Thursday, October 4, 2007

Upside Down World

. Thursday, October 4, 2007

Twenty years ago, developing countries were highly skeptical about participation in the global economy while western nations were enthusiastic participants. Now, it appears, as developing countries become increasingly supportive, western nations (especially the U.S.) become more uncertain.

"[A] survey of more than 45,000 people in 47 countries this past spring found large majorities everywhere saying trade was a good thing, particularly in countries lifted lately by trade-based growth, like Jordan and Argentina." (Click the image to the right for summary findings; Find the full survey here).

"But recent years have seen erosion in support for trade in advanced Western countries including Germany, Britain, France and Italy — and most sharply in the United States."

This is broadly consistent with the Stolper-Samuelson theorem's core prediction: abundant factors (developing country workers) gain from and support trade; scarce factors (western labor) lose from and oppose trade. Can it be as simple as that?

A puzzle: how can Americans be more favorable to free markets than to free trade (see the chart)?


Upside Down World




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