International Trade And Economic Disruption In Context

Paul Romer (Nobel '18) offered a pithy aphorism  a few years ago: "Everyone wants progress. Nobody wants change." But of course, the process of economic progress is inevitably lumpy. It doesn't smoothly affect everyone in the same way. International trade is one part of the process of economic progress, but nobody wants change.

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Adam S. Posen pushed back against the resulting dynamic in "The Price of Nostalgia: America’s Self-Defeating Economic Retreat" (Foreign Affairs, May/June 2021). He writes: 

There is a popular notion that the United States has been sacrificing justice in the name of economic efficiency, and so it is time to correct the imbalance by stepping back from globalization. This is a largely false narrative. The United States has been withdrawing from the world economy for 20 years, and for most of that time, U.S. economic dynamism has been falling, and inequality in the country has risen more than it has in economies that were opening up. Workers are less mobile. Fewer businesses have been started. Corporate power has grown more concentrated. Innovation has slowed. Although many factors have contributed to this decline, it has likely been reinforced by the United States’ retreat from global economic exposure. 

There's a lot to reflect on in the article, and there are parts of it I would agree with more than others. Here, I want to emphasize two of the points that Posen makes. 

One is that there are a wide variety of reasons for economic disruption and job loss: new technology, domestic competition, lousy management, shifts in consumer preferences for goods and services, and many more. For a huge and well-diversified economy like the United States, with its enormous internal market, the disruptions related to international trade are a relatively small part of the picture. Posen writes: 

After much debate, economists have agreed on an upper-bound estimate of the number of U.S. manufacturing jobs that were lost as a result of Chinese competition after 1999: two million, at most, out of a workforce of 150 million. In other words, from 2000 to 2015, the China shock was responsible for displacing roughly 130,000 workers a year. That amounts to a sliver of the average churn in the U.S. labor market, where about 60 million job separations typically take place each year. Although approximately a third of those total job separations are voluntary in an average year, and others are due to individual circumstances, at least 20 million a year are due to business closures, restructurings, or employers moving locations. Think of the flight of jobs from inner cities or the displacement of secretarial and office workers due to technology—losses that, for the workers affected, are no different in terms of local impact and finality than the manufacturing job losses resulting from foreign competition. In other words, for each manufacturing job lost to Chinese competition, there were roughly 150 jobs lost to similar-feeling shocks in other industries. But these displaced workers got less than a hundredth of the public mourning.

An American who loses his job to Chinese competition is no more or less deserving of support than one who loses his job to automation or the relocation of a plant to another state. Many jobs are unsteady. The disproportionate outcry about the effect of Chinese trade ignores the experiences of the many more lower-wage workers who experience ongoing churn, and it forgets the way that previous generations of workers were able to adapt when they lost their jobs to foreign competition.
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