Monday, July 25, 2005

Krugman, He Make Me Happy Ha Ha

A typically great essay, but what really makes me happy is the backhand that I'll emphasise:

But education is only one reason Toyota chose Ontario. Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States.

You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage. But that's not right, even aside from the fact that Canada's health care system has far lower costs per person than the American system, with its huge administrative expenses. In fact, U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs.

To see why, bear in mind that in the long run decisions like Toyota's probably won't affect the overall number of jobs in either the United States or Canada. But the result of international competition will be to give Canada more jobs in industries like autos, which pay health benefits to their U.S. workers, and fewer jobs in industries that don't provide those benefits. In the U.S. the effect will be just the reverse: fewer jobs with benefits, more jobs without.

So what's the impact on taxpayers? In Canada, there's no impact at all: since all Canadians get government-provided health insurance in any case, the additional auto jobs won't increase government spending.

But U.S. taxpayers will suffer, because the general public ends up picking up much of the cost of health care for workers who don't get insurance through their jobs. Some uninsured workers and their families end up on Medicaid. Others end up depending on emergency rooms, which are heavily subsidized by taxpayers.

Funny, isn't it? Pundits tell us that the welfare state is doomed by globalization, that programs like national health insurance have become unsustainable. But Canada's universal health insurance system is handling international competition just fine. It's our own system, which penalizes companies that treat their workers well, that's in trouble.

Is that a righteous slap at Tom Friedman? Maybe not, but I'd like to think so.

Of course Krugman is a pro-globalisation guy like Friedman. But unlike Friedman, he is decent enough not to spend time slagging various welfare states. Both want the US to "handle" globalisation by federal spending. But Friedman, so far as I can tell, only advocates education spending, specifically with regard to technology. Krugman at least advocates that there has to be a bigger social safety net than that when all these companies keep racing to the bottom.

Both are wrong on globalisation, Friedman egregiously so. But at least Krugman comes across as having a humane reasoning about it, while Friedman ..well, does what he does.

Edit: fixed horrendous error. Sorry.