There's no doubt that free trade is a big net positive for the US. But one of the major oversights of the last few decades of public policy is the failure to reallocate some of the net benefits of free trade more directly to the losers, e.g. lower middle class working people in the US. Maybe they figured these people would never organize or vote in serious numbers. Bernie Sanders and Donald Trump might prove otherwise.
>There's no doubt that free trade is a big net positive for the US.
Eh, I'm not so sure that cow's so sacred. Is free trade positive for the American economy? Yes, of course. It moves our country toward a richer, more intellectually-based economy, which should lead to greater quality of life for everyone: fewer shitty jobs building stuff, being hurt by industrial processes, working really really hard to make little money.
I guess I'm going to parrot you a bit here, because I agree with the rest of your point, but what's happening is the second part of that equation, the benefit for the workers and the individuals, is not being met. Our economy is flourishing, but workers who have been displaced are not being supported.
Our rich, rich economy should be able to either 1) train up people who were formerly doing the blue collar work to succeed in an intellectually based economy or 2) provide them with a standard of living given their inability to find good work (the standard income idea).
We are not even attempting to do either.
College costs a fucking shitload and social programs are drying up left and right. Our kids are getting dumber, relatively speaking, so they will be less competitive in a global workplace.
So no, that is not what I would consider a "net positive" as a net positive, in my mind, means that what's happening is good for most people. Clearly, it is not. We shouldn't make it a platitude, because then we don't get to say, "Free trade is clearly good, but if and only if..."
This statement reveals one of the larger problems in US culture: using profitability as he primary (or only) metric when judging social, political, or cultural issues. One of the best descriptions of this problem was David Simon's talk[1] from a few years ago, which I highly recommend.
And that notion that capital is the metric, that profit is the metric by which
we're going to measure the health of our society is one of the fundamental
mistakes of the last 30 years. [...]
[...] the idea that the market is going to heed all of the human concerns
and still maximize profit is juvenile. It's a juvenile notion and it's still
being argued in my country passionately and we're going down the tubes. And it
terrifies me because I'm astonished at how comfortable we are in absolving
ourselves of what is basically a moral choice. Are we all in this together
or are we all not?
The thing we call "free trade"[2] has clearly helped profits in the US, but "profit" is only one aspect that needs to be considered when evaluating if something has been "good" to a society. As you pointed out, we have had several decades of policies that were very effective at creating profit by razing the demand side of the market. A proper evaluation would have included other concerns like preserving demand and investing in less-obviously-profitable things like education.
As a result of this myopia - combined with the gradual destruction of social safety nets - we are now starting to see what happens when people start to lose faith in society. This causes people to start looking for "someone else" to fix these problems. So now we see fascism rising to try to capture some of that unrest. This is going to turn violent a lot faster than most people expect if we allow the status quo to continue.
[2] The policies pushed by the big treaties are just as much about adding barriers-to-entry and removing regulation (often called "standardizing" or similar newspeak; the canonical example is credit card companies racing into Delaware to exploit the local laws and the "free (interstate) trade" of credit.
The real problem in the US is that costs are prohibitive, particularly with regards to education. Add to that crazy housing costs (SF/NYC/etc) as well as health care prices and you've got a recipe for disaster..
That's because trickle-down does work to some extent (which isn't to say it's not still a socially regressive economic idea). A larger share of the global economy going to someone in your town raises all boats.
But in towns where parent's trade-exported jobs predominated, there's only pain without the benefit. Hence the resentment of the policy.
Which is good. People getting pissed off about that and making political choices based on that fact should be happening due to the fact that we haven't allocated the increased wealth due to trade around fairly.
... Honestly, we're essentially running knowledge/tech trickle-down economic policies now. In that if you aren't one of that class, then hopefully some of that wealth might get down to you... eventually...
That's an explicit policy of the Federal Reserve. Technological and economic progress means the price of goods is always trending down. As such, anything that can be financialized inevitably skyrockets.
I agree that jobs involving manual labor and assembly have a higher risk of physical injury than desk jobs. But I don't agree that "building stuff" is categorically more shitty than, say, sitting in a cubicle farm trying to maximize the rate at which people click ads.
"Free trade" is a misnomer for what is, in practice, freedom of capital to cross borders in search of lower labor. The dynamic certainly helped transform the lives of many people here in China for the better -- many people made rich from creating basically widjets for walmart, but in the US, many working class people lost both their jobs and their entire communities when Capital left.
Free trade benefits all people. Yes there are those who also lose a bit for it too but overall it benefits all it touches either directly or indirectly.
It brings the standard of living up in export countries, lower costs in import countries, and stimulates other countries to get into the act.
Not all industries are viable long term. Just like milk delivery faded in many areas so will some textile jobs. There are plenty of examples of widgets being made in the US alone from companies very young. It all comes down to this, do you look only for the negative?
I do know one thing is true. Any candidate campaigning on trade sanctions or the like is a loser and will make us losers too
It's not a misnomer. The free movement of capital leading to more efficient allocation of labor is one aspect of free trade. But it is not the totality of it. For example, no country has as much incoming foreign direct investment as the United States.
In recent years free trade can better be seen as regulatory arbitrage: companies close down worksites in places with strong environmental and labor protections and move work to places that have neither.
We've seen talks about CO2 emissions and the resistance of Asian countries against agreeing to a framework that puts the same restrictions in place for them as for the west. They clearly understand that a comparative lack of emission controls puts them at a competitive advantage.
Wage arbitrage is absolutely also a factor and the western world's working class absolutely have reason to resist that because they will not come out better off in that exchange.
To be fair to those countries, all the developed ones already went through their major pollution fuelled growth spurt and now want to deny other countries that growth spurt.
The developed countries should be disproportionately paying the cost of pollution as they caused it in the first place.
I totally understand we need to stop, but it's a lot more complicated than you're presenting.
That's a ontogeny recapitulates phylogeny style argument: technology is different than it was 100 years ago; there's no reason to "follow the same path" as the original creators of that technology along with all the miss-steps.
If you mean that Asian countries want a "growth spurt" by encouraging western corporations to build facilities where they can ignore modern pollution controls, then we are in agreement. But it's a beggar-thy-neighbor policy and one that hurts our entire planet and is abetted by free-trade agreements.
“Poor Faulkner. Does he really think big emotions come from big words? He thinks I don't know the ten-dollar words. I know them all right. But there are older and simpler and better words, and those are the ones I use.” - Ernest Hemingway
>For example, no country has as much incoming foreign direct investment as the United States.
And has that increased the rate of new businesses being founded, decreased the price of borrowing for existing businesses, or been poured into rent-seeking asset bubbles in markets like real-estate?
The net benefits are allocated to everyone through lower prices and greater consumer choices. This affects many more people, albeit not as dramatically, as those negatively affected. The fact that imported goods well in US is proof that many people value the goods higher than the alternatives.
If you go down the road of easing all competitive displacements of human capital, the eventual result would be lifetime job guarantees, protected cartels and a stagnant society.
You can't ease all of it, but if you are going to sign trade deals that benefit some workers over others, you should compensate the workers who lose their jobs.
It doesn't have to be job guarantees, there can be solutions like wage insurance, free or subsidized retraining + relocation, and basic income.
>there can be solutions like wage insurance, free or subsidized retraining + relocation, and basic income.
I hear this idea of 'retraining' offered as the panacea to globalisation in every article promoting it. What exactly are we going to retrain these workers in? The referenced article made the statement that one of the fired worker's daughter has a degree, yet makes a third less.
Sometimes it is spouted that they'll retrain in IT, becoming those elusive software devs the big corps just can't seem to find. But this BS is not being swallowed much anymore - the easier IT and dev jobs have already been offshored, those that can't are filled with H1Bs from India. College grads in liberal arts fields can't even find shitty service jobs in most places outside the coasts. So what skills, exactly, are a former assembly line worker going to learn?
The problem is that we have more people that need to work than jobs available. The fact that we continue to export jobs, while more and more workers are replaced with machines, and allow uncontrolled immigration into the US leaves us with problems that won't be solved by some community college or wage insurance.
And the establishment still feigns surprise over Trump's massive rise...
>If you go down the road of easing all competitive displacements of human capital, the eventual result would be lifetime job guarantees, protected cartels and a stagnant society.
We already have protected cartels and a stagnant society -- for capital-owners!
Over 50% of Americans own stocks (capital) [0]. Through competition for low-cost ETFs you too can join this prestigious class of capital owners for $7 and 0.7% annual fee.
