A new front has opened within the trade wars of yank politics. Because it spreads insecurity across the US workforce, the much-reported movement of white-collar jobs to low-wage countries – offshore outsourcing – is that the contested ground.
This trend has given economists another chance to evangelize how trade makes our economy more efficient. While strategically silent on who benefits from them, they’re right about the efficiency gains. The question “what’s in this for me?” is perfectly valid for working Americans to ask.
To competition from abroad are jobs producing autos and t-shirts have long been exposed. Considered un-tradeable were service-sector jobs like accountants (learn more), telephone operators, and medical technicians, until recently.
New technologies may have put these jobs up for grabs within the global marketplace. Familiar to anyone who regularly reads the business pages is the image of customer service representatives fielding calls from US customers from an office in Bangalore.
While the arguments over it are reruns of earlier rounds within the trade wars, services offshoring is also new. Pointing to losses of employment, wages, and bargaining power are workers in newly vulnerable industries and labor unions. Trade advocates traumatize traditional economic arguments that efficiency gains will raise the value.
One is often forgiven for thinking that these arguments contradict one another – trade can’t be bad for workers and yet raise the value, can it?
Actually, it can. Textbook trade theory, the standard wisdom of the discipline, predicts exactly that trade will raise the value within the US while leaving most workers poorer. This was proved not by some obscure tenured radical, but by the godfather of contemporary theory, Paul Samuelson, the person who literally wrote the fashionable economics textbook.
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Trade advocates implicitly acknowledge this. Together with a recommendation that government temporarily help trade-displaced workers go back on their feet, there’s a mention of the “winners” and “losers” from trade near the top of most pro-trade essays. This is often insufficient – trade doesn’t just harm workers directly displaced by imports; it also harms workers subsequently competing against one another for the remaining jobs.
Economics teaches that trade creates more winners than losers is what these same essays often imply. This is often strategically misleading – economics teaches only that the winnings are greater than losses. An entire bunch of losers is balanced out by one big winner. Economists agree (if not advertise) that almost all American workers are, on the net, prevent from winnings.
Of course, there are winners from trade. Companies that enjoy cheaper labor and inputs win, as do workers whose job is insulated from competition with foreign and domestically displaced labor. Thinning the pool of trade’s beneficiaries, service sector trade could radically shrink this latter group. Whether or not this process is nice “for America” depends on your perspective: is taking a dollar from a telephonist to allow Donald Trump two dollars good “for America”?
So what will be done? Trade defenders of a liberal bent sometimes verbalize a grand compromise, calling for trade’s potential victims to their drop political opposition in exchange for compensation within the health care, pensions, and adequate unemployment and wage insurance that are sort of publicly provided.
This bargain is worth considering, but only after this welfare is truly implemented, not before. There’s no reason why trade winners should get to make the most before American workers have their living standards insured. This is still true whether we’re trading automobiles and clothing or computer programs and accounting services. In the meantime, economists should focus less on deriding the anxieties about trade felt by American workers and their advocates and more on workable social welfare plans.
If trade yields gain so large on make it an imperative policy, surely a bit of those gain is wont to allow the bulk of the US workforce to share during this promised prosperity.