From that point forward developing countries like China and Vietnam ran enormous trade surpluses. This implied huge trade deficits and unemployment for manufacturing workers in the United States and to a lesser extent Europe. The U.S. trade deficit eventually peaked at almost 6 percent of GDP in 2005, the equivalent of a deficit of $1080 billion in today's economy. This trade deficit led to the loss of close to one-third of all jobs in manufacturing.
So Cohen is giving us this impressive display of hand-wringing, telling us that it is unfortunate that rich country workers had to get whacked, but it was necessary to allow for the poor in the developing world to improve their living standards. It's very touching, but in the standard economics, it was hardly necessary.
The standard economics would have allowed the pattern of growth of the early and mid-1990s to continue. In that story, rich country workers would still have their jobs. Instead of producing goods for people in rich countries, people in poor countries would produce goods and services for their own populations. This should have allowed for even more rapid gains in living standards.
The fact that the textbook course of development was reversed, with massive capital flows going from poor countries to rich countries, was due to a massive failure of the international financial system. Workers in rich countries did not suffer from any inevitable process that allowed the world's poor to improve their living standards, they suffered because of the ineptitude and corruption of the folks at the Clinton Treasury Department and the I.M.F.