By giving all consumers less choices as to what goods they can purchase and from whom, do you think you're really making those consumers better off? All in order to benefit a few that happen to be in those industries for which the US no longer holds a competitive advantage
What? Consumers in the USA before could have purchased Carrier air conditioners made here. Now they can purchase the same air conditioner made in Mexico.
And we know that prices won't go down. That's not why Wall Street pushes companies to relocate.
Maybe people are realizing, when you're living in an import country, sometimes its better to have higher prices and a job, than lower prices and no job.
Two policies could fix this. A negative income tax (with UBI) and a state backed insurance policy that either pays out as free retraining, or as wage insurance.
Read my comment from above. There are no jobs in which a assembly line worker can easily retrain.
No company on Earth would ensure these types of workers, in the same vein as insurance companies didn't ensure people with expensive pre existing conditions until forced by the gov. If it's subsidized, then just call it what it is: another tax. Unfortunately, the government already runs a massive deficit, so not sure how it can be afforded...
"One would almost expect in this day in age of miraculous digital enhancements to everything we do, and the related improvements in the efficiency of production... That prices in the absence of [The Fed's] monetary exertions would fall, so I suppose that a little bit of inflation is itself an anomaly... One ought to have seen kind of a dividend for the working guy in the form of everyday lower prices."
The failure of improved trade and technology to be the rising tide that lifts all boats is not a failure of policy to redistribute, but rather a consequence of interventionary monetary policy. The even scarier thing is that these policies are enacted by an unelected government organization (the Fed) on behalf of the people (I'm sure the Fed thinks that what it is doing is good for all of us). The net result: Despite his agitation for Fed transparency, Bernie is so clueless about economics, that it's likely that he will listen to cheerleaders like Robert Reich who stump for lowering interest rates and make the upward redistribution of wealth worse - and Donald Trump - well who knows what the hell he will do.
If you don't believe that the fed stoking inflation is bad for the little guy, consider 1) if inflation weren't bad for the little guy, we wouldn't have to raise the minimum wage periodically, and 2) http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hig...
"When you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."
Read that carefully, and between the lines. One of the policy justifications for inflation is that it cheats the working class out of the value of their earnings, in the name of "employment".
Finally, consider the words of Keynes, who is one of the advocates of monetary intervention to control the animal spirits (although even he would go pale seeing the one-sidedeness of the interventions that we've been doing in the past 40 years):
"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “profiteers,” who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat."
I think this is a perfect prediction of what has happened to our system of "capitalism".
> if inflation weren't bad for the little guy, we wouldn't have to raise the minimum wage periodically
How does that follow at all? Inflation means the value of money decreases, which means the price of things increase. The minimum wage is a price, so in order to keep it the same in real dollars it has to match inflation in nominal dollars.
> Read that carefully, and between the lines. One of the policy justifications for inflation is that it cheats the working class out of the value of their earnings, in the name of "employment".
You aren't being cheated out of anything. If tomorrow you're being paid the same amount but paying more for things and you don't like it, you can demand a raise or find another job. And if you can't do that, having some prices increase but not all prices is better for you than the alternative of taking a pay cut, because the pay cut reduces the amount of money you earn to pay for even the things that don't change in price, like a fixed rate mortgage payment.
Inflation is basically a tax on money. The people who pay it are the people who have money and the people who are owed money. You're trying to make the argument that future wages are money you'll be owed tomorrow and claim that inflation hurts the working class that way, but that is not the dominant effect, not least because most working class people do actually get cost of living increases.
> If tomorrow you're being paid the same amount but paying more for things and you don't like it, you can demand a raise or find another job.
The "you can demand a raise or find another job" argument. true for both the inflation case where your nominal pay stays the same and the the case where your nominal pay is cut.
> And if you can't do that, having some prices increase but not all prices is better for you than the alternative of taking a pay cut, because the pay cut reduces the amount of money you earn to pay for even the things that don't change in price, like a fixed rate mortgage payment.
Most poor people don't have a 'fixed rate mortgage payment', so your model of american poverty and the factors that influence their economic standard is delusional. Americans living on the margins are very much more concerned about things like the cost of food and fuel than mortgage payments.
> The "you can demand a raise or find another job" argument. true for both the inflation case where your nominal pay stays the same and the the case where your nominal pay is cut.
What conclusion did you expect to follow from that?
> Most poor people don't have a 'fixed rate mortgage payment', so your model of american poverty and the factors that influence their economic standard is delusional. Americans living on the margins are very much more concerned about things like the cost of food and fuel than mortgage payments.
Let's start with a fact. A significant majority of American families own a home. Of that group, the ones who don't have a mortgage payment are not the poorer ones.
But a mortgage payment was an example. What point are you even trying to make? That people who don't own a home have no loan payments whatsoever? The people who don't own a home would seem to be more likely to have a car loan or credit card debt.
Not trying to be pithy. I'm saying that in a country where 80% of the population are net-debtors[1], inflation constitutes downward wealth redistribution, whereas it would constitute upward wealth redistribution in a country (conceivable, but seemingly unlikely) in which the wealthy borrow while the poor lend.
He's saying that inflation hurts those who are owed money, and helps those who owe money. The people who are owed money are more likely to be rich. The people who owe money tend to be poor. Thus the immediate effect of inflation is to redistribute wealth from the rich to the poor.
The open question is what the longer term effects of inflation will be: who benefits, and who loses, once the system again reaches equilibrium. But based on history, I think we can assume that low inflation works out well for those who already hold lots of capital.
> But based on history, I think we can assume that low inflation works out well for those who already hold lots of capital.
Based on history, everything works out well for those who already hold lots of capital.
About the only exceptions are widespread economic destruction, violent revolutions, and that thing the transistor did to "those who already hold lots of capital" but invested it in the manufacture of typewriters and carbon paper.
And only the last one really helps the common people.
When you say inflation cheats workers, you are choosing a side and arguing it. The economic value generated by doing a given job can go down over time, in which case a reduced wage is not really cheating anyone.
For example, say A and B are factories that make very similar assemblies. Factory B adds some automation and reduces the prices they charge for the assemblies. The value of the labor provided to factory A has just gone down. If A can't afford automation, it may have to choose between reducing wages and ceasing those jobs altogether. Inflation lets it wait out the problem by not increasing wages until inflation has brought the market price for their assemblies back into line with the value provided by the labor.
> The economic value generated by doing a given job can go down over time, in which case a reduced wage is not really cheating anyone.
If that's the case, what's the problem with "actually paying the laborer less"? Why play a passive-aggressive game where you pay them something less in real value?
Basically it's a cheat that lets the employer avoid having tough conversations with labor. It also has secondary effects, like putting the entire society on a moving treadmill, encouraging consumption and economic destruction, eroding the power of social safety nets and charities, etc. etc. etc.
Bernanke was pretty clear that the extraordinary easing was made necessary by lack of fiscal stimulus. Congress should have borrowed a jillion dollars in 2008-9 and spent it anything with a positive multiplier.
That's an appeal to authority, (not necessarily bad) by what evidence do you have that Bernanke's word is something we should trust. Moreover when you say "made necessary" what would have been the consequences of not doing it?
>Congress should have borrowed a jillion dollars in 2008-9 and spent it anything with a positive multiplier.
Well, if that's not a recipe for corruption and redistributing wealth upwards what is? Do you suppose congress would have spent money on the poor? Who would have had the quickest access to that borrowed money?
That's not an appeal to authority. It's trusting an expert. It's also an entirely plausible statement and one I agree with. Would I sooner trust Congress? Obviously not because they dropped the ball. The stimulus they did pass was too small and loaded with giveaways to the rich. Like I said, they should have spent on anything with a multiplier.
It is important to note that practically no economist believes that free trade is not a net positive for all countries. In a recent survey of economists, two questions were asked, of which 95% of those surveyed either strongly agreed or agreed, while the remaining 5% were uncertain (none disagreed).
Question A: Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.
Question B: On average, citizens of the U.S. have been better off with the North American Free Trade Agreement than they would have been if the trade rules for the U.S., Canada and Mexico prior to NAFTA had remained in place.
I find it ironic that publications such as the NYT which often (rightfully IMO) put a lot of weight on the scientific consensus on issues such as climate change, are much more reactionary when it comes to issues such as free trade, relying more an personal antidotes and political rhetoric.
Economists? Are those the same people that make assertions based on observations & models lacking legitimate control groups?
