The Canada-US FTA at 25 October 5, 2012 Andrew Jackson 6 comments My take, in the Globe Economy Lab today. Facebook Twitter Email
Why then all the cries for austerity and refusal to enforce the Health Act of 1982? Where i the money for social programs? When will it be recognized that free enterprise an free markets are ideological statements that are have no intellectual integrity. Conservatives simply hate government. Since the PEF created the Galbraith prize, it is no stretch to imagine the need for government involvement in economic development.
“There is, of course, no path back to where we were in the late 1980s.”
Really? Why not?
People always say this kind of stuff. But we could walk out of the FTA and NAFTA in six months. Nearly all the factors making it “impossible” to do trade and Canadian development the way we did them back then, or better, are institutional rather than matters of nature or technology. The economy is more globalized now, sure–but that’s just saying we stopped doing trade barriers. Capital is footloose and roams the world without respect for natural borders–that is, we don’t have institutional controls on its movement any more.
But it hasn’t actually become any more impossible to do that stuff now than it was back then. We just don’t do it. And the folks on our side internalize the claim that it’s “impossible”, so the argument for it isn’t even made. There’s no reason to just accept the assumptions the Fraser Institute et al. would like us to imagine are inevitable; it leaves you fighting with one arm tied behind your back, having been hypnotized into believing that of course, nowadays you only have one arm.
Let’s quantify a bit of impossibility. People tend to say that since Canada has a small economy and low population and stuff, efficiency would be lost if we went protectionist and insisted on making more of our own stuff. Let’s assume that’s true, although I’m not convinced. Let’s imagine that Canadian protected industries would be like 20% less productive than globalized industries even after you account for reduced transportation expenses, fewer international middlemen and whatnot. It’s a number pulled out of an orifice, but not an unfair one I would think; if anything I’m trying to be generous here.
Now. Since the 1970s, even Canadian anemic productivity growth has been well over 50%, despite shifts into less productive industries that a protectionist, import-substitution-oriented policy would reverse. And out of that 50%, ordinary average people have seen . . . nothing. Median wages have effectively flatlined (at best–in real terms I still think it’s worse than that).
So. Assuming a significant productivity/efficiency hit, and assuming no productivity gains from shifting back into more productive sectors, ordinary people would still be at least like 30% better off from a movement towards protectionism, import substitution and regulation of foreign ownership assuming the associated shift in political/economic leverage allowed us to return to inequality levels from the seventies.
What I find out about this is that Dean Baker, who along with Krugman is one of the most prominent progressive economists in the USA, has been arguing that NAFTA did not go far enough! e.g. “The agreement did little to loosen the obstacles facing highly-educated professionals in Mexico, like doctors and lawyers, from working in the United States. If the agreement had freed up trade in this area, it could have led to gains to consumers in the tens of billions of dollars a year.”
Krugman himself explains opposition to free trade:
“…some intellectuals reject comparative advantage simply out of a desire to be intellectually fashionable. Free trade, they are aware, has some sort of iconic status among economists; so, in a culture that always prizes the avant-garde, attacking that icon is seen as a way to seem daring and unconventional.”
Okay people- hold your freaking breath Mike Moffit is about to tell us all how to do Statistical Analysis- the irony is killing me this morning- Mike would you settle down before you become the new Stephan Gordon and blow the economic lab off the face of the planet- try and stay within your grappling hooks of ability would you!
Telling us that the FTA cannot be analyzed with import data? Great point there Mike! And while your at it, why don’t you tell David Suzuki he is an idiot?
Oh and lastly why not miss the point on the central argument in the Corporate tax rates rising despite cuts to the rate- excellent fence sitting while you pretend to make a point.
Your a genius- lets all agree Mike is a genius.
Just a follow up on my last comment. Okay Mike Moffit is off my list of economists that can be viewed as economists. Attacking David Suzuki yesterday was most likely his attempt at gaining fame, but I do believe it backfired. Telling the most senior expert in the world on environmentalism to go and take an economies 101 course is very much Jerry Springer like behaviour and not at all acceptable within any group of economists that could be even remotely legitimate.
Mike, how about this, go take a basic environment course.