Follow the Fundamentals ( on Trade and Lou Dobbs )

[JMS]

Personally I like Lou Dobbs. He is a Harvard educated economies who has the guts and the intellect to speak out against flawed conventional wisdom in favor of common sense.

Central to Lou Dobb's message is Free Trade is a myth. It is a jingoistic expression pasted on top of our trade policy in order to mask reality. This sound bite coveys two false messages. First that our current policy is historically been a constant and doesn't reflect change, which is false. Second that this policy is about less government involvement not more, this is also false. The government is hip deep in creating and implementing this new policy and has been for more than a decade.

Fact is we run more than half a trillion dollar a year deficit globally while every one of our trading partners manages trade to avoid such imbalances. Sure China and Japan are keen to export, but they both manage imports just like the Europeans do. They sell cars here, great; but they restrict agriculture imports such as rice, apples, and beef where they can't compete with us. Frankly, it's not trade if by definition there is no exchange. What America's economic policy is, rather than trade, is a redistribution of wealth away from the working class, away from the middle class and in favor of the domestic and foreign wealthy class. Jobs which once went to Americans are now done by foreign workers at exploitive wages to the detriment of American consumers. Decades old American Labor, safety, environmental and manufacturing laws are being subverted.

The American middle class see's there wages stagnate and their standard of living decline; while the gap between the uber wealthy and the middle class continues to grow out of control.

It's a governmental transfer of wealth away from the middle class to the rich. It's a fundamental subversion of the market reforms which made the United States the envy of the world in the 1930's through 1950's.

Follow The Fundamentals (Brooks, NYT)

Tuesday, November 27, 2007

The New York Times

By David Brooks

Beijing

Lou Dobbs is winning. He's not winning personally. He's not going to start winning presidential awards or elite respect. But his message is winning. Month by month the ideas that once prevailed on the angry fringe enter the mainstream and turn into conventional wisdom.

Once there was a majority in favor of liberal immigration policies, but apparently that's not true anymore, at least if you judge by campaign rhetoric. Once there was a bipartisan consensus behind free trade, but that's not true anymore, either. Even Republicans, by a two-to-one majority, believe free trade is bad for America, according to a Wall Street Journal/NBC poll.

Once upon a time, the fact that hundreds of millions of people around the world are rising out of poverty would have been a source of pride and optimism. But if you listen to the presidential candidates, improvements in the developing world are menacing. Their speeches constitute a symphony of woe about lead-painted toys, manipulated currencies and stolen jobs.

And if Dobbsianism is winning when times are good, you can imagine how attractive it's going to seem if we enter the serious recession that Larry Summers convincingly and terrifyingly forecasts in yesterday's Financial Times. If the economy dips as seriously as that, the political climate could shift in ugly ways.

So it's worth pointing out now more than ever that Dobbsianism is fundamentally wrong. It plays on legitimate anxieties, but it rests at heart on a more existential fear - the fear that America is under assault and is fundamentally fragile. It rests on fears that the America we once knew is bleeding away.

And that's just not true. In the first place, despite the ups and downs of the business cycle, the United States still possesses the most potent economy on earth. Recently the World Economic Forum and the International Institute for Management Development produced global competitiveness indexes, and once again they both ranked the United States first in the world.

In the World Economic Forum survey, the U.S. comes in just ahead of Switzerland, Denmark, Sweden and Germany (China is 34th). The U.S. gets poor marks for macroeconomic stability (the long-term federal debt), for its tax structure and for the low savings rate. But it leads the world in a range of categories: higher education and training, labor market flexibility, the ability to attract global talent, the availability of venture capital, the quality of corporate management and the capacity to innovate.

William W. Lewis of McKinsey surveyed global competitive in dozens of business sectors a few years ago, and concluded, "The United States is the productivity leader in virtually every industry."

Second, America's fundamental economic strength is rooted in the most stable of assets - its values. The U.S. is still an astonishing assimilation machine. It has successfully absorbed more than 20 million legal immigrants over the past quarter-century, an extraordinary influx of human capital. Americans are remarkably fertile. Birthrates are relatively high, meaning that in 2050, the average American will be under 40, while the average European, Chinese and Japanese will be more than a decade older.

The American economy benefits from low levels of corruption. American culture still transmits some ineffable spirit of adventure. American students can't compete with, say, Singaporean students on standardized tests, but they are innovative and creative throughout their lives. The U.S. standard of living first surpassed the rest of the world's in about 1740, and despite dozens of cycles of declinist foreboding, the country has resolutely refused to decay.

Third, not every economic dislocation has been caused by trade and the Chinese. Between 1991 and 2007, the U.S. trade deficit exploded to $818 billion from $31 billion. Yet as Robert Samuelson has pointed out, during that time the U.S. created 28 million jobs and the unemployment rate dipped to 4.6 percent from 6.8 percent.

