Tuesday, June 22, 2010

Bad protectionist situation:

This is something Brad DeLong would surely object to: (excerpts, emp add)
SEYMOUR, IND. -- There is one factory left in the United States that manufactures the basic ironing board, and its survival against Chinese competition demands unrelenting, production-line hustle.

The 200 people at the plant in this small town make their boards very, very cheaply and as fast as 720 in an hour.

"The people on the line are making pretty good money; it can work out to about $15 an hour," said Dave Waskom, 61, a tool and die maker who readied the plant's machinery for 37 years. "But they work like dogs."

... it is the tariff that gives the plant here, a division of Chicago-based Home Products International, its biggest advantage in selling to Wal-Mart, Target, Kmart and other companies.

... there is little doubt in Seymour ... that the tariffs saved 200 jobs and leveled a playing field that had been tilted in favor of foreign factories.
Won't anybody stick up for the DeLong free-trade utopia? Fortunately, there is someone:
"It doesn't make much sense to force millions of U.S. consumers to pay higher prices for ironing boards to save 200 jobs," said Howard Rosen, an economist at the Peterson Institute who has organized efforts to get retraining programs for workers displaced by the offshoring of jobs. "It would make more sense to help workers move to other jobs."
Thank goodness there is someone from the Peterson Institute to look out for the average Joe, advocating the scrapping of 200 jobs paying at most $30K, and telling the workers to look for "other jobs".

UPDATE: Yglesias isn't fond of the protectionist measure:
... if you repeal the [tariff], the profits will flow away from [the 200 employee manufacturing facility] and toward retailers like Target and Wal-Mart. Consumers will spend less money on ironing boards and will either spend more money on other things, or else will save more money generating extra investment funds. Either way, 200 people will lose their jobs but new jobs will be created from the extra investment and consumption financed by cheaper ironing boards. All-in-all, throughout the economy resources would be better-allocated and the vast majority of people will end up better off.
Think of all those people who use irons, saving $2 each (in Yglesias' scenario) and directing all that money to "extra investment funds".


funny how opinion writers and economists (but I repeat myself...) are always in favor of cheap labor.

By Anonymous Troy, at 6/22/2010 2:39 PM  

With seventy years of preaching, and thirty years of living failed labor policy; you get the liberals spewing the same brainwashed non-sense as the neocons. We throw billions at big agri, big oil, big pharma and just threw trillions at big banks, etc. But heaven forbid I spend an extra five cents on a product made here that helps a neighbor earn a living wage. Nice.

By Anonymous Mart, at 6/22/2010 5:30 PM  

Silly me! I thought the American Dream was to work and buy a house, a car, raise kids, etc.

Apparently, the NEW American dream is to compete with foreign labor willing to work for 35 cents a day!

Just think of all the things I could now afford that might be too expensive if made by American hands. Too bad I don't have a job anymore! And the ones that are available don't pay enough to even shop at Wal*Mart.

Thanks, NAFTA!

By Anonymous Anonymous, at 6/22/2010 6:15 PM  

Yglesias is a privileged young punk who has never done a day of real work in his life -- to him, workers and jobs are economic abstractions.

By Anonymous joel hanes, at 6/22/2010 10:29 PM  

The modern economics profession refuses to understand that there is a third category of outgo between consumption and savings.

It's called THE RENT. And it dwarfs consumer spending and savings by an order of magnitude.

The cheaper we live, the higher the rent we pay to the landlord (and the higher the mortgage is for new buyers). This is obvious but we cannot see it because we are immersed in it like fish in the sea.

By Anonymous Troy, at 6/23/2010 1:30 AM  

Great to see the comments as well as Ugga's post. We have lost our industrial capacity over the past three decades, and regardless of whether we have Democrats or Republicans running things.

The corporatization of American society continues unabated.

This is why Obama is so insistent on attacking the last vestiges of the social contract with his "commission" on Medicare and Social Security.

I am getting close to deciding to vote for a third party presidential candidate again...I know I won't because I know what happened last time I did that in 2000. Republicans are totally insane, fascistic and...well, that's enough, isn't it?

By Blogger Mitchell J. Freedman, at 6/23/2010 7:00 AM  

The odd thing tho, in the next paragraph of Matt's article, he admits that the anti-protectionist argument is unfeasible, but still he can't bring himself to say that maybe, perhaps "free trade" doesn't work like it's supposed to. I like Matt, but I'm disappointed in this post; however, I can't help but read this as a small step towards his rethinking his DeLong-ish tendencies. (Sometimes wonky thinkers need to remind themselves that there are tangible, material consequences to policy.)

By Anonymous Anonymous, at 6/23/2010 11:34 AM  

A though experiment. What would you do if the Chinese - or Martian robots - offered us an infinite supply of free ironing boards? Would you reject them in order to employ Americans making something that could be had for free?

For myself, I'd rather provide those workers with generous unemployment benefits - generous enough to replace their lost earnings - while taking the free (or, realistically, cheap) products from the Martian robots or the Chinese manufacturers. That way we all end up ahead.

By Anonymous eb, at 6/23/2010 12:37 PM  

That way we all end up ahead.

Or so sez eb. The reality is that money still flows out of the U.S. (to either Mar or China), and taxpayer funds still flow to the unemployed. And over the longer term, we find that we can no longer afford either the benefits or the ironing boards, no matter how cheap they seem.

Your approach--take it because it's cheap now--is really just a version of "Gimme low-cost goods no matter what the price."

By Anonymous Anonymous, at 6/23/2010 4:47 PM  

"I'd rather provide those workers with generous unemployment benefits - generous enough to replace their lost earnings - while taking the free (or, realistically, cheap) products from the Martian robots or the Chinese manufacturers."

That's not the choice at hand.

First, the unemployment benefits aren't as generous.

Second, unemployment is psychologically damaging.

Third, are you going to put people on a stipend for their entire lives after their jobs are permanently shipped out?

Fourth, economists don't appear to realize it, but there's more to economics than abstract concepts like capital, and aggregate measures like GDP. When entire sectors are outsourced, they die, and that represents lost knowledge and industrial capacity that takes a long time to come back.

Fifth, the "free market" isn't free---there's a major distortion. Namely, the Chinese et al. keep their currencies undervalued.

By Anonymous Anonymous, at 6/24/2010 11:20 AM  

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