An ardent free trader’s apostasy sparks debate

Alan Blinder, the eminent Princeton economist who literally wrote the book on the subject, has been making waves lately with his confession of doubt about the benefits of free trade. Because of the wide range of jobs that can be done remotely and the massive populations of India and China entering the world’s labor force, ...

602067_070509_blinder_05.jpg
602067_070509_blinder_05.jpg

Alan Blinder, the eminent Princeton economist who literally wrote the book on the subject, has been making waves lately with his confession of doubt about the benefits of free trade. Because of the wide range of jobs that can be done remotely and the massive populations of India and China entering the world's labor force, he worries that some 30 to 40 million American jobs will be at risk of offshoring. 

Most other economists have rushed to the defense of free trade against this "apostasy." This laissez-faire crowd argues that Blinder fails to take into account the benefits from trade to consumers; that he underestimates the economy's ability to adjust; that the same changes he looks at open new export possibilities; and that the transition will be so gradual that it won't be a problem. And finally, there's little that can be done about it anyway.

All of the criticisms are correct. But all of them miss the point.

Alan Blinder, the eminent Princeton economist who literally wrote the book on the subject, has been making waves lately with his confession of doubt about the benefits of free trade. Because of the wide range of jobs that can be done remotely and the massive populations of India and China entering the world’s labor force, he worries that some 30 to 40 million American jobs will be at risk of offshoring. 

Most other economists have rushed to the defense of free trade against this “apostasy.” This laissez-faire crowd argues that Blinder fails to take into account the benefits from trade to consumers; that he underestimates the economy’s ability to adjust; that the same changes he looks at open new export possibilities; and that the transition will be so gradual that it won’t be a problem. And finally, there’s little that can be done about it anyway.

All of the criticisms are correct. But all of them miss the point.

Blinder continues to recognize the benefits that free trade brings, and emphatically eschews any protectionism. What he is picking up on is a brewing change in the U.S. political debate over trade. So far, the losers from trade have come disproportionately from the manufacturing sector. Service sector employees and highly skilled professionals, meanwhile, benefit from lower prices and increased demand for their work. Members of those two groups, however, will be increasingly less likely to see tangible benefits that outweigh the added risk that free trade brings. Since any protectionist fix will almost certainly be a cure far worse than the disease, it is crucial to head off the development of a new anti-trade coalition before it grows too strong.

Blinder recommends a pretty standard mix of social support and education to prepare the workforce for the coming changes. But trying to address a political problem with wonkish economic policies probably won’t cut it. More important will be the realization by the businesses and professionals that benefit from open economies—business services firms, technology companies, and the many exporting industries in which the U.S. still has a competitive advantage—that they need to actively defend a system that allows them to prosper.

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