Free Trade and the Social Safety Net

On Monday, the church-owned Deseret News published an editorial condemning—in no uncertain terms—the racism of “the KKK and other so-called white nationalist groups.” The editorial leaves no wiggle room, and brooks no disagreement.

And then it turns in what—to me—was an unexpected direction: protectionism.

So I’m a modern liberal, meaning I buy into the economic consensus that free and open trade is a good thing. It increases the net wealth in the world, and provides both Americans collectively, and our foreign brothers and sisters, better access to the goods we need.

But.

But the fact that free trade is a net benefit for society doesn’t mean it’s a benefit for each and every member of society. Free trade’s “costs and benefits are distributed unequally within each country, making some people better off and others worse off.”[fn1] In fact, economists have found that workers with the lowest incomes—the most vulnerable workers—bear the heaviest costs of international trade.

So what do we do about the unequal distribution of the costs and benefits of free trade? Like the Deseret News, I believe that protectionism is bad. It decreases the wealth available across the board; moreover, in our increasingly-globalized economy, returning to some sort of closed-off economy strikes me as implausible, even if I thought it were a good idea.

Toward the end of its editorial, the Deseret News touches on what strikes me as the best answer:

There is of course room for safety nets to aid those who cannot fully participate in the marketplace and appropriate wealth distribution to help mitigate adverse market excesses or to provide adequate access to opportunity and education.

I’d personally strengthen the recommendation, though, and explain it in slightly more detail. Essentially, what I’d say is this: free trade increases the net wealth, but it imposes significant costs on a subset of American workers, a subset that happens to be among the poorest and most vulnerable.

In order to pay for our increased wealth, then, we should be both willing and happy to expand the social safety net, not just to provide benefits to some imaginary group of “worth poor” (and excluding the poor we find unworthy), but provide true help and sustenance to anybody who falls below a certain line.

Assuming that free trade increases our collective wealth, it’s not costly to improve our social safety net. After all, the free trade that hurt our poorest neighbors has increased the wealth available to all of us. We can fund a social safety net and still be better off than we would have been with protectionist trade policies.

Which is to say, it strikes me that there’s a compelling economic argument to be made for expanding our welfare, job retraining, and other benefits available to prevent individuals and families from slipping into poverty (and, at the same time, to lift those in poverty out).

But it also strikes me that doing so helps us fulfill our religious obligation to build Zion, a place of one heart and one mind that notably has no poor among them.

[fn1] James Kwak, Economism 165 (2017).