The score is Chindia 98, USA 2, and USA is sticking to its game plan.
Monday, July 25, 2011 at 09:45AM
Skeptic in Free trade, Globalization

There were 27.3 million net new jobs created in America between 1990 and 2008, but 98% were in sectors of the economy that are not subject to foreign competition, according to a recent paper by Nobel laureate Michael Spence and Sandile Hlatshwayo

Government at all levels is the largest employer in the nontradable sector and accounts for more than 22.5 million jobs in 2008. Health care is a close second, with an end of period total of 16.3 million. In terms of increments, health care’s growth of 6.3 million jobs tops the list and the government’s addition of 4.1 million comes in second. These two increments combined produced almost 40 percent of the total net incremental employment in the economy since 1990.

"Tradable" goods and services are those that can feasibly be provided from afar.  For example, pipe is tradable, but installing pipe in your house is not; x-rays can be read by experts thousands of miles away, but massage therapy is strictly local.  What does it mean that the US has created almost no net jobs in tradable sectors since 1990?  Nothing good for America.  It means we are not increasing our ability to export goods and services, which conventional trade theory assumes--and requires to prove mutual benefit to both trading nations.  There is no economic reason for any company to want to create tradable sector jobs in America so long as US labor rates continue to be higher than in Chindia and there are labor surpluses in both places. Under current policies, we should be expecting continuing stagnation in all tradable sectors of the US economy for a long, long time to come.

What makes this even worse for ordinary Americans is that non-tradable sectors like government and health care services have continued to grow and to outgrow the ability of the population at large and taxpayers to pay for them. The political attack on the revenues of these two sectors is a natural reaction to that growing reality. That is regrettable because we can't shrink our way to greatness. Instead, we should be doing whatever it takes to achieve full domestic employment and balanced trade--even if that means balancing trade at a lower level. Neither the national Dems nor GOP seem even remotely interested in doing that. They are ignoring the ugly facts, sticking with ideology, and vying for the right to lead America's long painful retreat from greatness.

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