Don Boudreaux vs. Dani Rodrik on Industrial Policy: I Call This One for Don--I Think It's a Knockout

In the ring, Dani Rodrik stumbles into a knockout punch from Don Boudreaux:

Don Boudreaux:

Cafe Hayek: "Faith" In Free Trade?: I don't want here to rehearse debates over the meaning of the term "faith."  I would say that I have no "faith" in free trade; rather, the evidence and the theory of free trade are powerful enough to convince me that it is practically superior to any form of protectionism if the goal is widespread prosperity.  Faith is required when neither evidence nor theory support whatever proposition you choose to (or happen to) believe.  Even if Rodrik is correct about the errors and oversights of traditional trade theory and evidence, it is an unjustified smear to say that those who accept these as the basis for supporting a policy of free trade do so as a matter of "faith."

But my problem with Rodrik's position runs even more deeply.  If it's true that theory and evidence in favor of protectionism are sufficiently strong to warrant economists abandoning their conclusion that free-trade policy is generally sound, then why shouldn't economists -- led by Dani Rodrik -- also start exploring the potential benefits of intra-national protectionism?  Surely a scholar not benighted with the free-trade "faith" ought to take seriously the possibility that, say, Tennesseeans could be made wealthier if their government in Nashville restricts their ability to trade with people in Kentucky, Texas, Rhode Island, and other states?...

I suspect that if someone proposed to Dani Rodrik that he explore the wealth-creating potential of state-level protectionism, he would refuse.  He would likely (and correctly) say that it's ridiculous on its face to suppose that such protectionism would make the people of Tennessee as a group wealthier over time.  If my suspicion is correct, then to what would Rodrik himself attribute his out-of-hand dismissal of the notion that Tennessee tariffs might well make Tennesseeans richer?  Would he realize to his chagrin that he is a benighted, faith-based non-scholar?  Or would he instead understand that the case for an extensive, market-driven division of labor is so strong -- and that the political border that separates Tennessee from other states is so economically meaningless -- that it would be as pointless for a serious economist to explore the economic potential of Tennessee protectionism as it would be for a serious oncologist to try to cure a patient of cancer by bleeding that patient with leeches.

Dani Rodrik:

Let me confirm Boudreaux's suspicion that I would indeed be against imposing intra-state trade restrictions in general (or to be more precise, that I would have a strong presumption against them). So the question he asks is an important one. Why then do I not take an equally strong position against trade restrictions in international trade?

The answer is that the... two situations are alike only in the limiting (and counterfactual) case where government-imposed tariffs are the only transaction costs blocking economic exchange across international borders. In reality, national borders demarcate political and legal jurisdictions, which means that there remain plenty of transaction costs which block economic convergence. Capital flows are hindered by sovereign risk and the absence of international regulation and lender-of-last resort functions, which create the kind of syndromes that I often discuss in this blog. Labor mobility is severely restricted. And differences in regulatory regimes impose severe transaction costs (estimated by Jim Anderson and Eric van Wincoop to be of the order of 40% in tariff equivalents) on international trade. In the presence of these transaction costs, free trade in goods (in the sense of zero import tariffs) is in general incapable of achieving rapid economic growth and economic convergence in poorer nations of the world. If you do not believe this, just ask the Mexicans.

Within this U.S., economic convergence is achieved because there is a common constitution, a federal judiciary, nation-wide financial regulation, and free flow of labor. This ensures that a lagging region (such as the South until recently) catches up by a combination of capital coming in and labor moving out. Neither of these channels are operative in a world economy that is divided into nation-states. Removing restrictions on international trade in goods, services, and capital simply does not do it. Trade ends up being too small, and capital flows in the wrong direction (from poor to rich countries)....

Now, there is still the question of how trade restrictions may help in the kind of imperfectly integrated world economy I have discussed. I think the answer is that when you are stuck with a labor force that is producing at low levels of productivity, there exists a bunch of arguments having to do with learning and (domestic) market failures under which subsidization of tradable activities could speed up your economic growth. There also exists a bunch of historical and current instances where the evidence seems to have lined up with these theoretical presumptions. That is why I am not a free trade fundamentalist and believe that there are circumstances under which trade restrictions may serve a valuable function...

The knockout punch, of course, is that Dani Rodrik's country whose "labor force that is producing at low levels of productivity" is doing so because it has lousy political institutions: it lacks the "constitution... judiciary, nation-wide financial regulation, and free flow of labor" that have underpinned economic growth in the rich post-industrial core. The poor country is poor because its government is incompetent, and corrupt.

And yet Dani wants--in this situation--to enhance and extend the role and powers of the poor-country government by asking it to implement an active protectionist industrial policy because "there exists a bunch of arguments having to do with learning and (domestic) market failures under which subsidization of tradable activities could speed up your economic growth."

As Lant Pritchett put it once: "there is nothing as catastrophic as state-led development led by an anti-developmental state." Any argument to commit a government to an active protectionist industrial policy must be accompanied by arguments about why the government will be capable and effective in this role when it has not been capable and effective in its primary roles of establishing property rights, providing tolerable administration of justice, building infrastructure, and providing education.

So I score this for Don: a knockout.

Comments

[save_the_rustbelt]

Don wants free trade in everything (including illegal immigrants) with one exception.....

He wants to keep his nice fat tenured chair free from competition.

Which I guess makes him typical of freer trade economists.

[Joe S.]

"Any argument to commit a government to an active protectionist industrial policy must be accompanied by arguments about why the government will be capable and effective in this role when it has not been capable and effective in its primary roles of establishing property rights, providing tolerable administration of justice, building infrastructure, and providing education."

Two words: A revolution. Good examples: Meiji Japan, postwar Korea. Singapore would be in the same category, except it was small enough so a protectionist industrial policy made no sense.
Meh example: Ataturkey.

[kitten]

> Surely a scholar not benighted with the free-trade "faith" ought to take seriously the possibility that, say, Tennesseeans could be made wealthier if their government in Nashville restricts their ability to trade with people in Kentucky, Texas, Rhode Island, and other states?...

Would they consume less? Maybe. Does it matter? Our ruling class and upper-middle class is drowning in excess. To claim that a couple of percents of less consumption as a result of trade barriers is more important than fair distribution of that consumption by supporting domestic industries is pure bs.

[kitten]

In general, "free traders" have a lot in common with proponents of sexual abstinence: I got mine and it seems a good idea for you not to get any.

