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Economists are now admitting that they were wrong about globalization

• methodover 7y ago
  The big question I’ve been struggling with in regards to the free trade debate is this: Is cheap labor a legitimate source of comparative advantage? I increasingly don’t think that it is. Yes, we get products more cheaply. But those products are made in countries with fewer labor restrictions, often in places that are not democratic, where workers cannot vote for changing laws. We’re effectively saying we want democracy where we live, for our own white collar professions, but we don’t want to be shackled by those restrictions for how we get rich, or how we enjoy our wealth. We’re effectively telling local blue collar workers that we’re okay with their level of work being taken over by people with less rights than themselves. That increasingly doesn’t feel just. Comparative advantage makes sense for natural differences between countries, such as availability of natural resources or favorable weather for certain types of crops. But not for fundamental human rights.
  • beagle3 7y ago
    Let me play the devil’s advocate: you buying those products is measurably better for those disadvantaged blue collar workers, than you not buying it (on a 10 year horizon IIRC - There are some UN studies on this, on phone and can’t find them right now). So you are damned if you don’t enjoy them, damned if you do (but a bit less). Obviously, it is better if you could improve their situation to the point where their labor stops being cheap.... but how can you do that?
    • tr3ndyBEAR 7y ago
      > Obviously, it is better if you could improve their situation to the point where their labor stops being cheap.... but how can you do that? The big thing missing from this conversation is how the US/multi-national corporations use international organizations like the IMF and World Bank to force "structural adjustment" policies that end up degrading labor protections, forcing countries to privatize all gov't functions, etc. We have played a big role in the destruction of their "situation". Both historically through colonialism and still actively today with IOs and structural adjustment policies Not to mention all the fucking coups the US enacted and supported: https://en.wikipedia.org/wiki/United_States_involvement_in_regime_change https://en.wikipedia.org/wiki/United_States_involvement_in_r...
    • shkkmo 7y ago
      > Let me play the devil’s advocate: you buying those products is measurably better for those disadvantaged blue collar workers, than you not buying it (on a 10 year horizon IIRC - There are some UN studies on this, on phone and can’t find them right now). Maybe in some cases. However, you then have labor in those countries trying to struggle for the same protections and advances in wages that workers in the US struggled for, but they are struggling against a far more powerful corporate entity that has the backing of a more corrupt/disfunctional government while also having diversified options to break and weather strikes. Then you have to add to that all the non blue collar workers who have had their subsistence livelihoods destroyed through land seizures for resource extraction. Most of the benefits of globalization roll uphill (richer citizens, especially in richer countries extract most of the benefits) the trickle down is minuscule to non-existent.
      • davidw 7y ago
        > a more corrupt/disfunctional government You...sure about that?
      • cactus2093 7y ago
        Yes people still have challenges and problems. But at the end of day, there are hundreds of millions fewer people in poverty than there were just a few decades ago. None of what you're saying justifies that the alternative would have been better, where most of these people remained poor subsistance farmers.
        • shkkmo 7y ago
          > , there are hundreds of millions fewer people in poverty than there were just a few decades ago. And how much of that is due to globalization and how much of that is due to the growth of local economies? How much faster would those local economies have grown if wealth was not being siphoned out by multi-nationals? (These are not honest inquiries, not rhetorical questions.) > None of what you're saying justifies that the alternative would have been better, where most of these people remained poor subsistance farmers. The people who were poor subsistence farm who had their lands given away are generally not those who have been lifted out of poverty.
    • AWildC182 7y ago
      Maybe a better way forward is for labor cost disparity to be just small enough to encourage jobs by being cost effective after shipping with a hint of extra profit rather than a make-several-one-trillion-dollar-companies cost disparity.
    • methodover 7y ago
      I'm sympathetic to that idea, to some extent. Foreign workers would indeed be happy to get a marginal increase in their income, even if those wages and working conditions are well below developed-country standards. But, then, aren't we just making a trade at that point? I will fire 100 local blue collar workers, and hire 100 foreign workers who will do their job for less. I hurt 100 people, help 100 people, and along the way pocket some extra cash for myself. I think most moral systems would have a problem with this. It is generally thought of as immoral to rend one person in order to help one other. (Yes, things get complicated when you hurt N people to help more than N people, depending on the number of extra people helped and the kind of hurt. For example, sacrificing soldiers in order to save an entire country. Generally speaking though, most moral systems have a problem with hurting people against their will except in extraordinary situations involving very large numbers. Does this trade situation qualify as that? I'm skeptical that is does.) There has to be a better way. Some way where we aren't harming local blue collar workers, but are still helping foreign nations develop, while giving those foreign nations on the path of strong worker protections and wages that we have here.
      • harryh 7y ago
        It is generally thought of as immoral to rend one person in order to help one other. Not when it comes to buying things, which is what this situation is. Blue collar workers in the US (or other developed nations) don't have a moral demand on you to purchase their labor at the same rate forever. If someone across the street (or across an ocean) is selling the same product for less money it's perfectly fine to buy it from them instead. Do you think it's immoral when you, say, switch from Verizon to AT&T to get a cheaper rate on your cell phone plan?
        • methodover 7y ago
          Yeah, this is another aspect of the debate I find myself challenging: Labor is different. Our human lives are different than a cell phone plan.
          • harryh 7y ago
    • noonespecial 7y ago
      You adjust the system, however obfuscated and difficult it seems, so that they work to better themselves instead of for you. Because at the very bottom layer, that's what's happening.
  • deogeo 7y ago
    > We're saying, we want, we're okay By 'we', you mean the multinational corporations that write 'free-trade' treaties (that usually encompass much more than just tariff reductions). Because voters tend to not get much say (and sometimes not even senators!): https://en.wikipedia.org/wiki/Trans-Pacific_Partnership#Secrecy_of_negotiations https://en.wikipedia.org/wiki/Trans-Pacific_Partnership#Secr...
    • AndrewKemendo 7y ago
      As a consumer you are voting with those corporations by buying from them or using their services. It might not seem like it's a choice, because the plurality of consumers have made the choice to go along, so if you do otherwise you're in a small group. It's still a choice though. You either live the modern lifestyle, which includes (though reducing) consumption based on what could be classified in many cases slave labor. Or you choose a lifestyle that doesn't.
