This is a bit of a stretch

In 1996, only five years after the end of the Soviet Union – with Russia’s once-protected markets having been forcibly opened, leading to a sudden decline in living standards – a communist won 40% of the vote in Russia’s presidential elections.

The post-Soviet decline in living standards is grossly overstated. Among other things they went from a system which didn’t count economic output nor consumption to one that did. Seriously, Soviet GDP accounting was dire, even counterproductive.

But even so, blaming this on the country’s openness to trade is ridiculous.

I have to admit that I’ve never really gelled with this idea of Rodrik’s:

For Rodrik, it was “the process that has come to be called ‘globalisation’”. Since the 1980s, and especially following the collapse of the Soviet Union, lowering barriers to international trade had become the axiom of countries everywhere. Tariffs had to be slashed and regulations spiked. Trade unions, which kept wages high and made it harder to fire people, had to be crushed. Governments vied with each other to make their country more hospitable – more “competitive” – for businesses. That meant making labour cheaper and regulations looser, often in countries that had once tried their hand at socialism, or had spent years protecting “homegrown” industries with tariffs.

One reason being that globalisation was at least in part (and I would argue more than a minor part) a technological issue, not a policy one.

As an historical example, post Civil War US import tariffs doubled, at least upon manufactures. Yet imports kept going up by leaps and bounds. This is because trade barriers are not just tariffs, policy. They are those plus transport and logistics costs. The ocean going steamship lowered transport costs by more than the rise in tariffs – trade barriers actually fell (See O’Rourke and someone, The Power and The Glory).

What has also been happening since the late 1950s? Container ships and cheap flights and telecoms. It is vastly, hugely, cheaper now to go look for, find, and transport goods and services from other countries. Add the internet more recently. Actually, I was using the internet to do international trade in the early 1990s (shipping code from Moscow to Silicon Valley).

The point being that in order to have a neutral stance upon trade, or globalisation, policy against trade would have had to be enacted. Substantial levels too. Think about it a little. Alibaba has made it vastly easier to buy from mid and low level Chinese firms. Sure, there are problems etc. But how much higher would trade barriers like tariffs have to be to overcome that greater ease of trade?

Globalisation was and is at least partly a technical matter, not a policy one at all.

These moves were generally applauded by economists. After all, their profession had long embraced the principle of comparative advantage – simply put, the idea countries will trade with each other in order to gain what each lacks, thereby benefiting both.

Christ. Can we even get Ricardo right? That’s absolute advantage.

This then descends into gibberish:

While many economists attributed much of the insecurity to technological change – sophisticated new machines displacing low-skilled workers – Rodrik suggested that the process of globalisation should shoulder more of the blame. It was, in particular, the competition between workers in developing and developed countries that helped drive down wages and job security for workers in developed countries. Over and over, they would be held hostage to the possibility that their business would up and leave, in order to find cheap labour in other parts of the world; they had to accept restraints on their salaries – or else.

Entirely true. If there are losers then it’s going to be the low skill workers of the rich countries. Adding a couple of billion low skill workers to the global labour force will do that.

Over the course of the 1990s, an unwieldy international coalition had begun to contest the notion that globalisation was good. Called “anti-globalisation” by the media, and the “alter-globalisation” or “global justice” movement by its participants, it tried to draw attention to the devastating effect that free trade policies were having, especially in the developing world, where globalisation was supposed to be having its most beneficial effect.

That’s the idiocy. Because the people who undoubtedly benefit are those couple of billion low skill workers being added to the global labour force.

Activists were intent on showing a much darker picture, revealing how the record of globalisation consisted mostly of farmers pushed off their land and the rampant proliferation of sweatshops.

People sucked off their land by the greater opportunities of the sweatshops. Corrected that for you.

The rest of it is how evil the Washington Consensus was and the merits of infant industry protection behind tariff barriers. The bit being missed is that the second was tried and the outcome was it didn’t work. But apparently we should abandon the system which has, these past 40 years, caused the largest fall in absolute poverty in the history of our species and go back to something which provably doesn’t work.

Ho hum.

17 comments on “This is a bit of a stretch

  1. On a tangential note, it seems to be common currency that Chinese companies pay “less than subsistence wages”.

    OK, let’s put aside the idiocy of anyone wanting their employees to come to work starving and hence unproductive. If people aren’t being paid enough to live on, then we should be seeing millions of deaths from malnourishment in China then?

    We’d expect, for instance, to see malnutrition-related deaths to be higher than in France or Norway, right?

    Here’s a table based on 2014 WHO figures.

    We have say Congo up at 46.23 per 100k, that much is obvious.

