In this kickoff to our special series on trade, Nick and Goldy unpack why trade policy isn’t just about tariffs and treaties—it’s about people, power, and priorities. For decades, the dominant story has been that trade helps everyone by lowering prices. But the real question is: who does it help, and who does it hurt? From the false promises of globalization to the overlooked damage in hollowed-out communities, this episode sets the stage for exploring a fresh way to think about trade—one grounded in power dynamics, democratic values, and middle-out economics.
David Autor is a labor economist and professor of economics at the Massachusetts Institute of Technology who studies how technological change and globalization affect workers. He is also co-director of the MIT Shaping the Future of Work Initiative and the National Bureau of Economic Research Labor Studies Program.
Marc-William Palen is a historian and senior lecturer at the University of Exeter, specializing in the history of international relations, U.S. foreign policy, and political economy. He is the author of Pax Economica: Left-Wing Visions of a Free Trade World.
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Further reading:
Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization
Pax Economica: Left-Wing Visions of a Free Trade World
Recovering the Left-Wing Free Trade Tradition
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Nick Hanauer:
The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.
Goldy:
The last five decades of trickle-down economics haven’t worked. But what’s the alternative?
Nick Hanauer:
Middle-out economics is the answer because the middle class is the source of growth, not its consequence.
Goldy:
That’s right.
Ashley:
This is Pitchfork Economics with Nick Hanauer, a podcast about how to build the economy from the middle out. Welcome to the show.
Goldy:
We’ve made a lot of heretical assertions about economics over the years, Nick, and today I just want to start this conversation by making the most heretical assertion of all and I am embarrassed and ashamed to say this but I have to say that there’s one thing good that has come out of the Trump administration and that is that he has forced a conversation on trade. For better or worse, his policies are nuts, completely insane but they are at least, his take, is at least as heretical as ours and it’s forced people to rethink and reexamine what has been the consensus for just the past 40 years but, really, the consensus for the past 150 years in economics on trade.
And that is what we’re going to be talking about over the next few episodes and it’s really fitting because, as much as neither one of us are economists, we’re not natural experts in this field. You, Nick, have actual business experience in the field of international trade.
Nick Hanauer:
Yeah. Yeah, that’s true. One of the things, before we jump in, one of the things that’s I think interesting and relevant is the definition because humans have been trading for as long as there have been humans.
Goldy:
It’s what we do. We truck and barter-
Nick Hanauer:
Yeah, exactly.
Goldy:
… I think, is the economic term, mm-hmm.
Nick Hanauer:
And by way of anecdote, in our place in the San Juan Islands, because we dug some holes doing some repair work, we had to have some archaeologists on site looking at stuff and we found materials on Orcas Island, Washington which is a pretty remote place in the very northwest corner of the United States, we found materials that had been imported by those folks from Central Oregon, obsidian, that’s dated back 2,500 years, that’s nothing compared to how far back trade goes. The other thing I think that’s worth noting is that, until people really started to create borders, there was no such thing as international trade, right?
Goldy:
Right. So, let’s start definitionally. You and I, we are pro-trade because we’re pro-human and it gets back to the very foundational when we talk about economics where prosperity comes from, where innovation comes from. Trade, well, it’s not the first thing, the first thing is we make stuff and a lone human out in the wilderness which, by the way, is something that doesn’t exist, that’s not how we evolve, we evolved in social groups. But if all you’re doing is providing for your subsistence needs, you’ve got nothing to trade but you have a very meager existence.
Nick Hanauer:
Well, yes and no. The indigenous populations in the San Juan Islands were merely trying to provide for themselves but obsidian, which is a very important tool if you are-
Goldy:
But they didn’t have that too so they had to trade for it.
Nick Hanauer:
They had to trade for it.
Goldy:
Right,
Nick Hanauer:
Exactly.
Goldy:
So, when it comes down to this, really, we talk about prosperity coming from the division of knowledge and know-how across vast networks of highly cooperative specialists but without trade you can’t specialize. Because if you specialize in mining obsidian, then you need somebody else to grow food for you.
Nick Hanauer:
Correct.
Goldy:
Right? If you specialize in making iPhones, you need somebody else to-
Nick Hanauer:
Grow food for you.
Goldy:
Grow food for you, build houses, whatever it is, provide healthcare. And so, when we talk about trade at a very fundamental level, it is exchange, it is the voluntary exchange of goods and services. You pay me, Nick, and in exchange for that, I don’t give you as much as you probably expect. As I like to joke, you don’t actually pay me for my labor, you purchase my intellectual property. That’s what the economy is, it’s people exchanging goods and services and that allows us to specialize into an infinite variety of things which enrich us all but that’s not what we’re talking about
Nick Hanauer:
No. We’re going to talk about international trade and-
Goldy:
International trade which requires nations and the nation state is a relatively recent phenomenon in history. There were markets well before there were nation states.