      • deogeo 7y ago
        How nice. First subvert democracy through lobbying so they can offshore production, so the only 'choice' consumers have is go along with it, or live in the stone age. Then when consumers don't all retreat to caves and huts in the woods, claim this means they agree with and 'voted' for this course. Buying is not voting, and deceiving people into believing this has been one of capitalism's greatest successes.
        • dominotw 7y ago
          > so the only 'choice' consumers have its not the only choice in USA atleast. ethically made products cost more.
          • benibela 7y ago
            But the opposite direction does not hold. More expensive products are not necessary more ethically. Often the cheap and expensive products are made by the same workers and just sold under different brands. So the customers cannot know which products are ethically or not. They would need to vet the entire supply chain of every product. That is a full time job just to check one product
  • Animats 7y ago
    Is cheap labor a legitimate source of comparative advantage? That really is the big question. It worked out OK for the pre-China era of "Asian tigers". Japan, Korea, and Taiwan had a labor cost advantage and exported heavily to the US. Their standard of living went up, wages went up, and they lost the labor cost advantage. Then the next round - Bangladesh (world leader in T-shirt production), Vietnam, Thailand. Labor costs are still low, but the countries are not big enough to seriously hurt the US. But they were not as big as China. China is 3x the size of the US in population, close in GDP, and has industrialized very fast. The US can't absorb that shock. Eventually, China may lose the labor cost advantage; it's already declined quite a bit as wages go up. But for now, the US is taking a big hit on this.
    • thereare5lights 7y ago
      China is more than 4x
    • TMWNN 7y ago
      >Eventually, China may lose the labor cost advantage; it's already declined quite a bit as wages go up. According to Peter Zeihan's The Accidental Superpower (2014), manufacturing in China has gone from being one quarter as expensive as in Mexico to 25% more expensive. He expects that the US shale and natural gas boom will further reduce costs in Mexico and the US. Also see "Why China should follow Trump’s example and cut taxes" http://www.scmp.com/week-asia/opinion/article/2056874/why-china-should-follow-trumps-example-and-cut-taxes http://www.scmp.com/week-asia/opinion/article/2056874/why-ch... . Quote: "As far as manufacturing is concerned, according to Cao, everything is cheaper in America apart from manpower."
  • miles7 7y ago
    I agree it's an important question. But one thing often left out of the possible answers is to go forward with using cheap labor overseas while also providing a very strong safety net and job retraining options to those who lose their jobs as a result. If this was done, then those workers might be able to benefit from the cheaper prices of products too while still having money in their pocket. Instead they've just been abandoned. Obviously this is oversimplifying things, but I'm just saying that on the one hand it's important for disruption to happen (Uber making it harder for taxis) for the sake of progress, but for the sake of justice and the social fabric we should protect those most affected by the disruption.
  • AnimalMuppet 7y ago
    The thing is, for those workers in "poor" countries, this is a step up. My wife can tell you what two months' work for $300 meant to subsistence farmers in Guatemala. They were happy to get it. You may say "Sure, they're poor and exploited, but that doesn't make it morally right for us to exploit them just a little less". I agree, up to a point. But insisting on first-world working conditions (including pay) mean that very few of them get hired. This leaves almost all of them poor and exploited, without even the option of "slightly less exploited". Who does that help?
    • elliekelly 7y ago
      It's one thing to pay a lower wage for the same work - especially when the cost of living varies considerably. But I don't really think there's anything that justifies inhumane or unsafe working conditions.
    • khrbrt 7y ago
      The CIA under Eisenhower overthrew the government of Guatemala when trade unionists were elected on the promise of eight hour workdays and better conditions for field workers. What do you think the country would be like today if we hadn't killed the union leaders and installed a dictator friendly towards US business?
      • jacobolus 7y ago
        For one thing there wouldn’t have been a decades-long civil war leading up to a genocidal military dictator. https://en.wikipedia.org/wiki/Guatemalan_Civil_War https://en.wikipedia.org/wiki/Guatemalan_Civil_War > CIA under Eisenhower overthrew the government of Guatemala when trade unionists were elected on the promise of eight hour workdays and better conditions for field workers. This isn’t quite the whole story. A significant proportion of Guatemalan land was owned by the United Fruit Company (whose leadership/ownership included significant overlap with Eisenhower’s administration†), but the company was not using the land. The Guatemalan government wanted to buy the unused land back from the company at the price they declared it to be worth on their tax forms. The company went to the US government and whined that their private property was being expropriated. https://en.wikipedia.org/wiki/Decree_900 https://en.wikipedia.org/wiki/Decree_900 † “John Foster Dulles, who represented United Fruit while he was a law partner at Sullivan & Cromwell – he negotiated that crucial United Fruit deal with Guatemalan officials in the 1930s – was Secretary of State under Eisenhower; his brother Allen, who did legal work for the company and sat on its board of directors, was head of the CIA under Eisenhower; Henry Cabot Lodge, who was America's ambassador to the UN, was a large owner of United Fruit stock; Ed Whitman, the United Fruit PR man, was married to Ann Whitman, Dwight Eisenhower's personal secretary.”
  • csense 7y ago
    > Is cheap labor a legitimate source of comparative advantage? No, it isn't. Living in the Rust Belt, I find it so obvious that globalization is a race to the bottom that I'm amazed any reasonable person could believe otherwise. All the jobs move to countries with the worst wages, environmental protection, safety, workers' rights, etc. In economists' language, through labor organization and the democratic process, relatively free countries' workforces created a de facto monopoly on labor, which was able to extract some monopolistic rent (i.e. workers' wages > what they "should" be). Standard economic theory says this has a redistributive effect (labor pulls money from everyone else) plus an inefficiency effect (there's some potential value lost by the artificially high wages). Standard economic theory says markets should always be free, to avoid the inefficiency effect. This is where I disagree with standard economic theory: When it comes to the labor market, I firmly believe the inefficiency effect is a cost worth paying for the redistributive effect. If you open up your trade to the rest of the world, fungible jobs all go to the poorest, most repressed people, who can be paid the lowest wages and exploited in the worst ways. It's great for lifting people out of extreme poverty, but as a side effect it slides every country toward moderate poverty while moving all the wealth to the 1%. That's a recipe for potentially dangerous levels of social and political instability. My solution? Every country with high standards in wages, environmental protection, safety, workers' rights, etc. needs to implement tariffs to level the playing field. If your country has high standards, other countries can still choose lower standards and trade with you, but the competitive benefits of those lower standards will be nullified by the tariffs. Which lets you keep your high standards without wrecking your economy (and as a side benefit raises revenue without taxing your people directly, and gives countries with low standards an economic incentive to improve themselves. Which is potentially a great humanitarian breakthrough, improving the lives of lots of ordinary people in countries whose rulers care only for their wallet). I think the Trump's tariffs are a move in the right direction, although I think he's made a mistake by making the policy more of a negotiation lever than a semi-permanent way to compensate for China's low wages and poor standards. I believe so strongly in the value of a tariff policy that I used to say that I thought Trump's willingness to implement tariffs more than balances all of his many negatives. Lately I'm not so sure about that, not because I've lost faith in tariffs, but because Trump's done a lot more negative things than I thought he would.
