Greenspan defends free trade, productivity, despite shifting jobs
WASHINGTON (AFP) - Free world trade and innovation are critical to economic development even at the cost of a shifting jobs landscape, US Federal Reserve (news - web sites) chairman Alan Greenspan (news - web sites) said.
Greenspan drew on the history of rural American development to rebut protectionism amid deepening concern over the loss of US jobs to countries with cheaper labor such as India and China.
"The phenomenal gains in US agricultural productivity of the past century brought profound benefits to all consumers, regardless of their connection to a farm, in the form of lower prices, better quality, and more choices at retail outlets," he told a rural development conference in Virginia, according to a copy of the speech released here.
"But those gains also have been associated with dislocations in many rural areas, largely in the form of migration of farm workers to more urban areas and the resulting eclipse of many small towns and villages," Greenspan said.
"Although dislocations are bound to accompany economic growth, we should give rise to the challenges that come with innovation because innovation brings great improvements in material well-being."
The stubborn refusal of the US economy to churn out jobs has fed to rising anger at companies that close down American operations only to shift the work overseas.
The employment drought is now a key battleground in the fight between President George W. Bush (news - web sites) and Democratic challenger John Kerry (news - web sites) for control of the White House after November 2 elections.
The US economy created a meager 21,000 jobs in February, government data showed, meaning the nation has gone through a record 44 months without a single month of job creation exceeding 250,000.
The unemployment rate was stuck at 5.6 percent.
Some US lawmakers are pressing for legislation to curb the outflow of employment.
One bill proposed by Senator Christopher Dodd would prohibit taxpayer funds from being used to outsource or take offshore work formerly done in the United States.
Meanwhile Representative Bernie Sanders and 50 co-sponsors proposed a bill in the House to bar companies from receiving federal grants, loans and loan guarantees if they lay off a greater percentage of workers in the United States than they lay off in other countries.
William Poole, president of the Federal Reserve Bank of St. Louis, criticized the trend.
"Critics of free trade abound," Poole told a conference in Memphis, Tennessee.
"I'm convinced that outsourcing and globalization yield important long-term benefits for the United States as a whole."
And Treasury Secretary John Snow told a business conference here that free trade "helps create jobs at home by opening foreign markets to American exports and by encouraging foreign companies to set up operations here in the United States."
Greenspan said unfettered trade was a "vital" feature in the development of US agriculture.
"Today, our nation's farmers are highly dependent on exports to absorb their remarkable productivity, and their ability to compete internationally depends on lowering unit costs faster than producers in other countries are lowering costs."
The US farm population had peaked at 33 million in 1916 and declined to only a few million now, he said.
But the non-form population and employment level had increased "substantially." After World War II, manufacturing growth created new rural jobs, and more recently the countryside was hosting services industries.
Earlier this month, Greenspan warned that "erecting walls" in a bid to curb job losses would backfire on the United States.
"In all likelihood, employment will begin to increase more quickly before long as output continues to expand," he told lawmakers.
"We have reason to be confident that new jobs will displace old jobs as they always have, but America's job turnover process will never be without pain," he said.
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