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.
I would submit that our being a superpower is the result of our free market (which, IMO, is analagous to free trade) rather than the result of necessity.
However, now that the US is the world's wealthiest nation, super power is probably a necessity, if only for self defense.
Perhaps. Since the term "superpower" has not been defined, it's hard to say.
The auto industry vigorously opposed the steel tarriffs, and suffered from them, and laid off workers because of them. The fact that people kept buying cars is beside the point.
And technological advancements in most fields are still coming from America, even if code-writing is being sent overseas.
Much of America's wealth today comes from overseas investment by Americans. It comes back here, and it is used in turn to promote construction, and efficiency in the domestic manufacturing and mining and agriculture sectors, and to improve general quality of life in other fields such as health care and all the other lines of work you mention. We still do have a manufacturing base, because for some things we need it here. And we have enough of one to fight a major war if necessary.
As an aside, you must be happy about the recird high oil prices, because they are helping domestic drillers a lot. I don't think, though, that it means the nation is better off.
Freedom is not something that can stand alone as the Founders knew when they wrote the constitution with its second amendment. Jefferson's hypocritic pronouncements could not have done it. Hamilton's creation of a strong government was crucial in protecting the freedom the nation had won from England. But for his program Britain might well have re-conquered us during the War of 1812 after a decade of Jeffersonianists undemining the American military.
Of course independence from that Empire was the FIRST crucial step to freedom. Your inability to understand that does not change its truth.
Nor is there any such thing as a modern economy without freedom. Hamilton's program was to create a FREE enterprise economy. Hence his lifelong opposition to slavery and his plan to create Black regiments in the Revolutionary army.
Insulting our Founders is something I would expect from you and attacking them does indeed make things very personal. There is nothing wrong with appropriate criticism but worn-out and easily refuted falsehoods have no place here.
It is false that we are "sliding towards third worldism" that is just RATmedia propaganda.
There is virtually no way of controlling 6000 miles of border when desparate people are attempting to live. You could spend tens of billions and still not be able to do it.
It is true that the Saudi royals are divided but it is false that the Saudi government funds terrorism. I mean, come on, not terribly long ago the King was assassinated by a Royal.
once you lose an industry - you no longer make advancements in it. Advancements come from places where engineers work, and investments are made. This mythical idea that we can lose these tech industries, but that somehow "advancements" are simply going to spring forth here anyway because we are "the Americans" is chest thumping nonsense. who is going to make these future tech advancements, all the kids who are now piling into law school?
That is simply not true. Hamilton supported Tariffs both for revenue and as a method of encouraging the development of industries.
I don't know what you are saying "perhaps" to, but by *super power,* I mean a country with armed forces that are nearly irrestible by those of most other nations. Such as the US for the last 60 or so years, the UK in the 19th century, France under Napoleon, etc.
My point was that the great power of the US is due to her great wealth, which is due to the free market, as opposed to a top down managed economy, which many on this thread seem to advocate.
I also think that a wealthy nation in a poor world had better be ready to defend itself, so being a super power comes in handy.
Since you repeat two things I specifically mentioned in an earlier post I have no idea what you believe to be "not true."
Although I am under the impression that our founders were admirers of Adam Smith, I am seeing by Googling around that Hamilton was something of a protectionist.
Your comments are increasing personal, please post to someone else.
I agree. Many freepers do not truly believe in freedom.
I doubt you will find sufficiently deep works on Google regarding Hamilton to get a good idea of what he really was. There are many biographies which do show this however.
Forrest MacDonald's is the best for an understanding of his economic program and beliefs. A two page essay is less than ideal particularly wrt to this issue which is about all you will find on Google. Most are little more than Cliff Notes type stuff suitable for a bried overview but no real understanding of this, the most complex of men.
His reliance on the tariff was primarily for revenue but was mildly protectionist since there was no possibility for Free trade when our products were excluded by law from the markets of the European empires. A tariff rate of 10-15% is not particularly protectionist in any case.
You will find people who believe him to be a standard mercantilist but further research into his beliefs shows that to be a misunderstanding of his policies.
There are other biographies of him which are excellent if you are interested in this great man.
Any critique of your comments is apparently too personal. There was NO insult in my initial comment.
Yea, no kidding, tell the steel industry they are immune to offshoring
OK, thanks.
Also have the Federalist in the bedroom, which I've been meaning to read for awhile.
Insulting our Founders is something I would expect from you and attacking them does indeed make things very personal.
Personal attacks have no place on the forum. Desist please. Post to someone else. You have been suspended in the past for such things, please do not post to me.
Our trade and budgetary deficits are not hurting us because foreign money is being invested here. Where is that money going and how long will people keep investing money here?
Hamilton wrote two thirds of them. About one a week. Can you imagine turning out the greatest political philosophy since Plato and Aristotle and that being only ONE of your achievements? He was also the greatest lawyer in the nation. Marshall said that when compared to Hamilton he was like a taper to the sun. His judicial ruling started after examining the Federalist for a clue as to the Founders thought.
This is the man that nitwits whine did not care about freedom.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.