If you take a job away from someone who is paid a reasonable wage because they enjoy the protections and prosperity of democratic government, move it across a border, and give it to someone living under a thugocracy, forced to work for pennies with no protections whatsoever, it should be just plain obvious that the worker on our side of the border and the worker on the other side of the border are not going to be better off. And when you do this on a massive scale it just stands to reason that most people on both sides of the border are going to be worse off.
But propaganda being what it is we were somehow convinced to try a worldwide experiment in taking good jobs from democracies and turning them into bad jobs in thugocracies. Now, of course, the experiment has run its course and we can see the results.
Worker Against Worker
Setting worker against worker enabled a few people to get really, really really wealthy and powerful and use that wealth to become even more wealthy and powerful. Our country is in decline, burdened by massive trade deficits because the ones with vested interests in cheap labor won't let us won't take on the mercantilists, burdened by budget deficits because those vested interests have bought low taxes and government subsidies, our infrastructure crumbles because multinational business leaders refuse to invest here, with no more need of us as workers, and the resulting hollowed-out middle class can't consume anymore. Other countries also suffer from similar stresses.
Out of this situation a new global elite has emerged, contemptuous of democracy and government and any power but the power of their own money. In country after country, these top few won't share the proceeds with their own, either, while they keep the world from approaching solutions.
In January's post, Establishment Realizing: When You Close The Factory We Can't Make A Living, I wrote about how "the establishment," or as bloggers call it, "The Village" or "Versailles," are starting to realize that our trade policies just might not be working for us. Of course, they come to this realization only after our trade deficits approach the trillion mark, after we have lost millions of manufacturing jobs, after we have closed tens of thousands of factories, after we have lost the tech manufacturing industry, and after we have abandoned hopes of leading in green manufacturing as well...
(We're still waiting for them to realize that tax cuts do not increase revenue, that spending more on military than all other countries combined might contribute to deficits, that our too-big-to-fail financial sector is capable of causing problems, that the climate really is changing, that allowing corporations to pump money into politics means the end of democracy... but hey, a dollar spent by a vested interest on a politician apparently is a dollar very, very well spent.)
In the Washington Post, Steven Pearlstein recently reviewed Dani Rodrik's "The Globalization Paradox,"
It is dogma among economists and right-thinking members of the political and business elite that globalization is good and more of it is even better. That is why they invariably view anyone who dissents from this orthodoxy as either ignorant of the logic of comparative advantage or selfishly protectionist.But what if it turns out that globalization is more of a boon to the members of the global elite than it is to the average Jose?
Right, what if?
In "The Globalization Paradox," Dani Rodrik demonstrates that those questions are more than hypothetical -- that they describe the world as it really is rather than as it exists in economic theory or in the imagination of free trade fundamentalists.. . . The starting point of Rodrik's argument is that open markets succeed only when embedded within social, legal and political institutions that provide them legitimacy by ensuring that the benefits of capitalism are broadly shared.
And a unicorn. And a rainbow.
The paradox, as Rodrik sees it, is that globalization will work for everyone only if all countries abide by the same set of rules, hammered out and enforced by some form of technocratic global government. The reality is, however, that most countries are unwilling to give up their sovereignty, their distinctive institutions and their freedom to manage their economies in their own best interests. Not China. Not India. Not the members of the European Union, as they are now discovering. Not even the United States.In the real world, argues Rodrik, there is a fundamental incompatibility between hyper-globalization on the one hand, and democracy and national sovereignty on the other.
Clyde Prestowitz threw a one-two punch at free trade after Senator John McCain claimed that the iPhone and iPad are Made in America. In Why isn't the iPhone made in America? at Foreign Policy magazine, Prestowitz wrote,
John McCain provided some good laughs and made himself look stupid on a recent ABC news interview by telling Diane Sawyer that the iPhone and iPad are great examples of products that are made in America.They're not. And given the amount of high technology production in his state, McCain should certainly have known better. The fact that he didn't does make you wonder about what, if anything, they know in the U.S. Senate.
Prestowitz goes on to explain that while the iPhone is manufactured in China, parts, software, design and other components are made all around the world, not necessarily for low wages. He concludes,
So if America actually did produce the stuff it says it is good at producing, it wouldn't have a trade deficit with Asia for which China is the proxy at all. It would have a trade surplus and 20-40,000 more jobs than it has.
Prestowitz looks at a smaller picture here of the back-and-forth of trade with the US and China. Design, software and other capital and technology intensive components are not made in China. But the bulk of the jobs are in China. This could work for everyone if people there were paid enough -- and allowed by their government -- to buy things made here. That would be trade and everyone would be better off. But trade isn't really the point of "free trade."
Then, in It's not just the iPhone that America doesn't make, Prestowitz conitinues,
Okay, so yesterday I explained not only that John McCain was wrong to say the iPhone is made in America (as you already knew), but also that most of you were wrong to think it is made in China. I went on to show that the phone is only assembled in China from high-tech parts that are mostly made in Japan, South Korea, and Taiwan. I further explained that production of these parts is not labor intensive, but capital and technology intensive.In other words, these parts are just the kinds of products American economists, Silicon Valley venture capitalists and entrepreneurs, and Washington political leaders always say America is the best in the world at making. ... Then I left you with the question of why, if America is so good at making this stuff, it doesn't.
