Economists are now admitting that they were wrong about globalization
foreignpolicy.com
foreignpolicy.com
This is the crux of it. The notion that economics, as a field, was blindsided by the rapidity and extent of economic dislocation doesn't match the history. Such a narrative is a whitewashing of a particular clique of superstar economists, which explains why Krugman is so committed to it despite his current policy views.
I was studying International Affairs as an undergraduate in Washington, D.C. in the late 1990s. These issues were well known and heavily discussed, domestically and internationally. By the late 1990s the notion of controlled, incremental trade expansion as espoused by people like Prime Minister Mahathir of Malaysia was already on the upswing in the international community and cemented after the 1997 Asian financial crisis. That is, while mainstream economists were highly skeptical about the efficacy and unintended consequences of such industrial strategies, not to mention of the leaders like Mahathir who espoused them, it was impossible to deny the fundamental premise that the existential risks of too-rapid global trade expansion were very real.
The problem in the U.S. was much the same problem we've always had: free trade became synonymous to opposition to government intervention. All the free trade bills in the U.S. invariably included funding for re-education and R&D to help manage dislocation and build competitive advantages, but they were meager financially and suffocated by neglect. And that's because these measures were considered "government intervention" and hedges to preserve "big government", which as we all know as Americans (and, to a slightly lesser extent, everybody else in the Anglosphere) meant naivety, ineffectiveness, and corruption. So it's no surprise that the American public and politicians drifted toward a fundamentally broken policy situation.
This is no less true today even as we've soured on the notion of free trade. We'll put up trade barriers, but we still refuse to heavily invest in re-education and R&D, and not even our most liberal policymakers have proposed an industrial policy aimed at managing globalization. Just the same 20-30 years ago, these things are synonymous with big government, corporate subsidies, etc. Instead, we limit free trade presuming that the domestic industrial economy will naturally restore more equitable employment and wealth distribution.
Nothing about free markets guarantees "equitable" distribution; indeed, history has proven that they often tend to distributions that are untenable democratically. But we're even less prepared to effectively manage this stuff for our domestic economy than we are for international trade. Anybody expecting our social equities to substantially improve simply because we're limiting free trade is delusional, though they're in good company.
The thing is, we can never put the free trade genie back in the bottle. And the truth is, on balance free trade is better for the world and for every nation in it; just as with free markets more generally. The problem as always is managing dislocation and wealth distribution. We need to learn, as a society and as economists (armchair or otherwise--I'm not an economist), to stop equivocating industrial policy with government control. Until we do that, we'll never be able to discover and identify the levers and strategies available for mitigating the disruptive aspects of free markets while minimizing the risks of corruption.
But this hinges on the premise that employers are receptive to older retrained workers. In my life time I have never seen this, and I have long considered it to be one of the biggest lies in economics. This has never happened on a large scale, and is an academic theory. Whats more, this would only be possible with a some kind of glut of jobs. Starting at the bottom of another career hierarchy at the age of 40 is a complete disaster, you will be out-competed by 22 year olds who cost alot less, are easier to train, have less grievances about a low salary, are okay with the bottom rung, and do not have huge expectations. Even more than that, shifting X00,000 people from one career to another would flood the labor market and destroy wages. The whole thing makes literally no sense.
My point is that creative solutions are possible, if we dispense with the notion that the only solution possible is the free market.
But there's always the risk of a pathological co-dependency on government employment. You can see this in many developing countries. So for partly legitimate reasons, the Civil Service has long been the boogeyman of Republican politics. Specifically, that civil servants are reliable "big government", Democratic voters. Better to 1) pack their voting power and 2) prefer private out-sourcing. This is one major reason (if not the major reason) why government agency activity and policy have migrated to D.C., and why the headquarters of so many corporations have moved to the D.C. metro area.
Those that choose not to move can leverage their experience in private industry.
That's about $50 million wasted per job.
I was not proposing the above example as a foolproof plan applicable to every situation, so much as an example of a type of plan that has worked in some scenarios in the past.
I should also point out that part of the plan for the Scandinavian plan wasn't the replacement of government workers with locals, as much as the expectation that by moving so many jobs into such small areas, they were guaranteed to majorly shift the local economies. Numerous jobs opened up overnight supporting all these well paid government employees moving into the area.
Nonetheless, I am happy to learn about the counter-example, thank you!
It would be nice if you could name the failure you cite, too.
Government experts will live in a lot of places. NASA has major operations in a metro area in Alabama with only ~500k people, for instance: https://en.wikipedia.org/wiki/Marshall_Space_Flight_Center. That's more periphery than center, in my mind.
Sorry, should of course named it as that's what I was asking. It was the move of the Finnish Medicines Agency from Helsinki to Kuopio. Checking the latest status, they do now have presence in both cities so it wasn't cancelled in the end; I guess they pushed on but ended keeping the Helsinki office for the experts refusing to relocate.
Do you have the name of your example?
Not attempting such things doesn't mean we avoid the risk of such wealth destruction; it just means we have nobody to a point a finger at when it happens. Politically this is easier because of how people think and the dynamics of our social discourse. See Appeal to Nature Fallacy (https://en.wikipedia.org/wiki/Appeal_to_nature). This is especially true the more cynical and ideological we become as we're more likely to pounce on failures of action, but excuse failures of inaction as inevitable natural events or limitations.
Except: 1) UBI is unproven and 2) it strikes me as a bit of a band-aid solution designed mainly to avoid confronting certain ideological assumptions.
1. doesn’t cover the rising costs of medical care and insurance (in the us at least)
2. won’t keep up with inflation
3. sets up private markets to potentially inflate prices “because people have 1000 dollars extra to spend”
UBI in concert with price limits for basic goods and services, insurance reform, and medical costs limits might have a chance.... but then you are now confronted with the potential that it’s now the “rich and large corporations” who are subsidizing everyone, giving them extraordinary political power over the govt/people
i’m still skeptical of UBI
1. UBI (including some fractional amount per child) 2. Free universal healthcare (i.e. Medicare is no longer age-limited) 3. Better education & free public universities 4. Some kind of higher tiers of UBI for disabled people who really need it (judged strictly)
And then get rid of every single other means-tested benefit (including Social Security), as well as tax-advantaged retirement plans (which overwhelmingly benefit the already well-off), and get rid of the favorable tax on LTCGs and carried interest; everything pays full-freight income tax. After this, benefits are either free to everyone (i.e. healthcare) or you pay full freight out of your UBI. And UBI is not scaled by CoL, because it doesn't make sense to subsidize landlords in expensive cities.
And even with all of that, it's not clear that it won't be vastly more expensive than the current system, making it effectively unaffordable. There's also the issue that some people will not spend their money correctly, e.g. they'll fritter it away on drugs/alcohol and not have enough to pay rent or buy food. So you'd need some kind of combination of food stamps and Section 8 housing vouchers, paid out of UBI, for people who need to be forced to allocate their money correctly (as there will no longer be any separate means-tested food stamps or housing assistance).
I could see something like this working in smaller, well-connected, yet independent communities, but I'm struggling to see how it could scale up to a country the size of the US. The rich would be paying so much more in taxes to essentially subisidize many people who might choose not to work at all, that I think it's inevitable they'd manage to overthrow it.
Like you, I think from a realpolitik view of things (if nothing else), that it can't work.
How much would UBI reduce the crime rate? How much would it increase the rate of entrepreneurship? How much would it reduce anxiety and depression? How much would it increase average education levels? Upward mobility? Democratic participation and voter turnout? Volunteer work and charitable giving?
No one knows the answers to these and many other similar questions, but it seems plausible to me that the cumulative effect could produce drastically more wealth than it costs to implement.
