Continuing his long-running attack on free trade, William Greider has a new piece in The Nation touting a seven-year-old book by Ralph Gomory and William Baumol, which Greider claims had “languished in academic obscurity”until “recently,” which seems like a slight stretch given that Chuck Schumer and Paul Craig Roberts were essentially touting Baumol & Gomory’s thesis in a much-discussed New York Times op-ed over three years ago. Greider welcomes Gomory as the anti-trader’s “Martin Luther”—which I suppose is a good thing, since when Grieder has attempted to nail his own theses to the door, others have been quick to point out how confused and banal they are. And when you think about it, the sheer enthusiasm with which Greider greets some “credentialed” support for his longstanding views does sound a bit like an implicit acknowledgment that he didn’t have any serious support for them previously. But, Greider gushes, nobody will dare call Gomory a “protectionist”! Which is weird, because that seems like, you know, the accurate term for someone who’s proposing things like “capping imports.”
Leaving aside its merits, you do have to wonder how congenial the Gomory/Baumol theory really ought to be to traditional trada-hatas, however. On Grieder’s account, the nut of the idea is as follows: Trade really is a mutually welfare-enhancing “win-win” between rich industrialized countries and poor developing ones. But over time, this means that wages and productivity in these poorer countries rise, raising the cost of imports, while infrastructure improves, making them more attractive investment targets for corporations. The gains from trade to the majority in the richer country, so the theory goes, therefore begin to drop off.
If you buy all this, what’s the upshot? It seems to be that trade with poor developing countries is dandy, and trade with wealthier ones is what ought to be limited. More to the point, that trade with the poorer countries needs to be explicitly designed to depress wages and deter infrastructure improvements so that workers and consumers can reap a larger long-term share of the gains from trade. Does this sound familiar? It should: It’s the old Marxist-Leninist horror story about how capitalism and international trade supposedly worked already, giving workers just enough to subsist upon and continue producing, but never enough to permit them to get in the game themselves as competitors. So, to recap, now that we know capitalism doesn’t actually function in the way described in Marx’s dire predictions, The Nation demands a national industrial policy to make it work that way.