Beyond the fact that social sciences are generally not scientific and highly subject to groupthink, I don't think they're wrong in the sense that comparative advantages exist in the Ricardian/Smith sense. However, if they dont account for currency manipulation, tax loopholes, and labour safety standards, I think those same economists lose a lot of credibility clinging to this fantasy that free trade as we know it is actually free.
Are those the same people that make assertions based on observations & models lacking legitimate control groups?
You seem to be discussing climate scientists, actually. I guess the NYT shouldn't take their consensus seriously either?
However, if they dont account for currency manipulation, tax loopholes, and labour safety standards, I think those same economists lose a lot of credibility clinging to this fantasy that free trade as we know it is actually free.
Yes they do. Currency manipulation is well understood - it's a country giving things away to other countries. I don't know what you mean by "tax loopholes".
Economists are also well aware that trade is far from free. For example, Bryan Caplan is a famous advocate of increasing free trade in labor (via open borders). There is a general economic consensus that occupational licensing, as practiced in the US, is exceedingly harmful:
I hope this example has made the difference between economics and science clear.

It definitively has not. Rather than making confusing analogies, why not just state explicitly the difference?
Let's entertain your assumption that a near perfect consensus among economists isn't a reliable hint about the realities of the economy. Why should I trust you or some other group of people over the economists, especially when the economists' arguments for free trade match my understanding and intuition?
You shouldn't, but you should embrace skepticism and realize that is not science.
If you trust individuals making assertions based on unscientific methods because you value each individual's aptitude in the subject, fine. That is expert opinion.
If you trust an unscientific group consensus based on credentials that in actuality are worth far less than society values, then you're being naive.
True, logic and reason are the basis of these arguments. That is not the same as saying there is only one set of logic and reasoning from which an opinion could be derived.
> How could someone be better off with fewer choices as to where and from whom to trade with?
Well, if you're talking about comparative advantage due to something simple (like a mineral or natural resource without considering externalities from extraction), I'd agree.
If you're talking about labor costs at $20/hour vs $0.20/hour, then one could argue that without replacement jobs at $20/hour for those being replaced by cheaper foreign workers, then the only effect will be depression of domestic wages to retain competitiveness. Now, that might be nominal over the long run, but based on the US experience, it doesn't seem like social welfare has improved from more choice in trading partners. Our trading partners, however, are doing much better. Wage growth domestically has been stagnant in real terms.
> On an ethical standpoint, how could making goods more expensive for everyone in order to benefit a few justifiable?
If those costs account for the complete impact, then it would not be justifiable to make goods more expensive. If there are externalities and systematic impacts, then some might argue barriers to free trade are justifiable.
Keep in mind that I don't completely disagree with free trade. I personally despise unions (though, mostly just the public sector unions; trade unions are mostly OK with me, though I support right to work) and I think they share blame in some circumstances... But, my personal opinions do not prevent me from seeing drawbacks to the free trade at scale. The concept is very cultish and that is a clue right there that we should all be looking at it more critically.
I would ask you to consider why labor costs are $20/hour in some countries and $0.20/hour in others. Many jobs being done in the US could easily be outsourced to these lower cost countries, but are not. If the $0.20/hour was equally as productive as $20/hour, the $0.20/hour would be bid up. High price tag of American labor is not expensive because its American, its expensive because its very productive. The reasons its more productive is complicated, but it must be or in a competitive marketplace, the employer who is able to use the lower cost labor would have significantly lower costs than competitors.
Also, on a moral front, why should the accident of geography determine how you can make a living? Arbitrarily denying jobs to Mexicans living in America would be undoubtably immoral. But somehow denying Mexicans jobs in Mexico in favor of more expensive American workers is applauded by politicians. Why shouldn't Mexicans have an opportunity to compete with Americans?
Lots of other things to consider beyond the folksy idea of worker productivity (which I would argue doesn't scale uniformly across job type).
If we include the full cost of labor in that $20, then it is cheaper in locations unhindered by, say, insurance requirements. That is a very big difference between US and 3rd world (China, for example) labor markets.
Insurance is just one issue. Requirements for safe working conditions are another. There are factories in China where dioxin levels are several orders of magnitude above US EPA limits. I've only been near them and I sometimes wonder how much my cancer likelihood has increased.
At no point have I made a moral argument. I don't care about that argument. What I'm amused by is how the free trade argument can be morphed into a social justice claim for foreign economies... What would Adam Smith think of that?
Consumers used to buy air conditioners made by Carrier in the US. Now the exact same air conditioner made in Mexico can be bought.
If the price went down the same amount as the labor savings, you'd have a case. But the fact that the move is being pushed by shareholders means a large amount of the savings will go into their pockets.
Of course, if the Mexican workers had to deal with all our EPA and work regulations, had the same cost of living and taxes, it could be considered free trade. But they don't. It's the same old story of free trade and currency arbitrage for capital, but not for labor.
I certainly wouldn't argue against skepticism, even of claims supported by what you consider to be science. My point is that there is no other group of people that I'm aware of who are doing reserach on the economy that you do consider to be scientific.
To your second point, Joe Biden's former economic adviser wrote an op-ed in the Times [0] to this effect; that free trade is hardly free.
"… various countries with whom we compete have historically managed their currencies to gain a price advantage (i.e., they keep their currency low to boost their exports to us and suppress ours to them), and this has long been a source of our persistently large trade deficits."
And as (pre-political) Nobel Laureate and NY Times columnist Paul Krugman wrote:
> Even more fundamentally, we should be able to teach students that imports, not exports, are the purpose of trade. That is, what a country gains from trade is the ability to import things it wants. Exports are not an objective in and of themselves: the need to export is a burden that a country must bear because its import suppliers are crass enough to demand payment. [0]
Currency manipulation: Devaluing your currency such that you can sell goods artificially cheap to your competitors. In other words, Americans not paying enough. Also known as quantitive easing when US does it.
Tax loopholes: tax code
In regards to labor safety standards, every country has a right to impose their own standards based on cultural norms. There is no universal set of standards that every country can agree upon. Would you really want to give up the autonomy with some universal code? As countries become wealthier, they value health and safety to a greater extent and the law changes accordingly.
At no point in my statement did I echo Trumpism or political rhetoric. I was speaking generally about things that are rarely included in the "free trade is great" line of thought.
You are absolutely correct that every country has the right to set their laws and operate as they see fit. However, their trading partners have the right to consider the implications of those policies on their own objectives.
I have no interest in changing anything. My opinion is that when someone says "economists nearly universally agree on X", I generally think the best course of action is to lift up one's feet to avoid stepping in bullshit.
> My argument is that when someone says "economists nearly universally agree on X", I generally think the best course of action is to lift up one's feet to avoid stepping in bullshit.
That's not much of an argument, in fact it's not one at all. You don't like or trust economists, ok, that's an opinion, but it's not an argument.
There are legitimate control groups for this particular issue. There are states that do not adopt some semblance of free trade. Like Venezuela, for instance.
Also, how do you know they didn't account for those things when forming their opinions?
No, I'm sorry but you are wrong. Calling Venezuela a control for free trade in the United States is absurd. The number of variables that differ is insurmountable, from colonial history to Marxism. There are no controls in the study of economics like there are in pure sciences. That is why economic analysis is so inherently flawed.
Upvote. I think it was here someone said something like 'economists are the modern day clergy - paid by the rich to promote ideas that benefit the wealthy'.
With [...] macroeconomic analysis working worse than astrology, microeconomic papers wrong 40% of the time, the appointment of Bernanke who was less than clueless of the risks[...], people are perfectly entitled to rely on their own ancestral instinct and listen to their grandmothers with a better track record than these policymaking goons.
There is excellent evidence that many countries became prosperous because of protectionism: UK, USA, S. Korea... See for instance the book from Ha-Joon Chang, "Kicking Away the Ladder" (a digest can be found here: http://www.paecon.net/PAEtexts/Chang1.htm )
The use of averages conveniently masks the fact that most people lose while a few fat cats grab all the gains. When a group of 1000 people earns collectively 1 million, it's of tremendous importance if everyone gets $1000 or if one gets 999001 and all the others 1$ instead. "Free trade agreements" generally looks precisely like the latter.
Every American benefits from imports. Not just a few. The value of consumer choice could not be overstated.
Besides, free trade puts competitive pressure on American corporations. The "fat cats" would love protectionist markets so they don't have to compete with foreign companies. This has led to much higher levels of service and more choices to all Americans.
