Posted on 04/23/2007 12:52:04 PM PDT by A. Pole
I have done an awful lot of thinking and research on the effects of increased trade and the "race to the bottom" - meaning that developed countries are forced to lower their standard of living to effectively compete with less developed countries. The end result of all this at this point is this: there is no way to stop it from happening. In other words, we are entering a period of decreased living standards that could last 50-100 years during which the developed world's standard of living decreases while the developing world's standard of living increases. Until we reach a point of near parity there is little we can do on the policy front to prevent it from happening.
This is not the type of conclusion anyone wants to read. But let me explain why I think this is the case going forward.
While we can rail about the effects of free trade all of us benefit from free trade. Here's my latest example. A long time ago in a galaxy far, far away (actually a city named Austin, Texas) I was a professional guitarist (What else are you supposed to do with a political science/economics/music major?). Anyway, I still keep my hand in the game and read Guitar Player Magaine every month. This month they review budget guitars -- guitars under $500 or so. Here's the point of all this: all of the guitars are made in Asia, particularly China. I've played a few of these items and can tell you there are some really fine inexpensive guitars in the lot (particularly the Hamer XT series). It's a damn fine guitar for the money. In fact it's a damn fine guitar compared to some guitars under $1000.
This isn't an isolated instance. Literally every inexpensive product we buy in the US is now made overseas. Home electronics, kitchen implements, furniture, tools, hell you name it and it stands a good chance of being made in another country. And the fact that these goods are inexpensive benefits the US by giving us more choices. In addition -- and be honest -- how many people like getting something for less money? If you said no, chances are you're saying no simply to disagree with the point. And that's a central point: People like getting inexpensive stuff. That's a central reason why Wal-Mart is now the largest US retailer by a mile.
So long as foreign made goods are cheaper and better, we're going to import them. There's no way to stop that from happening. Any measures we take to stop it will prove temporary and fleeting.
In addition to the inherent benefits, implementing the types of proposals most Democrats argue for in free trade deals runs into large problems.
First, let me paint a picture with a hypothetical country. Country X is a third world country. Unemployment is high. The average daily salary is 10 cents in US dollars. There is a hodge-podge of infrastructure - roads, water and sewer lines etc.... Like most countries in country X's position, indigenous natural resources are their primary export. Typically, this is some type of mineral extraction or agriculture.
Let me use wages as an example. Hypothetically, suppose we argue for a wage of 15 cents a day. This sounds reasonable from a US perspective. However, from X's perspective, it is entirely unreasonable. First, high-unemployment indicates that 10 cents/day may be too high to begin with. Secondly, with an unemployment rate that high there is no practical reason for an employer to offer higher wages. He can simply find another prospective employee willing to work for 10 cents a day and with high unemployment the chances are high he will succeed. Third, an increase of 5 cents a day would increase wages 50%, increasing the possibility of increasing inflation which no country wants in excess.
As Democrats, we would want country X to have labor laws akin to US labor laws - laws that involve child labor standards, minimum wages, safe working condition regulations and maternity leave just to name a few. Out motives are on solid moral ground. Laws of this type are for the worker's protection. Companies have rarely demonstrated a long-streak of compassion when it comes to their workforce.
Here's the reality. None of this is going to happen. The government does not have the governmental infrastructure or resources to monitor or prosecute a company's behavior. More importantly, the government has other priorities like building the country's physical infrastructure and maintaining political stability. Issues of wage parity and working conditions are simply a low priority in this type of political environment. While it may have something to do with the persons in political power in X, it is also a function of where they are in terms of economic development.
We may argue for a third-party to monitor the countries labor resources - something like the US or another multi-lateral organization. This runs into problems dealing with the country's sovereignty, making it difficult to achieve.
The point here is that we are arguing about developed world problems and solutions when the other countries have developing world problems and solutions. The two sets of problems don't look anything alike and from the other country's perspective their problems (high unemployment, poor infrastructure, massive poverty etc...) are more important than ours.
SO -- what can we do?
Here are some basic ideas.
1.) We need to become more competitive in the "jobs of tomorrow" -- economic areas that will provide goods and services the world wants tomorrow. Three of my favorites are stem cell research, alternate energy and nano-technology. There are also many other industry sectors that qualify; these are just my pet favorites. The US must develop policies that promote these industries.
2.) The US workforce needs massive retraining/education. According to this paper from the New York Federal Reserve:
While the U.S. manufacturing sector has contracted sharply since the early 1980s, employment in high-skill manufacturing occupations has risen by an impressive 37 percent. An investigation of the growth in high-skill manufacturing jobs reveals that virtually all of the nation’s industries have shared in this trend. Moreover, skill upgrading has occurred in all parts of the country, even those experiencing severe employment losses.
However, the US workforce is not keeping pace:
But manufacturers, regardless of size, specialty or location, across the USA are reporting a dire shortage of skilled workers: people such as welders, electricians or machinists with a craft that goes beyond pushing buttons or stacking boxes but does not require a degree.
In a survey of 800 manufacturers conducted by the National Association of Manufacturers (NAM) last year, more than 80% said they were experiencing a shortage of skilled workers. In October, manufacturers surveyed by the Federal Reserve Bank of Philadelphia said "finding qualified workers" was their biggest business problem.
The point is the change to a more technologically advanced workplace has already started, and we're not keeping up with demand.
