There's no doubt that free trade is a big net positive for the US. But one of the major oversights of the last few decades of public policy is the failure to reallocate some of the net benefits of free trade more directly to the losers, e.g. lower middle class working people in the US. Maybe they figured these people would never organize or vote in serious numbers. Bernie Sanders and Donald Trump might prove otherwise.
>There's no doubt that free trade is a big net positive for the US.
Eh, I'm not so sure that cow's so sacred. Is free trade positive for the American economy? Yes, of course. It moves our country toward a richer, more intellectually-based economy, which should lead to greater quality of life for everyone: fewer shitty jobs building stuff, being hurt by industrial processes, working really really hard to make little money.
I guess I'm going to parrot you a bit here, because I agree with the rest of your point, but what's happening is the second part of that equation, the benefit for the workers and the individuals, is not being met. Our economy is flourishing, but workers who have been displaced are not being supported.
Our rich, rich economy should be able to either 1) train up people who were formerly doing the blue collar work to succeed in an intellectually based economy or 2) provide them with a standard of living given their inability to find good work (the standard income idea).
We are not even attempting to do either.
College costs a fucking shitload and social programs are drying up left and right. Our kids are getting dumber, relatively speaking, so they will be less competitive in a global workplace.
So no, that is not what I would consider a "net positive" as a net positive, in my mind, means that what's happening is good for most people. Clearly, it is not. We shouldn't make it a platitude, because then we don't get to say, "Free trade is clearly good, but if and only if..."
"Free trade" is a misnomer for what is, in practice, freedom of capital to cross borders in search of lower labor. The dynamic certainly helped transform the lives of many people here in China for the better -- many people made rich from creating basically widjets for walmart, but in the US, many working class people lost both their jobs and their entire communities when Capital left.
The net benefits are allocated to everyone through lower prices and greater consumer choices. This affects many more people, albeit not as dramatically, as those negatively affected. The fact that imported goods well in US is proof that many people value the goods higher than the alternatives.
If you go down the road of easing all competitive displacements of human capital, the eventual result would be lifetime job guarantees, protected cartels and a stagnant society.
Maybe people are realizing, when you're living in an import country, sometimes its better to have higher prices and a job, than lower prices and no job.
Two policies could fix this. A negative income tax (with UBI) and a state backed insurance policy that either pays out as free retraining, or as wage insurance.
"One would almost expect in this day in age of miraculous digital enhancements to everything we do, and the related improvements in the efficiency of production... That prices in the absence of [The Fed's] monetary exertions would fall, so I suppose that a little bit of inflation is itself an anomaly... One ought to have seen kind of a dividend for the working guy in the form of everyday lower prices."
The failure of improved trade and technology to be the rising tide that lifts all boats is not a failure of policy to redistribute, but rather a consequence of interventionary monetary policy. The even scarier thing is that these policies are enacted by an unelected government organization (the Fed) on behalf of the people (I'm sure the Fed thinks that what it is doing is good for all of us). The net result: Despite his agitation for Fed transparency, Bernie is so clueless about economics, that it's likely that he will listen to cheerleaders like Robert Reich who stump for lowering interest rates and make the upward redistribution of wealth worse - and Donald Trump - well who knows what the hell he will do.
If you don't believe that the fed stoking inflation is bad for the little guy, consider 1) if inflation weren't bad for the little guy, we wouldn't have to raise the minimum wage periodically, and 2) http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hig...
"When you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."
Read that carefully, and between the lines. One of the policy justifications for inflation is that it cheats the working class out of the value of their earnings, in the name of "employment".
Finally, consider the words of Keynes, who is one of the advocates of monetary intervention to control the animal spirits (although even he would go pale seeing the one-sidedeness of the interventions that we've been doing in the past 40 years):
"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “profiteers,” who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat."
I think this is a perfect prediction of what has happened to our system of "capitalism".
It is important to note that practically no economist believes that free trade is not a net positive for all countries. In a recent survey of economists, two questions were asked, of which 95% of those surveyed either strongly agreed or agreed, while the remaining 5% were uncertain (none disagreed).
Question A: Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.
Question B: On average, citizens of the U.S. have been better off with the North American Free Trade Agreement than they would have been if the trade rules for the U.S., Canada and Mexico prior to NAFTA had remained in place.
I find it ironic that publications such as the NYT which often (rightfully IMO) put a lot of weight on the scientific consensus on issues such as climate change, are much more reactionary when it comes to issues such as free trade, relying more an personal antidotes and political rhetoric.
