Word: baumol
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Near the middle of a three-hour round table on globalization that touched on innovation in medieval China, the impact of Sept. 11 on graduate engineering programs and India's market for software, New York University professor WILLIAM BAUMOL offered a much needed reality check: "The fundamental issue that we're losing in this discussion is, Is outsourcing bad for America? Is globalization good or bad for America?" Baumol, along with his fellow panelists on TIME's Board of Economists--RON HIRA of the Rochester Institute of Technology, CATHERINE MANN of the Institute for International Economics and MATTHEW SLAUGHTER...
...BAUMOL: As far as innovations quickly crossing borders, that's essential for us all, because that's the way of eliminating obselescence quickly. But I worry about government support of basic research, reduction in private spending...
...WILLIAM BAUMOL: There is a very clear possibility that the common man and woman's view is right: that [economic] catch-up in China may lead to a lower level and rate of growth of GDP per capita in the U.S. I am not advocating tariffs. We are so much richer than China that it may be desirable for us to make a modest sacrifice to raise their standards of living. But better still is for us to take measures that will be advantageous both to China and to us. It is obscene for us to ignore the effects...
...BAUMOL: My worry is that there's the wrong sense of urgency, one that will make for pressures for impediments to trade instead of dealing with the problems of the sort that you were discussing...
...BAUMOL: Trade policy is not the way to deal with unemployment. But you are right, the bargaining power of U.S. workers and the U.S. worker's wage is very heavily affected by globalization. Paul Samuelson has just written on the subject. He said if you believe this doesn't affect American wages, you also believe in the tooth fairy...