Free-market welfare state

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America’s historical combination of free markets and limited income security is fundamentally unstable. Either we get better at complementing markets with comprehensive income and re-employment supports, or the forces of creative destruction will generate anti-market backlashes with lasting political consequences. The fallout from China’s entry to the World Trade Organization in 2001 is a clear case in point. Cheaper imports benefited millions of Americans through lower consumer prices. At the same time, Chinese import competition destroyed nearly two million jobs in manufacturing and associated services—a classic case of creative destruction. Yet rather than help those workers adjust, our social insurance system left them to languish.