Evidence about trade and poverty


#1

Continuing the discussion from Same as the old boss: Justin Trudeau ready to sign Harper's EU free trade deal:

Alright, I’m listening. Where can I go to find data showing that trade is the best solution to poverty that disentangles the benefits of trade from increasing technology?


#2

Very interested in this thread. My friend is researching NAFTA and CAFTA and it’s abundantly clear that neither of these have helped with poverty or jobs. Though they have enriched a lot of big corporations. Incidentally, Clinton was unable to write an executive order prohibiting the federal government from using products that were made with child labor from Canada or Mexico because the NAFTA provisions would not permit it.


#3

Is it conspiratorially theoretical of me to imagine that the heavily monied interests are all positioning themselves for the AI revolution?

Do trade agreements make guaranteed income more or less likely?


#4

Also CAFTA/NAFTA were extremely one-sided. When Canada attempted to enforce provisions of the treaties against the US basically the US just said (in at least a couple of cases), “Nah, we’re just going to do what we want anyway.” What exactly were was Canada going to do about it?

But I’m more interested in the evidence that trade deals have lifted people our of dire poverty. We could simultaneously accept that trade deals between two G20 countries tend to favour the richer of the two and that trade deals between wealthy nations and impoverished nations improve the living conditions for the people in the impoverished nations. We know that return on capital is higher than growth, but it’s possible that trade increases growth to the extent that it’s actually better for people despite having so much of the wealth that is created vacuumed up by some foreigners. I’d like to know if that’s been true.

I guess I should also say that it’s important to separate trade from trade deals. If we have good evidence that trade lifts people out of poverty, that isn’t the same as evidence that trade deals are beneficial, it could be that the former is true (and given a broad enough umbrella of “trade” it would inevitably be) and the latter isn’t.

I don’t know, but I’d like to keep this thread about evidence of what trade has actually accomplished for people. I encounter this argument a lot, “but trade lifts people out of poverty” and what I’ve read about NAFTA says, “no, it doesn’t” but that’s not really the picture of all trade.


#5

I was responding to the ‘increasing technology’ chunk of your question.
Perhaps I’ve misunderstood, let me try to parse it again.

Proposition 1: (A type of) Poverty (poverty that) disentangles the benefits of trade from increasing technology.

Proposition 2: Trade is the best solution to 1.

Question: Where can you find evidence of this.

First I would have to ask, how do you imagine *Trade is (best) solving the issue of poverty disentangling the benefits of *itself from increasing technology?

Again, I may have parsed your question incorrectly but if Poverty is disentangling the benefits of trade from increasing technology, is it not because poverty makes it more and more difficult to access the types of technology that benefit quality of trade?
I can imagine that examples of this would be micro-transactions in market economies… education in currency exchange technologies and systems, anywhere where poverty can negatively effect the way in which people gain access to the types of technology which enable trade that is beneficial to them.

So, we are to imagine a type of trade which is beneficial to the poverty-afflicted in the sense that it enables itself even within a system dominated by trade enabled by increasing technology. It disentangles the benefits of trade from trade dominated by increasing technology.

Against the background of trade agreements, which seem to lock down severely access to markets, copyrighted ideas and technologies and the kind of access which those afflicted by poverty are likely to be able to gain (through stringent controls on how small businesses may act within the context of locally binding international trade agreements (for example)) you seem to be asking what kind of trade, or at least, what kind of evidence is there about what kinds of trade would enable the kind of markets which those afflicted by poverty may still access.

I assumed two fundamental contributing factors to the background of your question.

  1. In the face of ever more control at the international level and more and more poverty caused by concentration of wealth into fewer and fewer hands, basic guaranteed income has been proven to be a method of enabling those afflicted by poverty to access markets by encouraging small, local and international business markets to develop through easing of poverty conditions.
  2. The background of poverty-causing conditions is likely being exacerbated by the aforementioned concentration of wealth, which may be being driven ever more quickly and violently (through things like international trade agreements) by the markets reaction to the future predictions of economic activity affected by the advent of stronger and stronger AI (and recursively generating more and more suggestions that basic guaranteed income is a necessity in the face of this AI revolution.)

I don’t read up on this stuff enough to provide you with an exhaustive list of references but I did want to engage in conversation about my suggestions which may lead you to investigate a branch of market theory you hadn’t considered.

If trade does lift people out of poverty, then it is likely within the context of a strong support of small business creation, and that has to be achieved against the background of international trade agreements and corporate power.