It's hollowed out the middle, not just the middle class, but the spectrum of products available to buy. You used to be able to buy decent quality, medium price products that were made in America. They might not be as high-quality as the very best, but they were a lot better than the foreign-made WalMart/Harbor Freight-grade trash.
Now we've still got the high-end products, but everything else is almost indistinguishable cheap trash. The corporations don't really care whether they make something in Ohio or Shandong or Hanoi, as long as the differentials for labor and shipping come out positive. The biggest corporations are effectively post-national anyway.
I disagree that today's products are "cheap trash". Consider the automobile, today's entry level Camry is faster, safer and more comfortable than a 1957 Ferrari Testa Rossa. Air conditioning is in over 100 million homes [0], a significant increase from even the 1980s. TVs, telephones and appliances are the same story. The only reason that there is a perception of cheap things is that low cost items didn't exist in the past and were limited to the well off.
I think we are starting to see the effects of competitive pressure with more and more millennials (that don't live in SF, NYC or DC) opting not to marry, have children, and declining to purchase durable goods and homes.
They're not having children (the non immigrants, at least) in DC, NY, and SF. I'd say most millenials are still paying off loans in their late 20s and 30s. No way can they afford a home in one of these cities on top of that.
> I find it ironic that publications such as the NYT which often (rightfully IMO) put a lot of weight on the scientific consensus on issues such as climate change, are much more reactionary when it comes to issues such as free trade, relying more an personal antidotes and political rhetoric.
I don't find it surprising at all, workers are real people out there. Economics is messy and when you're the one being marginalized you don't say "well at least on average the country is better off" when you can't feed your family. If climate change had as accurate a barometer as unemployment you would see radically different coverage.
Economics is messy, but the free trade and consumer choice are very basic tenant of economics which lie at the foundation of economics. This is not one of the messier, controversial aspects of econometric models.
I don't think this is accurate. Piketty throws a big wrench in any assumptions which rely on increases in the average being disseminated widely throughout the economy. Economists have mostly made this assumption before Piketty, and the field hasn't really caught up to accounting for this effect. Globalization seems to be one of the major drivers of capital's advantage vs. labor in capturing a disproportionate amount of growth of late.
So, wealth distribution is a controversial topic in economics right now that is highly relevant to the conclusions that can be drawn from econometric models that deal with global trade.
The equations say we're better off overall, but not what to do with the marginalized citizens. It's not surprising that they are both vocal and talked about in the NYT.
Imagine you get laid off and the rest of your former co-workers all got raises that together equal more than your former salary. Everyone is better off, but how does that help you feed your family?
Do you make the same argument for those displaced by technology? All those ad-execs replaced by ad-words. All those film developers replaced by digital cameras.
Surely society could make these machines illegal as well and make a few better off at the expense of many.
Straw man argument. Technology increases have been around forever. The difference is now, capital gets to play wage arbitrage in places where labor can't roam to create an equilibrium. That is not free trade as defined.
Whole industries being wiped out is a problem, doubly so when an industry is the majority of a region's GDP. It's not the end of the world, but it's certainly worthy of discussion.
Therein lies the conundrum that we face: while the net is good for society, there will always be people who get burnt while rest of society benefits. You saw this at the advent of the automobile which left the horse and buggy industry in the dust and it is what we see now with "green" tech and fracking leaving oil and coal industries in the dust, not to mention the current hubbub of Uber/Airbnb vs Taxis/Hotels... Given a large enough N, there is bound to be a sizable subset[0] who will get hurt when society advances.
It's hard to argue about this though with people that is better because it comes off as economist being elitist and unconnected with the person you're in fact hurting. The best corollary I can imagine for me is if there was an influx of cheap PhD labor for doing science and putting me out of a job or forcing me to take >20K per year. But would it be better for science? Of course! But it would suck for me...
And I'm not sure of anything that could solve this problem. This is just the reality of the economics effects of any advancement.
[0] Small subset normalized to the total N, but a large subset compared to say, the number of fingers on one's hands.
I think this is a more representative graph[0]. I'm assuming that what you linked includes non-factory workers. [0] is specifically "Production and Nonsupervisory Employees" in Manufacturing. This is in no way weighted by the population at the time or the labor force at that time, but let's look at it this way. 8.5M around 2014 was about 5% of the total labor force in that year the US. I suppose 1 in 20 is a number of people if you're just looking at that one graph.
Here[1] is an informative graph (it'd be better if it were normalized to the total). Manufacturing is a major piece still, but the total is growing as manufacturing is somewhat changing little (overall absolute increase by [0] but might looks flat compared to growth in other fields, shrinking as a fraction of the total private industry workforce per [1]) with what looks like increases in other fields, specifically in the "education and health services" part on the bottom of the graph.
We have more employed people than ever, yet we have regressed in terms of %of population between ages 25-54 participating in the workforce. We have lost 4,000,000 manufacturing jobs in 15 years, despite wages languishing (in real dollars) and productivity increasing.
We have gained jobs in health -- this is to be expected with the aging boomer population.
We have gained jobs in transportation/logistics -- this is to be expected given all the stuff made in Chinese factories we buy from Amazon. Very soon these jobs will be automated, trucks will drive themselves and warehouses will stock themselves.
Worshippers at the altar of Free Market Economics (A Real Science) can wave around normalized, adjusted graphs all they want but if society doesn't figure out what to do with the people we graduate from high schools and colleges or layoff to pad quarterly earnings, we are going to have some serious issues on our hands in the next decade -- if not sooner.
Only because we have more people, period, than ever. We are actually closer to our lowest-ever percentage employed than our highest ever[0] since 1950.
And our workforce participation rate (i.e. where you don't ignore longstanding unemployed to dishonestly suppress reported unemployment stats) is still well below even the worst of Bush 43's tenure[1].
But economists aren't scientists. Most are employed to support government ideologies. And these IGM economists are handpicked by some committee.
For example, they're supposedly "geographically diverse". That means: Berkeley, Chicago, Harvard, MIT, Princeton, Stanford, Yale.
Where's Dean Baker, one of the few who predicted the housing bubble crash & impact of 2007-2008? Stiglitz? Pettifor? Varoufakis? Piketty? Do they not have sufficiently "impeccable qualifications" even by bureaucratic credentialist standards?
Pseudoscience and lying with statistics is the Economist Way. Consensus by a bunch of handpicked suit-wearing economists is nothing like the scientific consensus on global warming. "Globalization" and "free trade" are doublespeak; you have to prefix them with "corporate", like corporate globalization.
I don't understand your argument. This is an instance of the vast majority of scientists disagreeing with the policies of the vast majority of national governments.
If an engineer or physicist says they believe something about their field (not at the cutting edge) I tend to believe that they are right but economists, however smart and honest they might be, don't have the luxury of performing experiments so many of their pronouncements are either mere opinions or are arguments from first principles unsullied by attempts at verification.
I'm confused by your argument - you're right that most economists would agree that free trade provides holistic benefits, but most would also note that it imposes costs - and that the benefits are often widely dispersed, but the costs can be very concentrated. Is it wrong to write an article talking about the costs?
Its fine to mention the cost to those small groups affected negatively. But just be clear that those groups are really special interests and having a policy to cater to those special interests at the, albeit small, cost to many leads to a lot of problems.
Economists would also almost unanimously agree that trade creates winners and losers, within a given country. TANSTAAFL
Often trade deals are sold with "some people will lose, more people will win, we can take some of the gains from the winners to compensate the losers and everyone wins!" The second half of that statement doesn't happen, largely because it's difficult to come up with effective programs that share the gains of the winners with the losers.
On the whole I'm a free trade supporter. It's unsurprising, however, that the losers will get pissed off and start flocking to demagogues like Trump. That risk is concerning enough that I've decreased my support of free trade, for reasons of maintaining a healthy civic culture.
> I find it ironic that publications such as the NYT which often (rightfully IMO) put a lot of weight on the scientific consensus on issues such as climate change, are much more reactionary when it comes to issues such as free trade, relying more an personal antidotes and political rhetoric.
That's because economics is a social study, not a science.
>It is important to note that practically no economist believes that free trade is not a net positive for all countries.
Yes, on average it's a net positive. Of course, if you average +20 for capital with -15 for labor, you get +5, a "net positive" for "society overall", with the slight unexamined problem that capital and labor increasingly don't overlap.
Economists have always said that some state action would be necessary to compensate the sections of the working class harmed by competition with cheaper overseas labor. The state, being run by ideologues trying to strengthen capital over labor, never took any of the corrective actions recommended by trade economists.
