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To: Paul Ross

Ok. let me ask you this question: Person "A's" job depends on free trade. They are say a banker. Person "B's" job is taken by free trade. Do you penalize A to benefit B?


584 posted on 01/03/2006 4:05:40 PM PST by Sunnyflorida
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To: Sunnyflorida
Do you penalize A to benefit B?

Uh, contradiction alert: By your nebulous terms, your preferred policies are penalizing B to benefit A in the same example. If we adhere to these stark tradeoffs, then it is purely a zero-sum redistributionary exercise. I stipulate this is a grossly simplistic example, however, and there are even starker effects than this simple win-lose equation, than you might realize. You noted "A" was a "banker", so that places him in the financial services sector. You failed to designate which category "B" was in.

It can make a difference on the macroeconomic level, undercutting any claims of "win-win" which some free traders usually try to tout for the alleged virtues. It literally could be a win for the one sector, the financial, but a catastrophic loss for manufacturing, its service sector, its internal feeder chain, other manufacturers, etc. And the taxpayers picking up the tab of financing the outsourcing with OPIC funds and IMF loans, and oh yeah, unemployment compensation, and also retraining costs. Maybe even ultimately welfare. Label those "social costs" if you will, although they have a tangible price tag potentially. From your limited hypothetical there is no sufficient information to tell.

And regarding the redistributionary impacts, you really do need to take into consideration the mulitiplier effects of various kinds of activities. These are broadly generalized as follows:


Chart Source: U.S. Department of Commerce

To reiterate from my previous post, and summarize the import of the above:

Manufacturing’s use of intermediate goods and services in its production process means that it generates substantial economic activity at the intermediate level. This is called the multiplier effect, and it turns out that manufacturing’s multiplier effect is stronger than other sectors.

Specifically, every $1 of a manufacturing product sold to a final user generates an additional $1.43 of intermediate economic output, more than half in sectors outside manufacturing. Manufacturing’s multiplier effect is greater than any other sector and far greater than that of the service sector, which generates only 71 cents of intermediate activity for $1 of final sales—half of the additional intermediate output generated by $1 of manufacturing final sales.

Have you seen this old, 2001 publication which puzzled over some disconcerting facts...Just How Productive Are U.S. Workers?. It bears on this discussion because most free traders have been attempting to claim that we can shed via outsourcing...without any real impact on U.S. manufacturing, i.e., that it is actually uneffected by the imports displacing their previous functions. If the underlying facts speculated herein are true, it helps explain the two-year "jobless recovery" that had the Administration sweating tacks....we have encountered an accounting confusion which masks the real damage suffered within the U.S.

591 posted on 01/03/2006 4:49:43 PM PST by Paul Ross (My idea of American policy toward the Soviet Union is simple...It is this, 'We win and they lose.')
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