The steelworkers union scored a coup recently with the tariff on Chinese tires, and the United Steelworkers have a large appetite for leveling imbalances in the facade of free trade. Pointing out that Chinese companies receive lucrative subsidies and a host of state support, the steelworkers convinced the commerce department and the executive branch to place a thirty-five percent tax on Chinese tires. Obama recognizes that, in some ways, he owes his victory to unions and if he wants to win in Ohio and Pennsylvania, he will back their requests. As United Steelworkers president Leo Gerard pointed out, Chinese companies benefit from state intervention and support. To further illustrate this point, the final installment in the NYT's series Uneasy Engagement--which reports on the "stresses and strains of China’s emergence as a global power"--found that state companies and corporations headed by influential politicians or their relatives were linked to corrupt business tactics in Africa. Far from relying on fair strategies, the Chinese government and its businesses (the same as the Americans and most world powers) utilizes its leverage and financial resources to enrich itself and state companies regardless of the cost. It's silly to believe that they play the game with any other intention.
As one could guess, economists are decrying the tariff and warning of protectionism battles that threaten the inviolable doctrine of free trade. It's all well and good if you're preaching free trade in an economics classroom or from an executive's chair in a conference room, but the utopia of neoliberal free trade doesn't pay off for millions of Americans and hundreds of millions more across the world. My complaint about macroeconomics is that they fail to address the social cost and how free trade can eviscerate the working-class. Recently, in Paul Krugman's piece in the NYT Magazine, How did Economists Get it So Wrong, he blasted macro econ profs for, ultimately, their ignorance and reliance upon faulty quantitative models that distanced economists in academia, government, and the private sector from reality. While it won't surprise anyone, he lumps the majority of blame on neoclassical economists from the University of Chicago school ("freshwater economists") who dismissed Keynesian economics roundly. (As an aside, in a blog entry on Conscience of a Liberal, Krugman shares that Chicago economists did not enjoy his jeremiad. In typical fashion, Krugman doesn't give a rat's ass.)
Krugman credits the saltwater economists--the camp which he falls in as well as Brad DeLong--for keeping the Keynesian flame alive, and he advocates for dropping byzantine Planglossian modeling and a shift toward behavioral economics to grasp how and why economists function. Behavioral economics might offer a path to reduce volatility and put a necessary end to dreamy concepts such as credit derivative swaps.
I'm not an economist and I don't play one on TV or popular press outlets. I agree with Krugman and I think he's correct for pointing out that the profession as a whole requires an intellectual overhaul. However, his article never mentions how people encounter the Great Recession and similar horrific contractions. People appear as abstract, generalized concepts rather than individuals who suffer, lose, or marginally benefit. Economists are divorced from social consequences, which is why I'm pleased that the Obama administration acted in concert with the Steelworkers' requests. The obvious rejoinder is that macro economic methodology doesn't permit for such a narrow focus, which is the preserve of micro economics or social scientists. Fine, but it fails to explain why America's leading economists advance theory and policy that benefit a small section of a population and neglects to help the majority of people and often hurts them in pursuit of lofty ideas of streamlined free trade and GDP increases.
The question returns to a simple inquiry: who benefits and at what cost?
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