What Really Matters: The Long Run (II)

If you find this hard to believe, you can look west or east. In Japan, efforts to “protect” workers from international trade resulted in economic stagnation and have depressed real income growth over the past twenty years. In Europe, similar efforts to “preserve” the jobs of existing workers have resulted in higher , not lower, unemployment because firms are unwilling to hire people that they cannot fire later.

It is true that the pattern of job losses and gains in a given year is altered during an economic recession, such as the latest one. In particular, during the early stages of a recession, additional people lose their jobs in a given week and fewer people find a job each week, with the result being higher unemployment in the short run.

But international trade is not the cause of recessions in the United States (although an economic recession can be made worse by restrictions on international trade, as it was in the early 1930s). On the contrary, international trade is an important source of economic prosperity. If you are still wondering, simply look back at Figure 3–1. The lessons of history and of economics are clear: Trade creates wealth , and that is true whether the trade is interpersonal, interstate, or international.

The reality is that labor outsourcing is simply part of a worldwide trend toward increased international trade in both goods and services. As international trade expands—assuming that politicians and bureaucrats allow it to expand—the result will be higher rates of growth and higher levels of income in America and elsewhere. American workers will continue to enjoy the fruits of that growth, just as they always have.