Joe Nocera writes about how the cold, heartless ‘neoliberals’ took over American economic policy in the 1990s and have been proven wrong by Trump.
Joe Nocera has written for the Free Press what feels like the thousandth think piece about how the cold, heartless “neoliberals” took over all of American economic policy in the 1990s and have been proven wrong thanks to Donald Trump. Nocera writes from the perspective of someone who, as a journalist in the ’90s, “covered free trade . . . as if we had been handed Holy Scripture.” Given that journalists’ coverage of religion is reliably awful, it should come as no surprise that their coverage of the economics of trade has been, too.
What Nocera reveals in the piece is that he came to his views on trade not by studying economic theory or reading economic research. Instead, he was swept up in a wave of media sentiment supporting free trade in the ’90s. So it makes perfect sense that he would be swept up in a wave of media sentiment supporting protectionism today.
His idea of free markets is not Milton Friedman, F. A. Hayek, Ludwig von Mises, or any of the people free-market supporters actually admire. He says the “personification” of “neoliberalism” was Robert Rubin, secretary of the treasury under Bill Clinton. His globalization villains are Paul Krugman and Thomas Friedman. If you’re getting your views on any topic from the likes of Thomas Friedman, it’s only natural that your views are shallow and poorly informed.
Free-market supporters can’t stand those guys, either. We aren’t basing the case for free markets on what they said. History goes back further than the 1990s, and Nocera is lighting straw men on fire in his engagement with the economics profession.
“Though most economists were at least dimly aware that globalization was causing factories to close and workers to lose their jobs, that was not something they were willing to study or even talk about,” Nocera writes. Nonsense, Don Boudreaux responds in a blog post. “I’m aware of no serious economic book featuring a defense of free trade in which the reality of job losses and factory closures is not discussed, taken seriously, and substantively addressed — often at great length,” Boudreaux writes.
There’s an entire subfield of economics literature about unemployment and how it works. The 2010 Nobel Prize in Economics was awarded to three economists who have devoted their careers to it. You’ll be hard-pressed to find an economist who doesn’t think long-term unemployment is very bad for individuals and communities. The idea that the economics profession doesn’t engage with this question is preposterous, yet it is constantly alleged by people who don’t read anything economists write.
Nocera also relies on the media narrative about the “China shock” rather than what the actual economic research on the question says. The original “China shock” paper does not even attempt to demonstrate that trade with China was bad for the economy as a whole, or even for manufacturing as a whole. It is a paper about labor-market transition in places that were affected by trade with China.
That paper was the beginning of a conversation in the economics literature that has been ongoing ever since. Scott Winship of the American Enterprise Institute did a deep dive into what that research says, summarizing it in a Substack article.
The high-end estimate of manufacturing jobs “lost” due to trade with China is 2 million over ten years. That sounds like a lot, until you consider that about 5 million U.S. workers separated from their jobs last month. Of course, if job losses are concentrated in one area and happen simultaneously, that can cause problems for that area. No economist denies this. How national economic policy can fix that is never said. Nocera makes the classic move of advocating greater government programs for job training, but we know from years of experience that such programs don’t work very well.
Nocera thinks he’s being a good journalist by emailing David Autor, one of the authors of the most famous “China shock” paper, who, you’ll be shocked to learn, thinks that the paper he cowrote is good. The smarter move would have been to email critics of that paper and its conclusions. Winship outlines several subsequent papers that have found the negative effects from exposure to Chinese imports are much smaller than Autor et al. suggest, with some even finding positive effects. Who’s right? I don’t know. It’s a live question right now among economists that is yielding lots of interesting social science. Maybe read some of it instead of casting economists as stale dogmatists.
The intellectual Nocera is paying attention to is Michael Pettis, who is a professor of finance, not economics, and routinely makes economic errors in his commentary on trade. Pettis is a self-described “old-fashioned lefty” who lives in Beijing. Nocera notes another aspect of Pettis’s appeal: “A music enthusiast, he also started a nightclub called D-22, which made him even more of a must-visit for journalists.”
I’m sure the music is lovely, especially for journalists making use of their expense accounts on trips abroad, but China’s economic model is currently falling apart, and there’s no particularly strong reason to take Pettis’s enthusiasm for it too seriously. Clyde Prestowitz, another supposed prophet that Nocera praises, made a lot of the same predictions about Japan that others now make about China. Nocera notes this without considering whether it was actually true that Japan surpassed the U.S. (it did not), or considering how Japan’s economic planning has actually turned out (it has led to three decades of stagnation).
But what about those great furniture jobs in North Carolina and auto jobs in Michigan? Nocera raises High Point, N.C., and Flint, Mich., as examples of the casualties of globalization. He also points to more general plights of the working class nationwide.
Fortunately, we don’t have to rely on caricatures from journalists about local economies and segments of the labor force. We can look at real evidence about what actually happened. Economist Jeremy Horpedahl from the University of Central Arkansas — not a hotbed of globalist elitism! — did just that in a blog post.
From 2001, when China entered the WTO, to 2024, every single state has seen real median wage growth. No exceptions. (And yes, “real” means “adjusted for inflation.”) Michigan did have the lowest real median wage growth of any state, but North Carolina’s increased by 24 percent.
Horpedahl then looks at wage growth for workers in the tenth percentile, i.e., low-wage workers. Their wages increased faster than the median workers’ wages in 44 states. Again, every state saw an increase.
What about workers who finished high school and did not go to college? Their real median wage is currently at an all-time high. With the exception of Covid, it has been increasing since about 2013.
Next, Horpedahl zooms in to the High Point and Flint metropolitan areas. For workers at the tenth percentile, wages are up 26 percent in High Point and up 40 percent in Flint. The median wage since 2001 is up 11 percent in High Point and down 16 percent in Flint.
So there is a decline in Flint, that’s real. But is it because of trade with China? Flint’s decline is famous because it is anomalous, both in how severe it has been and in how long it has persisted. As Horpedahl writes, Michael Moore’s Roger & Me came out in 1989, and there were already academic books being published in 1996 about Flint’s decline, based on research conducted from 1990 to 1992. Manufacturing employment in Flint has been declining since 1978.
The vast majority of American cities don’t look like Flint. If the government had chosen to protect industry in Flint, some other city would probably look like Flint today, for the simple reason that in any ordinal ranking of places, some places have to be near the bottom. Terminating trading relationships and forgoing national wealth based on the experience of a handful of small cities is not a good way to make policy for a continental nation with 340 million souls — especially when we know that plenty of other similarly affected small cities have been able to adjust and thrive.
Nocera is hardly the only journalist who isn’t good at economics. I wrote a whole book review last year for Law & Liberty about the problem. Journalists’ job is to see things, but economics is about the unseen, in Frederic Bastiat’s famous formulation. Without any grounding in the actual subject matter, journalists get swept up in trends without thinking too deeply about what they’re saying. Nocera, perhaps unwittingly, reveals in his Free Press article that that’s what happened to him in the ’90s, and it’s what’s happening to him again right now.