[Winstonm]

Quote

For what its worth, I don't see much difference between free trade and globalization. (I say this as an ardent free trader).

Richard,

You seem to always have something of value to add. I am, though, somewhat surprised by the above statement. (Then, perhaps it is my understanding or misundertanding of the terms that is the problem.)

Here is my thinking of "free trade": When U.S. automakers began to build an inferior product, Japan began to build a superior product. There should have been no tarrif on the import of those Japanese products in order to protect the inferior skills on the American companies and workers. The benefit to society would have been that a superior mode of transportation would have been available at the same cost, requiring increased productivity gains from GM to keep pace.

Some would argue of unfair advantage for other countries who do not have to pay so much for their labor - I believe for the most part this is a strawman argument, in that slave labor or unresponsive-to-the-system workers (think U.S.S.R.) and underpaid workers produce inferior products. (If you remember, there was not great worldwide demand for Russian-built Aeroflot airplanes. Currently, I have had to purchase 2 Chinese built microwaves in the past year because each stopped working correctly, and the new Chinese calculator I bought was flawed.)

This same strawman argument has driven globalisation - that the manufaturing arm of a corporation can relocate to the least costly labor arena and yet hold the rights, benefits, and protections of incorporating within the U.S.

My own solution to this would be in brand recognition - if Crocs wants to produce their plastic shoes in Mexico, then the distribution in the U.S. cannot be under the Crocs namebrand, and any capital invested outside the country of corporation would be taxed as income by that country.

There should be no local tax incentives for labor arbitrage and capital investment in another locality.

Free trade is fair; labor arbitrage is an unfair advantage for capitalists versus labor.

[Al_U_Card]

kenberg, on May 17 2008, 08:43 AM, said:

Kids wouldn't miss 25% of their pay for the first five years?!?!. Speak for yourself, I sure as hell would have missed it.

Young people often end up with enormous debt when they finish school. I see it as tragic. If their situation is such that they must, then they must.

Exactly! No debt to worry about paying back...so you get the education that you want and need. Often, right out of college, earning 30K instead of 40K you are still in the frugal, student-mentality, mode.....wtp? Then once you are established, you have time (and a suddenly much bigger paycheck) to take on a family etc.

Creativity and innovation.....the only way to improve things.

[hrothgar]

Winstonm, on May 17 2008, 08:37 PM, said:

Free trade is fair; labor arbitrage is an unfair advantage for capitalists versus labor.

Free trade is based on comparative advantage
Labor costs are a crucial element of comparative advantage
You can't pick and chose what parts of free trade you approve of

For better or worse, there are a lot of folks out there who are willing and able to work for less than many Americans. Get used to it.

New England went through some hard times 70 years ago when lots of manufacturing jobs moved to the Sun Belt to take advantage of cheap labor. It was painful. The region eventually bounced back by focusing on different economic models. Right now, the Sun Belt is discovering that building comparative advantage based on cheap labor doesn't work too well when you're competing against countries like China.

Once again, there's going to be some hard times for a lot of folks. However, I don't think that we should burden the entire US economy trying to protect a bunch of jobs that are no longer economically viable. I'm all for providing some level of economic assistance to displace laborers. However, I don't believe that trade protectionism is the way to achieve this end.

[kenberg]

Al_U_Card, on May 17 2008, 01:07 PM, said:

kenberg, on May 17 2008, 08:43 AM, said:

Kids wouldn't miss 25% of their pay for the first five years?!?!. Speak for yourself, I sure as hell would have missed it.

Young people often end up with enormous debt when they finish school. I see it as tragic. If their situation is such that they must, then they must.

Exactly! No debt to worry about paying back...so you get the education that you want and need. Often, right out of college, earning 30K instead of 40K you are still in the frugal, student-mentality, mode.....wtp? Then once you are established, you have time (and a suddenly much bigger paycheck) to take on a family etc.

Creativity and innovation.....the only way to improve things.

If I have to give someone 25% of my salary for five years I call that a debt. Whatever it's called, I would run from anyone suggesting such a thing. No way, Jose. No deal, O'Neil. Nix, Trix. Etc.

[helene_t]

jtfanclub, on May 17 2008, 01:31 AM, said:

IMHO, this is a big problem with American society. We tend to look down on careers whose education doesn't come from a college. Even a generation ago, if you were a good farmer, auto mechanic, plumber, electrician, even a good ditch digger you were a well respected member of the community.

Hmmmm .... I, as an academic, must admit that my immediate sentiment when someone tells me "my daughter just married a plumber" is something like "I am sorry for you" although at the conscious level I know it is nonsense of course.

But I am not sure if this has much to do with rising income disparity. If anything it is the income disparities that cause me to have less respect for non-academic professions.

There is a campaign here in UK to get more women into plumbing. A colleague of mine considered it, since she could earn twice as much after two years of training as she now does (and she has 8 years of college education). Eventually she decided not to do it. Most people chose likewise. The result being that UK is full of broken toilets, and we try to solve the worst part of the problem by importing plumbers from Poland. My brother's house was just converted by a Polish construction company, btw.

