Crafted with Pride in U.S.A. Educational Campaign

Is "Leveling the Playing Field" the Issue? Article 6, November 2001: How does America advance the interest of its workers and its companies in a world filled with low-wage workers, productive over capacity, and shrinking demand.

Are We Tearing America's Economic Tapestry? Article 7, November 2001: The American economy is akin to an intricate tapestry and when one strand breaks the linked threads are weakened.

Does Steel Matter? Article 8, November 2001: America is the world's largest steel consumer. And its demand is growing.

Who Makes U.S. Trade Policy? Article 10, November 2001: Congress must fulfill its Constitutional obligation to regulate trade.

Can We Stop the Great Job-Giveaway? Article 11, December 2001: Congress shall regulate commerce with foreign nations. [NOTE: The link to this article is bad and the CWP Council has been duly notified via email]

What Do American Voters Think About Fast Track? Article 12, December 2001: By a 47-33 percent margin, voters believe that Congress should use normal legislative procedures, not fast track, to consider trade agreements.

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I thought of something recently, and thought it important enough to bug you about it. Hope you don't mind the late addition. ;)

Not at all - it reminded me to come back to you ;)

Let me take some point from both your posts, and try to formulate something of a response...

On the other hand, I see nothing wrong with my deciding to buy their shoes, even if they are more expensive than those made in China. I don't want to buy shoes made in China, for a variery of reasons. I do want to buy shoes made in the USA if I can. I want my fellow Americans to be able to earn a decent living. I don't want them to sink to the wage levels of the Chinese.

And that's fine. I have absolutely no problem with that, and if that's the case CPUSA was trying to make, I'd be off on some other thread ;)

What you essentially mean, I think, is that you've looked past simple price/quality issues to find some other criteria to use in making your purchasing decisions. You've found something else that makes you wish to buy domestically manufactured products, even if they might be more expensive than foreign offerings. And it's your money, at the end of the day - you are, and should be, free to make decisions about what you buy and don't buy for any reason you see fit. And doing that voluntarily is commendable, because those are all worthy reasons to buy domestically. And anyone who wishes to make that same decision should be free to do so, and if the CPUSA wants to persuade me that that's the right decision, I'll listen.

But, people are hard to persuade. It takes a lot more work to convince someone to see things your way than it does to just make them behave the way you want. And so what I object to, more than anything else, is the CPUSA attempting to leverage the power of government in order to make that decision for me, for you, and for everyone else.

Of course, there's also a down side to making that choice you've made. Every extra dollar you spend on domestically made products - over and above what you would have spent on foreign products - is another dollar you don't have to spend on something else. Opportunity costs are very much a reality, and spending more than you have to on any given good necessarily means fewer material goods for you overall.

And the aggregate opportunity costs for all of us can add up to quite a bit of money. If the 150+ million adults in this country buy one pair of shoes a year on the average, and we all spend an extra $10 per pair buying domestically, that's $1.5 billion in extra costs for us all. We could have all bought foreign shoes, and had an extra $1.5 billion worth of other stuff to boot. But we didn't, and now we have to forego all the other stuff we could have had with that money we would have saved.

Since we don't disagree on a lot of the basic issues, maybe the debate should be about which ways of American life are important and even vital to our uniqueness and promise as a nation, and thus worth preserving? I think small manufacturing fits into that. You would probably argue, I am dreaming, and only trying to postpone the inevitable. I am hoping technology will help in the revival. E.G. shoes again: many people in my family cannot find shoes off the shelf. Technology should permit making individual shoes to fit based upon measurements. Just in time manufacturing to the person. Etc. . . .

You might have a difficult time convincing me that much of anything is worth preserving ;)

And I say that semi-facetiously, but there's a serious motive behind it. Things that people want don't have to be "preserved". My major objection to something like government funding of the arts is not the habit the government seems to have of funding the most tasteless "artists" they can find - although that's a part of it;) - but rather the fact that all of us are being forced to fund something that only a very, very few of us actually want. Things that people want to have around will survive on their own, because the people that want them will ensure their survival voluntarily. If enough people want pictures of the Virgin Mary smeared with elephant sh*t, then they will have it, without forcing the rest of us to subsidize their particular tastes for the perverse and stupid. And if nobody, or only a very few somebodies want such things, why on earth should all of us be required to pay for it?

