Tyler Cowen responds to the Andy Grove essay I linked to previously. I think Cowen, who rejects the essay wholeheartedly on economic grounds, gets the better of the argument. There’s no doubt in my mind that in the greater scheme of things, globalization is a strong positive force in the world. People in rich countries get better stuff at lower prices, and people in poor countries do gradually move up the economic ladder. The jobs in Chinese semiconductor factories may not be great compared to jobs in America, but they’re still better than peasant farming in China. However, the benefits of globalization are not evenly distributed, and if we’re going to commit to globalization as a project, we should also commit to providing a strong social safety net for people who are losing out to globalization as well.
July 4, 2010 at 1:12 pm
Right about the social safety net.
Without it, globalization is just a very effective method of wealth redistribution from the poor to the rich — which is by design.
July 4, 2010 at 6:14 pm
Couldn’t disagree more. A strong safety net is no substitute for a job. Welfare is no substitute for work. What future for a nation is it to dream of having an elite of knowledge workers and a vast mass of underemployed and unemployed dole-recipients?
And in point of fact there will be no strong safety net because those who lose out from globalization lose their money, and those without money have no voice in American politics.
Damn near every other country than the US has a trade policy that seeks to avoid a trade deficit, because they understand the relationship between over-importation and unemployment. We blame China for its mercantilist policy, which is a ridiculous waste of time when we have the levers to ensure balanced trade with China.
July 5, 2010 at 9:50 pm
I am dumbfounded.
This post reads like it was written by a 19 year old, its so incredibly naive.
The notion that in America, globalization’s winners will fund a safety net for globalization’s losers was a plausible argument in 1970. Unless you are a paid lobbyist, arguing that position in 2010 just makes you look like an idiot.
This post seems incredibly out of character for you, Rafe.
July 5, 2010 at 10:06 pm
When did I argue that the winners want to pay for the losers? I said that we should commit to that, but I don’t harbor any illusions that we actually will. Although the losers outnumber the winners by a pretty large margin, so all that’s lacking is the willingness to raise taxes on rich people and redistribute it to people who aren’t.
I’m not naive enough to believe that we live in a world where globalization is going to be reversed in any meaningful way. I’m not convinced that globalization should be reversed. So the question is, how do we deal with globalization in a way that makes this country a better place to live for everyone? Maybe it’s a new industrial policy, maybe it’s a social safety net, but it has to be something.
July 5, 2010 at 10:33 pm
When you wrote this:
You honestly believe that the American political system would allow the creation of a strong social safety net funded by taxes on the rich? That’s what I mean about naive.
NOTHING, I repeat NOTHING happens in Washington without the express written consent of the top .01% of earners. If Obama’s first year didn’t prove that to you, I guess nothing will.
Still enjoy the blog and appreciate your work on it, Rafe. But it stuns me how an obviously intelligent person such as yourself could be arguing this.
July 6, 2010 at 12:03 am
I said “we should also commit”. Not, that we will. As you point out, rich people and corporations have a lot of say in what happens in this country. That’s obvious. So yes, we probably won’t see taxes raised on the rich to pay for a robust social safety net, I agree with that. But we’re also not going to see any alternatives that people want enacted, either. (Like a protectionist trade policy to erase our massive trade deficits, which is what Andy Grove seems to favor.) I think it’s useful to talk about what we should do, even if it’s unlikely to happen, just to remind ourselves that there are alternatives to our current course.
July 6, 2010 at 6:16 pm
I would argue that even if there was compensation that it would be inadequate simply because transfer payments or subsidies are not as stable as employment income at productive jobs.
I’m not opposed to trade, but I think we need a full employment policy (I’d say we need it “first”, but it’s a bit late for that). If full employment is maintained, and the overflow in US demand is used to employ people in other countries to produce things for the US in exchange for US$ that will later be used to buy things FROM the US when those countries are richer, that is OK. But then you don’t need compensating payments because you already have full employment.
But the current policy of naive free trade regardless of employment effects undermines US growth prospects, employment, makes inequality worse, and transfers expensively-developed US technology to future competitors. The meager potential future purchase of US goods does not compensate for the drag on wages. And trade is undoubtedly a big part of why US wages have lagged in recent decades.
July 6, 2010 at 6:17 pm
And read this too: http://economistsview.typepad.com/timduy/2010/07/why-is-the-american-jobs-machine-broken.html.html
July 6, 2010 at 6:25 pm
Broken link, sorry. Try this; http://economistsview.typepad.com/timduy/2010/07/why-is-the-american-jobs-machine-broken.html
July 6, 2010 at 6:49 pm
I would very much be in favor of economic policy centered around pursuing full employment.