Perhaps I’m assuming too much to even imagine that small business creation is, itself, helpful?


#6

Isn’t the era after NAFTA generally correlated with increasing poverty? I thought that was the majority consensus view among economists.

Among working voters anyway, there’s generally less union organization, less savings, fewer retirement assets, less home equity and onerous private debt burden dragging consumption. Income inequality spiked, and there was a recession.


#7

Simply put, I’m looking for evidence that trade lifts people out of poverty. I mention technology because I think a competing theory to “trade has lifted billions out of poverty” is that technology has lifted billions out of poverty. Trade has obviously been a major vehicle for sharing technology. I would like to give a fair hearing to evidence that trade is responsible for the huge alleviation of poverty that has happened in recent history, but I don’t want to waste my time looking at a bunch of charts showing the growth of GDP in countries that could be explained by any of a huge number of competing factors.

I think it is. I am just asking if there is evidence that trade is a benefit. It could be that trade between a very wealthy nation and a very poor one benefits the poor one while at the same time NAFTA was a terrible deal written by business for business and against the interests of the nations.

To what extent can we actually blame NAFTA for that? I really don’t know. If someone has evidence that the trade part was good but other things (e.g, monetary policy, cultural perception of unions, increasingly bought-off politicians) were wrong, I’d like to know about it.


#8

As with public policy generally, NAFTA proponents have the burden of proof to convince working voters that its something more than an ad campaign disguising an inequality engine. I don’t think serious people (without a dog in the fight) are making that argument, are they?


#9

I agree with you. This thread is an attempt to keep an open mind while trying to get evidence about the positive effects of trade. Every time I’ve ever asked someone for evidence that trade has lifted people out of poverty I’ve either gotten “Look at this [GDP or whatever] graph” which doesn’t tell me anything, or “If Alice’s car is worth $2000 to Alice and $3000 to Bob then…” nonsense. I’d like to know why people who think trade is so beneficial think it is so beneficial. Maybe it’s for a good reason, maybe it isn’t. But if someone is going to be incredulous that I’m not on board with the obvious facts, I’d like to at least hear them out.

Like I said, this is all about asking for evidence. It hasn’t worked to date, but I keep trying.


#10

Well said though I think a case can be made that corporatists are the new Maoists of public discourse. Old and new leftist groups sometimes found they could not sustain honest discussions about problem solving with party members who followed a disciplined party line.

It’s a similar phenomenon with people devoted to the corporate line: They are not always participating in an honest discussion about solving problems for working people.

Like a Maoist faction at an SDS meeting in 1969, the real effect is to disrupt honest discussions and consensus building about, for e.g., alternatives to NAFTA.


#11

First thanks, for setting this up. Second, I’m not certain it’s possible to disentangle technology from trade because trade is usually the driver of technology. Third, I have to walk back a bit from “tree trade automatically = poverty reduction”. Fourth, I’m not an economist, but my opinion is based on general consensus of economists, as they’re the ones studying the field. It’s pretty much the same approach I use dealing with medical matters - follow the consensus of doctors/medical researchers.

By the way, I’ll be pointing out arguments against my position as well. My general feeling is that if I can’t make a cogent argument against my position, then I haven’t looked at it closely enough to take any position.

Lastly, I’d like to thank you for prompting me to do a bit more in-depth research. It’s been interesting.

Generally, my opinion is reflected roughly by the Wikipedia article (Trade_and_development). However, this paper here (not all rah, rah trade) Will international trade reduce poverty is pretty reasonable. Appendix 5 has a pretty straightforward graph that provides correlation between trade and poverty reduction. Note, this won’t provide iron-clad proof because such proof is unobtainable in real life (unless you’re a Rand-ist…)

My personal view is influenced by the massive growth linked to trade in South Korea, Vietnam, and of course, the poster child for global poverty reduction, China.

However, this U.N. paper does indicate that the gains are not nearly as clear when we’re talking about countries with terrible institutions. While we could see large growth in India, Pakistan and Bangladesh, due to free trade, the gains from trade for various African nations vary tremendously over the continent.

Here’s another U.N. article of trade and poverty. Note if you want to find someone who is skeptical about the general consensus, I’d go with Dani Rodrik. Here’s an article where he questions the consensus.

Anyway, that’s something for the moment.


