“The truth about free trade is that it benefits 320 million-plus people in a way that they really can’t see and never think about,” Buffett said at The Brazil Conference at Harvard and MIT earlier this month. “It’s not itemized on the slip when they pay at the register at War-Mart or anything of the sort. So it’s diffused. It’s unrecognized. And nobody goes to sleep at night thinking about how much better they’re living because we have free trade.”
The 86-year-old, who is also the third-richest person in the world with an estimated fortune of $74.1 billion, recognized that it does hurt specific groups of people.
“The people it hurts — and it does hurt people — it’s very specific and they know what happened to them and they don’t feel it’s fair that it happened to them and I happen to agree with them. But that doesn’t mean you stop free trade.”
Retraining isn’t necessarily the solution either. Instead, Buffett thinks there should be policies that take care people whose jobs are impacted. He noted that the United States is a “very rich” country with close to $60,000 GDP per capita.
“So you have to take care, and if you don’t take care of the people who are specifically hurt by that you can’t blame them for voting for anybody that promises them that they’ll end their pain,” Buffett said. “If you’ve got something that is a benefit to all of society and it’s going to hurt a few individuals, part of a wise administration of government policy is to make sure you take care of the people who are going to be hurt specifically. Because in a democracy otherwise they’ll get organized. I’ve got every sympathy in the world for the steelworker, but you do not want to give up free trade.”
The dangers of isolationism
He went on to argue that if the country isolated itself there could be potentially dangerous consequences.
“Just postulate two kinds of worlds — One where the United States is isolated by itself and is doing fine and much of the world is suffering because of nationalist policies we have. Or one where everybody is improving and the emerging and poorer countries are growing faster than GDP per capita than the United States,” he said. “Well, you want the second world, particularly when people have nuclear weapons around. You do not want a lot of jealous countries around the world that have nuclear weapons or cyber capabilities or whatever it may be.”
He added that it’s important for the president to be “very candid” and deliver a message that some people who don’t deserve to be hurt will be impacted lost jobs, but there will be a safety net.
“This is going to hurt a lot of people who don’t deserve to be hurt if we are improving shoes or whatever it may be. And if you are at an age where it’s sensible to retrain and all that, fine, but if it isn’t, we’re going to have some sort of credit essentially that takes care of you because you’re contributing to society by us screwing up your life.”
We can afford to help
According to Buffett, the U.S. is an “abundant country” that can afford to take care of its own.
“We have 6-times the real GDP per capita that we had when I was born in 1930. Six for one in one person’s lifetime. And we started from a reasonable base. We have abundance coming out of ears,” he said.
“But we can’t have a situation where the Forbes 400 had $93 billion of aggregate net worth in 1982 when they started and now they have $2.4 trillion,” he said. “The top guy on the list was Dan Ludwig with $2 billion who nobody’s ever heard of. The rewards in a specialized market society have gone and will go disproportionately more to people who are at the top of the game and people get left behind.
“But we can take care of that. We can have earned income tax credits like we have and make that system a lot better and not give up the benefits of the free trade and the market system that causes the guys like Jeff Bezos and Steve Jobs to do things that work wonders for millions of Americans.”
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.