Unfair Competition from Robotland

Print Friendly, PDF & Email

This campaign season brings many complaints about “shipping jobs overseas.” Candidates promise to crack down on the offending corporations. American workers and the United States as a whole must compete on a slanted playing field against foreigners paid much below a dollar an hour. Moreover, the foreigners manipulate their currencies. They buy less from us than we from them, putting the US into a trade deficit (more exactly, a current-account deficit) costing us many billions of dollars a year. China, Japan, and Mexico count among the worst offenders. Free trade is fine, but only when it is fair.

In a similar but imaginary scenario, technology has advanced so far that “Robots” (in a stretched sense of the word) displace American workers at costs equivalent to Robot wages of 50 cents an hour. What is the difference between shipping jobs to Bangladesh and shipping jobs to Robotland? Well, Robotland does not have a balance of payments, so it cannot be accused of buying less from us than we from it, fleecing us of the difference. In the real world, automatic market mechanisms, if allowed to operate, forestall worrisome trade deficits and surpluses; and if the foreigners do make unbalanced sales to us, what can they do with the money? They acquire American bank accounts, securities, and properties, so supplying us with financial capital on advantageous terms.

What sense does the notion of one country competing with others have? Does it mean that international trade is a zero-sum game, with countries squabbling over shares in a fixed total of gains? On the contrary, international trade and advanced technology are alike in making desired goods more abundant. One country’s relatively low standard of living would trace to technological and entrepreneurial backwardness and perhaps to bad government. It would be absurd to blame its relative poverty on incompetent trade-policy negotiators.

One country’s relatively low standard of living would trace to technological and entrepreneurial backwardness and perhaps to bad government.

In the real world, conceivably, Robotland technology might displace many American workers, inviting Luddite arguments. I do not want to get into that issue here. I merely ask what the difference is between the scenarios of foreign competition and robots.

I wish that today’s vapid political debates could give way to ones with candidates testing one another’s policy-relevant understanding by posing questions like the one about robots. Other questions might be: How do your trade-policy proposals square with the principle of comparative advantage? What light might the absorption approach to balance-of-payments analysis shed on a connection between a trade deficit and a government budget deficit? In what sense is the Social Security trust fund a reassuring reality and in what sense a deceptive farce?

Unfortunately, such questions would not faze Donald Trump. He would respond with vicious personal insults and with reiterations of his own excellence. Anyway, allowing such questions could be entertaining. They might even enlighten some voters.

Leave a Reply

Your email address will not be published.