A few nights ago, I heard the hosts of one of America's eminent cable TV news programs blame the country's mounting job losses on global trade and investment. I've been hearing this argument a lot lately from politicians, as well as media pundits. Supposedly we're losing jobs because American companies are doing more and more of their production outside the United States, not justmanufacturing but also increasingly services, including a lot of software engineering in places like India where people are happy to work for a fraction of what Americans earn.
So the way to create more jobs here in America is to make it harder for American companies to relocate jobs abroad. The stunning simplicity of this argument is matched only by its utter ridiculousness. The number of jobs in America at any given time has nothing to do with how open we are to trade or global investment. It depends on the total level of demand in the American economy.
During the booming 1990s, American companies shifted millions of jobs overseas but 21 million new jobs were created here anyway. That's because American companies were also hiring millions of Americans, as were foreign-owned companies. As the American economy expanded, the demand for workers soared. Butfor almost three years now the American economy has been going nowhere, and thedemand for workers has been dropping. Much of the rest of the world is in the same sinking boat. Hopefully with another interest rate cut by the Fed, an appropriate fiscal stimulus and a lower dollar, the American economy will rebound and in six months or maybe 12 or 18 employment will start growing again.
You see, there's not a fixed number of jobs parceled out between America and the rest of the world. It's not as if they get them or we get them. If the world economy is expanding and demand is growing, we get more jobs and they do,too. And the more productive we are, the better educated we are, the higher thequality of our research universities, the better our infrastructure, the more likely it is that the jobs we get will be well-paying ones. The danger right now is that this lousy economy causes us to blame global tradeand investment. The last time this happened in a big way was 1930 with the result that America tried to cut itself off from the global economy. And that only prolonged the economic crisis and helped turn it into the Depression. Let's not make the same mistake again.
