Monday, October 31, 2016

[NJFAC] Inequality As Policy: Selective Trade Protectionism Favors Higher Earners

Inequality As Policy: Selective Trade Protectionism Favors Higher Earners

Globalization and technology are routinely cited as drivers of   inequality over the last four decades. While the relative importance of   these causes is disputed, both are often viewed as natural and   inevitable products of the working of the economy, rather than as the   outcomes of deliberate policy. In fact, both the course of globalization   and the distribution of rewards from technological innovation are very   much the result of policy. Insofar as they have led to greater   inequality, this has been the result of conscious policy choices.  ....  Instead of only putting manufacturing workers into competition with   lower-paid workers in other countries, our trade deals could have been   crafted to subject doctors, dentists, lawyers and other highly-paid   professionals to international competition. As it stands, almost nothing   has been done to remove the protectionist barriers that allow   highly-educated professionals in the United States to earn far more than   their counterparts in other wealthy countries.    This is clearest in the case of doctors. For the most part, it is impossible for   foreign-trained physicians to practice in the United States unless they   have completed a residency program in the United States. The number of   residency slots, in turn, is strictly limited, as is the number of slots   open for foreign medical students. While this is a quite blatantly   protectionist restriction, it has persisted largely unquestioned through   a long process of trade liberalization that has radically reduced or   eliminated most of the barriers on trade in goods. The result is that   doctors in the United States earn an average of more than $250,000 a   year, more than twice as much as their counterparts in other wealthy   countries. This costs the country roughly $100 billion a year in higher   medical bills compared to a situation in which U.S. doctors received the   same pay as doctors elsewhere. Economists, including trade economists,   have largely chosen to ignore the barriers that sustain high   professional pay at enormous economic cost.    ....  The pattern of gains from technology has been even more directly   determined by policy than is the case with gains from trade. There has   been a considerable strengthening and lengthening of patent and   copyright and related protections over the last four decades. The laws   have been changed to extend patents to new areas such as life forms,   business methods, and software. Copyright duration has been extended   from 55 years to 95 years. Perhaps even more important, the laws have   become much more friendly to holders of these property claims to tilt   legal proceedings in their favor, with courts becoming more   patent-friendly and penalties for violations becoming harsher. And, the   United States has placed stronger intellectual property (IP) rules at   center of every trade agreement negotiated in the last quarter century.    In this context, it would hardly be surprising if the development of   "technology" was causing an upward redistribution of income. The people   in a position to profit from stronger IP rules are almost exclusively   the highly educated and those at the top end of the income distribution.   It is almost definitional that stronger IP rules will result in an   upward redistribution of income.  ....  --   June Zaccone  National Jobs for All Coalition