I recently read an article titled, “WhyVoters Don’t Buy It When Economists Say Global Trade Is Good” by N. Gregory Mankiw, an economics professor at Harvard. The article starts by referencing a
poll conducted by CBS News and the New York Times where only 35% of registered
voters think that the US has gained from international trade. The thinking of
the voters in this poll is in direct contradiction with what we have learned in
class. We have learned that countries that move out of autarky and open
themselves to trade end up gaining overall. Through trade, countries are able
to produce more product and improve the overall welfare of their country by
moving up to higher indifference curves. The same poll also showed
that 55% of voters think that the US actually lost as a result of trade. From
what we have learned so far in class, this is not true.
The article
also provides two hypotheses as to why those voters felt that way. The first
hypothesis was that voters feel like they have not gained from trade because
not everyone gains from trade. In class we learned that workers in certain
industries lose from trade, but overall the gains outweigh the losses. The
hypothesis is that the voters who lose from trade are going to oppose it.
The second hypothesis from Edward Mansfield
and Diana Muntz dismisses the first one and then concludes that people oppose
trade for three reasons. The three reasons they found was isolationism, meaning
the US should stay out of foreign affairs, nationalism, thinking the US is “culturally
superior to other nations”, and ethnocentrism, thinking that their own ethnic
group is better than others. In the end, Mansfield and Muntz conclude that
people base their feeling toward trade on their psychological worldview rather
than their knowledge of economics.
While
it is hard to determine individual preferences, there is no denying that
opening up to trade is better than autarky. Through comparative advantage,
countries end up gaining from trade and improving the welfare of its citizens. Despite
what voters may feel toward global trade, it is important that our politicians
understand the benefits of international trade for the country and do not let
the general public try to persuade them otherwise.
I also found this article interesting, because often times free trade has been seen as a bad thing to voters, when like you said our class has clearly proven otherwise. One of the reasons I think voters see it this way is because towns like the city of Galesburg, IL lost their Maytag plant over 10 years ago, and the city has yet to recover. Likewise cities and towns all over the ‘Rust Belt’ of Pennsylvania, West Virginia and Ohio have seen their jobs disappear in likely free trade makes it cheaper and more beneficial to produce. So all these cities and towns see the negative impact on them and leaves a dark impression of free trade all over the county. However, one way I have described to my dad (and a good way to show voters) is on how free trade is beneficial is with TV’s. Over the past 5 years the price of TV’s have fallen in price and consumers have been the ones to benefit greatly with reduced price. Overall, I enjoyed this article because it is easy to see the negative effects of free trade, but harder to realize the benefits of free trade we utilize every day.
ReplyDeleteI thought the most interesting part of the article was when they talked about the other three sets of beliefs. I think it is interesting that people think that the United States should not solve global hunger problems. We have the extra food available and it is not going to hurt us. To the second belief, The United States has tried to set up Democracy in many countries. In some countries, it has worked and it has not worked in others. Obviously, everyone is different and other countries do not want to be like America. In my opinion, ethnocentrism is part of the reason racism still exists because no one should think their race or ethnicity is better than another. We all need each other and what other cultures and beliefs everyone brings.
ReplyDeleteWe have to be careful about judging people's opinions on trade. Some views are highly fallacious. For example, people say that jobs completely disappear, but there is no evidence of aggregate employment changing due to trade. Also, people see certain groups of individuals losing and assume that this means trade is bad overall. However, the general notion that trade makes a lot of people worse off could be valid. Aggregate gains can indeed be positive EVEN WHILE the MAJORITY of the people are worse off. This just means that the gains would be relatively highly concentrated.
ReplyDeleteIn chapter 4 we will learn about the effects on workers vs. capital owners - in developed countries it is mostly capital owners who gain from trade. Unskilled workers tend to see their wages decline. Why should I give a rat's patoot about aggregate gains if my family's income is falling?
We have to be careful about judging people's opinions on trade. Some views are highly fallacious. For example, people say that jobs completely disappear, but there is no evidence of aggregate employment changing due to trade. Also, people see certain groups of individuals losing and assume that this means trade is bad overall. However, the general notion that trade makes a lot of people worse off could be valid. Aggregate gains can indeed be positive EVEN WHILE the MAJORITY of the people are worse off. This just means that the gains would be relatively highly concentrated.
ReplyDeleteIn chapter 4 we will learn about the effects on workers vs. capital owners - in developed countries it is mostly capital owners who gain from trade. Unskilled workers tend to see their wages decline. Why should I give a rat's patoot about aggregate gains if my family's income is falling?