Our country (not to mention our world) is facing many extremely severe and worsening problems, many of which are rooted in economic inequality. We are, in my opinion, highly unlikely to solve these problems by incrementally chipping away at them, and the prospects for leaving them unsolved look increasingly bleak. So I think we need to be willing to consider big solutions if the cost-benefit analysis is favorable, even if they do require huge investments. We know UBI is technically affordable based on the amount of wealth that exists in our country—the question is whether it would really work (something we can test), and then if it would, whether we can summon the political resolve to make it happen.
Also I don't think Oracle should be allowed to hide behind the Phoenix name. This was Oracle PeopleSoft. Why would you pay billions for a piece of software when the maker isn't even willing to put it's name on it?
It is astounding nobody was fired for this.
What would your estimate be to: "rewrite facebook in language L, with the same behavior, bugs and all".
When people think of buying business software systems, they often imagine it's like buying a car or a an app on their phone. A better metaphor for software infrastructure is the renovation or replacement of floors in a skyscraper.
To function properly, business software usually needs to interact or interface with data, software and hardware infrastructure that is in countless existing systems.
The complexity in today's IT infrastructure is mind boggling. It is the result of decades of evolution. The data in existing systems is often held in tens of thousands of individually defined formats and schemas, it flows through thousands of specialized channels that have evolved over years with mechanism for propagation of errors, for dealing with exceptions, for ensuring constraints are in place for security, while allowing special cases when needed. There are rules to ensure redundancy, high availability, backups, to support different user interfaces, different types of computers and mobile devices. There are compatibility layers for different systems, hardware, operating systems, databases. In the case of Canadian government payroll, in the old code there were embedded rules about thousands of different positions negotiated over decades by a bunch of different unions. The business rules in the old code took into account, different programs created in different areas by different governments in different regions.
Skyscrapers can also seem simple from the outside, often being made of flat surfaces forming plain rectangular shapes. But a lot more lies under their skin. There are miles of electrical wires, of plumbing, heating and ventilation, security systems that have to connect and work together. There are stairwells, elevator shafts that have to be planned and positioned for safety.
When parts of skyscrapers get old and outdated, you never see anyone suggesting buying a pre-made piece of skyscraper and shoving it in place of the floors that are outdated. Yet this is what people try to do with software infrastructure.
It's as if an organization having a building with floor 20 to 30 needing updating decided to buy a 10 floor building to put in it's place. They sign the contract and then start working on the details. Putting one building inside another is not easy. You will have to renovate the five floors bellow the new floors and also above, so that the wiring, plumbing stairwell and elevator can connect. The elevators from the two buildings is a particularly difficult problem. They won't connect. As a workaround you might get people to take a detour and a stairwell for one floor to the old elevator, ah and add a two floor high elevator for handicap access next to the stairwell. After a few runs of sewage pipes on the outside wall of the building and running electrical wires in the air crossing from the building next door, your floor twenty to thirty now satisfy the contract and the company that sold you the ten floors considers the job done. Of course it works much worst than the old 10 floors and of course you also now have 20 barely functional floors instead of 10 outdated one. But what are you going to do? You already paid way over budget to hack this mess together. It is now very unstable, if you change anything the whole building might collapse and the company you contracted has pulled a trick. The blueprints to the building (aka. the source code) is proprietary so no other company can work on it.
Undoing the damage would mean completely rebuilding 20 floors (and the building needs to keep operating while this is happening and there is only one company that has access to the blueprints so they can charge anything they want and do a dismal job at it and leave you in a position where you have to perpetually give them more money to keep things minimally functional.
When you go to them because nothing is working, they will steer you towards replacing more of your floors with more of their buildings and break more floor above and bellow while taking away your access to the blueprints and securing their monopolistic position.
Successful businesses never allow themselves to be put in such a bad position for very long. Just recently Amazon announced that they got rid of all their Oracle databases. Governments should start that work as soon as possible. Yes it may require expensive rebuilding of parts of the infrastructure piece by piece, but in the long run it will be much less expensive.
Always renovate room by room, floor by floor while making sure the blueprints remain available so you can use different contractors when one turns out to be a lemon.
Pretty sure it was simply a time and materials contract, as is standard. No competent software company will accept a fixed price contract without tightly specified and unchanging requirements, which is something very few customers are able to provide (especially not government agencies).
The issue is it’s hard to scale that up to a multi year 2 billion dollar contract. However, I think individual large scale software projects are inherently a bad idea, which is probably a larger issue.
Just delivering something for the sake of it leads to atrociously bad public infrastructure, be it software or a stretch of pavement.
> Such a strategy failed utterly in Canada.
It's possible the strategy is good, they just utterly failed at executing it for other reasons.
A challenge is that many solutions to problems like unemployment have difficult to quantify primary effects - e.g. actual jobs created - while they have easy to quantify opportunity costs - expected return of investing capital in ETFs, or something.
My point is not the details, or to say that creative solutions can’t return more to the community or country than the financial costs of creative solutions - merely that those in the positions to propose these solutions are frequently unable to adequately model the return.
In another post a few months ago, there was a discussion that the government shouldn’t have to propose an ROI (in the context of building new infrastructure)- but it was pointed out that frequently these projects are financed with debt, and that lenders dictate a return.
If we want to move away from ROI calculations, and worrying about unquantifiable primary effects, a critical component IMO is that we can’t really pay for them with debt.
If you pay with debt, you are beholden to a real, quantifiable cost of capital. If you fund with cash, or equity, it gives you the freedom to pursue preference over return, or theory ahead of evidence. Startup funding works this way for a reason. Creative solutions require freedoms not always afforded by a time-bounded and certain cost of capital.
ROI is just one kind of utility function, but converting everything to said resource-equivalent works pretty well.
It's always a nasty burden to decide between hospitals and roads, but it's a neccesity also, because building just hospitals without roads doesn't help much, because ambulances can't get to them. And vice versa.
Sure, ROI in itself is a bad metric, and the problem is that developed nations are frequently get caught in an overly simplistic financial modelling situation. Because politically a more complex model is very hard to defend and the simple model gives simple answers, which are usually not optimal.
As you said, creative solutions are what's needed, but they are harder to quantify.
It's sort of like saying that if we want to avoid global extinction we need to acquire space travel and populate distance worlds. Not knowing how to get to space, let alone travel to distance worlds, doesn't change the logic. The alternative is that we accept extinction.
We're exceedingly myopic about what strategies like re-education imply. We associate it with a small number of particular programs and are quick to conclude they're ineffective. But re-education can mean many things, things we haven't even explored yet. We could look to German countries with a stronger history of apprenticeships and union labor programs, though that only scratches the surface. And maybe it does require incentivizing or even mandating age-based affirmative action. And maybe re-education (and education policy more generally) will ultimately prove to be relatively limited and constitute only a small part of a larger constellation of strategies. The point is that we have to stop pushing back and earnestly move forward.
There's simply no choice in the matter; we have to be open-minded. Unless we're comfortable continuing to roll the dice to see how many more generations the United States can go fecklessly chasing fantasies. What someone like Trump and the cast of opportunists across the spectrum he has ushered in have shown is that we're not immune to the political pathologies that have afflicted so many other countries in the Americas and around the world.
"It's sort of like saying that if we want to avoid global extinction we need to acquire space travel and populate distance worlds. Not knowing how to get to space, let alone travel to distance worlds, doesn't change the logic. The alternative is that we accept extinction."
My point, and the point of the economics article, is that this is not the case. We created this situation by shipping jobs over seas and enacting NAFTA/pushing for trade with China. Economic policies as well as other measures can protect and mitigate the devastating effects of offshoring all jobs. As the world becomes more connected wages will converge to an equilibrium, so the point of non free trade is to stop the equilibrium. If you don't, the USA becomes something like a third world country. It's that simple.
The decrease in US wages is offset by the decrease in prices (due to the increased efficiency of the whole global and local economy).
The problem is that individual workers are not strongly incentivized to relocate, retrain, rethink their life.