[. . .] it was believed that unilateral free trade (keeping one's markets open, even in the face of protectionism by one's trading partners) was a winning proposition. Thus, there was no need to be concerned about things like subsidization of key foreign industries or loss of capability in these fields, and hence no need for trade measures that might upset delicate geopolitical relationships.
This economic doctrine has been based upon the assumption of Anglo/American economics that economies of scale either don't exist in most traded products and industries or are relatively unimportant. That this assumption is dramatically and demonstrably wrong and not accepted by most of the non-Anglo world has not deterred its application to the making of much American and global trade policy.
In other words, it doesn't work. But we already knew that. We can see it all around us. And it is us who have to live with the results.
This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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In order to correct the issue we must bring some sort of strong manufacturing base back to the U.S. Yes this will raise prices on American goods, however you would have a strong set of middle class workers who, if supplied with jobs that are not as scarce as they are now, could be paid more and counteract the higher price of the goods.
We are one of, if not the only country, which is told that deficit spending is ok. To a degree a deficit is ok, our economy is one of the few that can still function with a deficit, but trillions is too much especially when we are creating no real wealth for our nation. We push the wealth (manufacturing) to other areas of the globe because it is cheaper and we fail to realize that by doing that we our pulling ourselves lower and lower in the amount of wealth the nation secures. The globalization tactics the U.S. uses must be changed to cut deficits. Telling the U.S. "You live above your means anyway deal with it” won’t solve the issue.
We see some indication of that raising standard of living in China,but the overall cost of Free Trade is proving unbearable here at home.Especially because we have less than ideal conditions involving certain greedy corporations.
I believe future generations will look back at this era where the winners are those nations that do the most harm to their environment and allow little protections of workers and make comparisons to Colonial Times and slavery!
The real problem is income inequality and worker dislocation.
Remedying these problems will require governments to take a more active role.
Many succesful industrial nations do just that.
Outdated institutions and ideology have thus far prevented the United States from taking corrective actions.
I had hoped the current crisis would result in a more proactive political climate.
However, reactionary politics combined with anti-regulatory corporate lobbying have thus far circumvented corrective measures to a large degree.
Some references on free trade from both the right and the left:
Free Trade Doesn't Work by Ian Fletcher
Bringing America Home by Tom Pauken
How the Economy Was Lost by Paul Craig Roberts
who really believed that third world countries would be buying US made products in any meaningful way?
free trade has never been about what the propagandists preached - "lifiting all boats" and other nonsense.
it is and has been about making it easier for jobs, technology and capital to move across borders, subverting comparative advantage. the measure of this of course is the trade deficit - the measure of jobs, technology and wealth leaving the US
NAFTA as we said back in the day No American Factories Taking Applications
a) 9 out of 10 of our largest trading partners are full democracies, with China being the lone outlier. In addition, our biggest trading partner, Canada (1), pays there workers quite well , as do Germany (5), UK (6), France (8), Japan (4), Korea (7), and Taiwan (9).
b) As much many would like imports to be the problem, a bulk of them, 55%-60%, are oil, chemicals and capital goods used in the manufacturing process. The shut down of car companies because of parts shortages due to the Japan quake is an example of how imports play a role in the manufacturing of higher value-added goods.
c) Since the 70’s our manufacturing production has continued to increase and we now produce more than we ever have. Production has not gone down. Yet jobs have disappeared. How is it that manufacturing output and manufacturing jobs are inversely correlated?
Technology!!! That is where the jobs have gone and it is where opponents of trade need to focus their efforts.
Kai
the parts shortages from japan show a major weakness in having supply chains spread all over the world
honest economists recognize that those production numbers do not accurately reflect the amount of foreign content and labor in US goods and are artificially inflated
techonogy does not account for the scale of job and factory loss. what new mfg tecnology in the last two, ten, 20 years has their been? these are largely mature technologies, and when its cheaper to ffshore than to invest millions in automation.
We have a vast market of our own here, and others want in. If we have conditions on access to our markets, like paying fair wages, protecting the environment,or else pay a big tariff to remove the competitive advantage gained from not doing those things, then they either make those changes or the tariff finances OUR investment to increase competitiveness.
so many even among non free trading economists are tar-iff-ied of the "T" word, yet it is the most appropriate,easiest to apply method to right an imbalance, not to mention raising govt revenue, easing the need for foreign debt and reducing the tax burden on individuals and business
I would rephrase your statement to read like this:
‘[Technology and Modern Manufacturing] CAN be about that, but we have to approach it with that goal, not the goal of exploiting [the Agricultural Worker that uses traditional farming methods] to lower costs.