Economists? Are those the same people that make assertions based on observations & models lacking legitimate control groups?
Beyond the fact that social sciences are generally not scientific and highly subject to groupthink, I don't think they're wrong in the sense that comparative advantages exist in the Ricardian/Smith sense. However, if they dont account for currency manipulation, tax loopholes, and labour safety standards, I think those same economists lose a lot of credibility clinging to this fantasy that free trade as we know it is actually free.
With [...] macroeconomic analysis working worse than astrology, microeconomic papers wrong 40% of the time, the appointment of Bernanke who was less than clueless of the risks[...], people are perfectly entitled to rely on their own ancestral instinct and listen to their grandmothers with a better track record than these policymaking goons.
There is excellent evidence that many countries became prosperous because of protectionism: UK, USA, S. Korea... See for instance the book from Ha-Joon Chang, "Kicking Away the Ladder" (a digest can be found here: http://www.paecon.net/PAEtexts/Chang1.htm )
The use of averages conveniently masks the fact that most people lose while a few fat cats grab all the gains. When a group of 1000 people earns collectively 1 million, it's of tremendous importance if everyone gets $1000 or if one gets 999001 and all the others 1$ instead. "Free trade agreements" generally looks precisely like the latter.
> I find it ironic that publications such as the NYT which often (rightfully IMO) put a lot of weight on the scientific consensus on issues such as climate change, are much more reactionary when it comes to issues such as free trade, relying more an personal antidotes and political rhetoric.
I don't find it surprising at all, workers are real people out there. Economics is messy and when you're the one being marginalized you don't say "well at least on average the country is better off" when you can't feed your family. If climate change had as accurate a barometer as unemployment you would see radically different coverage.
But economists aren't scientists. Most are employed to support government ideologies. And these IGM economists are handpicked by some committee.
For example, they're supposedly "geographically diverse". That means: Berkeley, Chicago, Harvard, MIT, Princeton, Stanford, Yale.
Where's Dean Baker, one of the few who predicted the housing bubble crash & impact of 2007-2008? Stiglitz? Pettifor? Varoufakis? Piketty? Do they not have sufficiently "impeccable qualifications" even by bureaucratic credentialist standards?
Pseudoscience and lying with statistics is the Economist Way. Consensus by a bunch of handpicked suit-wearing economists is nothing like the scientific consensus on global warming. "Globalization" and "free trade" are doublespeak; you have to prefix them with "corporate", like corporate globalization.
If an engineer or physicist says they believe something about their field (not at the cutting edge) I tend to believe that they are right but economists, however smart and honest they might be, don't have the luxury of performing experiments so many of their pronouncements are either mere opinions or are arguments from first principles unsullied by attempts at verification.
I'm confused by your argument - you're right that most economists would agree that free trade provides holistic benefits, but most would also note that it imposes costs - and that the benefits are often widely dispersed, but the costs can be very concentrated. Is it wrong to write an article talking about the costs?
Economists would also almost unanimously agree that trade creates winners and losers, within a given country. TANSTAAFL
Often trade deals are sold with "some people will lose, more people will win, we can take some of the gains from the winners to compensate the losers and everyone wins!" The second half of that statement doesn't happen, largely because it's difficult to come up with effective programs that share the gains of the winners with the losers.
On the whole I'm a free trade supporter. It's unsurprising, however, that the losers will get pissed off and start flocking to demagogues like Trump. That risk is concerning enough that I've decreased my support of free trade, for reasons of maintaining a healthy civic culture.
> I find it ironic that publications such as the NYT which often (rightfully IMO) put a lot of weight on the scientific consensus on issues such as climate change, are much more reactionary when it comes to issues such as free trade, relying more an personal antidotes and political rhetoric.
That's because economics is a social study, not a science.
>It is important to note that practically no economist believes that free trade is not a net positive for all countries.
Yes, on average it's a net positive. Of course, if you average +20 for capital with -15 for labor, you get +5, a "net positive" for "society overall", with the slight unexamined problem that capital and labor increasingly don't overlap.
Economists have always said that some state action would be necessary to compensate the sections of the working class harmed by competition with cheaper overseas labor. The state, being run by ideologues trying to strengthen capital over labor, never took any of the corrective actions recommended by trade economists.
There is one clear benefit to global trade: It makes things cheaper. The problem is that it only makes things a little bit cheaper, and it's difficult for most people to see the effect in their daily lives.
