Posted on 09/30/2004 4:35:23 PM PDT by rmlew
Up to now, offshoring of American jobs has been a political flashpoint but, judging by the responses of both parties, has been adjudged by the powers that be to be just another annoying political issue, which changes nothing fundamental and should be handled the way political issues usually are: by jockeying for position within the established policy consensus.
The Democrats, quintessentially John Kerry, have sought to make the smallest policy proposals sufficient to position themselves as the good guys on this issue for those voters that care about it. The Republicans, because they are in office, must defend a status quo they are no more or less responsible for than the Democrats, and are defending it using the same arguments that have always been used on the free-trade issue, as if nothing has changed.
Both responses are perfectly rational within the confines of ordinary day-to-day Washington politics, which is precisely why they have occurred. Unfortunately, both are completely deluded, because offshoring is already setting off a political earthquake that will reshape American politics for a generation. For in reality, free trade is dead and the only question is which party will figure this out fast enough to collect the burial fee.
The key to understanding why free trade is dead is to be honest about the fundamental way free trade is experienced by Americans as citizens of a high-wage nation:
Free trade is cheap labor embodied in goods.
Naturally, everyone wants the labor they consume, whether directly or embodied in goods, to be cheap. But as a wage earner, they also want the labor that they are paid for to be expensive.
Whether this is “efficient,” as academic economists understand this term, or not is irrelevant to the politics. This is shown by the fact that in American history there have been long-lived and stable electoral coalitions producing both free-trade and protectionist outcomes. Economists' theories about the efficiency of free trade touch the way voters actually experience trade peripherally at best and flatly contradict it at worst.
What is relevant to the politics is that this analysis implies the possibility, in a democracy, of a stable political coalition in which one part of society treats itself to cheap labor at the expense of another part. So long as the enjoyers of cheap labor exceed the victims in number, this coalition is viable.
For example, one could have a coalition of everyone who is not a manufacturing worker (roughly 85% of the population) against everyone who is. Manufacturing workers suffer the competition from cheap foreign labor, everyone else enjoys the cheap foreign goods, and a majority is happy. At least in the short run, before everyone begins to suffer the consequences of a depleted industrial base.
You may already see what the problem is and where this is going. What if the percentage balance in the coalition isn't stable? What if we go from 15% of the population harmed and 85% benefited to 30/70? Or 50/50? Or 70/30 the other way? The coalition starts to fall apart.
Free-traders have an argument here: they will tell us that even if we go to 90% or even 100% of the population being impoverished by competition with cheap labor, we will still be better off because goods will be cheaper.
The problem is, as is intuitively obvious to any laid-off factory worker who has contemplated the cheap knick-knacks on sale at Wal-Mart, that the drop in cost of living never matches the drop in wages. Like many free-trade arguments, it is qualitatively true but quantitatively false. The mitigating factors mitigate; they just don’t mitigate enough.
Don't believe this? Let's count up how many people have voted against incumbents because they were unemployed, and compare this to how many have done so because they couldn't buy a pair of scissors for $.99. Has there ever been a demonstration in the streets about the latter?
Free traders might have half an argument here if inflation were a live political issue today, but it isn't. Allan Greenspan has been worrying about deflation, not inflation. And given that the biggest inflationary factor looming on the horizon is the coming collapse of the dollar under the weight of accumulated trade deficits, they're better off not raising the topic.
But back to our electoral math: what offshoring has done is to radically shift the percentages of the electorate who fall into the two categories. So this beggar-my-neighbor coalition is starting to fall apart.
Of course, this takes time, as offshoring all the tens of millions of jobs that can now be offshored cannot be done overnight.
But what doesn't take nearly that much time is for the fear that this is going to happen to ripple through the electorate. Right now, people are taking a wait-and-see attitude, wondering if this is going to be just another one of those crises that were supposed to end life as we know it that never actually happened.
The problem is, unlike running out of oil in 1973, this is actually going to happen. Don’t believe it? It’ll probably only take another two years of empirical data for the trend to become dispositive.
As a result, the cozy acquiescence of a majority of Americans in letting free trade destroy American wages sector-by-sector is going to end. The dividing line between the winners and the losers, which the winners thought, as recently as the dot-com boom of a few years ago, would remain stable, has grown fluid.
Worse, no-one really knows where it will one day solidify. So no-one knows – on a personal, let alone political level – how to protect themselves.
