Capitalism can make the pie bigger, says Jeff Sachs, but you must compensate for those that lose out.
China and Europe helps its poorer people and they can't understand the American way.
Jeff Sachs | AMERICA Blames CHINA For Its Own GREED and STUPIDITY
re: the aggregate and distributional effects of trade
ReplyDeleteJeff Sachs gets it exactly right in this interview. At the expense of repeating what he said, a couple of notes:
Still, though trade may be good for the country over all — after netting out winners and losers — the case for globalization based on the fact that it helps expand the economic pie by 3 percent becomes much weaker when it also changes the distribution of the slices by 50 percent, Mr. Autor argued. And that is especially true when the American political system has shown no interest in compensating those on the losing side.
source: On Trade, Angry Voters Have a Point
Also, as Jeff notes, most job losses were due to automation, not outsourcing.
Take the steel industry. It lost 400,000 people, 75 percent of its work force, between 1962 and 2005. But its shipments did not decline, according to a study published in the American Economic Review last year. The reason was a new technology called the minimill. Its effect remained strong even after controlling for management practices; job losses in the Midwest; international trade; and unionization rates, found the authors of the study, Allan Collard-Wexler of Duke and Jan De Loecker of Princeton.
Another analysis, from Ball State University, attributed roughly 13 percent of manufacturing job losses to trade and the rest to enhanced productivity because of automation. Apparel making was hit hardest by trade, it said, and computer and electronics manufacturing was hit hardest by technological advances.
source: The Long-Term Jobs Killer Is Not China. It’s Automation.
Link to the study by Ball State University (pdf file): The Myth And Reality Of Manufacturing In America - Ball State University