Isolationists, both on the right and the left (although I am not sure if the nutjobs that protest at every G-8 meeting can actually read) are encouraged to read this op-ed piece by Robert Samuelson in the Washington Post, A Villian to Our Rescue.
"It's our versatile villain. Globalization has served as a whipping boy for politicians of both parties and legions of pundits. We blame it for all manner of grievances: lost jobs, greater inequality, shoddy goods. But take this quiz as a reality check. What explains the resilience of the U.S. economy in the face of the deepening housing collapse? (a) Ben Bernanke's deft management of the Federal Reserve; (b) the tireless spending of consumers; (c) low inflation; or (d) foreign trade.
The best answer is (d)."
"The trade deficit has been rising for so long that people forget that it can also fall. Well, it has -- to good effect. Through August, the deficit in 2007 was $472 billion, down $46 billion (9 percent) from the same period in 2006. In the second quarter, the U.S. economy expanded at an annual rate of 3.8 percent, even though housing subtracted 0.6 percentage points from growth. But the improved trade balance added 1.3 percentage points, notes economist Edward Yardeni.
Contrary to popular opinion, the trade balance (deficit or surplus) barely affects total U.S. employment over long periods. Domestic job creation and destruction ultimately overwhelm trade's effects. From 1991 to 2006, the trade deficit rose from $31 billion to $759 billion. In the same period, payroll jobs increased by 28 million and the unemployment rate fell from 6.8 percent to 4.6 percent."
Read the rest here.
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