March 21, 2016
It is apparently very appealing to many people to think that the loss of jobs in manufacturing and the resulting downward pressure on the wages of large segments of the working class was simply an inevitable result of globalization. For example, in an otherwise excellent piece on the closing of a Carrier factory in Indiana that makes heating and cooling equipment, the NYT told readers:
“The relentless loss of American manufacturing jobs, however, goes back nearly half a century, driven largely by forces beyond the control of any president. The advances of technology, the diffusion of industrial expertise around the world, the availability of cheap labor and the rise of China as a manufacturing powerhouse would have disrupted the nation’s industrial heartland even without new trade deals.”
Actually, presidents could have sought to put in place the same sort of barriers that protect our doctors, lawyers, and other professionals from foreign competition. There are millions of very bright people in Mexico, India, China and other developing countries who would be happy to train to U.S. standards and work as doctors and lawyes in the United States. However, because these groups have far more political power than manufacturing workers, we have maintained walls that largely prevent foreign professionals from competing with our own doctors and lawyers.
The result is that these professionals have seen substantial increases in real wages over the last four decades and the rest of us pay hundreds of billions of dollars more each year for health care, legal services, and other items. The cost to the economy from this protectionism is almost certainly an order of magnitude greater than any potential gains from a trade deal like the Trans-Pacific Partnership. In spite of the enormous economic costs, the power of these professions largely prevents economists or the media from even discussing the protectionism enjoyed by professionals.
Thanks to Keane Bhatt for calling this one to my attention.
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