Dan Griswold on Rodrik on Trade

From Don Boudreaux.

"My Mercatus Center colleague Dan Griswold has carefully read – and now reviewed – Dani Rodrik’s 2017 book, Straight Talk on Trade.  Dan is no fan of what he read.  (Dan said that one of his models for his review is the brilliant review, from 2004, by Doug Irwin of Ha-Joon Chang’s Kicking Away the Ladder.)

The importance of exposing the flaws in Rodrik’s arguments is especially high.  Rodrik is an economist, and one at Harvard, no less.  Rodrik’s opposition to free trade isn’t the standard, run-of-the-mill mercantilist shrieking that daily issues from the mouths of politicians and the pens of pundits.  It’s more sophisticated – in the original meaning of that term.  I urge you to read all of Dan’s review – which is titled “Anything-but-Straight Talk on Trade” – but I paste below some choice excerpts.

Straight out of the box, Rodrik stacks the deck with loaded terms to describe the people and ideas he opposes. He calls those who think the world needs more economic freedom and openness, not less, “globalization’s cheerleaders,” indicting their willingness to “parrot the wonders of comparative advantage and free trade.” He argues that these folks’ “obsession with hyperglobalization” and “reigning market fundamentalist ideology” blind them to “the danger of globalization running amok.” He accuses those who support free-trade agreements such as the Trans-Pacific Partnership of engaging in “propaganda” and “shading of research” in pursuit of “free-market nirvana.”
…..

Rodrik ignores or brushes aside inconvenient counter-examples such as Hong Kong, Singapore, and Chile — three spectacular economic success stories that did not rely on state intervention. Regarding Hong Kong, an example Milton Friedman often cited to show the power of markets to improve human well-being, Rodrik can only note that its government plays a large role in providing land for housing. That seems a minor point when set against its open economy and laissez-faire approach to industrial development and finance. If hyperglobalization is the reigning ideology anywhere, it is Hong Kong, and the results are enviable.
…..
he real aim of the book becomes more apparent when Rodrik complains about the austerity that has been imposed on Greece by its debtors. He doesn’t blame the profligacy of the Greek government, but the general forces of globalization for infringing on Greece’s “right as a nation to determine their own economic, social, and political path.” He ignores the fact that other nations should be able to exercise their own sovereignty over whether to transfer funds to bail out Greece, and under what conditions. Instead of austerity, he would prefer “some good old-fashioned Keynesianism.”
In fact, for Rodrik, the answer to every problem seems to be more government intervention and less personal freedom to engage in commerce, whether domestic or across borders. Among his more novel proposals would be the establishment of government-run investment funds in promising new technologies, with the dividends from the assumed profits distributed to the general citizenry so that the fruits of technological advancement can be more widely shared. This demonstrates not the slightest bit of skepticism about the ability of government officials to pick just the right start-up companies and technologies, while ignoring ample evidence that governments are ill-equipped and face the wrong incentives for such endeavors, and that politics often determine who gets funded.
…..
Despite critical words about President Trump at certain points in the book, Dani Rodrik seems to share many of the basic assumptions of our president when it comes to the global economy. It’s just that his arguments are more clever and less straightforward.

DBx: I especially detest being accused of believing that free trade, or the free market, produces “nirvana.”  No serious free-market scholar has ever argued that free markets produce earthly paradise.  Scarcity will alway bite; one of the benefits of free markets is that they encourage each decision-maker to take much-better account of relevant scarcities than typically occurs with protectionism and other interventions in place.  Indeed, one distinguishing mark of market-oriented scholars is their refusal ever to fall for any of the many proposals that are built on the implicit assumption that scarcity’s bite is escapable."