If we take gains from comparative advantage out of the picture (and it appears Dr. Krugman has, given his description of "wage arbitrage" above), it seems the net long-term impact of globalization is that unless we develop a replacement industry that pays good wages -- wages equal to those paid for the jobs that were globalized -- consumer demand will fall, and our economy will shrink, and even more jobs will be lost.And the growth of international trade in manufactured goods needs, perhaps, to be seen as something more special and less generic than often imagined. It’s not that there’s some inexorable force leading to stuff rattling around the globe; it’s that the combination of containerization and trade liberalization has made it possible to break up the value chain to take advantage of international wage differences.
Thing is - we need things like unions and a growing economy to keep wages high.
We perhaps won't see in the short run a net reduction in consumption (stuff made abroad is cheaper -- and plus all the consumer credit that (was) available), but in the long run.... good thing we'll all be dead.
