Stephen Roach, chief economist for Morgan Stanley:
In theory, Roach said, wages increase with productivity growth and all economies have a comparative advantage in the production of something. But real wage stagnation in some of the richest economies and increasing fears that China and India combined will eventually be able to make just about everything the West can, only cheaper, were turning that theory on its head, he said.
Weekly earnings for full-time American workers in the second quarter last year were unchanged from their 2000 levels - even though productivity grew by 18 percent in the same period
Yah, THAT worked out well....
HT: Dreher
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2 comments:
I like to read all the way to the end...
"Economics is not just politics," Sen said. "There is more to human progress than aggregate statistics of growth. We have to ask the right questions and concentrate on what matters to people."
These ideas are becoming more mainstream. I hope through French initiative they will become more widely accepted in Europe and beyond."
A year and a half ago, researchers at Yergin's group drew up a number of scenarios for the world economy in 2030. One of them, "Asian Phoenix," saw a world in which protectionism was kept at bay and Asian economies kept underpinning swift global growth. The other, "Global Fissure," was a troubled world economy with widespread economic nationalism and a backlash against globalization.
At the time, the latter scenario seemed to be the more remote. But that may be changing, Yergin said. "What seemed highly unlikely," he said, "could become rather more likely."
Also, poor Stephen Roach, his Morgan Stanleyness notwithstanding, clearly does not understand comparative advantage.
Comparative advantage does not disappear even if one side does everything better. In fact, the theory is predicated on one side doing everything better.
Also, on that little stat their, I'd wager a shiny nickel that benefits are not being counted as wages, thus ignoring health care costs, which is of course a separate issue from trade.
The linked article, if you actually read it, is in favor of free trade.
Should be "there."
My mistake.
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