Joseph Weisenthal is crushed that Jagdish Bhagwati doesn’t appear on Who’s Dated Who?, while Amartya Sen has an entry. I think Mr. Weisenthal is looking for this page.

Personally, I’ll stay with the family tree.

The US global trade deficit topped $800billion last year. Even so, the share of this deficit accounted for by East Asia, including China, in the 10 years to 2006 dropped significantly, from 70 per cent to 46 per cent. Meanwhile, the US trade deficit with the rest of the world has ballooned. Over the past decade, it grew by $244billion with East Asia but by $391billion with the rest of the world. Although China needs to apply fairer trading and currency policies, it is being blamed by US lawmakers, unions and manufacturers for some problems that it did not cause and cannot fix.

Michael Richardson also warns that a US-China trade war would cause significant collateral damage to many countries in the Asia-Pacific.

UPDATE: And to keep those numbers in perspective, see Steve Waldman in the comments section. Oil prices are a crucial element of the story.

Congressional populists and think tank economists alike want the administration to push China to revalue the renminbi. Clive Crook dissents:

So much is wrong with this approach that it is hard to know where to start. To begin with, an aggressive posture is unlikely to force China to change. The best argument for a moderate appreciation of the renminbi is that it would serve China’s interests. If China’s leaders are not persuaded of that, intemperate foreign demands are unlikely to change their minds.

Put that aside, though, and suppose that China did capitulate and let the renminbi appreciate briskly. What would that do to America’s current account deficit? The answer is: not much…

[A] meaningful improvement in the US current account deficit will require higher private saving and a smaller budget deficit at home – variables that, unlike China’s currency policy, are under the control of the US Congress. Why then give so much greater emphasis to what China needs to do? Perhaps the China-bashers think that Beijing is more susceptible to US threats than Congress is to elementary economics. Come to think of it, that might be a close call.

Full column in the FT (subscription required).

Congressional populists and think tank economists alike want the administration to push China to revalue the renminbi. Clive Crook dissents:

So much is wrong with this approach that it is hard to know where to start. To begin with, an aggressive posture is unlikely to force China to change. The best argument for a moderate appreciation of the renminbi is that it would serve China’s interests. If China’s leaders are not persuaded of that, intemperate foreign demands are unlikely to change their minds.

Put that aside, though, and suppose that China did capitulate and let the renminbi appreciate briskly. What would that do to America’s current account deficit? The answer is: not much…

[A] meaningful improvement in the US current account deficit will require higher private saving and a smaller budget deficit at home – variables that, unlike China’s currency policy, are under the control of the US Congress. Why then give so much greater emphasis to what China needs to do? Perhaps the China-bashers think that Beijing is more susceptible to US threats than Congress is to elementary economics. Come to think of it, that might be a close call.

Full column in the FT (subscription required).

Did the IT surge cause the 1990s productivity boom?

The only problem is, the explanation doesn’t work, according to John Van Reenen at the London School of Economics. … He said that the prices of information technology fell in Europe, too. And Europeans bought information technology. But they had no productivity miracle.

To explain the experience in the United States, one would have to believe that Americans have some better way of translating the new technology into productivity than other countries. And that is precisely what Professor Van Reenen’s research suggests…

But that is, of course, the paradox of the American position. We hate experiencing major adjustments … that force people to look for new jobs. That experience has made many skeptical about the future of the United States in the world economy. Yet the evidence seems to show that for all our dissatisfaction, we are the most flexible economy around and may be best poised to take advantage of the coming changes on a global scale precisely because we are so good at adjusting.

From the NYT via Mark Thoma, who adds:

I agree that the disutility of “experiencing major adjustments” needs to be considered and minimized to avoid the rise of protectionist sentiment. But an issue that isn’t mentioned, the distribution of the gains from trade and from technologically induced structural change, is also part of the political forces driving the opposition to trade liberalization. If faster response to change means that losers from the adjustment process are churned out more quickly, the politics will continue to build against globalization.

Joe Stiglitz has a few questions for Robert Zoellick:

Presidential appointments to senior posts in America’s government are subject to open hearings. Regardless of whether the old boy system is preserved – but especially if it is – the Bank’s Board should likewise conduct open hearings on Bush’s nominee to succeed Wolfowitz. Here are some of the questions – with some hints at right and wrong answers – that it should ask any proposed candidate for the Bank’s presidency, including Bush’s nominee, Robert Zoellick:

Do you believe that the president of the World Bank should put the interests of developing countries first? Will you press for Europe and America to eliminate their agricultural subsidies? Will you advocate a development round that emphasizes liberalization of labor markets more than capital markets, elimination of non-tariff barriers that keep developing countries’ goods out of advanced industrial countries, and abolition of so-called “escalating tariffs,” which impede development? Will you be open to research even when that research shows that policies of the advanced industrial countries may, at least in some circumstances, not be in the interests of developing countries?…

The old boy system of choosing the head of the World Bank must go. It has done enough damage. But if the advanced industrial countries that control the Bank refuse to stand by their principles, at least they should give a nod to greater transparency. The world should know what it is getting. Open hearings would be a step in the right direction.

