A Different Path Dems Could Take on Trade

They could accept globalization but try to help workers who lose out.

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Harvard economist Dani Rodrik has a blog where he recently gave his take on what a liberal free-trade agenda might look like. The whole thing is pretty interesting, but two points really popped out:

It would get real with the domestic social agenda. That means two things: more and better social insurance (safety nets) and more and better compensation. Progressives need to communicate that social insurance is the flip side of the open economy, that redistribution is logically the flip side of the gains from trade. The gains from trade do not become real unless and until there is compensation.... [Second], it would begin to chip away at the artificial distinction between the mobility of goods and capital, on the one hand, and the mobility of labor. Progressives should be in favor of expanding international labor mobility at the margin, and especially of temporary labor mobility schemes (which would spread the gains around more widely). It is possible to do this without necessarily creating an underclass of foreign workers.

My take: The first point gets to the creation of some sort of new social safety net—expanded unemployment, wage insurance, a universal 401(k)—to help workers in an age of globalization. This approach would basically accept free trade but use government to smooth some of the sharp edges. Democrats have so far seemed to have little interest in going down this path vs. attacking China for keeping the yen weak, though Hillary Clinton is pushing the 401(k) option—with a government match—as a replacement for her "baby bond" idea. The second point, I think, might be partially referring to the idea that real "free trade" would allow easier access to the U.S. market by service professionals such as doctors. Dean Baker of the Center for Economic and Policy Research has done a lot of interesting work on this subject.

Democratic Party