Compensating Variations

The British Parliament was debating how much slave owners should be compensated for their losses, 20 million pounds as it turned out, when a furious John Stuart Mill rose to his feet thundering, "I should have thought it was the slaves who should be compensated."

I am reminded of this story, which is probably apocryphal, whenever I hear about how we must compensate "the losers" from globalization.  Really?  Why should they get any compensation at all? 

Imagine that transportation costs fall so that Joe buys his shoes from China.  Why do lower transportation costs impose an obligation on Joe to compensate Mary, a U.S. shoe maker?  If transportation costs rise (say because the price of oil increases) does Mary have an obligation to compensate Joe?

Or imagine that tariffs have long protected the shoe industry and now the tariffs are lifted allowing Joe to save some money.   Why does this impose an obligation on Joe to compensate Mary?  Indeed, shouldn’t Mary have to compensate Joe?  After all because of the tariffs for many years Joe had to labor extra hours to buy shoes – shouldn’t Joe be compensated for this injustice?

Think about it this way: Suppose the mafia threatens to do you harm if you don’t buy at over-inflated prices from Guido’s Supplies.  For many years you buy but one day the mafia is forced out of business.  Now you are free to buy from any supplier.  Must you compensate Guido for his losses?

Of course, I understand that we might have to compensate the losers from globalization because without compensation they won’t allow us to trade.  My question is different.  It might be expedient to compensate slave owners but is this justice?


Addendum: It was Benjamin Pearson not Mill (see my comment below for citations).


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