Just look at Appalachia. There are still villages/towns where people sit around on welfare and do basically nothing plus moan about how that particular mine has run out. This has been going on forever. Humans are not that strategic masterminds when it comes to planning for the future. See also how paradigm shifts coincide with a new group rising in power because the old guard is too wedded to their ideology.
The equivalent in a computer would be a bunch of processors sitting idle, because the programmers couldn't figure out multi-threading.
This shouldn't matter in a liquid, competitive economy. If employers are not receptive to competent older retrained workers, they'll bid up wages for young workers and hold down workers for old workers. This opens up a market opportunity for some of those older workers to take the opposite side of the trade, start companies in new growth sector, and hire mostly older workers at lower prices, thus outcompeting their younger competitors.
In the short term it rarely works like this because VCs and other primary capital firms are just as susceptible to bias as hiring managers. In the long term it very frequently works like this, which is why you have firms like Whatsapp getting bought out for $19B while all the recent college grads that entered the social networking fray in 07-08 (myself included) got flushed out and took jobs in big tech.
Only if those 40 year olds believe they're entitled to higher pay just because they're older. The number of available jobs in a given career hierarchy shrinks pretty quickly as you ascend, which means that most people won't rise very far. Start at the bottom rung, stay at the bottom rung for the rest of their life.
My mother lost her job as a factory worker (bottom rung) when Samsung stopped manufacturing CRTs in Germany. She was 50 at the time and retrained as a call center agent, working for the same pay as 22 year olds. She kept working there until her retirement, while new 22 year olds had to be trained every few months because they hadn't yet learned how to hold down a job. Talk about "out-competed".
> Even more than that, shifting X00,000 people from one career to another would flood the labor market and destroy wages. The whole thing makes literally no sense.
Only if they all retrain for the same job. Spread it over all industries that have room for growth and the effect becomes much less catastrophic.
So your solution is to delegate a 40 year old replaced by trade policies to the bottom of the economic rung. This is the exact situation that the article is saying is a problem. Don't think you read the article.
My point was that we should tilt economic policies so that this situation does not occur. And make no mistakes, this situation is avoidable, and caused by the destruction of that 40 year old's career.
I think they should be given sufficient support to bridge the gap while they retrain; potentially even before their jobs disappear. That seems strictly preferable to unemployment.
The point is that economic policies can make it so that a career in manufacturing in the United States does not need to compete with a career in manufacturing in China. To keep standards of living high in the USA, we need to wall off companies from undercutting and destroying our workers wages. It doesnt matter if it can be done cheaper in China, when we allow that it ruins the quality of life for American citizens. The only people it benefits are the people running the companies here in the USA and the people in China. The rest of the United States slips further towards being a third world country.
Literally this article was about how its possible to defend jobs in a country
1) Older workers have naturally benefited from annual pay increases over the course of decades, so that even if they're in a non-senior role, they would take a sizable pay cut if forced into a new career entirely.
2) Older workers often need higher salaries because they have families to support (along with the many costs associated) which young workers do not. It's a naturally unbalanced situation.
I don't think there is a solution that doesn't screw over a double-digit percentage of the workforce in at least some way. UBI might be a mitigation strategy, but as long as there's an endless supply of young people, older workers who lost the career game for whatever reason will get screwed.
2) It's true that supporting a family requires a higher salary, but younger people can have families, too, and in any case retraining for a job that allows you to barely scrape by is better than nothing. Better to get mostly screwed than to get completely screwed.
2) In a purely rational way, yes. However,
a) I'm most interested in discussing average scenarios which in this case is young people = generally mortgageless and childless, older people = generally have children and associated costs
b) It often ends up more complicated than that when you factor in social safety nets. You could very well do better by not taking a job that allows you to barely scrape by and instead take the government assistance.
c) Rationalizing away a massive decrease in standard of living for a significant number of people as, effectively, "at least they're not homeless" is one of the ways you end up with massive inequality and eventually the populism push we're seeing now leading potentially to something akin to the French Revolution.
I think we can find a better solution. This is exactly the kind of discussion that has been missing on a national level until very recently.
If they don't care then there is no problem. If they are unwilling to take paths toward self improvement maybe it's for the best to not force them to do something they don't want?
And at the risk of stating the obvious, it is in society's best interest to support families, because children are literally the next generation and everything will quickly collapse if it becomes economically untenable for most to have children. So society has to set itself up in a way that promotes the ability for most people to have and support families.
That's completely illogical. What you need doesn't matter. The only thing that matters is what type of work is available for you and retraining expands the availability of work. If retraining is unattractive because you see higher paying opportunities elsewhere then you don't even have the problem that retraining is supposed to solve.
Compared to staying jobless it's a hell of a good deal.
More than that, free markets guarantee nothing at all. But the historical record is that free markets have lifted far more people out of poverty than anything else.
The most recent example is China turning to free markets, and the resulting vast improvement in their economy.
China hasn't turned to anything like textbook Anglosphere free markets. Yeah they loosened up and turned away from classical central planning, but state-owned firms still control 30% of assets and their government does quite a to set economic policy and direction. They didn't privatize everything and let the free market run amok.
[1] http://blogs.worldbank.org/eastasiapacific/state-owned-enter...: With all these evidences in hand, we can now answer the question raised before: How big are Chinese SOEs? Even though their share in the economy continued to decline in the past decade, SOEs still make up a substantial part of the national economy – roughly controlling 30 percent of the total secondary and tertiary assets, or over 50 percent of total industrial assets.
https://scholars-stage.blogspot.com/2014/08/passages-i-highl...
> Westerners often describe China's explosive economic growth as a product of its export sector. This sector, however, is not "in the system": “The private export oriented sector suffered massive losses in jobs, earnings, and the closure of small companies in 2008 and 2009. But China’s banks were not exposed in any material way to this sector. It is simple fact that China’s financial system and its stock, bond, and loan markets cater only to the state sector, of which the “National Champions” represent the reddest of the Red. These corporations, the heart of China’s state owned economy, are “inside the system.” The private economy, no matter how vibrant is “outside the system,” and in fact serves the will of the system.” (p. x)
The US taxpayers who invested trillions (largely in the guise of military expenses) in inventing the tech [1] didn't get to decide freely how the business to be conducted or how the profits to be shared. The Chinese workers (or similar ones elsewhere) didn't get to move freely to places for work with competitive wages.
The rich had the freedom to take the publicly funded tech, to exploit the confined sweatshops, all the while without even paying regular taxes that the ordinary Joe has no way to avoid [2].
[1] https://www.ineteconomics.org/perspectives/blog/what-the-ste... [2] https://www.washingtonpost.com/news/business/wp/2016/03/04/w...
Well not quite. Free trade is better for every nation after they have achieved development and wealth. Pretty much all of whom got wealthy by pointedly ignoring free trade.
There's a decent book from 10 or 15 years ago by Ha-Joon Chang called Bad Samaritans that explores globalisation, free trade and in particular the insistence of WTO, World Bank and developed nations forcing free trade on the developing world as a condition of loan, or agreements.
He makes a pretty decent case that free trade is only suitable after you've arrived. More to the point, it's not mere theory, but an exploration of what has actually happened in various nations around the world.
Edit: https://www.goodreads.com/book/show/1032019.Bad_Samaritans
Summary:
Step 1: Mechanize agriculture, to free up people for an industrial labor force
Step 2: Support export-oriented industries.
Step 3: Transition to a developed country.
Trouble comes when you botch step 2.
Steps 1 and 2 are increasingly frowned upon with WTO or trade agreement requiring acceptance of foreign finance into your markets, preventing the levels of subsidy most of the developed world went through, or trying to require honouring of foreign IP. Which seems to look increasingly like taking away the ladder the developed world used to "get there".
The honouring of IP is particularly comical (and to read about here seeing outrage at China borrowing some overseas IP), as from what I can remember everyone who managed to develop did so by stealing IP, subsidising etc whilst providing enough walls to ensure the fledgling industry couldn't simply be bought up by someone higher up the food chain.
