Economic Forum: In defense of globalization

• Pages: 63-64

Page 63

"The principles of free trade are ones that almost every economist subscribes to," Rajan said, "but paradoxically, they are very hard to convey to the lay public." In introducing Bhagwati, Rajan added that " it is difficult to convince people of the merits of free trade, which is why every generation needs its champion- an economist who stands up for the principles and talks to the lay public in a lucid language about its merits."

His new book, Bhagwati explained, explores the concerns of antiglobalization critics-those who, as he noted, want to "drive a stake through globalization, who reject multinationals on principle." He added that "when people say that globalization needs a human face, they must mean it lacks one," and that "globalization is handicapping them, rather than advancing them." Bhagwati argued that, on balance, globalization does have a human face. This, he said, is evidenced by studies that have shown that trade-a major element of globalization-increases prosperity. More than any other country, globalization has benefited the United States, where increased trade helped create nearly 35 million new jobs over the past two decades.

Justified worries?

Given these accomplishments, then, why is the outsourcing of some white-collar jobs to India or the Philippines "a major issue in this country and not in Britain, for example, or not in European countries"? Why does the United States "always get into a funk"? Part of the answer lies in the misperception about the number of jobs transferred through outsourcing. In reality, Bhagwati said, the number outsourced is minor compared with the number of jobs in the system. In a highly competitive system, if export industries do not reduce their cost levels to the absolute minimum, they will not be able to compete with those firms that are outsourcing or buy ing the cheapest imports. "Okay, we are taking 10 jobs away by buying services from abroad," he said, "but we are saving 90 jobs in the firm because the firm survives."

Rajan wondered whether public opinion has shifted in the United States, because previously nontraded goods and services are increasingly becoming traded. In the past, he said, individuals working in nontraded industries supported free trade. Now, when doctors and accountants see that their jobs are at risk-however small the job losses-are they shifting to the other side...