Savitri Era of those who adore, Om Sri Aurobindo and The Mother.

Monday, December 24, 2007

Trade, like technological change, can produce wrenching dislocations that hurt some workers

Editorial Bested by the Brits nytimes.com: December 23, 2007
There is good and bad to the news that Britain surpassed the United States for the first time ever in donations to the World Bank’s unit to combat world poverty. This should help dispel the notion that the bank’s International Development Association is an arm of the United States Treasury doing Washington’s will around the world. The more depressing side to the news is that the United States — with an economy five times the size of Britain’s — is doing far less than it could and should to help the world’s poorest countries.
Despite steep declines in poverty in China and other developing countries, world poverty is much deeper than was previously thought, according to new World Bank estimates. The bank had estimated that economic output per person in Congo amounted to about $2 a day in 2005, one of the lowest in the world. It is 72 cents in the bank’s recalculation. The new estimates shaved those numbers in Bangladesh to $3.50 a day from $5.60.
The International Development Association is the single largest source of donations for basic social services in the world’s poorest countries, financing projects in everything from education and health to public administration and roads. The $25.1 billion in new pledges that the World Bank announced this month was a record, 42 percent higher than what it got in the previous round in 2005.
The generosity was an endorsement of the new head of the World Bank, Robert Zoellick, who has championed the development association’s cause. Not only was Britain’s contribution of $4.2 billion about 60 percent higher, in dollar terms, than its pledge during the last round, six countries, including China, pledged money for the first time. The United States’ pledge of $3.7 billion was also 30 percent higher than its previous commitment, but still $500 million less than Britain’s.
The United States can partly blame the disparity on the declining value of the dollar versus the pound. But the fact remains that, no matter what Americans may think, the United States has long lagged behind other donors when it comes to doling out foreign assistance.
While President Bush has increased American official foreign assistance, it is still paltry: about 0.2 percent of the economy — and some 50 percent less, proportionally, than Britain’s and less than one-fourth the level of Sweden’s and Norway’s. Moreover, only about half of America’s foreign aid is devoted to programs aimed at alleviating poverty and promoting development.
The latest World Bank pledges are good news for poor countries. They show that developed nations are aware that they need to do more to assist those left behind by globalization. But they are also a reminder that the United States needs to be doing a lot more. It is the right thing to do. And it is the best way to help poor countries develop and avoid becoming failed states or breeding grounds for terrorism.
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Editorial Trade and Prosperity nytimes.com: December 23, 2007
It would be unfortunate for the United States if the winner of the 2008 election elevated skepticism toward trade from a red-meat sound bite on the campaign trail to a new wave of protectionist policy.
Many Americans are experiencing economic anxiety. Wages for most workers are going nowhere. It is a sad fact that despite enormous gains in productivity over the past few decades, the wages of typical workers are only marginally higher than they were a quarter of a century ago. But throttling trade — say, by reconsidering existing agreements — would hurt a lot more people than it helped. There is scant evidence that trade has played a big role in holding down typical workers’ wages. There is abundant evidence that it has contributed substantially to America’s overall economic growth. It offers American producers access to foreign markets. It multiplies choices for producers and consumers. Foreign competition spurs productivity growth at home.
Trade, like technological change, can produce wrenching dislocations that hurt some workers. But trade barriers are not the proper tool to deal with these changes. What is needed is a bold strategy to rebuild a functioning safety net, deploying some of the vast wealth this nation has gained through globalization to assist those hurt by the forces of economic change. This will allow Americans to embrace globalization, rather than fear it.
The planks of this strategy include health care reform, to ensure that workers who lose their jobs do not also lose access to affordable health insurance, and a form of extended unemployment insurance for all displaced workers, not just those hurt by trade. More progressive taxation — using tools like the earned income tax credit — should be used to address the stagnation of incomes. And more should be spent on the continuous training and education of workers throughout their lives.
It is unclear whether the next president will have the vision to carry through these changes. The Republican candidates’ posturing on trade has been pretty much substance-free. But considering the field’s uniform approach to economic policy, in which all taxes are bad and most nondefense spending is worse, it is unlikely that a Republican president would be interested in investing in such an expansion of America’s social safety net.
The Democratic candidates, on the other hand, tend to be on the right side of the discussion on issues like universal health care, education and social spending. But all of them have included hints of defensive trade policies amid their proposals. Barack Obama has offered the most resistance to the easy path of blaming imports from foreign countries for the woes of the American middle class. “Global trade is not going away, technology is not going away, the Internet is not going away,” he said in New Hampshire. “And that means enormous opportunities, but also means more dislocations.”
But Mrs. Clinton proposes a “timeout” on future trade agreements, including the World Trade Organization’s global trade negotiations, and a reconsideration of existing deals — including Nafta, a cornerstone of Bill Clinton’s presidency. Mr. Edwards also talks of “redoing” Nafta. All the Democratic candidates agree that trade agreements should be amended to attach provisions about minimum labor standards.
These changes would do virtually nothing to protect American workers from the disruptions wrought by trade, technology and other economic forces. A protectionist agenda would hurt them.

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