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amaebihttp://www.nytimes.com/2015/05/18/business/a-decade-later-loss-of-maytag-factory-still-resonates.html?emc=edit_th_20150518&nl=todaysheadlines&nlid=51019534
First of all, I'm only going to talk about tariff reductions, which increase international trade-- not about clauses that give/take property rights and legal rights to/from this entity and that. That's another set of issues.
You wouldn't know it at all easily from this article, but what increased international trade does, when the economy is at full employment, is to increase national income.
If the economy isn't at full employment-- that is, if there is a greater rate of unemployment than is consistent with efficient and desirable search time for new labour market entrants and those changing jobs for other reasons? That is best handled through expansionary macroeconomic policy through increasing demand for final products, and thus for the labour to create the products.
Increased international trade typically does result in changes in the relative income of labour and capital, and in the need for labour and capital to transition to new enterprises if full employment is to be maintained. If nation has an international comparative advantage in producing labour-intensive goods, increasing international trade will be for those labour-intensive goods, waging wage relative to rent, and necessitating a shift of both labour and capital from capital-intensive to labour-intensive sectors. That is, labour will win and capital will lose-- even with full employment. (Of course, it goes the other way round for a nation that's got a relative advantage in production of capital-intensive goods and services.)
The article does, on this point, quote economist Joseph Stiglitz:
“`The argument was always that the winners could compensate the losers,' Mr. Stiglitz said. `But the winners never do. And that becomes particularly relevant when we have a society with as much inequality as we have today.'”
And that's quite right. But the government can make the compensation happen by redistributing income through tax-cum-subsidy-- just as negotiating a deal to lower tariffs redistributed income. (Every regime, as well as every change of regime, has distributive consequences.)
The government can also subsidize or legislatively promote transition of resources into new industries.
And, obviously, if it's "too expensive" to do that, then the trade deal did not in net increase national income, and wasn't worth making on economic grounds. It must have been made for ideological or larcenous reasons.
We tend to hear, and perhaps even utter, evaluations of what we call "international trade" that incorporate assessments of the effects of in/action that are properly in the realms of macroeconomics or microeconomic tax/subsidy. I know that language is the way people use words. But it's useful for policy analysis actually to distinguish distinct causes.
First of all, I'm only going to talk about tariff reductions, which increase international trade-- not about clauses that give/take property rights and legal rights to/from this entity and that. That's another set of issues.
You wouldn't know it at all easily from this article, but what increased international trade does, when the economy is at full employment, is to increase national income.
If the economy isn't at full employment-- that is, if there is a greater rate of unemployment than is consistent with efficient and desirable search time for new labour market entrants and those changing jobs for other reasons? That is best handled through expansionary macroeconomic policy through increasing demand for final products, and thus for the labour to create the products.
Increased international trade typically does result in changes in the relative income of labour and capital, and in the need for labour and capital to transition to new enterprises if full employment is to be maintained. If nation has an international comparative advantage in producing labour-intensive goods, increasing international trade will be for those labour-intensive goods, waging wage relative to rent, and necessitating a shift of both labour and capital from capital-intensive to labour-intensive sectors. That is, labour will win and capital will lose-- even with full employment. (Of course, it goes the other way round for a nation that's got a relative advantage in production of capital-intensive goods and services.)
The article does, on this point, quote economist Joseph Stiglitz:
“`The argument was always that the winners could compensate the losers,' Mr. Stiglitz said. `But the winners never do. And that becomes particularly relevant when we have a society with as much inequality as we have today.'”
And that's quite right. But the government can make the compensation happen by redistributing income through tax-cum-subsidy-- just as negotiating a deal to lower tariffs redistributed income. (Every regime, as well as every change of regime, has distributive consequences.)
The government can also subsidize or legislatively promote transition of resources into new industries.
And, obviously, if it's "too expensive" to do that, then the trade deal did not in net increase national income, and wasn't worth making on economic grounds. It must have been made for ideological or larcenous reasons.
We tend to hear, and perhaps even utter, evaluations of what we call "international trade" that incorporate assessments of the effects of in/action that are properly in the realms of macroeconomics or microeconomic tax/subsidy. I know that language is the way people use words. But it's useful for policy analysis actually to distinguish distinct causes.
