Rather than escaping over-burdensome regulation, Loomis’s book points to a different understanding of what motivates a political project to enable capital mobility. In a strategic context, in which the owners of capital and of labor are engaged in competition for shares of productive output, the party with more and more valuable outside options to cooperation with the counterparty gains the upper hand, as in any negotiation. In a world of high tariffs and limits to international capital flows, strong labor unions, and state regulation of labor contracts themselves and workplace and environmental safety, labor has the upper hand and is able to secure a robust share of the economic pie. But in a world in which capital can move overseas at any time, where unions are weak and replacement workers hired here or in Bangladesh at little cost, and where labor contracts are not collectively bargained, the returns to capital are much higher.
When the Rana Plaza factory collapsed in 2013, Loomis engaged in a memorable online dispute with Matthew Yglesias, who published a piece on the disaster headlined “Different Places Have Different Safety Rules and That’s Okay,” essentially repeating the argument that once led Larry Summers to call southern Africa “under-polluted” since the people who lived there are less economically valuable than those in developed countries. The Yglesias corollary is that poor workers benefit more than rich ones from a job at a dangerous factory. Both arguments sustain a commitment to the idea that operating dangerous and environmentally damaging production in poor locales is an economic win-win, and anyone who fails to recognize the truth of this schematization lacks understanding of the way the economy truly works, or is in hock to an outdated leftism that clings to state socialism and can’t make sense of inexorable globalization. Loomis’s reply to Yglesias at the time is, in essence, the genesis of Out of Sight.
The Summers/Yglesias view descends from David Ricardo’s Theory of Comparative Advantage: Bangladesh specializes in cheap clothing produced in dangerous conditions, while the United States specializes in higher-value production, and the world is made better off, including workers in both places, the freer is American commerce with Bangladesh. Recently, the debate with Loomis flared up again, following Paul Theroux’s October 2nd Op/Ed in the New York Times juxtaposing a tour of economic dislocation in the American South with his travels in Sub-Saharan Africa.
Loomis’s and Zucman’s calls for re-erecting national boundaries and re-empowering democratically accountable regulators are implications of a much more successful model for explaining why inequality has risen so much within developed and developing countries than in Yglesias’ just-so story: capital has gained the upper hand over labor by creating and accessing outside options while eliminating those of its opponents. Both books are the product of careful reconsideration and critique of received wisdom in the fields each covers, and more casual commentators would be wise to take heed of their implications instead of peddling discredited objections to any check on international capital mobility.
Steinbaum is right to put this in the context of the Theroux piece and the Voxxers reaction to it because the indifference to the American working class among those people and the moral certitude of American capitalism gifting better lives to the global poor are both really problematic because they ignore the real costs of relative poverty to American society and because they don’t actually get on the ground to ask what workers want in Bangladesh, Vietnam, etc. Instead, when 1100 workers die, it’s just part of a process. Meanwhile, workers themselves are trying to form unions and fight against unsafe workplaces, sexual harassment from employers, low wages, etc. But that doesn’t concern the Yglesias/Lowrey/Matthews types who rather see a globalized Gilded Age capitalism as the greatest gift the world has ever seen, ignoring both what unregulated merchant capitalism did to the United States a century ago, what it is doing to developing countries and their workers today, and what it is in fact doing to the United States today as well. That doesn’t mean we don’t have global trade and it doesn’t mean that Bangladeshis don’t need jobs, as I point out in Out of Sight. It means that we need to ensure those jobs don’t exploit workers and kill them and pollute their communities. That can be done, if we actually take the voices of real life workers around the world seriously.