The Davos Man

Globalization's defenders reply by saying, Relax: it will never happen. This counterblast (much of it in a paper written by Columbia University's Jagdish Bhagwati, today's unchallenged intellectual champion of free trade) has two parts. First, free trade's defenders say, it is unrealistic to assume that China or India will suddenly develop a monstrous capacity in high-end, high-technology innovation. "The oft repeated argument that India and China will quickly educate 300 million of their citizens to acquire sophisticated and complex skills," write Bhagwati and his colleagues, "borders on the ludicrous. The educational sectors in those countries face enormous difficulties." This rings true. For the past few months, there have been reports of skilled-labor shortages in the most economically advanced areas of China. Second, free traders argue that even if China and India become advanced economies almost overnight, they will look just like Germany and Japan. And nobody--well, nobody you would trust--argues that trade between rich economies doesn't benefit everyone.

Such abstract arguments do not address the real concerns of American workers whose jobs have moved overseas. But the true nature of their plight might be easier to understand if leaders were more honest about what lurks behind the globalization-makes-you-poor argument. In 1945, when almost every potentially rich economy apart from the U.S. lay amid the rubble of war, the U.S. accounted for about 50% of world economic output, and U.S. wages were much higher than those elsewhere. But other nations caught up--first Western Europe, then Japan, then Southeast Asia, then Eastern Europe, now India and China. The U.S. share of the world economy is now only about 22%, and wages elsewhere are closer to those of Americans. Why anyone should think this process is a source of net human unhappiness beats me, but then--may as well admit it--I'm a Davos man.