In broad strokes, free trade is essentially a trade off between some US workers losing their jobs and reducing the cost to make everything that people buy at Walmart. I can understand that most people on hn don't shop at Walmart, and wouldn't even notice if prices for consumer goods went up by 5-10%. But the rise in household costs due to ending free trade would have a major impact on the poorest and most vulnerable citizens. A single mother with multiple children and one income simply can't afford to pay X% more for everything that her family buys.
And for what? So that a factory worker in Michigan or Ohio can have their union job back? That just seems like fighting progress. Those jobs are gone, mostly due to advances in technology and global connectivity. It makes sense to build things where it's most efficient to do so and to replace humans with robots wherever possible. Why increase prices on everything and hurt national and global economic growth just so that some people can keep the jobs that they're used to having?
And unfortunately, "re-training" programs tend to work out better on paper than they do in reality. The fact is that no one wants to throwaway a lifetime of work in a given industry in order to start all over again in another. It's not just learning new skills, it's years of meeting the right people, learning new cultures and customs, etc. So few people want to do that, it's just not human nature to start over from scratch.
HN is starting to sound like a broken record, but a Basic Income is probably the best solution. I believe that some politicians are also proposing a kind of "workers insurance", to help people who lose their jobs due to changes in technology or culture. Either of these would be a better solution than forcing price increases onto the millions of people who have jobs but still barely make enough to get by.
40 years old here, and I have seen much more pain than benefit over the last 30 years. Early in my youth I was exposed to libertarianism, and I was taken in - it sounded so simple and logical and effective. But, over time I saw the effects of globalization, free trade, and deregulation. They've been selling us, the masses, on it for 40 years. Why haven't salaries and demand for jobs increased? They always say it's because of the existing tariffs, regulations, unions, etc. 'Trust us,' they say, 'just a little bit longer - more deregulation and free trade, and it will happen. Trust us.' I've literally heard that same claim for as long I can remember.
Maybe I'm a minority. I'm the first college educated person in my family (most with 'gifted' level IQs - like that matters!). The rest were working class. Then, I've seen them slowly lose jobs, fall below the poverty line. Now, I make a good salary, and I have to send money back to my family because they're unable to find jobs, pay for transportation, pay for education or health care or housing. Luckily, they are still able to pay for food! It's like I'm an immigrant in my own country, sending money back to the old country. Just weird.
I am very happy that we have been able to raise standards of living for many who had been earning less than a dollar a day. But, this has come at the expense of the working and middle class in many 'rich' countries. There were and are much better ways to achieve the same goal. Instead of pressuring the benefiting countries to migrate to democracy and rule of law, we instead caved into our primal demand for low-cost junk. (Yay! $5 t-shirts. Thank you, Stefan Persson) Now, we have autocratic and corrupt countries with as much leverage as we used to have.
The capitalists have been selling us Powerball tickets for 40 years, and we keep lining up to buy them.
This isn't a 40 year old trend but rather has been happening ever since weavers were replaced by machines some 200 years ago (ever since the industrial revolution). The trends of rationalisation, automation, economies of scale and now globalisation all have the same effect. Replacing low value labour with higher value labour.
That's what competitive economies do and keeps them competitive (vs others, such as Cuba that just stay stuck in time). It's for the greater good, even if some temporarily will hit hardship. Understandably though, this isn't how people who are hit by this hardship think of globalisation..
Why haven't salaries and demand for jobs increased?
Because non-wage compensation is tax advantaged so it's cheaper for companies to increase compensation there. If they spent $1 more on health care, you get $1 more worth of health care. If they spend $1 more on wages, you get $0.80 in your take home pay.
Real compensation per hour has increased, both across the economy and in manufacturing.
That increase just comes in the form of health benefits/retirement/etc.
If you want to fix this, eliminate the Obamacare employer mandate and push everyone to the exchanges and increase taxes on non-wage benefits. (You can make it revenue neutral by reducing taxes on wages commensurately.)
There were and are much better ways to achieve the same goal.
What are some of these "much better ways" to reliably and effectively achieve the same goal?
> Luckily, they are still able to pay for food! It's like I'm an immigrant in my own country, sending money back to the old country. Just weird.
Well said. I don't have any answers, but wanted you to know that you are not alone in that feeling. It is incredibly disorienting to see the impact of income inequality so clearly in your own family in a single lifetime. It is even worse when you know that your children aren't interested in pursuing one of the few paths that can lead to financial security and are going to face a very difficult future if you aren't able to provide them with a safety net of your own.
What would it cost to have a device similar to an android tablet 40 years ago? Billion dollars? Now you can get them for $100.
