Monday, August 15, 2011

Econ and trade, Part II

Earlier, I talked about how econ is not a moral science. Free trade always (or, nearly always) improves economic outcomes, but if a company has an advantage through, say, slavery or letting companies poison their citizenry, it doesn't mean that free trade is the right thing to do.

There's another side to this, as well. What is the great benefit of free trade? Well, more goods and services are now available, for everyone, for less money. (Technically, for fewer resources - but let's pretend that resources and money are exchangeable.)

And?

Well, if there's less money being paid for goods and services, that means there's less being earned for goods and services. It's great for the well-off, who get more stuff more cheaply, but it's bad for those who just lost their job because someone in another country can do the same job cheaper.

Over the long term, economic growth is likely to turn things around, of course. But in the short term, opening up new trade often means a lot of people will get hurt.

In a nation with a strong social safety net, this is not a problem. Some people lose their jobs, and have to find something else - but with a good safety net, the impact to their lives is minimized.

In the US... well, there isn't a very good safety net, is there? And it's been slowly shredding for many years. The Republicans want to throw it away. And the Democrats, well, the Democrats want to maintain it for the poorest of the poor, and throw it away for everyone else.

And its ridiculous. It's a poor economic decision, for one thing. Look, if the safety net is too good, sure, people will live off the dole without looking for work. But we are so far away from that situation that it's hard to imagine at this point! What you want - what a society needs - is a safety net.

Not, as Clinton stupidly said, "a hand up instead of a hand-out." A safety net. Something to make sure that, when you fall, you're caught; nothing horrible happens.

It's a perfectly fair trade for free trade; boost free trade, but also boost the safety net. This way, you benefit everyone. There are more goods and services for everyone, and those whose jobs are lost have a much easier time moving to the next job... and, they can keep spending a bit while looking for work, which helps the economy to grow.

But of course, in this country, fairness isn't a virtue any more, is it? Free trade, to make the rich richer, and the safety net gets cut. Because, you know, "booga booga, deficit gonna kill you in your sleep!"

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