Rodrik on Foreigners

Rodrik writes:

So the "us" and "them" characterization that Tyler attributes to irrational nativism perhaps has more to do with the absence of a common set of international rules on labor standards, environment, consumer safety, and so on.

Tyler responds ably here, I will add a few more comments.  A testable implication of Rodrik’s hypothesis is that people will be more upset about international trade than immigration since foreigners in foreign countries obey different rules but immigrants obey the same rule as us.  In reality, people are more upset by immigration than by trade and as a result we are much closer to free trade than to free immigration.

Rodrik has a very Ivory-tower view of what people care about.  Rodrik may be upset that people in other countries have poor on-the-job safety but (for the most part) workers who lose their jobs to foreigners really don’t give a damn.  What U.S. workers are upset about is losing their job and if asked to name the problem the U.S. worker will almost certainly say it’s the low wages of foreigners not their poor working conditions.  Moreover, the worker’s diagnosis of the problem (problem to him or her that is) is correct and Rodrik’s diagnosis is wrong.  Why?  Because higher safety standards in foreign countries would cause foreign wages to fall and thus would not much reduce competition from abroad, which is what the worker cares about.  I assume that Rodrik knows this even if the worker does not. 

Rodrik’s deeper argument is also peculiar, especially for a liberal economist.  A liberal economist should understand that for the most part labor, environmental and consumer safety standards are chosen not imposed (not always, of course, but for the most part in the long run).  In the United States we have a lot of job safety because we are wealthy and are willing to pay for job safety with a reduction in our (already high) wages.  In other words, Americans buy a lot of on-the-job safety for the same reasons we buy a lot of smoke alarms and DVD players.  (OSHA has very little effect on job safety.)  Job-safety is thus a choice Americans make about what to consume – we use some of our wealth to buy safety both at home and at work and some of our wealth to buy DVD players.  Thus, to argue that we shouldn’t trade with foreigners because they don’t have the same job safety as Americans makes about as much sense as arguing that we shouldn’t trade with foreigners because foreigners don’t buy as many DVD players as Americans. 

Comments

There is one more subtle (or not to subtle angle to this issue). If you tell people in other countries that you are not trading with them because of safety issues, you come of sounding like "we are better than you" or "you better do things our way, or else", and that's not going to earn you any brownie points

"Because higher safety standards in foreign countries would cause foreign wages to fall and thus would not much reduce competition from abroad"

This is also wrong. Higher safety standards would indeed reduce demand for labor, and with it wages. But if whole countries/the world would have increased costs for safety, etc., then it is unrealistic to assume a labor supply elasticity that would lead wages to fall exactly to compensate for those increased costs.

"the government gets in front of a parade and pretends it's leading it."

This is my model for all government initiatives. Maybe not always true, but a good place to start. Being a politician is one of the least capital intensive ways to "lead" an uncertain future. All you have to do is purge any compunction you have about reneging on your promises and proclamations. What do they lose by jumping from parade to parade?

I think that certain politicians want to protect jobs in their district and they use the "safety inequality" argument to get the sympathy of other lefties to build support. I think they think that requiring foreign safety parity will raise the cost of employment. I agree. I have one question. Are the "unsafe" jobs that foreigners are taking less safe or safer than the other jobs they'd be doing? We know other benefits must be greater. I have a feeling industrial jobs are just better at recording safety incidents.

My father, at the end of his career, held a safety job for a large corporation. I can attest that at least the one developing country he spent the last couple years had a culturally lower value of individual safety than the US or the company standards. So, my opinion is that globalization is also best for making safety inroads.

'A testable implication of Rodrik's hypothesis is that people will be more upset about international trade than immigration since foreigners in foreign countries obey different rules but immigrants obey the same rule as us. '

And yet, politically, one of the largest complaints about Hispanic immigrants (both legal and illegal) is how they don't obey the same rules - they wave Mexican flags, speak Spanish, etc. While some of that complaining is merely a cloak for racism, of course, certainly not all of it is.

