I just thought I would counter yesterday’s discussion of “blowback economics” with a typical pro-trade argument from a mainstream economist, in this case Kenneth Rogoff at Harvard:

The rise of anti-trade populism in the 2016 US election campaign portends a dangerous retreat from the United States’ role in world affairs. In the name of reducing US inequality, presidential candidates in both parties would stymie the aspirations of hundreds of millions of desperately poor people in the developing world to join the middle class. If the political appeal of anti-trade policies proves durable, it will mark a historic turning point in global economic affairs, one that bodes ill for the future of American leadership…

The right remedy to reduce inequality within the US is not to walk away from free trade, but to introduce a better tax system, one that is simpler and more progressive. Ideally, there would be a shift from income taxation to a progressive consumption tax (the simplest example being a flat tax with a very high exemption). The US also desperately needs deep structural reform of its education system, clearing obstacles to introducing technology and competition.

Indeed, new technologies offer the prospect of making it far easier to retrain and retool workers of all ages. Those who advocate redistribution by running larger government budget deficits are being short sighted. Given adverse demographics in the advanced world, slowing productivity, and rising pension obligations, it is very hard to know what the endgame of soaring debt would be.

Like I said, I am still thinking these things through. I find the mainstream economic arguments very elegant and appealing, but clearly they haven’t led to the promised gains for everyone in either the developed or developing countries. I am suspicious of the trickle down claims, although I have spent time in so-called “middle income” countries in Asia and I can’t deny that even the relatively poor have made huge gains in areas in health, nutrition, and life span, even if monetary incomes are lagging. The fact that things are better than they used to be doesn’t mean they are as good as they could be. I would like to hear more details about these training technologies and education reforms that are going to make everyone competitive in the global economy – when are they going to be rolled out, how and by whom? Or if there is not a plan yet, who exactly is working on one?