Embrace Economic Change

Change has been the dominant theme of this presidential campaign. Barack Obama’s mantra has proved extremely popular among voters, so much so that other candidates in both parties have signed on.

The change they’ve embraced is political change. When it comes to economic change, enthusiasm is decidedly more muted. Many Americans would be happy with a change in our economic policies. But the notion that we should get used to — and perhaps even welcome — continuous, regular economic change is a tougher sell. This is particularly evident with respect to globalization. To many, change isn’t terribly appealing if it refers to more imports and outsourcing. For them this type of change equals disappearing jobs and smaller paychecks.

Globalization — much like technological advance, another key form of economic change — clearly does result in job loss and falling real wages for some Americans. Researchers disagree about the magnitude of the damage (see here). Some say it is tiny; others view it as small but growing; others conclude it is already large.

Yet on the whole economic globalization is a good thing. We benefit as consumers by having greater choice and paying lower prices. Citizens in other countries, especially poor ones, benefit from greater access to jobs and rising wages. The latter is beneficial not just on altruistic grounds. It is in Americans’ self-interest for poor countries to get richer. As countries develop economically they are more likely to become democratic, and to stay democratic. And democratic countries are less likely to attack one another. Also, as citizens in poor nations become richer they will be able to buy more goods and services produced here.

Yes, there are exceptions. But in the aggregate the advantages of globalization for Americans outweigh the costs. That, rather than because they are acting at the behest of corporate lobbyists, is the main reason why many Democrats are favorably disposed toward globalization.

Too often, though, they don’t talk that way. Especially when campaigning in states like Ohio, where large numbers of residents have lost a job in recent years or fear that may happen soon, Democratic candidates tend to say less about the benefits of economic change and more about the shortcomings of trade agreements such as NAFTA.

This is understandable as an election tactic. And on one view, it is largely innocuous. David Leonhardt of the New York Times aptly likens Democrats’ orientation toward globalization to the way many Republicans approach abortion: strong oppositional rhetoric during the campaign primaries, but little action once in office. If political leaders campaign against globalization but their later policy choices tend not to impede it, why worry?

The reason is that if leading Democrats instead were to advocate that we embrace economic change, they could stimulate a thorough discussion about, and likely generate greater public support for, policies that compensate for the adverse consequences of that change.

Most Americans who worry about globalization are not dead set against economic change. They just want government to do something to help. And government can do something. It can broaden eligibility for unemployment insurance. It can make benefits like pensions and health insurance more portable. It can help offset the cost of retraining and relocation. It can assist with job placement. It can offer wage insurance to limit income loss if getting a new job entails a pay cut. It can invest in infrastructure improvement to help rebuild hard-hit communities. It can gradually increase the minimum wage and the Earned Income Tax Credit. (More discussion here, here, here, and here.)

None of these policies would be inordinately expensive. None would require massive interference with markets. Each has considerable merit in its own right. And each would help to make globalization, technological advance, and other forms of economic change win-win.

But for this type of policy approach to make real headway in our political debate, we need our most visible political leaders to encourage us to embrace change.

11 thoughts on “Embrace Economic Change

  1. This commentary is lacking in substance. We’ve all been subject to this propaganda re: globalization. And now, some of the effects have become some strong, and negative, it’s possible to see get real data on the damage to American workers. From the latest BusinessWeek:

    Figures collected by the Bureau of Economic Analysis suggest the multinational sector has in some ways been a drag on the U.S. economy since 2000. From 2000 to 2005, the last year for which full data are available, U.S. multinationals cut more than 2 million jobs at home, even as employment in the rest of the private sector grew—and there’s no sign the trend has significantly reversed. The U.S. operations of foreign multinationals also shrank over the five-year stretch, dropping 500,000 jobs as foreign investors cut costs and sold off U.S. companies. Toyota, perhaps the most successful foreign company in the U.S., added all of 9,000 jobs in the states between 2000 and 2007.

    Note that MNC’s have hired more abroad than they have cut here. So there is growth under globalization, but at the expense of the American worker.

    Methinks the happy talk should be scrapped in favor of serious grappling with American decline.

  2. “American decline”

    I’m not sure how you’re measuring this, but it would be hard to call recent experience in America “decline”. Almost every group you can think of (i.e. cut the data by age, sex, race, various levels of geography, etc) has done better, in absolute terms, than a generation ago. Spend some time at the BLS looking at data, if you don’t believe me. Here’s a chart from infoplease.

    And why should only American welfare matter? Shouldn’t it matter that globalization has lifted billions (that’s a ‘b’) out of extreme poverty? (Just look at the recent experience in India and China if you don’t believe me.)

  3. I’ve done pretty well as an American engineer. I even banked a little dot-com boom money. I type this on a ridiculously inexpensive (imported) notebook computer. All good.

    The thing is, I can see engineering rapidly moving toward a “world rate.” Graduates of good schools (be they in the US or China or Russia) will make more similar wages.

