Rawls and the TPP: Some thoughts on why progressives should be pro-trade

One of the biggest challenges I face as an effectively anonymous contributor to online discussions about international trade policy is trying to deflect the harsh criticism my usual fellow-travelers on the left direct at me for being enthusiastic about global trade and investment agreements. Orthodoxy suggests that generic social democrats (of which I count myself) must unabashedly oppose agreements like the TPP and the TTIP. This is unfortunate. I want to share some thoughts I have as to why my friends on the left should embrace trade as much as I do.

Failures to the right, failures to the left

A major obstacle that the left will need to confront moving forward is how it responds to clear cut examples of regulatory failure. It should be apparent to all but the most stubborn free market extremists that markets sometimes fail. Technocratic consensus has safely been reached in the recognition that governments have a positive role to play in mitigating market failures. Ameliorative redistributive measures to address problems facing developed democracies like income inequality enjoy widespread support. As Noah Smith brilliantly wrote a few weeks ago in Bloomberg,

Free markets have worked wonders for the world’s poor, but pure unrestricted capitalism has elements that do need to be resisted. In the end, the boring old mixed economy — a capitalist base with some socialism on top — remains the most successful economic system ever created.

The left is traditionally very good at vocalizing when society is confronted by market failures. But, unfortunately, narrow ideological lenses have blinded contemporary social democrats to regulatory failures as well. Surely the rise of the sharing economy and the left’s knee-jerk opposition to Uber et. al. and its bizarre defense of taxi cartels is an example of this phenomenon. In a Canadian context the rigorous progressive defense of our dairy supply management system is a puzzling site to behold: why on earth would social democrats be more concerned about the welfare of a tiny group of millionaire farmers over the millions of families who unnecessarily pay a premium for basic foodstuffs? Canada, if anything, is a perhaps a particularly helpful case study of how government overreach can be extraordinarily harmful to consumers.

The point should be straightforward: progressives need to continue pushing for democratic egalitarian outcomes but recognize that sometimes things like over-regulation, government sponsored monopolies, and other regulatory failures are harmful and only serve to entrench already privileged interests. Sometimes government is the problem.

The economic philosophy for our age is surely some sort of “left neoliberalism.” A moderate and democratic synthesis that recognizes that the best public policy approach is that which benefits the worst off and, critically, understands that sometimes a free market is best placed to do just that. Tax the rich? Okay. But for goodness sake, legalize Uber too.

An unreconstructed socialist or similar critic will surely contest the left neoliberal approach. “But we’ve been through this before! The Clinton triangulation and Blair’s Third Way failed. We’re past that now. This is the age of Sanders and Corbyn.”

Blairism, I’ll concede, does seem to be fairly congruent with left neoliberalism. I don’t see how this is necessarily a failure. Politically, the Labour Party hasn’t won an election without Tony Blair since 1974. The reforms of the New Labour years do not get nearly the recognition and respect from progressives as they ought to. But a left neoliberal approach is hardly a fossilized set of ideas from the late ’90s: it is essentially the same very successful technocratic and egalitarian philosophy that has underpinned the Obama administration’s sweeping reforms over the past 8 years.

WWRD?

I am confident that every policymaker, judge, and legislator, would benefit tremendously from subjecting socio-economic questions that they tangle with to Rawls’ Difference Principle. When crafting an economic policy that will result in some people winning and some people losing (as most if not all do), to determine the democratic egalitarian justice of the resulting inequities the basic question that needs to be asked is: will the worst off benefit from doing this?

So how would the TPP fare from being put to the Difference Principle test?

What I think I sketched out earlier is that subjecting socio-economic policy questions to a Rawlsian-esque test is that the equation will not always result in more government regulation. If we want to design our economic policies in such a way so that the most impoverished in our society will reap tangible benefits then we social democrats will need to confront the reality that sometimes sectors of the economy that are encumbered with huge levels of regulation will need to be unburdened.

The TPP will result is the dismantling of a lot of tariff and non-tariff hurdles to trade that will mean that entrenched monopolies lose and consumers, through access to more competitively priced goods and services, win. John Tamny recently wrote about this in a Forbes article:

Your life without open trade would be horribly bleak. But thanks to the globalized division of labor that defines free trade, you have the world’s abundance before you at prices that continue to fall.

Not more than 5 or 10 years ago the computer on which you’re reading this piece would have qualified as a supercomputer (this describes your smartphone too), with a multi-million dollar price tag reflecting its super status. Thanks to open trade and the global cooperation among specialized producers, odds are what’s “super” cost you as little as $200 brand new.

So the worst off in the developed world signatories to the TPP benefit through cheaper consumer goods which will make their lives better. The biggest losers will be state-sponsored monopolies that benefit from having captive markets. Social democrats in the developed world need to ask a very honest question of themselves: when it comes to the TPP, do they want to come down on the side of domestic monopolies or low income consumers? The choice should be clear.

In a globalized political economy, however, utilization of theoretical tools like the Difference Principle needs to take into account the fact that socio-economic policy-making is increasingly being made on a transnational level. While Rawls himself was hesitant to inject too much internationalism into his over-arching political theory, I think the utility of the test is not diminished when applied to questions of global economic governance.

Those who will benefit most from the TPP are citizens in developing markets, especially Vietnam and Malaysia (although the benefits will expand, of course, if and when other regional frontier economies sign onto the agreement). The benefits for the Vietnamese are particularly impressive. Not only will the agreement mean substantial increases in inflows of job-creating foreign investment and market integration but the TPP also commits the country to deep democratic labor and environmental reforms. The bottom-line is that a lot of very poor people in Vietnam and Malaysia will become a lot wealthier because of the TPP. The TPP is, in essence, an economic policy set that will not only generate substantial wealth but will result in the distribution of that wealth to flow to some of the most impoverished people in the world. The deal passes the Difference Principle Test and, if for this reason alone, deserves support of my friends on the left.

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