Nick Hanauer:
Yeah, that’s right.
Goldy:
And so, we’re really talking about the past couple hundred years after the mercantilist period, after Adam Smith and David Ricardo, the modern nation state.
Nick Hanauer:
And trade impacts significantly how competitive each of those nation states is with respect to the other ones which is why it’s so relevant. In any case, all of this brings back memories from my days of actually doing trade and, if you don’t mind, let me just share an anecdote from the past which I think is-
Goldy:
Let’s table set. You came from a family business, a pillow-= and-
Nick Hanauer:
That’s right. Yeah, a manufacturer of home furnishings.
Goldy:
Right.
Nick Hanauer:
Bed pillows, down comforters, mattress pads, those sorts of things.
Goldy:
Nick is the progressive my pillow guy.
Nick Hanauer:
Yeah, exactly, exactly. And it was a pretty big company and we had a bunch of factories around the country, I don’t know, half a dozen factories around the United States but we relied heavily on foreign imports for the raw materials. In particular, duck and goose down which you basically really can’t buy in the United States because nobody eats, really, very many ducks and geese and, in Asia, they eat bazillions of them and down is a waste byproduct of the poultry industry.
Goldy:
Right. And to be clear, chicken feathers, not the same thing.
Nick Hanauer:
Not the same thing, can’t use those. So, anyway, many, many, many years ago when I think I was in my mid or late 20s, the United States government, in their wisdom, enacted a new set of trade policies and adjusted the duty rates in a way that made importing the raw materials from China about … Had twice the duty rate of importing the finished products.
Goldy:
I can’t imagine what might come from that.
Nick Hanauer:
Exactly. It was titanically stupid. But let’s be clear, my industry is a relatively small industry and I’m sure the people at the Customs service and Congress who cooked this up didn’t think it through at that level of detail. But it created a crisis for my business, my company because we manufactured all of our products in the United States, we didn’t import finished goods. We were faced with the prospect of having to shut our factories down and just start importing and that’s not something that we really wanted to do. And I guess, at the end of the day, it would’ve been the same for me, actually, maybe we’d have made more money because we could have gotten rid of all those manufacturing workers but it just didn’t seem right.
And so, I took it upon myself to try to reverse this and I hired a lawyer in Washington, D.C. who was expert in trade and flew out there and he and I tried to fix this. And it was an incredibly … How should I put it? Really, it was an incredible learning experience for me and, most definitely, a really big affirmation for me of the positives of how the federal government works because I went around from congressional office to congressional office trying to enlist support and I simply explained the situation. And without fail, every congressional office I talked to was sympathetic and helpful and they all put their shoulder to the wheel to try to get the Customs service to do something about this.
And by the way, Congress doesn’t set the actual duty rates, they pass a bill that instructs the Custom service to interpret. So, it is all a matter of interpretation of Congress’s intent, at least that’s the way it used to work. Today, it’s you literally have the president just says 31% which is completely nuts.
Goldy:
Well, thank God he’s finally sticking it to the Swiss.
Nick Hanauer:
Exactly. Those bastards. To make a long story short, all of that effort culminated in a meeting I got to have with the commissioner of customs and we explained the situation to him and they changed it. They were like, “This is crazy. We didn’t mean to do this, we’re going to fix it,” and they did.
Goldy:
And I’m sure had a couple of your workers gone to D.C. and tried to do the same thing on their own without the owner of the company with them, they would’ve had the same success.
Nick Hanauer:
I think that’s right.
Goldy:
You think so?
Nick Hanauer:
Oh, absolutely. I do think that’s right. No, no, no, no, I absolutely think that’s right. Obviously-
Goldy:
Do you think they would’ve had the means to hire-
Nick Hanauer:
No. No, no, no, but-
Goldy:
… a trade attorney and make all these meetings. I’m just saying that you were able to do it from position of relative power and wealth.
Nick Hanauer:
Yes. But I think that misses the point, Goldy, I didn’t give a dollar away of campaign donations. It would’ve, for sure, been harder for a worker to do that but it would’ve probably made my job twice as easy if I thought to bring some of the workers in those meetings.
Goldy:
But you know what would’ve made your job even easier, Nick?
Nick Hanauer:
What?
Goldy:
Deciding not to do this and just offshoring the jobs to China.
Nick Hanauer:
Correct, correct.
Goldy:
And you probably would’ve made more money that way.