• markmet433 7y ago
  Outside hardline libertarian and establishment wall street circles, no serious intelectualls fell for the new free trade religion. Seeing Krugman admit as much in order to preserve a shred of credibility is a good sign. Dont be confused though, Krugman is stil a hack intellectual for hire.
  • tr3ndyBEAR 7y ago
    The establishment of both major US policies have been pretty staunchly neoliberal and pro free trade up until recently. I don't think it's fair to say "no one fell for it"
    • naravara 7y ago
      That was largely driven by bankers and the finance industry moreso than academic economists. It's all about incentives.
  • qnsi 7y ago
    You are mistaken. It was and I think still is a consensus among economists. For example: https://people.uwec.edu/jamelsem/fte/fte/efl/teacher_stuff/articles/economists_agree.pdf https://people.uwec.edu/jamelsem/fte/fte/efl/teacher_stuff/a...
  • not_a_cop75 7y ago
    Krugman is basically the economist's version of a whore. There is no decently left there - only room to claim new things for huge wads of cash.
• codingslave 7y ago
  The odd part about capitalist based policies on trade and skilled work force immigration is how much the left has supported them. The right has long held a "capitalist laissez-faire" approach to economic policy, and has been open about that. But what I cannot wrap my head around is the paradoxical message of the left. On the one hand they have long been known for supporting and using government intervention to protect and bolster the common working man in the United States, but on the other hand have continuously and audaciously supported and put forwards free trade and ultra capitalist ideas. The outcome of which has been a disaster and is only getting started. Even more paradoxically, the most pro American Worker campaign ever ran, was run by Donald Trump, a quasi republican, who in turn won the election by stealing support from democrats in key states (Michigan, Ohio, Florida, etc).
  • markmet433 7y ago
    The left used to oppose immigration into the 1990's. It's only the very recent "woke" racial left that supports globalization, capitalism and immigration.
  • tokai 7y ago
    Social democrats won out last century over more radical socialist (in the west). Turned out marrying capitalism to socialism isn't that easy thou.
  • wahern 7y ago
    1) The American left has always been suspicious of government and comfortable with the market economy. The range of policies that look acceptable to the social left skew much more to the right than the social left in other countries. 2) Beginning with Goldwater and culminating with Reagan, the American public internalized economic libertarian ideas.[1] (See, e.g., https://www.nytimes.com/1964/10/25/archives/the-case-against-goldwaters-economics.html https://www.nytimes.com/1964/10/25/archives/the-case-against...) By the 1990s the Democratic Party had lost their multi-generational primacy, and the only politicians able to stem the loses were politicians like Bill Clinton (see also Tony Blaire in the U.K.), whose strategy was to co-opt libertarian economics. [1] The reasons for this are complex. For example, Southern conservative politics becoming vociferous advocates for deregulation and free trade obviously has more than a little to do with Nixon's infamous "Southern strategy". Republicans promised southern states a larger share of industrial manufacturing by 1) shifting it from the North and 2) extracting concessions from foreign manufacturers to build domestic manufacturing plants as part of trade negotiations.
• wahern 7y ago
  > But after the Cold War ended, the debate over trade (Krugman’s Nobel-winning specialty) became a proxy for a larger intellectual struggle over free markets versus government intervention. This is the crux of it. The notion that economics, as a field, was blindsided by the rapidity and extent of economic dislocation doesn't match the history. Such a narrative is a whitewashing of a particular clique of superstar economists, which explains why Krugman is so committed to it despite his current policy views. I was studying International Affairs as an undergraduate in Washington, D.C. in the late 1990s. These issues were well known and heavily discussed, domestically and internationally. By the late 1990s the notion of controlled, incremental trade expansion as espoused by people like Prime Minister Mahathir of Malaysia was already on the upswing in the international community and cemented after the 1997 Asian financial crisis. That is, while mainstream economists were highly skeptical about the efficacy and unintended consequences of such industrial strategies, not to mention of the leaders like Mahathir who espoused them, it was impossible to deny the fundamental premise that the existential risks of too-rapid global trade expansion were very real. The problem in the U.S. was much the same problem we've always had: free trade became synonymous to opposition to government intervention. All the free trade bills in the U.S. invariably included funding for re-education and R&D to help manage dislocation and build competitive advantages, but they were meager financially and suffocated by neglect. And that's because these measures were considered "government intervention" and hedges to preserve "big government", which as we all know as Americans (and, to a slightly lesser extent, everybody else in the Anglosphere) meant naivety, ineffectiveness, and corruption. So it's no surprise that the American public and politicians drifted toward a fundamentally broken policy situation. This is no less true today even as we've soured on the notion of free trade. We'll put up trade barriers, but we still refuse to heavily invest in re-education and R&D, and not even our most liberal policymakers have proposed an industrial policy aimed at managing globalization. Just the same 20-30 years ago, these things are synonymous with big government, corporate subsidies, etc. Instead, we limit free trade presuming that the domestic industrial economy will naturally restore more equitable employment and wealth distribution. Nothing about free markets guarantees "equitable" distribution; indeed, history has proven that they often tend to distributions that are untenable democratically. But we're even less prepared to effectively manage this stuff for our domestic economy than we are for international trade. Anybody expecting our social equities to substantially improve simply because we're limiting free trade is delusional, though they're in good company. The thing is, we can never put the free trade genie back in the bottle. And the truth is, on balance free trade is better for the world and for every nation in it; just as with free markets more generally. The problem as always is managing dislocation and wealth distribution. We need to learn, as a society and as economists (armchair or otherwise--I'm not an economist), to stop equivocating industrial policy with government control. Until we do that, we'll never be able to discover and identify the levers and strategies available for mitigating the disruptive aspects of free markets while minimizing the risks of corruption.
