Sunday, April 06, 2008

The New York Times' free trade deception:

From their editorial, jokingly titled "Some Truth About Trade":
Democrats need to tell voters the truth: First, trade is good for the economy, providing cheap imports and markets for exports, spurring productivity and raising living standards.
True about "providing cheap imports and markets for exports" and "spurring productivity" (up to a point). False about "raising living standards" - because some workers will be paid less (or even lose jobs) - as the next sentence reads:
... while trade can drive down some wages and displace some jobs ...
Free trade will raise the living standards of those not affected by free trade. Hooray!

The editorial continues:
Senators Clinton and Obama know protectionism could have disastrous consequences. Do they really want a trade war with China, the United States’ second-biggest trading partner? Would they want to block a global trade accord designed to help the poorest countries?
The Brad DeLong argument. Free trade should be pursued in order to help the poorest countries. Something of a dodge, since "poorest countries" doesn't necessarily mean "poorest workers". Who does the New York Times care about? American workers or (more likely) those abroad?

Towards the end, we read:
American workers need more to help them cope in a globalizing economy. The puny program to help workers displaced by trade needs to be strengthened and broadened to include other workers displaced by economic forces beyond their control, including technology.
This is a complete joke. Why have a program that attempts to determine who has been affected by free trade and then "helps them cope" (whatever that means)? Those programs are typically crudely fashioned and will not help many affected by free trade. Will a barber in a city that has seen its manufacturing shift overseas get help? Or will it only be those on the factory floor? And what is the "help" going to be? Transfer payments? They suggest so:
Unemployment insurance needs to be strengthened, perhaps to include some form of insurance to shore up the wages of displaced workers who are forced to take lesser-paying jobs. A more progressive tax policy could help redistribute some of the gains of trade accruing to those on the top of the income scale. More investment in physical and human capital — from roads and railways to workers’ lifelong education — would enable businesses and workers to better compete.
Okay all you domestic workers, just sit back and relax. All will be okay after we enact a tax policy to redistribute gains. Until then, wait and keep your mouths shut. (And of course, after years of this not happening, the workers will be somewhere else doing something else - so the problem disappears.)

Finally, the notion that a better road and railway system (and the hoary "education solution") will enable businesses and workers to better compete with factories paying one-tenth the wages is a total lie.


I agree the NYT is full of crap but the democratic candidates are being dishonest by implying that there is something that can be done to stop the tsunami of globalization. Nothing that is short of manning the ramparts of protectionism. I don't think that would happen. That is a short term solution at best and a false solution at worse.

I don't think there is a solution. Americans have to go through a tectonic shift in their thinking about work and their place in the world.

What do you suggest?

By Anonymous Rockie the Dog, at 4/06/2008 10:01 AM  

I think there is something that can be done to stop globalization: exit the system.

Or at least exit the system where it involves trade with countries that have workers being paid much less than in the United States. Effectively, that means to continue to trade with Europe, Japan, Canada, and some others.

I don't see that as a false solution. It's simply not trading with entities that pay their workers less. The falsehood that free traders engage in is, that they took (roughly) a 19th century Western European model where every worker's labor was priced about the same, and noticed that some places (mostly due to geography) were more efficient than everybody else (raising wool, growing tomatoes), and correspondingly cheaper. Given that, they declared that it made the most sense if each region could do what it does best and trade with each other so that the productivity benefits could be shared. But that (geographic price) advantage is not what's happening when we trade with China. It's due to lower wages, not better productivity. But free traders, beholden to examining everything through the lens of the consumer, missed that point. And missed the impact on workers that trading with (what could be considered for the point of argument) slave states.

By Blogger Quiddity, at 4/06/2008 2:29 PM  

Globalization is a step in the evolution of human society. Technolgy, particularly communication technology, has brought us all together.

There will be give and take as a global culture developes. Islamic extremism is a reaction to this ... they're trying to stop the tide. The Chinese are wearing western clothes and we're stir frying bok choi.

Americans are one of the world's wealthiest societies. But wealth and wages will have to be equalized. With Americans at the high end they will inevitably have get use to less.

Protectism would have just delayed the inevitable. Secondarily, all of the cheap goods from China would have been kept out but Americans wouldn't have built them because they would be too expensive so American consumer wouldn't have been able to afford them.

Americans need to find theri place in the new economy. I think the American economy of the future will have four employment sectors: low end service workers providing services for other Americans (cooks, waiters, gardners, garbage collects), high end service workers providing services for other Americams (doctors, lawyers, teachers, brokers), sales people selling things to other Americaxs (realtors, insurance salespersons, car dealers), and lastly, those that have global trade potential, intellectual workers (artists, designers, engineers, scientists, musicians).

By Anonymous Rockie the Dog, at 4/06/2008 8:41 PM  

In the long run, imports do have to be paid for with exports, and it won't be real estate brokers, lawyers or garbagemen who do so. As for the much ballyhooed 'creative class' of artists, scientists, designers, etc...such occupations will never employ more than a miniscule fraction of the American workforce.
These are science-fiction fantasies.

The problem is not free trade vs. protectionism; it is that the Chinese government has moved heaven and earth to set itself up as the workshop of the world, and we've been glad to help them in exchange for covering our debts. It's not a matter of 'the failure of free trade'; rather the success of Chinese mercatilism and American irresponsibility. There's a simple solution to the problem that doesn't involve tariffs or enlightened government intervention, and it's taking place right now: a collapse in the value of the dollar.

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