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These trends are unlikely to change, though Africa may eventually replace Asia as a
labor-intensive competitor. Outside manufacturing, in the services industries where trade and
new competition emerge from communications technology rather than through liberalization of
trade policies, ‘resistance’ seems even less feasible.
Second, the United States seems able to provide employment and high living standards as the
world and the American economy change. North Carolina’s experience, as Governor Easley
suggests, shows that it is quite possible for a state to evolve away from reliance on one set of
industries and adopt a new set.
On both grounds, we should be sparing with our regrets for a vanishing past. I personally believe
that the motives which led President Roosevelt to begin the trade liberalization project in the
1930s - an effort by the major economies to spark growth through exports and raise living
standards by encouraging competition; a hope to reduce the chances of war and economic crisis
- were valid then and remain so. Economic theory has recognized for many decades that the
alternative approach - using high trade barriers to guarantee local production - does not produce
higher employment and comes with a national economic cost. Practical experience, above all in
the textile industry, seems to show that even quite high trade barriers are now ineffective. And to
lament technological advance and logistical improvements is pointless.
But third, change and globalization come with human stresses that are sometimes very powerful.
And neither American government policies nor traditional concepts of trade unionism have been
able to ease them very significantly.
Over the past half-century, the United States has had a social-protection system quite different
from Europe’s. Businesses were the main providers of health insurance and pensions, while
government stepped in principally to fill the gaps in the system with special programs (Medicaid
and Medicare, along with Social Security) for the very poor and the elderly. This system worked
as long as companies could afford to provide permanent employment and high benefits without
incurring crippling expenses, and as long as workers expected to spend most of their careers at
a single company. In such an environment, a middle-class worker could envision a relatively
stable income and the ability to plan for retirement and for education expenses as children
mature.
The system always had a grave weakness: in contrast to Europe, the lack of a national health
insurance system meant that job loss is not only a traumatic experience in its own right, but
comes with extraordinary financial risk. The anxiety this produces has been magnified in recent
years by the fact that companies are pulling back from their social roles. This reflects intense
competition from abroad, not only in factories but in some services industries; and a changing
career pattern, in which workers now are more likely to advance in their careers by moves
among companies than to expect a long career at a single firm.
Thus our social contract has become badly outdated. The Kannapolis experience, though unique
in some ways, shows that individuals have very good reason for anxiety over job loss and its
effects - even if states and communities are reasonably successful in managing transitions.
Observers of American political debate will easily see the consequent public anxiety reflected in
Republican alarm over immigration, and in the anxiety of many Democrats over trade competition.
My hope is that this will lead to a reassessment of domestic policies, to provide a new social
contract capable of filling the gaps rapidly opening in the old. Taking the 2002 Trade Adjustment
Assistance law as a foundation, Congress needs to compensate by guaranteeing health
insurance for all workers, at minimum during periods after job loss; and adding to that a
guarantee of pension portability, and some social insurance programs to support college tuition
and mortgage payments.
Trade unions too may be able to think about new options. Their traditional role, negotiating with
large employers on behalf of a pool of long-term employees, has evidently become less relevant
than it was a few decades ago, now that workers move more frequently among companies, and