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As the world churns: They say it's the only way

THE BALTIMORE SUN

IN ONE OF THE MOST poignant parts of his highly praised stump speech, North Carolina Sen. John Edwards refers to his roots in the area of the country where the textile industry once provided thousands of jobs.

"This is very personal for me," Edwards says. "I grew up in a family where my father worked in a mill. I saw what happened when that mill closed, to my own community and to the families who were involved."

The villain in this scenario is often trade policies, blamed for making it easy to export the jobs of textile workers. What Edwards doesn't mention is that it was free trade policies within the United States that first brought those textile mills to the South.

Economists say that is what is going on with the globalization of free trade, the churn of economies as they constantly shed and create jobs. The adjustments can be painful, but the end result is usually an increase in wealth.

The mills that employed Edwards' father in the Carolinas had left Massachusetts - the home state of his rival for the Democratic presidential nomination, fellow Sen. John Kerry - a century ago, searching for the same thing they are looking for today, cheaper labor.

"The biggest reason why the textile industry became so important to the South is because by the time it started leaving New England, it was an industry that was easy for an underdeveloped place to get into," says David Carlton, a historian of the South at Vanderbilt University. "It did not require much in the way of either managerial skill or particular workers' skills. By the late 19th century, you could put an 8-year-old girl on a peach crate next to a spinning frame."

The industry still does not demand a skilled work force, which is what now sends it off to Third World countries.

The move south devastated many communities in the North, particularly Lowell, Mass., considered the birthplace of industrialization in the United States. Its textile mills, a wonder of modernity in the 19th century, were almost gone by the 1920s. Meanwhile, people like Edwards' father were signing on for work at mills in the Carolinas, creating an industrial economy in previously agricultural states.

Such economic transformation could happen easily in the United States because there is free trade among the states, guaranteed by the commerce clause in the Constitution. But Edwards and Kerry are targeting such free trade among countries as one reason for the difficulties facing many U.S. workers.

Yet, economists argue that the challenges brought on by increased trade are the types of challenges that have made the U.S. economy so resilient.

"I would say what we are facing now is a new variation of basically what we've been wrestling with a long time," says I.M. "Mac" Destler, director of the program on international security and economic policy at the University of Maryland, College Park. "I doubt it is worse than the large displacements that took place a century ago when the United States was becoming a national economy."

Steve Hanke, an economist at the Johns Hopkins University, agrees. "Churning is going on all the time in the United States and, in fact, in this situation what we are seeing is increasing productivity as people essentially move from low productivity, low-wage jobs into higher productivity, high-wage jobs," he says. "That is the nature of churn."

Hanke argues that such churning is one reason the United States became the world's dominant economy. Europe, he says, is trying to catch up with its European Union, doing away with trade barriers among its states.

Still, Hanke recognizes that there are costs to people and communities and politicians ready to take advantage of that. He blames President Bush for putting the trade issue on the table by imposing limits on imported steel and protecting sugar growers, mainly in Florida. The result, he says, was damage to U.S. industries that use cheaper, imported steel and sugar, pointing to thousands of workers in Chicago's candy industry who lost their jobs.

"Now we've notched it up even further with Kerry and Edwards pounding away on this," he says. By contrast, Hanke says, President Bill Clinton was a free trader "who really minimized inflaming passions on the issue because he was well-briefed."

Hanke says Clinton understood that though free trade costs some American jobs, many more are created. "Clinton could count," he says, giving free-trade policies much of the credit for the prosperity of Clinton's years in the White House.

Destler says he is bothered by what he is hearing from Edwards and Kerry on the issue. "I say this as a Democrat: They are really on the wrong side of history on this, at least in their rhetoric," he says.

That said, there is no doubt that the country's economic problems are particularly acute.

Sandra Polaski, a trade specialist at the Carnegie Endowment for International Peace, says a confluence of events is responsible. "Churning goes on all the time, but when that churning coincides with the cyclical downturn, that compounds it," she says. "In the short term you have more losers than winners. And if that coincides with a political year, you are going to have an amplification of it."

Adding to the problem, Polaski says, is the end of the Cold War. "That brought a breakdown of barriers between the Western economies and the trading systems of all the people on the other side, China and all the former states under the Soviet Union's control." she says.

"The global labor pool that was effectively integrated into the Western production system increased enormously. So at a very fundamental level, you have an oversupply of labor."

But Polaski does not believe that the United States should erect trade barriers, in part because helping other countries develop their economies eventually creates markets for U.S. products. Instead, she says, this country should take more measures to alleviate the short-term economic pain.

"I don't think it is desirable to stop the integration of the world economy, but it is very, very desirable that the government make minimal, but significant, interventions to improve the transition," she says.

Such measures include wage insurance to give aid to those laid off because of foreign competition and forced to take lower-paid jobs. They also would extend the unemployment benefits available to blue-collar workers who lose their jobs because of foreign trade to white-collar workers - such as those in call centers and software engineers, jobs increasingly going overseas.

Polaski also endorses putting basic protections into trade pacts. She worked in the Clinton administration, specializing in clauses that forced U.S. trading partners to respect labor rights.

Edwards has often said he would have voted against the North American Free Trade Agreement (NAFTA) that opened trade with Mexico and Canada had he been in the Senate then because it did not have adequate protections. Destler is not so sure of that because, he says, the textile industry was able to get what it sought.

"They got what looked at the time like a comparatively good deal," Destler says. "To be eligible for import into the United States, clothing made in Mexico had to be made of North American cloth. ... It is not as if nobody was trying to help the people who had jobs in those mills."

Destler said the North Carolina congressional delegation, originally opposed to NAFTA by a 9-to-2 margin, ended up voting 8-to-4 in favor. But even those protections could not stem the loss in textile jobs.

Carlton, of Vanderbilt, says he takes a personal interest in the textile issue.

"Johns Edwards' family background is a lot like mine," says the native of South Carolina. "My dad just had a high school education, went to work at the mill and climbed up into middle management. He was a production manager when I was in high school, just like John Edwards' father. So I am extremely familiar with what is happening in the textile industry. And my take on it is that basically the free traders are right. Is this part of a long-term economic change? Of course it is."

He argues that as painful as that change is, it will be good for the parts of the South dependent on textiles, forcing them to diversify their economies, to educate their work force, to attract better-paid jobs.

In Enterprise, Ala., there is a monument to the boll weevil, the insect that destroyed the South's cotton crop and forced it to diversify its agriculture.

Perhaps one day in the Carolinas there will be a similar monument to free trade.

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