Basically, there is not much left of the American economy that is invulnerable to offshoring. There are, basically, these jobs:
1. Those services that must be performed in person: cooking, policing, bagging groceries, teaching school, prostitution etc.
2. Those activities, like construction, that are performed on physical objects too large or heavy to be economically shipped from abroad.
3. Those activities, like agriculture, mining, and transportation, that are performed on, or relative to, objects fixed in place.
4. Those activities, like the practice of law or advertising, that depend upon peculiarly American knowledge that foreigners don’t have. But even this is rapidly breaking down as law firms, for example, start to offshore work.
5. Activities of government impinging upon sovereign power, like the military, or democratic legitimacy, like Congress. But given our use of mercenaries (sorry, “civilian security contractors”) in Iraq, clearly this can be nibbled away at in surprising ways.
6. Industries where America enjoys significant technological superiority tied to local labor pools or educational institutions, a rapidly-shrinking category.
7. Owning capital. Although not really a job, it's at least an occupation, and so long as America maintains a political consensus that rules out significant expropriation of capital, owners of capital gain from consuming cheaper labor and lose nothing.
The problem is, this isn't enough. In particular, it isn't a high enough number of high-wage jobs, as most, though obviously not all, of the jobs in these seven categories are relatively low-paid. This is largely inevitable, since jobs that must be done by hand, like stocking a Wal-Mart, are difficult to automate to increase their productivity.
So our little coalition starts to fall apart. What happens next?
For a start, the bad news for Republicans is that the psychological bourgeoisie starts to shrink. I use this term to describe everyone in the economy who identifies emotionally with the owners of capital, whether or not a majority of their income is investment income. All those yuppie financial analysts who may now get offshored are an obvious example, but there are far more people in this category, people all over American suburbia.
The key psychological bargain such people have until now had with the system is that economic forces are something that happen to other people. Someone with this attitude can indulge an amazingly dispassionate concern with economic efficiency.
More obnoxiously, he can explain that the jobs being lost are only "bad" jobs, while the jobs being kept, like his, are worth keeping. This is a wonderful way to covertly congratulate himself that his existence is a worthwhile one while that of a blue-collar worker is not. Thus the galloping narcissism of the baby-boomers becomes an emotional motor of globalist economics.
But that party's over, soon. It probably has only one presidential election cycle to go.
The bad news for Democrats is that they sold out so completely to free trade under Clinton that they've thrown away their natural position, earned over 60 years, as the party that protects Americans from the rougher edges of capitalism. With the classic stupidity of the imitator, they embraced free trade just before the fad went sour.
Either party could be the first to turn on free trade and thus capture public support on this issue. The Democrats could follow Ralph Nader's idea’s; the Republicans, Pat Buchanan’s. The fact that these wildly different figures oppose free trade is a strength, not the weakness the Wall St. Journal supposes, as it means that ending free trade can be credibly sold to people on either end of the political spectrum. Or packaged into a nice balanced pitch for the middle.
You want a right-wing America First appeal? You got it. You want a hippie sob-story about exploited workers? You can have that instead. You want a moderate and reasonable “commitment to a middle-class society?” Done.
Once the issue heats up some more after a few more rounds of depressing job-creation numbers from the Bureau of Labor Statistics, the only thing that will be keeping the status quo in place is the corrupt bargain of the American political duopoly, in which each party agrees with the other to not make trade an issue. This bargain is intrinsically unstable because of the temptation to score politically by defecting from it, so one must assume one party must eventually defect from it.
The other will have no choice but to follow or face electoral extinction, and America’s experiment with free trade, which has outlived its Cold War purpose of bribing foreign nations to not go communist, will finally be over.
To the extent that it continues to be eroded, the country will become moribund.
Enough power to defend the rights of the citizens is what is required.
