The Road to Hell is Paved With Good Intentions
Reader Jon H. emailed me Tom Friedman’s latest NYT Op/Ed piece, 30 Little Turtles. The editorial is about Indian call centers and what those jobs mean for the Indians who get them. It’s definitely worth reading, but that’s not the point of this post. In my response to Jon’s email, I wrote this (slightly edited for posting):
More generally, I strongly believe that the labor market problems stem from the overall state of the economy, not from outsourcing and free trade. Insofar as protectionism will harm the overall state of economy, and it would, it’s more likely to make things worse, not better.
I think I’ve made this point before, but never so starkly: protectionism will cost, not create, US jobs. This is true irrespective of cross-country asymmetries in labor and social conditions (more to come on this issue).
Now the ubiquitous and important caveat: both trade and technological progress harm specific sectors of the economy while benefiting both the average and the median citizen (and the other deciles too). Thus, it is vitally important to use some of the gains from trade to offset those sectoral losses — as Paul Krugman recently wrote, “free trade is politically viable only if it’s backed by effective job creation measures and a strong domestic social safety net … there’s a reason why the two U.S. presidents who did the most to promote growth in world trade were Franklin Roosevelt and Harry Truman.”
P.S. Brad DeLong recently made roughly the same point:
“… I can and do blame Democratic politicians for not resisting temptation: every day that Americans are told that trade destroys jobs–rather than that it shifts jobs from one industry to another, hopefully from lower-paying to higher-paying–is a day that makes it harder to pursue good policies to enrich America. Blame Bush for failing to take out the obvious insurance against a slack job market–for pursuing tax cuts for the upper class rather than fiscal policies that would provide an effective stimulus to demand and employment. But don’t you dare imply or state that the U.S. would be a richer, more productive, and faster-growing economy if we turned our back on the world market.”