Nick Hanauer:
I would’ve made more money, yeah.
Goldy:
And that is the decision that most capitalists make and that’s why they didn’t fight these things. It was, oh, great, it’s cheaper to import pillows and comforters now, let’s do that.
Nick Hanauer:
Yeah. But anyway, I think there’s more to the story because what we realized through this process was that our Chinese competitors were being given significant rebates from their government for exporting finished products. So, at that time, as I recall, for every finished product that our competitors in China exported, they would get approximately a 10% rebate from the government for doing that to say nothing of the subsidized cotton prices and a variety of other things. And so, for the longest time, I’ve had a very suspicious view of Chinese trade practices.
Goldy:
Right. Those damn Chinese for using the same industrial policies that every other industrialized nation used to build their economy.
Nick Hanauer:
Yeah. But for sure, yeah, but they use it ruthlessly and very, very effectively. And it’s simply not true … Certainly, there have been moments or industries that benefited from trade policy but the garment industry in the United States never benefited from trade policy and the toy business never benefited from trade policy and the home furnishings business never benefited from trade policy. And I could name a hundred other businesses that never benefited from any seed-
Goldy:
Manufacturing, manufacturing industries.
Nick Hanauer:
Yeah, just generally.
Goldy:
Didn’t benefit in the past 50 years, benefited 150 years ago when-
Nick Hanauer:
Maybe, maybe.
Goldy:
Yeah.
Nick Hanauer:
I don’t know.
Goldy:
Yeah.
Nick Hanauer:
And should all of those industries still be in the United States, it’s not clear. But the great Orange Man is not completely wrong that we have let, certainly, China take advantage of us. And I’ll tell you another thing that I learned and this was probably at the height of this policy agenda is that the USTR, the United States Trade Representative, is theoretically, I think, part of commerce. But the truth is, and people were explicit about it back then, is this was effectively an operating arm of the foreign policy apparatus of the United States. The country used trade as a foreign policy lever and the prevailing idea was that, the more we traded with people, the closer we would be … That we would turn enemies into allies through trade.
Goldy:
And communist countries into capitalists, democracies.
Nick Hanauer:
Right, absolutely. That was the whole rationale behind it.
Goldy:
Right. We were promised that, that opening up to China and developing China …
Nick Hanauer:
Yeah, right, is all going to be great for everybody. Obviously, that did not work out but it does illuminate the complexities of all of this and why some of it happened. It wasn’t just this naive view of comparative advantage or that orthodox view that all trade is good and, the more you have, the better off everyone will be. I think what animated a lot of the trade policy of the United States in the ’80s, ’90s, 2000s was this well-meaning but ultimately naive view that, by giving the world access to our markets, we’d all be one big happy family.
Goldy:
Yeah. We’d create a more prosperous and peaceful world and it’s-
Nick Hanauer:
And peaceful world.
Goldy:
… much cheaper to maybe ship some jobs overseas to China than it is to fight a war with them.
Nick Hanauer:
Yeah, absolutely, absolutely.
Goldy:
Instead, we’re going to end up fighting a war with a very industrialized, prosperous China eventually.
Nick Hanauer:
Yeah, exactly, exactly.
Goldy:
But that was the theory. And so, you make a point that a lot of this policy wasn’t justified internally by pure comparative advantage which we will get to in these episodes defining what we mean by that. It’s that classic thing you might’ve been taught in high school or college about how trade always advantages both partners but it was publicly justified by orthodox theory.
Nick Hanauer:
Yeah, that’s true.
Goldy:
I remember NAFTA, the first Bush administration and then when Clinton won, very famously, Al Gore was the spokesperson for getting NAFTA passed through Congress. This was a bipartisan effort, it was negotiated in the Bush administration and passed under the Clinton administration. And a lot of the arguments they were making publicly were those economic justifications of why this is good for everybody, how many new jobs would be created in the US through these liberalized. And NAFTA was just Canada and Mexico but there were plenty of other trade agreements going on around the same time. The intellectual framework through which this, whether you want to call it trade policy or foreign policy, was enacted in implemented that intellectual framework was the orthodox framework that trade is always a net good-
Nick Hanauer:
Absolutely.
Goldy:
… for reasons that we will go into more detail in future episodes. I want to get back to why this is really important and why we’re going to spend so much time talking about this issue. There’s a fundamental disagreement between orthodox economics and the way a real economy works. And trade, as we said, is essential because, without trade, there can be no specialization. We can’t specialize if we can’t trade the specialized products and services that we produce. But it also gets-
Nick Hanauer:
And if I could just interrupt, it certainly has historically been true and is still true to a certain extent is that forget products there are materials like obsidian, to use the former example, that may not be available to you in your area that you need for some critical component of a product that you need to make. And that, in the beginning, that’s why people traded, right?
