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Sunday, June 19, 2016

Political Economy of Relative Gains

Realist IR scholars reject the possibility of meaningful international cooperation on the idea that not all states can benefit from such cooperation. That's wrong, liberal institutionalists retort, because classic trade theory demonstrates that cooperation can promote mutual "absolute" gain.

Realists counter with the point that mutual gains rarely result in equal distribution. Some states will benefit more from cooperation and these relative advantages mitigate against cooperation. Why would a state partake in an agreement that helps competitors more than it helps itself? Essentially, because realists see international politics as a struggle for power, states can prevent a redistribution of power by refusing to partake in meaningful cooperation.

Plus, on many truly difficult issues, there are going to be costs to cooperation -- similar to the dues union members pay for the benefit of membership. States have an incentive to free ride, rather than to pay costs to create gains. Thus, on many global issues that require genuine multilateral cooperation -- Kenneth Waltz mentioned “poverty, population, pollution, and proliferation” (209) -- states won't work together because they lack incentives.

Realists do not think much of existing international cooperation. Believe it or not, a prominent realist view of past trade practices suggests that they reflect typical interstate competition rather than real cooperation. Realists recognize that states form alliances when confronted by potential hegemons, but this is basically because their survival is potentially at stake. In lesser circumstances, a strong state might set up sham institutions to promote forms of cooperation that are in their individual interest and essentially coerce others to participate. This could include institutions that serve multiple purposes, promoting selfish security cooperation with small economic bribes.

Some empirical evidence supports the pessimistic view of international economic cooperation.

This is a quick and simplified account of a complex debate, of course, but I mention it because of this study result I read in The Atlantic last October.** Individual Americans apparently embrace this vision and reject the prospect of mutual benefit if the benefits provides relative gains to "competitors." IOW, people see other people as competitors:
In a survey of faculty, students, and staff at the Harvard School of Public Health, nearly half of the respondents said they’d prefer to live in a world where the average salary was $25,000 and they earned $50,000 than one where they earned $100,000 but the average was $200,000. Similarly, a majority favored relative over absolute advantage when it came to their own intelligence and attractiveness, their child’s intelligence and attractiveness, or praise from a superior. Apparently the survey respondents would rather the planet be filled with stupid, ugly children than have their own child left behind [1].
There are apparent lessons in this about the rise of Donald Trump and the populist/nationalist concerns of his supporters. Trump wants to build a wall along the southern US border, deport millions of undocumented immigrants, and impose new tariffs on major trading partners such as China and Mexico. Many economists predict that his policies would hurt the white working class more than others. However, their analysis is generally framed in terms of utility theory.

What if his voters don't care about utility as much as they do about perceived relative gains -- for them personally as well as for the US? Perhaps they are willing to be additionally impoverished so long as their competitors do worse -- whether that is undocumented Mexican workers or China.

The danger, of course, is that Trump voters are likely very wrong in how his presidency might influence the outcomes they desire. His tax policies, for example, basically continue long-term Republican plans to benefit the richest Americans -- and this link is from The Economist, not some lefty politician or organization. Would the U.S. win a trade war with China?

** Yes, I'm cleaning out my office and have a stack of clippings.

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