Mr. Blinder’s answer is not protectionism…he accepts the economic logic that U.S. trade with large low-wage countries like India and China will make all of them richer — eventually. He acknowledges that trade can create jobs in the U.S. and bolster productivity growth. But he says the harm done when some lose jobs and others get them will be far more painful and disruptive than trade advocates acknowledge. He wants government to do far more for displaced workers than the few months of retraining it offers today. He thinks the U.S. education system must be revamped so it prepares workers for jobs that can’t easily go overseas, and is contemplating changes to the tax code that would reward companies that produce jobs that stay in the U.S.
Here is the article. Arnold Kling says technological progress will be more important than trade. I think that China is due for a crack-up and India will soon bump up against its horrible legal and educational systems. I saw that economists are listed as among the most threatened groups, but I doubt if the United States can look forward to the liberation of so much talented and witty labor. I also think that corporate welfare is a bad idea, and that universities should not train everyone to be a small town divorce lawyer. Teaching reading and writing would be a good start.
When our economists start preaching that we should look to economists and higher educators to predict the new, growing economic sectors, I again think that the Chinese are not the major problem.
This Blinder dude’s got blinders on. Can we just get rid of academics and listen to some smart people for once?
The competitive advantage that we would gain in dealing with such technologically lacking societies such as China and India would be offset by the loss of jobs in this country. As long as China operates as a closed society and does not allow immigration. No real advantage is therefore gained. Open borders to free trade should go hand in hand with open borders to immigration.
I agree completely. Corporate welfare will just make our industries uncompetitive in the long run, raising the dislocations of the inevitable globalization.
But, I do think that investment in technological progress, along with regulatory streamlining (such as developing unified cell phone standards, or revising recent silly changes in patent laws, or reforming SarbOx), would help our competitive position a lot.
Creative destruction
As a general point, it seems to me that growth depends on the fact that most efficiency gains are liberated for new uses. But if people who are made unemployed by efficiency gains are given *too much* support (especially via higher taxes and inefficient government agencies) then all the efficiency savings are simply wasted, and (economically speaking) there was no point in them losing their jobs in the first place.
In other words, the creation depends upon the destruction. In the long term, destruction is necessary if we want creation.
Wonder why Blinder is not concerned about technological changes that will also render certain workers’ skills useless and help others with higher skills get richer? Outsourcing and technology have precisely the same economic effects — the unit cost of production goes down, but expanded markets and higher level jobs bring the prosperity.
Where I do agreee with Blinder is that retraining needs a fix, though by using the market. I don’t think learning to read or write is the problem in developed countries that arew losing jobs due to technology or outsourcing — it is specific job skills that are way past reading and writing. A classical education is truly a wonderful thing, but it is a luxury. My not-for-profit (http://www.k-capital.com) is based on the supposition that we have a market failure in the market for information about good (effective at increasing income) re-training schools and programs. Schools are quite happy to train as manay as show up and not be responsible for the income that results. Banks that lend for such training would have such incentives, and so by creating a deep secondary market for such re-training loans, (a) the information should become more and more availaible and (b) good schools will gain more than bad schools, and (c) the worker needing retraining will get an avalanche more of information about effectiveness of competing retraining programs. Just imagine that instead of mortgage brokers desparately searching for people to sell houses to, we get training brokers dying to lend for retraining and helping you find a course that would work for you…
Somehow I think that would be better than the governments’ couple of months of training for laid off workers.
Blinder’s about-face was prompted by the realization “additional American workers will start to experience an element of job insecurity that has heretofore been reserved for manufacturing workers” and that a college diploma is losing “‘silver bullet’ status.”
Does he worry because the allegedly larger number of offshorable workers increases the size of the problem? Or do blue-collar workers not rate?
If one is thinking in zero sum terms then I’d think that abolishing the corporate income tax would be a no-brainer. It would discourage offshoring and encourage onshoring by foreign firms. Why are we shooting ourselves in the foot?
By the way, this also has positive sum benefits as well. It would encourage more new businesses. It would keep capital in the hands businesses with which to hire still more workers as it is now able to expand at a faster pace. The new hiring would both lower the unemployment rate and also bid up wages(!) of workers. The new businesses with all those new products would tend to lower prices as they compete for customers, thus in effect giving all workers a raise as they get more bang for their buck, as well as introduce new products and services that didn’t even exist before.
I don’t want to be mean to Blinder – and I was a bit in my post. He’s not the first free Trade economists who has started saying that we must “do something” about the discomfort of change. But by virtue of “doing” something, the trade is no longer “free” by definition.
In Blinder’s defense, he does worry that his concern will be used to install protectionist measures. But I still have problems with his forecast and recommendations.
With globalization and free trade comes change. While the effects of free trade are evident in manufacturing, the workforce in the US will have to reeducate itself and adapt to ever changing global economy. Additional incentives could be offered for “high value-added jobs” through government funded education assistance in addition to tax breaks for companies that create high value added jobs
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