From Charles Hugh Smith at oftwominds.com:
Cheap imports, offshoring of production and the global expansion of financial markets have driven U.S. corporate and financial profits to unprecedented heights.
Globalization (a.k.a. “free” trade) has become an election issue for two reasons: many voters blame “free” trade with China and other nations for job losses in the U.S. and rising income inequality as globalization’s “winners” in the U.S. outpace its far more numerous “losers.”
A recent article in the New York Times looks at the issue from the perspective of recent economic studies: On Trade, Angry Voters Have a Point (via Lew G.)
The case for globalization based on the fact that it helps expand the economic pie by 3 percent becomes much weaker when it also changes the distribution of the slices by 50 percent.
Before we dig into this complicated set of interconnected macro-dynamics, let’s stipulate that there is no such thing as “free” trade. Every trade agreement defines winners and losers by the very design of the agreement.
Also, other issues that are outside the confines of the actual trade agreement can have outsized influence on trade’s winners and losers.
For example, trade between the U.S. and China cannot possibly be “free” because China pegs its currency to the U.S. dollar (USD). This peg enables China to arbitrarily keep its products cheaper than they might be if the market set the value of China’s yuan.
To continue reading: “Free” Trade, Jobs and Income Inequality: It’s Not As Easy As We Might Think
