Ask Auntie Pinko
February 26, 2004

Dear Auntie Pinko,

I'm very confused about the business of free trade. Obviously Bush is doing the wrong thing, but are the Democratic candidates doing the right thing? Should we have protectionist trade policies? Will saving all the jobs being offshored save our economy? Or will people just lose jobs faster than ever because businesses will start fleeing the country altogether, and prices for domestic goods will be too high to keep the consumer cycle going?

I can't imagine either strategy (protectionism or free trade) really being good for everyone in the long run, but what's the answer?

Anne
Pawtucket, RI

 
Dear Anne,

Auntie can only give you an opinion, for what it's worth - which is not all that much, since I am not an economist or a scholar in this area. You make some interesting observations, though, and I think you do a good job of stating the central dilemma, which is, as you observe, that both 'free trade' and 'protectionism' have substantial down sides.

Now, as I said, I am not an authority. But what I can't understand is why we cannot have some of the best of both worlds, while (hopefully,) dodging the worst of the downsides to each?

There is a lot of truth in the free traders' contention that trying to protect jobs that can be done more cheaply elsewhere is ultimately a losing proposition. And there is probably some truth in the notion that protecting some jobs is a bit like subsidizing buggy whip manufacturers when the horseless carriages were taking over.

And yes, there is also a certain amount of factual accuracy in the contention that many jobs simply can't be moved, and there can still be plenty of jobs to go around. In fact, we have created many new jobs in the last twenty years even while opening up trade with NAFTA and other globalization efforts.

But.

With that out of the way, let's look at those 'jobs' that are being created (or at least, the ones the 'free traders' tell us will be created in a booming economy boosted by free trade.) Do they have the benefits and pay levels that will enable a full-time worker to support a family?

Auntie hasn't seen much evidence of this. More low-wage, low-quality jobs, and an inadequate net of resources and assistance to help families make ends meet, does not a prosperous economy produce.

Maybe the reshaping of the economy is irreversible, and we will never go back to a day when workers can count on their employers for job security, health insurance, retirement benefits, regular cost of living increases, etc. Maybe we don't even necessarily want to. Auntie knows many young people who regard a "job" as a three-to-five year commitment at best, and who seem to have no problem being virtually self-employed.

The number of people who patch together a living from part-time work for a 'regular' employer, contract work, and maybe a little home-based business, etc., continues to grow, and many people seem to like it, except for the big problem of health insurance, disability and retirement security, etc.

Now, I'm not too gung-ho on this notion, Anne, because I really don't know enough to be sure it would have a reasonable chance of working. But perhaps the Democratic economic policy should not be trying to stuff the genie of globalization and offshoring back in the bottle. Perhaps what we should be doing is concentrating on policies that will enable the coming generations of young people to successfully support families and create secure futures for themselves in this new economic environment.

What would this look like?

Well, for one thing, it would include a higher minimum wage for those service economy jobs that cannot be sent off-shore, so that they offer a hard worker an opportunity to actually support a family.

It would include the closure of tax loopholes and do-arounds that allow corporations doing business in America to pay absurdly low taxes, while we provide them with a generous infrastructure of transportation, workforce development, communications, economic and legal protections, etc.

It might include an array of well-coordinated totally private, partially-subsidized private, and publicly-operated 'security net' services, like health insurance, education and retirement saving/planning, disability insurance, unemployment insurance, etc., that will enable families to have a steady infrastructure of security regardless of the number of part-time and self-employed and temporary and other types of jobs they patch together to make their living.

It might include some "give back" programs that would reduce the impact of offshoring and job elimination by charging companies "job exit" fees that will help pay for a sturdy, ongoing infrastructure of retraining and workforce development/adjustment programs. And it might include some tax credit incentives to help employers keep some jobs here in America.

I don't know how realistic these ideas actually are, Anne, and maybe they are hopelessly utopian. But on the other hand, maybe they represent a middle ground that can bring 'free traders' and 'protectionists' back together with the common mission of ensuring that tomorrow's economy works for everyone. Thanks for asking Auntie Pinko!

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