Weeping econ professors

I like Paul Theroux well enough, particularly his very earliest writings. But it is regrettable how authors pen op-eds on things they are ill-informed about to stoke outrage that will help sell books (Theroux has a new one out.)

From The Hypocrisy of ‘Helping’ the Poor by Paul Theroux. In this instance, Theroux is trying to stir populist outrage against businessmen and globalization without understanding the nature of economics. The opening paragraphs are enough to make an Intro to Econ professor weep.

Every so often, you hear grotesquely wealthy American chief executives announce in sanctimonious tones the intention to use their accumulated hundreds of millions, or billions, “to lift people out of poverty.” Sometimes they are referring to Africans, but sometimes they are referring to Americans. And here’s the funny thing about that: In most cases, they have made their fortunes by impoverishing whole American communities, having outsourced their manufacturing to China or India, Vietnam or Mexico.

Buried in a long story about corruption in China in The New York Times a couple of months ago was the astonishing fact that the era of “supercharged growth” over the past several decades had the effect of “lifting more than 600 million people out of poverty.” From handouts? From Habitat for Humanity? From the Clinton Global Initiative?

No, oddly enough, China has been enriched by American-supplied jobs, making most of the destined-for-the-dump merchandise you find on store shelves all over America, every piece of plastic you can name, as well as Apple products, Barbie dolls or Nike LeBron basketball shoes retailed in the United States for up to $320 a pair. “The uplifting of impoverished people” was one of the reasons Phil Knight, Nike’s co-founder, gave in 1998 for moving his factories out of the United States.

The Chinese success, helped by American investment, is perhaps not astonishing after all; it has coincided with a large number of Americans’ being put out of work and plunged into poverty.

This is your traditional zero-sum understanding of the economy going all the way back to Marx and earlier where one person cannot get richer without another person becoming poorer. This is, of course, they very opposite of an open capitalist market where all people become better off through free trade.

It has been known and understood all along in classical liberal economics circles that 1) global markets improve productivity, efficiency and income, raising hundreds of millions out of poverty and 2) all free markets entail creative destruction. Old plants close, new plants open. Jobs requiring heavy repetitive labor move offshore while white collar, creative, services jobs open up here. It is never in stasis, there are always, at any given point in time people that have benefited and others who have lost. But what we do know empirically and beyond doubt is that the free market is the best and fastest way to improve the lives of all people and that there are no other known systems which produce superior outcomes. Actually, we know more than that. All existing alternative systems produce worse outcomes and usually much, much worse. There is no empirical dispute about the data demonstrating this.

Business executives in lawful and free markets do not make fortunes by impoverishing anyone. That is absurd, economically ignorant rhetoric even if it might be ideologically comforting and might sell a few extra copies of his books. It is the rhetoric of envy and populist anger.

Fostering open, lawful, free markets has been a north star for American foreign policy for decades. It has been always understood that such globalization would make everyone, American and foreign, richer but that there would come disruptions with that global competition. Some people suffer those disruptions in the short term and it makes it no easier in the short term to know that in the long run, both you and your children will be better off. What Theroux and his ilk fail to recognize is that even without globalization, change would have come, the factories would still have been shuttered. It would have taken longer but usually, postponed change is even more disruptive. The changes come, quicker or longer. The impact is always greater the longer it is postponed.

Globalization is simply a straw-man.

It is a pity our public intellectuals flood the pages with cognitive pollution and it is repugnant that they do so simply to sell more books.