And that's the argument, in a nutshell, against tariffs that force us to buy domestic products. If enough people feel as you do, and want domestically-made manufactured good, then they will have them - the market will provide if the demand is there.

And if it turns out that only a very few people really care enough to vote with their wallets about such things, then why should everyone else be forced to have things they demonstrably don't want?

So, do I think you're dreaming? I think that, for better or for worse, price and quality are by far the major factors when people decide what to purchase. Whether consciously aware of the idea of opportunity costs or not, most people instinctively understand that every dollar they spend on shoes is a dollar they don't have to spend on groceries. I think the empirical evidence is in - most people in most situations really are rational maximizers, who want to get as much stuff as they can, and will rationally evaluate their choices to get as much stuff as they can.

Will technology make things better? Maybe, or maybe by reducing the labor necessary, it will make things "worse", in a sense.

Here's a fun thought experiment you can mull over when you have some free time. This was posited on another thread a while back, which was also about textiles, IIRC - the textile workers have quite a lobby here on FR ;)

The original question was about chair manufacturing, but I'll modify it somewhat to make the scope a bit larger, and the impact greater. And it goes like this:

Imagine for a moment that some clever person has invented a machine that is so remarkably intricate and efficient that is can make you a whole entire car for $20. Think of it - you put your $20 in one end, select your color and your options (extra $0.50 for the CD player/AC package), the machine grinds and wheezes, and out from the other end pops your car, made just the way you like it. And you jump in and drive away. And the only tending, the only labor this thing requires is that, once a week, someone has to drive a truck over to it to dump in some scrap metal or pig iron, some rubber, and some unformed molten plastic.

So, there you go. The question is, is this machine a good thing for the economy? Consider - everyone who wants a car will save tremendous amounts of money, and lots of people who couldn't afford one before will now be able to. But, on the flip side, hundreds of thousands of domestic autoworkers will now be unemployed. So, do you, in your wisdom as the imaginary emperor of North America, allow this machine to be deployed, or not? Why or why not?

Unless we are going to do away with the nation state, there is also some logic to the national security argument.

I don't know about doing away with nation-states, but the trouble with the national security argument is that, if you define it in any way other than pretty much how I defined it in post #22 above, it becomes very difficult to rationally justify protecting some things in the name of national security, while at the same time excluding others. Just saying that "munufacturing" is critical to national security is too broad - once that camel's nose is under the tent flap, the rest of him is going to barge right in sooner or later, so to speak. Is anyone who makes anything really "critical" to national security?

Probably not, I think most people would agree. The loss of the domestic keychain industry, for example, is hardly a mortal blow to the American way of life. So, we need some criteria to decide what's really important, and what isn't. And just imagine the lobbying porkfest on the Hill as they're drafting that bill - it's almost inevitable. What do you possibly put forth as a reasonable definition of "critical to national security" that isn't so broad that it includes everything? I ask in all seriousness - I don't think it can be done, but I'm willing to listen if you have ideas...

And that's why I define "critical to national security" as narrowly as I do. Defining it that way preserves the traditional definition of "national security", while at the same time actually doing what it claims to do - protecting it by protecting the actual physical defense of the nation.

This: there are three recognized ways to create wealth: natural resources (timber, mining, etc.), manufacturing, and agriculture. (This was hammered home to me in my MBA and IE education.) Services, etc., transfer around wealth that was already created via enterprises of those three types. E.G., for retail, restaurants, health clubs, hair salons, stock brokers, etc. to survive, people have to have money; and no matter how many times it changed hands, money had to come from wealth created from natural resources, manufacturing, or agriculture . . .

