Tuesday, November 27, 2007

Campaign Protectionism

David Brooks offers a strong condemnation in today's New York Times of the current "protectionist drift" characterized by the thinking and prognosticating of Lou Dobbs &c. He has taken to calling this approach Dobbsianism, noting with fear that its popularity is increasing even now, during a period of relative economic well-being. "...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."

Many of the presidential candidates have moved along with the shifting tide of Dobbsianism. I have begun to think of this as Campaign Protectionism. As Brooks notes, "Their speeches constitute a symphony of woe about lead-painted toys, manipulated currencies and stolen jobs," rather than the increases in living standards and improved environmental standards that globalization fosters. Campaign Protectionism is a cynical tact because it plays on innate fears and ignores empirically verifiable gains from trade.

...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).

Paul Krugman is Brooks's colleague at the New York Times and a noted economist in his own right. While the two are rarely in agreement on political issues, they do concur, as Krugman recently told NPR, that politicians should "cool the rhetoric" on globalization.

So do we have to be protectionist to make workers' lives better? No. All the evidence says that you can be a full participant in the global economy while still paying good wages.


Anonymous said...

Actually, All ground floor evidence points to lowered living standards for first world labor as we sacrifice an entire generation of Americans for the wealthy global elite. All the while these elite make mass profits off market border protectionism which they manipulate through global trade agreements and consumer debt.

At this point protectionism is valid because the wealthy are not allowing the value of labor to rise in regions like China. Just a year or so ago some of our best know corporations in China politically attacked and whined about the possibility of unionization. There is nothing wrong with unions and they have done great things one of which is educate their workers. Oddly enough corporations complain they can’t find enough educated workers for the very high end jobs because they don’t have experience. That is actually their own fault and is directly related to busting unions who had in their interest to educate and create the best labor possible. As unions are being busted because of globalization and cheap labor, which is directly related to it not benefiting labor, we will have an entire generational work force that is left untrained and unable to replace the jobs of their elders.

Let us look at it rationally, logically in terms of supply and demand. Since most of the world earns about 2 dollars a day that means Americans have to learn to live on about 2 dollars a day. Until wages balance there will be no capital investment in our labor. There is no way to fix this without the American laborer losing out. This will make the wealthy very rich though as they feed off the interim transition, but only as long as the debt society holds up the value of our market since wages are unable to do so. And our economy is almost due for a massive correction as I write this.

At this point in time the entire world is using first world capital, so understand there is no superior work force in the world. Nor was there ever a superior work force beyond the capital investment in it. All labor that is the cheapest (Laborers call this the race to the bottom) will receive the capital investment like water flowing down hill to the ocean. The only thing that matters is being the cheapest laborer. Or you can attempt to have a highly protectionist system that keeps the fiat currency high and allows buying leverage. This of course means everyone in the market will have to pay more within their market as they consume things they produce at their costs but they have the leverage to do more outside their country as long as their currency remains strong.

You want to make globalization work beyond the dogma from Wall Street? Here are some of the things that must happen.

1. We must have a common currency based on real value that isn't politically manipulated or damaged by debt. Gold, silver, oil or anything that has real value, not manipulated paper.

2. We must have diminished government roles not more demand for leadership. The only reason for more rules and regulations is because of failure to leave the labor force alone. A good leader puts themselves out of a job by finishing and doing what is needed not by creating more work for themselves. A tyrant always finds reasons to stay in power, know the difference. Basically, we need less government and let people run their lives without interference. Governments must cease to exist as we move toward globalization, the more government the greater the chance of suffering.

3. Stop loaning fiat currency to first world nation consumers. This upholds the market arbitrage, which corporations are parasitically feeding off of. They are using the fiat currency difference for massive profits while stealing the value of labor right out of labors bank acounts through the entire world. And in fact, these wealthy elite are doing their best through politics to maintain this unbalanced relationship which will cause great harm to us all in the long term.

4. Throw out any economist who believes in the shell game and disregards supply and demand, which is fundamental. For every action there is a response, just like in physics. If you increase the supply of labor by billions of people you drop the wages. There is no way around this and any argument against this is political dogma and nothing more. You can use the shell game to mitigate some portion of your labor force from suffering but in the end the energy must be balanced. America choose to balance through massive consumer debt and now the loans are coming due with the possible near destruction of the dollar because of it.

5. All wages of labor will have to fall to the world average for wages of labor. There is no academic education (though collective bargins througn unions can help labor) that will save a laborer because of globalization and a huge addition of work force through China and India that will totally blow away anything an average laborer in another nation attempts to achieve. The only reason to suggest education is to keep people on a treadmill and out of the government’s and Wall Street’s hair. And the laborers that do win in our situation are akin to lottery winners who the global elite point to and then tell everyone they can do it to while they profit from market differences. You must make a smooth transition by using stable currency with value such that the wages of labor balance out slowly.

6. Prepare for a non-expansionist economy instead of an expansionist one. Because of fiat currency debt systems you must always expand or die. In order to fund the debt the burden is passed to the next generation so you require every larger populations and ever-larger access to resources. We must learn to live in a closed system, not a parasitic expansionist one.

7. End all income tax and property tax on labor. Allow labor to keep their earnings and create upward mobility through sales tax on luxury items but not of necessities. This allows people who are frugal and plan to move upward without taking on massive debts.

8. Deregulate patents and copyrights dramatically. This is internal protectionism that is hostile to the labor force. Open up the borders for medical labor and for our citizens to buy products over the borders. This will dramatically cut the costs of medical and must be done or it will skyrocket as most laborers lose buying power beyond their means to afford such things.
9. Any research that was paid for by tax money should be public domain. Deregulate all patents that were government funded and bought by corporations such that anyone can create and distribute such items. Stop letting the capitalists steal from labor and then selling back to them through protectionist policy.

10. Learn that the average American laborer will be hurt by globalization. Academic education won’t help them and unions are being busted so they won’t train them. Government can’t educate them as tax revenue falls from wage losses or stagnation. The best thing you can do for labor is make anything the corporations get a two way street. If they go and put a pharmaceutical plant in Mexico to increase their profits don’t let them force Americans to have to buy in our market. Let Americans buy in the Mexico market. If Americans can’t buy from the Mexico market and receive the benefit then you go protectionist against that corporation and tax their imports.

That is how it should work. Learn and listen. America is bleeding to death and liberty is quickly being eroded into sand and washed out to sea all for the wealthy aristocracy’s profits.

Anonymous said...

"innovations + ethics = better globalization"

This is a very short formula concerning a better globalization!

In my point of view no government has an answer how to balance the two levels of income of developed and non-developed countries. We should find a solution to get a win-win situation for the society in total. Without a reasonable way of proceeding societies of developed countries will be destroyed after some time.

Yours www.deutschland-debatte.de