Free-Trade lifts all boats like theory Titanic unsinkable.

[Eric J in MN]

http://www.nytimes.com/2004/02/23/opinion/23HERB.html

Bob Herbert column in NY TIMES:

One of the great achievements of the United States has been the high standard of living of the average American worker. This was the result of many long years of struggle to obtain higher wages, shorter work weeks, health and pension benefits, paid vacations, safe working conditions, a measure of job security and so on.

It is not an advance to move to a situation in which all of that can vanish with the flick of a computerized switch. High-quality employment is the cornerstone of the economic well-being of America's vast middle class.

Among the questions we should be asking about the real-world effects of unrestrained trade is what happens to the U.S. economy after we've shipped so many jobs from so many sectors overseas that American families no longer have the disposable income to buy all the products and services they need to buy to keep the consumer economy going.

That's not supposed to happen. In theory. But American workers are filled with anxiety because they understand that disaster can result when theory comes face to face with reality. One of the things that sank with the Titanic was the theory that it was unsinkable.

[xchrom]

1. one thing i worry about

is what happens when the jobs we export comes in contact with the laborers we import.
it's going to happen.

[brokensymmetry]

4. I believe it's happening right now...

Take a look at the jobs being created. They're the very ones being filled by illegal immigrants.

The train wreck is coming...I don't envy the guy in the Whitehouse in 2005.

[morgan2]

2. I just had an interesting idea about free trade..

Instead of having tarifs.. If you allow for free trade, but put heavy limits/taxes on foreign ownership of means of production. I don't see it ever getting passed, but theoretically I think the economics behind it are sound. The biggest problem with free trade is that capital can move with no cost to where ever the labor is the cheapest, but labor can not move quickly or cheaply to where the wages are high. If you put restrictions on foreign ownership of companies in the places with cheap labor, it would allow for the countries with cheap labor to actually benefit from it. I could go into more depth with an analysis but I dont think thats needed.

[kcwayne]

3. There are restrictions in China

That require about 45% Chinese ownership of corporations operating in China. These policies benefit the communist party leaders, but workers still get 30 cents an hour, so there is nothing in it for them.

[morgan2]

5. ya but china also has other problems

like state ownership of production and forced prison labor that won't make that work. If you just required citizens of the country to own a portion it would be different.

[kcwayne]

15. Communist officials and their cronies are citizens of the country

and even if "citizens" own the companies, when they are corporations masquerading as human beings (to borrow from Ralph Nader) it doesn't change much, unless you think that corporations such as WalMart are beneficial anyone's standard of living other than major shareholders.

[mobuto]

6. That's a bad idea

Foreign direct investment has been extremely beneficial to our economy. Foreigners buy American companies, or factories in America, and send their money here. I think Wes Clark was right - the solution isn't to erect trade barriers or prevent the free-flow of capital, but to protect jobs in the United States.

How do you that?

1. Provide economic incentives for employers to create jobs in the US. Clark suggested a $10,000/job tax credit. Whether that particular formula is workable or not, I do not know. But it seems to make sense.

2. Increase the value of the jobs we have. No US President since Truman has actively supported union organizing efforts. That's been a tremendous problem, and it seems stupid for unions to spend all their time bitching about trade issues and almost none of their time organizing the 88% of American workers who are ununionized.

[LincolnMcGrath]

7. Almost none of their time?

Unions have spent tons of time and money organizing. The legal deck is stacked against the Unions and has been for decades.

[mobuto]

8. I agree that the deck is stacked

Most unions have still spent very little time and effort organizing. AFSCME is an exception, SEIU is an exception, the UAW are an exception. But for the most part, they've done pretty-much nothing.

And in the political arena, it seems strange that Labor is spending so much time complaining about NAFTA and other free-trade legislation that will is really inevitable, and not nearly so much time opposing right-to-work laws, or supporting the repeal of Taft-Hartley, etc.

[LincolnMcGrath]

11. Pretty much nothing is spin, and false.

Free trade does not have to be inevitable, and Unions have led the activism against both 'right to work for less' laws, and 'Taft Hartley' like statutes.

Sorry you feel as if they are not doing enough.

