Paul Samuelson was like the dean of market economy oriented economics. His textbooks developed an unshakeable belief in market forces in generations of economists and managers. Eleven years ago, however, the now dead Nobel laureate shocked his intellectual disciples with a heresy, namely that free trade can cause lasting economic damage.
At the time, debate was raging in America over the pros and cons of open markets as many companies were moving jobs away from the United States to countries with cheaper labor. This led Mr. Samuelson, one of the most important market economists of the 20th century to question the free trade doctrine of the 18th-century British economist David Ricardo, and demand in the pages of Handelsblatt that, “We should slow down the pace of globalization.”
A decade and many movements toward globalization later, Mr. Samuelson’s famous nephew, Larry Summers, has reached the same conclusion. Mr. Summers, a Harvard University economist and former U.S. Treasury Secretary, wrote this week: “The era of agreements that achieve freer trade in the classic sense is essentially over.” A reflexive presumption in favor of free trade, he added, should not be used to justify future agreements.
It’s not by accident that free trade dogma is being questioned on both sides of the Atlantic. In Germany, opponents of the proposed Transatlantic Trade and Investment Partnership are upset about a perceived hostile takeover by American turbo-capitalism. In the United States, union-friendly members of Congress are using every legislative method available to block the Trans-Pacific Partnership agreement, supposedly because it endangers American jobs.