Economist David Autor et al keep producing really important findings about the impact of trade on people and communities hurt by international competition. Their latest entry, on the connection between trade-induced job losses and political polarization, is written up in today’s NYT:
“Cross-referencing congressional voting records and district-by-district patterns of job losses and other economic trends between 2002 and 2010, the researchers found that areas hardest hit by trade shocks were much more likely to move to the far right or the far left politically.”
For years, it was impolite to raise the costs of trade in policy discussions, even while fully recognizing the benefits. Eventually, the implications of the models, especially “factor price equalization,”—the idea that trade with low-wage countries could lower the wages of workers in sectors that compete with imports—allowed the word “globalization” to be added to “technology” in describing inequality. (Go ahead and try this at home: ask an economist what causes inequality, and they’ll say “globalization and technology.”)
But Autor et al, along with various others (the Economic Policy Institute has been onto this since its inception in the 1980s), have helped us get beyond sweeping generalizations. They’ve done so by drilling down into the microdata to identify the impact on affected communities, with a particular emphasis on the impact on China of trade in the 2000s. Their work is creating the oxygen to recognize, even in polite company, the double-edged sword of U.S. trade dynamics, with our persistent and large deficits.More ...