For those of us who have been fully inundated with Democratic National Convention coverage but would still like to read interesting articles about other topics, this week's edition of The New Yorker features an article on "the truth about free trade." In language that even a layman like me can grasp, John Cassidy's article explains that perhaps the outsourcing of jobs is not, as N. Gregory Mankiw says, "just a new way of doing international trade." First, the week's best cartoon:


Click here to order the cartoon.

Cassidy writes of how politicians are prone to attacking outsourcing because people worry about their jobs and possible loss of their livelihoods, and "politicians are paid to reflect these concerns." As a result, "it is left to economists to defend free trade."

The author writes about how Lou Dobbs (who some in the blogosphere are not huge fans of), often alone in his attacks on the issue, may be on to something. "While outsourcing isn't the only reason that businesses are so reluctant to hire American workers--rising productivity and a lack of faith in the recovery are others--it is certainly playing some role, a fact that most corporate executives are much more willing to admit than economists are."

After providing a walk through Economics 101, from Adam Smith and David Ricardo to Paul Samuelson and Mankiw, which explains why economists believe so strongly in free trade, even of jobs (I found this to be interesting, even if I had previously learned much of it in said class), Cassidy poses the key question that is not often enough raised: "How does the rise of potential economic superpowers like China and India benefit the United States? (italics added)

He answers this question by citing some theoretical models that economists develop--how "the winners from free trade--consumers and stockholders, say" compensate the losers (i.e. people who lose their jobs to outsourcing). In other words, it does not hurt us to lose these jobs because our economy will grow as a result of free trade and these gains can eventually be redistributed to the recently unemployed.

The problem with this model, Cassidy explains, is that it is indeed a model. Unfortunately, though it is implemented to a degree (through the federal Trade Adjustment Assistance program), but "a 2001 report by the General Accounting Office has shown that it is often ineffective, especially for older, less educated workers." What's more, some in the Bush Administration even "question the very idea of compensating the losers from trade."

(The article is not yet available online, but you can get it at any newsstand)

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In all, I found this to be an extremely interesting and highly damning report on the causes and effects of outsourcing. Although The New Yorker is an admittedly liberal publication, I'm glad to see that some in the media (in addition to Dobbs) are tackling this highly nuanced and tough issue.

If you get a chance, read it either online (if it eventually becomes available), or pick up this week's copy of the magazine. I found that reading the Cassidy article (in addition to many others in this week's edition) were a nice break from the many, many blog postings, editorials and newspaper articles I've been constantly reading about the Convention.