Paul Krugman says it may now be the case that international trade reduces the incomes of most Americans, even as it increases average incomes. It's interesting to observe, rhetorically, how much work "most" can do. The difference between some policy hurting five percent of the population and it hurting 20 percent is, objectively, much larger than the difference between a policy that's bad for 49 percent and one that's bad for 51 percent. But the former policies are both policies that "help most people" where in the latter switch we've gone from one that's "good for most Americans" to one that's "bad for most Americans."

Be that as it may, Krugman says the appropriate response is a strengthened social safety net. Tyler Cowen thinks outside the box:

Is not the appropriate policy recommendation to create a budget surplus, create a U.S.A. Sovereign Wealth Fund, and invest the resulting capital in the corporate winners from this entire process? In other words, we would be giving the trade-losers a more direct share in capital. Since output is rising and wages are falling, the return to capital must be rising; let's make money off of that.



That sounds like a reasonable enough idea to me. Back in the 1990s when it looked like we were looking at budget surpluses, there was some sentiment that the nominal Social Security surplus should be pulled out of exclusive investment in federal bonds and, in effect, turned into a Sovereign Wealth Fund. Mainstream people seemed to feel this was a very bad idea, but it seemed reasonable to me at the time and in many respects only seems more reasonable today. You would probably want to put a cap on how much of any particular firm the government was allowed to own, or else split the money up into several different Funds governed in different ways but the technocratic issues here seem like problems that should be solved rather than objections that should be deemed decisive.

This sort of thing aside, there's also simply the prospect of greater public investment in public infrastructure -- big, capital intensive projects that everyone can use.

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