What would it cost to have access to the sum of human knowledge instantly 40 years ago? In video/text/audio form? Now they hand out wifi free in coffee shops.
In each case people/industries were displaced while generating enourmous wealth. The value of your paycheck may be lower, but what it can buy is incalculably more valuable. I would rather been poor now than rich 40 years ago.
Summers: "Like experts in many fields who give policy advice, the authors show a preference for first-best, textbook approaches to the problems in their field, while leaving other messy objectives acknowledged but assigned to others.
In this way, they are much like those public finance economists who oppose tax expenditures on principle, because they prefer direct expenditure programs, but do not really analyze the various difficulties with such programs; or like trade economists who know that the losers from trade surges need to be protected but regard this as not a problem for trade policy."
I think this gets at the root of the dichotomy: it shouldn't be about making the lives of either Mexican workers or American workers better. If the system properly redistributed the profits from moving the factory abroad to, say, education and retraining and job placement programs to the American workers, then we wouldn't be having this debate in the first place.
Global trade is very similar to the Music (and software) revolution that happened over the last 15 or so years.
The original creators of creative works were upset because free music, software diluted the value of the original work and it would make it more difficult to sell it in the future because most people would just get it for free. These companies essentially needed to compete against the same software/music they were selling, but free.
The same thing is happening now, but with jobs. Companies are going overseas for workers and Americans now need to compete over a worker that can essentially do the same job, for a lower wage.
Many people here have defended software and music piracy and even said things like "I wouldn't have purchased it anyway".
Well, companies "Wouldn't have hired Americans anyway". It's ironic that so many of those same people are now clamoring for government protection when they fought against patents and copyrights for so long.
Instead of complaining, you basically need to compete and offer companies something that they can't get overseas. This is exactly what the software and music industries have both needed to do to survive.
The latest Econtalk episode was an interview with the mentioned professor of economics at MIT - David Autor - about the loss of US low-skilled manufacturing jobs to China.
Health care coverage requirements + environmental regulations + other nations without these things that you can ship your goods to the US from without paying a tax penalty...
The US citizens don't need cheaper iPhones, they need decent paying jobs. The average citizens DOES NOT benefit from free trade deals. The average international company does. If these other nations had the same regulations, then it wouldn't be cheaper to move the jobs there either.
Free trade is bad for the environment and bad for domestic low skilled workers. And with all the unemployed college students around, its clear that educating people for jobs that aren't there won't fix the issue. You're selling out your citizens for your corporate overlords, and now that Bernie is all but out of the running Trump is the only one left speaking the truth about this.
All I ever see from globalization advocates are a bunch of hypotheticals and never any actual quantitative data. Kind of concerning, considering how widely accepted the assumption "globalization=good" is.
It is true that Americans can buy cheap goods; but we need to calculate the differential good. Differential good for the blue collar workers vs differential good for the elite (capital holding class). This distribution of differentials is skewed: the elite is getting the most of the it.
While I can buy cheap stuff from Walmart, most of my income goes to rent. There is no free trade for rent and health care, while most of an average worker makes go for rent and insurance.
As many others have stated in these comments, free trade doctrine makes the assumption that the gains from said trade will be redistributed to the losers (if we did this properly there would be far, far less opposition to the system.) That we do not actually do very much (our "Trade Adjustment Assistance" programs are incredibly weak and stingy) is probably well known. What's less appreciated is that some to much of what we have doesn't even meet the Ricardian definition of Free Trade.
"Few economists have bothered to think about the issue of offshoring, preferring to dismiss concerns about it as manifestations of the old protectionist fallacy. They learned in graduate school that free trade is always mutually beneficial and ceased to think when they passed their exams. This is especially true of “free market economists” who believe that economic freedom, which they identify with the freedom of capital, is always good. Thus, most economists mistakenly believe that offshoring is protected under the authority of free trade doctrine.
However, free trade doctrine is based on the assumption that domestic capital seeks its comparative advantage in its home economy, specializing where its comparative advantage is best and, thereby, increasing the general welfare in the home economy. David Ricardo, who explicated the case for free trade, rules out an economy’s capital seeking absolute advantage abroad instead of comparative advantage at home.
...offshoring, or the pursuit of absolute advantage, breaks the connection between the profit motive and the general welfare. The beneficiaries of offshoring are the corporations’ shareholders and top executives and the foreign country, the GDP of which rises when its labor is substituted for the corporations’ home labor. Every time a corporation offshores its production, it converts domestic GDP into imports. The home economy loses GDP to the foreign country which gains it." - Paul Craig Roberts, former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal.
