The economists have looked out upon the world and pronounced it good. Just last week, Gregory Mankiw, chair of the Council of Economics Advisors, told us that outsourcing and displacement are just another installment of the historical process of economics growth and betterment and we should stay our fears about them. Somehow, the American public failed to be assuaged.
In one way, Mankiw is absolutely right, and in another, he needs to get a clue. Sure, change and displacement have always been a part of growth—ask the farmers who became industrial workers a century ago. But if change is the price of growth, what is our obligation to those displaced in the process?
One answer, particularly within the business community, is to emphasize growth, as if there were people somewhere who were against it. This school emphasizes the need for a well educated population, a culture of entrepreneurship and innovation, and a commitment to research and development and technological progress. If we have those, they argue, our economy and our people will be so deft, so agile that they will readily keep their feet amid the economy’s tremors.
This answer, like Chairman Mankiw’s, is both absolutely right and completely misses the boat. The vague promise of school later does little to alleviate fear now. And it risks being perceived as part of a political con game, in which business groups champion good schools and helpful technology, leaving the Administration to announce that there’s no money to fund them, because all the money went to the smash-and-grab tax cuts the same business groups supported.
For all of Lou Dobbs’ nightly ridicule of corporate traitors on CNN, outsourcing to India and China aren’t the driving forces behind job loss. Productivity, structural change and bad economic policy are. But ultimately, it doesn’t matter. A current of fear and protectionism is gripping the economy. It is so strong that economic progress itself has become suspect. And it leads to the inescapable conclusion that if we want to have trade, innovation, and growth, we need to have an adjustment policy.
What does adjustment policy mean? It means allowing workers to insure themselves against wage loss when they lose jobs. It means allowing them to take their health care with them as well. It means changing the tax system to expand support for the incomes and retirement of the working poor, and to treat an investment in education the same way it treats an investment in a machine. It means finding the resources to pay for national K-12 education, even if it means raising taxes and limiting Social Security and healthcare for the long term. And it means a higher minimum wage, to keep the bottom of the labor force attached to the rest of us.
I believe wholeheartedly in free trade, but the trade debate misses the point. Look at the steel industry. When they were unprotected, steel workers lost their jobs. They were protected, and the companies consolidated and workers lost their jobs anyway. Counterproductive restrictions on trade and investment won’t help working people. Nor will sermons from economists or businesspeople. A conscious adjustment policy that serves workers’ interests will.
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