Goldy:
And forget about needs just once, there are things that …
Nick Hanauer:
If you want gold …
Goldy:
Well, if you’re into French wine, you can only get it from France. I love good olive oil, there’s some good California olive oil but we can’t produce enough olive oil in the US to meet our demand. There’s lots of things that we import simply because we like them and it improves our lives because it makes us happier. But I want to get to a really fundamental different way of understanding the economy which is the orthodox economist view all this in terms of GDP. You just count up all the goods and services that are exchanged and the prices on them and that’s the economy. That’s how, if it grows, that’s good. If it shrinks, that’s bad. If it’s flat, oh, no, people are unhappy. We look at it very differently in terms of prosperity coming out of increasing complexity.
Nick Hanauer:
Correct
Goldy:
That, very simply, we view the economy as something that solves human problems, right?
Nick Hanauer:
Yes.
Goldy:
We make goods and services, I like a good olive oil, you give me a good olive oil, you’ve solved my problem in the same way, let’s say, an mRNA vaccine, which soon won’t be available here, solves the problem of … Prevents you from getting COVID. However complex you want to be, the iPhone, the earbuds that you’re listening to this podcast on now, those are all solutions to human problems. As we solve problems, we create problems and what you see is, really, you can measure prosperity and the prosperity of an economy by the amount of complexity within it. Because we imbue value into goods and services through that specialization we talked about, all that specialized knowledge and know-how networked across vast differences and hundreds or thousands or millions of people and, also, over decades, centuries of accumulating knowledge and know-how.
And you can look at the complexity of an economy and get a pretty good idea of how prosperous and resilient it is. And importantly, because technologies and industries evolved into adjacent product space, it’s path dependent. The more complex your economy, the more complex it can be. If you don’t have a textile industry in place, it’s very hard to expand into-
Nick Hanauer:
Kevlar.
Goldy:
Right. Right?
Nick Hanauer:
Yeah.
Goldy:
Yeah, that’s a great example. If you don’t have a steel industry, it’s hard to expand into specialty metals, specialty steel because you don’t have-
Nick Hanauer:
Yeah, right.
Goldy:
And this is historically and this is why China did the things it did, why it was so focused on building a textile industry because, historically, textiles has been the stepping stone into more complex manufacturing processes. It was in the UK, it was in the US, it was just about everywhere that’s why developing countries focused on textiles and then you expand into adjacent product space from there. So, when we offshore an entire industry, we are not just eliminating jobs in the present, we’re eliminating the possibility of jobs in the future because that path to those jobs either no longer exists or is very difficult to recreate because, as the physicist Cesar Hidalgo points out, knowledge is heavy. It’s actually much harder to import knowledge and know-how because it’s embodied in human beings, you have to … And in that, ability for them to cooperate.
So, when we simplify our economy which is what comparative advantage tells you to do, they want you to focus on the things that you are best at and let other people do the other things. When you simplify your economy, you actually-
Nick Hanauer:
There’s a big trade-off.
Goldy:
Right, and it comes in the future.
Speaker 4:
We wanted to provide additional depth on job creation and loss associated with trade so Pitchfork Economics producer, Freddy Doss, sat down and spoke with MIT professor David Autor.
David Autor:
My name is David Autor, I’m a labor economist at MIT and I study factors that affect earnings, employment and opportunity. I focus a lot on both globalization and technological change, most recently, AI.
Freddy Doss:
You and your co-authors studied how US labor markets responded to the China trade shock in a paper called Places versus People: The Ins and Outs of Labor Market Adjustments to Globalization. What were you trying to understand and what makes this study different from other studies and research on trade?
David Autor:
What this study tried to do is ask those questions simultaneously by looking both at a place and the people that were in the place originally and to say, okay, do places recover and, if they do, do workers recover, can we make that assumption or, if workers recover, do places recover or is it possible for them to go in different directions and so, we could follow both. By place we mean the local labor market where manufacturing was housed and we can say, look, what happened to wages, what happened to the industry composition, who’s working, who’s not working. And then by people we mean let’s look at the people who were in that labor market in 2000 when the trade shock hit, someone who were working in manufacturing, someone working in non-manufacturing, where did they go? Did they stay in the same place? Did they leave the labor force? Did they move from manufacturing to non-manufacturing? Did they retire?