• AzzieElbab 7y ago
  they knew it all along, but kept bs peddling(Taleb's term) anyway because everyone(even paul krugman) needs to eat
  • huffmsa 7y ago
    And it costs them nothing (except maybe a new book deal, so win win) to write the paper explaining why they were wrong.
• huffmsa 7y ago
  Of course they were bláse about it, it didn't affect their livelihood one way or the other. Do you get paid for saying fancy sounding things, or do you get paid because you did fancy sounding things? Economists are all talk and no stones and they should be ignored unless they can demonstrate that their portfolio represents the ideas that they espouse.
• zarro 7y ago
  I don't get why "Equitable rules to play by" is a concept so hard for everyone to understand. The free market is about creating a level playing field. Globalization was shit because because it did not create a level playing field, it created a subsidy for "developing" countries, at the expense of "developed" ones. Its hilarious that people think that somehow free markets and libertarians are responsible
  • trophycase 7y ago
    From Wikipedia: "In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority and from all forms of economic privilege, monopolies and artificial scarcities." I think most people stop reading at "government" and don't realize that for a free market to exist, it needs to exist in a vacuum. There is no frictionless market, and every market has it's share of cost externalizations (plastics, energy, etc.), or leverage imbalance (healthcare, labor market).
  • hn_throwaway_99 7y ago
    Was about to upvote you until your last sentence. Reason being, yes, I agree that a huge problem with globalization is that, while developed countries have spent many decades building things like labor rights, environmental protections, IP protections, etc., globalization essentially allows an out for companies to undermine all of these base-level rules. But there is a very good reason people are blaming "free markets" and "libertarians" - lots of the cheerleading behind globalization was based on people espousing their love for free markets and libertarianism. The fact that you may disagree with their definition of free markets and libertarianism doesn't change the fact that their definition is the one that is most widely acknowledged.
    • zarro 7y ago
      Which is why I deliberately left that sentence in there. Its because there is a profound misunderstanding of the definition "free market". I also disagree with the contention that what the most number of people mistakenly define to be true is justification for miscategorizing and dismissing something. The "cheerleaders" you are talking about clearly did not understand these concepts, and the result is mis-association, and thereby in effect dismissal of the idea of freedom as absurd. Even though "ideally", "In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority", In practice to achieve this end, this means creating a level playing field which take things into account such as "IP protections, environmental costs, etc." From a libertarian perspective, in order to eliminate a "government or other authority from all forms of economic privilege" in the long term, is to in the short term work to better define property rights and rules to play by to force more accountability with the individuals involved.
• amadeuspagel 7y ago
  Like most articles referring to economists as a group, now admitting whatever you, dear wise reader, have always known, this one does not contain any kind of survey, but simply quotes a few economists, as if they spoke for the entire economics profession.
  • joshdick 7y ago
    When some of the economists mentioned are the president of the International Economic Association, a a chair of the Council of Economic Advisers, and a Nobel Prize winner who also happens to be the economics columnist for one of the largest U.S. newspapers -- I think it's fair to say that these are representative of mainstream economic thought.
  • wallace_f 7y ago
    Economics always has been and still is very dogmatic, subservient to authority and hostile to "crackpots," dissent. That is until an honorable, respectable man like John Maynard Keynes uses elegant maths and trendy words to argue in favor of crackpot ideas.
• not_a_cop75 7y ago
  What crap. It's not that they didn't know. They frankly didn't care. None of it affected their bottom line. It just produced externalities (like always) that they'd act concerned about but wouldn't have to deal with.
• systematical 7y ago
  A giant sucking sound
  • WillPostForFood 7y ago
    Funny that the article tries to portray Al Gore as the guy that could have stopped free trade if he won the election in 2000, when he was the figurehead of free trade, and really helped lock in the free trade policy when he beat up Ross Perot in the NAFTA debate.
    • systematical 7y ago
      We picked the wrong guy in 92.
• eznoonze 7y ago
  Free market only works when everyone follows the same rules. When you have a player like China who is dead set on taking advantages of the rules but never taking the responsibility, you create an one-sided situation. Trade is not just an economic issue. It's a political issue when you have China in the game.
  • themagician 7y ago
    The “free market”, as it’s often portrayed, is a magical idea that exists only in text books. It’s not real. The real market is a mess of information asymmetry, unpriced negative externalities and govern emend subsidies. Economic theory is great for determining the direction of economic policy but not defining policy itself.
    • Merrill 7y ago
      There are only a limited number of markets where large numbers of buyers and sellers transact for commodities of well understood characteristics. The fundamental transaction of capitalistic societies is the "deal", where sellers vary the benefits of their products and conceal their deficits and where buyers conceal their willingness to pay as well as the exact thing they want to buy. Typically there are no more than two or three sellers (e.g. Airbus and Boeing) or two or three buyers (e.g. the market for very advanced fighter aircraft). The first thing you learn in business school is that you must have product differentiation and must at all costs avoid being in a commodity business..
  • aeternum 7y ago
    This isn't always true. Free trade has been shown to work fine even if other countries are imposing tariffs and performing currency manipulation. There may be a temporary deficit, but those dollars still need to eventually flow back into the country with the trade deficit, and lose value over time which is an advantage to the country with the deficit. Australia and NZ have been able to build very strong economies using this approach. Where it doesn't work is when other countries are willing to engage in theft, including intellectual property theft and industrial espionage.
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• lazyeye 7y ago
  Krugman and his ilk are to the economy are what Ansel Keys was to nutrition. And they appear to be getting off rather lightly considering the devastation they've wreaked on peoples lives.
