"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."

Is this right? What's the source? It does not accord with my understanding.

I thought that up until the 90s, the studies showed that the effect of trade on inequality is modest, as imports from cheap labor developing countries did not represent a large percentage of the overall economy. But Krugman and others are looking to see whether the dramatic increase in manufacturing imports from China with its dramatically lower wages alters that conclusion. So far, while theoretically it should (at least to some extent), it has been difficult to substantiate.

Link to Krugman's draft article on the issue.

http://www.princeton.edu/~pkrugman/pk-bpea-draft.pdf

Posted at April 10, 2008 10:21 AM in response to The Crunchian Take on Globalization

I agree that the Hamilton Project is a good thing both substantively and for the Democrats.

IMO, Phillips' economic views are outdated and goofy for essentially all the same reasons as stated in the Slate article. The HP tries to blend a firm commitment to the market and fiscal responsibility, on the one hand, with progressive and intelligent policies aimed at providing people with the tools (education, savings) and security (health care, a basic social safety net) to survive in such an economy, on the other.

On the politics, it makes a lot of sense to remind voters of the economic success during the 1990s. (Kind of a reverse Reagan: Were you better off then than you are now?) Although it is too simplistic to credit or blame any administration completely for the country's economic performance during its time and, by many measures, the US economy is doing well, the perception is that times are tough and, in large part, Bush is responsible. Moreover, the Adminsitration's reckless combination of spending excess and tax cuts with no movement on the looming crises in SS and Medicare as the baby boomers age verges on the criminally irresponsibile. In such circumstances, it would be silly not to take advantage of the Clinton/Rubin/ Bensen/etc. record of last decade.

As an aside, if you read the transcript of the event launching the Project, you'll see that Brookings is looking for Republicans to participate. They may have a hard time prior to the 2008 elections.

Posted at May 18, 2006 12:37 PM in response to Lighten Up on The Hamilton Project

Squeaky Rat, can you elaborate? Do you really believe that NATO, the US-Japan Security Agreement, IMF, WTO, etc. are irrelevant today? I do not. I think that they are critically important for essentially the same reasons as Ikenberry (and others) has laid out here and elsewhere. Why do you think otherwise? The terrorist threat? If so, generally or only in the case of nuclear or other WMD terrorism? And if so, what replaces the post-war liberal international order to deal with that threat?

Some have suggested that preemption should be the new organizational principle, though that argument has died down post-Iraq (which was more properly an exercise of preventive rather than preemptive war, as there was no imminent threat). My take is that preemptive and even preventive military action will be neceesary against terrorist groups in rare circumstances. However, preemption cannot possibly deal with the myriad of other security problems that face the US or even the vast majority of what constitutes the war on terror.

What do you believe is the best organizing principle for today's challenges?

Posted at May 13, 2006 5:10 PM in response to Grand Strategy as Order Building

I agree strongly that strengthening and building upon the liberal international order that the US helped establish post-WW II is critical and should be the organizing principle of AFP.

A couple of comments: (1) I probably believe more strongly in the need for US international leadership, at least in the medium term. I do so not so much from a nationalistic point of view, but rather from a Kindelberger/Mandelbaum/Haas/etc. belief that the type of cooperative international system we envision requires a strong guiding hand, a country that can assume a disproportionate share of costs and coax others into playing a constructive role -- in Mandelbaum's words, to provide public goods.

Over time, others may be able and willing to assume more of that role in various areas. Moreover, as the institutions and practices themselves are strengthened, the need for a such a benevolent hegemon may become less necessary. But for now and the likely foreseeable future, the US is the only possible option.

(2) The Order Building strategy is no easy task. I believe that you are correct that US post-WW II strategy derived not simply from the Soviet threat, but also from an attempt to avoid the errors and policies that led to the depression and WWII. The strategy you (and I) advocate, in essence, is a deepening and strengthening of the post-war international order to encompass additional countries (in particular China and Russia) and additional substantive issues. Here are a few hurdles.

(a) We are not emerging from the horrors of the twin shocks of the Great Depression and World War II. Those major dislocations "smoothed" the way for the cooperative system. They convinced the US to engage the international system like never before and convinced other countries that such a system made sense. Everyone was thinking big thoughts.

(b) We do not face anything like the Soviet threat at this time. Clearly, that threat contributed to our and our allies willingness to strike the bargains we did. It convinced us of the need to abandon our unilateralist conception of foreign policy and helped sustain our leadership as a contrast to the prospect of something worse, Soviet domination. The closest analog right now would be jihadists with a nuclear weapon. Although clearly a horrible, horrible prospect, I don't think that alone it will motivate Russia, China and others to become stakeholders in liberal international system (or even our allies to deepen existing institutions).

In a sense, the "easy" work is already done. The countries most likely to participate have signed on. I worry that absent the dislocations or security threat that helped spark the original "creation," it will be very difficult to take the system to the next level.

(c) The other factor that sustained American leadership and the international institutions it sponsored was the belief that the US was actually constructing a system that benefited all parties. I don't want to overstate this point, but there is certainly greater doubt about that proposition today.

Partly this is because the nations we are attempting to co-opt into the system have such different histories and perspectives. But even among our friends, our motives have come into doubt. That is in part structural. America's preponderance of power, particularly in the absence of a countervailing force such as the Soviet Union, is considered by many a danger unto itself. States are more likely to balance (even if it is "soft balancing") than bandwagon under such circumstances. In other words, the US is working against a headwind.

The other source of resistance stems from the Bush Administration's policies and rhetoric. Above all, the war in Iraq and its justification raise the possibility that the US will act to destabilize the international system and in disregard of the institutions and norms we believe should be strengthened and expanded. All of this reversible, but it makes a difficult task all the more so.

FWIW, here's a short review of Gaddis, Surprise, Security and the American Experience, that I wrote a couple of years ago. It addresses some of the same questions we're discussing here.

http://www.amcips.org/programs/policy_analysis_papers/age_of_terrorism.htm

Have a good weekend.

Posted at May 12, 2006 2:43 PM in response to Grand Strategy as Order Building