The Trouble With Globalization


Dani Rodrik over at the Milken Institute Review:

The logic of sustaining an open economy by compensating those who end up with smaller slices of the pie is impeccable. That’s how European nations, with their extensive safety nets and generous social benefits, integrated into the world economy. To this day, despite rising populism, international trade is not a very contentious issue in Europe. Anti-globalization ire focuses not on Chinese or Mexican exporters, but on faceless bureaucrats in Brussels and Frankfurt — and, of course, on immigrants. The United States, too, could have moved aggressively to compensate dislocated workers in the 1990s, when it opened its economy to imports from Mexico, China and other low-income countries in a major way. Instead, under the sway of market fundamentalists, the United States let the chips (and workers) fall where they may.

By now, the compensation approach has been tarred as “burial insurance.” The trade adjustment assistance programs that are habitually tacked on to trade agreements have provided inadequate aid — and to just a sliver of the affected population. That is partly by design: politicians have little incentive to implement strong compensation programs once trade agreements are approved.

More here. Also see in the Milken Institute Review, this piece by Brad Delong on Globalization:

Portions of the case against globalization have some traction. It is, indeed, the case that the share of employment in the sectors we think of as typically male and typically blue-collar has been on a long downward trend. Manufacturing, construction, mining, transportation and warehousing constituted nearly one-half of nonfarm employment way back in 1947. By 1972, the fraction had slipped to one-third, and it is just one-sixth today.

But consider what the graph to the left does not show: the decline (from about 45 percent to 30 percent) in the share of these jobs from 1947 to 1980 was proceeding at a good clip before U.S. manufacturing faced any threat from foreigners. And the subsequent fall to about 23 percent by the mid-1990s took place without any “bad trade deals” in the picture. The narrative that blames declining blue-collar job opportunities on globalization does not fit the timing of what looks like a steady process over nearly three-quarters of the last century.