Posted on 08/26/2004 3:03:36 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
Nothing in principle against the recent trend of British expats taking over American journalism, but aren't they supposed to be providing insights and perspectives that just don't come naturally to us natives? After reading Washington Post columnist Sebastian Mallaby's latest paean to current globalization policies, this belief is harder than ever to hold.
Not only did his August 2 article "Trade and the Honest Candidate" add absolutely nothing new to the debate on globalization, it easily could have originated in the flack department at the Business Roundtable or the National Association of Manufacturers. Coming as the economy's latest soft patch drags on, and as the U.S. trade deficit zoomed upward in June by 19 percent to yet another new record, this exercise in globalization cheerleading is worth examining in detail.
Discouragingly, Mallaby's ostensible plea for honesty in discussing globalization starts off on an intellectually dishonest note. Trade, he insists, "explains only part of the decline in manufacturing" being seized upon by globalization critics. But the salesmen for these policies have always promised us that their free trade policies would strengthen manufacturing. All of a sudden they're moving the goalposts? Can you imagine Bill Clinton and his former chief trade advisor Mickey Kantor selling NAFTA or the Uruguay Round agreement or normal trade with China by promising that they would cause only limited damage to domestic manufacturing?
Moreover, let's grant Mallaby his (completely unsubstantiated) point that trade is only partly responsible for manufacturing's woes. If better policies can prevent that part of the decline in manufacturing for which trade is responsible, shouldn't we put them in place? If not, Mallaby would need to show that trade policy's other benefits more than compensate for the manufacturing losses. Unless of course there's a new rule in town: "No evidence, please. We're British"?
Mallaby tries to minimize the problem by stating that from 1970 to 2002, "the trade deficit in manufactured goods grew only by about 4 percent of GDP…." What he leaves out is that, since manufacturing during this period averaged less than 30 percent of GDP, the hit taken by this vital sector was that much greater.
Further, even four percent of GDP represents roughly the size of the entire automotive sector. Not only is this a huge number in and of itself, but the law of marginal effects tells us that such losses will have even bigger effects on the wage structure of the rest of the economy. Every displaced manufacturing worker is plunged into a competition with the existing pool of service workers for lower-paying service jobs.
Even less serious is Mallaby's claim that "richer people tend to spend less of their money on manufactured goods and more on services. As a result, the composition of production tends to shift." But world trade patterns tell us that most of the downward shift has occurred in one country – the United States. If it were simply a matter of changing consumer preferences, then manufacturing production around the world would take a hit regardless of country. And the U.S. trade balance shouldn't change at all.
Predictably, Mallaby drags out the old saw that manufacturing's "productivity gain...allows firms to meet consumers' limited demand with fewer workers, so that manufacturing employment has fallen even faster than manufacturing's share of GDP." Again, he leaves out crucial information: Before the Great Opening of the U.S. economy to imports in the early 1970s, gains in manufacturing productivity took place amid rising manufacturing employment, not falling manufacturing employment. The changed relationship between manufacturing productivity and manufacturing employment that's taken place since then strongly suggests that the globalization of U.S. manufacturing explains much of the difference. Certainly it's been by far the biggest change in the big picture.
According to Mallaby, "the fear of foreign workers is exaggerated...[because they] may be cheap" but they add little value to products. But if foreign workers are so uneconomical, then why has so much total direct manufacturing investment been pouring into China lately – indeed, much more greenfield manufacturing investment than the U.S. has attracted recently?
The answer is that the very low wages of Chinese workers combined with decent and rising levels of productivity make them a bargain for multinational companies. If employing Chinese workers weren't more productive and hence more profitable to employ than American workers, why would all the investment be going there? As an act of charity?
MalIaby then proceeds immediately to contradict himself, assuring readers that "China's wages will rise...offsetting the advantage" he just said they lacked. At the same time, he completely ignores China's 20-plus percent urban unemployment rate, its ongoing campaign of net job-destroying (at least for the foreseeable future) economic reform, and its efforts to move peasants out of the countryside and into the cities. How could anyone who believes in the laws of supply and demand conclude that these trends will not prevent China's wages from rising fast enough to "offset the advantage" anytime soon?
Returning to the tired old globalization cheerleading script, Mallaby also contends, sans evidence, that "new technology...accounts for a much bigger part of the travails of unskilled workers." As noted above, however, this situation is no excuse for failing to deal with that part of the living standards problem that results from bad (trade) policies, as opposed to "progress."
