Trade and compensation

I'm risking stepping on Biased BBC's toes here, but the BBC's report on the Archbishop of Canterbury's sermon about world poverty is rather woeful. It tries to drag Dr Williams into a crude anti-globalization camp: "Dr Rowan Williams said a naive faith in free trade is stripping some countries of their economic power and hampering efforts to overcome poverty."
In fact, his sermon was - aside from some twaddle about trust - more economically literate. He said:

Universal trade liberalisation may offer fresh markets and promise overall increases in wealth. It also forces choices on vulnerable countries, whose effects may be – in the short to medium term – very costly indeed to a whole generation of workers, to the environment, to political stability...in the long term ‘free trade’ promises greater benefits, but in the middle term its costs are immense unless there are clear mechanisms for compensation – unless the benefits are put to work for all.

This is surely right. No serious economist pretends that every single person gains from free trade immediately. If an autarkic country opens up to trade, its more inefficient producers wil go out of business. That's a cost. Economists don't say free trade is an actual Pareto improvement, in the sense that everyone gains immediately - that's absurd. They merely say it is a potential Pareto improvement: everyone would benefit from it if the winners could compensate the losers.
And this is exactly what Dr Williams is saying - although he emphasizes the costs whilst economists usually emphasize the benefits. Sure, he goes on to say that "the answer is unlikely to be a simple recommendation for a universal and instant end to protection or preference." But if we read "simple" to mean "unaccompanied by compensation," few economists would argue with him.
As for how such compensation could be paid, this sort of thing is far too radical to attract the attention of the statist conservative BBC.
A better headline - although it might err towards being over-generous to Dr Williams - would be: "Archbishop calls for free trade accompanied by compensation."
But of course, the BBC can't recognize opinions like this. The debate about globalization is between compassionate opponents of free trade and callous advocates of it. Intelligent and humane positions aren't allowed, are they?

Comments

[dearieme]

What: a cleric being an intelligently conservative liberal? How upcheering. As for the Beeb: time it got the Carthage treatment.

[Tim Worstall]

Alex at the Globalization Instistute was, I think, rightfully proud that his month old think tank got a mention in that speech.