This is all yesterday's news, though. Even if we ripped up all our FT agreements, those jobs are gone permanently. The debate at this point is largely academic. Instead, we should focus on how to help those who lost their jobs with what we have to work with now (free training, free college, cash, etc.)
“We’ve shifted an abundant part of our manufacturing footprint to relatively lower cost countries, about two-thirds,” said Mr. McDonough, president of the climate, controls and security division of United Technologies. “Still, there’s some opportunity there.”
..
“Our company, with American workers,” he added, “builds a heck of a lot of stuff in the U.S.”
I feel really bad they have to resort to these kinds of tactics to increase shareholder value. I guess when you have a really banal business making things like air conditioners that hasn't innovated in years the only thing left is to reduce costs to stay competitive?
Methinks they should outsource the managements' jobs too.
The root problem is not jobs moving to poorer countries it's that manual labor is losing its value and will continue to do so as technology advances. A huge problem with capitalism is that it has no solution for what to do with the masses once a days labor is no longer worth a days living expenses. We are heading in this direction and are already there in many parts of the world. Education is a good solution but at some point demands for higher-level skills outpace the capacity of the average human brain. I'm not a big advocate of government run welfare but pure capitalism leaves many the gutter.
Although a similar argument could have been made as societies industrialised, that once the value of farming work fell (which nearly everyone did), then there would be mass unemployment. It didn't play out that way.
Workers are probably just forming knee-jerk opinions based on all of the evidence and all of the theory. It probably helps to calm them down that the NYT consistently equivocates between the entire concept of international trade, actual trade agreements (which are highly protectionist and monotonically increasing protection on copyrights, patents and professional services), and general lowering of tariffs.
[+] [-] nugget|10 years ago|reply
[+] [-] dclowd9901|10 years ago|reply
Eh, I'm not so sure that cow's so sacred. Is free trade positive for the American economy? Yes, of course. It moves our country toward a richer, more intellectually-based economy, which should lead to greater quality of life for everyone: fewer shitty jobs building stuff, being hurt by industrial processes, working really really hard to make little money.
I guess I'm going to parrot you a bit here, because I agree with the rest of your point, but what's happening is the second part of that equation, the benefit for the workers and the individuals, is not being met. Our economy is flourishing, but workers who have been displaced are not being supported.
Our rich, rich economy should be able to either 1) train up people who were formerly doing the blue collar work to succeed in an intellectually based economy or 2) provide them with a standard of living given their inability to find good work (the standard income idea).
We are not even attempting to do either.
College costs a fucking shitload and social programs are drying up left and right. Our kids are getting dumber, relatively speaking, so they will be less competitive in a global workplace.
So no, that is not what I would consider a "net positive" as a net positive, in my mind, means that what's happening is good for most people. Clearly, it is not. We shouldn't make it a platitude, because then we don't get to say, "Free trade is clearly good, but if and only if..."
[+] [-] bjshepard|10 years ago|reply
[+] [-] bko|10 years ago|reply
If you go down the road of easing all competitive displacements of human capital, the eventual result would be lifetime job guarantees, protected cartels and a stagnant society.
[+] [-] nickik|10 years ago|reply
Im also not convinced that this narritive is true. Other countries with free trade don't always see the same outcomes.
[+] [-] dpweb|10 years ago|reply
[+] [-] tdaltonc|10 years ago|reply
[+] [-] dnautics|10 years ago|reply
"One would almost expect in this day in age of miraculous digital enhancements to everything we do, and the related improvements in the efficiency of production... That prices in the absence of [The Fed's] monetary exertions would fall, so I suppose that a little bit of inflation is itself an anomaly... One ought to have seen kind of a dividend for the working guy in the form of everyday lower prices."
The failure of improved trade and technology to be the rising tide that lifts all boats is not a failure of policy to redistribute, but rather a consequence of interventionary monetary policy. The even scarier thing is that these policies are enacted by an unelected government organization (the Fed) on behalf of the people (I'm sure the Fed thinks that what it is doing is good for all of us). The net result: Despite his agitation for Fed transparency, Bernie is so clueless about economics, that it's likely that he will listen to cheerleaders like Robert Reich who stump for lowering interest rates and make the upward redistribution of wealth worse - and Donald Trump - well who knows what the hell he will do.
If you don't believe that the fed stoking inflation is bad for the little guy, consider 1) if inflation weren't bad for the little guy, we wouldn't have to raise the minimum wage periodically, and 2) http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hig...
"When you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."