We have a vast [traditional family plot farming] market [] here, and others want in [to make it more efficient using advanced technology and new efficient farming techniques]. If we have conditions on access [to the agricultural industry], like [limiting technology], protecting the environmen¬t, or else pay a big tariff to remove the competitiv¬e advantage gained from [efficient farming using technology], then they either make those changes or the tariff finances OUR investment to increase competitiv¬eness [of the traditional farmer].’
Just think, if we followed the above, we would have protected the 70 percent of our population that was in agriculture at the turn of the twentieth century. We would be THE GREATEST and STRONGEST agricultural nation on earth…but wait, we are anyway. How is that possible?
But wait, all those poor farmers lost jobs and those jobs never came back. Now there are only 2-3% of the population with good farming jobs and everyone else, by assumption, must be worse off with a worse job. No?
Kai
http://prestowitz.foreignpolicy.com/posts/2011/03/09/its_not_just_the_iphone_that_america_doesnt_make
NAFTA" 58,000 plants an factory close in America 25 million American jobs lost because of NAFTA
An instead of removing tax cut from NAFTA" to move jobs overseas ? Pres Obama want to jam another FTA Thur ?
Korus" FTA with Korea .. no jobs for the American worker with this FTA none .
Why play that game?
For us to play this game to win we have to give up all our environmental laws and all our protection for workers. No EPA No OSHA!
I think that's a bad idea!
Just my view as someone still manufacturing here helping employ 500 + people so I'm bias but I believe my arguments are sound!
http://citizen.typepad.com/eyesontrade/2011/03/debunked-fta-export-claims-continue-to-pop-up.html
Eyes on Trade: Debunked FTA Export Claims Continue to Pop Up
"In his announcement of the hearing on the Colombia FTA that occurred yesterday, Rep. Kevin Brady alleged that "Since 2000, U.S. exports to the 13 countries with which the United States has implemented trade agreements have grown almost twice as fast as our worldwide exports," but a fair accounting of the export record does not support this claim.
In our September report about the dismal record of U.S. exports to our FTA partners, Lies, Damn Lies, and Export Statistics, we debunked similar claims floated by the Chamber of Commerce and the U.S. Trade Representative. Apparently fair trade opponents think this claim is just too good to let facts get in the way, because it has surfaced again in Rep. Brady's statement.
It seems Rep. Brady is engaging in the same apples-to-oranges comparison trick that we highlighted in our September report (see page 18). If you take the unweighted average growth of exports to FTA partners and compare it to the weighted average growth of exports to the world over 2000-2010, you'll get an FTA growth rate almost twice as high as the growth rate of exports to the world.* Comparing weighted and unweighted averages makes FTAs seem great for U.S. exports, but it's a false comparison..."
Democrats AND Republicans are just two wings of what Thomas Ferguson calls the Property Party in his "Golden Rule:..." book, first published in 1995:
http://www.amazon.com/Golden-Rule-Investment-Competition-Money-Driven/dp/0226243176
Golden Rule: The Investment Theory of Party Competition and the
Logic of Money-Driven Political Systems (American Politics and Political Economy Series
"To discover who rules, follow the gold." This is the argument of Golden Rule, a provocative, pungent history of modern American politics. Although the role big money plays in defining political outcomes has long been obvious to ordinary Americans, most pundits and scholars have virtually dismissed this assumption. Even in light of skyrocketing campaign costs, the belief that major financial interests primarily determine who parties nominate and where they stand on the issues—that, in effect, Democrats and Republicans are merely the left and right wings of the "Property Party"—has been ignored by most political scientists. Offering evidence ranging from the nineteenth century to the 1994 mid-term elections, Golden Rule shows that voters are "right on the money."
Use any metaphor you like (share of the pie, pyramid of wealth etc) the clear and growing division between rich and poor shows the paucity of unrestrained corporatism.
Everyone remember VHS video? All of that was developed here in America in the 60's then the whole patent/technology was sold to Japan..... where ALL video recorders and equipment is still made today. No American worker has benefited from what we developed here.
We need to focus our attention on what Americans can develop AND PRODUCE HERE! We have the materials and the workers. However, the efforts now are towards lowering the American wages and protection provided by collective bargaining.
The American large companies have $$$billions sitting on the sideline. Why not invest in America to create jobs?
When unions are gone and Americans will work for less then the money will flow..
Got to love Free Trade.
Democrats and Republicans need to get off the 2012 political agenda and start working together to re-envigorize America as a place to develop and make products for the world to buy.... like we use to do.
Are you willing to have your income reduced by over 90% ?
Unfortunately, that is the direction US companies are going. Lower American workers wages by eliminating collective bargaining so they will accept anything to get and keep a job... even 90% less?
With so many Americans unemployed this is a sound strategy. The companies have lot's of money and can hold out for a long time to achieve their goal.
We are in a race to the bottom. The middle class lose.
25 million jobs lost ? That should have been Obama priority in 08 . We are done now.
KORUS" FTA is now ready to pass . With Obama backing ? In 08 Obama said a bad FTA for the American worker . Now he loves it .
At least to the American middle and working classes.
clueless