Everybody interested in economics should read Ha-Joon Chang and study the South Korean phenomenon. Those who haven't and still feel obliged to put down their 2 cents praising free trade / markets are talking out of their asses.
The fact that people are still willing to listen to Krugman (even this FP article is sympathetic) rather than cast him out as a colossal buffoon - not quite Alan Greenspan status but close - whilst geniuses like HJC wallow in relative obscurity is beyond sad.
Basically he argues using survivor bias. All the countries that tried to pick the winners (support X industry) and levy high tariffs but did not make it are simply not discussed.
https://eh.net/book_reviews/kicking-away-the-ladder-developm...
Completely executed trade policy works but so does free trade if you have rules of law and security of contract and property.
She also had the unique position of the free-port whilst being allowed better access to China than the rest of the globe had. Those refugees were the reason she grew, as they were mostly highly educated and skilled anti-Communists fleeing China's civil war, and the ugly repressive aftermath. The doctors, bankers, merchants and financiers rushing in surged the population from a minor town supporting the port and little else, to major offshore centre.
1949 through to about 1970 whilst there was no formal economic policy, there emphatically was subsidy. The administration was providing social housing for those refugees, education for their children, infrastructure programs that were often more ambitious than in the UK - providing complete new industrial towns, and land reclamation. There was a policy to limit cost of living increases as far as possible as the fledgling industry relied on low labour cost to compete.
There were also export restrictions on textiles and clothes - the backbone of the HK economy up until the seventies, perhaps longer. Those restrictions were certainly in place with the UK and Europe, not sure about the wider world.
The large subsidy during development merely wasn't direct to industry. Yet with textiles and cheap plastics, the two industries that formed the bulk of HK's exports, they happened to be two with low startup capital costs. As a result the HK economy was heavily skewed toward small and medium businesses and low startup costs.
Tariffs as a weapon in the fight against climate change would sure make free trade look at LOT more equitably distributed.
the other tool we tend to overlook is immigration. grow the economy through internal demand and upstart labor rather than external. but that means the possibility of more non-white people--unfortunately a real roadblock here (in the US).
The thing about immigration is that it can be good or bad. Immigration of entrepreneurs and skilled workers can grow the local economy, but immigration of unskilled workers into a country that already has an oversupply of unskilled labor only serves to suppress wages and increase the unemployment rolls.
And advocates of increased immigration typically use the numbers from legal immigration, which is (by design) disproportionately immigration of the first kind. But increasing immigration implies relaxing those sort of restrictions, and then the numbers change.
Immigration also can't be a global solution since it's a zero sum game. You take a doctor from one country and move them to another, it helps the destination country but harms the source. It's not helping us to take in another country's cab drivers, but it's also not helping poorer countries when we take their engineers away from them.
Only because economists' only metric is GDP with the baked-in assumption that exponentially increasing natural resource usage is a good thing.
Free trade did the world a lot of good. At the same time it caused a lot of problems, mostly offset by the good but not all of it. It's a bit like controlling a model airplane before the days of proportional control. You get to 'yank the lever' every so often and you always end up overcorrecting. And that's before we get into even more complex issues such as corruption (which is part and parcel of every political system in one form or another) and simply dealing with human nature.
"Industrial policy" in this environment would merely mean determining what mechanical processes to have human bodies implement while they despair under the specter of realizing their fake-need make-work tasks could be destroyed at any moment by the snap of a ruler's finger.
Some parents tell their children to start a lemonade stand or get a paper route. Teaching self-sufficiency is economically useful for any time period.
What you need is a market maker for labour hours that has to buy the hours of people at the living wage from anybody who offers them. If the central bank did that, rather than trying to prop up circulation by pushing loans onto people via interest rate targeting, then we may be able to let free markets do their thing. (Any business that doesn't like central banks buying hours need only make a superior bid to stop it).
We run society at the core by exchanging labour hours with each other. If you are to use your finite time on this planet to produce A to surplus (rather than just stopping work on Tuesday when you've made enough A for yourself and your suppliers), then I need to give up my finite time on this planet in exchange for A - and hopefully produce a B with the time that you consider at least appropriate use of that time to continue the exchange.
We have to set something like that up - presuming always we don't want to go down the road of entertaining philosophies that 'trim the excess population'.
The best and brightest of the world are educated in the United States. 85000 get to stay and the rest can GTFO according to a lottery, the number haven’t increased for 20 years.
Einstein wasn’t born in America, Von Braun wasn’t either. But they all managed to work here somehow, all that the United States need to do to ensure a dominant technological position is to retain the people that it trained. But no, H1Bs are stealing jobs, as if they don’t contribute to the US economy.
Is cheap labor a legitimate source of comparative advantage?
I increasingly don’t think that it is. Yes, we get products more cheaply. But those products are made in countries with fewer labor restrictions, often in places that are not democratic, where workers cannot vote for changing laws. We’re effectively saying we want democracy where we live, for our own white collar professions, but we don’t want to be shackled by those restrictions for how we get rich, or how we enjoy our wealth. We’re effectively telling local blue collar workers that we’re okay with their level of work being taken over by people with less rights than themselves.
That increasingly doesn’t feel just. Comparative advantage makes sense for natural differences between countries, such as availability of natural resources or favorable weather for certain types of crops. But not for fundamental human rights.
So you are damned if you don’t enjoy them, damned if you do (but a bit less). Obviously, it is better if you could improve their situation to the point where their labor stops being cheap.... but how can you do that?
The big thing missing from this conversation is how the US/multi-national corporations use international organizations like the IMF and World Bank to force "structural adjustment" policies that end up degrading labor protections, forcing countries to privatize all gov't functions, etc. We have played a big role in the destruction of their "situation". Both historically through colonialism and still actively today with IOs and structural adjustment policies
Not to mention all the fucking coups the US enacted and supported: https://en.wikipedia.org/wiki/United_States_involvement_in_r...
Maybe in some cases.
However, you then have labor in those countries trying to struggle for the same protections and advances in wages that workers in the US struggled for, but they are struggling against a far more powerful corporate entity that has the backing of a more corrupt/disfunctional government while also having diversified options to break and weather strikes.
Then you have to add to that all the non blue collar workers who have had their subsistence livelihoods destroyed through land seizures for resource extraction.
Most of the benefits of globalization roll uphill (richer citizens, especially in richer countries extract most of the benefits) the trickle down is minuscule to non-existent.
You...sure about that?
And how much of that is due to globalization and how much of that is due to the growth of local economies? How much faster would those local economies have grown if wealth was not being siphoned out by multi-nationals? (These are not honest inquiries, not rhetorical questions.)
> None of what you're saying justifies that the alternative would have been better, where most of these people remained poor subsistance farmers.
The people who were poor subsistence farm who had their lands given away are generally not those who have been lifted out of poverty.
In China the people who were poor subsistence farmers absolutely are those lifted out of poverty. The numbers are just too great for it to work any other way, with urbanization going from ~20% in 1980 to 70 or 80% now. Similarly in Korea.
But, then, aren't we just making a trade at that point? I will fire 100 local blue collar workers, and hire 100 foreign workers who will do their job for less. I hurt 100 people, help 100 people, and along the way pocket some extra cash for myself. I think most moral systems would have a problem with this. It is generally thought of as immoral to rend one person in order to help one other.
(Yes, things get complicated when you hurt N people to help more than N people, depending on the number of extra people helped and the kind of hurt. For example, sacrificing soldiers in order to save an entire country. Generally speaking though, most moral systems have a problem with hurting people against their will except in extraordinary situations involving very large numbers. Does this trade situation qualify as that? I'm skeptical that is does.)
There has to be a better way. Some way where we aren't harming local blue collar workers, but are still helping foreign nations develop, while giving those foreign nations on the path of strong worker protections and wages that we have here.
Not when it comes to buying things, which is what this situation is.
