Naked Economics by Wheelan, Charles (spanish books to read .txt) 📕

they do best and then trading. People in Seattle should not grow their own rice. Instead, they should build airplanes (Boeing), write software (Microsoft), and sell books (Amazon)—and leave the rice-growing to farmers in Thailand or Indonesia. Meanwhile, those farmers can enjoy the benefits of Microsoft Word even though they do not have the technology or skills necessary to produce such software. Countries, like individuals, have different natural advantages. It does not make any more sense for Saudi Arabia to grow vegetables that it does for Tiger Woods to do his own auto repairs.

Okay, but what about countries that don’t do anything particularly well? After all, countries are poor because they are not productive. What can Bangladesh offer to the United States? A great deal, it turns out, because of a concept called comparative advantage. Workers in Bangladesh do not have to be better than American workers at producing anything for there to be gains from trade. Rather, they provide goods to us so that we can spend our time specializing at whatever we do best. Here is an example. Many engineers live in Seattle. These men and women have doctorates in mechanical engineering and probably know more about manufacturing shoes and shirts than nearly anyone in Bangladesh. So why would we buy imported shirts and shoes made by poorly educated workers in Bangladesh? Because our Seattle engineers also know how to design and manufacture commercial airplanes. Indeed, that is what they do best, meaning that making jets creates the most value for their time. Importing shirts from Bangladesh frees them up to do this, and the world is better off for it.

Productivity is what makes us rich. Specialization is what makes us productive. Trade allows us to specialize. Our Seattle engineers are more productive at making planes than they are at sewing shirts; and the textile workers in Bangladesh are more productive at making shirts and shoes than they are at whatever else they might do (or else they would not be willing to work in a textile factory). I am writing at the moment. My wife is running a software consulting firm. A wonderful woman named Clementine is looking after our children. We do not employ Clemen because she is better than we are at raising our children (though there are moments when I believe that to be true). We employ Clemen because she enables us to work during the day at the jobs we do well, and that is the best possible arrangement for our family—not to mention for Clemen, for the readers of this book, and for my wife’s clients.

Trade makes the most efficient use of the world’s scarce resources.

Trade creates losers. If trade transports the benefits of competition to the far corners of the earth, then the wreckage of creative destruction cannot be far behind. Try explaining the benefits of globalization to shoe workers in Maine who have lost jobs because their plant moved to Vietnam. (Remember, I was the speechwriter for the governor of Maine; I have tried to explain that.) Trade, like technology, can destroy jobs, particularly low-skilled jobs. If a worker in Maine earns $14 an hour for something that can be done in Vietnam for $1 an hour, then he had better be 14 times as productive. If not, a profit-maximizing firm will choose Vietnam. Poor countries lose jobs, too. Industries that have been shielded from international competition for decades, and have therefore adopted all the bad habits that come from not having to compete, can be crushed by ruthlessly efficient competition from abroad. How would you like to have been the producer of Thumbs-Up Cola in India when Coca-Cola entered the market in 1994?

In the long run, trade facilitates growth and a growing economy can absorb displaced workers. Exports rise and consumers are made richer by cheap imports; both of those things create demand for new workers elsewhere in the economy. Trade-related job losses in America tend to be small relative to the economy’s capacity to produce new jobs. One post-NAFTA study concluded that an average of 37,000 jobs per year were lost from 1990 to 1997 because of free trade with Mexico, while over the same period the economy was creating 200,000 jobs per month.5 Still, “in the long run” is one of those heartless phrases—along with “transition costs” or “short-term displacement”—that overly minimize the human pain and disruption.

Maine shoe workers are expected to pay their mortgages in the short run. The sad reality is that they may not be better off in the long run, either. Displaced workers often have a skills problem. (Far more workers are made redundant by new technology than by trade.) If an industry is concentrated in a geographic area, as they often are, laidoff workers may watch their communities and way of life fade away.

The New York Times documented the case of Newton Falls, a community in upstate New York that grew up around a paper mill that opened in 1894. A century later, that mill closed, in part because of growing foreign competition. It’s not pretty:

Since October—after a last-ditch effort to save the mill fell through—Newton Falls has edged closer to becoming a case study of doleful rural sociology: a dying town, where the few people left give mournful testament to having their community wind down like an untended clock, ticking inexorably toward a final tock.6

Yes, the economic gains from trade outweigh the losses, but the winners rarely write checks to the losers. And the losers often lose badly. What consolation is it to a Maine shoe worker that trade with Vietnam will make the country as a whole richer? He’s poorer and probably always will be. I’ve gotten those e-mails, too.

Indeed, we’re back to the same discussion about capitalism that we had at the beginning of the book and again in Chapter 8. Markets create a new, more efficient order by destroying the old one. There is nothing pleasant about that, particularly for individuals and firms equipped for