Read that carefully, and between the lines. One of the policy justifications for inflation is that it cheats the working class out of the value of their earnings, in the name of "employment".
Finally, consider the words of Keynes, who is one of the advocates of monetary intervention to control the animal spirits (although even he would go pale seeing the one-sidedeness of the interventions that we've been doing in the past 40 years):
"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “profiteers,” who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat."
I think this is a perfect prediction of what has happened to our system of "capitalism".
[+] [-] SixSigma|10 years ago|reply
You need to add : in the short term
or
change "is a" to "has been"
[+] [-] bko|10 years ago|reply
Question A: Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.
Question B: On average, citizens of the U.S. have been better off with the North American Free Trade Agreement than they would have been if the trade rules for the U.S., Canada and Mexico prior to NAFTA had remained in place.
I find it ironic that publications such as the NYT which often (rightfully IMO) put a lot of weight on the scientific consensus on issues such as climate change, are much more reactionary when it comes to issues such as free trade, relying more an personal antidotes and political rhetoric.
[0] http://www.igmchicago.org/igm-economic-experts-panel/poll-re...
[+] [-] fixxer|10 years ago|reply
Beyond the fact that social sciences are generally not scientific and highly subject to groupthink, I don't think they're wrong in the sense that comparative advantages exist in the Ricardian/Smith sense. However, if they dont account for currency manipulation, tax loopholes, and labour safety standards, I think those same economists lose a lot of credibility clinging to this fantasy that free trade as we know it is actually free.
[+] [-] wazoox|10 years ago|reply
With [...] macroeconomic analysis working worse than astrology, microeconomic papers wrong 40% of the time, the appointment of Bernanke who was less than clueless of the risks[...], people are perfectly entitled to rely on their own ancestral instinct and listen to their grandmothers with a better track record than these policymaking goons.
from https://www.facebook.com/nntaleb/posts/10153658794008375
There is excellent evidence that many countries became prosperous because of protectionism: UK, USA, S. Korea... See for instance the book from Ha-Joon Chang, "Kicking Away the Ladder" (a digest can be found here: http://www.paecon.net/PAEtexts/Chang1.htm )
The use of averages conveniently masks the fact that most people lose while a few fat cats grab all the gains. When a group of 1000 people earns collectively 1 million, it's of tremendous importance if everyone gets $1000 or if one gets 999001 and all the others 1$ instead. "Free trade agreements" generally looks precisely like the latter.
[+] [-] jonknee|10 years ago|reply
I don't find it surprising at all, workers are real people out there. Economics is messy and when you're the one being marginalized you don't say "well at least on average the country is better off" when you can't feed your family. If climate change had as accurate a barometer as unemployment you would see radically different coverage.
[+] [-] hudibras|10 years ago|reply
Too bad this article, as it says right in the headline, is about workers and not consumers or the average U.S. citizen.
Nice try, though.
[+] [-] calibraxis|10 years ago|reply
For example, they're supposedly "geographically diverse". That means: Berkeley, Chicago, Harvard, MIT, Princeton, Stanford, Yale.
Where's Dean Baker, one of the few who predicted the housing bubble crash & impact of 2007-2008? Stiglitz? Pettifor? Varoufakis? Piketty? Do they not have sufficiently "impeccable qualifications" even by bureaucratic credentialist standards?
Pseudoscience and lying with statistics is the Economist Way. Consensus by a bunch of handpicked suit-wearing economists is nothing like the scientific consensus on global warming. "Globalization" and "free trade" are doublespeak; you have to prefix them with "corporate", like corporate globalization.
[+] [-] kwhitefoot|10 years ago|reply
[+] [-] nemild|10 years ago|reply
[+] [-] scarmig|10 years ago|reply
Often trade deals are sold with "some people will lose, more people will win, we can take some of the gains from the winners to compensate the losers and everyone wins!" The second half of that statement doesn't happen, largely because it's difficult to come up with effective programs that share the gains of the winners with the losers.
On the whole I'm a free trade supporter. It's unsurprising, however, that the losers will get pissed off and start flocking to demagogues like Trump. That risk is concerning enough that I've decreased my support of free trade, for reasons of maintaining a healthy civic culture.
[+] [-] tryitnow|10 years ago|reply
Climate change is not a policy whereas free trade is.
A better analogy would be between "free trade" and "carbon taxes" or "free trade" and "renewable subsidies."
Polling "experts" on policy issues is a different beast than polling them on scienfitific issues.
[+] [-] raziel2p|10 years ago|reply
That's because economics is a social study, not a science.