So, using your testable implication, I'd say Rodrik wins the point.

Not sure how Tyler "responds ably" other than to recognize that human nature isn't going to disappear just because a few ivory tower libertarians want it to, but you're correct in that Rodrik is on the wrong track.

Americans don't care much at all about public safety in other countries.

"Because higher safety standards in foreign countries would cause foreign wages to fall and thus would not much reduce competition from abroad, which is what the worker cares about."

contra

"In the United States we have a lot of job safety because we are wealthy and are willing to pay for job safety with a reduction in our (already high) wages."

It's possible that those workers (I'm not sure why your ivory tower provides a better understanding than Rodrik's) know very well that safety costs money, and assume that foreign wages are already at a floor that can't be lowered. By demanding environmental, safety, and other regulations, they're simply imposing costs that can't be shifted to lower wages. People can't work for less than nothing, which is what a bowl of rice a day is.

And by "possible," I mean that's almost exactly what most union guys think when you talk to them. Why don't you try talking to them?

Alex asserts:

"A testable implication of Rodrik's hypothesis is that people will be more upset about international trade than immigration since foreigners in foreign countries obey different rules but immigrants obey the same rule as us."

So that's why the state of California has such a rock solid budget surplus! All the immigrants are paying taxes at the same rates as natives.

"A testable implication of Rodrik's hypothesis is that people will be more upset about international trade than immigration since foreigners in foreign countries obey different rules but immigrants obey the same rule as us. "

People have criticised this above enough, but I'll join in the chorus -- there are a lot of other factors that go into objections to immigration, beyond effects on wages, labour standards, and so on. Almost none of these objections is in any way shape or form relevant to the problem of international trade. If people object to international trade because it creates a race to the bottom in terms of labour standards or whatever, only a tiny part of objections to immigration stem from the degree to which immigrants might undercut the bargaining power of whatever socioeconomic class they immigrate into (usually poor and destitute natives, at least in Western countries).

Other common objections are that (1) natives don't like them as neighbours (since they come from different cultures and you can run into awkward miscommunications all the time, even if the immigrants bother to learn to speak the natives' language), (2) that they don't have adequate dedication to whatever country they immigrated to (because mostly they just immigrated for the jobs, and would prefer, all else being equal, to be back home, rather than in some strange land of bizarre and savage native customs -- us/them), (3) that they bid up the price of housing and cause traffic congestion (because they increase the population, and may be willing to put up with more than the natives are, e.g. squeezing more people into a single home; alternately, in many countries, because they are so much richer than the natives are).

None of these has the slightest relevance to international trade. It is a complete apples and oranges comparison.

Back to the gist of what Alex what saying, Rodrik is, in fact, singing from the ivory tower. Oddly enough, it was his fellow-traveler Krugman who provided the best refutation ever of his thinking:

http://www.slate.com/id/1918

It's hard to believe Krugman was ever that good.

sethstorm: "...until they discover that the resulting junk costs them more in time/money/travel than something done right."

Right. American unions and their protectionist advocates have been arguing that Asia and Latin America produced inferior products for all of my lifetime - over 5 decades. The problem is, consumers eventually realized it was not true - and that paying more in order to "Buy American" was just lowering their standard of living in order to support outrageously overpaid blue collar workers.

Why should US workers be paid any more than mexican workers or chinese workers or egyptian workers or bangladeshi workers? What makes US workers worth more is really the capital behind them. We can move the capital to where the cheap workers are, or move cheap workers to the capital. Americans who work for a living deserve no more than nigerians or haitians who can do the same work, supported by the same capital. If you don't like your standard of living dropping to that of nigeria, then you should figure out how to play the stock market or something and get rich. Vietnamese workers deserve your job just as much as you do.

This argument needs to be expressed clearly with great enthusiasm and vigor, preferably by McCain.

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