Now that we’ve debated the principles of Crunch economics for a few days, I wanted to post one of the questions and answers that make up the core of the book. This one’s about globalization. It’s longer than most of the book’s Q&A discussions, but it’s not a simple topic and I try to add some nuance. See what you think.

Q: What’s so right and/or wrong about globalization? Am I really hurting American workers if I buy cheap imports? Should I feel lousy about this? Am I supposed to oppose trade deals? Isn’t our loss the gain of some poor person “over there” who probably needs the money even more than we do?

A: Settle in. Comfortable? This is going to take a few minutes.

First, allow me to share my latest encounter with the economics of globalization.

I’m a music lover and a critical listener, so when I finally got out of grad school, paid off some debts, and had a little real money, I bought, for many hundreds of dollars, a kickin’ stereo. The components were very high quality and lasted for decades. I had to buy a CD player at some point—that medium didn’t exist when I bought my system—but otherwise, I hadn’t bought any electronic music equipment in about 25 years.

Well, I guess I blasted “Purple Haze” one too many times, and the speakers finally died of old age (the big, clunky tuner is as healthy as ever and is living in my attic—I should give it to the Smithsonian). So I headed out to the big box electronics store to get a new high-quality system.

Not having been in the market for such an item for so many years, I wasn’t sure how much money I was going to need to spend, but I mentally put aside at least $500. That was already a few hundred less than I had spent on my old system in nominal dollars. In real dollars—adjusted for inflation since then—it was probably half as much.

Here’s the clincher: Barring the purchase of a personal recording studio, I couldn’t find a way to pay anywhere close to the amount I’d put aside. I found amazing systems, one of which now sits on my bookshelf, for the mid-hundreds of dollars. (The “I” in that last sentence is literal. The salesperson who helped me in this Best Buy store literally couldn’t figure out how to turn the thing on. I’m not just being snotty—I come back to this point later in the book in a discussion of the big box retailer Circuit City). Oh, by the way, the next day I saw the same system advertised on sale for $20 less, and Best Buy made up the difference. I think I ended up paying about $130 for the system.

So, you don’t have to look far to see the benefits of globalization. In economic terms, globalization—defined here as the increased flow across borders of goods, services, people, and ideas—by increasing the supply of stuff, lowers prices. There are other benefits, of course, accruing both to us and to our trading partners, but for all the lofty talk about expanded trade building bridges to the future and intertwining the fates of countries, most of us encounter and benefit from globalization in much the same way as I did that day.

And clearly, I don’t think there’s anything wrong with buying cheap imports. Yet, in these questions posed by a friend in San Francisco, my spiderlike senses pick up a murmur of guilt, mixed in with a lot of confusion.

That’s not surprising. The U.S. trade debate generates a whole lot more heat than light.

Economists, policymakers, and the punditry are forever going on about the benefits of trade and the horrible folly of protectionism. In large part, they’re motivated by two points, only the first of which is valid. That’s the principle of comparative advantage, a great and centuries-old insight showing that trading partners both end up better off when they specialize in what they do best, even if their best isn’t all that great.

The other motivation, the one that generates all kinds of undesirable yet avoidable outcomes, is the belief that more trade always makes everyone better off.

Journalist Eric Alterman, in a piece in The Nation titled “Dude! Where’s My Debate?” notes that the afore mentioned Thomas Friedman, a highly influential and breathless booster of “free trade” (the quotes are important, as you’ll see), was asked if there was any free-trade agreement he’d oppose.2 Friedman, a guy you would never think of as thoughtless, responded, “No, absolutely not,” adding, “You know what, sir? I wrote a column supporting the CAFTA, the Caribbean Free Trade initiative. I didn’t even know what was in it. I just knew two words: ‘free trade.’”

It’s worse. He didn’t even get the name right: It’s the Central American Free Trade agreement. This guy owns some of the most influential intellectual real estate in the world: He writes two op-ed essays a week for the New York Times. His books are everywhere. Yet because he’s so thoroughly convinced that free trade is always a big winner and that legislation like CAFTA promotes it, he brags that he doesn’t even have to look under the hood.

That’s a shame and a disservice to the debate. And, thankfully, as the untruths of the free-trade uber alles boosters have become clearer to more people, there is now a debate on these issues.

To join that debate, it’s helpful to consider the five myths of globalization:

1. You could stop it or even slow it down much.

The globalization horse is way far out of the barn, and trade agreements have much less to do with its pace than people like Friedman seem to think. Thirty-five years ago, trade volume amounted to 10 percent of our economy; now it’s 30 percent (that’s exports plus imports as a share of GDP). The fastest-growing exporter to the United States is China, and we don’t have any trade treaty with them (yes, they joined the WTO, but research has found little relationship between that and the penetration of our market, meaning much of it arguably would have occurred anyway). Like any other legal negotiation, these trade deals, like NAFTA (the North American Free Trade Agreement) and CAFTA, create a structure that generates winners and losers, with rules that protect some groups relative to others. NAFTA, for example, created lots of opportunities for investors but did little to ensure that workers in any of the three countries would reap the benefits of the agreement.

