David R. Henderson  

Bhagwati vs. Blinder

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My review of Jagdish Bhagwati and Alan S. Blinder, Offshoring of American Jobs, appears in the latest issue of Regulation.

I show that although Bhagwati had accused Alan Blinder of dropping his belief in free trade, the accusation was unfounded. A key paragraph:

So, rest assured that the interesting debate in this book is not about whether free trade is desirable. Neither of the main essay writers, Bhagwati or Blinder, questions free trade. Nor do the four economists who comment on the main essays -- Richard Freeman, Douglas Irwin, Lori Kletzer, and Robert Lawrence -- question whether free trade is desirable. There is also no dispute that the effect of free trade on jobs will be approximately zero. As economists since David Ricardo have shown, the effect of free trade is on the types of jobs people have, not on whether they have jobs.The real controversy in the book is about how many Americans will actually have to switch jobs or occupations, and how big a deal this is.

Also, after pointing out that Blinder advocates a substantial increase in government intervention in response to job loss, I note:

The other authors agree with him to varying degrees. Bhagwati and Irwin advocate trade adjustment assistance by the government, although Irwin also expresses his skepticism that government job retraining programs, which Blinder advocates, can accomplish much. Lori Kletzer of the University of California at Santa Cruz signs on to all of Blinder's proposed government programs. Lawrence advocates "the right safety net and redistribution policies," but does not specify what those "right" policies would be. Harvard's Richard Freeman advocates giving unions more monopoly power but does not specify how this would help, and advocates socialized health insurance and higher taxes on "the rich." None of these economists actually makes a case for any of these proposals. None points to examples of these policies that have worked in the past, and none deals with any of the potential negative consequences of such policies. All treat government as a deus ex machina that somehow will make things work.


COMMENTS (1 to date)
Alex J. writes:

The purpose of trade adjustment assistance programs is to demonstrate that their advocates care about people who lose their jobs to foreigners. Messing around with historical examples and side effects is not necessary if all you want to do is send a signal.

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