And so, that’s the setup and the surprise is you get really different answers when you look at the places versus the people. Not incompatible answers, they make sense, but you would reach a different set of conclusions. If you look at the places, you would say, wow, these places have really … They’ve transformed themselves. There’s much less manufacturing. Once manufacturing goes down, it never comes back. On the other hand, there are more jobs relative to other places. After 2010, employment rebounds, these jobs are in a really different set of sectors. A large part of it is healthcare and education, not fancy hospitals but just care facilities for elderly folks and so on, healthcare and education and then you’ll find warehousing, trucking, hospitality and low-paid services. So, you’re primarily low-paid economy, except for the healthcare jobs, some of them, and so they’re in a different set of industries and it’s really a different set of people working.
The places have changed, you wouldn’t say they’re more affluent but they are economically active and there’s new things going on and there’s a whole different set of people. And the people who are originally there, the world has changed around them dramatically, they’ve stayed in place and everyone else has reshuffled the deck. And so, I imagine, from their perspective, the world looks like it’s changing really rapidly around them even though they’re holding still. Politicians are so busy looking over their shoulder at the war that we lost 20 years ago, at the battle that they are not noticing the troops surging over the mountains for the current battle and that’s really going to be costly in the much longer run, much more costly. Because those old sectors, although they provided decent jobs and that was great, they were not what gave us military or economic or political leadership, they didn’t give us the innovation that is so critical to a affluent country to keep moving ahead, they were not the source of dynamism.
In many ways, they’re great jobs, I don’t mean them any … Casting aspersions on them, I’m sorry to lose them but they weren’t really where the future was. Many of these were jobs of a century ago that had been migrating to lower and lower wage places and would eventually migrate overseas. These sectors that I just mentioned, semiconductors and robotics and EVs and aviation and drones and fusion power and so many things, those are where the future is and they’re going to create the profits and they’re going to create the jobs and bring the talent and those are really threatened. And so, our current trade policies actually deeply threatened to undermine those because they just make everything expensive to do here. There are things that are worth paying for. I do not think just lower consumer prices is the measure of a national or individual well-being.
Obviously, no matter how low the prices are, if you don’t have a good job, it’s not really much help to you. We should be willing to invest, absolutely. And even if that’s costly, even if that hurts but we got to make the right investments and, right now, I fear we are trying to relive and change the past rather than the present and future that is so imminent, so immediate right now.
Nick Hanauer:
I want to talk just for a second about knowledge and know-how because the distinction is so important. So, knowledge is what is contained in a book. So, for example, you can have a book which tells you everything about how to play the guitar but playing the guitar takes a lot more than reading a book, right?
Goldy:
Right.
Nick Hanauer:
People who can play the guitar have know-how in addition to knowledge.
Goldy:
And they don’t generally learn it by reading a book.
Nick Hanauer:
Yes, correct.
Goldy:
Right.
Nick Hanauer:
And so, you can read a book on how to make super complex transistors but being able to do it is completely different.
Goldy:
Well, I’ll give you a more prosaic example. I had my gallbladder removed last year and you can certainly read a book on how to remove your own gallbladder but I did not go to a guy who read a book, I went to a trained surgeon with many years-
Nick Hanauer:
Of practice, right.
Goldy:
… of practice doing it. That’s who removed my gallbladder.
Nick Hanauer:
That’s right. And this is such an important point is that the devil is in the details. Having a workforce that has the know-how to do a particular thing which is adjacent to a new thing that you want to do is absolutely critical for being able to do that new thing. And if you don’t have that knowledge and know-how available, spinning it up from scratch is virtually impossible, it’s just incredibly hard. And again, if your goal is prosperity in the future, then the embedded knowledge and know-how that you presently have in your economy is the best indicator of what will happen in the future. Because if you don’t have much, unless there’s some lucky windfall, you strike oil or something like that, the chances are not great that your trajectory will be good.
Goldy:
Well, actually, if you strike oil, your chances are worse.
Nick Hanauer:
Yeah, probably. Over time, yeah.
Goldy:
Over time, right.
Nick Hanauer:
But anyway. But this is-
Goldy:
Because you end up specializing in extracting oil from the ground which …
Nick Hanauer:
Well, it’ll prop up your GDP.
Goldy:
Right. But Venezuela had a lot of oil.
Nick Hanauer:
Yeah, that’s true.
Goldy:
Still does.
Nick Hanauer:
Yeah. That perspective is something that I think the Germans have understood for a very long time. The Germans have been phenomenal at protecting their industries in a way that enables them to continually be at the forefront of making whatever is important in the future. And so, I think that the United States is relearning some of these lessons, albeit in the most stupid and counterproductive way, right now. Certainly, the Biden administration understood this in a small way because the biggest focus of the economic programs were chips and the IRA all aimed at bringing these industries of the future back to the United States which the Trump administration is doing their best to reverse.
