Saturday, May 28, 2016
Economists Are Rethinking Their Assumptions About Free Trade
The prevailing wisdom among economists has typically been biased towards the benefits from free trade. They acknowledged that their were winners and losers from free trade but that the losers would somehow benefit in the long run. Some would find other employment and governments might redistribute income from the winners to the losers. The political consequences of free trade are visible in rich countries around the globe. The losers from free trade are still waiting for the benefits to be shared with them. Somewhat belatedly, economists are questioning their assumptions about free trade. This article describes the shifting sentiment about free trade within economics. In particular, the loss of manufacturing jobs to China has affected labor outcomes in service sectors which had been dependent upon spending by manufacturing workers. Other effects were not mentioned in this article but governments have not made much of an effort to redistribute the benefits from free trade. In fact, there has been an effort to reduce government redistribution programs. This is often justified by an appeal to fiscal responsibility. Moreover, one doesn't have to go far to observe the destruction of wealth in cities that were dependent upon manufacturing employment. Real estate prices have collapsed along with the tax dollars that had supported education and other important public services. Small businesses which had served these communities have also suffered. Their customers have disappeared along with the value of their assets. Globalization has moved much faster than the ability of many states to manage the process.