The Corner

Free Trade & Inequality

Here’s a point you don’t hear nearly enough these days (See Andy’s dispiriting post about the GOP and free trade below). And that it comes from Obama’s economic adviser is, to say the least, interesting. Via George Will:

“Globalization” means free trade and various deregulations that supposedly put downward pressure on American wages because of imports from low-wage countries. Goolsbee, however, says globalization is responsible for “a small fraction” of today’s income disparities. He says that “60 to 70 percent of the economy faces virtually no international competition.” America’s 18.5 million government employees have little to fear from free trade; so do auto mechanics, dentists and many others.

Goolsbee’s rough estimate is that technology — meaning all that the phrase “information economy” denotes — accounts for more than 80 percent of the increase in earnings disparities, whereas trade accounts for much less than 20 percent. This is something congressional Democrats need to hear from a Democratic economist as they resist trade agreements with South Korea and such minor economic powers as Peru, Panama and Colombia.

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