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.
"Free" trade bump!
In the end we all will be dead.
An English corporate raider by the name of Goldsmith, who was the basis of the robber-baron turned good-guy in the movie "Wall Street," suggested many years ago that free trade should exist between similiar economies so that everyone in the First World is not totally undermined by cheap Third World labor. Free trade, or trade with minimal tariffs, between Japan, Australia, USA, Canada, Europe, et.al. would definately create enough competition to keep a lid on inflation and be condusive to middle class stability. In addition to strengthing our economies, it will definately strengthen our values!!
"Protectionism" is a loaded word whose use should be properly challenged. For the life of me I don't know why GM and Ford can't compete against Honda and Toyota. But I do know that I can't compete against cheap Chinese labor and that I'm not interested in lowering my standard of living until we reach an equilibrium with the new Chinese and Indian middle classes!
Ultimately we have to ultimately decide whether we are a nation or a market.
An English corporate raider by the name of Goldsmith, who was the basis of the robber-baron turned good-guy in the movie "Wall Street," suggested many years ago that free trade should exist between similiar economies so that everyone in the First World is not totally undermined by cheap Third World labor. Free trade, or trade with minimal tariffs, between Japan, Australia, USA, Canada, Europe, et.al. would definately create enough competition to keep a lid on inflation and be condusive to middle class stability. In addition to strengthing our economies, it will definately strengthen our values!!
"Protectionism" is a loaded word whose use should be properly challenged. For the life of me I don't know why GM and Ford can't compete against Honda and Toyota. But I do know that I can't compete against cheap Chinese labor and that I'm not interested in lowering my standard of living until we reach an equilibrium with the new Chinese and Indian middle classes!
Ultimately we have to ultimately decide whether we are a nation or a market.
The Republican party needs to move away from free trade. If Bush loses, it will be caused by the damage done to most Americans by free trade. The average American does not benefit from free trade as it is currently practiced.
An example of the way trade should be done is this: A developing foreign country needs American lumber to build housing units. The United States agrees under one condition--the lumber is processed in American sawmills, packaged by American firms, shipped in American freighters. This is trade that benefits both parties. But free traders would ship raw logs on a foreign-owned ship, processed by foreign workers through outsourcing so that the only beneficiaries are corporate executives and foreigners.
When Bush ran for President in 2000, he promised "Prosperity With A Purpose." But if free traders and outsourcing C.E.O.'s have their way, most Americans will have neither.
I think the gentleman underestimates the DLC's Third Way (or whatever they call it today) New Democrats. They did not act stupidly. They and the conservative "free traders" are fast partners. No stranger than Ralph Nader and Pat Buchanan partnering in opposition. The Third Way Democrats and "free trade" conservatives are indeed a political duopoly just as they are on "migrant labor" (ILLEGAL immigrants). I think it's called globalization.
What's at stake is the control of the world (Third Way Democrats and their foreign comrades) and a customer base of six billion middle-class spendin' fools -- or so the useful idiots (conservative "free traders") have been led to believe is theirs.
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.
How ironic. If that was the purpose the purpose now is a Marxist revolution from the top down, IMO. The useful idiots provide the wealth for all via the market economy (and no small amount of redistribution of wealth through technology transfers and jobs) then that pesky dialectical materialism kicks in -- from the top this time.
Meanwhile the Third Way Democrats have alrady promised Nader's people and the anti-WTO radicals that there will be social justice, economic justice, racial justice, and environmental justice in the end. Nader will join the Third Way, if he's not already a member.
In fact, the WTO just might soon be changed to stop being neutral about "human rights" and address those issues as they regulate trade. Nader, et al. will be happy.
Something you may find of interest ping!
That's right. I am looking forward to the day when all those millions of unemployed factory workers become nurses so they can take care of me when I am in the hospital. Do you really see the people standing in the unemployment line, who have been working an assembly lines their whole lives, as a viable choice to be hanging IV's, passing out medications, changing bandages and being able to make life sustaining choices for patients?
I have great respect for my fellow Americans but I also know that few of them are qualified for the health care field.
You forgot "abolishing the IRS."
That's icing on the cake.
Hamilton was a prime jackass, IMO.
AG, you might want to bounce the NRST off of this line of thought.
Interesting, and I think he's right on the eventual outcome, barring some gigantic increase in sales which will drive similar increases in production hiring.
There's an alternative theory now being pushed by a manufacturing-trade group out of Chicago, who is stating that demand for US-made goods will snap back in the next few years. They cite shipping costs, delivery-times, and quality issues as well as available labor supply here.
Yeah but in the specific instance of copper, America's largest mining-firm is hiring like crazy to increase domestic production of copper.
You can get a copper-chart to see why; the stuff's about doubled in the last 4 years.
Employment of illegal aliens is a form of slavery - because they are workers with no vote, so they cannot vote to change the rules of their employment. But the fact that they are still counted in the census gives the employers in their area of residence disproportionate political power - since his vote actually represents more people than himself, but who are not able to vote, and he votes for those who will perpetuate the system.
Other than the involuntary nature of slavery, the conditions are identical.
I once raised the topic of illegal immigration with my local Republican Central Committee. One of the members was a farm owner who immediately asked me if I wanted to pay a much higher price for lettuce, and then pointed out that the best thing about employing illegals was that they could not vote.
At that point, I decided that these people weren't Republicans, a party started on the concept of citizen Free Labor, but rather Southern Democrats without the nationalism. A rather squalid mix, if you ask me.
I agree. I see the same argument with those who claim some right to low cost technology. $1000 for a PC is too much, so we send the parts suppliers to China and get a $600 PC. Then, $600 is too much, so we send seminconductor fabrication to China to get a $500 PC. Then, $500 is too much, so the US engineers must be eliminated in favor of $30K chinese ones to get a $400 PC. What's next? Would we want Chinese prison labor to work at the seminconductor fabs for free, so we can have a $200 PC?
And what I love is - what businesses are we trying to support domestically with these lower costs? As in the example of mexican illegals - how much economic benefit is a restaurant providing that we should look aside at illegal immigration, which brings other costs to the society? does someone needing a $300 PC to run a small business selling crap on EBAY justify ditching the US technology industry?
>And as a small businessman, I will gladly outsource tech work
>if it helps keep me afloat.
You do realize that as a small businessman, the only reason you are afloat is that the business you happen to be doing has not yet been exposed to the crushing weight of some offshore competitor who can hire workers for $0.25 an hour, don't you?
Or are you one of those arrogant franchise owners who has deluded themselves into believing that they are something other than an outsourced middle manager for a MNC...
>Ultimately we have to ultimately decide whether we are a
>nation or a market.
You deserve a gold medal in the intellectual olympics for this quote.
Twenty years ago, we were undisputably the former. Today, under the pressure of outsourcing, illegal immigration, and a two party system that ignores the best interests of the majority of its citizens, we are increasingly the latter.
Amen!
I do my work because it's profitable. When it isn't, I'll need to find another line of work, not count on the government to help me at someone else's expense.
Americans have been doing this for centuries.
I believe you are well meaning but historically ignorant.
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