Monday, January 9, 2017

Deirdre McCloskey on Liberalism, Trump and Free Trade

She is interviewed by Dave Rubin here:

I have to admit that I don’t know much about Deirdre McCloskey, but on the basis of this interview, she strikes me as an absurd pro-free market ideologue.

Let’s take a couple of the points raised in this video:
(1) she claims that the original arguments in favour of the minimum wage were to exclude blacks, immigrants and women from the labour force. I have no idea if this is correct, but let’s assume it is. She then jumps to a pathetic non sequitur: she implies that the modern policy of a minimum age must therefore be immoral, because the justifications given for it in the past were immoral. This is so stupid. The modern case for a minimum wage has long had its own independent justification, which is very different from the justification that was supposedly given for it a century ago.

(2) McCloskey apparently thinks labour is a commodity just like soft drinks. This is an idiotic notion. She then invokes the law of demand to argue that minimum wage rises will necessarily decrease demand for labour and hence decrease employment. Of course, the problem with this is that the law of demand (as in neoclassical economics) is an empty tautology, and does not necessarily tell us anything certain about what will happen in the real world. The law of demand, as currently formulated, is an anti-empirical, analytic a priori statement.

In the case of modest minimum wage rises, labour is not like other commodities, since income to labour also provides a major part of the aggregate demand that sustains capitalist economies. Whatever actually happens in a real world economy when a minimum wage is set or raised will depend on all sorts of factors. If the economy is steered by strong Keynesian macroeconomic management, whatever negative effects caused by minimum wage rises (if any) will most likely be swamped by other positive demand effects.

(3) and it turns out (as can be seen from 8.55), McCloskey is a free trade fanatic and cultist. If free trade has been so good for the “poor of the world,” then how come, after much of the world liberalised from the 1970s and turned to globalisation, neoliberalism and free trade, growth rates slumped? See the GDP data here:
Average Per Capita GDP Growth Rates 1960–2010
Region | 1960–1980 | 1980–2010

sub-Saharan Africa | 2.0% | 0.2%
Latin America and the Caribbean | 3.1% | 0.8%
Middle East and North Africa | 2.5% | 1.3%
East Asia and Pacific | 5.3% | 7%
Developed Nations | 3.2% | 1.8%
(cited in Chang 2015: 25–26).
The area where growth rates were better post-1980 was East Asia, but that was not caused by neoliberal free trade and laissez faire ideology, as can be seen here. While market access to the Western world was an important element of the East Asian success story, the industrialisation of East Asia was pursued by intense industrial policy and various forms of protectionism.

(4) the point where McCloskey says that the purpose of an economy is not to provide jobs, but only to increase output is the point where we may as well have entered the Twilight Zone. The important point about the fate of American manufacturing after 1980 is not just the loss of jobs, but also the increasing outsourcing of production and parallel rise in the trade deficit and the collapse of all the related industries and services that provided factor inputs for manufacturing. We have to factor in the jobs lost by the latter closures too and the devastating social costs of this unemployment.

For my posts against free trade and in support of infant industry protectionism, see here:
“Industrial Policy in Meiji Japan,” December 28, 2016.

“More Bibliography on Protectionism and Economic Growth,” December 27, 2016.

Peter Navarro’s “Death by China” Documentary, November 1, 2016.

“Bill Mitchell on Free Trade, Part 4,” December 1, 2016.

“Kaldor’s Growth Laws and Verdoorn’s Law: An Overview and Bibliography,” October 8, 2016.

“Thirlwall’s Law: An Overview and Bibliography,” October 7, 2016.

“Ha-Joon Chang on the History of Protectionism,” August 14, 2016.

“Robert Murphy’s Debate on Free Trade,” August 7, 2016.

“The Cult of Free Trade in a Nutshell,” July 4, 2016.

“Ricardo’s Argument for Free Trade by Comparative Advantage,” July 5, 2016.

“Erik Reinert versus Ricardo on Free Trade,” July 5, 2016.

“Ha-Joon Chang on Wage Determination in First World Nations,” July 6, 2016.

“A Heterodox and Post Keynesian Bibliography on Trade Theory,” July 7, 2016.

“Erik S. Reinert on Heterodox Development Economics,” July 9, 2016.

“Britain’s Protectionism against Indian Cotton Textiles,” July 12, 2016.

“Those Free Trading British Cotton Textile Manufacturers,” July 13, 2016.

“Friedrich List on English Free Trade and the Colonisation of Germany,” July 22, 2016.

“Mises on the Ricardian Law of Association: The Flaws of Praxeology,” January 25, 2011.

“The Early British Industrial Revolution and Infant Industry Protectionism: The Case of Cotton Textiles,” June 22, 2010.

“Protectionism and US Economic History,” June 8, 2014.

“A Short Bibliography on Protectionism and Industrial Policy,” April 30, 2016.
All in all, I sense that this new found love of “Classical Liberalism” amongst former progressive liberals who have tired of the cultural left will lead to these people degenerating into some type of libertarians.

But that is a dead end. These people will just be more free market crackpots, peddling their exhausted and bankrupt laissez faire cult.

Finally, do any left heterodox economists take Deirdre McCloskey seriously?

Chang, Ha-Joon. 2015. “The Failure of Neoliberalism and the Future of Capitalism,” in Satoshi Fujii (ed.), Beyond Global Capitalism. Springer, Tokyo. 19–34.

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  1. She is an attention-seeking moron.

    She is also a postmodernist neoclassical/neoliberal. I swear. I'm not making that up. That is pretty much how she defines herself.

    Please don't promote her stuff. She is trying to integrate the WORST aspects of postmodernism into economic methodology. I HATE that heterodox people take her seriously.

  2. On a practical note, there appear to be multiple cases of Rodents found in soft drink cans. All involving companies which remained in business.

  3. I'm fairly tired of the old cliche about how liberalization of domestic economies and international trade has made the world a better place since the 80's. Remove China( and to a lesser extent Vietnam) from the data and you see much less positive change. Given how these two communist countries still engage in large scale planning of their economies people need to seriously reevaluate global growth in recent decades.