Paul Krugman, Nobel Laureate in international trade and New York Times op-ed snarker, has finally admitted what many of his already knew: globalization hurt middle class workers more than they thought it would.
Globalization has been a hot topic in business schools since the 1980s, particularly since Bill Clinton favored the North American Free Trade Agreement. NAFTA was opposed by Presidential candidate Ross Perot who argued:
We have got to stop sending jobs overseas. It’s pretty simple: If you’re paying $12, $13, $14 an hour for factory workers and you can move your factory south of the border, pay a dollar an hour for labor, … have no health care—that’s the most expensive single element in making a car—have no environmental controls, no pollution controls and no retirement, and you don’t care about anything but making money, there will be a giant sucking sound going south. … when [Mexico’s] jobs come up from a dollar an hour to six dollars an hour, and ours go down to six dollars an hour, and then it’s leveled again. But in the meantime, you’ve wrecked the country with these kinds of deal
In addition to losing middle-class jobs to Mexico and subsequent outsourcing of jobs to China, we have seen a perpetual decline in Money Velocity (GDP/Money Stock) since 1995.
The GINI ratio of US income inequality took a jump-up under Clinton and NAFTA. Although financialization contributed to income inequality as well.
Yes, globalization has helped suck jobs and wage growth out of the USA contributing to a decline in money velocity. So when snarky NY Times op-ed writer Paul Krugman admits that globalization is harmful to American workers (and money velocity), we better rethink what we are teaching in business schools.
Including over-reliance on The Federal Reserve to bail-out flawed Federal policies.