Louis Uchitelle profiles Harvard economist Dani Rodrik, and his views on trade: Economist Wants Business and Social Aims to Be in Sync (New York Times, Jan 30).
He focuses on Rodrik's views on two issues:
Rodrik's argument that trade reform needs to be coupled with measures to help persons who may be hurt by the reform:
Like most economists, Mr. Rodrik believes that unrestricted trade enriches the participating nations, helping more people than it hurts. But in his view, this is not the moment to lower trade barriers another notch.
The movement across borders of goods, services, capital and production, he said, is “open enough as it is.” He would concentrate instead on building public awareness that social insurance and free trade are “two sides of the same coin,” a concept entrenched in Europe but not in the United States.
“The people who talk incessantly about trade and its importance,” Mr. Rodrik said, “do so without recognizing the importance of the social insurance agenda as part and parcel of that process.”
Rodrik's argument that government policy has a very important role to play in identifying and nurturing potential export industries:
...Mr. Rodrik’s matter-of-fact insistence that in the rest of the world, trade goes forward because government plays a decisive role in promoting it.
Mr. Autor [an MIT economist - Ben] counters that Mr. Rodrik puts too much trust in policy makers. “Government does not have special information that allows it to pick winners and losers,” Mr. Autor insisted. “So unless there is a specific market failure that requires public intervention, we economists do not presume that government does a better job than the icy fingers of the invisible hand.”
Mr. Rodrik sympathizes with this view, but he nevertheless says that in the developing world, almost no one practices hands-off economics. Government, he argues, often plays a role in creating a comparative advantage where one did not exist before. He made this point [with respect to China - Ben] at the annual meeting of the American Economic Association in Chicago this month...
The Chinese government operated on several levels as that nation grew into an export powerhouse, Mr. Rodrik said. It nurtured the manufacture of electronic products and auto parts. It forced foreign investors into joint ventures with domestic producers. Beijing lowered trade barriers, he said, “only after it developed a relatively sophisticated manufacturing capacity.”
Absent an activist policy to protect China’s nascent industries, it would not have emerged as an export power, Mr. Rodrik said. “The traditional forces of comparative advantage,” he said, “would have pushed China to specialize only in the labor-intensive products ‘appropriate’ to low-income economies.”