Finally (Trade Benefits Edition)

Krugman writes a blurb on trade:

Although the outsourcing of some high-tech jobs to India has made headlines, on balance, highly educated workers in the United States benefit from higher wages and expanded job opportunities because of trade. For example, ThinkPad notebook computers are now made by a Chinese company, Lenovo, but a lot of Lenovo’s research and development is conducted in North Carolina.

But workers with less formal education either see their jobs shipped overseas or find their wages driven down by the ripple effect as other workers with similar qualifications crowd into their industries and look for employment to replace the jobs they lost to foreign competition. And lower prices at Wal-Mart aren’t sufficient compensation.

A LOT of people don't understand this basic point. The weird thing, though, is that the Krugman of olde probably wouldn't have agreed with it either. Sometimes the slighly greater overall ability to consume that comes from increased trade just ain't worth it. Yes, cheaper video cards are nice, but they aren't worth the expense and (more importantly) uncertainty that comes from losing your job and having no guarantee whatsoever that you'll be able to find one. People don't like to gamble with their livelihoods, they're minmaxers, and they're not necessarily going to go "woo, I can retrain and make not as much money as I was doing something else that might get outsourced in a year, while most of the real benefits accrue at the top!"

And that's the other issue: consumption benefits are generally accompanied by productive benefits. That money has to go somewhere, to somebody; even if it is traded with another country, the trade itself must create benefits for producers in your own country for them to bother. Where does that money go? Well, it goes to the top. It goes to the people with the liquid capital, to the people managing that liquid capital, or to that small, lucky group that can't be outsourced.

It's honestly kind of rich watching economists slowly discover the idea that intra-economy distribution matters. I like Paul a lot, even if he still vaguely calls for a "social safety net" that nobody wants to fall into as a way of solving a problem much, much more basic... but man is it frustrating playing the Cassandra on trade.