Goldy:
I think they understood it in a bigger way than they were able to enact on it.
Nick Hanauer:
Oh, yeah.
Goldy:
Because when you remember the words of the US Trade Representative talking about how we need to build a more resilient economy and that has a lot to do with complexity too. The more complex your economy, it can be fragile but it can also be resilient because, as the economy evolves, you have a lot more mimetic diversity within that economy that allows you to adapt.
Nick Hanauer:
Certainly the pandemic brought that to the fore for a lot of people because, all of a sudden, as the global supply chains broke, people discovered that the United States was incapable of making the simplest things like face masks.
Goldy:
Right.
Nick Hanauer:
You couldn’t-
Goldy:
Right.
Nick Hanauer:
There was nobody in the country who could make a face mask which is just insane.
Goldy:
The important takeaway here is just because Trump is wrong on trade doesn’t mean the orthodox view was right.
Nick Hanauer:
Correct, yeah.
Goldy:
They’re both wrong in different ways, it’s a lot more nuanced, a lot more complicated. Trade is good, not all trade is good.
Nick Hanauer:
Correct. Yes, yes, exactly. And not on …
Goldy:
Oh, my gosh.
Nick Hanauer:
And not any terms. And the other thing, Goldy, that my experience doing trade taught me is that our trade policies allow us to export a lot of externalities too. So, for example, we bought most of our fabrics in China too and they were much cheaper but it wasn’t just because labor was lower in China, it was also because the Chinese dyeing factories and weaving factories dumped their effluent directly into the rivers. Things are different now but, when I was going to China in the ’80s and ’90s, it was so horrifically polluted it staggered the imagination, the whole country was cesspool. And those things also need to be taken into account. Bad practices by other countries bring prices down and often those bad practices will catch up with us somehow some way too. A lot of trade policy hides really terrible behavior. Say nothing of child labor and all that very obvious stuff but there’s a whole layer of less obvious stuff that goes on that is equally horrible.
Goldy:
This, Nick, gets to a basic critique of comparative advantage, what is comparative advantage and what isn’t and it’s not simply your ability to produce something cheaper because there’s lots of reasons why you can produce something cheaper. You could have very low or zero environmental regulations, you could have forced labor or very low exploitive labor costs and so a lot of what’s happened with these jobs going overseas is less comparative advantage than it is wage arbitrage.
Nick Hanauer:
Wage and pollution arbitrage.
Goldy:
Right. That’s not a comparative advantage. That might be a competitive advantage but it’s not a comparative advantage that you are … Now, let’s be clear, China is today more efficient at producing a lot of things than we are because they’ve had 20 years to refine their processes but, at first, they were just cheaper. And I don’t know if you remember, when we were kids, you would get products sometimes that said made in Japan. And if it was said … I actually have something which says made in occupied Japan, it’s a treasure. When we were kids, made in Japan was a sign of cheapness. You didn’t want something made in Japan because it was a load of crap, it was a piece of crap that wasn’t going to last.
And then, by the ’80s, made in Japan was, oh, yeah, no, oh, that’s quality, the high quality stuff is made in Japan. And at first it was a competitive advantage because their economy had been destroyed and labor was cheap and so forth but, eventually, they built these efficiencies over several decades and their stuff became high quality. And so, we preferred the Japanese stuff and that’s true of a lot of Chinese imports as well. Those iPhones are very high quality, designed in the US, manufactured in China.
So, we want to use this talk a little bit to get into a conversation about labor which is something we haven’t talked a lot so far on this episode and this will be key to … And we’ll talk about this in later episodes on trade but just to sum it up right now, this idea, we were told by everybody, Republicans and Democrats alike, in the ’90s when we really opened up all this, this would be good for everybody. Yeah, there’d be winners and losers but we’d retrain the losers and we create a lot of great jobs and so forth. But in fact, we ended up impoverishing, not just millions of people, but huge swaths of the country were deindustrialized in the ’80s and ’90s and aughts over the past 40 years due to our trade policies. The idea that, in some ways, in many ways, our trade policy has been class warfare, that your class has won. And yes, you did not want to close your factories and move them overseas but your family did eventually sell the family business. Did they have any US factories
Nick Hanauer:
They bankrupted it within a year. Private equity.
Goldy:
But I’m sure they made money.
Nick Hanauer:
Yeah.
Goldy:
Private equity made money.
Nick Hanauer:
Who were those criminals? I think it was called Sentinel. Just completely incompetent buffoons.
Goldy:
Right. And the people who really suffered were the workers who lost their jobs in the end-
Nick Hanauer:
Yeah, of course, yeah. Yeah.
