From The Economist
http://www.economist.com/agenda/display ... id=2442040
Virginia Postrel in the NY Times (free registration probably required)Foreign competition now affects services as well as manufacturing. Good
FOR the past 250 years, politicians and hard-headed men of business have diligently ignored what economics has to say about the gains from trade—much as they may pretend, or in some cases even believe, that they are paying close attention. Except for those on the hard left, politicians of every ideological stripe these days swear their allegiance to the basic principle of free trade. Businessmen say the same. So when either group issues its calls for barriers against foreign competition, it is never because free trade is wrong in principle, it is because foreigners are cheating somehow, rendering the principles void. Or else it is because something about the way the world works has changed, so that the basic principles, ever valid in themselves, need to be adjusted. And those adjustments, of course, then oblige these staunch defenders of free-trade-in-principle to call for all manner of restrictions on trade.
In this way, protectionism is periodically refreshed and reinvented. Anti-trade sentiment, especially in the United States, is currently having one of its strongest revivals in years. Earlier bogus “new conditions” that were deemed to undermine the orthodox case for liberal trade included the growth of cross-border capital flows, the recognition that some industries exposed to foreign competition may have strategic or network significance for the wider economy, and concerns over exploitation of workers in developing countries. Today's bogus new condition, which is proving far more potent in political terms than any of these others, is the fact that international competition is now impinging on industries previously sheltered from it by the constraints of technology and geography.
http://www.nytimes.com/2004/02/26/business/26scene.html
Thomas Friedman, also in the NY TimesSUPPOSE we lived in an economic world with no borders, where goods, capital and people could move anywhere.
We've all heard the dire predictions of what would happen. All the businesses and jobs would rush to the places with the lowest wages. The poor countries would get richer, but only by making rich countries poorer.
Eventually we'd all be roughly equal, but formerly well-to-do Americans would be a lot worse off. Many Americans are afraid that globalization and free trade will have exactly this effect.
We rarely realize that we already live in a version of that theoretical world. The United States is one giant free trade zone. Businesses can move their plants, investors can move their money and workers can move themselves from region to region without government permission.
Over the last century, a lot of that movement has occurred. Rich and poor regions have converged to about the same standard of living. But the results haven't been anything like the "race to the bottom" of protectionist imaginations.
Incomes still vary widely across regions. Income per capita in Connecticut, the richest state, was about $42,000 in 2002, compared with $24,000 in New Mexico, the poorest. (These figures aren't adjusted for price variations between regions.)
Today's differences are small, however, compared with the huge differences that used to exist. A century ago, the poor states were like third world countries compared with the richest states. They've caught up only since 1960.
Adjusted for regional price differences, income per worker in the South was just two-thirds of the country's average as recently as 1940, according to calculations by two economists, Kris James Mitchener and Ian W. McLean, reported in The Journal of Economic History.
The disparity was even greater in the late 19th century.
Over the last half-century, "once-poorer states have been growing faster than richer ones," says Professor Mitchener of Santa Clara University in California. "That's going to cause the poor ones to catch up to the richer ones." But, he adds, that doesn't mean impoverishing the rich ones.
In fact, states like New York, California, New Jersey, Connecticut and Massachusetts have remained at the top of the list for more than a century. They've kept growing, though at a slower rate than poorer states. The most dramatic improvement has been in Florida, which was among the poorest states in 1880 and among the richest a century later.
http://www.nytimes.com/2004/02/26/opini ... IE.html?hp
Catherine Mann does some research on the issue.
I've been in India for only a few days and I am already thinking about reincarnation. In my next life, I want to be a demagogue.
Yes, I want to be able to huff and puff about complex issues — like outsourcing of jobs to India — without any reference to reality. Unfortunately, in this life, I'm stuck in the body of a reporter/columnist. So when I came to the 24/7 Customer call center in Bangalore to observe hundreds of Indian young people doing service jobs via long distance — answering the phones for U.S. firms, providing technical support for U.S. computer giants or selling credit cards for global banks — I was prepared to denounce the whole thing. "How can it be good for America to have all these Indians doing our white-collar jobs?" I asked 24/7's founder, S. Nagarajan.
Well, he answered patiently, "look around this office." All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke, because when it comes to drinking water in India, people want a trusted brand. On top of all this, says Mr. Nagarajan, 90 percent of the shares in 24/7 are owned by U.S. investors. This explains why, although the U.S. has lost some service jobs to India, total exports from U.S. companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What goes around comes around, and also benefits Americans.
(pdf file)
http://iie.com/publications/pb/pb03-11.pdf