So trade deals have little to do with whether globalization goes forward. Regardless of these deals, countries will continue to expand trade relations. But that by no means suggests we should ignore trade deals. To the contrary, we need a new architecture, and by “we,” I mean workers the world round (see myth #5).

2. Globalization is wonderfully benign; or it’s all pain, no gain.

Like I said, for years the cheerleaders have derailed the debate, but you also need to be balanced here. You would be hard-pressed to find someone who has not saved some serious money thanks to expanded trade. Nor can anyone deny that there are lots of smart people in other countries who have great new opportunities thanks to globalization.

But you don’t have to look too far to see the pain either. Since 2000 alone, we’ve lost over three million jobs in manufacturing, in no small part due to our unbalanced trade—we import a ton more than we sell abroad. And now, with the offshoring (more on offshoring below) of white-collar jobs, the downward pressure on wage growth is hitting sectors that were previously inoculated. You know all those satellites and fiber-optic cables carrying ones and zeros all over the globe? Well, if your work can be represented by those ones and zeroes, it can be crammed into those nifty cables, and guess what? Don’t matter whether you’re a scholar or a fool, you’re now in competition with smart, cheap people in faraway places.

And all that stuff about low prices? It’s true, but remember, the story of stagnant American wages and incomes for so many workers in the middle and lower rungs of the scale is an inflation-adjusted story—that is, these wages are adjusted for the price-inducing benefits of trade, and they’re still falling. In the horserace of low prices versus low wages, wages still sometimes lose.

3. Its costs and benefits are broadly shared.

Would it were so. In fact, estimates are that U.S. trade with low-wage countries explains 20 to 30 percent of the increase in wage inequality over the past generation.4 That’s less than half, so you could say it’s not a smoking gun, but there are no single factors that explain more. Globalization, American style, is one reason why our economy has become more unequal.

4. Its downsides only affect displaced workers.

It is now de rigueur to acknowledge that—who knew?—a small group of losers are genuine victims of globalization. It’s just a few hard-hatted dinosaurs from the rust belt, but hey, I’m sensitive . . . I recognize that an egg or two had to get broken to make this global omelet.

Wrong. While folks whose jobs actually and visibly went overseas may be the most recognizable victims, tens of millions of incumbent workers—men and women still at work—have lower wages today than they would if trade were more balanced. My colleague Josh Bivens, an economist, estimates that increased trade has cost the typical household about $2,000 over the past generation. That’s not a huge dent, but it’s not trivial either (and remember, this is a net calculation—it accounts for the low-price effect).

5. Its outcomes cannot be shaped.

They must be accepted as is. Once you get that trade deals have little effect on globalization (barring, of course, crazy ideas that wouldn’t fly, like huge tariffs), you are free at last to get smart, creative, and compassionate. Maybe most important, given that their regimes want access to our markets, here’s where we might be able to help the downtrodden in poor countries.

Instead, as Bivens puts it, “Today, access to the U.S. market is contingent upon the developing world adopting a host of policies that map awfully conveniently to what the international corporate class wants.”

Why, exactly, is labor so cheap in what the trade literature calls “less developed countries”? The economist would answer that it’s because their workers are plentiful, with low value added; and, though Chinese productivity, for example, is growing faster than ours, there’s something to that. But lest we get too cozy with our cheap stuff, let us not forget that political repression is another reason. As long as they want access to our markets—and believe me, they do—we should use that leverage to insist on the granting of workers’ rights.

It would thus be a real advance if these trade deals devoted less ink to protecting “intellectual property rights” of first-world producers and more to the rights of workers in developing countries. One good reason to get behind globalization is that we’d like to see the world’s poor realize some of the prosperity that expanded trade is supposed to generate. When we play overly nicely with repressive governments—when we essentially make exclusive deals between their big investors and our big investors—we sacrifice this opportunity.8 Does all this mean we should smugly blast Jimi Hendrix on our cheap but awesome sound systems, slipping into a purple haze while we forget about globalization’s downsides?

Of course not. As I discuss in the book’s solution’s chapter, there’s lots we could do here to offset the downsides without sacrificing the upsides.

Crunchpoint: I know it took a while to get here, but the answer is, there’s lots that’s right and wrong about globalization. Cheap imports help us as consumers but hurt us as workers. Trade deals are not just about globalization, they’re also about power, and they should stop protecting investors at the expense of workers, here and abroad.