When talking about outsourcing jobs, why don't politicians ever mention the less expensive goods we get in return?
This from coverage of last night's Democratic debate:
Sanders is no fan of General Electric. He and the iconic American company have been trading jabs ever since Sanders attacked the firm in an interview with the New York Daily News earlier this month for sending jobs overseas...
Let me start my rant here by stating the conclusion. To paraphrase Gordon Gekko, "Trade is Good!"
Let's take a look at a somewhat simplistic example to illustrate why focusing on jobs when talking about trade is silly. Suppose four friends, two farmers and two carpenters embark on a fateful trip aboard a tiny ship from a tropic port. The weather starts getting rough and their tiny ship is tossed. The ship splits in two, the farmers aboard one half and the carpenters aboard the other half. Each half runs aground on separate uncharted desert isle, within raft distance of each other.
At first the two groups don't know the location of their friends, so they take on the task of survival on their own. The carpenters readily build shelter, but over time, struggle to generate a sustainable supply of food. They spend a lot of time trying to grow food and in doing so take a lot of time away from building shelter. So they end up with inadequate food and shelter.
The farmers on the other hand have no problem with their food supply. Their farming knowledge allows them to quickly work the land on their island and are able to generate a minimally adequate food supply. If they could focus only on farming, they would have plentiful food, but they need to take much of their farming time and dedicate it to building shelter, something for which they are not trained. The shelters they build are weak, and are frequently damaged by tropical storms due to their inferior carpentry abilities.
One day while scavenging for food on a high spot on his island, one of the carpenters sees a nearby island, that looks as if it is reachable by raft. Using their carpentry skills, the carpenters build a raft, and one of the carpenters sets sail for the other island.
Upon arrival, the hungry but well-rested carpenter finds his farmer friends, healthy from their adequate food supplies, but weather beaten and tired from their inadequate shelter. The farmers, glad to see their friend, explain that they are having no problem growing food, and could grow more than enough if they didn't have to waste so much of their time trying to constantly fix their shelter. The carpenter tells the farmers that they are having no trouble making shelter, but they are starving. If they had more time, they could build tropical mansions for themselves, but they are constantly using their time to just find enough food to survive.
So the carpenter makes the farmers a proposition: If you two dedicate all of your time to farming, you can grow more than enough food for all four of us. If we spend all of our time building, we can build luxurious shelter for all of us. So let's do this. You grow food, we'll build shelter and then we will trade. In return for some of the food you grow, we will come to your island and build you shelter.
The farmers agree to the deal. The farmers outsource their carpentry jobs to the carpenters' island and the carpenters outsource their farming jobs to the farmers' island. The farmers farm, the carpenters build.
What is the result?
Better food supply, better shelter and EVERYONE REMAINS FULLY EMPLOYED doing what they are good at doing*.
And that is the point of trade.
Trade makes everyone better off. The fact that some jobs move to places where those workers can specialize is a good thing for everyone. In return, we get cheaper goods and services, and we get the opportunity to produce those goods and services for which we have the comparative advantage. Everyone wins.
Trade is not a zero sum game. It's not 'if we export, we lose and they win.'
Yes, some jobs will shift.
They always have. Here's a nice picture from a couple of years ago that illustrates the point:
In 1840, almost 70% of the U.S. workforce was in agriculture. That number steadily declined ever since. Where did all of those jobs go? Do we have thousands of unemployed agricultural workers?
No. As the U.S. developed a more educated workforce, jobs shifted initially to manufacturing and then jobs shifted from manufacturing to the service industry.
As these shifts have occurred, agricultural products got cheaper and manufactured goods got cheaper and services got cheaper.
And overall employment rates really haven't changed much:
So what's my point?
Trade and jobs should be independent discussions.
The question isn't whether we lose jobs to trade. We do.
But we also gain jobs from trade. It's just that those jobs are different.
And different makes people uncomfortable.
The U.S. is now a service based economy.
And that's a good thing.
But, are we providing the educational and job training opportunities for those caught up in the churn to succeed in the service economy?
If not, some will be left behind.
And that's not a good thing.
Let's stop worrying about which jobs are outsourced and what we are trading and instead focus on providing the education and job training for the future.
Rant over.
*And if you're wondering why one of the carpenters doesn't move to the farmers' island and one of the farmers move to the carpenters' island to make everyone better off, well, that would be immigration. And we all know what we think of immigration.
