Jagdish Bhagwati is a sweet and courteous man in private, but his writing often makes me cringe. That is not because I frequently disagree with him, but because of the rhetoric he uses to attack his intellectual opponents. It's as if he has an evil twin that sometimes takes control of his writing hand.
The passage that made Dani cringe seems to have been:
But Mr Blinder seemed unaware of the fact that outsourcing via the internet was the mode of service transactions that the US lobbies were keenest about in the Uruguay round of trade negotiations: they saw that they would be the big winners, as no doubt they are. They hugely dominate transactions in high-skill and high-value services in architecture, law, medicine, accounting and other professions. Mr Blinder, when challenged, shifted ground to arguing that, as services became tradeable online, the number of jobs that would become “vulnerable” would rise pari passu, requiring adjustment assistance. However, there is hardly any serious trade economist who has objected to providing adjustment assistance. The first adjustment assistance programme in the US goes back to 1962. Virtually all trade legislation since has tried to improve on it. Many trade economists have written extensively on the subject. Mr Blinder, who started talking poetry, has therefore wound up talking prose. We free traders have no problem with him as he backs into our corner. But if he is to remain the new icon for those who oppose free trade, they have to be pretty desperate.
Something tells me that Alan Blinder can rise above this rough rhetoric. The specific passage that surprised me was the notion that the possibility that compensation might theoretically be possible cures all ills. Professor Bhagwati earlier had noted the 2004 paper by Paul Samuelson:
Autarky real per capita well being, does not deny that new technical Chinese progress in goods that America previously had competitive advantage in can, ceteris paribus, lower permanently measurable per capita U.S. real income. Nor does it deny that technical progress in China's export goods can, ceteris paribus, hurt permanently her own net measurable per capita real income itself when demand inelasticity prevails. Ergo, the winds of dynamic comparative advantage cannot be counted on to create in each region new net gains of the gainers assuredly greater than the new net losses of the losers. However, correct Ricardian theory does imply that worldwide real income per capita does gain net, so that winners' winnings will suffice worldwide to more than compensate losers' losings--some cold comfort in a scenario of many semi-autonomous nations.
Bhagwati would correctly note that the Chinese likely gain more than the losers lose –so in theory – the Chinese winners could compensate the American losers. But seriously – when do we ever see such compensation taking place?