Wednesday, June 13, 2007In an article on Larry Summers (he of "girls can't be scientists" fame), NYT Magazine columnist David Leonhardt casually asserts the following:
Most [Democrats] globalization itself cannot be held back, because it stems more from the inexorable march of technology than from any change in trade laws. Credit-card call centers have moved to India and Ireland because they can function there, not because a new law allowed them to go. Trying to prevent jobs from leaving will create the problems that protectionism always had, like higher inflation and slower economic growth. But leaving the market to work its magic also won’t do.
I love how free trade rhetoric is always so uncontested in major publications.
Contention 1: Globalization is a product of technological change.
Reality: Globalization is as much a product of liberalized capital flows (from free trade agreements), low transportation costs (from government-supported low oil prices), weak labor unions (from government policy), and the embrace of markets by India, Eastern Europe, and China (from political decisions) as any "technology" genie.
Contention 2: Outsourcing is not due to trade policy
Reality: Not just trade policy, but the whole panoply of political action (and non-action) has facilitated globalization.
Contention 3: Protectionism leads to low growth and inflation
Reality: I demand evidence for this argument. I keep waiting for someone to identify a country which has successfully industrialized without some sort of industrial policy - usually in the form of protectionism. I keep waiting for someone to identify a major industrailized country other than the U.S. that does not practice some sort of protectionism. And I keep waiting for someone to present me with statistical evidence that tariffs leads to lower growth rates and higher inflation, controlling for other factors.
I am still waiting.