1/6
Great piece. Although I have a lot more respect for Paul Krugman than Michael Lind does, I agree with what Lind says about trade. Ricardo showed that when businesses move abroad to benefit from comparative advantage, the global economy is better off.
tabletmag.com/sections/news/…
Great piece. Although I have a lot more respect for Paul Krugman than Michael Lind does, I agree with what Lind says about trade. Ricardo showed that when businesses move abroad to benefit from comparative advantage, the global economy is better off.
tabletmag.com/sections/news/…
2/6
But while lower wages in less developed countries can reflect a form of comparative advantage, this is no longer the case in countries in which the wage gap exceeds the productivity gap. In a Ricardian world, wages keep pace with productivity.
But while lower wages in less developed countries can reflect a form of comparative advantage, this is no longer the case in countries in which the wage gap exceeds the productivity gap. In a Ricardian world, wages keep pace with productivity.
3/6
But when wage growth is repressed relative to productivity growth, this is always the result of explicit policy decision, in which case offshoring doesn't allow businesses to benefit from comparative advantage reasons so much as to benefit from mercantilist wage policies.
But when wage growth is repressed relative to productivity growth, this is always the result of explicit policy decision, in which case offshoring doesn't allow businesses to benefit from comparative advantage reasons so much as to benefit from mercantilist wage policies.
4/6
What Lind doesn't mention — in this piece anyway — is that while moving production abroad for comparative advantage expands global demand, moving production to take advantage of lower relative wages actually reduces global demand.
What Lind doesn't mention — in this piece anyway — is that while moving production abroad for comparative advantage expands global demand, moving production to take advantage of lower relative wages actually reduces global demand.
5/6
What is more, because it allows the mercantilist country to expand its share of reduced global demand, its trading partners must absorb more than 100% of the resulting contraction in demand. That is what is meant by "beggar they neighbor".
What is more, because it allows the mercantilist country to expand its share of reduced global demand, its trading partners must absorb more than 100% of the resulting contraction in demand. That is what is meant by "beggar they neighbor".
6/6
Lind also doesn't mention that workers, small producers and the middle classes in both the surplus and deficit countries equally bear the brunt of these mercantilist policies. It is the banks and business elites in both that benefit.
Lind also doesn't mention that workers, small producers and the middle classes in both the surplus and deficit countries equally bear the brunt of these mercantilist policies. It is the banks and business elites in both that benefit.
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