    That is more fair, and more humane, but … there is no avoiding the fact that you are changing the equation for future “skills graduates” in America … just as in the past we changed the equation for union factory workers.

  4. BTW, I’m fortunate enough to be semi-retired, but I work with a California shop where most programmers are really in Moscow.

    I guess I’m an older experience anchor for the team … but I don’t see new kids being hired here for future growth.

  5. Almost every group you can think of (i.e. cut the data by age, sex, race, various levels of geography, etc) has done better, in absolute terms, than a generation ago.

    Uh, no.
    For example, men in the 30’s make 12.5 LESS than men in their thirties made in the 1970’s.

    Perhaps you don’t now how to adjust for inflation?

  6. If there is a genuine call of change it is political change. People want politicians to do something about economic change. That means that economic change is not experienced as a good thang.

    As a pundit, there’s no cost to this silly performance about how global economic change will net benefit most people. God, how utilitarians are smug fucks.

    All of us pre-rich (to borrow David Brooks term for the poor) can enjoy vicariously the joys the new crop of billionaires as recently announced by Forbes. Billionaires in Mexico, Nigeria, India, China, Moscow! At 23 the Facebook founder is a billionaire!

    That the global economic system has produced so many billionaires a good thing?

    As a social scientist, you ought to know that economic change always involves uneven costs and benefits. And as for the long-term…well..

    You have to have a lot of familiarity with the old quip attributed to John Maynard Keynes. In response to the economic orthodoxy in the 1930s that optimistically chimed that economic problems were temporary and in the long run economic equilibrium would mean prosperity. Keynes replied that in the long run we’re all dead.

    There’s a lot of churning occurring because of corporate globalization and it doesn’t take Durkheim’s ghost or even Marx’s spectre to remind us that such constant churning will have it’s own consequences, regardless of whether the long-run could produce benefits.

    Do you seriously see global corporate capitalism eventually showering the billions of humans with prosperity. China is dumping nearly a billion people into the global labor supply.

    I wish our politicians could be sober about the coming prospects and indicate how we’re going to be shepherded through the coming turbulence.

    Instead you want politicians to tell voters to enjoy the bubbles!


  7. Dissent:

    The report that was the base of the msnbc article you link to does not account for immigration. Moreover, (and despite that fact) the family incomes of those men is still higher because women’s earnings have increased so much.

    A better report (by the same organization) that directly links parents and children found that for every group, except for about 20% of blacks (a potentially important exception), children’s family incomes were substantially higher than those of their parents. (And yes this accounts for inflation).


  8. [quote]”…But the notion that we should get used to — and perhaps even welcome — continuous, regular economic change is a tougher sell. This is particularly evident with respect to globalization. To many, change isn’t terribly appealing if it refers to more imports and outsourcing. For them this type of change equals disappearing jobs and smaller paychecks…”[/quote]


    “They” have been trying to sell the “change is good” mantra for at least 15 years now, probably a lot longer. But you know, people were awake. They sort of noticed that most of the changes they were forced to embrace involved stagnant or falling wages, increased workloads, unpredictable layoffs, etc.

    In the long run, we are told, things will be better. How long is that run, and will there be stability at the end of that time?

    The art of the con artist is to offer something of less substance in exchange for something of real substance, while still making the lesser item look better than what’s being given up.

    The offered item, the bait, can be misrepresented or non-existent, but often it is merely distant in likelihood, in physical distance, or in time. “I will gladly pay you Tuesday for a hamburger today.” And this works, but it doesn’t work very well if the sucker has been waiting 15 years for the carrot to come over the horizon.


  9. I have to disagree that it is mutually beneficial. I think outsourcing does not help people in foreign nations. They are sometimes paid more than in other local jobs, but this is not a solution to their economic problems as these outsourced jobs become the highest-paying employers without paying a local living wage. I’m living in Buenos Aires where outsourcing is bleeding the city dry… the call centers serve as an example for other businesses, with slightly higher than average, stagnant wages that never rise unless the government steps in to force them to. These wages are higher than almost any other employer, making it so that any non-English speaker has to settle for very, very poor wages. And since they’re not paying a living wage, there is a generation of young call center workers who are living with their parents because the realization that this situation is not “temporary” is coming on slowly. They’re working and spending the money on iPods, which I guess is good for U.S. businesses but not really for the people of the U.S. in any tangible way. And the situation here is precarious and getting worse, and more and more people will run out of money to support their working children and end up homeless or living in the “villas de emergencia”.

    I do agree with you that outsourcing COULD be a GREAT thing for the world. But for that to happen, we need to impose better conditions and wages for workers in the U.S., and extend that standard to include any imported products as well. A living wage law in the U.S. that also bans imports on products made by people who are not paid a living wage where they live would make a huge difference all over the world. The economic adjustment would be severe at first, but business will never just stop in its tracks, so recovery would happen quickly.

  10. Pingback: Why Embrace Economic Change? « Consider the Evidence

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