[mobuto]

17. Of course they've led opposition to them

who else would? But clearly they haven't done enough. The numbers speak for themselves. There has not been a single piece of pro-union legislation passed in 30 years. Not one right-to-work state has repealed its right-to-work legislation. Union membership has declined rapidly, not just in percentage terms but in absolute terms.

Unions are picking the wrong fights, and not fighting the fights they have to fight with the vigor that's required.

[WhoCountsTheVotes]

19. when they have tried, everyone gets fired - illegally

but the corporatiosn are never punished for it - Clinton didn't punish any corporation ever for illegally firing organizers as far as I remember..

"And in the political arena, it seems strange that Labor is spending so much time complaining about NAFTA and other free-trade legislation that will is really inevitable, and not nearly so much time opposing right-to-work laws, or supporting the repeal of Taft-Hartley, etc."

False on a number of accounts. First of all, FTAs are NOT "really inevitable" they are a product of human action, not some mysterious spectral force. Second, of course the unions have spent a lot of time and money opposing "right to work" laws, and as for repealing Taft Hartley - the Democratic party would stop that proposal before it ever got to the Republicans.

[mobuto]

20. You're absolutely right

And that's why its odd that unions have put pressure on politicians on trade issues, and NOT AT ALL (on the national level) on making labor-friendly decisions. I can tell you more horror stories about corporate behavior than most other people can, and you know what? Unions still give tons of money to pro-business, anti-union, but anti-free-trade right wing Democrats and Republicans. That's crazy.

False on a number of accounts. First of all, FTAs are NOT "really inevitable" they are a product of human action, not some mysterious spectral force.

They themselves are, but they're forced upon us by the fact that if we don't sign them, the American economy will suffer greatly. In the long run, they raise wages everywhere. The problem is how you mitigate the short-term effects.

Second, of course the unions have spent a lot of time and money opposing "right to work" laws, and as for repealing Taft Hartley - the Democratic party would stop that proposal before it ever got to the Republicans.

Again, what they've done hasn't been nearly enough. There has not been one single piece of pro-union federal legislation in 30 years. That's remarakble.

[WhoCountsTheVotes]

26. evidence, please

"In the long run, they raise wages everywhere. The problem is how you mitigate the short-term effects. "

In the long run, we are all dead. Do you have any evidence that in the glorious future FTAs will raise wages everywhere? Any evidence at all? Some academic theory that is not disprovable doesn't count.

[morgan2]

9. thats not a long term solution

you can't simply subsidize labor. That doesn't scale. What I'm saying is not to ban foreign ownership, but to limit it to a certain percent. If foreigners own over a certain percentage of means of production in a country, it'll just create a country of cheap laborers and the wealth will flow out.

[mobuto]

10. Why can't you?

you can't simply subsidize labor.

Why not?

What I'm saying is not to ban foreign ownership, but to limit it to a certain percent. If foreigners own over a certain percentage of means of production in a country, it'll just create a country of cheap laborers and the wealth will flow out.

And I'm saying that doesn't follow. Jobs in certain industries are going overseas regardless of who owns the companies. Foreign direct investment brings money into the country, which is a positive benefit. Moreover, when foreign capital buys offices and factories in the United States, their money goes towards the paying of American salaries - and again that's a good thing.

I also don't think America's in any danger of becoming a country of cheap labor. More businesses here mean more competition which leads to rising wages.

[morgan2]

12. why cant you?

you think you can pay businesses 10k for every employee they have? Even 1k? Thats quite a lot of a money.

Jobs flow overseas because they have cheap labor there. The way to stop jobs from flowing overseas is to raise wages overseas. If their wages are closer to ours, the added cost of shipping from abroad will make moving overseas too costly. The reason people call for "fair" trade, is so we only have free trade with countries with comparable working conditions and wages. We can have free trade with everyone if we can raise their wages/benefits/environmental conditions.

[muriel_volestrangler]

13. Government paid health care would be one way

then an extra job in the USA wouldn't mean an extra cost on that particular employer; it would already be paid for out of general taxation (including the profits of companies employing overseas labour, directly or indirectly, if corporate tax loopholes were closed, and reasonable tax rates established). Plus of course that would mean everyone had access to proper health care.