Blue collar workers in the US (or other developed nations) don't have a moral demand on you to purchase their labor at the same rate forever. If someone across the street (or across an ocean) is selling the same product for less money it's perfectly fine to buy it from them instead.
Do you think it's immoral when you, say, switch from Verizon to AT&T to get a cheaper rate on your cell phone plan?
Labor.
But that's an entirely different situation than the matter at hand, where we're talking about the United States government's policies on trade and the impact on our entire labor class and their fate within our own borders.
The entire point of an economy is to serve humanity. We're all participating in this circus to put food on our tables, provide for our children, grow, and enjoy life. We cannot lose sight of that fact. We have an obligation to see labor not as just cogs in a machine, but rather as constituents whose well-being we have an obligation to protect.
(I have to say, and I'm sure you don't mean it, but you comparing a human being to a cell phone plan is among the more callous things I've read on these forums. It might behoove you to sprinkle a bit more empathy in your language, just a tiny bit.)
In the vast majority of circumstances you aren't firing an individual American and hiring an individual from China. You're just choosing to buy something from a giant corporation that manufactures goods in China instead of a competing giant corporation that manufactures goods in the US. Switching cell phone providers is just like switching from American Giant (made in America) to some other purveyor of sweaters that manufactures overseas.
Are you saying that you think you have a moral obligation to buy things made by American workers, who are universally wealthier and have access to a much stronger social safety net, than Chinese workers?
If anything it seems like it would be the opposite to me.
But if it's not, then we shouldn't restrict free trade.
The people across the ocean in this instance are working obscene hours under deplorable conditions. When you take your business to these overseas firms you are effectively telling your local workers "these are the conditions I think you ought to be working under."
Except it's even worse because you don't have the stones to say it to their face.
Unequivocally yes! Understanding this ironclad fact is one of the most important things to understand about changes in the world economy over the last 50 years.
China has gone from a country full of subsistence farmers to a country of middle class wage earners.
From the perspective of a critic of wage labour (and class society), one form of domination in substinence farming has been replaced by arguably a quantitatively better but much more cunning and egregious one, which disguises its aims through the mantra of freedom to buy and sell - and you won't find many people who would give up that freedom now. That doesn't mean the freedom is desirable, it just means it's better than what came before.
In addition, while working in a factory making iPhones might not be the best of jobs, it's a hell of a lot better breaking one's back on the rice patties every day.
When you compare living conditions and material benefits, of course the world is better, but that comes at the moral cost frequently expressed as "sweatshops are necessary because the country becomes richer and you get better living conditions". I don't know how this is justified, this kind of trade-off is not justified by any major ethical system, including most serious forms of utilitarianism.
Consider the case of a Chinese peasant farmer who has has land confiscated by the regime, so now he gets to make iPhones to earn a wage so he can spend it on buying food and shelter and medical care. The conditional freedom of needing to sell one's product (whether that is a material thing the peasant makes, or the labour power the iPhone factory worker produces) hasn't been eliminated, it's just changed form.
You claim to be able to reduce these factors to a comparison in which you can say one is better than the other, and I'm not convinced the reduction is sound. Most people, even our iPhone factory worker, would think that there is (and there should be) more to life than the wage and its spending.
Chinese people used to starve to death all the time because they couldn't afford to buy food. Now that happens much less often because China has gotten much richer through international trade.
That's a much better world.
"When you take your business to them you are effectively telling your local workers..."
By "them" I meant the overseas workers. My bad.
Virtually no one is unemployed in the US because of the combination of international trade and minimum wage laws.
- Wage growth over time - Health outcomes - Savings rate - Credit card debt rate - Feelings about the future (are we on the right track/wrong track?)
The stats you mention are interesting but not relevant to OPs assertion that a wage floor in developed nations was problematic in a free trade world.
Also: things cost more in the US. You can't survive on 3rd world sweatshop wages in the US, even if they were permitted by abolishing minimum wage laws.
Very little, actually. Bus drivers need to buy more than bus tickets: even if you reduced their wages to third-world levels and reduced bus ticket prices to third-world levels, bus drivers still get sick and need to pay the doctor? Are you going to push doctor salaries down to third-world levels too? What about education, etc? At some point, you're just going to be pushing wages down across the economy and importing massive levels of inequality.
Expecting to people to take massive pay cuts and enact massive deflation in the name of market liberalism is frankly an ideologically-blinkered, impractical, stupid idea. It entails too much pain for little to no actual gain. The only people happy with the results would be a s small minority of oligarchs and ideological purists.
This is an astounding comparison that seems to aim to reduce questions of exploitation down to questions of personal morality, rather than the actual historical development of the systems we have and the ones we like to see. Is it immoral to switch phone providers? I don't think so. Is the system in which switching a cell phone provider can actually harm labourers morally questionable, even on the grounds that liberal egalitarians set out? For sure.
By 'we', you mean the multinational corporations that write 'free-trade' treaties (that usually encompass much more than just tariff reductions). Because voters tend to not get much say (and sometimes not even senators!): https://en.wikipedia.org/wiki/Trans-Pacific_Partnership#Secr...
It might not seem like it's a choice, because the plurality of consumers have made the choice to go along, so if you do otherwise you're in a small group.
It's still a choice though. You either live the modern lifestyle, which includes (though reducing) consumption based on what could be classified in many cases slave labor. Or you choose a lifestyle that doesn't.
Buying is not voting, and deceiving people into believing this has been one of capitalism's greatest successes.
its not the only choice in USA atleast. ethically made products cost more.
So the customers cannot know which products are ethically or not.
They would need to vet the entire supply chain of every product. That is a full time job just to check one product
Nah. You outsource that job to the store carrying the product. People shop at REI and whole foods for this precise reason.
The choices are 1. Slow down 2. Use bad labor practices 3. Completely automate production. Nobody seems to want to do #1 and we're not advanced enough for #3
That really is the big question.
It worked out OK for the pre-China era of "Asian tigers". Japan, Korea, and Taiwan had a labor cost advantage and exported heavily to the US. Their standard of living went up, wages went up, and they lost the labor cost advantage.
Then the next round - Bangladesh (world leader in T-shirt production), Vietnam, Thailand. Labor costs are still low, but the countries are not big enough to seriously hurt the US.
But they were not as big as China. China is 3x the size of the US in population, close in GDP, and has industrialized very fast. The US can't absorb that shock. Eventually, China may lose the labor cost advantage; it's already declined quite a bit as wages go up. But for now, the US is taking a big hit on this.
According to Peter Zeihan's The Accidental Superpower (2014), manufacturing in China has gone from being one quarter as expensive as in Mexico to 25% more expensive. He expects that the US shale and natural gas boom will further reduce costs in Mexico and the US.
Also see "Why China should follow Trump’s example and cut taxes" http://www.scmp.com/week-asia/opinion/article/2056874/why-ch... . Quote: "As far as manufacturing is concerned, according to Cao, everything is cheaper in America apart from manpower."
Obviously this is oversimplifying things, but I'm just saying that on the one hand it's important for disruption to happen (Uber making it harder for taxis) for the sake of progress, but for the sake of justice and the social fabric we should protect those most affected by the disruption.
You may say "Sure, they're poor and exploited, but that doesn't make it morally right for us to exploit them just a little less". I agree, up to a point. But insisting on first-world working conditions (including pay) mean that very few of them get hired. This leaves almost all of them poor and exploited, without even the option of "slightly less exploited". Who does that help?
What do you think the country would be like today if we hadn't killed the union leaders and installed a dictator friendly towards US business?
https://en.wikipedia.org/wiki/Guatemalan_Civil_War
> CIA under Eisenhower overthrew the government of Guatemala when trade unionists were elected on the promise of eight hour workdays and better conditions for field workers.