Goldy:
… not the private equity people.
Nick Hanauer:
They were fine.
Goldy:
I’m sure they figured out how to pay themselves. That’s right.
Nick Hanauer:
They fucked everybody else.
Goldy:
Right.
Nick Hanauer:
Like they always do.
Goldy:
They fucked everybody else and that is class warfare.
Speaker 4:
For a deeper look into the roots of cooperative trade, Pitchfork Economics producer Freddy Doss to historian and author Marc Palen.
Marc Palen:
I’m Marc Palen, I’m a historian at the University of Exeter in Southwest England. I teach about the history of empires and anti-imperialism and peace and globalization and all the ways that those are connected and it’s really those connections that I also explore in Pax Economica, my new book. The left-wing internationalists, the progressives, the left-wing globalists of their age, they tend to say, “Well, how can we create something different? Something that doesn’t support monopolies, that doesn’t support high prices and trade wars, doesn’t create these geopolitical conflicts, that doesn’t lead to a search for new markets. Can we do something different?”
And so, for a lot of them then, they saw this free trade system that could be implemented instead, this interdependence theory, if you want to call it, a capitalist peace theory as some and international relations scholarship call this. The idea that, the more you trade with one another, the less likely they are to go to war, why would you want to go to war with your trading partners, this sort of thing. One of the things the left-wing free traders, especially from the early 20th century, wanted was a super national regulation of … They saw no contradiction calling for the super national regulation of food stuffs-
Freddy Doss:
Food production.
Marc Palen:
… because there was enough food to feed the world. If you had true global trade in a way that was equitable and not just about profit seeking. So, I think you lost that non-profit motive that I think, in many ways, drove at least parts of the left-wing free trade movement that it still exists, I think, in the international cooperative movement. If anybody shops at a co-op, you’re walking into this left-wing free trade legacy there. There could have been a free trade world order, as they saw it at least, where labor and environmental protections could still be a really big part of that. You could have social and economic justice high on the menu, democratization could be a key part of this too and peace and an end of empires is just a natural byproduct of that vision of that.
Freddy Doss:
Of that. I do like the idea that, if you go to a food co-op today, that’s a remnant of what their idea was but on a much smaller scale.
Goldy:
When we look at where we are right now economically and politically, obviously, you and I, we’ve been working together for more than a decade now on inequality issues. Again, we started off by talking about Trump, Trump doesn’t exist without 40 years of class warfare. I’m not saying that Trump is a champion of working people like he says he is, he isn’t but it’s understandable because nobody else has been representing the interests of working people so maybe this autocrat will do it for them. And so, the undermining of our democracy has come from the undermining of the American dream, of that promise, which was always a myth, but still that promise that the country, the economy would work for everybody and every generation would do better than the last and we’d see constantly rising living standards which we have not seen for the majority of American and a lot of that has been because of the way we have de-industrialized.
Nick Hanauer:
Yeah. Yeah, yup.
Goldy:
Right. And this gets to another point which we’ve talked about which is this idea that industrial jobs are the best jobs. You hear this from Trump, he wants to bring these good industrial jobs back home. Who was it? Which secretary of his talked about his beautiful vision of millions of Americans screwing tiny screws-
Nick Hanauer:
I don’t know, I don’t know. I don’t know.
Goldy:
… into phones? Was that the … Whichever. I don’t know if it was commerce or treasury, whatever. That’s just insane. There’s a reason why manufacturing jobs were good jobs and that is because they were unionized.
Nick Hanauer:
Correct.
Goldy:
They were crappy jobs.
Nick Hanauer:
Yeah, they were the worst jobs ever.
Goldy:
They were horrible jobs, the worst jobs. The satanic mills. There’s a reason why we have … They were terrible jobs until the labor movement, they were unionized and then they became middle-class jobs. You didn’t have auto workers buying cabins in the woods and boats and RVs and going on vacations before the 1950s, this was something that happened in the ’30s and the ’40s and the ’50s and continued into the ’60s into the ’70s which we have since destroyed, the labor movement. So, there’s no particular reason why service jobs can’t be good jobs too. Good jobs in the sense that they pay well income with great benefits, why those jobs can’t be middle-class jobs too. We have just made the manufacturing job iconic because it’s something we had for 30 years where you could go to work in the factory and retire 30 years later with a good pension and middle-class home and send your kids to college. You could afford to send your kids to college and that’s the irony. Why did you want to send your kids to college? So, they wouldn’t have to work in the goddamn factory.
