated our trade deficit and contributed in a major way to our current economic woes.  (China now owns us through owning our debt.)  I think the question, was it worth it, is an open, not a foreclosed, one.  My misgivings have to do with the old idea that charity begins at home. 

I agree with Mr. Tono-Bungay that it might sometimes be wise and good to buy expensively rather than cheaply.  Five-dollar-a-gallon gasoline is outrageous as long as the gasoline comes from the morally unsalvageable Saudis; it would be bearable if it came from Texas wells or Midwestern tar-sands. 

Robinson Crusoe might have replied to the free trader that cheap goods, while attractive, had a price that the free trader meanly did not mention: That in selecting them over the products of his own labor, the buyer would be selling the habits and disciplines that had made him independent in his own realm. 

Laura writes:

Mr. Bertonneau writes, “… the buyer would be selling the habits and disciplines that had made him independent in his own realm.”

This is an important insight. If free trade deprives an entire portion of the population of “the habits and disciplines” that made them independent in the first place, it ultimately is not economically sensible. By the doctrine of free trade, all this is supposed to work out by some inner magic. When we give up our manufacturing sector, somehow it is supposed to miraculously come about through the mindless, inner logic of free trade that the “habits and disciplines” that came with industry, which go to those who do not have the initiative or capital in most cases to start their own businesses, will be maintained through new ventures.

Now, a free trader would respond that the alternative, which is control of the economy by self-interested bureaucrats and politicians with their inefficient meddling, is no better. But with the sort of across-the-board tariffs Ian Fletcher recommends, it seems the damage to be done by politicians and bureaucrats is minimized. And the fact is, the governments of other countries, such as Japan, have been protectionist and are protectionist.

R.S. writes:

“…[T]he buyer would be selling the habits and disciplines that had made him independent in his own realm. “

 I agree with Laura that this is an important insight.

Giving away the manufacture of “doohickeys”, if coupled with a blind ideological adherence to unilateral “free” trade, is merely the first step in giving away everything. There never was a truer adage than “innovation starts on the shop floor”, and yet ideologues never stop believing that we can somehow maintain a prosperous economy with a few well-paid “creative designers”, far removed from the nuts and bolts of manufacturing, in an ocean of poorly-paid service workers. (An aside: I have, coincidentally, recently been viewing the old 1978 BBC series “Connections.” It is interesting not only for illustrating just how dumbed-down even “quality” science programming has become in recent years, but for really hammering home the truth of the aforementioned adage about innovation. Invention isn’t an ivory tower process.)

Most Americans would be shocked to know that we know longer have the capacity to produce even so critical a “doohickey” as penicillin. Yes, that’s right, we’re completely dependent on foreign manufacturers for this necessity. (Doesn’t this fact just make you swell with pride at the thought of our superior, noble, national leadership?) And this is not something that can be rectified quickly in an emergency. Production is a capital-intensive process that requires a good decade of lead time to bring online. As another example, I will point out that people who follow such things are aware that we are right now in the beginning (middle?) of the process of ceding our aerospace industry – which true believers constantly hail as an industry in which we have some magical “comparative advantage”. We don’t. The fact that much of it is defense-related won’t save us. “We” already happily outsource critical components for defense hardware even to the very nations, such as China, we’re supposed to be defending ourselves against.

Mr. Tono-Bungay (I salute the name!) is correct that of the nations he mentions, “[e]very single one got rich on trade”. What they most emphatically did not get rich on, however, is free trade. (Ha-Joon Chang’s books are a good place to start here, whatever your political leanings.) Theory refuses to recognize that China is a game changer. What we could tolerate in the way of trade deficits with advancing smaller nations (and even that is open to debate), became simply obdurate, destructive dogma once China entered the World Trade Organization. The U.S. is being destroyed by “free” trade. One can only look on in despair as the alleged crowning virtues of the Anglo-Saxon approach – empiricism, pragmatism, taking the world as it really is rather than attempting to subsume it to theory – are ground under in the ideological fanaticism of neoliberal trade theory. (Granted that this summation is hyperbolic, misleading. There is, of course, enormous “pragmatism” behind this insane devotion to “free” trade. Certain parties are doing very nicely indeed while propagandizing the “free trade” line – the nation be damned.)

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