Also, as indicated above, before globalization really began to roar, technological change seemed to create at least as many opportunities for the unskilled as it threatened. Indeed, the wage premium for education was much narrower in those days, even though we had a lot of technology, and it was advancing quickly.
Perhaps aware of how weak the cheerleaders' claims of rising U.S. worker wages have become, Mallaby also repeats the hackneyed argument that expanded trade "has generated new wealth at home, making all kinds of products more accessible to working families."
Yet if trade has been creating such net gains for the typical American, and has been growing as a share of the economy, how could inflation-adjusted median wages have fallen for the past 30 years? This indicates that, whatever the reduction in consumer costs generated by trade, they have been more than offset by the losses in the form of lower worker wages. Or does Mallaby believe that decades of trade deficits and market-share losses by U.S.-based industries have in and of themselves been net positives for wages?
In Mallaby's view, the way to help the losers created by trade "is to spend part of the dividend compensating society's least fortunate...." As some trade critics have observed, this amounts to a deliberate policy of "work to welfare." It's not only economically senseless, it's socially destructive. In addition, what kinds of jobs will we be educating and training these inner-city folks for? Manufacturing is the only economic sector in American history with a record of providing middle-class living standards for the great majority of the workforce that has not finished four years of college. And we know what's been happening to the software engineers and workers in other "industries of the future" -- today's trade policies are sending their jobs to low-income countries, too.
As is typical of globalization cheerleaders, Mallaby ultimately tries to excuse the damage being done by trade to rich-country workers by claiming massive benefits for their poor-country counterparts. "Over the past generation," he argues, "trade has lifted millions of people in developing countries out of poverty." Yet third world progress coming at the expense of American workers should be unacceptable to every American – not to mention how it totally undermines assertions that current trade policies benefit all countries. In addition, the great progress made fighting poverty in areas like India and China results from many factors having nothing to do with trade – e.g., the Green Revolution in the former and the post-Mao economic reforms in the latter. Why should trade be considered the main difference-maker?
Contrary to the principle of comparative advantage underlying current trade policies, Mallaby's writing tells us that British pro-globalization propagandists have nothing more original or insightful to say than their American counterparts. And the determination of newspapers like the Washington Post to permit such dreck to dominate their pages tells us that a free market in ideas and genuine debate about globalization remains a distant dream.
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
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I think that may be the official rate in the special economic zones (SEZ) and does not include the estimated 100 million "floating population." Then there are the estimated 800 million in the rural population that have been left out of the SEZ relative prosperity. It will be awhile before wages rise. Oh.. and don't look for 1.3 billion middle class spendin' fools any time soon either, "free" traders. Besides the Chi-coms will have all your intellectual property long before that.
As is typical of globalization cheerleaders, Mallaby ultimately tries to excuse the damage being done by trade to rich-country workers by claiming massive benefits for their poor-country counterparts. "Over the past generation," he argues, "trade has lifted millions of people in developing countries out of poverty."
Here is the motive for New Democrat "progressives" to partner with "free" trade conservatives. It doesn't take much googling to learn that the progressives intend to manage the "globalization" process (worldwide prosperity; i.e., raising everyone's boat). There will be no laissez faire capitalism. The progressives assure their street-demonstrating anti-WTO critics that social justice, economic justice, racial justice, environmental justice, you name it are to follow the prosperity created by the "free" traders' market economies.
Though both New Democrat "progressives" and "free" trade conservatives are together on technology and wealth transfers and both acknowledge job losses in America, they differ on what to do about it. The New Democrat "progressives" propose government "re-training," the "free" trade conservatives say no American has a right to a job.
But try as he might Mr. Dobbs could not make Mr. Medved understand the difference between outsourcing TO us and our outsourcing to DEVELOPING COUNTRIES.
To wit, outsourcing TO us brings foreign investment that hires Americans, manufactures products or services and sells them TO Americans.
Outsourcing by us to developing countries simply transfers the production of goods and services to other countries that are then exported to America.
Perhaps an example of good outsourcing by us to a developed country would help explain, a call thought. Nope. Mr. Medved still didn't get it.
The caller tried to explain by citing the Heinz company outsourcing to developed countries. The Heinz company sells their ketchup in the foreign countries. That's good outsourcing by us to foreign countries. Simply outsourcing to get cheap labor, immediate profits, and then importing the goods and services to sell to Americans in bad outsourcing.