Nick Hanauer:
Exactly. Yeah, exactly, yeah. Yeah. No, no, no, it’s so true, it’s so true. So, Goldy, why are we blabbing on and on and on, just you and me, about trade?
Goldy:
Well, again, as I started at the top, because, to some extent, Trump has made it an issue. And to be clear, it’s something you and I have been thinking about for many years yet we’ve had a very difficult time talking about it because there’s a lot of-
Nick Hanauer:
Yeah, it’s much more complicated than many other economic issues.
Goldy:
Right. It’s difficult to pack into a middle out narrative for a lot of reasons and we’ve put a lot of thought into it and I think, now that the nation is focused on trade, we felt like we had an obligation to …
Nick Hanauer:
Do a series on trade, yeah.
Goldy:
Right. To dive into it publicly and, not just share our thoughts, but also work it out. Because I think, with some of the guests we have on in the coming episodes, you don’t agree with all of them and you and I don’t agree with each other on some of this. We’ll talk to the authors of the book Trade Wars or Class Wars, you are a little more skeptical of their thesis than I am. I think it is about … And there’s a class where … And understand, part of the class war with China is going on in China.
Nick Hanauer:
Just to be clear, Goldy, all wars are class wars. Yeah.
Goldy:
In a sense. The people starting them and the people fighting them tend to be of-
Nick Hanauer:
Tend to be very different.
Goldy:
Different classes, yes. So, we’re talking about this because it is the talk of the nation right now and it’s absolutely essential to understanding how economies work, market economies, all economies and it would be negligent of us to ignore this topic especially at this moment in time. In the coming episodes, we’re going to be talking about, we’re going to get stepped through this, we’re going to talk about the history of, not just trade, but of ideas about trade, both on the left and the right, and the history of globalization, what its impact has been on the real lives of workers, of American workers and also on our democratic institutions which, spoiler alert, it’s not been good.
Nick Hanauer:
It’s not been good.
Goldy:
As is typical, we’re not just going to talk with economists because, quite frankly, the number of economists who are willing to think deeply and creatively about these issues is … There’s a lot of them out there but, as a percentage of the field, it’s relatively small. Comparative advantage, that is canon. If you say you don’t believe in comparative advantage, you’re crazy. So, we’ll be hearing from historians, labor leaders, policy thinkers about what trade is and how we might reimagine our policies. We’re going to talk a little bit about protectionism which is really what Trump is talking about though I think, if you give him a gold bar or an airplane, he’s willing to drop your tariffs so I’m not sure who he’s trying to protect. But again, talking … Look, talk and action are two different things and we want to take advantage of the fact that at least he’s getting people to talk about this stuff to maybe get people to more creatively rethink it.
I think the hardest part for us is when we get to the benevolent dictator quest and we don’t use that term anymore. What do we call it now?
Nick Hanauer:
I have no idea. Can’t remember.
Goldy:
Oh, the magic wand. We call it the magic wand because it was easy to talk about a benevolent dictator when we didn’t have a dictator.
Nick Hanauer:
Yeah, sure.
Goldy:
Let’s just put it that way. So, exactly, it’s hard for even us, you and me, to come up with creative trade policies because we’re path dependent.
Nick Hanauer:
Yeah, sure.
Goldy:
We’re so constrained by our own experiences and our own decades of being constrained by orthodox thinking on this. It’s one thing to understand that the orthodox thinking is wrong, it’s another thing to be able to come up with some novel and innovative approach. And so, what ends up happening, and this is true a lot with the policies we talk about in many areas, is we end up with policy ideas that seem old or familiar like industrial policy which is a terrible word phrase but, whatever, the type of stuff that Biden had started doing. We come to these things but we come to them for different reasons than the old new deal progressives might have. There’s a different justification and so they will end up looking familiar but being a little different.
Nick Hanauer:
Yeah, yeah. I think that’s fair.
Goldy:
And I think the most important takeaway I hope we get from this series, Nick, is that, if we want to build an economy from the middle out, if we want to build a more broadly prosperous, inclusive, democratic and environmentally sustainable future, our side of this debate, whatever, whoever you consider, the non-Trumpers are going to have to reclaim trade policy as a talking point and as an essential feature of our narrative and our agenda because, without that, we’re just going to get more of the same.
Nick Hanauer:
Yeah. No, I think that’s fair. Well, hopefully, it will be an interesting series.
Goldy:
The journey is the reward. In podcasting, I guess, because it’s nothing but journey.
Nick Hanauer:
Love it.
Freddy:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to follow, rate, and review us wherever you get your podcasts. Find us on other platforms like Twitter, Facebook, Instagram, and Threads @pitchforkeconomics. Nick’s on Facebook as well, @NickHanauer.
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