Economist has second thoughts on free trade

While the Washington Consensus on economic matters was once largely viewed as the premise from which to start a debate on trade, (for more on this see David Brooks on " The Death of Neoliberalism," and the facinating array or responses from liberal bloggers), more and more our starting to notice the downsides of the policies.

In today's Wall Street Journal, there is a report of Princeton Economist, Alan S. Binder -- once a staunch supporter of neoliberalism -- now singing a different tune.

For decades, Alan S. Blinder -- Princeton University economist, former Federal Reserve Board vice chairman and perennial adviser to Democratic presidential candidates -- argued, along with most economists, that free trade enriches the U.S. and its trading partners, despite the harm it does to some workers. "Like 99% of economists since the days of Adam Smith, I am a free trader down to my toes," he wrote back in 2001.

Politicians heeded this advice and, with occasional dissents, steadily dismantled barriers to trade. Yet today Mr. Blinder has changed his message -- helping lead a growing band of economists and policy makers who say the downsides of trade in today's economy are deeper than they once realized.

Mr. Blinder, whose trenchant writing style and phrase-making add to his influence, remains an implacable opponent of tariffs and trade barriers. But now he is saying loudly that a new industrial revolution -- communication technology that allows services to be delivered electronically from afar -- will put as many as 40 million American jobs at risk of being shipped out of the country in the next decade or two. That's more than double the total of workers employed in manufacturing today. The job insecurity those workers face today is "only the tip of a very big iceberg," Mr. Blinder says.

Of course, Prof. Binder as not flipped over to the side of Sherrod Brown or Lou Dobbs -- not even close. But he is saying what the archneoliberals so often refuse to aknowledge: that the free trade doctrine they prescribe to has massive consequences to working people.

Mr. Blinder's answer is not protectionism, a word he utters with the contempt that Cold Warriors reserved for communism. Rather, Mr. Blinder still believes the principle British economist David Ricardo introduced 200 years ago: Nations prosper by focusing on things they do best -- their "comparative advantage" -- and trading with other nations with different strengths ...

But he says the harm done when some lose jobs and others get them will be far more painful and disruptive than trade advocates acknowledge. He wants government to do far more for displaced workers than the few months of retraining it offers today. He thinks the U.S. education system must be revamped so it prepares workers for jobs that can't easily go overseas, and is contemplating changes to the tax code that would reward companies that produce jobs that stay in the U.S.

UPDATE: William Greider puts in his $.02 at The Nation.

This just in from today's Wall Street Journal: "Pain From Free Trade Spurs Second Thoughts." Can you believe it? A "downer" story on globalization from the mother church of free-market capitalism. Who knew it was so bad? Actually, many millions of working Americans knew and have known for many years. They were regarded as mindless "protectionists." WSJ gave them the back of its hand.

Think of today's lengthy, revelatory story as a massive "correction." It led the newspaper's front page and recounted the heavy doubts accumulating among establishment free-traders about what they have wrought. The actual destruction from globalization is worse than anything they had imagined and it's going to get far worse.

The Journal is playing catch-up, to put it kindly. This is the bad news that newspaper was never willing to face frankly and publish. Now that it has, however, the impact will be truly significant--mainly by opening the way for other newspapers (think New York Times and Washington Post) whose editors and reporters have been similarly afraid to tell the whole truth about free-trade dogma's destructive impact on American prosperity. I look forward to many more confessional "corrections" from our leading media