This isn’t quite the whole story. A significant proportion of Guatemalan land was owned by the United Fruit Company (whose leadership/ownership included significant overlap with Eisenhower’s administration†), but the company was not using the land. The Guatemalan government wanted to buy the unused land back from the company at the price they declared it to be worth on their tax forms. The company went to the US government and whined that their private property was being expropriated.
https://en.wikipedia.org/wiki/Decree_900
† “John Foster Dulles, who represented United Fruit while he was a law partner at Sullivan & Cromwell – he negotiated that crucial United Fruit deal with Guatemalan officials in the 1930s – was Secretary of State under Eisenhower; his brother Allen, who did legal work for the company and sat on its board of directors, was head of the CIA under Eisenhower; Henry Cabot Lodge, who was America's ambassador to the UN, was a large owner of United Fruit stock; Ed Whitman, the United Fruit PR man, was married to Ann Whitman, Dwight Eisenhower's personal secretary.”
In particular, that discussion helps us define a "good" union: one that adds value for both the business and the workers it mediates between.
What makes a "bad" union, then? Well, in some industries, organization of labor won't add much value, so there won't be demand for their services. Union leaders will honestly believe they add value (like many organizations that can't acknowledge they're no longer in demand) and will lobby for laws to force unionization against the will of workers and businesses. That will become a bad union; its efforts will center preserving its own existence.
Worse, unions depend on solidarity, so the good unions will have to side with the bad unions if they want to be able to strike effectively.
And then their critics won't percieve any meaningful distinction between good and bad unions.
[1]: https://www.econtalk.org/mitch-weiss-on-the-business-of-broa...
Because unfortunately its much more profitable to exploit them.
That doesn't mean that I think the US was in the right. I don't. But it does not follow that all the problems in Guatemala are our fault.
My point is that a factory moving overseas isn't some platonic transaction. There is a history and a context to why labor is so cheap and regulations are so lax.
[Edit: Forming unions doesn't automatically lead to rising wages - or if it does, it may do so at the price of fewer jobs. It isn't automatically going to lead to all the subsistence farmers getting good-paying factory jobs.]
> There is a history and a context to why labor is so cheap and regulations are so lax.
In Latin America, perhaps. In China? Korea, back in the day? Vietnam?
Not if the companies can help it. Just because they're in a low labor cost country doesn't mean that they want to pay any more than the minimum they can there - they're not looking to give a step up, they're looking for the minimum cost to attract a sufficient workforce.
Everybody always talks about these jobs as if they are necessarily great jobs. They may be great, maybe if the company has some sort of local political arrangement that would stay favorable if the jobs stay good, maybe if the management is simply bad and is accidentally paying more than the prevailing rate. But, on the other hand, these jobs are often with awful subcontractors who pay bargain basement wages even for the area, cut safety corners, demand unpaid overtime, and have any potential union leaders killed.
No, it isn't. Living in the Rust Belt, I find it so obvious that globalization is a race to the bottom that I'm amazed any reasonable person could believe otherwise. All the jobs move to countries with the worst wages, environmental protection, safety, workers' rights, etc.
In economists' language, through labor organization and the democratic process, relatively free countries' workforces created a de facto monopoly on labor, which was able to extract some monopolistic rent (i.e. workers' wages > what they "should" be). Standard economic theory says this has a redistributive effect (labor pulls money from everyone else) plus an inefficiency effect (there's some potential value lost by the artificially high wages).
Standard economic theory says markets should always be free, to avoid the inefficiency effect. This is where I disagree with standard economic theory: When it comes to the labor market, I firmly believe the inefficiency effect is a cost worth paying for the redistributive effect.
If you open up your trade to the rest of the world, fungible jobs all go to the poorest, most repressed people, who can be paid the lowest wages and exploited in the worst ways. It's great for lifting people out of extreme poverty, but as a side effect it slides every country toward moderate poverty while moving all the wealth to the 1%. That's a recipe for potentially dangerous levels of social and political instability.
My solution? Every country with high standards in wages, environmental protection, safety, workers' rights, etc. needs to implement tariffs to level the playing field. If your country has high standards, other countries can still choose lower standards and trade with you, but the competitive benefits of those lower standards will be nullified by the tariffs. Which lets you keep your high standards without wrecking your economy (and as a side benefit raises revenue without taxing your people directly, and gives countries with low standards an economic incentive to improve themselves. Which is potentially a great humanitarian breakthrough, improving the lives of lots of ordinary people in countries whose rulers care only for their wallet).
I think the Trump's tariffs are a move in the right direction, although I think he's made a mistake by making the policy more of a negotiation lever than a semi-permanent way to compensate for China's low wages and poor standards.
I believe so strongly in the value of a tariff policy that I used to say that I thought Trump's willingness to implement tariffs more than balances all of his many negatives. Lately I'm not so sure about that, not because I've lost faith in tariffs, but because Trump's done a lot more negative things than I thought he would.
The importance of faxes to trade is underestimated. Not only was it faster, faxes work well across language barriers. An invoice still looks like an invoice, a purchase order still looks like a purchase order, and a bill of lading still looks like a bill of lading. For the normal cases, the info in the blanks, the info that matters, matches up, and that's all you need most of the time. Especially since everybody uses the same number symbols. Business forms became an international language. You've almost certainly received some package that came with a bill of lading in a foreign language, recognized it as a bill of lading, and could probably make out the list of items. Even if the descriptions were unreadable, the part numbers matched.
Economists did not get that these rather banal mechanical improvements had a far bigger effect than their economic theory. This is embarrassing, since everybody in shipping, and then everyone in business, had figured out how to deal across borders thirty years ago.
Container ships were almost the poster child of globalization.
Faxes (and telex, etc) had been around for decades. We have the alphabet we use today because international Phonecian traders (phonetics, see?) used it for exactly the type of documents you're talking about.
Which is the problem. Those things were bigger than Government economic policy, as we can see them having affected trade across a large number of countries with varied policies.
It's not "productivity", anyway. It's "relative cost advantage" and "reduction of trade friction".
The giant mistake of macroeconomics is claiming that free markets are a self-perpetuating condition. In the absence of trade friction and the presence of network effects, consolidation tends to occur. It continues to the point of monopoly or oligopoly. The end state, for now, seems to be having three or less providers who don't compete very hard on price.
There's an EU study that indicates prices drop from competition only with four or more players. "Free markets" seem to have a minimum size in practice.
The US has three big banks, three big drugstore chains, and will soon have three big cellular providers. Two big agriculture companies. Five big film studios, though.
This line reminded me of the joke that the worst part of the US invading your country is that 20 years later they'll return to make films about how killing your civilians made their soldiers really sad.
We will see this continuing, rolling from one low-cost country to the next as companies try to maximize profits.
Unless some controls are put into place, this will continue for the next 300 years.
Most of the world is far better off in nearly every measure than 20 years ago.
The 50% to 90% bracket in the US for example holds $31-$35 trillion in household wealth. The 90% to 99% bracket holds another $39-$44 trillion. So 50-99% holds $80+ trillion.
The Forbes 400 is worth $3 trillion.
what percentage of the u.s population fits into that bracket?
It’s a mystery.
This is true of most journalists.
Post WW II the US had about 50% of the global GDP. The situation was huge inequality between nations. That was politically untenable and the solution was seen to be development of other nations' economies. Some of this was accomplished with things like the Marshall Plan and some with programs of foreign aid to underdeveloped countries.
However, the US taxpayer would never support a large enough foreign aid budget to really solve the problem. On the other hand, free trade could be sold politically, companies would export capital and know how to lesser developed countries, and the problem of inequality between nations could be ameliorated. Of course, it was at the expense of the US worker whose standard of living stagnated from the '70s onward. But the bet was that other nations would develop slowly enough, US consumers would enjoy cheap goods, business would make lots of money, and that US standard of living wouldn't actually decrease significantly for a politically potent group.
Of course, there aren't enough resources in the world for all 7.5 billion people to enjoy US standard of living. Therefore, the implication of greater equality of standards of living between nations is less equality of standards of living within nations. Less inequality internationally implies greater inequality intra-nationally.
