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 agree with you on the immigration question. On the security side, the govt has an obligation to arrest all illegals. And on the economic side, unless Americans are allowed to work for the same low wages as illegals, it isn't fair to let the illegals steal all the jobs.
Wrong, because there are certain jobs that must be done in-country (i.e. personal service, construction) that must be done in country. However, the higher paid information-manipulation jobs can be outsourced. Thus, the myth that white collar jobs would replace the outsourced blue collar work is shattered.
If so, then so are the steelworkers you're trying to protect at my expense, and the farmers, and just about every other industry, unfortunately. But under the current artificial market circumstances, they are "the private sector."
I would not ask me for job advice--I have not had to look for a job lately. But there are a lot of things out there. I don't do that badly, and I know people who make a better living than I do selling things off of E-Bay. I know office IT guys (on-site), and there's a huge shortage of pharmacists right now, almost a crisis. If I just think over the last three days what sort of professionals I've met in industries where one can still make a good living--delivery jobs, H-Vac jobs, skilled trades (plumbing, electrical, et al), construction work, I met an aircraft mechanic just finishing his apprenticeship, and there are auto mechanics and car salesmen, I have friends who run blogs at a small profit, and edit texts on a freelance basis, and a whole host of other things.
And if we'd change our environmental laws, we'll have more coal jobs. If we repeal our tariffs, we'd have a lot more decent jobs in agriculture.
What, do you want to hire them to do nothing on the assembly line instead?
I don't see how you can make ridiculous posts like this and claim that I am ignorant in any way, historically or otherwise.
Real wages have risen dramatically when you include all the health benefits and retirement matching and increased social security contributions employers must now make, to name just a few.
Wages plus benefits have never been higher, adjusted for inflation, than they are now.
This analysis is spot-on, in my opinion, based on nearly 30 years in business. As I stated in a prior thread some time ago, I never met an economist who doesn't work for a university, big utility, or the government.
If they believe their theories, why not go to the bank, put up their house as collateral, hire some people who expect to be paid on a regular basis, and start dealing with the myriad of taxes businessmen have to face?
In the past 20 years, I have been seeing the so-called middle class in this country buy more "stuff", owe more money, and lose more real net worth than I ever imagined.
One day the piper is going to have to be paid - and it ain't gonna be pretty....
I'm sure I'll change my attitude once you explain how we are to be a world power with no manufacturing base.
Regarding Thomas Jefferson, I have read that although his original political philosophy was derived from the English Whig tradition, he became converted while in France, at least to some degree, to the French Rationalism in which government makes top down decisions for the benefit of its citizens and which also embraced egalitarianism. Rationalism is at the root of socialism, not that Jefferson was a socialist, I don't think.
I'm not exactly a scholar on this subject, perhaps someone else can let me know whether or not I have the right of this.
As I stated before, I am fairly ignorant on the subject of economics. But it does seem to me that the market *rules,* regardless of the actions of government. In other words the market is a fundamental force that exists beyond the bounds of state control. I know this probably sounds silly, but it makes sense to me - I kind of think of the market as Newtonian, when government attempts to regulate the market, there will be an opposite and equal reaction by the market, whether they like it or not.
"I'm not interested in lowering my standard of living until we reach an equilibrium with the new Chinese and Indian middle classes!"
I know you already addressed this question, but it still makes sense to me that competing openly with third world costs, if it becomes universal enough, could negatively impact our standards of living.
Meant to ping you to #93
indeed, "captive" markets like education and health care - reflect true costs (no global wage suppression) and true prices. that's why americans can't afford them, and they look to government to provide them. but cheap chinese made products, americans buy those as fast as they can.
in the log run - it leads to a two class system - the very wealthy, those with access to capital or "protected" jobs (lawyers, CEO and the executive suite, etc) - and workers, for whom the only thing they have to trade to obtain money is their labor - only to find the worth of their labor is diminshed. government workers, or those who obtain compenstation through government programs (health care workers, education, etc), comprise the middle class.
you can forget about sustaining a republican party in that environment - once the private sector middle class is withered away, the Dems will have a permanent majority in the US.
no, jobs which require the physical presence of the worker in this country cannot leave. and if you look at where jobs are growing, and where they are being shed, that's exactly where we are moving towards.
where do you work? fortune 500 corporate jobs are shedding pension, health care, and retiree benefits as fast as they can. read some of the recent news on IBM settlements in the pension lawsuits against them - that's just the tip of the iceberg.
the problem with these wage statistics is that they include compensation for those at the top - and are therefore skewed.
show me some wage statistics with those making over $250K eliminated, then we will talk. When Oracle offshores 1000 engineers making $75K per year to India, and turns around and gives 25 executives bonuses in the same amount, the wage statistic appears flat for that company - the statistic does not capture what has truly happened.
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