However what keeps the economy still stable, if not exactly bouyant right now?
I think the latter. Look at this, as a case in point.
Caterpillar, are a huge exporter. From 2004 to 2006, its exports rose 44 percent to $10.5 billion. Since the startof2006, Caterpillar says it has hired more than 11,000 new U.S. production workers. None of this guarantees that a U.S. export boom will prevent an American recession. But the mere possibility suggests that we need to be smarter about globalization -and not simply to parrot popular stereotypes.
On the job front, for example, much of today’s vitriolic anti-trade rhetoric is misleading and ill-timed.
Contrary to popular opinion, the trade balance (deficit or surplus) barely affects total U.S. employment over long periods. Domestic job creation and destruction ultimately overwhelm trade’s effects. From 1991 to 2006, the trade deficit rose from $31 billion to $759 billion. In the same period, payroll jobs increased by 28 million and the unemployment rate fell from 6.8 percent to 4.6 percent. The domestic economy still dominates. Big job losses today relate to housing: construction workers, real-estate agents, mortgage bankers.
In 2001, unemployment came from busted dotcoms and telecoms.
But trade- like any form of competition- does affect specific workers. Those vulnerable to imports naturally want to save their jobs, even if open trade is good for the country as a whole (it broadens choices, reduces prices). Although protectionism is a logical response, it’s too late. The right time would have been 30 years ago before the trade deficit exploded. Thosejobs are now gone, and most aren’t coming back.
Perversely, being anti-trade today will weaken the employment prospects of trade sensitive industries.
A case in point: the Bush administration has proposed “free-trade agreements” with Peru, Panama, Colombia and South Korea. Together, they would bolster U.S. exports, though modestly. In today’s anti-trade climate, none has yet passed Congress.
The shrinking trade deficit reflects two realities. First, the dollar has depreciated. Since 2002, it’s down 21 percent against a basket of26 currencies. That makes U.S. exports cheaper abroad and foreign imports more expensive here.
We’ve wrongly made globalization the scapegoat for many of our economic problems. But the ritualistic attacks are dangerous.
China has sold us shoddy goods. but so have domestic U.S. firms.
Globalization’s casual bashers should remember that. They think they’re playing only to a domestic audience, but the world is listening, and it may not like what it hears
Tags: awhole, case in point, consumer spending, contrary to popular opinion, domestic economy, domestic job, dotcoms, export boom, housing construction, job creation, logical response, long periods, mortgage bankers, protectionism, real estate agents, scapegoat, shoddy goods, trade balance, trade deficit, unemployment rate