August 22, 2012
David Leonhardt’s latest blog post on increasing inequality is a discussion of globalization. It’s most reasonable except the underlying premise appears to be that globalization is something that just happened.
While this is a common theme in polite circles, it is ridiculous on its phase. Globalization has been by design. Ever hear of the WTO, NAFTA, CAFTA etc.? These are carefully hammered out deals that determine which sectors will exposed to more competition, which sectors will see increased protection (e.g. pharmaceuticals and Disney), and which sectors will largely be left alone.
It is not an accident that autoworkers and custodians have to face competition from people willing to work for very low wages from developing countries whereas doctors and lawyers are largely protected from this competition. This was by design. If the folks negotiating trade deals had put the same effort to open up competition in the currently high-paid professions as they did in manufactured goods, we would probably be paying our doctors $100k a year or less. And we would be saving hundreds of billions of dollars a year in health care costs, legal fees and other areas.
But, our trade negotiators were not trying to bring about economic gains at the expense of doctors and lawyers. These are people with whom they identify. They are also people who make large campaign contributions and who have friends and relatives who write news stories in major media outlets. So free trade in professional services was never a topic for trade negotiators. They remain largely protected from international competition and the people who write on economics pretend not to notice.
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