Free trade makes its way to the hair salon

By M.J. ANDERSEN
PROVIDENCE JOURNAL
Editorial writers tend to sit and stew. So it is good that we are forced to go out and get our teeth cleaned or our hair violated now and then. Otherwise, we would not have the slightest idea what is on people's minds.
Every situation has its limits, of course. While you can sometimes gauge the mood of the country during an eye exam, the issues often blur. And it is hard to get a good give-and-take going in the dentist's chair. "Blrgrrf!" I said once, when a child's decision to enlist came up.
In my experience, it is the haircutters who tend to be the best all-around takers of the national pulse. Even so, I was surprised the other week when the stylist bent on relieving me of a ratty inch or two announced that China and India were about to eat our lunch. Further, if the United States did not watch out, we would soon become a faded power like England.
This was the first time I can remember that globalization was Topic One in the salon. Granted, this salon, in Cambridge, Mass., was probably not representative. Cambridge is a town where the janitors are up on capital markets and the waiters know about the Phillips curve.
Still, people tend naturally to discuss their anxieties. So I left the chair feeling I ought to study up.
It was striking, in my reading, how often India and China were in fact mentioned. In the horror-movie version of what is now going on, China gobbles up all our manufacturing jobs. India grabs the good white-collar service-sector jobs, which are in a) computer programming and b) radiology. We keep Wal-Mart.
The usual shorthand for these worries is the term outsourcing, by which Americans mean the shipping of their jobs (good jobs) overseas. But we would all do well to stop speaking of outsourcing and switch our concern to free trade. Because that, beneath everything, is the issue.
Ingenious force?
Economists have sworn by free trade ever since they first noticed it, and they have made a career out of telling everyone else what an ingenious force it was. Left to itself, free trade builds prosperity, they believe, and makes the economic pie bigger for all. (How this wonderful-world Weltanschauung came to be called the dismal science I will never know.)
Of course, these same economists will grant you that in the short term, there are winners and losers. But theory holds that the gains are always bigger than the losses. Usually, consumers win; the losers, here and there, are people thrown out of work.
Today, most economists still embrace free trade as virtuous. But recent changes wrought by globalization have some re-examining classic assumptions. Among the critics, surprisingly, is Paul A. Samuelson. Now 89, he wrote the standard textbook that droves of college students have labored part-way through, then returned to the bookstore for a much-reduced slice of their personal pies.
Samuelson is no protectionist. But he sees the United States as potentially losing more than it gains in its current competition with low-wage countries. The resulting pressure to lower wages here, he suggests, could ultimately reduce U.S. per-capita income.
In other words, for Americans, free trade might no longer create a situation in which everybody gains. And this is pretty much economic heresy.
Plenty of economists disagree with Samuelson. Among the most prominent is his former student Jagdish N. Bhagwati. A professor at Columbia University, Bhagwati outsourced himself from India to come here, and is the author of the just-published book "In Defense of Globalization."
Poverty reduction
His argument, partly based on India's transformation, restates the classic one: free markets must be allowed to function for poverty to be reduced. Any damage cheap-labor countries may do to high-wage ones is temporary, he asserts, since as they develop, poorer nations change the types of products they export.
Cheap goods will not endlessly pile up in U.S. warehouses. Nor will India consist only of call centers and X-ray labs.
It's comforting to think of this future equilibrium, until the numbers jolt you back to the present. Indian workers earn a fifth to a tenth of what their U.S. counterparts do. And they are increasingly well-educated in a system with strong science and math programs. U.S. science programs, meanwhile, are disturbingly on the slide.
How many jobs are we losing to the forces of free trade? Figures vary. The Wall Street Journal recently cited a study by Forrester Research Inc. that estimated 315,000 service-sector jobs had left the country by the end of last year. Manufacturing jobs have of course been leaving for decades.
For non-economists, it is not easy to know what to think. At the moment, I stand somewhere between the haircutter, who practically had my shortened tresses standing on end, and the traditional economists, with their statistical version of tough love.
Yet what an annoyingly sunny bunch these economists are -- as hard to argue with as a pink slip. The trouble is, their descriptions of what happens quickly begin to sound like a justification. And too many policymakers take them that way.
It is enough to make the losers of the free-trade game tremble. And potentially, that could be most of us.
Scripps Howard News Service