[josh bivens]

well, if you're willing to make up arguments and attribute them to Dani, it's going to be easy to have him lose the argument.

he nowhere in his answer says that the hypothetical country is poor because it has lousy institutions or is corrupt.

he instead argues that nation-hood allows the harmonization of governing institutions and for the (intra-national) mobility of labor intra-nationally that makes tariff-cutting the last step towards getting near the first-best world of costless transactions, and, all of these are needed to unlock the potential gains from trade.

since no such harmonization exists internationally, and, since labor mobility is not insured, tariff-cutting will still leave you far enough away from transaction-less trade that you need to get serious about the second-best options available.

none of this is about dani demanding that corrupt, incompetent governments do more (bad) governing.

[Slocum]

"So I score this for Don: a knockout."

Well, so do I, but for most of those commenting here? Not so much. And nor, sadly, do the leading Democratic candidates for president. The latter is starting to make me more than a little nervous.

[andres]

I also do not see this as a knockout blow in favor of free trade, and Brad is being faith-based in seeing it that way. As Joe S. (Joseph Stalin?) correctly argues, one critical aspect of a change in policies occurs if there is a change in governing regimes where a government that was previously committed to maintaining feudal, aristocratic class structures inherited from agriculture (and consequently to importing most of its manufactured goods from foreign barbarians) is suddenly replaced by a government that wishes to industrialize and to catch up in technology, whatever the social costs in terms of the turnover of old class structures.

This regime change occurred not only in Meiji Japan, but also in revolutionary Russia and China and in post-Great Depression Latin America. In each case, the succeeding regime had a greater commitment to autarky at least on the import side of the trade balance.

Whether this transition succeeds in terms of industrialization and growth depends on the domestic economic policies that are implemented. Soviet Russia and Maoist China are rightly judged to be disasters in history because they relied almost entirely on authoritarian central planning and thus incurred the costs of all the resulting pathologies. At the opposite end of the spectrum is post-feudal Japan which put up high tariff barriers but otherwise relied on its domestic firms to produce in a decentralized manner, maintained macroeconomic stability, and even as it increased foreign travel in order to learn western methods and technology.

Import substitution-era Latin America falls somewhere in between these two extremes. The high trade barriers contributed to a high degree of growth in manufacturing, but at the same time the Latin American countries failed to plug in large population growth into the ISI strategy and also the lack of transparency in government finances led to inflationary pressures which exploded after foreign lending shut down in the 1980's.

Overall conclusion: the importance of trade policy is greatly exaggerated. A country committed to free trade will remain backwards and undeveloped if it suffers from a corrupt government committed to maintaining the economic power base of a narrow elite. On the other hand, a large country that follows autarky will grow and develop provided that it gets its internal microeconomics and its governance and public finances correct. This was also, btw, the case of the US in the 19th and early 20th centuries.

[andres]

The real reason that internal protectionism makes no sense (except to preserve culture--I'd be 100% in favor of California taxing or even banning ketchup imports from other states, provided it didn't produce ketchup itself) is that at least in theory the Federal government prevents individual states from subsidizing their own local industries in a beggar-my-neighbor manner. ie the same Federal labor and environmental regulations apply for all 50 states as well as outlying territories and Puerto Rico (I think).

In actual practice, there are numerous ways that individual states get around this equal protection system. This includes lower state income tax rates (or no state income taxes at all), lower property tax rates for businesses, and right-to-work laws which act to slow unionization and keep labor costs lower. Commenters like save_the_rustbelt are quick to critize the effect of free trade with foreign countries on employment in the northeastern states, but I have yet to hear them talk about the deleterious effects on the northeastern states of economic policies pursued by their southern sun belt neighbors.

That doesn't mean that internal protectionism is a good idea, but that the US social contract needs to be reformed so that individual states can't subsidize their local businesses by screwing both other US states as well as their own (sales)taxpayers and workers.

[MBunge]

Good grief. Any one who wonders why economists get such a bad reputation should only consult this supposed "knockout blow".

Boudreaux - "If you don't want to have free trade with China, then you must want Tennessee to have tariffs in place against Kentucky!"

Rodrik - "Uh, no. The relationship, both economic and in other ways, among the individual U.S. states is not similar enough to the relationship between different nation-states to make such a comparison valid."

DeLong - "Giberish that has nothing to do with Rodrik's point."

As Jeff Foxworthy might say...If you're reduced to arguing that Iowa and Illinois have the same sort of trade relationship (and every other sort of relationship) as the U.S. has with China or Indonesia...you might be a free trade zealot.

Mike

[tinbox]

"The poor country is poor because its government is incompetent, and corrupt."

I don't see how that follows. Was the Congo poor in 1962 because of its new government or many years of Belgian exploitation?
Countries are rich or poor for many reasons other than government honesty or competence.

I don't see Boudreaux throwing a knockout punch--how would his Tennessee example looked applied to Canada today? Would an independent Quebec be better off following South Korea or Mexico as a model?

[Cranky Observer]

The discussions of the benefits of free trade always have a paragraph or sidebar that says "It is possible that some subgroups within the society will end up permanently worse off as a result. However, the society as a whole will create so much new wealth that it can easily afford to compensate this small subgroup. Consult the Political Science Department of your university for details".

But this discussion, much less this compensation, NEVER HAPPENS. The result is that since 1970 we have had one "small subgroup" after another that has been left far, far worse off by unregulated trade and never compensated. Meanwhile those who are responsible for removing the historical web of regulation on trade (where, and only where, it is to their benefit to do so) have reaped enormous gains.

So yeah you can argue that in theory unregulated trade is better, Pareto optimal, whatever. You can keep arguing that way until the Gilded Age returns, which will most likely be followed by a return of red revolution as well.

Cranky

[Jack]

Where does Dani's compelling China, Korea, Japan, Malaysia are high growth and protectionist/Latin America low growth and more free trade point fit in this analysis? Who has followed advice and prospered?

Instead of arguing that a nations workers can only be of low productivity because their institutions are weak and weak institutions are no good at protectionism one could with as much reason have said that strong institutions can hold the line on the nation's interest while weak elites will free trade when someone will pay them.

Intra state trade is different because there is a state to ensure fair play, too look after the steel workers and corn farmers, to provide a safety net and pursue regional development and because it has been worked on for years. It's as if Ronald Coase had never lived.

[save_the_rustbelt]

Good job Cranky.

Don always throws in the nonsense about intra-state trade protectionism to avoid arguing the main issues.

