| > Is cheap labor a legitimate source of comparative advantage? No, it isn't. Living in the Rust Belt, I find it so obvious that globalization is a race to the bottom that I'm amazed any reasonable person could believe otherwise. All the jobs move to countries with the worst wages, environmental protection, safety, workers' rights, etc. In economists' language, through labor organization and the democratic process, relatively free countries' workforces created a de facto monopoly on labor, which was able to extract some monopolistic rent (i.e. workers' wages > what they "should" be). Standard economic theory says this has a redistributive effect (labor pulls money from everyone else) plus an inefficiency effect (there's some potential value lost by the artificially high wages). Standard economic theory says markets should always be free, to avoid the inefficiency effect. This is where I disagree with standard economic theory: When it comes to the labor market, I firmly believe the inefficiency effect is a cost worth paying for the redistributive effect. If you open up your trade to the rest of the world, fungible jobs all go to the poorest, most repressed people, who can be paid the lowest wages and exploited in the worst ways. It's great for lifting people out of extreme poverty, but as a side effect it slides every country toward moderate poverty while moving all the wealth to the 1%. That's a recipe for potentially dangerous levels of social and political instability. My solution? Every country with high standards in wages, environmental protection, safety, workers' rights, etc. needs to implement tariffs to level the playing field. If your country has high standards, other countries can still choose lower standards and trade with you, but the competitive benefits of those lower standards will be nullified by the tariffs. Which lets you keep your high standards without wrecking your economy (and as a side benefit raises revenue without taxing your people directly, and gives countries with low standards an economic incentive to improve themselves. Which is potentially a great humanitarian breakthrough, improving the lives of lots of ordinary people in countries whose rulers care only for their wallet). I think the Trump's tariffs are a move in the right direction, although I think he's made a mistake by making the policy more of a negotiation lever than a semi-permanent way to compensate for China's low wages and poor standards. I believe so strongly in the value of a tariff policy that I used to say that I thought Trump's willingness to implement tariffs more than balances all of his many negatives. Lately I'm not so sure about that, not because I've lost faith in tariffs, but because Trump's done a lot more negative things than I thought he would. |