[Marxism] Re: Bhagwati's defense of Mankiw

Julio Huato juliohuato at hotmail.com
Mon Feb 16 08:05:29 MST 2004

Ahmet Tonak wrote:

>Any reaction to the following op-ed defense of Mankiw by Bhagwati.  I 
>observe two flaws:
>1) a complete misunderstanding of competition; Bhagwati attacks Kerry 
>because, Bhagwati thinks, Kerry is unable to see the connection between 
>outsourcing of jobs and the "improve[ment of] the competitiveness of 
>American companies."  And then he goes and says this: "jobs disappear in 
>America ...because technical change has destroyed them, not because they 
>have gone anywhere"  as if this technical change a God-given or 
>conspiratorial phenomenon rather than the very imposition of "improved" (I 
>would say, intensified) global competition.

IMO, Bhagwati is just stating the final conclusions he and others draw from 
the debate on whether stagnation and increased dispersion in U.S. 
manufacturing wages in the last decades were *mostly* due to trade or to 
skilled-biased technological change.  For a summary of this literature, see 
the papers compiled by Robert Feenstra in the NBER book, The Impact of Trade 
on U.S. Wages.

However, it is not fair to say that these people -- to whom Bhagwati seems 
to be alluding (Krugman included by the way) -- have not been aware of the 
link between "neoliberal globalization" and technological change.  Much of 
the econometric paraphernalia in their papers is designed to get around the 
problem of collinearity between trade and technological change (and other 
data problems).  So, they don't ignore that trade -- as trade policy has 
evolved during the years of "neoliberal globalization" -- is linked to 
technological change.  That is implicit in the exercise.  What they are 
trying to do is disentangle effects that appear mixed up together.  I think 
this is a legitimate attempt.

But Bhagwati may be relying a bit too much on ideology and old empirical 
work in making his assertion.  He says that "there is little evidence of a 
major push by American companies to set up research operations in the 
developing world," but it seems to me that he's talking about studies done 
in the late 1990s.   I'd be much more cautious because, understandably, 
there's little work on what happened to U.S. labor markets during the 
recession and the (so-called) recovery.  Steve Roach seems to believe that 
there's an ongoing wave of "international labor arbitrage," intensified by 
the recession, but these are things that need to be measured first and 
disputed on later.

>2) a racist blindfoldedness and arrogance in his unsolicited advice to 
>Craig Barrett, chief executive of Intel; I would argue that Barrett's 
>perception has a quality of superior understanding and realism of a 
>functioning capitalist regarding the high quality of researchers in the 

Arrogant, perhaps, but I don't think there's any basis to say that 
Bhagwati's remarks are racist.  He's just saying that Barrett's claims about 
the availability of labor abroad ready to replace U.S. skilled workers are 
"exaggerated."  And he may be right.  Barrett and, more generally, U.S. CEOs 
with an eye on foreign outsourcing are not unbiased on this.  They want to 
weaken the hand of the U.S. workers with the scare of people out there 
willing and able to do the same at much lower rates.  Whether Barrett's 
claims are exaggerated or not is something to be shown empirically, but I 
don't think it's fair to label Bhagwati's remarks as racist.

I have sat in Bhagwati's classes and believe he is honest.  Indeed, he's 
impatient with people who are unwilling to follow his arguments, and his 
arguments are not always easy to follow, but radical economists (and the 
anti-globalization radicals who have harassed Bhagwati) are not always 
prototypes of intellectual tolerance either.  The guy just happens to think 
that the best way to deal with poverty in the Third World is through "free 
trade" and his argument is not absurd, as it's been around since Adam Smith. 
  And his "free trade" advocacy is much more nuanced that we care to 
acknowledge.  We may have forgotten, but Bhagwati has been just as opposed 
to the U.S. agenda on the WTO under Bush as he's now jumping on Kerry.  A 
few months ago, during the Cancún WTO meeting, the left was using Bhagwati's 
remarks in the Financial Times about how the U.S. "special interests" had 
come to gut the WTO negotiations out of any meaningful content and how the 
Bush administration was not really committed to trade.  There was little 
echo of Bhagwati's complaints in the NY Times.  The problem is that the U.S. 
media that amplify his anti-Kerry remarks tend to ignore his criticism of 
the U.S. trade agenda under Bush.

It is anathema to some people on these lists, but in my view Marx's emphasis 
on the progressive character of capitalist production in certain settings is 
not that far from Bhagwati's insisting that capitalism in the Third World is 
"a dissolvent of reactionary forms of privilege."  As Ahmet knows, among 
conventional economists, Bhagwati has been one of the few who have worked 
seriously on the political economy of profit seeking, something that -- in 
spite of some terminological and methodological misunderstanding -- is not 
alien to the classic distinction between productive and unproductive labor.


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