There is one clear benefit to global trade: It makes things cheaper. The problem is that it only makes things a little bit cheaper, and it's difficult for most people to see the effect in their daily lives.
In broad strokes, free trade is essentially a trade off between some US workers losing their jobs and reducing the cost to make everything that people buy at Walmart. I can understand that most people on hn don't shop at Walmart, and wouldn't even notice if prices for consumer goods went up by 5-10%. But the rise in household costs due to ending free trade would have a major impact on the poorest and most vulnerable citizens. A single mother with multiple children and one income simply can't afford to pay X% more for everything that her family buys.
And for what? So that a factory worker in Michigan or Ohio can have their union job back? That just seems like fighting progress. Those jobs are gone, mostly due to advances in technology and global connectivity. It makes sense to build things where it's most efficient to do so and to replace humans with robots wherever possible. Why increase prices on everything and hurt national and global economic growth just so that some people can keep the jobs that they're used to having?
And unfortunately, "re-training" programs tend to work out better on paper than they do in reality. The fact is that no one wants to throwaway a lifetime of work in a given industry in order to start all over again in another. It's not just learning new skills, it's years of meeting the right people, learning new cultures and customs, etc. So few people want to do that, it's just not human nature to start over from scratch.
HN is starting to sound like a broken record, but a Basic Income is probably the best solution. I believe that some politicians are also proposing a kind of "workers insurance", to help people who lose their jobs due to changes in technology or culture. Either of these would be a better solution than forcing price increases onto the millions of people who have jobs but still barely make enough to get by.
40 years old here, and I have seen much more pain than benefit over the last 30 years. Early in my youth I was exposed to libertarianism, and I was taken in - it sounded so simple and logical and effective. But, over time I saw the effects of globalization, free trade, and deregulation. They've been selling us, the masses, on it for 40 years. Why haven't salaries and demand for jobs increased? They always say it's because of the existing tariffs, regulations, unions, etc. 'Trust us,' they say, 'just a little bit longer - more deregulation and free trade, and it will happen. Trust us.' I've literally heard that same claim for as long I can remember.
Maybe I'm a minority. I'm the first college educated person in my family (most with 'gifted' level IQs - like that matters!). The rest were working class. Then, I've seen them slowly lose jobs, fall below the poverty line. Now, I make a good salary, and I have to send money back to my family because they're unable to find jobs, pay for transportation, pay for education or health care or housing. Luckily, they are still able to pay for food! It's like I'm an immigrant in my own country, sending money back to the old country. Just weird.
I am very happy that we have been able to raise standards of living for many who had been earning less than a dollar a day. But, this has come at the expense of the working and middle class in many 'rich' countries. There were and are much better ways to achieve the same goal. Instead of pressuring the benefiting countries to migrate to democracy and rule of law, we instead caved into our primal demand for low-cost junk. (Yay! $5 t-shirts. Thank you, Stefan Persson) Now, we have autocratic and corrupt countries with as much leverage as we used to have.
The capitalists have been selling us Powerball tickets for 40 years, and we keep lining up to buy them.
This isn't a 40 year old trend but rather has been happening ever since weavers were replaced by machines some 200 years ago (ever since the industrial revolution). The trends of rationalisation, automation, economies of scale and now globalisation all have the same effect. Replacing low value labour with higher value labour.
That's what competitive economies do and keeps them competitive (vs others, such as Cuba that just stay stuck in time). It's for the greater good, even if some temporarily will hit hardship. Understandably though, this isn't how people who are hit by this hardship think of globalisation..
Globalisation is not as inevitable as you make out, and it is not at all clear it is for the greater good. What does the greater good even mean in this case? Globalisation is definitely good for the holders of capital, because they can move it wherever it gives the best return.
If you study the history of free trade (See [1] as an excellent introduction), countries in the past had a lot of policy options available to them to protect and develop their economy/industries. As neoliberalism has become the dominant economic paradigm (i.e. cargo-cult) a lot of the past has been forgotten, and neoliberals will have you believe that the rich countries all got rich following neoliberal policies. This is most definitely not the case. Capital controls, tariff protection and government subsidy are vital tools for protecting infant industries and AND protecting your economy from mercantalists.
It is interesting to hear from Americans in this thread, as I would describe the US approach to free trade as somewhat pragmatic. In contrast, Australia is has an extremely ideological pro-free-trade policy position. We do not subsidise agriculture, or car manufacturing, have low tariffs and almost no capital controls. This approach, amongst other policy decisions, has not left us with a robust or diverse economy. In contrast, the US fights hard in trade negotiations to protect its domestic agricultural markets, defense and intellectual property industries, whereas Australia will sign everything away for the faintest promise of maybe some possibly freer access to US sugar markets (see TPP negotiations) which will probably never happen since the US will find a way to keep us out.
I think most of us get that. But, the goal of all of this should be improvement of general well-being. And, clearly that's not happening. Sure, some people are getting crazy rich, but it's not trickling down into the general population.
I disagree. In absolute terms we have never been richer. And that's really what counts. Relative richness is "just jealousy" and not a real measure of wealth. Though people do of course compare themselves through relative means..
Simply not true; there was a time in this country when a middle class lifestyle worked on one income leaving one parent free to raise kids. Those times are over, the middle class has been virtually destroyed and two income families are now the norm just to get by. That's not a relative comparison, that's an absolute decrease in lifestyle. That technology has progressed making computers cheap means diddly squat.
Any incremental progress over time results in increased wealth, but that's a rather low bar. Should think of how much better or worse things could be, not just that they improved. Technology has been increasing, innovation has been increasing (with time). That's a very low standard of expectation.
Why haven't salaries and demand for jobs increased?
Because non-wage compensation is tax advantaged so it's cheaper for companies to increase compensation there. If they spent $1 more on health care, you get $1 more worth of health care. If they spend $1 more on wages, you get $0.80 in your take home pay.
Real compensation per hour has increased, both across the economy and in manufacturing.
That increase just comes in the form of health benefits/retirement/etc.
If you want to fix this, eliminate the Obamacare employer mandate and push everyone to the exchanges and increase taxes on non-wage benefits. (You can make it revenue neutral by reducing taxes on wages commensurately.)
There were and are much better ways to achieve the same goal.
What are some of these "much better ways" to reliably and effectively achieve the same goal?
That’s one of the problems with data. It seems so exact but can really be so misleading. You break out charts, I break out charts. [1] My gut feeling is that much of middle class america has seen significant wage and livelihood stagnation. I’m all for free trade and a competitive economy, but something feels off about the past couple decades and the distribution of economic gains. And I don’t really trust the Federal Reserve and their CPI metrics—the institution is far too political and the members have too much skin in the game, rotating in and out of banking jobs.
Your charts don't contradict mine. They say yearly wages for certain households have gone down, I've shown wages+benefits/hour for workers has gone up.
It's true that CPI has it's flaws - inflation is wildly overstated. Medicine - one of the big drivers of increases in CPI (the other is education) is not even hedonically adjusted. If we properly measured inflation compensation would almost certainly be a lot higher.
Of course if you want to ignore all data which doesn't support your preconceived notions, I can't stop you. (Incidentally the data is from the BLS, not the fed. The fed just brings all the data to one convenient site.)
Sounds like we're at an impasse. Both sides have their own respective stats and figures that they draw their conclusions from. The only way forward is for each side to debate the merits' of each dataset.
If you believe this is about one 'side' vs. another, I'm not sure what we gain by having a dialogue, honestly. I'm not coming from 'a side'. I'm not battling some ideological conflict. I'm just reflecting on a reality that I and many others like me experience. Honestly, I am a pragmatist - I am not interested in an ideology or 'side' winning an intellectual battle. Maybe I was in my teens and 20s. But now, it doesn't matter what it is that works, as long as it works. I would simply like to see a system and set of policies and laws that work for most people. That has not happened in the last 40+ years, so we need a new way. I'm open to anyone's ideas, including yours. It's a collaboration, not a conflict.
Important to note there is that employer provided health care (that non-wage compensation thats supposed to be making up for stagnate wages) has been falling for the last 20 years.
For one, we should not allow trade with countries that do not have some base level of rule of law, human rights, anti-corruption, safety nets, military control, and democratic rule.
Capitalism is a game, and games still work even when there are rules in place. The rules just have to be consistent and enforced. I'm not against people getting rich. Some people like that. But, allowing those people to make us throw out important rules of the game just because it makes the game harder for them is really short-sighted.