[jonfernquest]

"As Lant Pritchett put it once: "there is nothing as catastrophic as state-led development led by an anti-developmental state." Any argument to commit a government to an active protectionist industrial policy must be accompanied by arguments about why the government will be capable and effective in this role when it has not been capable and effective in its primary roles of establishing property rights, providing tolerable administration of justice, building infrastructure, and providing education."

What I really wonder, is why actual historical cases of country's that did have industrial policies that aided them in development are not cited.

As for South Korea, did in fact have a command economy under what could only be considered a dictator Park Chung Hee and had all of the above: "establishing property rights, providing tolerable administration of justice, building infrastructure, and providing education," but not under democracy, and that really seems to be the issue is democracy.

Sout Korean under Park Chung Hee achieved the below, but not by democracy: "labor force that is producing at low levels of productivity" is doing so because it has lousy political institutions: it lacks the "constitution... judiciary, nation-wide financial regulation, and free flow of labor"

IMHO economic arguments should be mapped to some pre-existing political economic reality. Arguments based on pure theory are not convincing.

[Mark]

Kitten says: "In general, "free traders" have a lot in common with proponents of sexual abstinence: I got mine and it seems a good idea for you not to get any."

Let's also not forget the long run benefits of free trade, which is obviously missing from Kitten's statement.

Nobody is arguing that there aren't some people who are adversely affected by individuals in one country freely trading for goods and services and capital with individuals in another country. I purchase a television made by a television company whose workers and residual claimants are Mexican (or live in Mexico, then yes, the workers at the last television manufacturing company in the U.S. (Ohio, at least as recent at two years ago) are adversely affected.

But it's also the case that, even should the workers in Ohio find their factory shuttered as a result of foreign competition, real wages for today's workers are increased and the new technologies and innovations that occur because capital is shifted from television manufacturing to, say, computers, pharmaceuticals, etc., my children are made better off down the road.

And to save-the-rustbelt, whose comments I've read here and there for over two years now, are you also for saving the family farm? Look at the poor countries in this world and consider what is their largest sector - agriculture. The same is coming true of manufacturing, not remotely because of free trade, but because of changing technologies. I live in the post-industrial wasteland known as, well, I won't disparage the state. But I can tell you that what's hurt workers here isn't trade, it's the greedy union who for decades they could transfer wealth from the risk-taking owners of capital to provide themselves economic rents. The owners of capital are fleeing to safer ground, both inside and outside the U.S.

[kitten]

> But it's also the case that, even should the workers in Ohio find their factory shuttered as a result of foreign competition, real wages for today's workers are increased and the new technologies and innovations that occur because capital is shifted from television manufacturing to, say, computers, pharmaceuticals, etc., my children are made better off down the road.

Real wages increase through increased productivity and the distribution of its gains to both labor and capital. There is no way on God's green Earth the closure of the factory in Ohio either increases overall US productivity or makes distribution more equal. Nor does it have anything to do with the capital shifting from manufacturing to pharma etc. That very same capital is still invested in television manufacturing, except it is invested in Thailand, and none of the gains are distributed to US labor. Which goes to either temporary labor like construction or to become "sales associates" at minimum wage and no benefits in Wal-Mart. Of course, ruling class is able to buy their BMWs at a cheaper price and does not have to indulge its servants, which is what "free trade" is really all about.

[caveat bettor]

Mark, I posted at Marginal Revolution that the commenters above are pretty weak. Please know that you are an exception to that sweeping generalization.

[caveat bettor]

kitten: did closing the horse buggy makers, the military draft, the gasoline lead additive producers, or lead paint manufacturers decrease productivity? you must have live in a special place that doesn't require the contraints of math or logic.

[Joe]

"The poor country is poor because its government is incompetent, and corrupt"

This argument is laughable. Besides, it is is ironic that someone can sit in America and make pronouncements about corruption in poor countries. To quote Jagdish Bhagwati "Are President Suharot's entourage "cronies", whereas people at Bechtel and Halliburton are Vice President Dick Cheney's "friends". (I would even argue that corruption is NOT necessarily a bad thing-as long as the accumulated bribes are not tucked away in Swiss-bank accounts (as Mobutu did), but invested productively in the local economy (as Suharto did in Indonesia)). So let's not stretch the corruption argument too far.

"why the government will be capable and effective in this role when it has not been capable and effective in its primary roles of establishing property rights, providing tolerable administration of justice, building infrastructure, and providing education."

On the first point-establishing property rights: This is no primary role at all. Historically, technological progress, and hence economic growth, in laggard countries stemmed from the imitation of foreign technologies. So it is in the best interest of a poor country not to establish property rights at all, after all.

On the other points "providing tolerable administration of justice, building infrastructure, and providing education": The inadequate provision of these do not mean that the governments are "incapable" or "inefficient". They rather reflect the lack of resources at the disposal of the governments in poor countries . Therefore, the primary task of the governments in poor countries is to find ways to create wealth. They have done so historically by enabling domestic companies move up the global technological ladder (through imitation and learning) and establish themselves globally . The government intervention comes in the form of an array of "carrot and stick" instruments, which are well documented in the historical literature on "late industrialization".

Now, which are the failed states? These are those which cannot devise (or not interested in devising) the right policies that help establish a strong domestic technological base and a dynamic domestic industry. Dani Rodrik is right when he says that each country has to devise its own country-specific policies, taking into account its specificities and other local circumstances (ideas well understood in development economics).

[Kenji]

As Lant Pritchett put it once: "there is nothing as catastrophic as state-led development led by an anti-developmental state." Any argument to commit a government to an active protectionist industrial policy must be accompanied by arguments about why the government will be capable and effective in this role when it has not been capable and effective in its primary roles of establishing property rights, providing tolerable administration of justice, building infrastructure, and providing education."

There is plenty of empirical evidence on successful industrial policies. You think Japan or any of the successful economies in Asia would be where they are today without government intervention?

As to your reference to Pritchett's remark, let me just say that criticizing something by pointing out the worst example of that something is not a good argument. We're not debating here whether laissez-faire is superior to the North Korea model, for example.

[William Newman]

Thank you, Professor DeLong, for (blowing my mind by) spontaneously bringing up the point about imperfect government. My snide opinions about studiously-avoided politically inconvenient lines of analysis at Berkeley in general and in your office in particular have been considerably weakened.

