What's the difference between a light bulb and the American manufacturing worker?

If you think globalization hurts many workers in rich countries, you're not alone - just read this excellent column by Larry Summers. As Summers points out, the rapid globalization of the last decade has mainly helped business owners, while plenty of workers have lost out.

But, as Willem Buiter points out, this fact does not mean that U.S. trade protectionism will bring things back to the way they were. He writes:

[Protectionists] are deeply mistaken in their belief that trade restrictions/protectionism can restore the status quo ante and bring back the well-paid manufacturing jobs (and increasingly also service jobs) that were lost to foreign competition. The knowledge, skills, technology, management systems and other drivers of superior efficiency and productivity that permitted US workers to enjoy steadily rising real wages for 40 years following World War , have now been disseminated across the world. The US monopoly rents, which were shared between labour and capital, have largely disappeared. The autarkic centrally planned economies of Central and Eastern Europe and the former Soviet Union have stopped shooting themselves in the foot and have become market economies that are increasingly integrated into the global economy. On a much larger scale, the same has happened in China and India...

[G]iven the right domestic redistribution instruments, unilateral free trade can make everyone, even Larry’s morose middle, better off than they would have been with any other trade regime. They will not necessarily be better off tomorrow than they are today or were yesterday or 10 years ago. As Samuelson has pointed out, growth abroad can make a country worse off. But with free trade that country will be less worse off than with any other trade regime.

Like it or not, China and othe developing countries now part of the global economy. That means hundreds of millions of workers suddenly dumped on the labor force (holding wages down), without much capital (driving profits up). The poor lose, the rich win. But if we restrict imports, China won't just vanish; they'll keep selling stuff to Europe and Japan and India etc., and those countries will keep investing in China. The only thing we'll get is a big fat depression.

So what do we do? Well, we wait for China to catch up in terms of capital and technology, at which point their growth will hit a wall like Japan's and Europe's did at the start of the 1990s. And we make sure we stay comfortably ahead in the productivity race, so that when that day comes, we'll be able to get our "monopoly rents" back. Problem is, China is really big, and might not hit a wall for 20 years. My generation may spend the better part of our working lives competing in a race to the bottom with a hungry horde of eager Chinese workers. And there may be nothing, at this point, that anyone can do about that.