Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization Author(s): Paul A. Samuelson Source: The Journal of Economic Perspectives, Vol. 18, No. 3 (Summer, 2004), pp. 135-146 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/3216810 Accessed: 10/08/2009 09:34
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18, Journal of Economic Perspectives-Volume Number3-Summer 2004-Pages 135-146
Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization
Paul A. Samuelson
ost noneconomists are fearful when an emerging China or India, helped by their still low real wage rates, outsourcingand miracle export-led developments, cause layoffs from good American jobs. This is a hot issue now, and in the coming decade, it will not go away. Prominent and competent mainstream economists enter into the debate to educate and correct warm-hearted protestors who are against globalization. Here is a fair paraphrase of the argumentation that has been used recently by Alan Greenspan,JagdishBhagwati, Gregory Mankiw, Douglas Irwin and economistsJohn or Jane Doe spread widely throughout academia. Yes, good jobs may be lost here in the short run. But still total U.S. net laws of comparative national product must, by the economic advantage,be raisedin the long run (and in China, too). The gains of the winners from free trade, properly measured, work out to exceed the losses of the losers. Thisis not by mysterious fuzzy magic, but rather comes from a sharing of the trade-induced rise in total global vectors of the goods and services that people in a democracywant. Never forget to tally the real gains of consumers alongside admitted possible losses of some producers in this working out of what Schumpeter called "creative capitalist destruction." Correct economic law recognizes that someAmerican groups can be hurt by dynamic free trade. But correct economic law vindicates the word "creative"destruction by its proof [sic] that the gains of the American winners are big enough to more than compensate the losers.
and InstituteProfessor * Paul A. Samuelsonis Professor Economics Emeritus,Massachuof Massachusetts. settsInstituteof Technology, Cambridge,
136 Journal ofEconomic Perspectives
The last paragraph can be only an innuendo. For it is dead wrong about necessary surplus of winnings over losings-as I proved in my "Little Nobel Lecture of 1972" (1972b) and elsewhere in references here cited (see also Johnson and Stafford, 1993; Gomory and Baumol, 2000). The present paper provides explication of the popular polemical untruth. Here Ricardian equilibrium...