May

7

My colleague Tyler Cowen calls this phenomenon "the great blowing sound."

6 May 2007

Editor, Washington Post
1150 15th St., NW
Washington, DC 20071

Dear Editor:

Alan Blinder worries that as technology opens up pools of low-wage labor in poor countries, the gains to American workers from free trade will be slow in coming ("Free Trade's Great, but Offshoring Rattles Me," May 6). He forgets that the world's stock of capital expands quickly to take advantage of profit opportunities.

If American workers today produce enough output to justify their high pay, any transfer of capital from America to China or India opens up profit opportunities for new investments in America. Skilled, motivated workers in a commercial environment of secure property rights will not long remain unexploited by capitalists.

Want evidence? Foreign direct investment in the U.S. from Latin America was $87.3 billion in 2004 - 114 percent higher than 1999's figure of $40.8 billion.

Sincerely, Donald J. Boudreaux Chairman, Department of Economics George Mason University 


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