The classic definition of wealth-creation - it's vaguely familiar ;)

But consider this - services do create value. After all, if they didn't, we wouldn't pay for them. So, the plumber who comes to fix your pipes didn't make anything, nor did he grow or mine his product - his product is purely intangible. It's the service he performs when he comes to fix your pipes, thus saving you the trouble of doing it yourself. And so go the lawyer, the doctor, the architect, the banker, and the kid who mows your lawn on weekends. They all create value for you by doing things you need done, but either don't have the time or the skill to do yourself.

And there are those opportunity costs again - every hour you spend fixing your pipes or drafting your own will - and praying that it won't leak, or that it will stand up in a courtroom as your relatives fight over your stamp collection - is an hour you can't spend doing the things you're good at doing, or enjoy doing. That hour, once spent, is gone forever.

So, when you wake up feeling poorly, you don't take the potentially large amounts of time and effort necessary to diagnose yourself - you go find an expert service provider, who is much better at figuring out why you're coughing up blood than you are, and much more likely to have an effective treatment than you are. Of course - you go see your doctor. He saves you time and effort, and cures you faster than you could cure yourself, most likely, as well as giving you valuable advice about quitting smoking and how you could stand to drop a few pounds (well, that's what my doctor tells me, anyway). And all of this creates value for you - his advice might give you a few more of those fleeting hours that we all never have enough of, as well as saving you all those hours that you would have spent learning about diseases of the gastro-intestinal tract, or whatever. And that service, most importantly, frees up those hours you would have spent healing youself and lets you do the things you do well, whatever those things are, and thereby frees up your time to create wealth for yourself. So, you pay him for his valuable service to you.

And when you think about services in this way, "value" and "wealth" become close parallels, if not synonymous.

Let me close by considering a historical example, for a moment - and if you've made it through to this point without falling asleep, you're doing pretty well ;)

Anyway, in the 19'th century, Britain was the richest, most powerful nation in the world. Forget for a moment how the 20'th century went for them - it's not really germane anyway. So, the question is, how did they become so rich and powerful?

And the answer is, they believed in free trade too, but with a twist. The British system of mercantilism worked like this - they recognized that adding value was the same as creating wealth, for all intents and purposes. And they further recgnized that more value was added by producing finished goods than by growing things or digging things up, or what-have-you.

Essentially, they saw that more value was produced by making manufactured goods than by producing raw materials. But, they needed those raw materials to make their manufactured goods, so their solution was pretty simple - you go out and get yourself a bunch of colonies, put your own folks in charge, and make the colonies produce the raw materials for you. Then you take those, make things, and sell them to anyone and everyone, but especially back to those colonies, who get them cheaper than other manufactures, because there's no tariff for your stuff.

So, fast-forward to today. There's your producers of raw materials, who don't add much value, comparatively speaking. And there's your manufacturers, who add more value than the miners and farmers, so nations with strong manufacturing bases tend to be wealthier than nations who only farm things and dig things up, just as the British were wealthier than their own colonies.

But now there's a third way - providing those high value-added services. And those services are potentially even more value-adding than manufacturing is. It's not hard to see why - there's more skill involved in doctoring or lawyering or engineering or even plumbing, than there is in being a bolt-tightener at some manufacturing plant. Not to denigrate those in manufacturing, but it's pretty hard to avoid noting that mass-manufacturing does not generally require skilled craftsmen, since mass-manufacturing was designed from the beginning to avoid needing skilled craftsmen. Anybody can be a bolt-tightener, but not everyone can be skilled in the way that professional workers are. That's why manufacturing is moving to the third-world - those countries have bolt-tighteners and nail-pounders by the truckload, and they're cheap. We have educated and skilled workers, so they do educated and skilled things

Now, if we were only serving each other, you'd be right - it would just be an endless paper chase, as we cut each others' hair, and wash each others' cars, and so forth. But we take the expensive, high value-added services, and we don't keep them to ourselves - we export them, and provide those services to the whole world, or at least the parts of the world that can afford expensive services like ours ;)

