Industrialization and Its Discontents

When the United States talks about China, you hear a lot of complaints about how we're losing our "good jobs"--our manufacturing base--to countries abroad.  A lot of the people I've spoken with here so far have pointed out that this is silly--that comparative advantage is real, and that shipping lower-skilled jobs over here results in mutually beneficial gains from trade.

All true.  And yet what you also hear quite a bit now is the same sort of anxiety about China losing its jobs.  One person told us a story about the Chinese premier talking to Obama.  "Mr President," he said, "you say that the economy needs to create 8 million jobs in order to bring America back to prosperity.  I need to create 24 million jobs every year just to absorb the college graduates and the rural migration."

I have no idea if the story is true, but the point is certainly sound:  China has an enormous population that needs to be absorbed into the labor market each year.  So perhaps its natural that you're starting to hear exactly the same trade worries that Americans voice:  textile jobs going to Bangladesh, assembly work heading across the border to Vietnam.  Hell, in Vietnam, they spend a surprising amount of time worrying about the Cambodians taking their low-end manufacturing jobs.

Yet in both places, the worry is silly--at least on an aggregate level.  For an individual with a job in a textile factory, there may indeed be displacement.  Yet over the centuries, our economy has "lost" millions of jobs.  Weavers no longer ply their trade in front of a hand loom, threshers don't stride through the golden fields of wheat with their scythes, and wheelwrights and blacksmiths have lost their livelihoods to the horseless carriage.  Yet unemployment has not shot up to 100%; over time, we've found jobs to replace all of these specialties.

Perhaps someone will protest that we lost those jobs to technology, rather than trade, but what's the difference between competing with a Chinese laborer, and competing with a machine?  Either one can cause distressing temporary dislocation, but both of them make us more productive, boosting our lifestyle (and, thankfully, the lifestyle of the Chinese laborer).

After a couple of decades of urging the Americans to overlook their anti-trade biases, the Chinese are going to have to adjust to the same discomforts.