Joe Stiglitz has a few questions for Robert Zoellick:

Presidential appointments to senior posts in America’s government are subject to open hearings. Regardless of whether the old boy system is preserved – but especially if it is – the Bank’s Board should likewise conduct open hearings on Bush’s nominee to succeed Wolfowitz. Here are some of the questions – with some hints at right and wrong answers – that it should ask any proposed candidate for the Bank’s presidency, including Bush’s nominee, Robert Zoellick:

Do you believe that the president of the World Bank should put the interests of developing countries first? Will you press for Europe and America to eliminate their agricultural subsidies? Will you advocate a development round that emphasizes liberalization of labor markets more than capital markets, elimination of non-tariff barriers that keep developing countries’ goods out of advanced industrial countries, and abolition of so-called “escalating tariffs,” which impede development? Will you be open to research even when that research shows that policies of the advanced industrial countries may, at least in some circumstances, not be in the interests of developing countries?…

The old boy system of choosing the head of the World Bank must go. It has done enough damage. But if the advanced industrial countries that control the Bank refuse to stand by their principles, at least they should give a nod to greater transparency. The world should know what it is getting. Open hearings would be a step in the right direction.

Dani Rodrik explains globalization anxiety:

There is plenty of evidence that suggests that people are concerned about globalization not (just) because their pocketbooks are adversely affected but because they do not think its outcomes are right or fair. Issues of labor rights, environment, and pharma patents excite people because of the sense that the rules are not right. Economists may struggle with the term, but “fairness” in trade does resonate with most others. People do not seem to mind that technological progress makes the Sergey Brins and Bill Gates’s of the world multi-billionaires—because this kind of inequality seems somehow to fit with people’s moral code of what is acceptable. The inequality you get when a corporation fires a long-term employee to employ an (almost) equally productive Chinese at one-tenth the wage is viewed differently. It is not just about inequality, but also about procedural fairness.

If people oppose greater economic integration not primarily out of concern for the economic and social costs of labor market churn, but rather because they think there is something morally wrong with firing an American employee to hire a foreigner at a lower wage, then I have little sympathy for them. What’s procedurally unjust in (bilateral) employment at will? And why does crossing a national border bring greater scrutiny?

If downsizing and income inequality are tolerated at home, but outsourcing and foreign investment are met with hostility, then “people’s moral code of what is acceptable” strikes me as insufficiently cosmopolitan.

Is Rodrik merely describing the emotions underpinning globalization anxiety, or is he defending the American nation as the relevant moral community? He’s previously said he believes “cosmopolitan considerations should enter our calculus when the gains abroad (or to foreign nationals) are sufficiently large.” We know the gains are large in China.

In considering technological-induced inequality versus outsourcing-induced inequality, I think cosmopolitan considerations are sufficient to demand consistency between the two. If so, then heeding calls to “tinker with the rules of globalization” in response to this brand of public anxiety would amount to yielding to an ignoble instinct.

Having only completed my exams on Wednesday, I haven’t had time to read many papers in the NBER’s latest batch of releases, but here are some abstracts that caught my eye:

NYU’s Jan De Loecker says that previous studies have overestimated the productivity impact of trade liberalization by using sales data as a proxy for output. He models demand explicitly and finds a productivity impact that, while still positive, is smaller than the typical estimates. Ungated pdf.

Torsten Persson & Guido Tabellini estimate the impact of political transitions on growth using semiparametric techniques and are more pessimistic about democratization than other studies. “In particular, we find an average negative effect on growth of leaving democracy on the order of -2 percentage points implying effects on income per capita as large as 45 percent over the 1960-2000 panel.” Ungated pdf.

Jiandong Ju & Shang-Jin Wei: “While financial globalization always improves the welfare of a developed country with a good financial system, its effect is ambiguous for a developing country with an inefficient financial sector/poor corporate governance. However, the net effect for a developing country is more likely to be positive, the stronger its property rights protection. This is consistent with the observation that developed countries are often more enthusiastic about capital account liberalization around the world than many developing countries.” NBER W13148.

Paul R. Bergin, Robert C. Feenstra & Gordon H. Hanson develop a stochastic model of outsourcing to explain fluctuations in value added for outsourcing industries in Mexico. Ungated pdf.

For more on the topic of compensating globalization’s losers, here’s Paul Krugman:

In 1995 I also believed that the effects of trade on inequality would eventually hit a limit, because at a certain point advanced economies would run out of labour-intensive industries to lose – more formally, that we’d reach a point of complete specialisation, beyond which further growth in trade would have no further effects on wages. What has happened instead is that the limit keeps being pushed out, as trade creates “new” labour-intensive industries through the fragmentation of production…

What all this comes down to is that it’s no longer safe to assert, as we could a dozen years ago, that the effects of trade on income distribution in wealthy countries are fairly minor. There’s now a good case that they are quite big, and getting bigger.

This doesn’t mean that I’m endorsing protectionism. It does mean that free-traders need better answers to the anxieties of those who are likely to end up on the losing side from globalisation.

Full column.

This is a hot topic in the policy world, so if you don’t yet have a dissertation proposal, you might consider it…