Saturday, March 06, 2004

free trade and jobs

i'm at work again and just like last time i came in to my office to "work" on a saturday. but here i am posting instead.

i actually drove here. while i posted earlier about how i don't have a real spring break, my wife the professor does. so she's flying to florida this morning. i drove her to the airport and then decided to just take the car to center city rather than hauling it back to the burbs to take the train back in.

anyway (and there is a point to this pointlessness), i was listening to n.p.r. on the radio as i was circling and looking for a space to park. some economic expert was talking about why job creation has been so bad even though other economic signs say we are in a "recovery."* he explained that economists had two theories about why economic growth has not produced more jobs:

(1) increased productivity--employers have "gotten more productivity out of their existing workforce rather than hiring new people" [i.e. making people work longer hours]

(2) business leaders are still skittish about the economy and are reluctant to commit to hiring new people

what surprised me is that there was no mention of a third reason, which seems to my amateur eyes to be a major factor in why the nation's unemployment figures are not improving:

jobs, in fact, are being created, just not in this country. unlike the recovery period from prior recessions, the countries biggest companies are no longer really "american" companies, but rather multinationals in a largely global system. when a company's fortunes improve, it tends to hire where it had offices, factories, etc. this is still probably true today. the difference is, in the past the offices and factories of american companies were largely located in the u.s. and now, since the explosion of free trade and falling tariffs in the 1990s, "american" companies' facilities are located all over the world--aside from the nationality of their c.e.o., they are no longer really american. high speed internet only compounds the problem as it allows even white collar jobs for the first time to be outsourced abroad.

the thing that i find so odd is that, while there is a lot of talk about outsourcing of jobs overseas, and lots of talk about the economy's dismal employment figures, the two are rarely spoken about at the same time. i would imagine someone else is talking about this, but i haven't seen it (though admittedly i have not looked very hard. i'm just reacting to the economic news that i encounter by accident as i did this morning. in those reports, i have yet to hear one which discusses this possible connection). admittedly, i do not totally know what i am talking about on economic issues. but this theory has a common sense appeal to it that at least deserves a rebuttal by qualified economists.

one other thing bothers me about this. i have this sneaking suspicion that one of the reasons it's not talked about is because no one wants to open the pandora's box of protectionism. there seems to be a fear that if the downside of free trade were discussed openly (and it does have a downside--although laissez-faire types will try to argue that, in fact, everything is win-win. but nothing is really win-win. it's only win-win when you disregard the losing side), the public would clamor for trade barriers.

almost no one is protectionist anymore. as far as i am aware and aside from gephart, all of the presidential candidates were free traders to one extent or another. at best, politicians propose tinkering with nafta. no one seems to be for repealing it. even the liberal bloggers occasionally note that they are "free traders" (see e.g. atrios). "protectionism" seems to be universally considered to be a bad word in political discourse, while "free trade" as a term has a positive connotation that seems to cross most of the political spectrum. indeed, i have my own prejudices against protectionism, though i have a hard time articulating them in a coherent way. i guess i just picked up the general spirit of our modern age and its distaste for trade barriers. also, at least on an abstract level, it's hard to see why trading with people in other parts of the world, by itself would be bad. if a person in uzbekistan has a hat that i want and i have some money that he wants, there is nothing wrong with us making an exchange. at its most basic level, that is what free trade is.

but it also seems to me that the offhand dismissal of any attempt to address some of the problems that come along with trade is counterproductive. we need an open policy debate about job loss in the u.s. where economists at least knowledge the costs as well as the benefits of free trade and to see if there is a way to get some of the benefits while minimizing the cost.** i have no idea whether there is such a solution, but maybe if this were talked about more directly we could figure one out.


*-my question: how long can you continue to call this a "recovery," with its implication that things are getting better. officially we're some 2 years post-recession. by now we have either recovered or we haven't. is it a "recovery" right up to the day we enter the next recession?

**-there has been some discussion of "minimizing the costs" of free trade. but again, as far as i have heard, only in a general abstract kind of way. i want to hear a discussion of actual proposals. has anyone out there seen any?