Globalization and creative destruction

In previous posts, I’ve treated trade and technology as competing explanations for why employment has declined in certain sectors. However, to be fair, the effects are not mutually exclusive. Open borders increase the incentives for technological innovation, and innovation increases the rewards from trade. On this point, the New York Times ran an article two ...

By , a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast.

In previous posts, I've treated trade and technology as competing explanations for why employment has declined in certain sectors. However, to be fair, the effects are not mutually exclusive. Open borders increase the incentives for technological innovation, and innovation increases the rewards from trade. On this point, the New York Times ran an article two days ago about how the trade and technology are intertwined. Their case study -- how globalization is affecting the orange-growing industry. The highlights:

In previous posts, I’ve treated trade and technology as competing explanations for why employment has declined in certain sectors. However, to be fair, the effects are not mutually exclusive. Open borders increase the incentives for technological innovation, and innovation increases the rewards from trade. On this point, the New York Times ran an article two days ago about how the trade and technology are intertwined. Their case study — how globalization is affecting the orange-growing industry. The highlights:

Chugging down a row of trees, the pair of canopy shakers in Paul Meador’s orange grove here seem like a cross between a bulldozer and a hairbrush, their hungry steel bristles working through the tree crowns as if untangling colossal heads of hair. In under 15 minutes, the machines shake loose 36,000 pounds of oranges from 100 trees, catch the fruit and drop it into a large storage car. “This would have taken four pickers all day long,” Mr. Meador said…. [A]s globalization creeps into the groves, it is threatening to displace the workers. Facing increased competition from Brazil and a glut of oranges on world markets, alarmed growers here have been turning to labor-saving technology as their best hope for survival. “The Florida industry has to reduce costs to stay in business,” said Everett Loukonen, agribusiness manager for the Barron Collier Company, which uses shakers to harvest about half of the 40.5 million pounds of oranges reaped annually from its 10,000 acres in southwestern Florida. “Mechanical harvesting is the only available way to do that today.”…. [T]he economics are in mechanization’s favor. A tariff of 29 cents per pound on imports of frozen concentrated orange juice lets Florida growers resist the Brazilian onslaught — but not by much. According to Ronald Muraro and Thomas Spreen, researchers at the University of Florida, Brazil could deliver a pound of frozen concentrate in the United States for under 75 cents, versus 99 cents for a Florida grower. Mechanical harvesting can help cut the gap. Mr. Loukonen of Barron Collier estimates that machine harvesting shaves costs by 8 to 10 cents a pound of frozen concentrate.

Read the whole thing. The creative desctruction of technological innovation does impose short-run dislocations on certain segments of the American economy — particularly unskilled workers. However, the long-run effects are unambiguously positive, as Ted Balaker argues over at Reason (link via Virginia Postrel). This is not a new debate — Frédéric Bastiat made these arguments in mid-19th century France. The Dallas Federal Reserve has a nice primer of Bastiat’s arguments (thanks to Scott Harris for the link). The rhetoric of Bastiat’s opponents sound awfully familiar today.

Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner

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