I was especially impressed by you choosing to bring up that point because I think even without hammering on that point so hard (not that there's anything wrong with that:-) you could take apart Rodrik's arguments. E.g., Rodrik alluding to capital flowing "the wrong direction" as though it's a mysterious observed regularity of the economic universe that we can't change, or that perhaps we should fix with trade restrictions, but which anyway invalidates the case for free trade. Or Rodrik presenting arguments which with a few exceptions (esp. labor mobility) leave him squarely on the hook for a trivially-modified version of Boudreaux's argument: does Rodrik think a good economist should judiciously decide on the virtues of tariffs for the poor parts of St. Louis and Philadelphia on a case by case basis because given the messy realities of the world, economics doesn't lead us to expect they'd be a bad idea.

Also, it seems really remarkable for Rodrik to criticize free trade with "free trade in goods (in the sense of zero import tariffs) is in general incapable of achieving rapid economic growth and economic convergence in poorer nations of the world" on one hand, and on the other hand praise tariffs with "there also exists a bunch of historical and current instances where the evidence seems to have lined up with these theoretical presumptions." If free trade must achieve rapid growth or be refuted ("just ask Mexico"), then how can Rodrik turn around support tariffs with appeals to nuanced analyses of all the places where high trade barriers haven't achieved rapid growth? Does Rodrik have an answer for "just ask Africa," or do only faith-based economists need to answer objections like that?

(save_the_rustbelt: Is Boudreaux hypocritical? GMU econ professors are not exactly renowned for their policy conservatism, so he might well support more immigration. (You could Google "Boudreaux immigration" and see...) Or even if we grant for the sake of willfully ignorant mindlessly repetitive anonymous insinuation that he supports current restrictions where his competitors are concerned, how restrictive are such restrictions? What is the proportion of US professors of economics who are foreign born? Is it enormously less than than the proportion of manufactured goods consumed in the US which are imported?)

[Patrick Schoenfelder]

Free trade can be discussed in two contexts. The first is the context of developed systems like the US. The second is the context of less developed systems.

There is good evidence to support the assertion that free trade is almost always beneficial to developed countries on the whole. While individuals may suffer, the state as a whole and its residents will benefit over all. It is the job of successful developed states to create institutions that protect the individuals who are hurt by free trade from the ill effects, so that the rest of us can benefit.

There is no existing evidence that free trade benefits developing systems. On the contrary, every country that has made the transition from underdevelopment to development -- England, the US, Germany, France, Japan, Taiwan, South Korea, etc. -- have used trade restrictions of all sorts as part of the process to make that transition.

It is true that several instances of regional free trade zones have been employed with success to help countries in the region to make the transition -- the EU and the US itself are the best examples -- but this has always been accompanied by strict regulation and barriers to external trade, as well as aggressive and generous aid policies used to benefit the less developed members of the community.

In that respect, the followers of the "religious" interpretation of free trade as opposed to the "pragmatic" supporters of "some free trade sometimes" are in the position of most religious people: in order to believe you must have faith, since the science is not there. The free trade fundametalists will have to await the rapture of some undeveloped country by free trade to support their position.

American president U.S. Grant probably put it best 125 years ago when in response to British pressure for free trade he said that the United States would be eager for free trade sometime in the future, but not at this time.

Or as St. Augustine said, "God grant me purity, but not yet."

[Justin X]

The problem with “free trade” is that, in the real world outside the textbook world of “free competition”, there is no impartial world government with the coercive power to enforce the rules and norms for a “level playing field”.

With absent or imperfect rule enforcement, it always pays for the individual country/state/firm to cheat by playing “beggar thy neighbor”.

Besides,countries/firms with pervasive economies of scale, learning economies, and financial leverage, to say nothing of superior military power, will almost always gain and be able to retain (but perhaps not permanently) a competitive edge.

The case of inter-state trade within the US proves the rule rather than the exception.
The record shows that, here, individual states climb over each other, using all the available weapons of taxes, subsidies, industrial parks, lobbying, etc., in the drive to gain an advantage for local firms and bring in new investment to the state. In fact, they pursue “industrial policy” with a vengeance.

This occurs even in the presence of a federal government that is supposed to be able to set the rules for a level playing field among the states. In fact, the federal government itself becomes an instrument for the promotion of industrial policy within the states, through the intense lobbying by the states for federal government contracts and earmarks.

So much for the idealistic notion of “economic convergence” from free markets and an impartial, non-interventionist state.

[kitten]

> did closing the horse buggy makers, the military draft, the gasoline lead additive producers, or lead paint manufacturers decrease productivity?

What exactly that has to do with displacement of production out of the country? Are you saying the horse buggies and military draft are produced in Thailand and imported to US? Bought any recently?

> you must have live in a special place that doesn't require the contraints of math or logic.

Leave insults for your mom.

[Richard Pointer]

Kitten,

A thought experiment. You used to purchase your envelopes for 1 dollar per 100 from a USA papermaker. Now you purchase 100 envelopes for .80 dollars from a Thai papermaker. You have extra money to go spend somewhere else. Of course the USA papermaker is out of business but the savings each consumer gets is reinvested or spent in other industries. Eventually, the USA papermaker workers move into another industry/jobs. If we never did this process then we would never get productivity improvements. This would mean we should never allow a company to go out of business even if they cannot compete on price with other competitors. What about technological improvements? Should we make it a law that no one should invent tools to increase a humans productivity? You know what? You can live in that world if you want to but I certainly don't.

[JRoth]

"But I can tell you that what's hurt workers here isn't trade, it's the greedy union who for decades they could transfer wealth from the risk-taking owners of capital to provide themselves economic rents. The owners of capital are fleeing to safer ground, both inside and outside the U.S."

Can we ban Mark for this sub-AEI level analysis? This is one of the most childish and ignorant things I've ever read not written by an "Al."

If you're interested in facts, as opposed to 19302-grade Republican propoganda, you might want to read "And the Wolf Finally Came", written by the WSJ's labor beat reporter about the death of the US steel industry. You'll be shocked to learn that the capitalists were not, in every case, enlightened defenders of man's progress.

I love how mainstream economists like Brad are terrified to admit out loud that free trade isn't all that the econ books say, because doing so would strengthen Bad Protectionists, but they welcome the embrace of know-nothing economic royalists like Mark.

Sleep tight, Professor.

[Chris]

Joe - To compare the corruption that exists in the US to the corruption that exists in the 3rd World is to be completely ignorant of corruption.

