Professor Bhagwati has published a number of economic books and is becoming a "hot" name in the academic world. I recently read one of his earlier works, Free Trade Today. I dislike his writing style, which carries a strange odor of disarming arrogance. Still, no one can doubt Professor Bhagwati's diligent research--there were 114 footnotes in a 120 page book, some to his own works (hence, the arrogance).
This book was divided into three chapters. The first one, a defense of free trade, was impenetrable. For example, Prof. Bhagwati says that in a recession, the free market is failing to pay people their properly calibrated wage, and responding to unemployment with tariffs in an attempt to spur domestic consumption only makes the problem worse. This is because the real answer to unemployment is to create higher demand , and tariffs curtail more demand for services by limiting entrants into the market. But here's how Prof. Bhagwati expresses these thoughts:
The Keynesian warming to protection in times of unemployment due to deficiency of aggregrate demand evidently derived from the notion that tariffs could divert aggregrate demand from foreign to domestic goods. But from the viewpoint that I am setting forth about the role of free trade, it is equally possible for us to see that since the social cost of labor in a situation of massive unemployment us clearly less than its (market) wage, this is a market failure, and free trade is no longer a compelling policy. [In other words, too much unemployment leads to major social detriment, which may create a compelling scenario for government intervention.] That the optimal policy mix would still be to remove that market failure by creating a sufficiently more aggregate demand, instead of diverting a given aggregate demand towards yourself, and then holding on to free trade, is a matter that I shall turn to in the context of proposition 2 in the next section. (p. 17, Princeton U Press, 2002)
Did we all get that? (I'm still not sure I have.) Prof. Bhagwati redeems himself in the second portion of the book, which is the only portion I would recommend to anyone. In one section, Prof. Bhagwati demonstrates his high intelligence and understanding of economics vs. sociology:
First, fairness rather than justice is the defining moral principle in the United States, as compared to the more socially structured European and Japanese societies. So equality of access trumps equality of success; equal opportunity trounces equal outcomes. (p. 52)
This statement holds true, as long as the average American continues to have political beliefs slightly right of center. In an extremely interesting premise, Prof. Bhagwati also says democracy is a check against unfettered and irresponsible capitalism:
Few governments, certainly now that democracy has broken out worldwide, are likely to say instead to multinationals: come and make profits by polluting our waters and air. (p. 59-60)
In another interesting section on preferential trade agreements (PTAs), Prof. Bhagwati correctly says that rich nations insert provisions in these trade contracts that are one-sided. For example, the U.S. will focus on child labor rather than environmental or "quasi-slavery conditions for migrant labor in American agriculture." (p. 71) In addition, eliminating child labor in poor countries may lead to children entering more undesirable professions, such as prostitution. (p. 77)
The third chapter is more technical, but still readable, and focuses on how to draft bilateral agreements that favor free trade. Prof. Bhagwati points out that there are now so many bilateral agreements establishing favored trading partners or products, that it is becoming more difficult for poorer countries to navigate this system or even attain fair results.
I would not recommend this book to the casual reader, but if you want to major in economics, read this short book to see whether you have a future in the field, as most of the ideas mentioned are intelligent and informed.