Economic Integration, Compensation, and the Value(s) of Work

Anno LVIII, n. 236, gennaio-aprile 2023
Centro Einaudi
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In this paper I will argue that the standard ‘efficentarian’ version of the argument in favor of more economic integration through trade fails both on its own terms and given the background assumptions implied by widely accepted intuitions about distributive justice. It fails on its own terms to the extent that it is presented as a Paretian argument since, as is clear both theoretically and from empirical evidence, economic integration creates winners and losers. Given the distributive effects of economic integration through trade predicted by standard models the predictable outcome is that workers in developed countries with relatively lower skills and training will be penalized by trade with developing ones. Thus, from a distributive perspective, in developed countries, those who were relatively worse-off to begin with have been further penalized by the policy choice of deepening economic integration; they paid the price for greater societal prosperity over time, and this is intuitively unfair. Of course, stated in this way, the argument forgets what many economists usually gesture at, namely, that higher social welfare can create the resources necessary to compensate the losers from free trade. However, this frequent rejoinder, often put forward via appeals to ‘compensation policies’, can be shown to be largely ineffective. From an empirical point of view, we will see that compensation policies are seldom properly funded, they are subject to various political pressures that distort their intended outcomes, face problems of identification and ultimately do not seem to efficiently compensate workers that have suffered economic dislocation.
In addition, and more importantly, compensation policies are bound to fail because the view that they can affect something like ‘rectification’ flies in the face of descriptive and normative arguments to the effect that work is valued and valuable in more ways than simply as a source income.