The third world is run more like a mob racket than a country. Everything that you could possibly want to do requires paying off so many people that its not worth actually doing anything.

Every measure of corruption puts the West so far away from the 3rd World that comparing the two isn't even worth the bother.

[andres]

If all economics were as simple as Richard Pointer's thought experiments, beggars would ride BMWs. Here's an addendum to his experiment:

Suppose that the $.20 lower production costs for Thai as opposed to US-made envelopes comes from a combination of sources such as (1) deliberate non-enforcement of Thai minimum wage laws, if necessary by intimidating or killing any worker who dares to complain (2) locking workers into the envelope factories and making them work overtime without overtime pay, (3) dumping the untreated factory effluent into the river instead of into treatment facilities the way most developed countries would.

In effect the Thai envelope industry gets a cost reduction not because it is more productive in any reasonable sense of the term, but because it is the beneficiary of an indirect production subsidy paid for by Thai envelope-producing workers and/or Thai residents living near the pollution-affected areas, as well as by the outcompeted US envelope industry. If the US envelope industry does by some chance receive government compensation, that compensation will come from the very same taxpayers who supposedly benefited from the cheaper envelopes.

If there is no compensation, this lost income is transferred to (a) US consumers who don't critically need it, (b) whoever happens to own the Thai envelope industry, and (c) to the terrible category that economists call "deadweight loss" in large part because the subsidy results in the overproduction of envelopes relative to world demand.

Now getting back to reality, I'm not saying that anything close to a majority of international trade takes place with such production conditions, but too much of it does. The first-best solution to such trade distortion would be to end the production subsidy itself, preferably by throwing into prison the owners of the export industry who are illegally subsidized in this manner. Unfortunately, the current WTO rules do not allow foreign countries to initiate such legal actions. So the second-best solution is to provide for trade protection against such products, at worst by tariffs and at best by giving these envelopes a nasty yuck sticker indicating that they are produced under hazardous conditions.

The long-term solution, of course, is to include labor and environmental standards in the WTO guidelines so that this sort of subsidization of export industries can be held accountable. Unfortunately, most developing country governments have come out against such a move in the Doha Round negotiations, which goes to show who really finances them.

[kitten]

> You used to purchase your envelopes for 1 dollar per 100 from a USA papermaker. Now you purchase 100 envelopes for .80 dollars from a Thai papermaker.

Actually, I am buying from the same US papermaker that laid off all American workers and opened a factory in Thailand - instead of seeking technological improvements that would decrease the cost of production here. Deindustrialization of America is not a result of technical progress. In fact, it is an obstacle to progress since the companies focus not on increased productivity and environmental safety but on cheaper labor and low regulation.

When Ford started making his cars one of his goals was to make them eventually affordable to his workers. The key points are that, first, no factory worker could afford the horse buggy before and, second, the resulting prosperity (and btw relative social peace) was produced by increasing real wages of US workers. If some candyass imported the cars at 80% of the price without employing US workers, those who could afford the car anyways would surely enjoy savings, which is really the point of "free trade". However American technical progress and prosperity would both receive a huge setback - which will be the inevitable result of "free trade".

[Keith]

"However American technical progress and prosperity would both receive a huge setback - which will be the inevitable result of "free trade"."

Yep, all those cheap foreign computer chips destroyed us. We didn't use them to make an internet or Iphones or anything.

[Bob Dobalina]

So, DeLong, do you ever read your comments and just shake your head?

[jonfernquest]

Now that it's morning and I'm fully awake with my senses, I have to state:

How can economics just pull policy out of a hat without citing historical precedents to prove that they are somehow feasible?

I'm happy to see the debate though, because after the factory closings in Thailand this week, with a PR public opinion edge to them that emphasizes the impact of baht appreciation, strategic exchange rate policy is fast becoming a big issue.

At the Bangkok Post I cited Rodrick's paper on industrial policy, because it argues for such a policy and there does seem to be a strong similarity to Japan and South Korea's policies of the past that did lead to development, although under a rule of law that Thailand may not have attained yet

[kitten]

> Yep, all those cheap foreign computer chips destroyed us. We didn't use them to make an internet or Iphones or anything.

We sure did not use them to make Internet. And if we started making first ICs in Japan instead of US to get that 20% "free trade" discount, quite likely we'd have this conversation in Japanese.

[Praxis]

I skipped most of the comments so I don't know if anyone else made the obvious point that should and must be raised every single time this nonsense gets trotted out.

Virtually every country to have successfully pursued capitalist development since England has done so under protectionist export-oriented industrial planning while virtually none have done so under free-trade regimes.

In short, it's a knockout punch except for the historical record showing overwhelmingly that export oriented industrial policy has been overwhelmingly the most successful development path (see: The U.S., France, Italy, Germany, Japan, South Korea, China, etc.)

[P.M.Lawrence]

What the hell, I might as well just paste in a letter to the Australian Financial Review and a critique of a free trade article I once wrote. It compares and contrasts such reforms in theory and in practice. Before I do, I should point out that much of what passes for free trade today also includes the bundling as assets and buying up of resources by outsiders. This wouldn't matter if it corresponded to a real matching capital inflow, but not only is the receiving country often kleptocratic, it is also often paid off in fiat currency with nothing behind it (you know whose); it has to hope it can pass the buck to someone else. So China passes US$ off on Australia, which gets a wonderful looking current account...

Letter printed in the Australian Financial Review of 5.10.00

In Alan Mitchell's article of 4.10.00, "Freer trade helps the poor", it appears that throughout he is citing analysis of what happens to poor countries as a whole and not what happens to the poor within the countries. Even after comparing "...the potential gains from freer trade with the potential cost of imposing higher labour standards on developing countries", he goes on to bring out the aggregate benefits to those countries as a whole.

Is this in fact what he is answering? Because if so it goes very little way towards addressing what increased trade liberalisation actually does for the poor. It is true that wealth eventually trickles down, but this is a slow process, and without that the effect may be like the old saying about foreign aid: taking from poor people in rich countries to give to rich people in poor countries. It may be said that it only happens when there is something kleptocratic about the developing countries, but this is like saying "guns don't kill people, people kill people" - it begs the question of the reasonably foreseeable consequences of giving the means to those who are likely to use them that way.