#12

I think you have to keep your expectations realistic. The USA will always be able to beat Canada up and take its lunch money. Treaties are about trying to dissuade them from doing it as often. NAFTA won’t stop the USA from bullying Canada (see Software Lumber), but it does make it more awkward for them to do so.

Instead of slapping us around every time a senator is pressured by his constituents, not it takes five senators coming in a bloc to persuade the government to kick us around.

This is progress.


#13

Economic growth is a different question than poverty reduction.


#14

This. A trade deal like NAFTA also has stipulations for trade outside that agreement.


#15

Agreed, but growth is pretty much a prerequisite for poverty reduction. Anyway, with China, I’ll quote an article in the Guardian:

[quote]
China has lifted more people out of poverty than anywhere else in the world: its per capita income in increased fivefold between 1990 and 2000, from $200 to $1,000. Between 2000 and 2010, per capita income also rose by the same rate, from $1,000 to $5,000, moving China into the ranks of middle-income countries.
Between 1990 and 2005, China’s progress accounted for more than three-quarters of global poverty reduction and is the reason why the world reached the UN millennium development goal of halving extreme poverty.[/quote]

Of course the other thing to look at is whether we’re talking about absolute or relative poverty. Absolute poverty is pretty much unknown in developed nations (few starve to death, etc.), but relative poverty is a real problem, and is often exacerbated by trade. However, I will submit that absolute poverty is many times worse than relative poverty and cannot be addressed without economic growth.


#16

Exported jobs and stagnant U.S. wages proves accelerating inequality not poverty reduction.


#17

First, I was talking about absolute poverty. Earning < $1,000 year. If GDP is less than $1,000 per capita, you will have lots of absolute poverty.

You are talking, of course, about relative poverty. And that is far more a matter of social policy more than anything else. The American electorate seems to have consistently shown an unwillingness to vote in politicians that believe in higher redistribution.

I say this not as a criticism (who am I to criticize the expression of American democracy), but to point out that trade has little (not nothing, but little) to do with either stagnant wages or greater inequality. After all, America manufactures more than it did during the “golden age” of manufacturing. Just like the agricultural revolution reduced employment in the agricultural sector by massive amounts while producing more food, we’re seeing manufactured good produced with much higher technology and thus requiring many fewer workers.

Tragic job losses in Michigan are far more due to trade with the car manufacturers in the Southern states than those overseas.

For the most part, this is good. After all, your lifestyle is dependent on your productivity. Someone producing at 1950’s level of productivity would be living at what we would consider the poverty line. However such progress does put pressure on those who have a hard time guaranteeing the phenomenal levels of productivity that are necessary to support a middle-class lifestyle.

Social support for those left out by technological change is an imperative. In the US, this requires a cultural shift from “anyone can make it if they just try hard enough” to acknowledge that some segments need support in order to find a productive economic place.


#18

Have you read James Galbraith? He wrote an accessible book called [The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too] (http://www.powells.com/book/predator-state-how-conservatives-abandoned-the-free-market-why-liberals-should-too-9781416566830/1-9). It’s a great book for understanding how political emphasis on deregulated finance fueled, among other issues, tech bubbles which contributed to steeply increasing inequality which is still accelerating.


#19

Maybe EC/EU? It is a free trade zone and countries like Portugal or Ireland benefitted from the membership - they were, compared to other European countries, poor as a church mice.

(Though the free trade was accompanied by substantial redistribution of money, without an instrument like the European Regional Development Fund trade alone is probably not able to balance unequal economies.)


#20

Thanks, I’ll get that onto my “to read” list - the table of contents looks interesting.

Personally, I find the market a fairly powerful tool for generating wealth. While it’s obvious to me that an unregulated market eventually destroys itself, I’m not a great fan of heavy regulation as my experience has been that such regulation usually ends up simply protecting the incumbents.

(The financial markets may be an exception to my preference for a lighter hand in regulation. Like the nuclear industry, finance has shown that their failures can affect far more than the participants and thus are a suitable object for close regulation. This is not a statement of their character, just an observation of the importance of their industry.)

Anyway, I certainly remember the debates by the regulators that the Internet needed to be properly regulated because it threatened the well-regulated monopolies of the phone service and the post office. And truth be told, dismantling the Internet would solve many of the ills of unemployment and concentration of wealth that afflict us today.

However, I, like many, am greedy, and will take my personal comfort of having the Internet over the discomfort of the millions that the Internet has rendered unemployed.