Wednesday, 21 December 2016

What to say to those who lose their jobs because of imports

Here at the Cafe Hayek blog Don Boudreaux takes up one of the most difficult issues to do with advocating free trade, what does an advocate of free trade say to to those who lose jobs to imports?
Nothing that you say to someone who loses his or her job to changing market conditions is likely to satisfy that person. The personal almost always trumps the abstract. The seen hides the unseen. The proximate overwhelms the distant. The present is real while the future is still to be created. This reality, however, does not diminish the importance of defending free trade honestly, unconditionally, and without apology.

Such a defense begins with the insistence that jobs are not lost to imports or to foreigners; instead jobs are lost to fellow citizens – in two ways. First, it is the spending decisions of fellow citizens that determine when particular jobs are created and when they are destroyed. Second, the job lost by Smith is replaced with a new (and likely very different) job filled, if not by Smith, then by Smith’s fellow citizen Jones. So when someone complains about losing his or her job “to imports,” it is right to note that protecting that job necessarily requires that fellow citizens’ freedoms be curtailed and fellow citizens’ economic well-being be reduced. Protection necessarily shrinks the spending power of countless fellow citizens. Protectionism also destroys the actual jobs of many other fellow citizens (for example, jobs in domestic machine-tool factories that disappear because steel tariffs take a bite out of domestic machine-tool production) and destroys the job prospects of still other fellow citizens (for example, retail-store-management jobs that never materialize because tariffs on consumer goods reduce consumers’ demand for such goods).

Again, no such arguments will satisfy someone who believes that his job disappeared because of international trade. But that person’s refusal to accept that these arguments are part of a sound case for free trade does not, as emotionally understandable as this refusal is, render these arguments invalid. If we mute or trim our defense of free trade out of understandable sympathy with the unemployed worker who we see, we are complicit in supporting a system – protectionism – that not only destroys the jobs of workers who we don’t see (but who are, and whose sufferings are, every bit as real as the worker who we do see), but also will deny to our children and grandchildren a future that is as prosperous and as peaceful as possible.
It is necessary to keep in mind when defending free trade that it will destroy some jobs (a fact that is often clearly seen), and this has very real negative effects on people, but it is also necessary to realise that it will also create jobs (a fact that is often unseen) which has very real positive effects on other people. As Paul Krugman has written,
It should be possible to emphasize [...] that the level of employment is a macroeconomic issue, depending in the short run on aggregate demand and depending in the long run on the natural rate of unemployment, with microeconomic policies like tariffs having little net effect. Trade policy should be debated in terms of its impact on efficiency, not in terms of phony numbers about jobs created or lost.
The trade economist Douglas Irwin has this to say on the matter of trade and jobs,
The claim that trade should be limited because imports destroy jobs has been around at least since the sixteenth century. And imports do indeed destroy jobs in certain industries: [...]

But just because imports destroy some jobs does not mean that trade reduces overall employment or harms the economy. [...]
So in terms of jobs the free trade/protection debate is about which jobs there are in an economy rather than the total number of jobs. Changes in trade policy moves jobs a round the economy, free trade moves jobs away from sectors of the economy that produce things we are (relatively) bad at doing towards things we are (relatively) good at doing. Each of free trade and protection will be good for some people and bad for others. Perhaps the real question is, how do we best help those who in the short-run are harmed by changes in trade policy?

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