March 14, 2016
Dean Baker
Truthout, March 14, 2016
The economists are really angry this year. They have cause. Leading presidential candidates in both political parties are trashing the trade agreements that many have devoted their careers to promoting. This is not supposed to happen in the United States they know.
Donald Trump has catapulted to the top of the Republican field at least in part on a commitment to renege on the North American Free Trade Agreement (NAFTA) and other trade agreements the United States has signed over the last quarter century. Sen. Bernie Sanders remains a real contender to former Secretary of State Hillary Clinton in large part because of his consistent record opposing these trade deals.
In the past, serious candidates could always be counted on to support trade agreements. (These deals are routinely referred to as “free trade” agreements for marketing purposes.) In the course of a presidential campaign, they may express opposition to these deals for political reasons, as both Obama and Clinton did with respect to NAFTA in 2008, but all the big money types know they don’t really mean it. What’s different in 2016 is that Sanders is actually opposed to these trade pacts and Trump certainly could be.
The economists’ anger could prove to be an even greater source of amusement in this political cycle than the debate over the size of Donald Trump’s fingers. After all, if economists knew anything about the economy, they would have seen the $8 trillion housing bubble, the collapse of which sank the economy. The cost in lost output is now more than $12 trillion (at $40,000 per person), with millions having seen their lives ruined from unemployment and/or home foreclosures. But the economists want us to be really upset over Trump’s threats of 35 percent tariffs on air conditioners from Mexico.
It is hard to know where to begin with the contempt for “free trade” economists. The trade agenda of administrations of both parties has been to quite deliberately put US manufacturing workers in direct competition with low paid workers in the developing world. The predicted and actual consequence of this competition is to eliminate jobs in manufacturing and to put downward pressure on the wages of less-educated workers more generally. And the economists can’t understand why people are unhappy.
The economists’ complaints would at least be more understandable if it they were based on some consistent principle, but they aren’t. We have not sought to impose free trade everywhere. We have only done it for less well paid and less educated workers. We have maintained (and in some cases, strengthened) protectionist barriers that sustain the jobs and paychecks of the most highly paid professionals.
Take the case of doctors with an average pay of well over $200,000 a year. (Sorry politicians, that is not middle class.) We prevent foreign doctors from practicing in the United States unless they completed a US residency program. Does anyone believe that we can’t ensure that doctors going through training programs in Canada, Germany and other wealthy countries get sufficient skills to competently treat patients in the United States?
There is a similar story for dentists, who get paid almost as much as doctors. They used to be required to get a degree from a dental school in the United States. We just recently started allowing graduates from dental schools in Canada to practice in the United States.
Donald Trump argues that our trade negotiators are stupid. This could be the case, but they can’t possibly be so stupid that they couldn’t work out an arrangement that allowed foreign doctors and dentists to practice in the United States while still ensuring their competency.
This is about power. Just as autoworkers and textile workers want protection from foreign competition, so do doctors and dentists. The difference is that doctors and dentists have the power to get protection and to get the economists to ignore this massive interference with free trade. Unlike the relatively minor forms of protection that get economists so excited, protection for doctors is real money. It roughly doubles their pay in a market of $200 billion a year (at $1,600 per family per year). This protection for doctors and dentists means lower pay for ordinary workers, since it is money out of their pockets in the form of higher health care costs.
There is a similar story for copyright and patent protection, especially for prescription drugs. We pay more than $400 billion a year for drugs that would likely cost one tenth of this amount in a free market. This is equivalent to a 1,000 percent tariff on drugs. Yes, we call them “patents,” not tariffs, but the market doesn’t give a damn. The economists’ models give the exact same outcome: the same waste and corruption from a patent that raises the price by 1,000 percent as a tariff that raises the price by 1,000 percent. (Yes, there are other ways to finance research, but the economists don’t want us to discuss them.)
So, when you see an economist who is angry that major presidential candidates are advocating “protectionist” policies, treat it just like the debate over the size of Donald Trump’s fingers. It should be a source of great amusement. These economists are totally fine with protectionism of all sorts, as long it benefits the wealthy and not ordinary workers.
