Cool the globalization rhetoric

Marketplace Staff Nov 26, 2007
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Cool the globalization rhetoric

Marketplace Staff Nov 26, 2007
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TEXT OF COMMENTARY

KAI RYSSDAL:
A funny thing’s happening on the way to the Democratic presidential nomination. The Wall Street Journal pointed it out the other day. Iowa voters are worried about the after-effects of globalization. So worried that the major Democratic candidates are working overtime talking down free trade. Globalization is turning into a hot-button campaign issue. Republicans are having their problems, too.

But commentator Paul Krugman says, its effects on the U.S. economy are overblown.


PAUL KRUGMAN: I’ve been on the road a lot lately, talking to audiences about my hopes for a great revival of middle-class America, and I almost always get asked about whether such hopes make sense in an age of globalization. Is it really possible to make working Americans better off, when they have to compete with workers around the world?

Yes, it is. The truth, is that international trade is less important, for good or for evil, than most people suppose.

Let’s start with the idea that globalization makes it impossible for American workers to earn good wages. The facts say otherwise. All of the world’s advanced nations have to compete in the same global economy. Yet America’s combination, of soaring incomes at the top and stagnant wages for most workers, is unique.

We’re told that unions, once a key support for wages, have become obsolete in the modern world. Yet the collapse of the union movement in America hasn’t been matched elsewhere in the advanced world, even in our neighbor Canada. About 30 percent of Canadian workers are union members, compared with only 12 percent of workers here.

And some of the benefits workers in other advanced countries take for granted are, if anything, competitive advantages in the modern world. For example, the Canadian auto industry benefits greatly from the fact that health care is provided by a national insurance program, rather than being a cost of production.

So do we have to be protectionist to make workers’ lives better? No. All the evidence says that you can be a full participant in the global economy while still paying good wages.

On the other side, however, protectionism itself isn’t as serious an issue as some economists would have you believe. The most recent estimates of the International Trade Commission show that the total cost to the U.S. economy of all the protectionist measures currently in place is only $3.7 billion a year — less than one-thirtieth of 1 percent of GDP.

So here’s what I have to say about globalization: cool the rhetoric. It’s a lot less important than you think.

RYSSDAL: Paul Krugman’s a columnist for the New York Times. His latest book is called “The Conscience of a Liberal.”

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