[LincolnMcGrath]

14. SO true

Workers expect me to bargain for a raise over a contract. Keeping benefits free means accepting less on the wage end, unfortunately.

[mobuto]

18. Its not that much money

If you're talking about a $40,000 job, a one-time $10,000 credit isn't going to break the bank.

Every economic analysis shows that free trade has a net positive effect on the economy. The problem is that it creates imbalances in jobs. You can create ten jobs in Houston, but if in doing so you lose five in Greenville, SC, then you still have a problem. Subsidising employement would help to lessen that problem.

If their wages are closer to ours, the added cost of shipping from abroad will make moving overseas too costly. The reason people call for "fair" trade, is so we only have free trade with countries with comparable working conditions and wages.

The problem with that is that doesn't work and it doesn't raise wages in the developing world either. If the US doesn't buy Chinese goods for example, then wages in China will fall. Moreover, US companies will be hurt because they will be replaced by European and Japanese companies which will have a competitive advantage over American companies with cheaper labor.

[IrateCitizen]

16. One of the most complex and polarizing issues of our time

And this article by Herbert doesn't even really touch the surface of it.

First of all, the term "Free Trade" is a complete misnomer. The current trend is not toward "free" trade, but rather toward corporate-managed trade. Since corporate interests are the ones who are dominating all of the trade agreements and domestic policies, the rules are naturally being written primarily for their benefit.

But it is definitely not "free". "Intellectual property rights" have nothing to do with "free" trade. "Investor-state provisions" that allow corporations to sue governments for enacting environmental legislation is not "free" trade. Prohibiting technology transfers, as was done to Mexico in NAFTA, is not "free" trade. Forcibly removing indigenous peoples from their lands for logging and agribusiness benefit (as in the case of the Zapatistas in Mexico) is not "free" trade.

The major question before us is not whether or not trade will be "free" -- because it never really can be in reality. Rather, the question is by whose means will trade policy be developed and who will it benefit? Will it be used to simply enrich corporations and their shareholders at the expense of workers' rights and the environment? Or will it be seized by popular control and be used to truly benefit the great mass of humanity on earth?

Finally, a few ideas toward that question....

First off, protectionist measures on the part of industrialized nations is NOT the answer. Tariffs against other countries' goods don't do much to accomplish the broader aim, which should be using trade to lift people out of poverty -- rather, it will only sow the seeds of discontent in the long term as the people of developing nations continue to struggle against the industrialized ones. Likewise, the policies of forcing developing nations to open up their markets and accept onerous "austerity measures" -- policies that have never, nor will ever, be accepted by industrialized nations -- must be abandoned. This, of course, includes the forgiving of the vast majority of third world debt which continues to crush developing economies -- in some instances, debt repayments to Western banks making up over 50% of all government expenditures.

Secondly, there should most certainly be an institution of a "Tobin tax" on international capital movement. The funds raised by such a tax could be administered by an independent organization toward the kinds of economic development projects that are most badly needed in developing nations -- namely, small-business community loans rather than large-scale projects like those undertaken by the World Bank.

Thirdly, there has to be a concerted effort on the part of people in industrialized nations to oppose the current course through large-scale noncooperation. This is perhaps the most difficult part, because it would involve two things that go against the current trend, especially in the United States: people giving up the vast quantities of junk that comprise our "higher standard of living", and the formation of vast community support networks in which resources (food, clothing, shelter, capital) are widely shared to enable everyone to continue to refuse to cooperate. But while the most difficult, this last part is perhaps the most important, because no system can continue to function without the cooperation of the greater populace. As soon as the people refuse to continue to cooperate with that system, whether it be a democracy or dictatorship, that system can no longer continue to function.

Anyway, this is my personal take on "free" trade -- and the beginning steps on how to fix it. It is important to note that the effort to truly fix it lies not simply in advocating reform through legislative process -- because that process will remain corrupted so long as the majority of the populace continues to passively give its support to the status quo. It is only through a combination of people applying pressure outside of legislative process in order to force the system to truly change, that success will be gained in the long term.

