Globalisation means we share jobs as well as goods
By Brad Delong
Published: August 27 2003 5:00 | Last Updated: August 27 2003 5:00
<<Elmat wites, the University professors nod in approval :-)>>
Ivory, apes and peacocks: that is what the international trading fleet of Solomon, son of David, imported 3,000 years ago. But did Ye-Shua, herding sheep in the hills of Samaria, or Ish-Baal, farming in the shadow of the hill of Megiddo, care? No. Until after the industrial revolution, international trade barely touched the lives of farmers and workers. Before 1500 it was just too costly to ship anything other than slaves, silks, spices, perfumes and other precious items. Even the commercial revolution added only a few things to the list of traded goods: guns, tobacco, rum, high-quality cloth, fine porcelain, coffee and a few others.
International trade became a big deal for ordinary people only with the arrival of the iron-hulled, steam-powered, ocean-going cargo ship. Cheap transport made it profitable to trade the staple manufactured and agricultural commodities of the industrial age: US wheat, Australian wool, Argentine beef, British machines, German steel, French luxuries, Swiss precision instruments, Italian pottery, Brazilian coffee, Malaysian rubber, African palm oil and so on.
By 1900, people everywhere knew that if they grew crops or worked in factories they were competing with workers two continents away - and if the dynamics of comparative advantage shifted, they could lose their jobs, their incomes and their livelihoods.
So, a century ago, they organised. They sought protection against that age's globalisation. American steel-masters and steelworkers sought (and got) protection against British producers, boosting steelworkers' standard of living and helping to enlarge the fortunes of J.P. Morgan and steel magnates Andrew Carnegie and Elbert Gary. But protection came at a price: it was more expensive to construct America's railroads, so America's farmers and ranchers paid higher shipping costs and some of what would have been their incomes went instead to subsidise rich New Yorkers' tickets to Carnegie Hall.
The Junker military-service nobility of Germany was horrified when Hamburgers made their bread from American wheat. They allied with German steelmasters seeking protection against British competition in the "marriage of iron and rye". Higher grain prices and lower living standards for Germany's urban workers meant more wealth and political power for the army-officer class, and that class's added weight played a role in driving Germany down its disastrous 20th-century political course.
Now we have another turn of the wheel. The internet, the submarine fibre-optic cable and the communications satellite are cast in the role played last time by the iron-hulled, ocean-going steamship. Now it is not just atoms but bits that are traded across oceans in rapidly increasing volumes. Customer support, medical analysis, technical work, computer programming, form-filling and claims-processing - all these jobs can now move around the globe in the same way that farming and factory jobs could a century ago.
This global reallocation of jobs promises to be a powerful source of world economic growth over the next two generations. But, as happened a century ago, those workers who face new competition from people a hemisphere away are not happy about it. Large-scale international trade has hit the service sector and, as a result, foreign competition is no longer merely a phenomenon that affects blue-collar workers and gives white-collar workers the opportunity to buy manufactured goods more cheaply. The political system is beginning to respond: New York City no longer dares to digitise tickets and send them to Ghana for processing; New Jersey politicians want public sector contracts limited to US-based processing centres and in return the government of India wants to add a provision securing market access for service sector professionals to the Doha round of world trade talks.
The current wave of concern about service-sector outsourcing is overblown. It is more a reaction to macroeconomic distress than to a shift in the world distribution of employment; if the post-industrial core were closer to full employment, few would care. There are still seven US jobs in software and systems design for every four such jobs that existed when Netscape launched its initial public offering in 1995.
Trade, after all, does not destroy jobs but shifts them elsewhere. If central banks succeed in keeping the advanced post-industrial economies near full employment, for every job that moves out to an Indian call centre another job moves in. If Indians spend the harder currencies they earn on developed countries' exports, it will be a job making machine tools or new kinds of hybrid seeds, or managing the construction of an Indian factory. If Indians use the harder currencies they earn to invest in the developed world, it will be a job in construction. There are more and bigger winners from the demand created by a job's shift to an Indian call centre than there are losers.
But there are losers and they are articulate and potentially angry. For the moment, they are relatively few in number, and the tide of their concern will ebb as the business cycle turns. But it will come back, for there will be more and more losers over the next two generations. The next wave of concern over service sector outsourcing will be bigger, and the one after that bigger still.
Nearly a century ago, the political systems of Germany, France, Italy, America and even Britain accommodated protectionist pressures as the domain of commodities traded across oceans grew. Such accommodation was almost certainly a mistake then and would almost certainly be a mistake now.
On the economic side, more people would suffer from a backlash against globalisation than from an increase in free trade and foreign competition. Such a backlash would also slow the economic growth of developing nations such as India and China.
On the political side, does anybody really want Indians and Chinese in 50 years' time - the 3bn educated citizens of what will then be industrialised economies and proud countries - to remember that western Europe and North America took whatever steps they could to slow Indian and Chinese economic growth in the first half of the 21st century? Democratic politics will produce strong pressures to compensate and assist those who work in industries that will be battered by foreign competition. But, please, let the compensation and assistance take the form of social insurance rather than trade protection.
The writer is professor of economics at the University of California at Berkeley |