"Freedom is not a means to an end, it is the end."
you seem to think that the economy can survive without manufacturing and technology. that we can have a workforce of public sector drones, those who work in sectors funded by government (education, health care, defense), and private sector employment only in service industries. everyone can be a teacher, or a salesman, or an insurance agent, an auto mechanic, real estate, financial services, retail sales, restaurant and food service, travel and leisure, media and publishing, etc. not that there is anything wrong with those jobs, they are just fine and we need as many of them as we can create. but we must have some kind of core economic engine that invents things, and builds high multiple manufactured goods.
what I am telling you is that the US will be a much different nation (if a nation at all) without technology and high tech manufacturing industries. the tax base will be grossly eroded, while at the same time demands on government for more services to replace what wokers can no longer pay for from their wages, will grow astronomically. we can't keep running trade and budget deficits forever. we've had a huge monetary and fiscal stimulus over the past several years - and still can barely hang onto 3% growth and job creation just above the 150,000 per month replacement cycle. with this much stimulus, we ought to be seeing a large increase in government reciepts, as occured under Reagan, to help grow us out of this deficit. where are they? the problem is, for every dollar we give in domestic stimulus, consumers send a good part of that offshore buying foreign goods, and corporations do the same with capital spending. how do we break that cycle?
your claim that the auto industry is suffering is, frankly, nuts. car sales are at record levels, foreign manufacturers build light trucks in Texas and Alabama now - in part due to the import tariff.
Nonsense. Our standard of living is the highest in the world and will remain so as long as the economically ignorant are kept out of power.
The surest indication of our continuing wealth and power is the impossibility of keeping immigrants out.
If the lower classes received "third world" wages we would not be having millions flock across the Southern border.
Your comments wrt my comments idicate you cannot respond rationally to what I have said. RATmedia rhetoric is not a proper response.
Good question...where does one find the answer?
Good question...where does one find the answer?
My favorite place is the Census Bureau, oddly enough.
They have for 2003 that we bought 3,676,006,000 barrels, at $99,167,171,000, at an average price of $26.98 per barrel. That would be around 6.5% of our total imports ($1,517,011,000,000) for 2003 by dollar value.
Thats interesting...I wonder what the total % would be if you added petro+all other things that we absolutely cannot manufacture or mine out of the earth in the U.S. (i.e. precious metals/stones/elements that do not exist in the U.S.)
Live and learn. I have respect for their intellects.
225 years ago very little was known about economics compared to today.
Given what is known today, I'm confident they would repudiate the anti freedom people on FreeRepublic.
PS, Hamilton was no friend of freedom in any case.
Something to consider:
http://www.townhall.com/columnists/paulcraigroberts/pcr20030828.shtml
That is not true Hamilton and Washington proposed tariffs in order to FUND the federal government. It was strictly political expendiency.
Hamilton understood the benefits of Free trade but they were not available to a nation which was excluded from the markets of the European empires of his day. Manufactured products from America were not allowed into them. And there were no means of funding the fedgov except through tariff revenues. He also proposed using those revenues to subsidize the creation of industries necessary for our National security and defense needs. They were also imposed to give the US leverage in negoitiation trade pacts with the Europeans.
These were POLITICAL decisions made with full awareness of their less than savory economic results.
That is about right. My calculations from seven yrs earlier seemed to be something less than 10%.
Hamilton was one of freedom's greatest friends. His entire adult life was devoted to winning independence for this Republic, securing its protection and creating a modern economy.
Your insults show you know little about him. What a shock!
The article contains some interesting points but overlooks several points. Ricardo was not the first advocate of free trade but followed some decades after Adam Smith's attack on Mercantilism.
While the complaint about the shrinking manufacturing base is rather old there is no mention of the fact that services have been becoming a larger portion of the economy for a hundred years. Complaining about this decline is no more sensible than complaining about the declining share of agriculture. These trends are not going to be reversed.
We are seeing great changes in the products themselves as products are using less and less material within them and energy to operate them. This is almost a spiritualization of commodities of which the computer is an excellent example. What was once a machine the size of a room is now small enough to carry around or even smaller.
Roberts' discussion of the mobilization of international factors is one that is difficult to carry on here. Highly technical methods would be necessary to do it justice.
Independence from England and freedom are two different things.
His entire adult life was devoted to winning independence for this Republic, securing its protection and creating a modern economy.
Nothing about freedom there.
Your insults show you know little about him. What a shock!
I referred to Hamilton, not to you. He is dead, he can't be insulted. I didn't insult you so please take your personal insults elsewhere. Please do not post to me if you can't keep it impersonal.
If you need a excuse to avoid a losing argument, that's as good as any.
This isn't really the topic of the thread, but it is most certainly true that elements of the Saudi royal family support terrorism. Billions of petrol dollars have been come from Saudi Arabia over the last 25 years supporting Wahabbi schools and mosques worldwide, which are breeding grounds for terror.
Some elements of the Saudi government are very pro-America indeed. But they do not speak with one voice.
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