Posted on 11/06/2004 2:45:55 PM PST by Willie Green
For education and discussion only. Not for commercial use.
A battle royale has just been initiated in the rarefied world of economic theory, although the rumblings have not yet reached these shores. The first salvo has been fired by no less a person than Paul Samuelson, and the targets he has chosen include some of his most prominent acolytes and disciples.
The MIT professor, winner of the Nobel Prize in 1970 and research mentor of countless economists, who later became major scholars in their own right, has re-assessed his entire stand on globalisation and the benefits that accrue from the process. In doing so, Samuelson has been scathing in his critique of some of his students, including Jagdish Bhagwati, once a member of his innermost circle.
In an article in the Journal of Economic Perspectives, Samuelson has postulated that free trade, far from being an unqualified blessing, may prove to be a major drawback under certain circumstances. The major cult figures who are sought to be chastised by the guru on this issue are Gregory Mankiw, Bhagwati and countless other `globalists'. The first two have been mentioned by name in the article's opening paragraphs as purveyors of `polemical untruth'. In the corridors of theoretical economics, you cannot get more direct than this.
The thrust of Samuelson's analysis is that a country like China, basically a low-wage economy, will create a net negative impact on the American people, when it manages a substantial rise in productivity in an industry in which the United States was earlier a leader. Initially, American consumers may benefit from low-priced goods in their supermarket chains, but their gains may be more than neutralised by large losses sustained by American workers who lose their jobs. This thesis, from the erstwhile mastermind of the neoclassical school of economic thought, has led to tumult in the profession even before its official publication.
Among Samuelson's fellow liberals, this revisionism has been a welcome development and could not have come a day sooner. Many American commentators are saying this is a clarion call for the US to launch serious programmes for supporting workers displaced by globalisation. American workers need a much stronger and a viable safety net, on the lines of their European counterparts or even those in Canada, the immediate northern neighbour. Some American economists are even saying empirical research on the subject in the past was skewed, because of the in-built biases of the free-trade proponents.
Claims of substantial gains from free-trade were based on `extraordinarily poor studies', according to one commentator, Jeff Madrick, who goes on to add there is now hope for a more balanced perspective in future research in international trade theory. Policymakers in Washington are now being urged to move away from their high perches and to take a hard look at ground realities. When one of the most respected contemporary economists has stepped out of the shadows and said things are not as simple as they were earlier made out to be, it is a development that cannot be ignored. Another observer, Pat Choate, feels this paper is the correction of `an embarrassing mistake'.
Samuelson, at the age of 89, is signalling to his disciples that they should think about the real world rather than `postulate assumptions and develop elegant models which ultimately are irrelevant'. More critical economists, like Paul Roberts, feel the maestro's attempt to patch a leaking vessel that is ultimately doomed will just not work. Roberts suggests the paper responds to an insightful critique by Ralph Gomory and William Baumol, another economist familiar to all Indian students of economics.
In their publication, Global Trade and Conflicting National Interests, Gomory and Baumol launched a powerful attack on orthodox international trade theory. They showed free trade is characterised by conflicting interests and not by mutual benefit, as neoclassical economists assume. Roberts, in fact, lambasts Samuelson for not taking on the issue of outsourcing in any depth.
While the friendly fire in this debate is clearly sympathetic to the overall theme, the globalists are clearly worried. The damage-control effort of this brigade is led by none other than Jagdish Bhagwati, the former Samuelson disciple, singled out in the paper for reprobation. The Columbia don has reportedly prepared a response to Samuelson, which will be published in the same journal.
Bhagwati, of course, got a lot of media attention recently when he described John Kerry's trade policies as `voodoo economics'. He has been one of the most committed globalists for many years and was a defender in the 1980s for the Japanese trade lobby, which he exonerated from charges of protectionism, while reserving his blame for `bullying' American policy-makers. He dismissed the argument that non-tariff barriers significantly reduced Japan's appetite for imports from America. There is now sufficient evidence (and semi-official admission) that Japan was a major protectionist country throughout its period of growth in the 1960s and much later on.
Most of us who have worked in this country's corporate sector and interacted with Japanese companies will vouchsafe for the enormous clout of these organisations and the seamless interlinking between the much-vaunted MITI and Japan's private business. In any case, Japan's continuing trade surpluses are likely, once again, to become a controversial issue in Washington very soon.Bhagwati will have his work cut out, as he takes on his former guru in a no-holds-barred fight to defend orthodox economics.
In these shores, North Block and Raisina Hill would do well to ask their think-tanks to introspect on the complex subject. Else, they can be taken to task for swallowing the globalisation mantra a tad too uncritically.
The writer is a financial-corporate analyst and a member of the Delhi Stock Exchange.
The liberal disease all over again. It is not about truth, about martialling argument and fact in support of your thesis. It is all about power and influence on behalf of the liberal cause. His former students are not scholars in their own right (i.e. independent thinkers). they are acolytes and disciples to be brought to heel for their doctrinal heresy. Any legitimate economist has questions and doubts about the short term benefits and detriments of free trade with countries like China. It is a serious quesiton worthy of reasoned debate.
But no, once again, the liberal master calls the twelve apostles to a last supper and asks them to drink the Kool Aid one last time for the sake of the party.
