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KRUGMAN_TRADES
November 06, 2021
In a talk on May 25, 2021 in Melbourne (available at
a youtube near you), Krugman makes the point that the
understanding Economists thought they had nailed down
of Free Trade circa the early 90s was almost immediately
undermined by changes in the real world.
Within ten years of the publication of "Peddling Prosperity",
container shipping really took off, and US imports from
China went from around half a percent to nearly 3 percent--
and it's now understood that the *rate of change* matters a
lot concerning impact on US workers.
His sketch of older economics modeling has
it too obsessed with wide-scale, long-term
results: okay you had this trade shock, now
after everything reaches equilibrium, what
do things look like?
He praises the paper "The China Shock", by David Autor et al:
Rapid increase in Chinese exports displaced about a
million jobs in the US. And while that isn't an increase
in unemployment of a million people, it's still a big
adjustment everyone had to make: they found jobs, but they
weren't the same jobs, and they weren't necessarily the
kind of jobs they wanted.
And that influx of imports can hit *localized*
industries, the change is felt more strongly in
some places than others.
The lost of US furniture manufacturing wasn't such a big deal for
the US as a whole, but was devastating to Hickory, North Carolina.
That generates some powerful stories that sours people
on the idea of free trade, even if *overall* economists
weren't *that* far off.
"We missed the dynamics of trade."
Other points:
Public opinion concerning free trade has been
swerving up-and-down as Republican voters follow
Trump's (somewhat erratic) lead.
The international system of trade agreements is
more fragile than they realized-- as of the time
of this speech, it was entirely at the mercy of
his Trumpiness.
Krugman refers to a model that shows that
yes, there is a global elite that's profited
a lot from this change in trade, but there's
also a big impact on the middle, in the
exporting countries.
(China went from a third
world country to a first
world one in a very short
period of time.)
There was a question from the audience
about ecological impacts of globalization-- Krugman points the finger
a good point, though this question ocused at coal burning-- that's
solely on transport, though. the first things to worry
about. This misses what I
Really, the trouble with would say is the point:
globalized manufacturing is China burns a lot of coal
that the places where it's itself, and their
happening have weak environmental controls
environmental controls. have been famously weak.
Krugman, I think
understands (though I In any case, Krugman's
don't think he said this understanding, in broad
explicitly) that outline, sounds correct
transportation by water to me: enemy number one
is actually pretty is coal burning,
efficient, so it's not transportation energy
such a big contributor. costs do matter, but
most of that is "people
driving around in cars".
He conceeds that raising
price of oil (as we would
with carbon pricing) would
reduce imports by air a lot.
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