• ZeroGravitas 7y ago
  > globalization would lead to “hyperglobalization” and huge economic and social upheaval, particularly of the industrial middle class in America. This line reminded me of the joke that the worst part of the US invading your country is that 20 years later they'll return to make films about how killing your civilians made their soldiers really sad.
  • thewileyone 7y ago
    Hyperglobalization is happening right now as manufacturers move out of China and into Vietnam and Indonesia to circumvent the US-China trade war. We will see this continuing, rolling from one low-cost country to the next as companies try to maximize profits. Unless some controls are put into place, this will continue for the next 300 years.
• rb808 7y ago
  To be clear this article isn't whether globalization is good or bad but about how it affects "American workers". Its pretty clear it has been on average very good for America and the world, but bad for say factory workers or coal miners. The response should have been to tax the wider benefits and subsidize the people who lost out, but that money got lost somewhere en-route... Most of the world is far better off in nearly every measure than 20 years ago.
  • ngold 7y ago
    It's been fantastic for the 400 people that own more wealth then the entire country.
    • deleted 7y ago
      [deleted]
    • davidw 7y ago
      That's a political choice we've made in the US, not an inevitable consequence of globalization.
    • rb808 7y ago
      Yes it has, that doesn't make it bad though. It has also been fantastic for 90% of the world's population.
    • adventured 7y ago
      An extreme exaggeration that ignores the extraordinary wealth holdings of the US middle class, which is wealthier than their peers in Germany or Sweden. That is despite heavy middle class demographic change from Latin America immigration the past ~45 years, they're still wealthier than those elite nations. The 50% to 90% bracket in the US for example holds $31-$35 trillion in household wealth. The 90% to 99% bracket holds another $39-$44 trillion. So 50-99% holds $80+ trillion. The Forbes 400 is worth $3 trillion.
      • andrekandre 7y ago
        > The 50% to 90% bracket what percentage of the u.s population fits into that bracket?
• mips_avatar 7y ago
  Can we please get Paul Krugman off the New York Times editorial board? Or at least include a disclaimer that he doesn't know much about most of the things he writes about. He got his Nobel prize from a career working in a pretty specific scope. I am tired of people taking his articles as works of a god.
  • blfr 7y ago
    at least include a disclaimer that he doesn't know much about most of the things he writes about This is true of most journalists.
    • mips_avatar 7y ago
      And I do think Krugman is qualified to write about the economy (less so about other things). I just don't like him (or people quoting him) using his Nobel Prize as some kind of ethos cudgel to hit me over the head with.
  • skunkpocalypse 7y ago
    Or you could just do this: https://en.wikipedia.org/w/index.php?title=Paul_Krugman&oldid=723949576 https://en.wikipedia.org/w/index.php?title=Paul_Krugman&oldi...
• ThomPete 7y ago
  Paul Krugman and other mainstream trade experts are now admitting that they were wrong about globalization: It hurt American workers far more than they thought it would. Did America’s free market economists help put a protectionist demagogue in the White House? Even if you didn't vote for Trump or don't like him, Trump has been critiquing globalization for years before he came to office especially with regards to China. Yet their conclusion is that he is a demagogue. The very people who cheered on the very globalization that made some of us rich but left many of our fellow citizens in the dust. I assume they agree that the purpose of globalization was to make everyone better of not just some and that those that would benefit from it most should be paying back their fair share to the communities. Today we have a situation where it's impossible to save your way to retirement, where the cost of living has increased and the middle class decreased and we did so while increasing the deficit of the country.
  • sarah180 7y ago
    I think most economists would say that the purpose of globalization was to make the nation better off, and that the nation's values, systems and leadership would be called on to distribute those gains in a way consistent with that nation's values. Perhaps the real issue here is not one of trade, but of the collapse of unions, the dramatic change in the nature of our media, broken leadership structures, and a lazy mindset that views capital and markets as the goal rather than the tool.
    • ThomPete 7y ago
      Well, nations are part of everyone in globalization no? Not sure I understand the distinction. The issue wasn't of trade but of a small group of people who benefitted from exporting jobs abroad to sell products at home and then still avoid paying the taxes.
      • sarah180 7y ago
        Increasing the wealth of a nation doesn't mean increasing the wealth of everyone in that nation. A nation can distribute those gains in wealth and power in a way that provides no utility to many of its citizens. Trade has made nations richer. Economists were not wrong about this. What many were wrong about is the thesis that the social & market structures in developed, "stable" democracies would ensure that those gains eventually improved the utility of everyone—the proverbial "rising tide that lifts all boats." The standard claim is that markets may not immediately fix issues, but over time they will converge on an efficient distribution of resources. Yes, this is a late reply.
• Animats 7y ago
  What really made globalization work was containers and faxes. Before containerization, shipping was kind of an iffy business. Sometimes it showed up, sometimes it got lost or stolen, and sometimes it got broken. After containers, if you ordered a container load, it usually showed up intact. The importance of faxes to trade is underestimated. Not only was it faster, faxes work well across language barriers. An invoice still looks like an invoice, a purchase order still looks like a purchase order, and a bill of lading still looks like a bill of lading. For the normal cases, the info in the blanks, the info that matters, matches up, and that's all you need most of the time. Especially since everybody uses the same number symbols. Business forms became an international language. You've almost certainly received some package that came with a bill of lading in a foreign language, recognized it as a bill of lading, and could probably make out the list of items. Even if the descriptions were unreadable, the part numbers matched. Economists did not get that these rather banal mechanical improvements had a far bigger effect than their economic theory. This is embarrassing, since everybody in shipping, and then everyone in business, had figured out how to deal across borders thirty years ago.
  • marshray 7y ago
    These things are so fundamental that you don't see economists writing articles about them. Macroeconomics generally lumps those things under "productivity". Container ships were almost the poster child of globalization. Faxes (and telex, etc) had been around for decades. We have the alphabet we use today because international Phonecian traders (phonetics, see?) used it for exactly the type of documents you're talking about.