That's because, as Robert Lawrence of Harvard and Martin Baily of McKinsey have calculated, 90 percent of manufacturing job losses are due to domestic forces. As companies become more technologically advanced, they shed workers (the Chinese shed 25 million manufacturing jobs between 1994 and 2004).

Meanwhile, the number of jobs actually lost to outsourcing is small, and recent reports suggest the outsourcing trend is slowing down. They are swamped by the general churn of creative destruction. Every quarter the U.S. loses somewhere around seven million jobs, and creates a bit more than seven million more. That double-edged process is the essence of a dynamic economy.

I'm writing this column from Beijing. I can look out the window and see the explosive growth. But as the Chinese will be the first to tell you, their dazzling prosperity is built on fragile foundations. In the United States, the situation is the reverse. We have obvious problems. But the foundations of American prosperity are strong. The U.S. still has much more to gain than to lose from openness, trade and globalization.

Print

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[ACW]

:bsflag: :bsflag: :bsflag:

Free trade is good. It simple means that consumers can buy their goods from wherever. And BTW, look at the comparative status of people in countries with little or no free trade (Cuba <partly thanks to the idiotic US embargo :doh: >, North Korea) vs. countries with comparatively freer trade (Hong Kong; the US).

[JMS]

:bsflag: :bsflag: :bsflag:

Let's keep it specific cause I'm looking for a discussion on this.

Free trade is good. It simple means that consumers can buy their goods from wherever.

Which is totally false. American trade policy doesn't open up new markets for American goods. It has lead to massive record trade deficites which demonstrate that foreign consumers aren't free to purchase our products. Hell those foreign consumers in China ( half a trillion a year deficite in 2006) for example aren't free at all. Their freaking communists. There economy is as managed as their currancy and their politics.

So rather than calling it free trade, which implies both mutuality with doesn't exist; and an exchange with doesn't exist. Why don't we call it what it is. Undercutting American workers in favor of exploiting foreign works who exist outside of our laws.

And BTW, look at the comparative status of people in countries with little or no free trade (Cuba <partly thanks to the idiotic US embargo :doh: >, North Korea) vs. countries with comparatively freer trade (Hong Kong; the US).

There is no foreign model for American trade policy. No country on earth subscribes to massive unilateral trade deficites as the US does.

Your examples of Cuba and N. Korea are not representative of countries which manage their trade but rather are examples of isolated countries.

Better, examples of countries which manage their trade are ( every country on earth other than the US.. including China, Japan, the EU, Mexico and Canada )... We are not the norm, even among countries where we've negotiated these crazy one sided echanges of goods with!!

[portisizzle]

Why don't we call it what it is.

Why don't we REALLY call it what it is. The unionization of America has failed the middle class.

[JMS]

Why don't we REALLY call it what it is. The unionization of America has failed the middle class.

Actually the unionization of America lead to the highest standard of living in the world. It lead to a larger more empowered middle class than at any other time in American history. And the Unions didn't fail, except in not garnering enough polititians in Washington.

Fact is these one sided trade deals where American workers "compete" with Chineese workers who are salaried at about 3 percent of the average US manufacturing workers wage are a joke.

http://www.manufacturingnews.com/news/06/0502/art1.html

Like earning a living wage is a bad thing? Like it's a new thing? Fact is those who suffer the most under the unilateral transfer of goods is the American middle class. We pay for it and are diminished by it.

[ACW]

Okay, let me do the reduction argument from econ. class:

If managed trade is so great, why doesn't each state have tariffs and such?

[JMS]

Okay, let me do the reduction argument from econ. class:

If managed trade is so great, why doesn't each state have tariffs and such?

Tariffs have been the United States primary means of protecting it's marketplace. That's why these trade agreements targets tariffs so strongly as illegal protectionism. The short answer to your question is Every country in the world, other than the US does protect their domesitc markets. This is demonstrated by America's record breaking trade deficites with China, Japan, Mexico, China, and the EU all for different products; yet none of these countries run record deficites with any other country; much less each other! They don't use tarrifs largely because they don't need to.

• They control imports at the docks.
  
• They manipulate their currency to make their markets artifically unprofitable while our marketplace artifically uncompeditive.
  
• They limit retail space for foreign goods.
  
• They deny foreign ( American ) companies from entering their retail markets.
  

The net effect is they certainly manage their trade via massive governmental intrusion as our government actively bypasses existing American laws to enable the process.

[Larry]

Actually, my "free trade" question is much simpler:

If free trade is always good, then why can't we buy drugs from Canada?

(The answer, as near as I can tell, is that allowing employers to shop overseas (for labor) helps Big Business, whereas allowing consumers to shop overseas (for drugs) helps consumers.)

[luckydevil]

Why don't we REALLY call it what it is. The unionization of America has failed the middle class.

"The unionization of America"................ we do not live in the 50's. Unions as a political force are impotent and weak.

[chiefhogskin48]

Loud Dobbs is a populist fool. I don't care what his education is, he doesn't know squat about economics. His beliefs fly in the face of all logical economic thought.

[Ancalagon the Black]

I am really confused. JMS, you appear to be pro-Lou Dobbs. Why, then, do you post an article that is so explicitly anti-Lou Dobbs? And why is no one in this thread responding to the article?

From the article:

So it's worth pointing out now more than ever that Dobbsianism is fundamentally wrong. It plays on legitimate anxieties, but it rests at heart on a more existential fear - the fear that America is under assault and is fundamentally fragile. It rests on fears that the America we once knew is bleeding away.

[ACW]

Actually, my "free trade" question is much simpler:

If free trade is always good, then why can't we buy drugs from Canada?

(The answer, as near as I can tell, is that allowing employers to shop overseas (for labor) helps Big Business, whereas allowing consumers to shop overseas (for drugs) helps consumers.)

My answer is: you SHOULD be able to buy drugs (including, in my libertarian opinion, pot) from Canada.

[JMS]

Actually, my "free trade" question is much simpler:

If free trade is always good, then why can't we buy drugs from Canada?

(The answer, as near as I can tell, is that allowing employers to shop overseas (for labor) helps Big Business, whereas allowing consumers to shop overseas (for drugs) helps consumers.)

Excellent point. This administration believes corporations should be free to export work, import workers, take products from foreign countries.... But when American companies are selling their own products for 30 cents on the dollar in Canada vs the US. United States citizens are not permitted to buy those drugs in Canada and return the United States with them...

Empowering the corps to screw the middle class..... excellent economic policy.

Empowering the middle class to take advantage of perscription drug competition.... illegal.

[JMS]

Loud Dobbs is a populist fool. I don't care what his education is, he doesn't know squat about economics. His beliefs fly in the face of all logical economic thought.

The fact that he is a harvard educated economist would seem to say that it's you who don't understand either economics or Lou Dobbs.

Fact is conventional thought on economics is a relatively new belief. Fact is Lou Dobbs beliefs are more reflective of American economics policy over the last 30 years, rather than the last 15.

[JMS]

I am really confused. JMS, you appear to be pro-Lou Dobbs. Why, then, do you post an article that is so explicitly anti-Lou Dobbs?

QUOTE]

I posted the article because I think David Brooks hurts himself with his logic. He says Lou Dobbs is winning the debate and has converted the majority of the country away from open import strategy and back towards a balanced trade policy which the rest of our trading partners follow.

The fact that David Brooks follows up his observed statements about balanced trade with citisizing the majority of the United States citizens I think says more about David Brook's bias, not lou Dobbs.

That he's writting his article from a hotel room in Hong Kong but doesn't bother to tell us the reader why he's there is also interesting.

And why is no one in this thread responding to the article?

The article is about open imports jingoistically reffered too as free trade, and whether that's a positive thing. That's all we are discussing here.

[JMS]

My answer is: you SHOULD be able to buy drugs (including, in my libertarian opinion, pot) from Canada.

Ahhh, so you are a Libertarian. So was I 30 years ago when I was a moron. Libertarianism is a formula for disaster. It's like going to a knife fight and dropping your weapon before the fighting begins. Fact is the government spends more money in this country than any other organization on the planet and that's not going to change in our lifetime.

Arguing for unilateral open boarders, open imports because you think all government actions are immoral is idiotic. The government defines, best case influences(worst case controls, but often) everything in the country, and has for a century. The only question is whether the government influence should be used for the benifit of the citizens or the benifit of the few elite who can afford to purchase polititians.

Advocating tearing down the government while you allow it to role over the citizens, I don't understand.

[ACW]

Ahhh, so you are a Libertarian. So was I 30 years ago when I was a moron.

:slap: And BTW, just because something is policy or supported by a majority doesn't make it right.

[JMS]

:slap: And BTW, just because something is policy or supported by a majority doesn't make it right.

My 20 year old son calls himself a libertarian. He's a very smart kid. He just lacks any real world experience. It's hard to speak to him on the subject because we just talk passed each other.

I agree with much of the libertarian message. Smaller less intrusive government; I'm all for it. I just find it infuriating how modern libertarians frame their activism by advocating selectively pulling all protections from consumers in favor of trusts and multinationals.

I guess I've come to reject the idea that government has no role to play in our society. The government is a powerful weapon, likely the most powerful economic weapon in the world. Not to use it for the benifit of the consumer, Not to use it to ensure a free market; is to condemn us to live in the relm of competing trusts as we did in 1880's, as we do now.