On several occasions, in Benzene and elsewhere, I have made the claim that the Democratic Party has reverted to its pre-1990 form. I usually accompany that with some vague reference to "neoliberalism", but I rarely explain what the heck I mean by the term, and I know that some of you are wishing I'd at least offer an example.

OK. Something happened today which illustrates the point perfectly. Unfortunately, I'm not nearly well enough informed to discuss it in any depth, but I can at least point it out.

Some time today, Council of Economic Advisors Chairman Gregory Mankiw made a statement to the effect (I don't even have the quote) that outsourcing of jobs is good for the U.S. economy. Immediately, just about every Democrat in the country, along with many Republicans, howled in protest, some of them calling for the resignation of this heartless egghead who would dare to make such an outrageous statement.

Now these critics are not 100% unjustified -- there are in fact problems with outsourcing which need to be addressed -- but on the immediate point, they're just wrong. On the whole, outsourcing really is good for the economy.

The problem, of course, is in that "on the whole". As with any major economic change, there are going to be winners and losers.

When jobs are exported from our country, the net result is that we get goods and services and the other country gets U.S. dollars. Those U.S. dollars might get circulated around the world a bit, but ultimately either they come back to the U.S. to buy stuff from us or they don't. If they don't, then hurray, we've just gotten goods and services for free. If they do, then that creates new jobs providing whatever goods and services the foreigners are buying back. The point is that when you examine the entire system (which surely is what Mr Mankiw was talking about) there is no net job loss, but there is a gain in efficiency.

Now, there are oodles of complications here. One is that those dollars might come back and buy land. Another is that the return of the dollars can be delayed for a long time, which means we have free financing in the interim, which could be a good thing, but not if we use it to live so far beyond our means that we are bankrupt when the bills come due. There's also a whole lot of funny stuff about exchange rates and trade deficits that I mostly don't understand except that I know having a big deficit always makes it worse.

But I'm digressing. My point is not to defend outsourcing. My point is to draw attention to the near-unanimous Democratic response to Mr Mankiw's statement.

A different approach would be to say: "Yes, that's true: outsourcing does benefit the economy on the whole. However, the costs fall disproportionately on one group of people, while the benefits accrue to another. This sort of economic dislocation is unacceptable, but since there really is a great economic advantage to be had here, it would be a shame to pass it up by not outsourcing. So let's examine our economic system and find ways to compensate for the dislocation so that all Americans can share in enjoying the economic windfall."

This latter approach, usually accompanied with lots of wonky talk about specific proposals for economic reform, is the essence of neoliberalism. It was the policy of guys like Paul Tsongas, Gary Hart, Bruce Babbitt, and even -- on issues of trade, at least -- Bill Clinton.

Today, neoliberalism has virtually disappeared. Now, all the Democrats are against trade and other policies that lead to economic growth. The Republicans are all for growth at any cost, but they are content to leave the dislocations unaddressed.

Postscript: Aha, I see on Brad DeLong's blog that former Secretary of Labor Robert Reich is one Democrat who is making the case. OK, I stand corrected. Some Democratic economists are still neoliberal, but still no Democratic politicians.

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