Anti-Foreign Bias
Tyler in the NYT Sunday:
The last 20 years have brought the world more trade, more globalization and more economic growth than in any previous such period in history. … Despite all these gains, the prevailing intellectual tendency these days is to apologize for free trade. A common claim is that trade liberalization should proceed only if it is accompanied by new policies to retrain displaced workers or otherwise ameliorate the consequences of economic volatility. …
What’s really happening is that many people, whether in the United States or abroad, are unduly suspicious about economic relations with foreigners. These complaints stem from basic human nature – namely, our tendency to divide people into "in groups" and "out groups" and to elevate one and to demonize the other. Americans fear that foreigners will rise at their expense or "control" some aspects of the economy.
Only on his blog does Tyler make his best point:
Virtually all of the "second best worrying" about trade could be applied also — in fact more so — to technical progress. Or to trade across the fifty states. Yet when it comes to foreigners, the worries acquire a more dangerous credibility. That is the real second best problem, not any theorem you might derive about trade and externalities.
Nothing new here, but its worth a reminder from time to time.
If you are laid off because they automated half the production line, your skills are just as devalued as if you are laid off because they outsourced half the production line to China.
Ansel F - True, but I use the example of Russians because it has been done repeatedly enough to be reported as a problem. (As an American who has an application in for an apartment in Montreal, I now have a relative ["comparative"] advantage over an honest Russian applicant who would have the same bona fides--through no other reason than that enough "lemons" of Russian origin have been in the market recently to cast aspersions on any honest searchers.)
ad - "It is just that [globalization] unpredictably alters the distribution of wealth within America. But so does new technology, so why do people object to one, but not the other?"
"Unpredictably" just isn't true (nor, quite frankly, would I blame globalization for most of that change. Ask Warren Buffett). As more value accrued to capital [new technology], there should be a temporary spike in the value assigned to capital. Then people learn to use it, and there (again) should be a rebalancing to labor. (The more skilled laborer should be compensated for hisser additional skills.) So the long-term change from improvements in technology should be close to zero on the balance between labor and capital, cet. par.
The trend has run that capital's share of income has gone from ca. 25% to ca. 33% over the past fifty years, with inequality increasing with the share to capital. (Again, no surprise. The large majority of Americans do not own capital and therefore will not benefit directly from an increase in share to capital. [And, no, I don't count stock held in an IRA/401{k} as capital for those who have no other major capital holdings--it's an annuity meant to be consumed at a future date, and therefore should be viewed as savings, not investment.])
Offshoring, otoh, both reduces labor costs (increasing inequality, as noted above) and reduces the values of those skills in the workplace. Ask anyone who made Zenith televisions (e.g.) whether their years of experience (what we call "sweat equity" when it's a white-collar job) were compensated for by their next employer at the gas-pumping station or Starbuck's or laying network cables.
And the result is not that televisions went away: they're just built elsewhere, by workers with less skill, and the institutional memory of how to make them in the U.S. fades away and goes away, even as the demand for product goes up.
Technology improvements still value skills; they just require adding more. Offshoring devalues skills.