Elites need to stop denying the breadth and reach of economic pain caused by America's integration with a much poorer global economy

The pain of globalisation | 11/09/07 "Guardian" | By Jared Bernstein and Josh Bivens

For years Americans have been told that they all benefit from trade with poorer countries - yet many now find they are worse off.

These poll results, however, should not surprise anyone who understands the economics of trade. Chapter one of the trade textbook was essentially written by David Ricardo, and it does indeed teach that trade, on the basis of comparative advantage, typically boosts a nation's average income. ...

Sadly, both for American workers and the quality of the trade debate, the textbook has other chapters. One of them explains the Stolper-Samuelson Theorem (SST), which points out that when the US exports insurance services and aircraft while importing apparel and electronics, we are implicitly selling capital - physical and human - for labour. This exchange bids up capital's price (profits and high-end salaries) and bids down wages for the broad working and middle-class, leading to rising inequality and downward wage pressure for many Americans.

Note that this is not just a story about laid-off factory workers, who obviously suffer the toughest losses. Rather, all workers in the US economy who resemble import-displaced workers in terms of education, skills, and credentials are affected. Landscapers won't lose their jobs to imports, but their wages are lowered through competition with those import-displaced factory workers.
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Lastly, we - and "we" here refers to the economic elites in both parties playing guard-dog for the trade status quo - need to stop denying the breadth and reach of economic pain caused by America's integration with a much poorer global economy. The polls are telling us something pretty ironic: the people have read ahead of us in the trade textbook. We'd better catch up.
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