[+] [-] eli_gottlieb|10 years ago|reply
Yes, on average it's a net positive. Of course, if you average +20 for capital with -15 for labor, you get +5, a "net positive" for "society overall", with the slight unexamined problem that capital and labor increasingly don't overlap.
Economists have always said that some state action would be necessary to compensate the sections of the working class harmed by competition with cheaper overseas labor. The state, being run by ideologues trying to strengthen capital over labor, never took any of the corrective actions recommended by trade economists.
[+] [-] karmacondon|10 years ago|reply
In broad strokes, free trade is essentially a trade off between some US workers losing their jobs and reducing the cost to make everything that people buy at Walmart. I can understand that most people on hn don't shop at Walmart, and wouldn't even notice if prices for consumer goods went up by 5-10%. But the rise in household costs due to ending free trade would have a major impact on the poorest and most vulnerable citizens. A single mother with multiple children and one income simply can't afford to pay X% more for everything that her family buys.
And for what? So that a factory worker in Michigan or Ohio can have their union job back? That just seems like fighting progress. Those jobs are gone, mostly due to advances in technology and global connectivity. It makes sense to build things where it's most efficient to do so and to replace humans with robots wherever possible. Why increase prices on everything and hurt national and global economic growth just so that some people can keep the jobs that they're used to having?
And unfortunately, "re-training" programs tend to work out better on paper than they do in reality. The fact is that no one wants to throwaway a lifetime of work in a given industry in order to start all over again in another. It's not just learning new skills, it's years of meeting the right people, learning new cultures and customs, etc. So few people want to do that, it's just not human nature to start over from scratch.
HN is starting to sound like a broken record, but a Basic Income is probably the best solution. I believe that some politicians are also proposing a kind of "workers insurance", to help people who lose their jobs due to changes in technology or culture. Either of these would be a better solution than forcing price increases onto the millions of people who have jobs but still barely make enough to get by.
[+] [-] ap22213|10 years ago|reply
Maybe I'm a minority. I'm the first college educated person in my family (most with 'gifted' level IQs - like that matters!). The rest were working class. Then, I've seen them slowly lose jobs, fall below the poverty line. Now, I make a good salary, and I have to send money back to my family because they're unable to find jobs, pay for transportation, pay for education or health care or housing. Luckily, they are still able to pay for food! It's like I'm an immigrant in my own country, sending money back to the old country. Just weird.
I am very happy that we have been able to raise standards of living for many who had been earning less than a dollar a day. But, this has come at the expense of the working and middle class in many 'rich' countries. There were and are much better ways to achieve the same goal. Instead of pressuring the benefiting countries to migrate to democracy and rule of law, we instead caved into our primal demand for low-cost junk. (Yay! $5 t-shirts. Thank you, Stefan Persson) Now, we have autocratic and corrupt countries with as much leverage as we used to have.
The capitalists have been selling us Powerball tickets for 40 years, and we keep lining up to buy them.
[+] [-] ricw|10 years ago|reply
[+] [-] yummyfajitas|10 years ago|reply
Because non-wage compensation is tax advantaged so it's cheaper for companies to increase compensation there. If they spent $1 more on health care, you get $1 more worth of health care. If they spend $1 more on wages, you get $0.80 in your take home pay.
Real compensation per hour has increased, both across the economy and in manufacturing.
https://research.stlouisfed.org/fred2/series/COMPRNFB
https://research.stlouisfed.org/fred2/series/COMPRMS
That increase just comes in the form of health benefits/retirement/etc.
If you want to fix this, eliminate the Obamacare employer mandate and push everyone to the exchanges and increase taxes on non-wage benefits. (You can make it revenue neutral by reducing taxes on wages commensurately.)
There were and are much better ways to achieve the same goal.
What are some of these "much better ways" to reliably and effectively achieve the same goal?
[+] [-] unknown|10 years ago|reply
[deleted]
[+] [-] griffordson|10 years ago|reply
Well said. I don't have any answers, but wanted you to know that you are not alone in that feeling. It is incredibly disorienting to see the impact of income inequality so clearly in your own family in a single lifetime. It is even worse when you know that your children aren't interested in pursuing one of the few paths that can lead to financial security and are going to face a very difficult future if you aren't able to provide them with a safety net of your own.
[+] [-] johngalt|10 years ago|reply
What would it cost to have access to the sum of human knowledge instantly 40 years ago? In video/text/audio form? Now they hand out wifi free in coffee shops.
In each case people/industries were displaced while generating enourmous wealth. The value of your paycheck may be lower, but what it can buy is incalculably more valuable. I would rather been poor now than rich 40 years ago.
