The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Save NAFTA II

05/06/2019

Back in 1972, I worked through the math supporting the economic Law of Comparative Advantage, which explained how globalization increased GDP, and I have been a “globalist” ever since, even now when it is an unpopular position.  In fact, most economists are still globalists, even if they won’t currently admit to it.  But the globalization we have witnessed since the mid-1990’s is not our first experience with globalization.  The first experience was in the early 1900’s.  Sadly, both experiences ended unhappily.

In both cases, GDP did increase nicely, because the “pie” increased nicely, although workers didn’t share fairly.  The rich got richer, and the poor got babies, as is usual. In the first experience, we didn’t have to deal with the social problems of globalization, as world trade was fractured by World War I. But, economists did learn that unequal distribution of the benefits of globalization will produce a real social problem.

That’s why legions of economists gave Congressional testimony during the 1990’s that job retraining and relocation assistance was necessary  to prevent the social problems of globalization.  Naturally, Congress did nothing, saying they didn’t want to “pick winners and losers.”  By doing nothing, they made losers out of millions of Americans, whose jobs went overseas!  This gave birth to populism in America.  (Read Hillbilly Elegy by J.D. Vance.)

I was a big supporter of NAFTA, which needed to be updated but certainly not trashed.  While NAFTA II has a few warts, it is clearly better than no NAFTA at all!  Right now, it is waiting approval by the Democratic House.  Shame on the Democrats if they allow NAFTA wallow and die!

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