(Never mind taking China from a Communist agrarian state to a Communist fascist industrialized state in one generation. Trouble ahead, for the children.)
Do you know much about Mr. Tonelson? I am going to be looking at his book soon, and am wondering about his background and views. Is he mostly focused on globalization, or does he publish on other issues?
Alan Tonelson is Research Fellow at the USBIC Educational Foundation, a Washington research organization studying U.S. economic, technology, and national security policy. His new book, The Race to the Bottom: Why A Global Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards, was recently published by Westview Press.
Tonelson's articles on American politics, foreign policy, globalization, and technology policy have appeared in numerous publications, including The Atlantic, Foreign Affairs, The New York Times, The Washington Post, The Wall Street Journal, The Washington Times, The New Republic, Foreign Policy, The Harvard Business Review, The Los Angeles Times, The National Interest, and Issues in Science and Technology, as well as in several anthologies. In addition, Tonelson appears often on radio and television networks and programs, including The Newshour with Jim Lehrer, The Diane Rehm Show, The Nightly Business Report, CNN, TalkAmerica, and Global Economic Media. He is co-editor of Powernomics: Economics and Strategy after the Cold War (Economic Strategy Institute and Madison Books), and author of Made in China? America's Failed Trade Policies towards the People's Republic and Giving America the Business: The Business Roundtable's Shoddy Case for Corporate-Driven Trade Policies, both published by the USBIC Educational Foundation.
Tonelson has testified before the Senate Commerce Committee, the Congressional Trade Deficit Review Commission, and the Congressional China Security Review Commission. And he has lectured at the State Department's Foreign Service Institute, The National Defense University, the Woodrow Wilson Center, Columbia University, Harvard University, The University of Virginia, the Nitze School of Advanced International Studies, Georgetown University, The College of William & Mary, the University of Southern California, the University of California at Los Angeles, the University of California at San Diego, the University of San Francisco, the University of Oregon, the University of Washington, Boston University, the David Sarnoff Research Center, George Washington University, The American University, the World Affairs Councils of Philadelphia, Kansas City, and Hampton Roads (Va.), the Universities of East Anglia, Sussex, and Kent, and Bonn, and many other fora.
His previous positions include Fellow at the Economic Strategy Institute and Associate Editor of Foreign Policy. Tonelson received a B.A. in history with highest honors from Princeton University in 1975. A native of New York City, he currently resides in Washington, D.C.
IMHO, his views are America First! conservative.
Thanks, that is very helpful. It appears that international economics is his main focus, and he appears at first glance to be an industrial-policy type rather than someone who opposes big multinationals and so-called "corporate welfare" per se. But I'll certainly look into it to be sure.
I think that's a fair assessment.
As a conservative, he definitely is pro domestic business.
He's NOT one of the left-wing anti-globalization wingnuts who think all corporations are evil.
Interesting Article, well argued.
I think we Britains will always lean toward the view that globalisation 'is a good thing' moreso than our US freinds, and this is going to show in Brit journalists writings.
Why are Brits inherently more pro Globalisation? Since the days of the empire it has been the only real way to continue to grow. We are far from disadvantaged in terms of natural resources, but do not enjoy them to the abundant scale that you Americans do which makes a truly powerful domestic focus a realistic option for your prosperity. We are so densley populated in copmarison to the US that our lack of personal space or expansion space natrually makes us more outward looking.
My lifestyle, wealth, and livlihood are all down to globalisation. The corporation I work for owns interests in 180 countries in the world. It is true we offshore some stuff with terrible consequences for the Brits this affects (we are a British company) - but believe it or not some of that flows the US way! Overall, I look at the company I work for, its corporate governance standards and the consequent demands we place on our suppliers, its business ethics, its customer focus, and the leaderships attitude to the global market, and I honestly think it is an overall force for good.
Our only realistic choice in a non-globalised world for the UK is to wholeheartedly enter the economic powerbloc of the EU politically as well as economically or wither annd fade due to our geographic size.
Would I feel the same if I were an American? Maybe not. We are creatures of our own environment and experience.
Both articles referenced above are well written and argued. They are also both predjudiced and that is fine. If they didn't want to share the predjudices and shape thought they would have become academics not journos!
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