Sterling Ambivalence (sterlingnorth) wrote,
Sterling Ambivalence

So, Is Free Trade Good or Bad?

I suppose one way to calm anxiety about losing one's job to India or Mexico is if perhaps the government, private industry, or the local colleges would offer to pay for retraining of America's jobless. Perhaps we can all take Brad DeLong's economics classes at Berkeley. Thus we can all understand why free-trade is good, or at least not the boogieman that our politicians and now recently our press corps makes it out to be.

He is mad as hell, and he isn't going to take it anymore.

Why Oh Why Can't We Have a Better Press Corps? (Special Free Trade Edition)*

I'm sorry. I can't let this pass. You ask any of the recent Chairs of the Council of Economic Advisers--Mankiw, Hubbard, Baily, Yellen, Stiglitz, Tyson, Boskin, Feldstein, Weidenbau, Schultze, Greenspan--of either party, and they will say that politicians who link trade and jobs and reporters who enable them do America no good service at all. Increasing trade does not create or destroy jobs in aggregate. The level of employment in the United States is determined by how good a job the Federal Reserve does in offsetting shocks to domestic demand, in setting monetary policy to hit the sweet spot where there is neither high unemployment nor rising inflation (with a secondary assist or hobbling by fiscal policy).

What trade does is to shift jobs, shift the composition of American employment: people in import-competing industries lose jobs, while people in export industries (or, with the capital inflow, construction and investment goods industries) gain jobs. Economists have lots of good reasons for believing that the jobs gained are better jobs than the jobs lost, and that there are more and bigger winners from expanded international trade than there are losers.

Though Brad does note that we have an administration who doesn't care about the people who fall through the free-trade cracks.

Perhaps if I took economics, I'd understand all of this.
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