    • Animats 7y ago
      Macroeconomics generally lumps those things under "productivity". Which is the problem. Those things were bigger than Government economic policy, as we can see them having affected trade across a large number of countries with varied policies. It's not "productivity", anyway. It's "relative cost advantage" and "reduction of trade friction". The giant mistake of macroeconomics is claiming that free markets are a self-perpetuating condition. In the absence of trade friction and the presence of network effects, consolidation tends to occur. It continues to the point of monopoly or oligopoly. The end state, for now, seems to be having three or less providers who don't compete very hard on price. There's an EU study that indicates prices drop from competition only with four or more players. "Free markets" seem to have a minimum size in practice. The US has three big banks, three big drugstore chains, and will soon have three big cellular providers. Two big agriculture companies. Five big film studios, though.
• Merrill 7y ago
  I doubt that there was ever any illusion that if financiers could arbitrage labor rates between nations that they would. Hence the expectation always was that living standards among nations would tend to equalize. Post WW II the US had about 50% of the global GDP. The situation was huge inequality between nations. That was politically untenable and the solution was seen to be development of other nations' economies. Some of this was accomplished with things like the Marshall Plan and some with programs of foreign aid to underdeveloped countries. However, the US taxpayer would never support a large enough foreign aid budget to really solve the problem. On the other hand, free trade could be sold politically, companies would export capital and know how to lesser developed countries, and the problem of inequality between nations could be ameliorated. Of course, it was at the expense of the US worker whose standard of living stagnated from the '70s onward. But the bet was that other nations would develop slowly enough, US consumers would enjoy cheap goods, business would make lots of money, and that US standard of living wouldn't actually decrease significantly for a politically potent group. Of course, there aren't enough resources in the world for all 7.5 billion people to enjoy US standard of living. Therefore, the implication of greater equality of standards of living between nations is less equality of standards of living within nations. Less inequality internationally implies greater inequality intra-nationally. And that is exactly what has happened. The world, including the US, will tend towards the situation in India where there is extreme wealth and extreme poverty side by side.
  • NTDF9 7y ago
    Yup. I don't think most people today realize what a one-time event American wealth was after world war 2. After WW2, the rest of the developed world was destroyed and the under-developed world was colonies. Today, they all have woke citizens working hard to reach a developed lifestyle. Which means America has to compete, hard!
  • shantly 7y ago
    It was sold as "rising tide lifts all boats" (implication: boat = person, and "all" = "nearly all, at least") and "everyone benefits under free trade, trade barriers always make people worse off, it's just a fact, what don't you even know Ricardo?" Never mind that "all boats" was, in the best case, "all GDPs", not individual incomes, and "everyone" was... well, the average of all GDPs, actually, so also not actually every individual, and still with a pile of caveats for even that to be true. In point of fact nothing about all this said that even most people would benefit, if you either 1) applied common sense, or 2) actually looked at their sources. source: figured out the common sense reasons this was BS when I was in like 4th or 5th grade watching the China-MFN debate & vote on CSPAN (god I was a nerd); later did the reading and learned that yes, my elementary school intuition mapped closer to reality than the crap they sold us.
• cafard 7y ago
  "Paul Krugman has never suffered fools gladly." Paul Krugman has never suffered disagreement gladly.
• TheOperator 7y ago
  One thing I notice about Trade now is the perverse power we've given to groups which fundamentally don't have other countries or individuals interests in minds. One thing I notice is that left wingers are essentially universally aghast over what's happening to Hong Kong. They will hold to the idea that a trade war with China is the stupidest thing ever that causes economic damage to yourself and incurs great risk. Which is true. However you can't have it both ways and you have to choose between economic vitality and essentially having no say in a situation like Hong Kong. I've seen countries hunger for trade being used as a lever for international legal reform. A condition of signing trade deals with the united states where countries essentially have to agree to give multinational corporations more government enforced rights or not have free trade. Specifically "intellectual property harmonization". If you want to have trade with the united states you appearantly need to agree that for every idea a corporation comes up with, they have an exclusive right to using that idea for more and more years, and consequently governments need to agree to punish people for not giving corporations money for those ideas for longer and longer periods of time. This is effectively a system that redistributes wealth towards corporate interests in an era of striking wealth inequality, on the reasonable sounding grounds they need that money to "develop new medications", but then it's ignoring the reality on the ground of poor health spreading like a contagion due to economic inequality. As the average person is unable to afford things like medications more and more... the economic vitality of all society... including the very companies who lobbied for these laws will suffer. Yet there's no effective way to push back against these laws without giving up free trade and shooting yourself in the foot economically. I think at some point we're going to start realizing how many costs free trade have that haven't really been accounted for. It's very easy to portray it as a positive if you don't account for all the externalities.
  • sarah180 7y ago
    This is true in a discussion where the relative value you place on international trade is either infinite or zero. You can oppose an ill-considered trade war without opposing all actions that would impact trade. This is not an either/or proposition. It's not hypocritical to suggest that, in the real world, sometimes you might have to weigh competing goods.
• namirez 7y ago
  But I thought economists have known this for a long time (at least since 2013). Basically, the Elephant Graph [1] summarizes the effects of globalization. Most of the economic gains of the past few decades went to the super-wealthy and the middle class in the developing world. Meanwhile, the middle class in wealthy countries and the poor in developing countries were left behind. https://www.vox.com/policy-and-politics/2018/2/2/16868838/elephant-graph-chart-global-inequality-economic-growth https://www.vox.com/policy-and-politics/2018/2/2/16868838/el...
• mc32 7y ago
  Perot was right. He knew what the deal was. He warned us. Did we listen? No, we have good old Bill Clinton to “thank”. Thanks a lot Bill for selling out blue collar workers in America and those around the globe who followed your “leadership”.
• jokoon 7y ago
  Isn't that common knowledge that China devaluating its currency allows them to take advantage of their big worker population to develop their economy and make the entire world dependent on China's industry? It really sounds like china is being the smartest one here.
  • barry-cotter 7y ago
    How? They’re paying more than ten percent of GDP to keep the value of their currency down in a massive subsidy to their export sector at the expense of everyone else in China. They’re subsidizing the rest of the world’s consumption.
    • jokoon 7y ago
      Sure, but it's massive advantage for the future of china. It's an investment.
• TazeTSchnitzel 7y ago
  Plenty of economists always knew. But economics is not the clean uncontroversial hard science it would like to present itself as. It's a political battleground shaped by wealth, influence, trends. And so it should be no shock there was neoliberal economics to go along with neoliberal politics.
