Page 218 - Global Political Economy_Understanding The International Economic Order

THE TRADI NG SYS TEM
industries require more highly skilled workers than in the past, and
this means that the demand for unskilled workers has declined dra-
matically throughout the American economy. The semiskilled assem-
bly-line worker in Detroit or Cleveland who once commanded a high
wage in the automobile and other mass-production industries is in-
deed becoming superfluous in the information economy.
British economist Adrian Wood disagrees with this consensus
among economists and points out that competition from low-wage
countries has stimulated labor-saving technological change in the
United States and thereby reduced the demand for low-wage labor. 15
Although, viewed from this perspective, some of the effects on wages
attributed to technological changes can be attributed to trade compe-
tition from low-wage economies, it is highly doubtful that imports
from low-wage economies are as significant as opponents of global-
ization have claimed. It is certain that trade protection is not a wise
solution to the problems ofstagnant wages, income inequality, and
job insecurity. The solution lies in job-training programs and other
programs to aid adjustment to rapidly changing economic and tech-
nological developments.
In the 1990s the issue oftrade and unemployment became impor-
tant in both Western Europe and the United States. In Europe, a high
rate oflong-term or structural unemployment had emerged in the
1970s, particularly in southern Europe, France, and even Germany.
The overall rate ofunemployment in Western Europe in the 1990s
had reached approximately 10 to 12 percent, more than twice that of
the United States. In some countries the rate climbed over 20 percent!
Not surprisingly, it became almost an article offaith among business,
political, and intellectual leaders that imports from low-wage econo-
mies were responsible for this situation. In the United States, the issue
became inflamed during the debate over the ratification ofthe North
American Free Trade Agreement (NAFTA). Some political leaders,
especially Perot and Buchanan, along with organized labor, pro-
claimed that the agreement would result in the loss ofmillions of
American jobs. The Clinton Administration, after considerable vacil-
lation, maintained that the agreement would create “jobs, jobs, jobs.”
Both positions were wrong.
A country’s unemployment rate is determined principally by its
macroeconomic policies. Through fiscal and monetary policies, the
developed countries in Western Europe and the United States can,

15
Adrian Wood, North-South Trade, Employment, and Inequality: Changing For-
tunes in a Skill-Driven World (Oxford: Clarendon Press, 1994).
205