As will soon be apparent, I have a new found interest in The Economist. It started a few weeks back when I posted excerpts from an article on marketing and Post modernism. Now we turn our attention to what might be called the "inefficient casualties" of globalization:
NESTLED among the wooded Blue Ridge mountains in Virginia's far south-west, Galax is a town of bluegrass music, barbecue and hardscrabble living. It is home to an annual fiddlers' convention and, less happily, a huddle of textile and furniture factories. Over the past few years, globalization has hit hard.
Unable to compete with Mexican and then Chinese competition, the town's old industries have withered, taking thousands of jobs with them. Last year brought the biggest single blow. Three big factories closed their doors within months. More than 1,000 people, around one-sixth of the town's workforce, lost their jobs.
For some, particularly those in their 50s, the future looks bleak. At 59, Paul Rotan sees little chance of finding another job with health insurance, but he is still six years away from qualifying for Medicare, the government health plan for the old. He is terrified of what will happen in June when the temporary public subsidies for his health insurance end...
In the neat world of economics text-books the downside of globalization looks much like Galax. Low-skilled workers in a rich country, such as America, suffer when trade expands with a poorer country with plenty of much cheaper low-skilled workers, such as China.
If labor markets are efficient in the rich country the displaced workers should find new jobs, but their wages will probably fall. Although the country overall gains handsomely, these people are often worse off. Hence the case for redistributing some of trade's gains and compensating the low-skilled losers. Traditionally, trade-displaced workers have also tended to be older and less educated than typical workers, and to have worked in only one industry. They take longer than average to find another job and, when they find one, are more likely to see their wages fall.
There is nothing surprising or innovative in this account. Unfortunately it has become the norm across the most "developed" and technologically advanced economies. To its credit, The Economist spends a good deal of space discussing the effectiveness of various government programs designed to help subsidize and train displaced workers. But ultimately they must stick to their over riding faith in free market fundamentalism:
As public fears of globalization rise, so will the political appeal of these schemes. But they will have less impact than getting other, more basic, policies right. Globalization underscores the need for a flexible, dynamic labour market and a well-educated, adaptable workforce. And a worker whose health care is not tied to his job will be less worried about trade than one for whom job loss also spells the loss of medical insurance. The tasks of freeing up labour markets (in Europe), reforming health care (in America) and improving education (everywhere) are far more important than any amount of experimentation with wage insurance or retraining schemes. If politicians really want to respond to the worries caused by globalization, those are still the best places to start.
As an American I would applaud any effort to provide universal health insurance that was not tied to one's employment. But the bottom line is still the same: we cannot try to interfere with the mechanisms of the market for fear of destroying its natural efficiencies. It is the individual worker (and individual countries) that must adapt to its rigorous demands, no matter how difficult it may be for real human beings to adjust. And of course this completely ignores the terrible costs globalization imposes on those who are finding new employment - the supposed "winners" in places like China and India. I find it both infuriating and absurd that we are expected to celebrate our subordination to this inhuman system, and call it freedom. I am not smart enough to know what the alternative will look like or what will make it happen - but I have to think that "another world is still possible."