Capitalism and Inequality

2 Globalization and inequality

Does anyone lose from free trade?

Donald J. Boudreaux

I. Introduction

How might free (or freer) international trade uniquely affect economic inequality? The qualifier “uniquely” is vital. If free international trade affects inequality only by first affecting some other economic phenomenon – and if this other phenomenon affects inequality even in the absence of trade – then whatever effects on inequality might be ascribed to trade are really effects properly ascribed instead to the other phenomenon.

The most obvious and germane example of one such other phenomenon is economic growth. Economists since Adam Smith have convincingly argued that free international trade is a major source of economic growth.¹ But because ...