[+] [-] aab0|10 years ago|reply
[+] [-] raldi|10 years ago|reply
I'd like to see a video of the Mexicans receiving the news that a factory is opening in town, and it's going to need lots of employees.
[+] [-] jordanb|10 years ago|reply
[+] [-] Apocryphon|10 years ago|reply
[+] [-] pink_dinner|10 years ago|reply
The original creators of creative works were upset because free music, software diluted the value of the original work and it would make it more difficult to sell it in the future because most people would just get it for free. These companies essentially needed to compete against the same software/music they were selling, but free.
The same thing is happening now, but with jobs. Companies are going overseas for workers and Americans now need to compete over a worker that can essentially do the same job, for a lower wage.
Many people here have defended software and music piracy and even said things like "I wouldn't have purchased it anyway".
Well, companies "Wouldn't have hired Americans anyway". It's ironic that so many of those same people are now clamoring for government protection when they fought against patents and copyrights for so long.
Instead of complaining, you basically need to compete and offer companies something that they can't get overseas. This is exactly what the software and music industries have both needed to do to survive.
[+] [-] icebraining|10 years ago|reply
http://www.econtalk.org/archives/2016/03/symposium_autor.htm...
[+] [-] Vlaix|10 years ago|reply
[+] [-] andrewclunn|10 years ago|reply
The US citizens don't need cheaper iPhones, they need decent paying jobs. The average citizens DOES NOT benefit from free trade deals. The average international company does. If these other nations had the same regulations, then it wouldn't be cheaper to move the jobs there either.
Free trade is bad for the environment and bad for domestic low skilled workers. And with all the unemployed college students around, its clear that educating people for jobs that aren't there won't fix the issue. You're selling out your citizens for your corporate overlords, and now that Bernie is all but out of the running Trump is the only one left speaking the truth about this.
[+] [-] Dowwie|10 years ago|reply
[+] [-] chdjcnx|10 years ago|reply
[+] [-] hiram112|10 years ago|reply
And if you do, you're obviously a [racist, xenophobe, uneducated, commie, etc].
[+] [-] api|10 years ago|reply
[+] [-] canistr|10 years ago|reply
For instance, investing in security. "Workers see costs, not benefits to security".
[+] [-] raincom|10 years ago|reply
While I can buy cheap stuff from Walmart, most of my income goes to rent. There is no free trade for rent and health care, while most of an average worker makes go for rent and insurance.
[+] [-] Futurebot|10 years ago|reply
"Few economists have bothered to think about the issue of offshoring, preferring to dismiss concerns about it as manifestations of the old protectionist fallacy. They learned in graduate school that free trade is always mutually beneficial and ceased to think when they passed their exams. This is especially true of “free market economists” who believe that economic freedom, which they identify with the freedom of capital, is always good. Thus, most economists mistakenly believe that offshoring is protected under the authority of free trade doctrine.
However, free trade doctrine is based on the assumption that domestic capital seeks its comparative advantage in its home economy, specializing where its comparative advantage is best and, thereby, increasing the general welfare in the home economy. David Ricardo, who explicated the case for free trade, rules out an economy’s capital seeking absolute advantage abroad instead of comparative advantage at home.
...offshoring, or the pursuit of absolute advantage, breaks the connection between the profit motive and the general welfare. The beneficiaries of offshoring are the corporations’ shareholders and top executives and the foreign country, the GDP of which rises when its labor is substituted for the corporations’ home labor. Every time a corporation offshores its production, it converts domestic GDP into imports. The home economy loses GDP to the foreign country which gains it." - Paul Craig Roberts, former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal.
[+] [-] Futurebot|10 years ago|reply
[+] [-] sjg007|10 years ago|reply
[+] [-] iamleppert|10 years ago|reply
“We’ve shifted an abundant part of our manufacturing footprint to relatively lower cost countries, about two-thirds,” said Mr. McDonough, president of the climate, controls and security division of United Technologies. “Still, there’s some opportunity there.”
..
“Our company, with American workers,” he added, “builds a heck of a lot of stuff in the U.S.”
I feel really bad they have to resort to these kinds of tactics to increase shareholder value. I guess when you have a really banal business making things like air conditioners that hasn't innovated in years the only thing left is to reduce costs to stay competitive?
Methinks they should outsource the managements' jobs too.
[+] [-] jcoffland|10 years ago|reply
[+] [-] roblev|10 years ago|reply
[+] [-] pessimizer|10 years ago|reply