Trade and Social Justice

Today’s Wall Street Journal has an interesting op/ed piece entitled Democrats and Trade. Online, it can be found here: http://online.wsj.com/article/SB116355620263923409.html?mod=hps_us_at_glance_opinion

The emerging Democratic majorities in the Congress concern some of us on tax issues, as raising tax rates is what they do best. The typical Democratic approach to taxation involves targeted relief for particular interest groups, rather than broad-based relief. As a result, you get more complexity and less equity. Likely targets for Democratic reform also include those measures that have contributed significantly economic growth – such as the reduced tax rate applicable to dividends and capital gains enacted in 2003.

But even more troubling than higher tax rates is the prospect of restrictions on trade, which are the topic discussed in the above op-ed. The interests of unions, which have long been in the Democratic corner, call out for protectionist practices in order to preserve jobs from outmigration in the global economy. Those interested in social justice may also fall into this camp. They see the trade matter as a conflict between wealthy capitalists and their poor working brethren. But the reality is not so clear.

Concern for the poor, which is undoubtedly a Biblical value, is widely embraced but not thoughtfully practiced. Free trade tends to benefit the poorest among us, to the extent that jobs become available in areas with historically low wages. Even though wages may not be up to U.S. or European standards, they are still better than is otherwise available. Over time, standards of living increase. Witness the dramatic increases in the standard of living in India and China, all due to increased opportunities from global trading and manufacturing. And let us not forget, the lower price from trade mean more goods are available - meaning more material goods for rich and poor and more money left to buy other things, to invest, or to pursue one's own conception of the good. Not bad, eh?

Though designed to protect jobs at home, trade barriers end up hurting those who are down several rungs on the economic ladder. And surely our concern for the poor should not stop at those in our own borders. There is a sense in which those near to us are our neighbors, and they deserve greater attention than those remote from us. Yet when one considers the relative consequences of poverty, it is undoubtedly better to be a poor person in the U.S. than in other countries. After all, both rich and poor people here tend to be overweight – a problem lots of people in the world would like to have.

Happy Wednesday.
EAM