Posted on 06/16/2015 2:17:57 AM PDT by Cincinatus' Wife
How can it be that the largest pending trade deal in history – a deal backed both by a Democratic president and Republican leaders in Congress – is nearly dead?
The Trans Pacific Partnership may yet squeak through Congress but its near-death experience offers an important lesson.
It’s not that labor unions have regained political power (union membership continues to dwindle and large corporations have more clout in Washington than ever) or that the President is especially weak (no president can pull off a major deal like this if the public isn’t behind him).
The biggest lesson is most Americans no longer support free trade.
It used to be an article of faith that trade was good for America.
Economic theory told us so: Trade allows nations to specialize in what they do best, thereby fueling growth. And growth, we were told, is good for everyone.
But such arguments are less persuasive in this era of staggering inequality.
For decades almost all the gains from growth have been going to a small sliver of Americans at the top – while most peoples’ wages have stagnated, adjusted for inflation.
Economists point to overall benefits from expanded trade. All of us gain access to cheaper goods and services.
But in recent years the biggest gains from trade have gone to investors and executives, while the burdens have fallen disproportionately on those in the middle and below who have lost good-paying jobs.
So even though everyone gains from trade, the biggest winners are at the top. And as the top keeps moving higher compared to most of the rest of us, the vast majority feels relatively worse off.
To illustrate the point, consider a simple game I conduct with my students. I have them split up into pairs and ask them to imagine I’m giving $1,000 to one member of each pair.
I tell them the recipients can keep some of the money only on condition they reach a deal with their partner on how it’s to be divided up. They have to offer their partner a portion of the $1,000, and their partner must either accept or decline. If the partner declines, neither of them gets a penny.
You might think many recipients of the imaginary $1,000 would offer their partner one dollar, which the partner would gladly accept. After all, a dollar is better than nothing. Everyone is better off.
But that’s not what happens. Most partners decline any offer under $250 – even though that means neither of them gets anything.
This game, and variations of it, have been played by social scientists thousands of times with different groups and pairings, and with remarkably similar results.
A far bigger version of the game is being played on the national stage as a relative handful of Americans receive ever-larger slices of the total national income while most Americans, working harder than ever, receive smaller ones.
And just as in the simulations, those receiving the smaller slices are starting to say “no deal.”
Some might attribute this response to envy or spite. But when I ask my students why they refused to accept anything less than $250 and thereby risked getting nothing at all, they say it’s worth the price of avoiding unfairness.
Remember, I gave out the $1,000 arbitrarily. The initial recipients didn’t have to work for it or be outstanding in any way.
When a game seems arbitrary, people are often willing to sacrifice gains for themselves in order to prevent others from walking away with far more – a result that strikes them as inherently wrong.
The American economy looks increasingly arbitrary, as CEOs of big firms now rake in 300 times more than the wages of average workers, while two-thirds of Americans live paycheck to paycheck.
Some of my students who refused anything less than $250 also say they feared allowing the initial recipient to keep a disproportionately large share would give him the power to rig the game even more in the future.
Here again, America’s real-life distributional game is analogous, as a few at the top gain increasing political power to alter the rules of the game to their advantage.
If the American economy continues to create a few big winners and many who feel like losers by comparison, opposition to free trade won’t be the only casualty.
Losers are likely to find many other ways to say “no deal.”
It used to be an article of faith that trade was good for America.
Maybe it is good for America. WHAT is being called free trade here?
Exactly.
Where’s (what’s) “here?”
1. Even a low wage is a wage, and it still costs more than a machine.
2. Low labor costs in Asia are partially offset by transportation costs. So it doesn't necessarily "cost less" to pay an Asian $1/hour vs. an American $20/hour for the same labor.
One of the big influences in the migration of jobs to Asia is that more and more companies are selling to Asian customers. This was illustrated in some of the discussions about the production locations for the iPhone. If you are a manufacturer like Apple and you are selling a product where 350 million customers are located in North America and 3 billion customers are located in Asia, where do you think it makes the most sense to produce it?
Here's another version of that joke, this one from Russia, I think repeated in a Chekov story:
The genie says to the peasant, you have one wish, you can have anything you want, but keep in mind that whatever I give you, I give your neighbor (who the peasant hates bitterly) double.
If I give you a new house, your neighbor gets two new houses. If I give you a new herd of animals, your neighbor gets 2 herds. If I give you a pile a gold, your neighbor gets 2 piles of gold.
The peasant thinks and thinks and finally makes his wish:
Pluck out one of my eyes!
And they (we) don't trust the HOR and US Senate to vote against the globalist elitists in a majority vote. Too many of them are sold-out backstabbers.
When the last factory I worked in started downsizing, administrative staff were the first to go. Floor workers were simply more essential than people who enter numbers into computers. As a foreman, rather than taking paperwork to the office every day, I sat down at my desk and entered the data myself.
It just amazes me that no one in the game will think of offering $500, thus sharing the $1000 equally. That tells us a LOT about human nature. The “game” is to keep as much for yourself as you possibly can. Everyone thinks me-me-me. But this, unfortunately, is the way of the world.
I am wholeheartedly in favor of free trade; I am dead-set against giving a socialist like obozo a free hand to decide what free trade is.
My impression of this latest controversy has been that we may have found out that LIV’s exist on the Conservative side also. The best example of it being the dumb look on the face of the King of Conservative LIV’s, Sean Hannity, when real Conservative Economists tell him he is wrong on this issue. It has seemed to me that the issue has become Bubba Bait to boast ratings for some Conservative talk radio hosts.
Explain (details) to me, just how Obama has a free hand.
The problem is not free trade. The problem is bodies of people ruling like courts on our industry not bound by our Constitution.
Right to the heart of the matter. Nicely done.
"Free trade" is a slogan. It refers to a type of tariff policy that encourages exports through negotiations with other nations.
It doesn't mean "no tariff policy" and it shouldn't mean encouraging IMPORTS to solve economic problems in foreign countries.
Like everything else, it's become a struggle between people who understand words like "foreigner", even "enemy", and people who do not.
I completely agree.
America has been sold out, by a lot of people. China is now the world’s largest exporter / producer. And the trend continues to go toward China, which doesn’t even allow Americans full ownership, and discriminates in matters of immigration.
Trump is announcing (something) at 11:00 this morning. It sounds like he’s going to announce his candidacy for the presidency, and at the moment he is the only person out there, who seems to get this issue.
United States, Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, Canada, Mexico and Japan.
and, china is the world’s largest nation
Jeffrey Lord has an article on Trump out this morning.
http://spectator.org/articles/63094/donald-trump-and-american-dream
fwiw
China is NOT part of the TPP.
If you take time to look at the data the USA has had a no tariff policy in place for decades and decades. THe problem with free trade deals is anyone older than 40 has seen the demise of the USA's economy but we are told there is no down side to these international agreements. Why does every agreement acknowledge that US workers will be displaced and money be aside for retraining. I mean how f-ed up is that?
Trump has extreme animosity toward china. I bet that he went to china expecting to toss around his weight and reputation and they handed him his ass. the deal maker got taken by the shrewd and inscrutable chicaps.
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