An integrated global economy has its limitations, according to a new study by an international team of economists.From the WSJ:
For years, economists have told Americans worried that cheap Chinese imports will kill jobs that the benefits of trade with China far outweigh its costs.New research suggests the damage to the U.S. has been deeper than these economists have supposed. The study, conducted by a team of three economists, doesn’t challenge the traditional view that trade is ultimately good for the economy. Workers who lose jobs do eventually find new work or retire, while the benefits from trade, such as lower prices, remain. The problem is the speed at which China has surged as an exporter, overwhelming the normal process of adaptation.The study rated every U.S. county for its manufacturers’ exposure to competition from China, and found that regions most exposed to China tended not only to lose more manufacturing jobs, but also to see overall employment decline. Areas with higher exposure also had larger increases in workers receiving unemployment insurance, food stamps and disability payments.
The world is beginning to change faster than many blue collar workers can adapt to it. The government offers job training programs and generous unemployment benefits to workers who have lost jobs to international trade, but these benefits also mean higher taxes and less investment in the domestic economy:
The economists also found that higher exposure to Chinese imports led to larger increases in unemployment insurance, food stamps, disability payments and other government benefits. Those add up to big losses, they said, because the higher taxes the government must collect to pay for benefits, and the way benefits reduce people’s incentive to work, makes the economy less efficient.
Protectionism is not the answer for keeping manufacturing jobs at home, but neither should Americans naively assume that all paths toward a more liberal global order are equally prudent, equally advantageous for the United States, or equally sustainable. the great weakness of the globalist consensus of the 1990s — one of the Clintonian concepts that made the transition into the Bush years and has survived into the Obama era — was its naively ahistorical understanding of economic policy and its role in American strategy. American intellectuals need to search for a more sustainable internationalism which takes our interests into account. Many paths to a more open world economy exist, but determining which works best for the U.S. is a task that America’s leadership has largely neglected for almost twenty years.It is time for a change.