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June 28, 2005

Crazed Loons Come Out of the Woodwork.

It only takes a few mild comments on the benefits of free trade, the value of reducing distortions, for the crazed loons to appear howling about the evils of free trade. Alex Singleton is asked by Newsnig8t for his views on the reduction in the sugar support programme in the EU.

He is, to my mind, exceptionally mild....regular readers will know that I advocate the complete destruction of CAP yesterday. Yet this brings a crazed response from Perfect.co.uk.

Dangerous extremist given airtime by the BBC

No, I’m not talking about the Ignorant Bigots on the Today programme, but Alex Singleton of the Globalization Institute on Newsnig8t.

Our word is our weapon has plenty of material that de-bunks their dangerous claims, go read…

Alex is hardly a dangerous extremist, that’s a phrase more usefully used of Jim at Our Word. Now you might already know that I am involved with the Globalization Institute so what I say about this might need to be taken with a large handful of salt. So why don’t we look for someone else on the subject?

How about Owen Barder? He likes Jim at Our Word, doesn’t like my views at all and has been scathing about Alex and the Globalization Institute. He’s also, in his own words, a typical Guardian reading lefty, and more importantly for this discussion, actually works in the world of aid and NGOs, even has a decent education in economics. What is his view on the specifics of what is under discussion? The issue of trade liberalisation? It is this very point that is the difference between, say, Jim (and many of those supporting Make Poverty History) and Alex.

Owen on Christian Aid’s comparison of free trade with slavery:

To compare free trade with slavery is a grotesque mischaracterisation.

On infant industry protection (the major argument given as to why poor countries should not liberalize their own trade):

The trouble is that the firms often become dependant on the protection from competition, and do not ever become truly competitive. The result is that the population of the country have to pay more for those things than if they could buy them on world markets; and the industry never becomes a viable proposition.

On the benefits of globalization:

  • there is no question that the world as a whole is better off with free trade - the gains far outweigh the losses
  • but the distribution of those gains will depend on how the liberalisation is managed
  • if we want to acclerate trade liberalisation - and so reap those benefits sooner - we should be more creative about redistributing the benefits to compensate the losers. These gains are so large that, even if we provide generous benefits to the losers, we are still better off as a whole.
  • we should use the benefits of global trade liberalisation to offset short term losses in developing countries - both to ensure that the poor get a large proportion of the benefits of trade liberalisation, and to ensure that the impact on poor countries does not become an obstacle to further trade liberalisation

On the EU’s attitude towards trade regulation:

The EU has reached an agreement with China under which China will restrain its exports of textiles and clothes into the EU until the end of 2008. The negotiators - EU Trade Commissioner Peter Mandelson and Chinese Commerce Minister Bo Xilai - are are very pleased with themselves for averting a trade dispute. They should be ashamed of themselves.

This is an agreement that does not benefit the EU, whose consumers will be denied access to cheaper clothing, nor the China whose producers will be prevented from selling their products to people who want to buy them.

On the very basics of free trade and the worst possible outcome (which is that at worst, we could end up no better off):

This is an excellent post by Brad DeLong, explaining why free trade can only be good, and explaining why we should not worry that all our jobs and income will shift overseas.

What I think needs to be emphasied here is the political, even emotional divide. Alex and I might be considered to be on the right wing on most matters. Owen and Jim on the left. Brad DeLong and Paul Krugman are also of the left (and much better economists than any of us).

Yet on this one subject, free trade, the value of or not thereof, the split is not between those of right and left, between those of a particular political persuasion at all. It’s between those who know their economics and those who don’t. Mssrs Krugman and DeLong, Professors both, are adamant and unapologetic free traders, as is almost every other academic in the field. Alex and I and Owen are all similarly on the free trade side. Owen supports much of the Make Poverty History aims and ambitions, and is most certainly not an admirer of the views of Alex or myself.

Yet don’t you think it interesting, don’t you think it actually says something about the subject under discussion?  The academic view is , from Friedman to Krugman, that free trade is a good thing, in and of itself. From within the NGO/Aid groups, Owen concurs. Alex and I are similarly going with the mainstream view (on this, if not everything).

Just who are the extremists around here?


June 28, 2005 in Make Poverty History | Permalink

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» Dangerous extremist given airtime by the BBC from perfect.co.uk
No, I’m not talking about the Ignorant Bigots on the Today programme, but Alex Singleton of the Globalization Institute on Newsnig8t. Our word is our weapon has plenty of material that de-bunks their dangerous claims, go read… Update: In re... [Read More]

Tracked on Jun 28, 2005 10:39:55 AM

» Dangerous extremist given airtime by the BBC from perfect.co.uk
No, I’m not talking about the Ignorant Bigots on the Today programme, but Alex Singleton of the Globalization Institute on Newsnig8t. Our word is our weapon has plenty of material that de-bunks their dangerous claims, go read… Update: In re... [Read More]

Tracked on Jun 28, 2005 10:42:43 AM

» Dangerous extremist given airtime by the BBC from perfect.co.uk
No, I’m not talking about the Ignorant Bigots on the Today programme, but Alex Singleton of the Globalization Institute on Newsnig8t. Our word is our weapon has plenty of material that de-bunks their dangerous claims, go read… Update: In re... [Read More]

Tracked on Jun 28, 2005 10:45:19 AM

» On left wing free traders from Owen's musings
I suppose I'm flattered to be picked out by Tim Worstall as an example of someone who is both left of centre and in favour of free trade (even if it is in a post entitled "crazed loons"). However, in a desperate attempt to put some clear red water... [Read More]

Tracked on Jun 28, 2005 6:52:42 PM

» Free trade is not a free lunch from Our word is our weapon
Displaying his trademark grasp of statistics, Tim calls me an extremist because he can think of five people who can disagree with me on the issue of free trade and development. Since one of them is himself (someone who thought... [Read More]

Tracked on Jul 1, 2005 2:41:42 AM

Comments

Tim, you're not actually talking about "free trade" here. The context was a very specific proposal; an alteration to the CAP's sugar regime.