• olivermarks 7y ago
  I think the logic here also applies to the challenges and relevance the EU faces going forward. A useful EU information site I visit often https://euobserver.com https://euobserver.com
• readams 7y ago
  Of course, the other side of this is billions of people outside the United States raised out of extreme poverty. Eventually, globalization means that everyone in the world has access to the same opportunities. The nationalist argument that workers in the us are better or more deserving of that high standard of living and those opportunities doesn't really stand up to much scrutiny here.
  • kypro 7y ago
    > The nationalist argument that workers in the us are better or more deserving of that high standard of living and those opportunities doesn't really stand up to much scrutiny here. This might be too simplistic of a take on it. If you don't consider your own interests first then your good will can be exploited. If the whole world embraced free trade then you might have a point, but as it stands countries such as China are not playing fair. I'd also have to question wherever the moral good of Chinese workers being lifted out of poverty is worth the growth of China as a global superpower. If we're embracing free trade for charitable reasons don't you think we need to be sure our money isn't ending up in the hands of governments like the CPC? I also think that even if you were right from a morally objective point of view you're employing a kind of "for the greater good" reasoning here that many would find objectionable.
• jandrese 7y ago
  It seems to me that the big problem with Globalization is that we're only doing half of it. If we exported work but also exported working conditions then globalization would be a good thing. Bringing all of the people of the world up to the first world standards. But instead we outsource only the work and not the working conditions so there's an enormous gap between what you can expect in the first world vs. third world. That gap ends up mostly as profit that is absorbed by the ultra-rich. Globalization ends up being impossible in practice because there is no central world government dictating standards for all countries of the world, and opens up the system to exploit poor countries as they race to the bottom.
  • Nasrudith 7y ago
    Well of course - exporting work conditions is non-trivial to impossible. Take a textile factory in a newly industrializing nation. Okay now add air conditioning to get it up to US standards - oh wait there isn't even a power plant to connect to.
  • CryptoPunk 7y ago
    >>That gap ends up mostly as profit that is absorbed by the ultra-rich. The statistics don't bear this pessimistic hypothesis out. Global wages have increased faster over the last 20 years than at any point in history, and the global poverty rate has declined at similarly unprecedented rates. Globally there has been no change in income inequality either.
    • jandrese 7y ago
      Interesting premise, but the data doesn't support it very well. https://wir2018.wid.world/files/download/wir2018-full-report-english.pdf https://wir2018.wid.world/files/download/wir2018-full-report...
      • CryptoPunk 7y ago
        I don't want to download a pdf from a random website. Do you have source that I would recognize?
• Mikeb85 7y ago
  They knew the effects of globalization. It's going exactly as intended, exactly the effects I learned about during my econ studies, they just didn't think there'd be as much political blowback. It's easier for them to claim ignorance than to admit they willfully deceived the public.
• sb057 7y ago
  The Council on Foreign Relations (publisher of Foreign Policy) sure is quick to point the finger at economists.
• cryptica 7y ago
  >> The U.S. president has effectively discarded modern economics, reembraced crude protectionism, and, like the mercantilists of the pre-Adam Smith era, appears to see trade as a zero-sum game Trump is right. Almost all business activity today is a zero-sum game. Americans have all the abilities and skills to produce everything they need on their own. If (hypothetically) the US were to start banning foreign companies, new US companies which are just as good would pop up in their place. This would create better, high-paying jobs for Americans and more opportunities for entrepreneurs and technologists. This is true for pretty much any developed country with respect to foreign goods and services. For example, if France blocked Facebook, within a matter of weeks, better alternatives would pop up to cater for the French market. This is not speculation BTW, it's pretty much what happened in China with respect to all major US tech companies. China knows exactly what kind of zero-sum game they're playing. Ability is not the bottleneck. The bottleneck is human attention. Governments have to leverage their laws and regulations to maintain control over the attention of their citizens so that they can focus it to benefit local businesses. Free markets only make sense at the small scale; for example, I'm a builder and I want to focus all my time and energy on building houses so that I can gain more experience to fine-tune my skills and become more efficient over time - but I have a problem: While I'm busy becoming an expert in construction, I need to eat bread to survive... The solution to this problem is a free market; it will allow me to use the money that I earn from building houses to buy bread from a baker (who is an expert in baking). The efficiency gains here are obvious. When you look at the same problem at a global scale, it doesn't make sense because, taken as a whole, a country (especially one with a large population) can focus on many things at once whilst being an expert at all of them. Being really good in one area does not prevent a country from also being really good in a different area. Applying a microeconomic solution (in this case, a free market) to a macroeconomic problem doesn't work. It's like if you were a plumber and your kitchen sink was leaking and instead of fixing it yourself (which would take 5 minutes and cost you $0), you decide to call another plumber to come to your house and fix it (which would take 1 hour of travel time extra and cost you $100). It makes no sense. If you have the skills to do something on your own, and you have an unlimited ability to multi-task you'd have to be an idiot to pay someone else to do it.
• cwkoss 7y ago
  Paul Krugman is much more of a pundit than he is an economist.
• jayd16 7y ago
  For being so critical of those full of themselves this article is taking a pretty big unfounded victory lap. Just because someone else is wrong that doesn't make you right... Just because Krugman thought globalization would turn out better does not mean isolationist policy would have improved things.
• jeffdavis 7y ago
  It's strange to me how anyone can have such arrogance about a complex system -- especially a social system -- that they "lacerate" those who question them.
• didibus 7y ago
  > Yet it has taken an awful long time for economists to admit that their profession has been far too sure of itself I think that's something where diversity in the field could have helped.
• cmrdporcupine 7y ago
  Mobility of capital without mobility of labour. Surprise, it's not just.
• Glyptodon 7y ago
  I think a big reason it hurt so much is not globalization, but globalization without requiring human rights minimums or guarantees, and without actual open markets. Cheap labor that rests on a foundation of abuse only creates a whole world that depends on there being people to plunder while the abuser accretes an armor of indispensability. Allowing the participation of countries who operate by separate rules that are inherently advantaged or abusive does the same. If the US hadn't been obsessed with industry and consumer-driven realpolitik and killing the faintest whiff of "communism" at any cost it might have been able to use its post-WW2 clout to create a globalization that worked, but to the surprise of no-one, greed was too good and functional globalization ultimately wasn't even much of a dream.
