Krugman on globalization: how to manage the losers

Comparative advantage (see also) has been famously described as the one social science proposition that is both true and non-trivial. It's the reason that free trade strongly tends, on average, to be a resilient win-win proposition. I've summarized the thesis as:

... It's not that you can't do the work better than someone else, it's rather that you have better things to do...

The operative constraint here is "on average". A win for America is not necessarily a win for programmers, GPs, or the guys in the parts department. Increasingly the vast majority of the winnings from globalization appear to be going to the top 1%

Krugman last discussed this topic in May of 2007. Now he returns with new data ...

Trouble With Trade - New York Times

... contrary to what people sometimes assert, economic theory says that free trade normally makes a country richer, but it doesn’t say that it’s normally good for everyone. Still, when the effects of third-world exports on U.S. wages first became an issue in the 1990s, a number of economists — myself included — looked at the data and concluded that any negative effects on U.S. wages were modest.

The trouble now is that these effects may no longer be as modest as they were, because imports of manufactured goods from the third world have grown dramatically — from just 2.5 percent of G.D.P. in 1990 to 6 percent in 2006...

... Those who think that globalization is always and everywhere a bad thing are wrong. On the contrary, keeping world markets relatively open is crucial to the hopes of billions of people...

... It’s often claimed that limits on trade benefit only a small number of Americans, while hurting the vast majority. That’s still true of things like the import quota on sugar. But when it comes to manufactured goods, it’s at least arguable that the reverse is true. The highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose....

...For the sake of the world as a whole, I hope that we respond to the trouble with trade not by shutting trade down, but by doing things like strengthening the social safety net. But those who are worried about trade have a point, and deserve some respect.

Krugman has been more specific in the past about strengthening the social safety net. Obvious ideas include:

• universal health care
• separate benefits from employment
• intelligent retraining programs
• rethinking the meaning of disability in a post-industrial society
  

Krugman is a gem. One of the reasons I gave up reading Greg Mankiw is that his ideological blinders prevent him from considering the impact of trade on less competitive workers. Paul Krugman and Brad DeLong don't have that problem.

Update 12/28: Today's Cringely column is sadly relevant.