It Is Simply Not the Case That Globalization “Led to Economic Hardship Among Working Class Families”

By Stan Veuger of AEI.

"Instead of accepting either of the views presented here as correct, I would strongly dispute the premise underpinning the disagreement. It is simply not the case that globalization “led to economic hardship among working-class families.” In fact, if we think of the modern era of globalization as having started around 1990—around the fall of the Berlin wall and the dissolution of the Soviet Union—the opposite holds true.

My colleague Michael Strain likes to use July 1990, a business cycle peak, as the base period for comparisons along these lines. Average real wages for production and non-supervisory jobs have grown by around 20 percent between then and now using the CPI, or by about 40 percent using the PCE. In fact, it’s the twenty years before 1990—with price and wage controls in the United States, no NAFTA, and closed, centrally planned economies in eastern Europe and much of Asia—that were a disaster of wage stagnation.

Of course, the ebbs and flows of the free-enterprise system do not benefit everyone on any given day, and one can easily find people whose economic circumstances were negatively affected by import competition. But no cost-benefit analysis worth its salt should count only those costs.

What is true is that disastrous land use policies across much of the West have made it difficult for the benefits of globalization to materialize fully. Restrictions on the construction of new housing in superstar regions have excluded many less-privileged workers from reaping the fruits of agglomeration economies. At the same time, immigration restrictions and dropping fertility have contributed to the depopulation of other regions. Not coincidentally, those are often regions where cultural maladies have led to significantly intensified or even self-inflicted economic harm.

But those are errors wholly unrelated to the attitudes and policies typically associated with globalization—openness, freedom of movement, free trade, liberalized capital flows. Similarly orthogonal are the cruel and authoritarian domestic policies of Chinese dictatorship. It is those policies that should be the target of our ire, not the recipe for success that is globalization."