Posted by: dsquared | Jun 28, 2005 8:55:31 AM

Looks like the usual left-wing smear tactics to me. Business as usual, then.

Posted by: Blib | Jun 28, 2005 9:24:59 AM

DSquared.

I'm not sure I understand you. Are you saying that Alex Singleton is being accused of extremism because of his views on the CAP sugar regime?

Posted by: Bishop Hill | Jun 28, 2005 10:39:59 AM

The inconsistency I see in your position, Tim, is this. Standard economic arguments about the CAP would suggest that overall its effects on LDCs ought to be positive - basically cheaper (subsidized) food for the urban Third-World poor paid for by rich taxpayers in Europe and the US. However, that treatment ignores the effect of those subsisies on the ability of the LDC agricultural sector to develop past first base and trade with the outside world, and all the path-dependent results that follow from that. Economic development is effectively still-born; major long-term damage is done.

Tim adds: Ahhh, but. What you say is true except that we need to balance the two effects, urban against rural. No, I don’t know the figures but in highly rural societies (which most of them are, it’s one of the reasons they’re poor) I wouldn’t be surprised if the bad outweighed the good. There’s some evidence that in Ghana, rigging the exchange rate for the urban population (ie, too high, making imports cheap and exporters of cocoa got screwed) was detrimental to the entire economy.


Jarndyce again:
So, building capacity is important. And if building capacity is important (or the beginnings of capital accumulation, if you like), then there is a role in some cases for import protection, if applied ideally, as a second-best solution, aimed only at the phase of capacity-building before complete liberalization takes over.

Now, whether many LDC bureaucracies are able to apply such protection ideally is debatable, but there is evidence (Korean, Taiwan) that it has been done well in the past, as much as there's evidence it has been royally bollocksed up in the past (Peronist Argentina).

Tim adds: I’ve just poted on this at the Globalization Institute.

Jarndyce:
On top of that, there is the relative effectiveness of tax collection in LDCs via tariffs as opposed to income/VAT etc., which is another factor outside standard trade theory. Without tax collection, there can be no infrastructure development, no adequate protection of property rights, and so on. Economic development is stifled again.

Tim adds: Hadn’t thought through that. Thanks for giving me something to chew over.

My point isn't really whether or not import protection has worked or not in the past. You and Jim have fought that one to a standstill, I think. More the economic logic of the argument.

Posted by: Jarndyce | Jun 28, 2005 5:44:19 PM

The economic logic of the argument is that making your consumers poorer by making the price of things they purchase more expensive(tarrifs) makes the country poorer.

Posted by: Rob Read | Jun 28, 2005 6:04:55 PM

Tim: Your piece at the GI does offer the best argument against infant industry protection. Agreed. What would your thoughts be if it could be shown in some cases, assuming good governance, that some tariff protection was second-best optimal. Would you even accept that such a condition might exist?

Tim adds: I’ve recently been made aware of a case where tariff protection was in fact the optimal course of action. Something called trade immiseration. Very rare circumstances as I understand it, in fact, everyone points to exactly the same case, Brazil and coffee in early 20th cent. There’s a paper on it from the 50s by Baghwati (sp.?) but I haven’t found a copy of it online.

Posted by: Jarndyce | Jun 28, 2005 6:49:23 PM

I guess you've tried Google Scholar already? I had a quick look. Plenty of Bhagwati stuff on trade, and the odd trade immiseration piece, though nothing from as far back as the 1950s.

But that wasn't what I meant. More that selective infant industry protection could be justified as part of a long-term strategy (see Korea/Taiwan), even when 'standard' economic theory said it wasn't beneficial in the shorter term, given good governance and the like obviously.

Posted by: Jarndyce | Jun 28, 2005 7:47:39 PM

I'll be responding to this post in due course, but thought I'd just note that the Bhagwati paper Tim is looking for is probably "Immiserizing Growth: A Geometrical Note", from 1958. I'd quite like to pretend that I knew this off the top of my head, but actually it's the product of a quick search on JSTOR, the scholarly journal archive, (which you need an academic password to access).

Be warned that thought it's quite short, it's mostly maths and thus mostly incomprehensible to me.

Posted by: Jim | Jun 28, 2005 10:49:37 PM

Anyone who defends the CAP is defendng the indefensible...esp now that the money per cow is compared to income of most Africans.

Posted by: Andrew Ian Dodge | Jun 30, 2005 11:57:35 PM

>Yet on this one subject, free trade,
>the value of or not thereof, the split
>is not between those of right and left
>It’s between those who know their
>economics and those who don’t.

Tim

By your comments you seem to be misrepresenting my position. I am in favour of free trade. I'm against the inequities of forced de-regulation and 'liberalisation' in developing countries without anything from the 1st world in return (like ending agricultural subsidies).

I'm sure there are some nuancies of poiicy we may disagree on (and other areas of policy I don't know enough about to comment on), but from this debate I see we share a lot of common ground.

To paraphrase you, the split it not between left and right, but different understading's of the term 'free trade'.

The left tends to interpret 'free trade' protectionism from the 1st world while extorting the third (which is what the American's have always promoted as free trade). Hence the rebranding of free trade as fair trade. Which the right now seems to misunderstand similarly...

Posted by: Robin Grant | Jul 1, 2005 4:46:20 PM