Globalization, American Wages, and Inequality

A strange argument has begun making the rounds in the globalization debate, one that asserts there is a puzzle

in American politics: economics teaches that globalization leads to national gains, yet popular opinion is am

bivalent at best about it. This puzzle even comes with a plausible-sounding explanation: globalization’s benefits are huge but diffuse (consisting of lower prices for imported goods), while its costs are small but concentrated (workers displaced by imports); hence, the gains are hard to see but the losses are all too visible.

The alleged puzzle and the fashionable-again explanation forwarded to resolve it should sound strange to

economists, as they are clearly at odds with what the most conventional theory teaches about the likely results of the rich U.S. economy integrating with a poorer global economy. While this integration is indeed “win-win” in between countries, it is pitilessly “win-lose” in terms of individual outcomes within countries. That is, the U.S. and its poorer trading partners

both end up with higher national