Also, I've seen your posts before. Often, you post links to data. I like data, and each time you post a link, I check it out. But, in the past I've been convinced that you had cherry picked your data or misrepresented it. But, when I've queried you about it in the past, I'd gotten no response.
Cherry picking means presenting one set of data that supports an argument while ignoring others that don't.
The data isn't from the fed but from BLS. And, a reading of the descriptions of what that data contains shows that it includes all non-farm works, including managers and executives, and even private business owners.
yummyfajitas prefers to offer an alternate history of the USA, full of "what might have been"s. There was an era from the 1930s to the 1950s when the top income tax bracket was taxed at 91%. In the early 1960s, the top tax was lowered to 70%, and it remained at that level till the big tax cuts of President Regan, who lowered the top tax to 28%, back in 1982. When the top tax rates were extremely high, most workers sought un-taxed benefits, rather than money. For instance, in the 1950s, any income in excess of $100,000 was taxed at a rate of 91%, but benefits such as health care and life insurance and company sponsored travel were not taxed. Therefore, during that era, it became common for top workers to demand non-monetary, un-taxed perks. The same forces also drove the middle class, who were also facing high taxes -- they sought those benefits that were un-taxed, since asking for more money ran into the penalty of very high taxes.
Everything changed once President Reagan lowered taxes in 1982. Then it became much more common for workers to seek income. Seeking un-taxed benefits became less crucial, once taxes were lowered. For reasons that I don't understand, yummyfajitas prefers to flip this narrative, and suggests that workers sought non-monetary compensation after President Reagan had lowered taxes. That is both ahistorical and it doesn't even make rational sense.
The median male wage has been in decline since 1973:
Some people like to disguise this fact with rhetoric about the increasing quality of products. The debate over the standard of living can get very complex. There are thousands of variables that can be considered. To my mind, the strongest fact that effects this debate is that Bureau of Labor Statistics compiles the Consumer Price Index to keep track of the cost of an average basket of goods for an average American family, but rent is left out of the CPI. The ratio of the average wage to the average rent actually hit its happiest peak in 1958. For obvious reasons, this was also the peak year of the Baby Boom (if people have a more difficult time affording a place to live, then they will have fewer babies). Therefore, it is likely that men have seen a decline in wages since before 1973. That is, a full accounting of the median male wage, reduced by the full effects of inflation, including the impact on rent, suggests that men have seen an erosion of their standard of living since some point between 1958 and 1973.
I'm confused - your post implies something I said does not reflect reality. Do you believe the BLS data I linked to is wrong? If you subtract increasing total comp from flat wages, do you not get an increase in non-wage comp?
What, exactly, do you think I'm wrong about?
And why do you care only about male wages? I'll remind you that it's not 1973 anymore - women get to have careers if they want and compete economically with men.
The point is that one income could provide for a family. Now two incomes cannot adequately do that.
We're all under agreement that women having the chance to work is great. But I think many people, including most women I know, would be thrilled if they could afford to raise their kids instead of work (i.e. only one salary needed for the family unit, man or woman) should they choose. Even though we're supposedly so rich with IPhones, sugary foods a plenty, etc, these gains in income sure don't buy what they used to.
That's because the definition of "adequately" has grown faster than income. If you can reduce your standard of living to that of someone in 1973 you still can live on a single income (as demonstrated by data on real hourly comp).
Of course, the law makes it very hard to reduce your standard of living that low. For example, Obamacare and similar laws make it illegal to sell cheap 1973 insurance (the kind of insurance where you die if the cure hit the market in 1974). Cheap "unsafe" 1973 cars are also illegal. Etc.
The problem is increased payments to a bloated health care sector with costs growing faster than inflation does not actually amount to a real increase in compensation.
> Luckily, they are still able to pay for food! It's like I'm an immigrant in my own country, sending money back to the old country. Just weird.
Well said. I don't have any answers, but wanted you to know that you are not alone in that feeling. It is incredibly disorienting to see the impact of income inequality so clearly in your own family in a single lifetime. It is even worse when you know that your children aren't interested in pursuing one of the few paths that can lead to financial security and are going to face a very difficult future if you aren't able to provide them with a safety net of your own.
What would it cost to have a device similar to an android tablet 40 years ago? Billion dollars? Now you can get them for $100.
What would it cost to have access to the sum of human knowledge instantly 40 years ago? In video/text/audio form? Now they hand out wifi free in coffee shops.
In each case people/industries were displaced while generating enourmous wealth. The value of your paycheck may be lower, but what it can buy is incalculably more valuable. I would rather been poor now than rich 40 years ago.
The value of my paycheck can not buy an average home in my city. I'm not talking about a large McMansion, but a house built in 1940. It's great that I can buy an IPhone, but basic necessities in life like shelter, children, etc. are being priced above the middle class in many area. Sure I could move to a cheaper area, but then I wouldn't have a job.
The "sum of human knowledge" is not available on the internet. A lot of it yes, but not everything. And there is also plenty of misinformation on the internet as well.
30 years ago my library did a good job of coming up with most of the information that I needed.
Summers: "Like experts in many fields who give policy advice, the authors show a preference for first-best, textbook approaches to the problems in their field, while leaving other messy objectives acknowledged but assigned to others.
In this way, they are much like those public finance economists who oppose tax expenditures on principle, because they prefer direct expenditure programs, but do not really analyze the various difficulties with such programs; or like trade economists who know that the losers from trade surges need to be protected but regard this as not a problem for trade policy."
That's absolutely true. If you consider the plight of Mexicans less important than the plight of Americans, the factory moving to Mexico is a bad move.
And I'm not being sarcastic here; such a bias is exactly what the US government is supposed to have.
But as an individual, that's not my perspective on the world. Tell me if a person considers themself foremost an American or a citizen of the world, and I'll tell you their opinion on free trade agreements.
I'm foremost an American, and I'm enthusiastically for free trade agreements. The US government is looking out for its citizens, who on the whole will benefit greatly even if particular factory workers suffer.
(Also very happy that the rest of the world benefits, and not a little selfishly. I don't think people have a good conception of just how incredible life will be in a world economy where the average Chinese or Indian worker produces and earns as much as the average American worker today.)
> I don't think people have a good conception of just how incredible life will be in a world economy where the average Chinese or Indian worker produces and earns as much as the average American worker today.
The problem is that's only going to happen because of American wages going down significantly; something Americans aren't going to think is so incredible. When the world lifestyle normalizes out eventually, the result will be the India's and China's lifestyle stepping it up a bit and the American lifestyle being reduced drastically. The whole planet cannot live the American lifestyle, we don't have those kind of resources.
Why can't we all increase? Cause part of globalisation's promise is increased productivity which should mean we ALL get richer.
Except, it turns out only the wealthy capital owners get more in the US. And please don't tell me I'm actually better off because I have an IPhone and my grandpa didn't. My grandpa had job security, a stay at home wife, and 4 kids on a middle class salary. Virtually nobody under 30 in the US or anywhere in Western Europe could afford that today.
> The whole planet cannot live the American lifestyle; we don't have those kind of resources.
We would if a couple billion more people were given the opportunity to unlock their full human potential. And that's not even considering all the resource discounts we're going to be getting from AI and robotics improvements.
As I suspected, it's full of bad reasoning. For example, "We make up 5 percent of the global population, but use 20 percent of the world's energy."
If we gave a billion new people access to the same kind of education you and I were lucky enough to get, do you really think we couldn't quadruple our energy resources? We could literally put ten million college-educated scientists to work on nothing but solar panels.
You're nitpicking energy; but no, that wouldn't happen because it takes energy to build those solar panels. The notion that we can somehow just up the lifestyle of the unwashed billions to our level and things will just scale up is patently silly. Our lifestyle isn't even sustainable as is. Our lifestyle exists due to third world labor arbitrage; robots can't fix that without first addressing that increases in productivity mostly help the capital holders so automated labor doesn't scale with capitalism far enough for everyone to live the American way. There are many many obstacles both politically and economically that would prevent raising the world lifestyle to ours long before resources even became a problem.
It's beyond silly to try and bet on things that are decades away. If you think I'm wrong, perhaps try pointing out what you think is wrong. Do you think the Earth has enough resources for 7 billion people to live the American lifestyle? I know for a fact it doesn't, so for the whole world to live about the same lifestyle, the American lifestyle must by logical necessity be reduced.
Would you support a federal handout to former employees of factories that move operations to other countries? As you say, a small group of Americans is suffering for the benefit of the country at large; this is a way the country at large could help make up for that.