    France comes in at 2.25, Norway at 1.07, the USA at 0.58.

    Where does China fit in with this? Well, at 0.36 it’s just one place below Switzerland at 0.34…..

    So no, millions of people are not starving to death in China unless we want to believe that millions are also dying in France…

    This is a massive example of Feelz trumping Evidence, and reminds me of the Thomas Sowell quote: “The whole political vision of the left, including socialism and communism, has failed by virtually every empirical test, in countries all around the world. But this has only led leftist intellectuals to evade and denigrate empirical evidence.”

  2. If Nikil Saval is so opposed to global trade why is he, a Yank, writing tripe for the Grauniad?

  3. Another twat to be added to my list of people who are going to be beaten to within an inch of their lives with a copy of Johan Norberg’s Prgoress.

  4. Dearieme: a Yank, yes, but from the looks of him, of Asian extraction. Is he really sorry that his forebears were “yanked from the land…” and allowed to participate globally?

  5. It’s also so all anti-historical, which is the biut that annoys me.
    The steamship and the telegraph laid the foundations for our world today. The world economy pre 1914 was truly globalised. I was just reading last night that Germany imported a third of its food in 1914, nearly all of its grain came from North America. Nearly all of Britain’s beef came from South America.
    The difference then being that Western Europeand USA producd the goods, with raw materials from Bongobongoland, now the goods are made in Bongoland but we supply the design and money.

  6. BnliA,

    “The world economy pre 1914 was truly globalised”

    And very few countries insisted on passports for entry.

  7. I have someone here, right now, was reaching adulthood in a small town in Eastern Siberia during the fall of communism Their memories of the period, recounted over dinner last night, were of increasing prosperity & seeing things in the shops they didn’t believe existed. The fact that they’re here, now, on the Mediterranean coast, is more of the same.

  8. Another issue was that companies/ industries had not been designed with efficiency in mind. So an initial slump in many areas is probably to have been expected as inefficient domestic industries meet efficient foreign industries in one go. Of course, the increased openness to trade would improve efficiency as well but for that initial point in time a decrease in living standards is not infeasible.

  9. “But apparently we should abandon the system which has, these past 40 years, caused the largest fall in absolute poverty in the history of our species and go back to something which provably doesn’t work.”

    And you wonder why I think this shit is deliberate neo-racist propaganda.

  10. We know why you think that Dave –you are a fucking lunatic with a brain full of SJW bullshit and fantasy anti-Semitic conspiracies.

  11. Russian male life expectancy plummeted from 65 in the mid-1980s to 57 in 1994, and didn’t fully recover until 2013. Unless the Soviet life expectancy figures were as unreliable as their GDP figures, that’s a fairly damning indictment of the transition.

    Obviously they’re back the old level now, so no complaints. But it took a lot of pain to get there.

  12. A large part of that was due to Russian males tendency to drink anything that remains liquid at Earth-normal temperatures and has the slightest trace of alcohol (or some near-relative) in it.

  13. “…..often in countries that had once tried their hand at socialism, or had spent years protecting “homegrown” industries with tariffs”

    It sounds al so innocent and bucolic.

  14. @ Andrew M
    Yes, the Soviet figures were unreliable, but there probably was a decline in male life expectancy.
    There were several factors – Mr Ecks quotes one that is trivial (how much did drinking vodka increase after the fall of the Berlin Wall?) among which was the closures of the health centres that were used for holidays by employees (and their families) of large enterprises. The major impact of alcohol was, like in the North-East of England when they closed coal mines, the sharp increase of the amount drunk when the guy wasa unemployed and had nothing else to do.
    Anecdata alert – I once visted Yakutsk: while waiting for the plane to take off, my guide/colleague drank a half-bottle of brandy; we met a local expert in a Sauna – he drank more than a whole bottle of vodka in less than two hours

  15. Tim – I appreciate that the GDP figures were garbage prior to EOSU, but you were there, right? Didn’t a reasonable amount of people (perhaps underrepresented in those you would have interacted with, but still..) tell you that they did, in fact, experience a decline in living standards?

  16. As far as I’m aware from that personal experience two things.

    1) There was a decline, but it was 88 and 89 really. By 1990 and the changes, the decline had happened.

    2) Much of the change was things that weren’t monetised before becoming monetised. For example, queuing for rationed goods stopped when there were no more rationed goods. Queuing was not counted as part of the economy, it not being a monetary transaction. And boy, did you have to queue.

    Sure, I was privileged. But my definite impression was that things got better from perhaps 2 months after the end of price controls.

Leave a Reply

Name and email are required. Your email address will not be published.