Acton Institute Powerblog

Economists are People Too

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In any period of economic transition there are upheavals at various levels, and winners and losers (at least in the short term). We live in just such an age today in North America, as we move from an industrial to a post-industrial information and service economy, from isolationism to increased globalization. There’s no doubt that there have been some industries and regions that have been more directly affected than others (both positively and negatively).

Michigan, for example, has been one of the most manufacturing-rich states in the nation for the last century, and has been running record unemployment numbers for the last decade or so, as manufacturers move to more friendly economic environments, both within the US and without. Not least of these factors contributing to Michigan’s competitive disadvantage is the high labor costs associated with a labor union-laden state.

The perception that manufacturing workers are simply being left behind in the new economy is pervasive, such that popular opinion is shifting away from free trade. As Fortune magazine reports, “A large majority – 68% – of those surveyed in a new Fortune poll says America’s trading partners are benefiting the most from free trade, not the U.S. That sense of victimhood is changing America’s attitude about doing business with the world.”

As an aside, this is a perception that doesn’t quite match up with the typical caricature of globalization. After all, how can both America (as the “imperial” dominator) and the developing world (as the exploited poor) both be made worse off by international trade?

If it were truly the case that global trade weren’t mutually beneficial, that would be one thing. What’s visible on news reports everyday are the layoffs, buyouts, and unemployment levels in the US. What isn’t always so visible is the extent to which Americans depend on the low prices associated with many imported goods. One group you might think should know better than the average American about such complexities are professional economists.
But economists are people too, and they don’t live (typically) in an isolated bubble hermetically sealed off from the rest of the world. Popular concerns about free trade are bound to influence their thinking at some level or another. And now we have word that, following the resurgence of popular concerns, economists too are “rethinking” free trade (here are two responses to the BusinessWeek piece).

According to BusinessWeek, “Economists are, however, noting that their ideas can’t explain the disturbing stagnation in income that much of the middle class is experiencing. They also fear a protectionist backlash unless more is done to help those who are losing out.” That latter fear is really the one that is driving most concrete policy proposals.

And it shouldn’t be much of a surprise that where both the voters and the experts go, the politicians won’t be far behind. Thus we have proposals about extending unemployment benefits, increasing and augmenting government training programs for displaced workers, and even blatant calls for income redistribution.

A great deal of this is coming to a head in the debate about the economic stimulus package being debated currently by the Senate. A major point of disagreement between the package passed by the House (with White House endorsement) and the versions under consideration in the Senate is whether the stimulus package should include payments only to people who pay taxes (House version) or to everyone (Senate version). The Senate’s version also includes extending the term of unemployment benefits.

In defending the House’s version, Speaker Nancy Pelosi has said that she would love to stand “on the streetcorner and hand out checks,” but that the focus on this package needs to be particularly on taxpayers. Sending checks from the government to people who don’t pay taxes (income, FICA, or SS) is nothing more than a thinly veiled redistribution scheme, and even though she presumably supports such a scheme, Pelosi doesn’t want debate about it to bog down the passage of the stimulus package.

Dartmouth’s Matthew J. Slaughter, an international economist who served on President George W. Bush’s CEA, has called for “A New Deal for Globalization,” which BusinessWeek describes as a “form of income redistribution to spread the gains from free trade to more workers.” So the payoff of all this may not be so much an increase in isolationist and protectionist trade policies, but in a radically increased role for government welfare programs.

I think we have to take the concerns of those who are displaced by layoffs and outsourcing seriously, but if I have to measure the proportion of my concern between a North American worker who has typically had years, and perhaps decades, of employment at a level allowing for them to live comfortably and save if they so choose, and a person in a developing country that has had no such opportunity, there isn’t much of a choice at all. The situation of an unemployed worker in the US is qualitatively better (and no real comparison in the end) than their unemployed counterpart in a developing nation.

Letting a preferential option for the poor in the developing world influence our trade policy would move us toward more liberal trade agreements and away from protectionism. Economists need to do a better job not only understanding but also communicating the tangible benefits of free trade (as David Ranson does here). And religious leaders need to focus not only on the situation of workers in their congregations but on the suffering of fellow Christians and the plight of the poor around the world.

Jordan J. Ballor Jordan J. Ballor (Dr. theol., University of Zurich; Ph.D., Calvin Theological Seminary) is a senior research fellow and director of publishing at the Acton Institute for the Study of Religion & Liberty. He is also a postdoctoral researcher in theology and economics at the VU University Amsterdam as part of the "What Good Markets Are Good For" project. He is author of Get Your Hands Dirty: Essays on Christian Social Thought (and Action) (Wipf & Stock, 2013), Covenant, Causality, and Law: A Study in the Theology of Wolfgang Musculus (Vandenhoeck & Ruprecht, 2012) and Ecumenical Babel: Confusing Economic Ideology and the Church's Social Witness (Christian's Library Press, 2010), as well as editor of numerous works, including Abraham Kuyper Collected Works in Public Theology. Jordan is also associate director of the Junius Institute for Digital Reformation Research at Calvin Theological Seminary.