Indeed, there are mechanisms that can cause some people to regress during the early stages of adjustment in any country, such as increased rents or increased use of land for the cash economy. Although it does not always happen, when it does it gives the poor a sort of J curve of progress, reculer pour mieux sauter. The trouble is that with several stages of change piling up one after another, the separate J curves combine to produce a downward trend, at any rate over any period that matters. So, regardless of the fact that the country is developing, we still cannot be sure that we really are helping the poor that way. We certainly cannot rule out these possibilities in advance from empirical experience - even our own experience shows people who have remained caught for years in the eddies produced by our own advancement, despite the fact that anyone not caught definitely benefits.

The Best of All Possible Worlds, or The Only Game in Town?

In "The Market Shall Set You Free", in the Spectator Magazine (U.K.) for the 24th of June, 2000, as a preview of a book they were about to release, John Micklethwait and Adrian Wooldridge made a number of minor yet cumulatively effective attacks on [what some people consider are] some perceived weaknesses of economic globalisation. It is worth looking into those areas a little more deeply, if only to see the true costs and harms that go with its putative benefits.

Since they cited an earlier age of globalisation, beginning around the repeal of the Corn Laws in 1846, it's worth looking at some of what happened then. In fact, parts of it were even earlier; the general peace and freedom of trade within the British Isles had already helped Scotland. For, make no mistake, the arrival of sheep in the Highlands, prompted by English markets, led to an undoubted increase in Scottish wealth; only, the Highlands were cleared. This is a type of what is happening now in developing countries, so we cannot just dismiss it as long past or a mere aberration - it stands for all.

Then, English markets made raising sheep for wool comparatively advantageous in Scotland, rather than raising food for crofters who paid what little rent they could. So - and accompanied by a change in how land was held - the sheep drove out the men, who had trouble reskilling to grow wool. While Scotland gained, more than 100% of the gain went to the newly landed aristocracy; there aren't that many percents, but the rest came from the broken men, worse off with wealth than without.

Now, the parallel is a developing country in which subsistence farmers are driven off land and a cash crop grown for export instead - often coffee, which is at present labour intensive. But fewer workers are needed, and the "iron law of wages", a race to the bottom, still applies (particularly since there is often some subsistence land left, so the bottom is only a top up wage even lower than subsistence). Those workers have to take as little as possible, as there is always another unskilled worker even more desperate for that top up wage. But how is that, when our beautiful and elegant abstraction, comparative advantage, has shown that all must be for the best in this, the best of all possible economic worlds?

The usual answer is that this is because the general increase in wealth is accompanied by a wholly unrelated transfer of wealth, and it is as wrong to blame globalisation for the coincidental ills of kleptocracy in modern developing countries as it was to blame the English for the encroachments and clearances carried out by Scots. But this is not so, in these respects:-

* There is no coincidence. Without the means being put in their hands, none of the gainers could have carried things to their conclusion. And it is downright Panglossian to suppose there will never or should never be those who will use those means, and that it is those countries' own fault for allowing it. How else can Scottish peers maintain themselves in London or buy part of the Parthenon, if not with money? And the same applies to the wealthy we now find in poor countries.

* Those that use the means are themselves constrained. It is what competition is all about; if Bute puts sheep on his land, can Campbell not? For what Bute gains, in part he spends, putting up the prices of necessities so the old rents are insufficient to maintain the old ways - yet they are all the old ways can afford [we know this because some clan chiefs, like the Dukes of Atholl, tried to stand against the tide and ended up impoverished for their pains]. And so also in today's developing countries.

* And there are the banks and such.

Now it is quite wrong to criticise the banks as such; they are mere catalysts and facilitators, quite neutral in all this. But by the same token they catalyse and facilitate any harm that is going, buying and selling and asking no questions. The modern view - which is quite accurate as far as it goes, though one size most definitely does not fit all - is that "debt is good", for with debt you should increase your revenue more than enough to pay the interest; being wise, if this is not the case, you do not do it. But not all are wise, any more than all are good, and what is more, if one borrows, can another afford not to? Sometimes - especially with classic externalities like the "Tragedy of the Commons" - there is little choice. If a farmer improves his yield with fertiliser he must borrow to buy, he does so or the next man does; yet if all do the price drops, since only so much food is needed - more than 100% of the gain goes from the country to the town which gets its food cheaper, and the interest must still be paid. It was partly from such as this that Scotland squeezed out the capital that made Fleming's merchant bank, channelled through the merchants of Dundee.

It may be said that this merely accelerates things rather than aggravates them, that the catalytic effect not only speeds up the harm, it also speeds up coming out the other side. But this is not so. In their article Micklethwait and Wooldridge remark "...many people feel that they just want a bit of a pause. The world has speeded up too fast - even for the winners." While true, this misleads by suggesting that this is a mere psychological effect. But it so happens that speed matters in substantive ways too, because it makes ideas of equilibrium and the long run meaningless - if new change is arriving faster than old change can be assimilated, there is a qualitative difference. Look at the Highland Clearances again. From an Olympian height we could say, nobody owed the Scots a crofter lifestyle; let them emigrate, go to the cities and the factories, or to Canada or Australia. Well, they did these things and we their descendants indeed share in the gains.

Only they didn't. In the short term, you can starve. We know the cities were no carrot to offset the stick, because we have a natural control experiment; on Lewis Lord Lever built Leverburgh around fish processing, and the locals, having more choice, stayed away in droves. And we can see why the cities lacked appeal, when as late as the 1930s a Dundee tenement could have stairways dimly lit by the stairhead gas, flickering from a fitting bent upside down by desperate men to bubble monoxide through milk until it went blue for a cheap drunk, the same diseased cow juice that could give a child TB that rotted through the side of his throat until a hospital could be found. Ah, but at least there was the money for those.

But there were Canada and Australia. Many drowned on the way, in coffin ships, and even arriving brought no relief. Here in Australia Caroline Chisholm found and helped starving Scots who had only the Gaelic and so could get no work; she interpreted for them and arranged work as contract woodcutters. You see, as well as distance there was a cultural journey to make. It did not matter that there were no legal barriers, even so there were effective barriers. Which is enough to destroy any argument that freedom of movement is a remaining barrier that we must take down, to get the full benefit of globalisation; what could Caroline Chisholm have done for human waves of migrants? In physics such things are a shock wave, and our constant change is throwing all this at us, accelerated by our very efficiency. In the 1846 era of the repeal of the Corn Laws, Disraeli was inspired to write "Sybil", and there he wishes for some way to offset the harm to those who are thrown down by change, even as it lifts others up. Even then, those lifted up were the younger generation, the old being dropped.