This is called Trade Adjustment Assistance, and AFAIK it's near criminally ineffective. I hope you can imagine a few reasons why that might be inevitable.
But hey, I'll pay for tens, maybe hundreds, of billions of dollars for largely ineffective programs if it's the price of substantially freer trade.
I know more Chinese-born people than I know Indianans. I also spend a lot of time working with people in offices in other countries. They're good people and I automatically like them more than any American who would consider voting for Trump.
Imagine how much better the world would be if no one thought that they were more valuable than everyone else on Earth simply because of the nation state they were born in.
I think this gets at the root of the dichotomy: it shouldn't be about making the lives of either Mexican workers or American workers better. If the system properly redistributed the profits from moving the factory abroad to, say, education and retraining and job placement programs to the American workers, then we wouldn't be having this debate in the first place.
> If the system properly redistributed the profits from moving the factory abroad to, say, education and retraining and job placement programs to the American workers, then we wouldn't be having this debate in the first place.
Yes we would, but it'd be the employers complaining about the unjustified entitlement of the American workers who think the company owes them profits and retraining. Why should a factory in Mexico pay out profits to unemployed Americans to deal with their employment issues? By what justification does a company "owe" the workers anything beyond wages for labor?
This gets into more abstract and ideological concepts about citizenship and moral duty and so forth, but at the end of the day an American company still needs to pay taxes, and so the idea would be taxes on revenue from free trade would go to alleviating the state of unemployed workers. If the employers don't like it, they can reincorporate in Mexico.
Global trade is very similar to the Music (and software) revolution that happened over the last 15 or so years.
The original creators of creative works were upset because free music, software diluted the value of the original work and it would make it more difficult to sell it in the future because most people would just get it for free. These companies essentially needed to compete against the same software/music they were selling, but free.
The same thing is happening now, but with jobs. Companies are going overseas for workers and Americans now need to compete over a worker that can essentially do the same job, for a lower wage.
Many people here have defended software and music piracy and even said things like "I wouldn't have purchased it anyway".
Well, companies "Wouldn't have hired Americans anyway". It's ironic that so many of those same people are now clamoring for government protection when they fought against patents and copyrights for so long.
Instead of complaining, you basically need to compete and offer companies something that they can't get overseas. This is exactly what the software and music industries have both needed to do to survive.
The latest Econtalk episode was an interview with the mentioned professor of economics at MIT - David Autor - about the loss of US low-skilled manufacturing jobs to China.
Health care coverage requirements + environmental regulations + other nations without these things that you can ship your goods to the US from without paying a tax penalty...
The US citizens don't need cheaper iPhones, they need decent paying jobs. The average citizens DOES NOT benefit from free trade deals. The average international company does. If these other nations had the same regulations, then it wouldn't be cheaper to move the jobs there either.
Free trade is bad for the environment and bad for domestic low skilled workers. And with all the unemployed college students around, its clear that educating people for jobs that aren't there won't fix the issue. You're selling out your citizens for your corporate overlords, and now that Bernie is all but out of the running Trump is the only one left speaking the truth about this.
All I ever see from globalization advocates are a bunch of hypotheticals and never any actual quantitative data. Kind of concerning, considering how widely accepted the assumption "globalization=good" is.
It's easy for us to criticize and complain about the economy but we only see our thin slice most of the time. Odds are most of the people active here don't know a plumber or a cop, let alone a factory worker and don't know someone directly affected by these changes or they're isolated to the hometowns we left long ago. We just move in wildly different circles.
I think this article is less about free trade and its ramifications and more about communicating "and here is why labor favors Donald Trump.."
If AFL-CIO comes out for Trump, the election is effectively over. That siphons a huge amount of cash and ground organization from the Democrats.
Wow, yes that would end it. Doubtful but not unimaginable.
Coastal and white collar America simply do not understand that rural, interior, and blue collar America have been stuck in a depression since 2000. The downhill slide actually started in the 70s, but by 2000 the engine ran out of oil and started to grind metal.
People hear Trump trolling and race baiting and think that's the reason for his support. There are a small number of people who go for that stuff but his real support comes from his (probably empty) promise to do something about this.
Trump could smear himself with cream cheese and cover himself with feathers and cluck like a chicken at the debates, and if he promised to do something about labor arbitrage (a.k.a. "free" but hugely unequal trade) he would get double digit support at least.
Bernie Sanders is also riding the same wave by the way. He would also be an unthinkable candidate a few years ago. Go visit St. Louis or Cleveland or much of rural America and you'll see stuff that resembles Russia in 1991. It's at collapse of society levels in a few places.
Try IT worker. Along with factory workers, we've been screwed the most by the elite. It's bad enough to have your job move to India, China, or Mexico.
But that wasn't enough for our masters. They took advantage of H1Bs, so now we get to train our replacements here at home.
I would imagine there are many, many IT workers supporting Trump. Most of HN swings younger, and still thinks they're doing great making six figures in their open office plan and $3k month studio apartment in SF.
I see that you comment exclusively on H1B/Immigration issues. Obviously you have spent lots of mental cycles on this.
I am curious if you have any thoughts on what immigration to unites states should look like. From my limited research on this, there seems to only 2 ways( there are others but irrelevant) to immigrate to the states 1. dual intent work visas 2. family connections.
If AFL-CIO comes out for Trump, the election is effectively over.
This will, not to put too fine a point on it, never happen. The AFL-CIO would never burn their bridges to the Democratic party, particularly not for a Republican candidate likely to lose in a landslide.
If Trump does get the GOP nod, it's going to be great fun for us sensible Republicans to watch the parade of theories of how he will still win despite being down in the RCP average by what I expect will be an easy 8-10 points.
I wouldn't count Trump out. They've been saying there's no way he'll win since the moment he entered. And the media certainly has done everything they can to stop him.
The fact of the matter is that Hillary has had it easy with Bernie. Trump will destroy her as she won't be able to hide behind politics as usual since Trump is self funded.
And the media certainly has done everything they can to stop him.
No, they haven't. They've given him absurd amounts of coverage, which hasn't been nearly as critical as it might have been, and certainly will be once the media's interests ("Blow up the racist, stupid GOP!") stop aligning with his.
...since Trump is self funded.
There is no way Trump can fund his own campaign. He's simply doesn't have a billion dollars in cash. He's nowhere near that rich.
It is true that Americans can buy cheap goods; but we need to calculate the differential good. Differential good for the blue collar workers vs differential good for the elite (capital holding class). This distribution of differentials is skewed: the elite is getting the most of the it.
While I can buy cheap stuff from Walmart, most of my income goes to rent. There is no free trade for rent and health care, while most of an average worker makes go for rent and insurance.
As many others have stated in these comments, free trade doctrine makes the assumption that the gains from said trade will be redistributed to the losers (if we did this properly there would be far, far less opposition to the system.) That we do not actually do very much (our "Trade Adjustment Assistance" programs are incredibly weak and stingy) is probably well known. What's less appreciated is that some to much of what we have doesn't even meet the Ricardian definition of Free Trade.
"Few economists have bothered to think about the issue of offshoring, preferring to dismiss concerns about it as manifestations of the old protectionist fallacy. They learned in graduate school that free trade is always mutually beneficial and ceased to think when they passed their exams. This is especially true of “free market economists” who believe that economic freedom, which they identify with the freedom of capital, is always good. Thus, most economists mistakenly believe that offshoring is protected under the authority of free trade doctrine.
However, free trade doctrine is based on the assumption that domestic capital seeks its comparative advantage in its home economy, specializing where its comparative advantage is best and, thereby, increasing the general welfare in the home economy. David Ricardo, who explicated the case for free trade, rules out an economy’s capital seeking absolute advantage abroad instead of comparative advantage at home.
...offshoring, or the pursuit of absolute advantage, breaks the connection between the profit motive and the general welfare. The beneficiaries of offshoring are the corporations’ shareholders and top executives and the foreign country, the GDP of which rises when its labor is substituted for the corporations’ home labor. Every time a corporation offshores its production, it converts domestic GDP into imports. The home economy loses GDP to the foreign country which gains it." - Paul Craig Roberts, former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal.
This is all yesterday's news, though. Even if we ripped up all our FT agreements, those jobs are gone permanently. The debate at this point is largely academic. Instead, we should focus on how to help those who lost their jobs with what we have to work with now (free training, free college, cash, etc.)