I wasn't talking about Japan from the 1950s. Yes, China may do well for awhile selling the cheap trinkets like the Japanese did in that era. But the trade mega-surplus of the 1980s about did them in. The question is will China be ruined by the huge surpluses before they become fully developed while selling us trinkets in an era of expensive oil? Unless China has an energy source we don't know about, they are not going to be Japan or 4X the US or anything else. They will strangle the world oil economy and kill their export markets first. Our trade deficit so far does nothing but make dollars a world circulating currency backed by uranium and plutonium.
Private sector employers aren't as generous as the military in handing out tuition, housing and medical care.
You're just parsing...a trait of a well-known liberal.
You claim to be a conservative, which means standing for smaller, less intrusive government, but you advocate protectionism, which means bigger, more intrusive government.
In America, Ronald Reagan stood for conservatism...and free trade.
I know...you were for free trade, before you were against it.
Precisely.
Liberal as it was meant a century ago, referring to Gladstone and the disciples of Smith and Ricardo.
If inflation worsens and the housing market crashes, we could well be in for a strong economic nationalist third party. There is definitely a yearning for one. And it would be based on the religious right who, after all, were economic populist New Deal Democrats two generations ago.
Explain to Harley Davidson that Reagan was for free trade. Just the opposite, tariffs saved their a*s.
"Free traders" have already responded: Americans have no right to jobs -- uh.. excepting the job of risking life and limb protecting "free traders" and others from enemies.
The greed-related cognitive challenged "free traders" forget that jobs = pay checks = consumer demand.
"Free traders" actually have an answer to that: "Who cares? Our business partners and dear friends have promised us one billion Chinese middle class spendin' fools. Who needs America?"
I am tutoring you for free. BTW, what meaning of the word "liberal" did you use in the phrase above? In the classic sense or as the liberality/largesse?
Either way, this lesson is free.
This is one aspect where "free trade" conservatives and their globalization New Democrat Third Way progressive partners differ. The "free trade" conservatives simply sneer that Americans have no right to jobs while the Clintonista progressives support government programs.
The only issue more important to the Clintonista one-worlders and their conservative "free trader" partners is who gets to make the rules. To wit, should the WTO stop being neutral toward "justice" and start enforcing social justice, economic justice, racial justice, and environmental justice -- or should a higher authority like the UN enforce "justice."
The whole argument about the evil capitalists sending our jobs overseas, and how we should rise in a new political Party and use the force of government to stop them from doing so, is simply Marxism (economic determinism) hiding behind a (very) thin veil.
Are you guys going to call yourselves Bolsheviks, or will you be looking for a new moniker?
Reagan DEFINED conservatism, and conservative causes...free trade was a Reagan conservative cause.
It still is today.
Or is it being used everywhere else outside of America. The confusion came from the American socialists/socialdemocrats being ashamed to be called by their true name. So they stole the name from the real liberals (the name "liberal" is related to the word "liberty").
Same way as pederasts want to be called gay (joyfull, happy) what they are not.
Oh please!
Don't flatter yourself.
You are a Marxist through and through.
You're not tutoring me, I'm exposing you.
Not to worry. If that community is anything like many "free traders" they will handle this with name calling and insults about Professor Samuelson's age.
Ronald Reagan defined conservatism in America.
Ronald Reagan stood for free trade.
You stand against free trade.
You are then the opposite of a conservative.
The opposite of a conservative is a liberal.
Embrace it...you'll feel a whole lot better about yourself.
When Samuelson was pro-free trade, before joining his "fellow liberals"...you respected him?
Don't be lying now...
Here is a man who wants a World Immigration Organization that protects migrant labor and the various developing countries' "diasporas."
The host country benefiting from the labor would be responsible for the workers' "human rights" while the workers (nonresident citizens of the source countries) would pay their taxes to the source country.
Kinda like the Mexican model where the corrupt government of Mexico demands (and is about to get?) "human rights" for its citizens and its citizens sends billions in remittances to Mexico. Some remittances (group remittances via home town associations, HTA) go to corrupt government entities to finance public programs. Taxes, IMO.
Show me where my views depart from the traditional Christian social doctrine as defined in the Papal Encyclicals.
RERUM NOVARUM - ON CAPITAL AND LABOR
Centesimus Annus - Hundredth Anniversary of Rerum Novarum
what jobs do you want americans to be able to get? just government, service jobs, lawyers, education, financial services, real estate agents, etc? to what level are we supposed to de-industrialize until you are satisfied? OK, I grant you that the case could be made for low and semi skilled manufacturing being unsustainable in the US. but that is all gone now anyway, the last vestiges, such as furniture manufacturing in north carolina, is all going to china. so we aren't debating about those kinds of jobs anymore, that's history. but now its tech jobs and high multiple manufacturing that are going (we decided to save autos, because it is so important and our market so big).
what's the endgame?
The "intellectual" level of your arguments is really inadequate.
But on the subject of Bolshevism, what is truly Bolshevik is the determination of free traders like you to expend the lives and prosperity of the American people in pursuit of your theoretical model of the perfect world.
He was the author of my introduction to economics textbook -- this was in the days when free trade meant free trade not moving production offshore for "cheap" labor and importing "cheap" labor's goods and services.
Yes, I respected the young professor and was glad the university selected his book.
I don't know how many times we've got to say it: We are for free trade.
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