There's more. If we may not bring Mahomet to the mountain, at least our modern mountains may go to him. That is, we can export jobs. Granted, we in the developed world have a technological edge of sorts, but it is not sustainable. Already some kinds of software are outsourced to places like India. Now recall what I noted above, about how a race to the bottom for wages can go below the cost of living, if only there is some subsistence land about - it gives what amounts to a concealed non-cash subsidy. (Disraeli also wrote of the possible desirability of "potato grounds", which survived into the allotment movement and was an example of just such a non-cash subsistence subsidy.) Although this only happens at the bottom, in any country it works through the local price structure to give comparably lower rates than we can offer throughout. Unless, of course, we do something equivalent but overt, and such we are forbidden. Micklethwait and Wooldridge also wrote "...the far greater gains (the cheaper steel that goes into all our cars and houses) are diffuse and hard to spot." Only, it isn't "all" - it's only so for those that have them, not for the dispossessed, the broken men. With some jobs leaking out overseas at every level, there are always some that do not get a gain.

It is not a question of whether the fact that some might get a greater proportion of the gain might be inequitable. It is the fact that there may well be a paradoxical reaction, the way giving oxygen can make a patient go blind by shifting oxygen away from the eyes. Some may actually go back to make up the more than 100% elsewhere - something that is less likely with slow change, uncatalysed by the engines of finance. We cannot know in general, of course, only case by case; but we have enough of a sound theoretical framework to know we cannot rule it out a priori, and enough anecdotal evidence to suspect it may be happening as we speak, so we should in all prudence cease our rush and examine our future, case by case.

We can look beyond our bellies. Micklethwait and Wooldridge also cover cultural matters. Well, here we are on shakier ground still: are we just burning down our house to roast our pig? Is our loss of our immediate means of support justified by some noble dream of greater cultural wealth - for it is a dream, anchored in the days to come, not here present. But suppose it so, for such things must always lie ahead before they can be sought for. It may also be that these cultural things are our birthright, this cost the pottage we would be fools to keep.

We would still be cheating ourselves, two ways. First, we have already had the cultural enrichment; each new Big Mac is just another of the same, like the old joke that a certain man didn't have twenty years' experience, just one year's experience twenty times over. Second, there's a crowding out. Here in Australia it's reaching the point that multicultural means any culture but our own, no more cooked vegetables but only half cooked or raw (al dente or salads, to you) - and, far from increasing choice, it's more like Henry Ford's "any colour they like so long as it's black" or the school food approach where rather than being offered curry there is always some day in the week when curry is compulsory.

In the end a better metaphor may be, not would we give up our pottage for our birthright, but "what profiteth it a man if he gain the whole world, if he lose his own soul?" Is this cultural bird in the bush at the price of the one in our hand, the things that make us what we are? While Sparta may have shunned the new to avoid compromising the old, even Athens embraced additions of culture without abandoning its own. In this area they only differed as to means. The alternative to multiculturalism is not narrowness but synthesis, a true diversity not self-abnegation.

[Alex Tolley]

Richard_Pointer: A thought experiment. You used to purchase your envelopes for 1 dollar per 100 from a USA papermaker. Now you purchase 100 envelopes for .80 dollars from a Thai papermaker. You have extra money to go spend somewhere else. Of course the USA papermaker is out of business but the savings each consumer gets is reinvested or spent in other industries. Eventually, the USA papermaker workers move into another industry/jobs. If we never did this process then we would never get productivity improvements.

So the factory in the US re-opens, but pays the workers less so that the 100 envelopes cost 0.70 instead. The technology is mature so productivity gains are not really possible. Rinse and repeat. Where does that leave us? I know, Marxism.

The trouble with much of the original post type of econ analysis is that it assumes people are plug-and-play components with infinite speed adjustment to changes. Consider for a moment the plight of "educated" workers, computer programmers, accountants, doctors, even econ professors. It takes a long time to get educated to that basic level and start earning a living to pay the education investment. Suppose the job becomes obsolete because it can be outsourced or because foreign owners have cheaper supplies of your skills to sell to the US. So they retrain for the next "high skill" job, but that takes time and money too. So adjustments are hard and painful. No-one gets guarantees in life, but make it hard to do this and eventually your local population cannot retrain for that next high paying job because the payoff is just too uncertain.

I have to wonder whether modeling macro-economics using many rational individual agents results in the same results that modeling with aggregates gets.

[Cranky Observer]

> Yep, all those cheap foreign
> computer chips destroyed us.
> We didn't use them to make an
> internet or Iphones or anything.

Although DEC was developing and selling routers before what we now know as Cisco existed, it of course lost the router battle to Cisco. However, if you buy a pre-1998 Cisco router - which is what "made the Internet" - from eBay and take it apart you will find that all the core chips are DEC, most of them manufactured in Massachusetts. Some of the non-critical chips will be from Taiwan or Malaysia, but DEC and Cisco both kept the high-value work close to home. Then take apart a post-1998 Cisco router and tell me what the difference is.

Which brings me back to the question I ask in every one of these threads: what exactly does the United States do, and what will it do for the next 50 years, that will induce the rest of the world to continue sending us 40% of their natural resources so that we can mantain our munificient lifestyle (even granting the econ professor's definion of "our")? Building tract houses? No. Biotech and pharma? Maybe, but many of those entities are sending their R&D to China. Intellectual property and financial services? Again maybe, although that too can be done cheaper elsewhere - but will that keep 300 million people earning a decent middle-class living?

I would really like to know the answer to this so I can advise my children.

Cranky

[save_the_rustbelt]

Mark:

I am neither opposed to increased trade nor am I trying to preserve the 19th century. However,.....

1) Economists grossly misstated the ability of displaced American workers to recover during the transition, and for the most part (excluding Krugman and Thoma) most will never admit the errors. Most of course enjoy tenured jobs.

2) Since 1993 the federal government, both Clinton and Bush, have been whores to Wall Street at the expense of 90% of Americans. I'm so glad Bob Rubin and his friends got nice bonuses this year.

3) The Chinese are allowed to proceed without following any sort of rules or standards, because that is good for Wall Street and corporate leaders.

(My tv somehow tuned to Neil Cavuto and his band of econo-hacks on Fox News, other than a reporter from Fortune they are all delusional.)

[save_the_rustbelt]

"...Eventually, the USA papermaker workers move into another industry/jobs...."

At about 60% of prior compensation and with fewer benefits.