[IrateCitizen]

21. I didn't go through the trouble of typing this response...

... only to see the thread sink like a stone in still waters.

:kick:

[ProfessorGAC]

22. Sorry, I/C

I concur with most of your points. The most pressing is that the concept of free trade has been bastardized by the neoconservative ideals of economic hegemony. A forced hegemony is, by definition, not free. So, what these folks want is not a free trade environment at all.

The most shortsighted aspect of that philosophy is the negative impact on size, scope, and robustness of the middle class. The data over the last 100 years is appallingly clear. This country's economic health and the accumulation of huge sums of wealth by the richest of the rich were both concurrent to the formation of a large and vibrant middle class. The bigger the middle class, and the higher the average income of the middle 4 standard deviations, the richer the super rich get, and the more stably the economy grows, in both real and nominal terms.

The neoconservitive economists and financiers have not understood this data. Therefore, the goal is to increase their market size and reduce cost of operations by exporting jobs and importing goods. This puts downward pressure on domestic employement costs, but since goods stay low, they still get bought with margins improving.

All seems good, except it runs contrary to the actual data. But, admitting their wrong is not amongst the virtues of neoconservatives.
The Professor

[IrateCitizen]

24. Thanks for your response, Professor...

I always appreciate your insight into economic matters, especially in helping to counter some of my previous misconceptions.

I have been trying like hell over the last year or so to abandon the "either/or" thinking that so permeates the criticisms of trade policy -- instead trying to further educate myself and come up with some basic solutions to start pushing the system back toward greater fairness.

I think it's important to note that, when it comes to international economics and trade policy, those advocating the corporate free-for-all are actually called neoliberals, not neoconservatives. And there have been plenty of Democrats to include among the ranks of the neoliberals -- including the Clinton administration after Bob Rubin won out the internal battle with Robert Reich over economic policy.

Of course, Indian author and activist Arundhati Roy has correctly identified neoconservatism as the military arm and neoliberalism as the economic arm of the same general movement: neoimperialism. So my semantics here probably matter little.

You do, of course, realize that the vast growth of the American middle class did occur with some highly protectionist measures, right? So the question then arises as to how we can maintain a vibrant middle class in the face of inevitable economic shifts that will occur from an honest lowering of trade barriers by industrialized nations.

Another area I'm concerned about is the environmental impacts of increased global trade. While environmental degradation during the manufacturing, mining or agricultural processes is a real concern, there is also the issue of fossil fuel use through shipping large amounts of good halfway across the earth. What are your thoughts on this, in the spirit of tying together the root "ecos" between economics and ecology?

[revcarol]

23. And Kerry voted for every one of these bills...

Hmmmm.

I'm not supposed to say that because he's ........"electable"

[IrateCitizen]

25. Please see my point #3 in post #16 above, revcarol...

Kerry is behaving in a predictable manner on this, supporting the status quo. After all, that is what the overwhelming majority of successful politicians do -- support the status quo.

Blaming Kerry is much easier than looking at our own culpability in this state of affairs. And our passive acceptance of this system (rather than organizing efforts to refuse cooperation) has enabled it more than John Kerry ever could. I would appreciate your thoughts on this excerpt from the post referenced in my title block:

Thirdly, there has to be a concerted effort on the part of people in industrialized nations to oppose the current course through large-scale noncooperation. This is perhaps the most difficult part, because it would involve two things that go against the current trend, especially in the United States: people giving up the vast quantities of junk that comprise our "higher standard of living", and the formation of vast community support networks in which resources (food, clothing, shelter, capital) are widely shared to enable everyone to continue to refuse to cooperate. But while the most difficult, this last part is perhaps the most important, because no system can continue to function without the cooperation of the greater populace. As soon as the people refuse to continue to cooperate with that system, whether it be a democracy or dictatorship, that system can no longer continue to function.

Anyway, this is my personal take on "free" trade -- and the beginning steps on how to fix it. It is important to note that the effort to truly fix it lies not simply in advocating reform through legislative process -- because that process will remain corrupted so long as the majority of the populace continues to passively give its support to the status quo. It is only through a combination of people applying pressure outside of legislative process in order to force the system to truly change, that success will be gained in the long term.