In Samuel Beckett’s postwar play “Waiting for Godot,” a defining work in the theater of the absurd, Didi and Gogo are waiting for Godot, nobody knows who Godot is, and he never comes. In many ways, the current trade negotiations between the American government and the Chinese government verge on the absurd: for most subjects of the two governments, such negotiations are meaningless and tragic. Look at the economics and politics of international trade with the economist’s non-romantic eyes.
(The picture below represents the two actors who play Didi and Gogo in a Berliner Ensemble interpretation of “Waiting for Godot”: respectively, from left to right, Axel Werner and Michael Rothmann.)
Axel Werner, Michael Rothmann – Theaterproduktion “Warten auf Godot” (von Samuel Beckett, Regie: George Tabori), Berliner Ensemble, Probebuehne, Premiere am 4. Februar 2006, Berlin-Mitte.
Forget about the small absurdities that often pop up in the trade war that the US government has launched against China. Just one example in today’s Wall Street Journal (“Can This Marriage Be Saved? Chinese-U.S. Integration Frays,” May 9, 2019):
Senators have proposed barring local governments from using federal funds to buy railcars from China’s state-owned rail company, ostensibly because the cars could be used to spy on American commuters.
Let’s focus instead on the big absurdity picture, and look for some rational-choice explanations. Rational choice means using the generally rational behavior of individual actors to explain social, economic, and political phenomena. Rational choice does not mean that economic actors are omniscient, but that they try to maximize their utility on the basis of the information that they have or find profitable to acquire.
Trade negotiations are run on the illusion that each side is bargaining on behalf of its citizens, as Paul Krugman reminded us in a well-known article (“What Should Trade Negotiators Negotiate About?” Journal of Economic Literature, March 1997). As Krugman noted, if economists had their way, there would be no need for trade negotiations, because there is no reason one would negotiate with the goal of imposing handicaps to oneself. Trade negotiations do look absurd: the government of each country grants “concessions,” or import liberalizations, which will benefit most of its subjects, in order to obtain for some of its subjects the privilege of using “national resources” to export goods and services to the subjects of the other ruler.
For more than two centuries, economists have shown that protectionism hurts most of the residents of the country that is supposedly “protected,” irrespective of whether the governments of other countries do the same to their subjects or not. Joan Robinson, the famous Cambridge economist, suggested that retaliation is as sensible as it would be “to dump rocks into our harbors because other nations have rocky coasts.” (Krugman attributes the famous aphorism to Frédéric Bastiat, but I have been unable to find it in the latter’s work. Robinson’s quote is from her 1947 book, Essays in the Theory of Employment.)
As Krugman prudently recognized, though, one can find a good reason for trade negotiations. Perhaps they are not absurd after all. Assume that your own government is actually intent on defending the common interest of the vast majority of its subjects (perhaps you can then call them “citizens” instead of “subjects”). Given that assumption, you and your government recognize the danger that a successor government may yield to special interests and limit your freedom to import. Some exporters might share your fears as domestic protection might lead to trade wars that would be harmful to them too. Therefore, you may want trade negotiations and treaties to tie the hands of your own government. Why trade negotiations and agreements? We could answer with a tired (and not very polite) formula: “It’s your own government, stupid!”
This approach explains one phenomenon that is incomprehensible to those who don’t understand that most residents of a country benefit from the freedom to import. If you understand the economic argument for free trade and are a resident of China, you would welcome the efforts of the US government to prevent your own government from limiting your imports from America. In exactly the same way, if you are a resident of the United States, you would applaud the efforts of the Chinese government to prevent your own government from interfering with your imports from China.
We may make room for ignorance. Perhaps Donald Trump and Xi Jinping never read Adam Smith, David Ricardo, or Jean-Baptiste Say, and none of their trusted advisors did either. Perhaps they are deeply persuaded that they are helping “their people”—as if their people had the same preferences and interests besides the liberty of each to do anything peaceful he wants to do and can do. But note that ignorance, which is as widespread among the rulers as among the ruled, is actually one reason to limit the state and not grant rulers the power to control trade and manage society.
It is generally more fruitful to try and explain behavior on the basis of individual interests rather than from ignorance. The public choice school of economics has successfully modeled politicians and bureaucrats as ordinary, self-interested individuals. So perhaps it is an illusion to think that your angelic government is negotiating for you? Perhaps your out-of-control government is negotiating tor itself. Both Trump and Xi have an interest in pleasing their supporters, that is, the part of the population that can keep them in power. One might think that the rulers would want as much free trade and thus as much prosperity as possible. But Trump obviously believes that his supporters (about one-third of registered voters voted for him) don’t want free trade. And Xi probably thinks that his own supporters (one-third of Chinese adults, perhaps?) don’t want their government’s power limited by the policies of, or agreement with, the government in DC.
Trade negotiations may not be between angelic governments each trying to protect its citizens’ interests, but between Leviathans intent to maintain or increase their power. “Running” the economy and controlling their subjects’ imports can only increase or confirm Xi’s and Trump’s personal power. How else to explain that Trump has betrayed his farming supporters by launching a trade war with China? Ignorance probably plays a role, but so do the personal interests of rulers. In this perspective, the current trade war is not absurd from the point of view of the rulers, although it is from the perspective of the subjects.
The current act of the real-world play in the theatre of the absurd is that Trump and Xi are playing a chicken game with the possible outcome that none of the two will yield and that most of their subjects will be harmed. They play chicken with their subjects’ cars. Another intriguing absurdity of this chicken game is that one of the players is the chief ruler of a state called tyrannical (which it is in many respects), and that the other player is the chief state official of a country called free (which it is in many respects). And both apparently have enough power to wage a trade war, if not a worse war.
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