[save_the_rustbelt]

"...Eventually, the USA papermaker workers move into another industry/jobs...."

At about 60% of prior compensation and with fewer benefits.

[save_the_rustbelt]

"...Eventually, the USA papermaker workers move into another industry/jobs...."

At about 60% of prior compensation and with fewer benefits.

[anne]

Remember to keep on using sexist language for insults, because sexist language must be used to show us who to abhor. Me, I abhor the use of sexist language. But keep on, for sexist language must be used evidently.

[anne]

Just so we understand, if understanding is possible: "Since 1993 the federal government, both Clinton and Bush, have been ...... to Wall Street at the expense of 90% of Americans." Remember, sexist language, sexist insult, makes ther argument stronger.

[anne]

Don Boudreaux is beyond the slightest concern for any worker who might be displaced and harmed for any economic reason, and I have not the slightest sympathy for any argument he makes. Mention strengthening the positions of American workers, and Boudreaux moves elsewhere. So, even if I were by chance to agree, I would not agree.

There are, by the way, as I find each semester from successful students any number of desirable studies and opportunities.

[Walt]

P.M.: That was an eloquent letter.

Cranky: Isn't the answer obvious? The United States' comparative advantage is in middle management.

[anne]

What is missing as always when Don Boudreaux controls an argument, is any sense of how there can be a balance kept between business management or ownership interests and employees. There is every reason to foster trade, there is no reason no to attend to employee needs. We are a country so little concerned with employee needs that not only are tens of millions employed with no health care insurance, but there are no legislated paid sick days and about 50% of employees have no sick days. So much for employee needs.

[anne]

Speak to general health care, speak to free or minimal cost public education extending through college and university, speak to early childhood care and education, to a focus on infrastructure development, especially in lower education and green infrastructure, to strengthening union ppossibilities or prospects, and trade has a different feel about it.

[anne]

The relative position of labor has seriously weakened these last years as reflected everywhere from the work of Saez and Piketty to noticing the poor quality of the current sustained recovery where capital returns are terrific while labor returns poor and poorer. But, the problem is not trade or India or China or Brazil or South Africa. The problem is lack of labor support, and weakening of balance.

[anne]

The problem also is not this president or that, but wild conservatism that has controlled the Presidency and Congress and gradually and finally the Supreme Court. Simply look to the bent of the Supreme Court to business interests, turning about laws and precedents of decades and generations against employee or consumer or environmental caretaker interests. This is wild conservatism, that would have completely ended a Teddy or Frankin Roosevelt or New Deal legacy if possible. There is the problem Paul Krugman and Brad DeLong have described.

[kitten]

> Speak to general health care, speak to free or minimal cost public education extending through college and university, speak to early childhood care and education, to a focus on infrastructure development, especially in lower education and green infrastructure, to strengthening union possibilities or prospects, and trade has a different feel about it.

Or reverse: if you are an economist, believe in free trade but understand that in our society the institutions that soften its negatives either are insufficient (when exist at all), do not promote free trade ffs.

[anne]

Here Brad DeLong was remiss in not considering the work of Benjamin Friedman, who Brad has increasingly been thinking of in terms of understand what economic democracy must be pointing to. But, Brad, as Stiglitz or Krugman, is coming closer to Friedman. Read Friedman on the New Deal, then Galbraith and, yes, Schlesinger, as Krugman is doing and I am doing, and this period looks different and the pillaging of wild conversatism that is really no conservatism at all become clearer.

[anne]

Kitten, nicely done.

"If you are an economist, believe in free trade but understand that in our society the institutions that soften its negatives either are insufficient (when they exist at all), and do not promote free trade in isolation."

[Edited....]

[P.M.Lawrence]

Cranky, the USA is currently "paying" its way doing something that falls between what the Spanish did unintentionally with New World bullion, and what the French revolutionary regime did in occupied countries and what the Dutch did in the East Indies to set up their "Culture System" after the Napoleonic Wars, after learning some lessons from printing too much money.

Spanish bullion flowed via middleman countries like England and Holland to end countries like Poland, Turkey, India and China. Spain got the "Dutch disease" that afflicted the Dutch in the 1960s from natural gas revenues; their own industrial base declined. Countries at the other end got spurious gains, exporting goods and services for depreciating bullion, not understanding that the real value of their gains was shrinking from new supply. The middleman countries gained infrastructure and intangible resources, which endured, although when the pulse of wealth moved through it caused domestic dislocations in the landed classes and - later - more expensive oriental imports (which stress was a factor in empire building).

The French and the Dutch built structures with printed or depreciated currency, only they didn't apply the money supply to themselves but to the countries they occupied. What is more, they applied the resources to capital; as there was no matching real capital inflow, the result was a wealth transfer, giving them a revenue stream. In the Dutch case, local cpmpradores shared the wealth, and in the French case, nearly all the wealth went to a local elite in return for meeting current French needs, but in neither case did the trouble sheet home to the perpetrators - just to the poorer groups at the end of the chain.

The parallel now is that the USA's elite can abandon its own infrastructure and pay for imports with printed currency, and it can do it indefinitely as long as there are yet other countries beyond the suppliers willing to provide raw materials on even better terms - which also means abandoning their own infrastructure and reverting to quarries. Both ends of the chain have survivor bias, meaning that people who drop off the edges don't get counted, the same way that statistics prove that average wages of hand weavers in England and Scotland rose throughout the 19th century. The trick is sustainable, just as French revolutionary "evacuation" of northern Italy and the Low Countries was, for as long as the printing country can arrange for the end of the line groups to keep accepting the deal. It looks good in nominal terms, just as impoverishing the non-Atlantic old world did.

[baileyman]

Don's example is a poor one, ideal for his agenda.

Rather, consider the period when the textile barons of Massachusetts picked up their equipment and shipped it to the Carolinas. This was the same labor arbitrage we now call free trade. The results devastated many towns.

Don has yet to answer why anyone should want to be a member of a society that won't protect them from this risk.

[MBunge]

"Just so we understand, if understanding is possible: "Since 1993 the federal government, both Clinton and Bush, have been ...... to Wall Street at the expense of 90% of Americans." Remember, sexist language, sexist insult, makes ther argument stronger."

Whore is sexist? In this clearly non-sexual application? Frankly, whore is the appropriate term in this case...because prostitutes do it for the money. And while the money has obviously been facilitating the free trade cult, free trade zealots really aren't doing it FOR the money.

Mike