• gridlockd 7y ago
  What difference does it make whether globalization hurt "the american worker" more than some people estimated? What really matters is whether it hurt them more than it helped. That may well be the case, but it isn't obvious. Also, what about "the non-american worker"? Did it hurt them more than it helped? Is there a comparative disadvantage? Also, why the focus on workers? What about the young, the sick, the elderly? Could an aging society's welfare be improved by being shielded economically from younger societies?
• resters 7y ago
  This is ridiculous. Trump's economic policy is a near exact copy of what Krugman has been advocating for years. See my previous comment with an itemized list of op-ed pieces by Krugman linked with major themes of Trump's economic rhetoric: https://news.ycombinator.com/item?id=20647721 https://news.ycombinator.com/item?id=20647721
  • dragonwriter 7y ago
    > Trump's economic policy is a near exact copy of what Krugman has been advocating for years: No, it's not. Let's start with the major area of economic policy called taxation: https://www.nytimes.com/2019/01/05/opinion/alexandria-ocasio-cortez-tax-policy-dance.html https://www.nytimes.com/2019/01/05/opinion/alexandria-ocasio...
    • resters 7y ago
      > Let's start with the major area of economic policy called taxation How about if we start with the ones I listed in the linked comment. The link you cite is Krugman aggressively trying to signal something anti-Trump after it was already too late. I've been reading Krugman's op eds for years and nearly everything Trump says about economic policy is practically verbatim Krugman. Also, one could argue that Trump's massive increase in deficit spending will likely result in increases to future income tax rates to the levels AOC advocates, but with the beneficiaries (unfortunately) being defense contractors rather than the poor and middle class. Krugman has advocated closed borders for years as well: The New Deal made America a vastly better place, yet it probably wouldn’t have been possible without the immigration restrictions that went into effect after World War I. For one thing, absent those restrictions, there would have been many claims, justified or not, about people flocking to America to take advantage of welfare programs. (https://www.nytimes.com/2014/11/21/opinion/paul-krugman-immigration-children.html?_r=0 https://www.nytimes.com/2014/11/21/opinion/paul-krugman-immi...) To be clear, Krugman is a respectable person unlike Trump, but he shares the same ideology of economic populism and framing of rust belt workers as victims of modernization, globalization, and trade.
• mr_toad 7y ago
  The article cherry picks a few words from the original Krugman essay in a way that would make Maximilien Robespierre proud. So while we’re at it: > major disruptions now would be more likely to come from an attempt to reverse globalization than from leaving the current trade regime in place. At this point, millions of decisions about where to put plants, and where to move and take jobs, have been made on the assumption that the open world trading system will continue. Making that assumption false, by raising tariffs and forcing a contraction of world trade, would set off a whole new wave of disruption along with a whole new set of winners and losers.
• api 7y ago
  Well paid workers, OSHA, and the EPA vs countries with dirt cheap labor and no worker or environmental protections... which do you think will win? The big question for me is how in the world so many smart people convinced themselves it would turn out otherwise?
• chiefalchemist 7y ago
  To be fair, it elected BHO as well. But the tone, culture and mainstream media then was different. When "Yes we can" and "Hope you can believe in" didn't pan out those emotions took a u-turn. It's easier to see the direct line to DJT, but that historic line passes through eight years of BHO.
• WheelsAtLarge 7y ago
  I remember that in my Econ class, so many years, the idea that we could close manufacturing plants and transfer them to low cost labor countries and not have a replacement job in the US was a very big discussion that my professor could never answer with clarity. He would always say that the US economy would develop other ways to employ the people that lost their jobs. So even then there was a lot of dought on the idea of globalization. Ok fine, there was a mistake in thinking but there's no one that has a satisfactory answer on what to do to fix the problem. I for one think that we can't go back to the way things were so we need to start by separating benefits, health care ins. and such, from employment. Once that's done people will be freer to take on jobs that are not high paying but are being created by the gig economy. We also need to cut the workweek to fewer hours lets say 30hrs vs 40hrs now. The last part is automation. As a country we need to embrace it. They say that automation brings on more jobs than it destroys but nothing says that those jobs will be in the US. Whether we like it or not it's coming so we need to be the country that controls it.
  • christophilus 7y ago
    I agree completely. One other aspect that often gets lost in these conversations is that manufacturing capacity is a huge part of what wins wars. The US won World War II largely because we could produce planes and ships faster than our enemies could destroy them. When we shipped our manufacturing capabilities overseas, we also undermined a key wartime advantage. It is within our national interest to have a strong industrial base. The only way I can see that happening from here is automation.
• mdpopescu 7y ago
  Wow. Krugman is a free trade economist now... and most people in the comments seem to agree with that. The lunatics have taken over the asylum.
• CryptoPunk 7y ago
  Free trade is being scapegoated for the failure of laws violating contract liberty to empower unions, and social democracy. Giving unions a stranglehold over industries, and redistributing 30 percent of national output for formulaic social welfare programs administered by central authorities, is not conducive to economic development, and guarantees that the country becomes uncompetitive on the global stage in most industries. Since the 1960s, social welfare spending has increased on average by over 4 percent per year. The last 50 years have seen a dramatic shift to a more centrally managed economy that favors social safety nets provided by governments over market forces based on private property and individual responsibility. The labor laws passed in the 1930s and 50s meanwhile guarantee that any industry that does start to become a significant contributor to national output, whether it's the Big Three Auto Makers and the big steel manufacturers in the 1950s, or Tesla, Amazon and Google today, becomes the target of rent-seeking unions who are impossible to effectively resist thanks to the free-market undermining labor laws in place. The decline in productivity growth, particularly in globally competitive markets like manufacturing, is a predictable consequence of that.
• tjpnz 7y ago
  Same deal with neo-liberalism actually. It wrecked New Zealand in the 80s and most politicians will at best admit it was flawed, yet it still continues to this very day because it's become institutionalised and utterly entrenched in our political system.
• mbrodersen 7y ago
  Economics is, and has always been, formalised ideology. In other words, Economics is not a science and Economists are not scientists.