And that's the key - we don't selfishly hog the services of the bankers and lawyers and doctors to ourselves. We sell them abroad - that's our new major export, and our secret weapon for the economy of the 21'st century. It's no accident that whenever some Saudi prince gets the sniffles, he warms up the family jet to whisk him off to the Mayo Clinic in Minnesota. It's no accident that outfits like Citibank and Chase Manhattan and Merrill Lynch do huge amounts of business overseas. It's no accident that software service companies like Oracle and IBM ply their trade all over the world. We are the best damn service providers in the whole entire world, and there's money in that. More money than in anything else out there. There's gold in them thar hills ;)

So, let the rest of the world make the keychains and the cuckoo clocks and the shorts; and, yes, the cars and trucks and whatever, too. We make and sell the really expensive, high-value stuff - the services that the rest of the world needs, or will need soon. And as the poorer countries get richer by making those sneakers and chairs and cars, why, that's just that many more people that we can sell our expensive services to, isn't it? ;)

And that is all, in a long-winded way, why I don't mourn the loss of manufacturing in this country...

So, let the rest of the world make the keychains and . . . the cars and trucks and whatever, too. We make and sell the really expensive, high-value stuff - the services that the rest of the world needs, or will need soon. And as the poorer countries get richer by making those sneakers and chairs and cars, why, that's just that many more people that we can sell our expensive services to, isn't it? ;)

This aspect of our economy should not be disparaged. However, not every American citizen is able to provide high-value expensive services, and those can be done overseas, too (witness the use of Indian programmers, etc). The rest of the world is catching up a lot faster than they used to. Everyone does need the opportunity to make a living for his family. As a nation, we can't pretend that people "unable to compete" in a "global economy" don't matter. Just as manufacturing has become "cheaper" to move overseas, many other services could fall to the same fate.

So, we do need a mix in our national economy. Loggers and lumber mill workers, farmers, factory workers, truck drivers -- who wouldn't make it as medical researchers or international traders ;). Thus there is wealth created, some exported, some sold to others in America, who can then buy services, basic and high-value.

Just saying that "munufacturing" is critical to national security is too broad

Public policy does quickly become a can of worms, doesn't it? Well, if the federal government can subsidize dung-covered "art", why not textile and shoe workers? . . .I am not justifying this as sound policy. However, we have a long way to go before we say that the government is not affecting markets. Textile and shoe workers have a right to lobby the government as much as anybody else . . .My basic perspective is that the federal government takes far too much of our money, and uses it on things that the federal government shouldn't be doing. THIS takes more away from my grocery money, than the price of American goods ;).

I think that, for better or for worse, price and quality are by far the major factors when people decide what to purchase. - most people in most situations really are rational maximizers, who want to get as much stuff as they can

And the markets tend to reinforce shorter-term gain at the expense of longer-range cost/benefits. I think more people would make the "buy American" choice if they could see the long-range effects of what they are buying, but the market does not show that to them -- until it is too late? The beauty/efficiency of the free market is that a lot of valuable information is “summarized” in the price. However, there is some information that the market does not efficiently provide to the consumer, so the consumer has to make a choice on only price and quality unless they want to do a lot of research (like some of us are willing to do). Anyway, I am on the persuasion band-wagon -- just ask my family and friends ;). Our schools apparently aren't even teaching kids how to do basic math, but they do "learn" what to buy from slick advertisements. Maybe shoe and textile workers need to advertise in a slick way on MTV -- not totally joking . . .

Anyway, persuasion is to be greatly preferred over government action. Government involvement is hard to moderate and control. In principle, I am not opposed to tariffs (they were used in early American policy), or some limited rules to encourage a level playing field between foreign and domestic goods: i.e. providing "information" that the market would not otherwise be able to provide, such as that those cheap goods were produced under slave-like conditions, without pollution safeguards, etc . . .

The other major problem with a "hands off" approach to government policy, is that other major players are already affecting public policy -- providing their own different "information" to the markets via government policy. Big international corporations, foreign government lobbyists, and many others do have clout . . . We can't just close our eyes and pretend that it is only the "free market" which is changing the landscape of America . . . So while many of your arguments are sound economic theory, reality is unfortunately a lot messier (sigh). Free market capitalists have this problem: to protect themselves legitimately from the effects of market distortions (some intentional government policy) without making the distortions and interference worse (sigh).

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