Wednesday, June 18, 2008

True Progessivism

That's the title of a post at Cafe Hayek. Don Boudreaux:

According to today's Wall Street Journal, Barack Obama alleges that "Globalization and technology and automation all weaken the position of workers." If this presidential wannabe is correct, then some of the world's most prosperous workers must be the people in that newly discovered tribe in Brazil -- persons with absolutely no contact with the global economy or with modern technology.

Less extreme cases, of course, include persons not so cut off from the world as these Brazilian tribes. Sub-Saharan Africans should be more prosperous than eastern Europeans, who, in turn, should be more prosperous than Americans and western Europeans.

Of course, if the facts don't follow this pattern, then I guess that Sen. Obama will soon publicly apologize for either misspeaking or admit that his thesis is flawed.

I won't be holding my breath for apologies from the Senator. The statement does make some interesting points. Globalization and technology do have similar effects on the labor market. It is certainly true that technology is responsible for the vast majority of manufacturing jobs that have been "lost" over the last 30 year rather than free trade (globalization). Productivity has risen dramatically in that time and returns on capital have risen. So in some sense Senator Obama is correct that these market forces weaken the position of workers. There are fewer jobs in manufacturing to go around.

On the other hand those who are the most productive attain higher wages. The proper question for Senator Obama is why we should not want our economy to become more efficient. Those workers who are no longer employed in manufacturing may find more rewarding jobs in other fields. In a sense those workers have been freed from repetitive physical jobs to pursue jobs requiring more brain than brawn. That should be seen as a good thing. Furthermore, the higher return on capital means that there will now be capital available to fund other businesses that will produce more jobs. Higher productivity and increased trade are good for the economy, but workers need to be more versatile and flexible. The ability to adapt is highly rewarded in a dynamic economy.

The only plausible role for government in this equation is to assist the transition of the workers displaced. And frankly, I think that is debatable. What we shouldn't do is handicap the entire economy because a minority of workers are not able to make the transition in a more competitive environment.

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