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Robert Skidelsky on the case for compensated free trade
Jesse Richman, 11/16/2018

According to his Project Syndicate biographical sketch, Robert Skidelsky is "Professor Emeritus of Political Economy at Warwick University and a fellow of the British Academy in history and economics, is a member of the British House of Lords. The author of a three-volume biography of John Maynard Keynes, he began his political career in the Labour party, became the Conservative Party’s spokesman for Treasury affairs in the House of Lords, and was eventually forced out of the Conservative Party for his opposition to NATO’s intervention in Kosovo in 1999."

Skidelsky's latest column for Project Syndicate is a tour-de-force summation of the trade challenge and the appropriate solution -- a mechanism to automatically shift trade towards balance.  The column can be read at https://www.project-syndicate.org/commentary/compensated-free-trade-allows-protectionism-by-robert-skidelsky-2018-11.

He begins by framing the issue as follows: 

According to Harvard’s Dani Rodrik, the nation-state, democracy, and globalization are mutually irreconcilable: we can have any two, but not all three simultaneously. In fact, there may be a solution to Rodrik's “trilemma.” 

And that solution in Skidelsky's view is compensated free trade.

The scaled tariff is a similar mechanism and would also achieve the same end, albeit in some what different ways.  The tariff would be collected as a tax on imports, which is in my view more feasible than a fine levied by one state on another as in compensated free trade.  But the specific collection mechanism is in some senses less important than the key accomplishment either of these (or country specific import certificates) would bring.  They would assure relatively balanced global trade, pushing against the financial flows, mercantilism, and other strategies that have helped generate perpetual trade deficits for the United States and some other countries. By so doing, they would assure that trade matches more closely with the comparative advantage argument -- that trade works to make the citizens of all countries better off. 

These mechanisms would limit the impact of globalization somewhat, while preserving the opportunity for unlimited global growth and trade, provided that it is relatively balanced. They also preserve space for democracy by providing some limits on the degree to which the rising totalitarians of the world can manipulate markets to capture the productive capacity and know-how of those in the free world.  And they preserve national boundaries to the extent that the nation state plays a role in protecting the prosperity of its citizens. 

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    Wikipedia:

  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

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  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

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  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]