Rattle Shaking Shamen

Look, you will never, ever hear from me that Economics is any more a “science” than the obeah divination practiced by the late lamented Ms. Cleo (Youree Dell Harris of Los Angeles California who left the Seattle stage after her failed production of Supper Club Cafe).

Still there are some Theories that are generally accepted as useful approximations of reality except of course by Neoliberals, particularly of the Chicago School, who prefer fairy tales that support their Paymasters’ greed.

Dean Baker helpfully reminds us what a few of those are, relating to the Trans-Pacific Partnership and International Trade.

Fareed Zakaria Is Confused on Trade and the TPP
by Dean Baker, Center for Economic and Policy Research
02 September 2016

In pushing trade agreements it is fair to say anything, even if it has no relationship to the truth. Therefore it is not surprising to see Fareed Zakaria pushing the Trans-Pacific Partnership (TPP) by claiming that it will boost growth and attacking Bernie Sanders for opposing “trade policies that have lifted hundreds of millions of the world’s poorest people out of poverty.”

First, the impact on growth will be trivial. According to the International Trade Commission’s assessment, the TPP will boost the annual growth rate over the next fifteen years by less than 0.02 percentage points. And, this projection does not take account of the negative impact of the protectionist measures in the TPP, such as stronger and longer copyright and patent protection. These measures have the same impact on the protected items as tariffs of several thousand percent.
…
(I)n standard trade theory, most of the benefits from lowering tariffs accrue to the countries that lower them. In trade theory, it benefits their consumers. Overall, trade balances are not affected. This is why the very pro-TPP Peterson Institute shows that by far the largest gains to TPP accrue to Vietnam. It lowers its tariffs by the most under the terms of the deal.

In terms of the attack on Bernie Sanders for opposing the world’s poor, Zakaria is again confused. In the standard trade story, capital is supposed to flow from rich countries like the United States to poor countries in the developing world. That would mean rich countries run trade surpluses and poor countries run trade deficits. This allows poor countries to sustain consumption levels even as they build up their capital stock.

The world actually looked like this in the early and mid-1990s, especially for the fast-growing countries of East Asia. Malaysia, Vietnam, South Korea, and Thailand all had very large trade deficits even as their economies grew very rapidly. This reversed following the East Asian financial crisis in 1997. The terms imposed by the Clinton Treasury department through the I.M.F. forced these countries to start running large trade surpluses. As a result, the countries in the region had considerably slower growth in the subsequent two decades than they did from 1990 to 1997.

There is no reason, in principle, that these countries could have not continued to grow rapidly along the standard path of running trade deficits. It was a policy decision to force them to run trade surpluses. In other words, this is yet another gratuitous swipe at Bernie Sanders of the sort that readers have come to expect from the Washington Post.

At the end of the day, the TPP is about increasing the power of large corporations, who contribute heavily to political campaigns and offer former politicians high-paying lobbyist jobs, at the expense of the people of the region. Its proponents will say whatever they think is necessary to sell the pact, even if it has nothing to do with reality.