“We’ve shifted an abundant part of our manufacturing footprint to relatively lower cost countries, about two-thirds,” said Mr. McDonough, president of the climate, controls and security division of United Technologies. “Still, there’s some opportunity there.”
..
“Our company, with American workers,” he added, “builds a heck of a lot of stuff in the U.S.”
I feel really bad they have to resort to these kinds of tactics to increase shareholder value. I guess when you have a really banal business making things like air conditioners that hasn't innovated in years the only thing left is to reduce costs to stay competitive?
Methinks they should outsource the managements' jobs too.
The root problem is not jobs moving to poorer countries it's that manual labor is losing its value and will continue to do so as technology advances. A huge problem with capitalism is that it has no solution for what to do with the masses once a days labor is no longer worth a days living expenses. We are heading in this direction and are already there in many parts of the world. Education is a good solution but at some point demands for higher-level skills outpace the capacity of the average human brain. I'm not a big advocate of government run welfare but pure capitalism leaves many the gutter.
Although a similar argument could have been made as societies industrialised, that once the value of farming work fell (which nearly everyone did), then there would be mass unemployment. It didn't play out that way.
Workers are probably just forming knee-jerk opinions based on all of the evidence and all of the theory. It probably helps to calm them down that the NYT consistently equivocates between the entire concept of international trade, actual trade agreements (which are highly protectionist and monotonically increasing protection on copyrights, patents and professional services), and general lowering of tariffs.
It's democracy and everybody is entitled to vote for their own benefit. When cars where invented, horse breeders should have voted for laws against cars.
Still, not sure if the typical worker can really be sure they are a net loser? They might have less money in the pocket, but if the TV they want costs only 10% of what it would cost without global trade, maybe they are still in the positive overall?
The problem is the world is always changing, and people and nations always have to try to keep up and adapt. Or maybe not, looking at the example of the Amish? What would happen if everybody would become Amish overnight?
Well you could just say we are an Amish country now, and divide everything by Amish rules. Are there too many people already for all of them to be able to go Amish?
I've read sometime ago that the Amish population doubles in regular intervals, so in theory they should own the whole country after some time?
Americans are living way above their means with rampant entitlement mentality. You see a lot of these paper-shuffling office jobs where nothing of value is produced; people studying worthless subjects(sociology, political science, gender studies etc.) plus there is an assumption that everyone needs to go to college; trades are looked down upon; push for $15/hour minimum wage; entitlement mentality with welfare etc.
You have very little of that in China + some other countries and that is their appeal.
I would say the opposite: too many people are stuck in the wage-slave mentality. To focus the best parts of your life on competing tooth and claw in a zero-sum game of finding employment, with the consequence of failing being homelessness and begging at the side of the road: that's such a waste.
Society has achieved the capacity to keep every single person healthy and safe, but selectively denies it in order to keep them motivated by the fear. Do you really think that's a giood thing?
I'm not advocating communism, I'm just saying that maybe it's time to step back and look at the bigger picture. It's not a sense of entitlement, it's trying to make human life a grander thing than just getting by.
Especially since, when that market is inevitably disrupted, all those workers are fucked.
Without a proper social safety net, diversification is hedging against downturns...
Besides, right now where I live, it's geologists and engineers that are unemployed. Supposedly 'safe' jobs.
And finally, if everyone piles into the same industry, it drives wages down, and you'll still have plenty of grads who are unable to get a job.
The problem in the end, is that, because a degree is the new HS diploma, everyone needs one, in any subject, and unemployment is the inability of the economy to absorb workers, it has nothing to do with those people choosing the 'wrong' degree anyway.
Any reasonable definition of the market includes the people making choices about what to study.
If people are buying whatever degrees, economics says that those people are buying a degree that they consider valuable. They are paying 'the market' price for the degrees, they can't be separated from it.
It's easy to observe that other actors place far less value on the degrees than the people buying them, but those people are not setting the market price for the degrees.
We should be careful when talking about market characteristics of the market for college degrees, at least in the US. It is one of the markets that is most heavily skewed by government subsidies.
The US approach to Government subsidies on the consumer side of privately supplied markets in college and health care mostly seems to accomplish raising the prices of college and healthcare as market providers raise prices to what the relatively hotter markets will bear.
Yeah, I think the structures that make buyers less price sensitive are a pretty terrible idea, but the government incentives/subsidies/etc don't change the fact that students are part of the market and are the ones setting prices (it just screws up the prices they set).
You mean you don't want to live in a world where you actually have to learn useful skills, so that you can trade with other people who have learned to do something you find useful?
I've already addressed that when I mentioned 'rampant entitlement mentality'. It's people thinking that others owe them something just because they happen to be members of homo sapiens species. Entitlement 101.
It's not a coincidence that most of the people studying philosophy, sociology, gender studies etc. are leftists, many even radicalized (e.g. anarcho-syndicalism in philosophy departments).
That's why the leftists need a powerful state. Since they are useless parasites, they have to make money by working in government or non-profit or government-inspired jobs.
No. You're being at the least inconsistent when you on the one hand claim that it's wrong to push for a higher minimum wage (because the free market should decide what low skill jobs are "worth") and on the other hand deride sociology and gender studies as worthless when people are willing to pay a lot of money for those courses. In other words, you're not a capitalist, you're just co-opting the language of capitalism to spout a particular brand of conservative moralism.
Where exactly did I write that it is (morally) wrong to push for a higher minimum wage? I am not writing that it is wrong to push for $15/hour. I'm writing on why American workers have a hard time competing with people in Asia or South America, many of whom work for $15/day. That's why, among other things, companies are leaving for Mexico or Vietnam.
Students are taking huge government-backed student loans, so that they can go to college and study sociology/gender studies(or some other worthless field) and then get a job in the government or non-profit. Do you see the circular nature of that?
My point is that most people(except some spoiled & stupid rich kids) who are studying sociology now would NOT do it in a truly free market environment, because:
a) There wouldn't be many government jobs or government-inspired jobs waiting for them.
b) 18 yo couldn't get student loans to study these subjects. Why? For the same reason homeless drug addicts aren't getting $10 million loans from banks. It's a bad investment for a bank to give unreliable people money. Likewise, sociology(or some other worthless field) majors couldn't get a loan, since their earning potential is very low.
c) No welfare. Since there wouldn't be welfare checks to fall back on, most people would think twice about what to study and their choice would not be sociology.
You seem to have intense negativity towards what you label "worthless fields." What is your definition of a non-worthless field? Not to mention, a lot of graduates in those fields end up working in other fields anyway (I've met a good amount of tech recruiters who were polisci or communications majors on LinkedIn). That seems to contradict your point of considering these people as inherently unreliable and unemployable.
> people are willing to pay a lot of money for those courses.
No, people are willing to have the government pay a lot of money for those courses, in the form of financial aid. People who actually have to pay for the courses themselves are far more likely to study something with actual practical value.
"Far more likely"? That's quite an assertion to make. Do you have a link? I'm genuinely curious. Also, as Apocryphon mentioned, "actual practical value" is a problematic phrase. If you mean "economic value" then just say that. But on the face of it, if you are applying for work for which the minimum qualification is a degree from an accredited college/university, then any course which gets you closer to fulfilling that qualification has some economic value.
> if you are applying for work for which the minimum qualification is a degree from an accredited college/university, then any course which gets you closer to fulfilling that qualification has some economic value.
This is true. But why is the minimum qualification a degree? For some jobs that qualification makes sense; but there are many for which it doesn't, yet it is still considered a minimum qualification. The assertion that this state of affairs is largely due to the fact that college degrees are subsidized--many people can get them without having to pay for them themselves--is certainly not original with me; economists have been making it for decades.
> people studying worthless subjects(sociology, political science, gender studies etc.)
College isn't trade school, its purpose isn't to study profitable subjects, its purpose is to produce well rounded well educated people, not to produce workers.
Sociology and political science, which you term useless, are exactly the sorts of study focused on the issues you are addressing in your complaint. They may not be valued by capital; do not confuse that with uselessness.
Why does it matter if sociology or political science are focused on what I wrote above? It's not like they're going to solve the problem of parasitic people with worthless degrees, since they are one of them. They won't eliminate entitlement mentality. They won't promote trades, because if they did, then why didn't they study trades if they're so great?
They won't do anything, except enrich themselves with high-paying parasitic office jobs in the government or some non-profit.
> You have very little of that in China + some other countries and that is their appeal.
China is busy building stuff that no one will use, it's the equivalent of paper-shuffling and is quite literally the product of a giant stimulus plan by the state:
