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| The Height of Economic Ignorance As recently as 1995, opponents of free-trade rallied against the approval of the North American Free Trade Agreement (NAFTA)with dire predictions of mass unemployment, economic downturn, and the elimination of the American middle class. How could we possibly compete with nations with such lower wages? The left (and some on the right) warned of the "giant sucking sound" we'd hear as millions of jobs left the U.S. and went to Mexico. Of course, in the years following NAFTA, the U.S. economy enjoyed the largest economic expansion in history, complete with high-employment and low inflation. Free-trade has made us a wealthier nation, not poorer, and gave us higher employment, not lower--the rich got richer and the poor got fewer (characteristic of capitalism). What I can't get is, given all this evidence of the economic benefits of fre-trade, there still emerge opponents bearing the same old worthless arguments: All our jobs are going overseas and we'll have none (as if the labor market is a zero-sum game), cheaper goods will destroy our economy, somehow if another economy expands, ours must contract (again, the zero-sum game mentality).
The case against free-trade is a simple tactic of focusing on the costs of free trade and ingoring the benefits. When business is able to sustain a level of production using fewer resources, the savings are passed along to the consumer, which means more money in the pocket of the average American (if big eevil corporations simply kept the difference, you'd hear no whining about the need for a "level playing field"). Often times this means jobs in certain sectors are displaced; in fact any time cost reducing methods of production are used, including the use of machines or computers in industry, the result will be fewer jobs in that sector. Assuming consumers and business doesn't burn or eat the money they save from lower priced goods, they're inevitably going to spend it somewhere and thus create employment (or invest it, or put in it a bank which will invest it) in some other sector(s) of the economy. Can anyone explain why our economy didn't plunge into depression after NAFTA, or why our economy continues to expand despite job displacement and a growing trade deficit? Yeah, the big fall is right around the corner...
All this is why capitalist nations, which are free-trade by nature, enjoy an imminsely higher standard of living than those nations that promote domestic production with economically crippling trade restrictions (in economic-speak, policies of "import substitution"). Considering the intense regulatory and litigious business climate, can anyone blame American companies for relocating abroad? No EPA or OSHA breathing down IT companies' necks, no frivilous "discrimination" lawsuits, no obscene corporate taxes or costly employee healthcare benefit requirements to be subjected to. I'm sure you can think of some others on your own. You may think all these things are nice and necessary, but the government forgot that making American workers more costly makes foriegn workers more attractive. Whoops.
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For every action, there is an equal and opposite government program. | |
MotoVTVonage User Since Jan 2004
join:2002-12-03
Butler, PA | Joe blow who just lost his job could care less about outdated 18th century trade practices.
He just wants his job, that's all.
You forgot to note that many 3rd world countries offer little of the "quality of life" bennies that we have here.
Sure, no EPA would be great for american business but hell on americans in general! You might look at pollution levels in many places in China (where there is no EPA). Yea, the workers there are certainly low cost, but I prefer not to have to use oxygen to breathe when I go outside. The Yello river is quickly becoming a dead water.
Check the maquilladors in Mexico....again, a very competitive workforce resides there. Then go look at the wage scale these people are paid. Its laughable. So is their lifestyle. No, I don't think they choose to life in tin shacks or drink polluted water. But boy, they sure are low cost workers.
When arguing free trade,you have to consider the other costs of this practice.
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Part time Vonage Phone man. | | |
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| said by MotoVT:
Joe blow who just lost his job could care less about outdated 18th century trade practices.
He just wants his job, that's all.
Of course people who are directly affected will strongly support anything that'll keep them their jobs. But what about the rest of us who must suffer higher prices? As for the modern global economy, hardly an "outdated 18th century trade practice." The only thing reminiscent of the 18th century is all the advocacy of mercantilism (the notion that if they get richer, we'll get poorer). Such ideas were destroyed by Adam Smith in 1776, setting the framework for a nation of free-trade and immense wealth. Pick up a copy of The Wealth of Nations, it's been around a while.
said by MotoVT:
Sure, no EPA would be great for american business but hell on americans in general! You might look at pollution levels in many places in China (where there is no EPA)
Quite the opposite: in China, there is nothing but an EPA--the government (or the people, as they would say) owns and lays down the rules about where and how everything is produced, not private business. Of course the environmental quality is poor -- you'll find that's a common trend in nations void of capitalism.
Bureaucracies like the EPA do about a dime of good and a dollar's worth of damage. Case in point: Intel doesn't pollute, but they still fall subject to EPA regulation. Any adjustment to production requires prior EPA approval, involving a several hundred page permit request, which, after approval, is followed by 30 days for public comment, another 45 days for the EPA to respond, 90 days for revisions to be considered, and then 60 days for citizens to petition for changes. How do you think a company such as Intel can remain competitive and respond quickly to consumer preferences in such an environment (just consider constantly changing nature of the IT sector)?
As for the poor Mexicans (and Filipinos, Taiwanese, Indians, or anyone else) who live in tin shanties and drink polluted water, they're certainly free to go back to whatever they were doing before the big eevil corporations provided jobs in their factories. Something tells me they won't; any guesses as to why? »www.gmu.edu/departments/economic···hop.html
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For every action, there is an equal and opposite government program. | |
MotoVTVonage User Since Jan 2004
join:2002-12-03
Butler, PA
1 edit | Tell me again about all these "higher costs"?
Once all the jobs are gone and replaced with Mcjobs, who are corporations going to sell to?
"As for the poor Mexicans (and Filipinos, Taiwanese, Indians, or anyone else) who live in tin shanties and drink polluted water, they're certainly free to go back to whatever they were doing before the big eevil corporations provided jobs in their factories. Something tells me they won't; any guesses as to why? "
So this all justfies keeping them in abject poverty so that we can all get our Guess? jeans a little cheaper? | |
| said by MotoVT:
Once all the jobs are gone and replaced with Mcjobs, who are corporations going to sell to?
Another argument put forward during the NAFTA debates of 1995. If job displacement caused firms to fold for lack of consumers, as you're suggesting, NAFTA would have been followed by a tremendous economic depression, instead of the boom that was realized. Can you explain that?
said by MotoVT:
So this all justfies keeping them in abject poverty so that we can all get our Guess? jeans a little cheaper?
It demonstrates that they are unquestionably better off than they otherwise would be. If you raised their wages, as some politicians would do with an "international minimum wage," those factories would shut down and put them flat out of work. Are you seriously claiming they'd be better off? Please... The abject poverty was around in those countries long before American manufacturers were there, a result of oppressive governmental controls and brutal economic regulation. Is there something wrong with making them better off? | |
MotoVTVonage User Since Jan 2004
join:2002-12-03
Butler, PA | I guess "better off" is a relative term.
You're not seeing the fact that we are gradually, with the erosion of middle class factory and IT jobs, moving towards a two tired society. The haves and have nots. And no, all the education in the world won't help if there is no career to move into.
You should look into micoeconomic studies of towns and areas that suffer job losses. Its an eye opener.
Finally on wages......if there was an internantional wage that was paid internationally, then where would the corporate bafoons er I mean illustrious leaders go for cheap labor then? Mars?
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Part time Vonage Phone man. | |
| said by MotoVT:
I guess "better off" is a relative term.
No, it isn't.
said by MotoVT:
You're not seeing the fact that we are gradually, with the erosion of middle class factory and IT jobs, moving towards a two tired society. The haves and have nots.
The statistics aren't with you on this one, sport; they seem to paint a picture of "have lots", and "have lots more." According to census data from 1994 (»ferret.bls.census.gov/macro/0319···_000.htm) and 2003 (»ferret.bls.census.gov/macro/0320···_001.htm), there are in fact more middle-class households (conservatively defined as having a household income of between $30,000 and $50,000) than there were 10yrs ago, and considerably fewer households below the poverty line (14,223,000 down from 18,165,000). I've attached the links, you can look for yourself -- it's all adjusted for inflation. And all this while free trade expanded; how do you figure that happened?
When certain jobs are displaced, others are created from the resulting availability of cheaper goods. An example: An American steel mill closes, builders are able to save money on steel (a critical input in a wide array of domestic industries), and hire a larger workforce and invest in additional capital goods (which are built, maintained, and operated by workers). Since those workers can buy less expensive goods such as clothing, vehicles, and *gasp* computers made in foreign countries, they're wealthier because their dollar stretches further.
said by MotoVT:
if there was an internantional wage that was paid internationally, then where would the corporate bafoons er I mean illustrious leaders go for cheap labor then?
There would be no reason to employ poor nations, eliminating those jobs, and making those workers, as we've discussed before, worse off. | |
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