Economics

Selected Skirmishes: Last Tango for Socialism

Statism vs. the world's poor

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Of all the inanities spouted in the recent "debates" over NAFTA and GATT, the most outrageous—a very competitive title—concerned the contempt with which Americans on the left (Jerry Brown, Ralph Nader) and right (Ross Perot, Pat Buchanan) dismissed "cheap foreign labor."

The exploitable populist fear underlying every advance of international commerce is the threat that somewhere, in a place far different from our own, people far different from us will rise up and take our jobs. We will be helpless, hapless, superfluous—these people will eat dirt for dinner, sleep standing up, and produce twice what we can at one penny a day. How can we possibly compete against these alien life forms?

Defenders of rational discourse, including in this very lucky instance White House spin doctors, dwell on the inaccuracy of those claims. They pound home the lesson that "comparative advantage" makes the whole pie bigger. I know all about gains from trade; I love and cherish them (on the blackboard and in real life). But what is ugliest about the "cheap foreign labor" argument is its utter brutality. Scratch the surface of the (flawed) economics and you arrive at a horrendously inhumane moral supposition: Screw those poor bastards—they'll outcompete us just for a meal!

If free trade really did downsize domestic incomes, it is only because the poor (them over there) are getting richer while the rich (us here at home) are getting poorer. Tossing out any gains from trade puts one in a zero-sum world where our incomes drop because wages are equalizing and foreign workers are getting more than they get now. More than they deserve, certainly. After all, they were born poor. They shouldn't mind it as much as we Americans, born to a high station in life.

Despisers of the market system once held the moral high ground. It was a stretch to argue, without giggling, that West Germany was less efficient than East Germany when the capitalists were driving Beemers and Mercedes and the socialists were putting about in Ladas and Skodas (Yugos being entirely out of their price range). But, the tale went, it was only in the meanness and harshness of the marketplace that such brutal efficiencies could be squeezed. "From each according to his ability" was much kinder and gentler, and a whole lot more equitable.

With the anti-market types now boastfully abandoning any pretense of fairness, going so far as to demonize the earth's downtrodden, the intellectual victory of capitalism is complete. It is both cushier and more conscionable—a double whammy in the war of ideas.

The ultimate market test of the market system is that the world's poor are jumping statism's sinking ship. In a watershed election just passed, the Brazilian electorate was faced with a choice between a hard-left union organizer promising massive state intervention to help the disadvantaged, and a radical free-market professor who advocates strict anti-inflation measures, dramatic reductions in public spending, and widespread privatization and deregulation of state monopolies. The capitalist slam-dunked, getting elected by an overwhelming majority in this country of 150 million—60 million of whom live in abject poverty. It is difficult to ascribe this mandate to right-wing talk radio or Republican dirty tricks.

Or to the sociologists at Yale, Oxford, and Stanford with whom the new Brazilian president, Fernando Henrique Cardoso, once taught and fantasized. Formerly an oracle of redistribution, Cardoso—an author of 21 books who was jailed by the Brazilian junta that ransacked the country between 1965 and 1984—has gotten religion, apparently in the Church of the Chicago Boys. As finance minister, his conservative monetary policy cut inflation from 50 percent per month to 2 percent and gave him a popular national platform from which to advocate sweeping market-oriented measures.

The class struggle has taken on a new character. Cardoso's deepest pool of support came from minimum-wage workers who flocked to him because he was credible in his pledge to reduce inflation. At 50-percent inflation per month, "Are you better off than you were four weeks ago?" becomes one hell of a campaign slogan. And Cardoso's staunchest opposition lurks in the "selfish bureaucrats and grasping politicians," as B.J. Cutler of Scripps-Howard put it. Some 2 million highly paid federal employees detest the program espoused by Cardoso and will try every trick to see that the state does not wither away.

It has been a confusing century, with market forces condemned by both great poets and opportunistic fixers. For a time they snookered the upper classes into believing that God preferred socialism and the underclasses into believing there was money in it for them. In their hearts, the statists believed that their schemes would humanize capitalist competition.

The apologists for an administered order, both at home and abroad, have now been reduced to defending rich workers against the rising aspirations of the poor. Today they have sacrificed not simply their analytical skills, but their souls.

Contributing Editor Thomas W. Hazlett teaches economics and public policy at the University of California, Davis.