Everyone Hates Trade

Erik Loomis agrees that Trump won the segment on trade.  He agrees, because he goes on to say that NAFTA was indeed awful and awful for everyone.

I've liked reading him, since I added LGM to my reading list this summer, but I don't know what to make of his argument.  He calls the trade deal terrible for Mexican workers.  Here's a chart for the GINI co-efficient for Mexico.  (GINI measures the economic inequality in a country.)  Objectively speaking, inequality is better in Mexico today than it was in 1995, when NAFTA passed.

But GINI only measures the inequality in a society.  America and China have roughly the same inequality, but the American poor are measurably better off than Chinese poor - who suffer from lack of clean drinking water, food scarcity and reliable electricity.

How do we measure quality of life?  The best metric might be the Human Development Index.  This measures things like health, education, literacy and life expectancy.  In 2014, the US ranked 8th in world behind some wealthy European countries, whereas China ranked 90th.

Mexico ranked 74th in the world, between Sri Lanka and Turkey above it and Georgia and Azerbaijan below it.  It had a "raw score" of .756 on the Index.  In 1990, Mexico's raw score was .648.  In 2000, it was .699, in 2010, .746.

So, since implementing NAFTA, Mexico has seen inequality fall and quality of life improve.  The single biggest negative about Mexico at the moment is the drug cartel violence and corruption in the judiciary.  Mexico ranks 103rd out of 175 in corruption (the US was 17th out of 175). In 1996, Mexico ranked 38th out of 54, as Transparency International wasn't able to assess more than the large countries.

The Mexican middle class is growing.  While that story is complicated, it's undeniably real.  What is also undeniably real is that the billionaire class in Mexico has benefited more from NAFTA than has the middle class.  The one group has been hammered by NAFTA is NOT the middle or working classes, it's the rural poor.  The people furthest removed from NAFTA have been the ones who can't escape poverty.

The story of globalization is that the rising tide lifts the yachts a lot more than the ferries and rowboats.  But the ferries and rowboats ARE rising.

There's a tendency among the left to dismiss trade agreements on the basis that they do create more inequality.  Neoliberal economics will do that.

What isn't honest is portraying them as objectively horrible.  These trade deals are bringing increased prosperity to the working and middle classes of countries like Mexico and China.  Globalism has been really good for the global poor, a population who are shrinking.

Inequality is a real problem generated by this.  The proper question is not "How do we get out of NAFTA?" but "How do we insure that populations disadvantaged by trade deals are helped?"