When Free Trade Comes at a High Price

This story on Marketwatch’s site by John Dvorak got my attention: it turns out that Paul Samuelson, 89-year-old Nobel Prize winner for economics, says that free trade isn’t necessarily a great idea when it comes to things like offshoring work to places like India. As you might expect, this opinion didn’t go unnoticed over in Delhi. 


I’m one of those people who typically believe that free trade is good for all involved, as long as a) it’s truly free, and b) it’s a level playing field. However, I can understand that there’s this sense that the low-wage countries like China have a huge advantage when it comes to the sheer cost of human capital compared to industrialized nations like the U.S. and other western countries which may outweigh any short-term benefit gained from the lower prices that result from the lower labor costs.

I can help but think, though, that we sometimes just end up screwing ourselves. After all, it’s not China’s or India’s fault that the savings rate here in America is at an all-time low at the same time that government deficit spending is at an all-time high. It’s also not their fault that American consumers are infatuated with buying everything in sight – this article in the Onion is clearly parody, but there is of course an element of truth to it in that we here in America buy completely useless crap. I mean, we even have television channels here that are devoted entirely to shopping. That position is simply untenable – the American consumer cannot indefinitely be the consumer of last resort for the rest of the planet. At some point, something has to give, and the way things are going, it’s not going to be the Chinese or Indian economies.

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