And that is exactly what has happened. The world, including the US, will tend towards the situation in India where there is extreme wealth and extreme poverty side by side.
After WW2, the rest of the developed world was destroyed and the under-developed world was colonies. Today, they all have woke citizens working hard to reach a developed lifestyle. Which means America has to compete, hard!
Never mind that "all boats" was, in the best case, "all GDPs", not individual incomes, and "everyone" was... well, the average of all GDPs, actually, so also not actually every individual, and still with a pile of caveats for even that to be true. In point of fact nothing about all this said that even most people would benefit, if you either 1) applied common sense, or 2) actually looked at their sources.
source: figured out the common sense reasons this was BS when I was in like 4th or 5th grade watching the China-MFN debate & vote on CSPAN (god I was a nerd); later did the reading and learned that yes, my elementary school intuition mapped closer to reality than the crap they sold us.
Do you get paid for saying fancy sounding things, or do you get paid because you did fancy sounding things?
Economists are all talk and no stones and they should be ignored unless they can demonstrate that their portfolio represents the ideas that they espouse.
Ok fine, there was a mistake in thinking but there's no one that has a satisfactory answer on what to do to fix the problem.
I for one think that we can't go back to the way things were so we need to start by separating benefits, health care ins. and such, from employment. Once that's done people will be freer to take on jobs that are not high paying but are being created by the gig economy. We also need to cut the workweek to fewer hours lets say 30hrs vs 40hrs now.
The last part is automation. As a country we need to embrace it. They say that automation brings on more jobs than it destroys but nothing says that those jobs will be in the US. Whether we like it or not it's coming so we need to be the country that controls it.
One other aspect that often gets lost in these conversations is that manufacturing capacity is a huge part of what wins wars. The US won World War II largely because we could produce planes and ships faster than our enemies could destroy them. When we shipped our manufacturing capabilities overseas, we also undermined a key wartime advantage.
It is within our national interest to have a strong industrial base. The only way I can see that happening from here is automation.
So while we’re at it:
> major disruptions now would be more likely to come from an attempt to reverse globalization than from leaving the current trade regime in place. At this point, millions of decisions about where to put plants, and where to move and take jobs, have been made on the assumption that the open world trading system will continue. Making that assumption false, by raising tariffs and forcing a contraction of world trade, would set off a whole new wave of disruption along with a whole new set of winners and losers.
It's easier to see the direct line to DJT, but that historic line passes through eight years of BHO.
Trade is not just an economic issue. It's a political issue when you have China in the game.
Economic theory is great for determining the direction of economic policy but not defining policy itself.
The fundamental transaction of capitalistic societies is the "deal", where sellers vary the benefits of their products and conceal their deficits and where buyers conceal their willingness to pay as well as the exact thing they want to buy. Typically there are no more than two or three sellers (e.g. Airbus and Boeing) or two or three buyers (e.g. the market for very advanced fighter aircraft).
The first thing you learn in business school is that you must have product differentiation and must at all costs avoid being in a commodity business..
Where it doesn't work is when other countries are willing to engage in theft, including intellectual property theft and industrial espionage.
There's always a tension. Developed countries want as much access as possible for their advanced corporations to all markets around the world. They also want to be able to exploit cheap labor in developing countries without transferring any know-how to local competitors. Developing countries want to be able to export to the large markets in the developed world, but also want to protect their fledgling industries from much stronger competition from the advanced countries. They also want to acquire know-how from the developed world, in order to move up the value chain. Toyota probably wouldn't exist today if Japan hadn't protected it from American competition after WWII. This is why there are special provisions in the WTO for developing economies - the same policy doesn't fit countries in all stages of development.
Because of its uniqueness (both as the largest developing country in history and as a former non-market economy), China is actually subject to additional restrictions under the terms of its accession to the WTO. For example, other countries have increased leeway to place tariffs of Chinese goods, without China having the usual right to retaliate. It's not true that China is a particularly egregious rule-breaker.
I think that fundamentally, these claims of China breaking all the rules and taking advantage of everyone come from a place of fear that China will become the dominant world power - not from an actual understanding of Chinese economic policy.
You want US global allies to enforce an artificial market, which I'm not really against at all. Its just very silly to call that a free market action if China's actions aren't.
Just because Krugman thought globalization would turn out better does not mean isolationist policy would have improved things.
It really sounds like china is being the smartest one here.
The big question for me is how in the world so many smart people convinced themselves it would turn out otherwise?
https://www.vox.com/policy-and-politics/2018/2/2/16868838/el...
Thanks a lot Bill for selling out blue collar workers in America and those around the globe who followed your “leadership”.
One thing I notice is that left wingers are essentially universally aghast over what's happening to Hong Kong. They will hold to the idea that a trade war with China is the stupidest thing ever that causes economic damage to yourself and incurs great risk. Which is true. However you can't have it both ways and you have to choose between economic vitality and essentially having no say in a situation like Hong Kong.
I've seen countries hunger for trade being used as a lever for international legal reform. A condition of signing trade deals with the united states where countries essentially have to agree to give multinational corporations more government enforced rights or not have free trade. Specifically "intellectual property harmonization". If you want to have trade with the united states you appearantly need to agree that for every idea a corporation comes up with, they have an exclusive right to using that idea for more and more years, and consequently governments need to agree to punish people for not giving corporations money for those ideas for longer and longer periods of time. This is effectively a system that redistributes wealth towards corporate interests in an era of striking wealth inequality, on the reasonable sounding grounds they need that money to "develop new medications", but then it's ignoring the reality on the ground of poor health spreading like a contagion due to economic inequality. As the average person is unable to afford things like medications more and more... the economic vitality of all society... including the very companies who lobbied for these laws will suffer. Yet there's no effective way to push back against these laws without giving up free trade and shooting yourself in the foot economically.
I think at some point we're going to start realizing how many costs free trade have that haven't really been accounted for. It's very easy to portray it as a positive if you don't account for all the externalities.
You can oppose an ill-considered trade war without opposing all actions that would impact trade. This is not an either/or proposition. It's not hypocritical to suggest that, in the real world, sometimes you might have to weigh competing goods.
In the end trade is valued higher than democracy by both Trump and his detractors. It just makes me sad and cynical. I wonder if we will ever have a "Nixon goes to China" moment in reverse?
P.S. Don't know what you're on about saying how my position is only true if trade has no or infinite value. My position would be utterly incoherent if I thought it had infinite value. My position would be coherent if I believed Trade had no value but it's also coherent if I believe it's overvalued.
This might be too simplistic of a take on it. If you don't consider your own interests first then your good will can be exploited. If the whole world embraced free trade then you might have a point, but as it stands countries such as China are not playing fair. I'd also have to question wherever the moral good of Chinese workers being lifted out of poverty is worth the growth of China as a global superpower. If we're embracing free trade for charitable reasons don't you think we need to be sure our money isn't ending up in the hands of governments like the CPC?
I also think that even if you were right from a morally objective point of view you're employing a kind of "for the greater good" reasoning here that many would find objectionable.
Since the 1960s, social welfare spending has increased on average by over 4 percent per year. The last 50 years have seen a dramatic shift to a more centrally managed economy that favors social safety nets provided by governments over market forces based on private property and individual responsibility.
The labor laws passed in the 1930s and 50s meanwhile guarantee that any industry that does start to become a significant contributor to national output, whether it's the Big Three Auto Makers and the big steel manufacturers in the 1950s, or Tesla, Amazon and Google today, becomes the target of rent-seeking unions who are impossible to effectively resist thanks to the free-market undermining labor laws in place.
The decline in productivity growth, particularly in globally competitive markets like manufacturing, is a predictable consequence of that.
I think that's something where diversity in the field could have helped.
The lunatics have taken over the asylum.
Trump is right.
Almost all business activity today is a zero-sum game. Americans have all the abilities and skills to produce everything they need on their own. If (hypothetically) the US were to start banning foreign companies, new US companies which are just as good would pop up in their place. This would create better, high-paying jobs for Americans and more opportunities for entrepreneurs and technologists.
