Seeker Blog

The benefits of freer trade were estimated in a paper presented by Professors Kym Anderson and Alan Winters. They found that a successful Doha Round could generate up to $113 trillion in new wealth during the 21st century, at a cost of $420 billion or less from inefficient industries going bust. If you like ratios, that’s a return of $269 for every $1 of cost. A less conservative projection puts the gains three times higher. More than 80% of this global windfall would go to the world’s poorest countries.

The results of the 2008 round of the Copenhagen Consensus are not too surprising, and food for thought. As in all the preceeding annual reviews of spending priorities targeted at helping the world’s poor, global warming mitigation finished near the bottom. However, research into low-carbon energy technologies finished better, at #14.

Even as the U.S. Senate debates a vast new tax and spend regime in the name of fighting climate change, a more instructive argument was taking place in Copenhagen, Denmark. Some of the world’s leading economists met last week to decide how to do the most good in a world of finite resources.

Scarcity is a core economic concept, though politicians and even many economists prefer to ignore it. There isn’t an unlimited amount of money to be spent on every problem, so choices have to be made. The question addressed by the Copenhagen Consensus Center is what investments would do the most good for the most people. The center’s blue-ribbon panel of economists, including five Nobel laureates, weighed more than 40 proposals to improve the world by spending a total of $75 billion over the next four years.

What would do the most good most economically? Supplements of vitamin A and zinc for malnourished children.

Number two? A successful outcome to the Doha Round of global free-trade talks. (Someone please tell Barack Obama.)

…”It’s true that trade doesn’t immediately save lives,” explains Bjorn Lomborg, the political scientist who heads the Copenhagen Consensus Center. “But it’s proven that when people have more money” – as tends to be the case when trade barriers fall – “they improve their health, their education and so on.” The resulting prosperity reduces such problems as malnutrition and disease, while improving education. All three of those ranked high on the priority list.

…As Mr. Lomborg explains, the costs of mitigating climate change would be enormous for what are highly speculative benefits. He prefers research on new technologies, rather than a global cap and trade regime that would raise energy prices and thus reduce overall economic growth. Meanwhile, societies that are wealthier due to free trade will be better able to cope with the consequences of warming, if it occurs.

The Doha trade round has fallen out of the news, largely because there is so little political will to compromise and get a deal. As the Copenhagen Consensus shows, this is a global tragedy that will do far more harm to more people than a modest increase in global temperature.

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