Trade deals must be bilateral
When we make deals with other countries, we must insure there are policies in place that benefit US exports. Just as example, China has fallen behind on implementing parts of its WTO agreements:
At the same time, today’s report to Congress highlights a number of areas of concern about the level of China’s implementation of its WTO commitments in areas such as intellectual property rights, industrial policies, trading rights, services, transparency, and agriculture.
As an additional example, this report from the US Trade Representative highlights high barriers in China's regulatory structure that hamper medical devices, technology, transportation companies, food companies and financial services from competing with local companies. These are all areas where the US excels.
It's also important that we don't back away form a trade fight. If a country we deal with makes it incredibly hard for US companies to enter, slap a tariff on their imports until they capitulate -- or take similar measures to force the other country's hand. There are a lot of examples where US goods have a difficult time gaining access to other countries where they shouldn't. There are plenty of economic areas where the US excels -- technology and finance being prime examples -- where out companies have a hard time gaining entry. If we're serious about lowering the trade deficit, it's time to play some offense.
For more information on various countries' policies, go to this page, which provides a report on many country's trade barriers to US goods and services.
In short, the domestic policy alternatives deal with moving the economy forward into new areas that create higher paying jobs. The foreign policy alternatives deal with leveling the playing field in foreign jurisdictions.
However, the above mentioned suggestions won't prevent the pain. In short, we are moving into a fast-pace period of world development where the underlying economic fundamentals are going to change rapidly and often. People will have to develop a whole host of skills to deal with this situation. Multiple careers will become common place and switching jobs/industries the norm.
There will be a fair amount of pain along the way for all involved -- but especially the US because it is our living standard that will be hit the hardest.
Free trade bump!
The free traders always like to tell people that wealth creation is not a zero sum game.
How come the living standard for the average worker seems to be zero sum?
What makes you think its “zero sum”. Are you saying your own living standard isnt better then what it was when your dad was your age? During your dad’s time, was he able to afford a mobile phone, computer, HD tv, microwave....etc?
Its always the case that an individual average worker looks at his/her own living standard relative to other “average worker” (i.e peers) and so his/her own living standard seems to remain static, and hence is very likely to believe that living standard for the average is “zero sum”. In reality it’s not.
Screw this.
I'm going to buy some acreage, grow vegetables, live in a shack without electricity, and own two pairs of shirts and coveralls I'll wash in the creek.
And I'm only half joking.
I'll take my dad's living standard:
Career security, a strong and loving family, a nice home, affordable medical insurance, thermostat set to 72 in the winter, plenty of good food, well-behaved kids who marry the nice boy or girl next door, church on Sundays, leaving your front door unlocked, and home from work by 6 P.M. every night.
You can keep your damn gadgets.
And we had no air conditioning, and you can keep that too.
We did have a black and white TV, but you can keep that too.
I have exactly the same feelings.
The shortage is self-imposed. Corporations want to pay high-skilled labor (electricians, mechanics) the same wages as the entry level laborers.
If you really want a taste of an idyllic country life that has no access to modern technology, then picture this:
You are living in a country that sweltering hot in summer and freezing cold in winter. No electricity means no AC/heating system, you would have to chop wood in winter and bring them on mules or camels. If you are living in a dry region, then your woman would be walking bare feet on burning sand for miles to get water in earthen pots. (Thats what they still do in parts of India and Africa where water is scares). You would have to walk or take the carriage and go for miles to get to the nearest hospital in case of emergency only to know that the disease is incureable. And as for making a living......if the crops fail..... you starve.
I am dying for the idyllic country life. /sarc
From the perspective of poor Indian the globalism might look good indeed. But for many Americans the perspective of rat race in competition with the Third World laborers might be less appealing.
Given the choice between "multiple careers" and endless "switching jobs/industries" many in developed countries might give up most of gadgets and take it easy.
I am living in North America, where there are plenty of hungry and homeless victims of industrialization.
Let me know when your consumerism society makes ours a Utopia--the blather we've been hearing for a hundred and more years says Utiopia's just around the corner--but industrialization won't bring it.
A handful of intelligent, objectively thinking people who have more sense than to value the products and lifestyle of consumerism, have done what I said and lived happily ever after.
My biggest fear is that society will someday find a way to take my land "for the greater good."
Just as it took the land of the American Indians--
And more recently, of the small American farmer.
“Men have an indistinct notion that if they keep up this activity of joint stocks and spades long enough all will at length ride somewhere, in next to no time, and for nothing;
“But though a crowd rushes to the depot, and the conductor shouts ‘All aboard!’ when the smoke is blown away and the vapor condensed, it will be perceived that a few are riding, but the rest are run over—and it will be called, and will be, ‘A melancholy accident’.”
-Henry David Thoreau
Every time someone says to me or mentions in my earshot a statement to the effect that we must fight for equality, I remind them that the only possible way for everybody to have exactly the same amount is for everybody to have nothing.
Longer and healthier isn’t necessarily happier and more comfortable; when I see people running I want to ask, “who’s chasing you?!”
Do we all want to be the same, or will we all be made to be the same for the “greater good?”
None of those things existed in my dad’s time so how can I possibly compare?
I’m beginning to think he had it better....much better.
I agree with you.
And most of the shortcomings could have been overcome with knowledge instead of gadgets.
For example, life expectancy could have been increased in his day (and ours) more from exercise and heatlhy eating than from modern medicine.
Not only that but I heard on the radio today(fox network news) that the pet food poisoning was INTENTIONAL!
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