Before the creation of Brasilia, Johannesburg (then the world’s 80th largest) was the biggest city not on a major waterway. Great cities are the gateways to the trade routes that are often the Earth’s waterways. That surprising fact confirms the importance of trade as the source of economic growth. There is a lot of debate about who benefits from that wealth.
What’s interesting is that China’s establishment as an economic powerhouse is directly linked to the country joining the World Trade Organization in 2001. And that lifted 400 million people out of poverty, doing more to achieve the Millennium Development Goals than all the millions of dollars that aid agencies dedicated to those objectives.
At the beginning of the 16th century China and India represented 50% of the world’s economy. After Marco Polo had introduced Europe to Eastern goods, traders convinced their governments, Portugal, then Holland, followed by the British (who built an Empire on trade) to find trade routes to the East. And they did.
For centuries economists have been telling us that trade is good. Over two hundred years ago, Adam Smith in his seminal work, the Wealth of Nations, explained the benefits of trade. Simply stated, through trade – goods are cheaper and consumers benefit from the lower prices.
But when the manufacture of goods moves off-shore, jobs in the local economy are lost. Historically economists have argued that the workers adapt, learning new skills, and move to places offering jobs that need those skills.
Those economists have probably never experienced the trauma of losing a job, surrounded by friends who have lost theirs, without the resources to develop the new skills and the money to move to an unfamiliar place in the hope of getting a job, that often demands prior experience.
Lately some economists have uncovered the error in their thinking. They have discovered that many people who become unemployed as their jobs move off-shore eventually stop looking for work.
In Europe they are voting for the fringe parties that believe that the Union is a failure. In America they are voting for Donald Trump.
Their answer is to build walls, and end trade. Building islands of isolation.
That does not work. South Africa was forced into isolation during the apartheid years, and that eventually destroyed the economy. The desperate state of the economy forced De Klerk to release Mandela, and call a referendum asking whether everyone should be given the right to vote. And the privileged, faced with economic collapse, gave up their status.
Until then, South Africa’s businesses, sheltered from international competition became ever less efficient, and goods became more and more expensive creating the curse of rampant inflation. The prime overdraft rate reached an unaffordable 25%. Businesses were collapsing and unemployment rocketed.
And that is what Trump and his European counterparts are wishing on their constituencies.
Targeting trade is killing the goose that lays the golden egg. The answer is to acknowledge that while the majority of the population benefits from trade deals, there are some people for whom upheaval is their only prospect. The affected businesses can afford to lobby and they make sure that their interests are more than looked after. It is the ordinary voters, whose elected representatives are failing them, that need to have their interests protected, and included as a part of any trade arrangement. The deal for them should be so good that they are the most vocal champions of the trade alliance.
Until that happens, the world’s economy which is struggling to move forward, will steadily move in the opposite direction.
A hire power
A lapse in concentration
Adding Japan And Korea To The TPP
AGOA Rules: The Intended and Unintended Consequences of Special Fabric Provisions
An inconvenient iota of truth
An open and shut case
Asterix in Belgium
Capital Controls: Gates Versus Walls
China In The TPP
The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade
The China Syndrome: Local Labor Market Effects of Import Competition in the United States
Coming and going
The Condensed Wealth of Nations
The consensus crumbles
Dealing with Donald
Declining Migration Within the US: The Role of the Labor Market
Developing-Country Trade and US Wages: Theoretical Perspectives
Do Developed and Developing Countries Compete Head to Head?
Donald Trump’s Trade Policies: Blessing Or Curse?
The Economic Effects of the Trans-Pacific Partnership: New Estimates
Economic Implications of Deeper South Asian–Southeast Asian Integration
Estimating the Impact of Trade and Offshoring on American Workers Using the Current Population Surveys
Explaining nationalist political views: The case of Donald Trump
Fear of the maple menace
A Firm-Level Perspective on the Role of Rents in the Rise in Inequality
Firming Up Inequality
Foxes and tigers
Globalization and the Inequality of Nations
The good, the bad and the ugly
“Good Jobs”—Trade and US Manufacturing Employment
The Great Convergence: Information Technology and the New Globalization
The Hyperglobalization of Trade and Its Future
Import Competition and the Great US Employment Sag of the 2000s
Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure
In defence of NAFTA
Industrial robots will replace manufacturing jobs — and that’s a good thing
Inequality and Unemployment in a Global Economy
It’s Where You Work: Increases in Earnings Dispersion across Establishments and Individuals in the U.S.
KORUS of disapproval
The Long-Term Decline in Prime-Age Male Labor Force Participation
Measuring The Unequal Gains From Trade
NAFTA and other trade deals have not gutted American manufacturing
NAFTA at 20: Misleading Charges and Positive Achievements
Needed but not wanted
The Neoliberal Mind at Work: Brad DeLong’s Muddled Defense of NAFTA
The new political divide
No, thank you
Of growth and globalisation
On The Principles of Political Economy, and Taxation
Place-based economic policies as a response to populism
Policies to help Britons who lose out from free trade are woefully inadequate
Politicians cannot bring back old-fashioned factory jobs
The politics of anger
Put Globalization to Work for Democracies
The reset button
Return of the Solow Paradox? IT, Productivity, and Employment in U.S. Manufacturing
Scrimping on sense
Shattering the Myths About U.S. Trade Policy
Skills, Tasks and Technologies: Implications for Employment and Earnings
South African Trade Policy Matters: Trade Performance And Trade Policy
The Surprisingly Swift Decline of U.S. Manufacturing Employment
The toll of tariffs
Three amigos and two spectres
Through the mill
Trade in the balance
Trade and Inequality: From Theory to Estimation
Trade, at what price?
Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence
The Trans-Pacific Partnership and Asia-Pacific Integration: Policy Implications
Try, Persist, Persevere!
US Trade and Wages: The Misleading Implications of Conventional Trade Theory
US Welfare and the Trade Balance
Wallonia is adamantly blocking the EU’s trade deal with Canada
The way ahead
Wealth of Nations
What Does Human Capital Do?
What Trumponomics means for the border region
Why Are American Workers Getting Poorer? China, Trade and Offshoring
Why Do Cities Matter? Local Growth and Aggregate Growth
Why Has Regional Income Convergence in the U.S. Declined?
Why is globalisation under attack?
Why they’re wrong