This is true for pretty much any developed country with respect to foreign goods and services. For example, if France blocked Facebook, within a matter of weeks, better alternatives would pop up to cater for the French market. This is not speculation BTW, it's pretty much what happened in China with respect to all major US tech companies.
China knows exactly what kind of zero-sum game they're playing. Ability is not the bottleneck. The bottleneck is human attention. Governments have to leverage their laws and regulations to maintain control over the attention of their citizens so that they can focus it to benefit local businesses.
Free markets only make sense at the small scale; for example, I'm a builder and I want to focus all my time and energy on building houses so that I can gain more experience to fine-tune my skills and become more efficient over time - but I have a problem: While I'm busy becoming an expert in construction, I need to eat bread to survive... The solution to this problem is a free market; it will allow me to use the money that I earn from building houses to buy bread from a baker (who is an expert in baking). The efficiency gains here are obvious.
When you look at the same problem at a global scale, it doesn't make sense because, taken as a whole, a country (especially one with a large population) can focus on many things at once whilst being an expert at all of them. Being really good in one area does not prevent a country from also being really good in a different area.
Applying a microeconomic solution (in this case, a free market) to a macroeconomic problem doesn't work. It's like if you were a plumber and your kitchen sink was leaking and instead of fixing it yourself (which would take 5 minutes and cost you $0), you decide to call another plumber to come to your house and fix it (which would take 1 hour of travel time extra and cost you $100). It makes no sense. If you have the skills to do something on your own, and you have an unlimited ability to multi-task you'd have to be an idiot to pay someone else to do it.
The free market is about creating a level playing field. Globalization was shit because because it did not create a level playing field, it created a subsidy for "developing" countries, at the expense of "developed" ones.
Its hilarious that people think that somehow free markets and libertarians are responsible
I think most people stop reading at "government" and don't realize that for a free market to exist, it needs to exist in a vacuum. There is no frictionless market, and every market has it's share of cost externalizations (plastics, energy, etc.), or leverage imbalance (healthcare, labor market).
Reason being, yes, I agree that a huge problem with globalization is that, while developed countries have spent many decades building things like labor rights, environmental protections, IP protections, etc., globalization essentially allows an out for companies to undermine all of these base-level rules.
But there is a very good reason people are blaming "free markets" and "libertarians" - lots of the cheerleading behind globalization was based on people espousing their love for free markets and libertarianism. The fact that you may disagree with their definition of free markets and libertarianism doesn't change the fact that their definition is the one that is most widely acknowledged.
The "cheerleaders" you are talking about clearly did not understand these concepts, and the result is mis-association, and thereby in effect dismissal of the idea of freedom as absurd.
Even though "ideally", "In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority", In practice to achieve this end, this means creating a level playing field which take things into account such as "IP protections, environmental costs, etc."
From a libertarian perspective, in order to eliminate a "government or other authority from all forms of economic privilege" in the long term, is to in the short term work to better define property rights and rules to play by to force more accountability with the individuals involved.
Even if you didn't vote for Trump or don't like him, Trump has been critiquing globalization for years before he came to office especially with regards to China. Yet their conclusion is that he is a demagogue. The very people who cheered on the very globalization that made some of us rich but left many of our fellow citizens in the dust.
I assume they agree that the purpose of globalization was to make everyone better of not just some and that those that would benefit from it most should be paying back their fair share to the communities.
Today we have a situation where it's impossible to save your way to retirement, where the cost of living has increased and the middle class decreased and we did so while increasing the deficit of the country.
Perhaps the real issue here is not one of trade, but of the collapse of unions, the dramatic change in the nature of our media, broken leadership structures, and a lazy mindset that views capital and markets as the goal rather than the tool.
The issue wasn't of trade but of a small group of people who benefitted from exporting jobs abroad to sell products at home and then still avoid paying the taxes.
Trade has made nations richer. Economists were not wrong about this. What many were wrong about is the thesis that the social & market structures in developed, "stable" democracies would ensure that those gains eventually improved the utility of everyone—the proverbial "rising tide that lifts all boats."
The standard claim is that markets may not immediately fix issues, but over time they will converge on an efficient distribution of resources.
Yes, this is a late reply.
2) Beginning with Goldwater and culminating with Reagan, the American public internalized economic libertarian ideas.[1] (See, e.g., https://www.nytimes.com/1964/10/25/archives/the-case-against...) By the 1990s the Democratic Party had lost their multi-generational primacy, and the only politicians able to stem the loses were politicians like Bill Clinton (see also Tony Blaire in the U.K.), whose strategy was to co-opt libertarian economics.
[1] The reasons for this are complex. For example, Southern conservative politics becoming vociferous advocates for deregulation and free trade obviously has more than a little to do with Nixon's infamous "Southern strategy". Republicans promised southern states a larger share of industrial manufacturing by 1) shifting it from the North and 2) extracting concessions from foreign manufacturers to build domestic manufacturing plants as part of trade negotiations.
Democrats have more or less embraced that markets can work and policy makers have picked battles accordingly. I'm not sure what full throated free market policies US Democrats have put forward that overreach their GOP counterparts, although they have certainly become very complacent.
Cheap labor that rests on a foundation of abuse only creates a whole world that depends on there being people to plunder while the abuser accretes an armor of indispensability.
Allowing the participation of countries who operate by separate rules that are inherently advantaged or abusive does the same.
If the US hadn't been obsessed with industry and consumer-driven realpolitik and killing the faintest whiff of "communism" at any cost it might have been able to use its post-WW2 clout to create a globalization that worked, but to the surprise of no-one, greed was too good and functional globalization ultimately wasn't even much of a dream.
No, it's not.
Let's start with the major area of economic policy called taxation:
https://www.nytimes.com/2019/01/05/opinion/alexandria-ocasio...
How about if we start with the ones I listed in the linked comment. The link you cite is Krugman aggressively trying to signal something anti-Trump after it was already too late.
I've been reading Krugman's op eds for years and nearly everything Trump says about economic policy is practically verbatim Krugman.
Also, one could argue that Trump's massive increase in deficit spending will likely result in increases to future income tax rates to the levels AOC advocates, but with the beneficiaries (unfortunately) being defense contractors rather than the poor and middle class.
Krugman has advocated closed borders for years as well:
The New Deal made America a vastly better place, yet it probably wouldn’t have been possible without the immigration restrictions that went into effect after World War I. For one thing, absent those restrictions, there would have been many claims, justified or not, about people flocking to America to take advantage of welfare programs.
(https://www.nytimes.com/2014/11/21/opinion/paul-krugman-immi...)
To be clear, Krugman is a respectable person unlike Trump, but he shares the same ideology of economic populism and framing of rust belt workers as victims of modernization, globalization, and trade.
Paul Krugman has never suffered disagreement gladly.
That may well be the case, but it isn't obvious.
Also, what about "the non-american worker"? Did it hurt them more than it helped? Is there a comparative disadvantage?
Also, why the focus on workers? What about the young, the sick, the elderly? Could an aging society's welfare be improved by being shielded economically from younger societies?
Bringing all of the people of the world up to the first world standards. But instead we outsource only the work and not the working conditions so there's an enormous gap between what you can expect in the first world vs. third world. That gap ends up mostly as profit that is absorbed by the ultra-rich.
Globalization ends up being impossible in practice because there is no central world government dictating standards for all countries of the world, and opens up the system to exploit poor countries as they race to the bottom.
Okay now add air conditioning to get it up to US standards - oh wait there isn't even a power plant to connect to.
The statistics don't bear this pessimistic hypothesis out. Global wages have increased faster over the last 20 years than at any point in history, and the global poverty rate has declined at similarly unprecedented rates.
Globally there has been no change in income inequality either.
https://wir2018.wid.world/files/download/wir2018-full-report...