Sunday, February 26, 2017

Rodrik: the wrong solution to his own trilemma

Dani Rodrik believes that the only way to protect democracy is to stop trying to achieve a better globalization and re-affirm the nation-sate. He thinks that by doing this, we will fix his trilemma by sacrificing hyper-globalization and keeping both democracy and national sovereignty. However, globalization is out of the bottle: are we going to stop the Internet? are we going to stop climate change by forgetting about global rules? is capital going to stop moving? Bradford Delong is clear that Rodrik is wrong even if your priority is the welfare of your nationals: national welfare for example in the USA requires a better world, starting with a better macroeconomic health of their Mexican neighbors: "We find Rodrik beating his breast about how "Cosmopolitans often come across like the character from Fyodor Dostoyevsky’s The Brothers Karamazov who discovers that the more he loves humanity in general, the less he loves people in particular.... The best way to serve global interests is to live up to our responsibilities within the political institutions that matter: those that exist..." In today's political context, that will be read as: "only weenies care about the impacts of policies on people outside national borders, and any consideration of those impacts has no place in any political debate." In today's political context, that will be read as: "the well-being of Mexicans and the stability of Mexico must have a zero--nay, a negative--weight in the U.S. discussion about whether to abrogate NAFTA."
But the major reason to do NAFTA is and always was that it is an important and a big good deal for Mexico. Having a good relationship--i.e., being in a positive-sum gift-exchange relationship--with the country on our southern border is a matter of elementary prudence in international relations. And doing what we can easily and cheaply to increase the chances that the country on our southern border is stable and prosperous is elementary prudence as well.
NAFTA is close to rounding error in terms of its effects on the U.S.--not one of the thirty most important things the U.S. government could do for good or ill for the U.S. economy. It has small net benefits, yes. It had some costs for groups that had flourished under the umbrella of the pre-1993 barriers to imports from Mexico, yes. Those costs should have been better cushioned--and would have been had not Americans voted for Gingrich as House Speaker and Dole as Senate Majority Leader in 1994--yes. But those costs are now sunk, and those firms and sectors have adjusted and moved on. Abrogating NAFTA would impose a new and different set of costs, and would have no net positive benefits as an upside, yes.
But NAFTA is, substantively, not worth committing political capital to attack or to defend if one is required to limit one's view to its direct effects on the U.S. The rational strategy, therefore, if one is forced to look at the direct effects in the U.S. and at the U.S. only is to let the point go and keep your powder dry for more important struggles, rather than wasting energy and stressing political alliances.
That's where Dani's rhetoric takes us.
And that is, I think, very wrong. The indirect and long-run benefits for the U.S. in living in a more peaceful, more stable, and more prosperous world are large and mighty. NAFTA is and was worth doing for the reason that it is and was a stone placed in that still-unfinished arch. But to point that out is to be a rootless cosmopolite--the thing that Dani wants to rule out as a political position. And if one has to argue that abrogating NAFTA is "poor domestic governance" in terms of its direct effects on the U.S. economy--well, that is a very heavy lift indeed..."

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