MDRC in the News

The Case for Smart Protectionism

The Atlantic


…..Most people think of protectionism as externally focused—for example, protecting companies from foreign competition. But what the U.S. middle class really needs is more domestic protectionism from homeland adversaries, such as geographic inequality, income inequality, corporate monopolies, and rising health-care costs…..

…..There are other ways to practice smart protectionism at home. In a column for the Washington Post, Fareed Zakaria has argued for what he calls “open and armed” economics—trade markets open to the world and labor markets armed to protect the vulnerable. There are some obvious solutions that even have tepid Republican support, such as expanding the Earned Income Tax Credit…..

…..And yet, perhaps slightly more effort to remediate would be good. Zakaria surfaced research by Edward Alden and Rebecca Strauss and by a team at Harvard Business School that found that the U.S. spends just 0.1 percent of GDP on retraining, compared to 0.8 percent in Germany and 2.3 percent in Denmark. Job training has a terrible reputation in the U.S., where underfunding and poor coordination between trainers and employers has led to disappointing results. Many workers don’t have time for training, because U.S. welfare policy pushes them to find work immediately, even if it doesn’t lead to a more prosperous career. But several successful training programs, like WorkAdvance in New York City, suggest that in addition to income transfers, the government could also take a more active role in helping displaced workers…..

…..Future presidents will govern a world sundered by globalization and technology whether or not they are fond of these forces. Of the 27 million net new jobs created between 1990 and 2008, 99 percent occurred in so-called “nontradable” occupations, which is work that must be done locally, such as a treating patients, teaching students, or cutting people’s hair. Multinational businesses have become geniuses at moving their production around the world toward new markets and cheap labor, which often means away from the United States. Companies like GE, Siemens, and Coca Cola will continue to buy robots and hire abroad no matter what the U.S.’s technology and trade policies.

Still, the U.S. worker deserves to be protected. If it’s politically useful to call such a policy protectionism, so be it. Future presidents can welcome the future, because the benefits will be broad, while protecting the vulnerable, because their losses will be acute.

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