The Eastern European strawberry pickers in the Netherlands are there because Dutch farmers refuse to pay competitive wages. If the politicians decided to close the borders for seasonal workers, strawberrys would become a luxury article in the Netherlands, and people would eat a lot of canned strawberryes and other imported fruits during the strawberry season. A similar story can be told about the Philippine nurses working at Dutch hospitals.

But plumbers and construction workers earn decent money. It is just that for some reason nobody choses those professions.

I really wonder why. I can see two possible causes:
1) Although my colleague (like I) earns less as a scientist than she would have done as a plummer, academic training offers a perspective of high income. I think the average lifetime income is still higher for a scientist than for a plumber. Maybe she dreamed of a better job when she started college.
2) Generation gab. The plumber's son doesn't discuss choice of eduction with his father but with his teacher.

[kenberg]

I have some experience with this in both directions generationally.

My father finished eight grade, my mother had a year and a half of high school. I have two daughters, one with a Ph.D, the other did not go to college. Both daughters chose their course on their own. Both are successful.

When I was between my junior and senior year in college I had a summer job crating farm machinery for railway shipping. I loved it and gave some consideration to dropping out of school. But not for long. I had been reading Scientific American since around eighth grade and I knew where my interests lay.

Others make other choices. I was at a shopping mall one time when a young woman came up and reminded me that in high school she was a friend of my older daughter (the one with the Ph.D). "Oh, yes, what are you doing now?" "I'm a go-go dancer". Then she introduced me to her boyfriend, a male stripper. Different strokes for different folks. Or can I say that?

Seems we need to make sure young folks understand: (a) You have to make a living (b) You should choose something you like ( c ) Try not to embarrass the family.

[Winstonm]

Quote

Free trade is based on comparative advantage
Labor costs are a crucial element of comparative advantage
You can't pick and chose what parts of free trade you approve of

Richard,

Perhaps I am not framing the question correctly. My question is this: Company A in the U.S. hires illegal immigrants at 1/2 cost to build its products; Company B opens a manufacturing arm in another country at 1/2 the labor cost. Other than investment capital, what is the difference? Why make company A in violation of the law but approve and subsidize company B?

Ravi Batra wrote a book about this back in the 90's. As an original proponent of gobalisation, he changed his views with "The Myth of Free Trade". In that book, he forecast the demise of the U.S. middle class and growing wealth disparity as the U.S. evolved from a high-paying manufacturing based economy into a lower-paying service based economy.

Labor's negotiating tool is low unemployment, i.e., high demand. When a normal labor pool in a country is expanded to include the world labor pool, normal supply/demand becomes skewed heavily to supply side.

The nature of human history has shown us that when either side gets too out of balance that outrages occur - the theoretical inherent strength of the ideal is trumped by the nature of mankind.

[kenberg]

We penalize company A because we want to discourage illegal immigration. I assume that is the reason. With enough of a penalty I imagine it would have a discouraging effect on hiring and a subsequent discouraging effect on illegal immigration. Congressmen might even have to hire American nannies, who knows, although they usually find ways to exempt themselves from the rules that they set for the rest of us.

I'm not sure why we would subsidize company B. Do we? Maybe it depends on B? A large enough campaign contribution and we will subsidize anyone. Ask the sugar industry.

[luke warm]

i think it depends on the definition winston is giving 'subsidize' ... if i move my widgit company out of the us, with its relatively high tax rate, to another country where the corporate rate is low to non-existent, yet still sell my product here, is that considered subsidization? how about if i stay here but move my tech support call centers to india?

i was in favor of nafta at first, but i think it's been a failure... if the income gap continues to grow and if america's base commodity leans more and more toward service rather than manufacturing, the failure will be more apparent - but imo we'll recognize it too late (luckily by that time we'll have 8 lane highways from canada to mexico)

[kenberg]

Perhaps. For clarity, subsidy should mean subsidy. Definitely the current situation provides at least some motivation for some companies to move outside of US borders. Although I think the picture is hazy with lots if subtleties, or so I understand.

[mike777]

"was in favor of nafta at first, but i think it's been a failure... if the income gap continues to grow and if america's base commodity leans more and more toward service rather than manufacturing, the failure will be more apparent - but imo we'll recognize it too late (luckily by that time we'll have 8 lane highways from canada to mexico) {"



1) Lets assume future America that the income gap(whatever that means) increases...or at least does not decrease.
2) Lets assume future America GNP means more service .....and less manufacturing....whatever that means......
3) lets assume 8 lane hwy from mexico to Canada


These 3 points seem good not bad...compared to
1) smaller income gap
2) more manuf
3) 7 lane hwy.

btw side note...I have real doubts that the medium PHD makes more than the medium expert/good ..Plumber..... If helene makes more...cool but i have my doubts that is standard.

[onoway]

The whole issue of free trade is a sick farce as far as I can see..looking at the myriad disputes and charges of unfair subsidization or whatever suits the fancy of special interest groups. In Canada, we are apparently going to slaughter thousands of pigs, if we haven't already, because what farmers are getting for them doesn't cover the cost of raising them. So, not only is the government subsidizing this slaughter, but because of trade agreements, no-one is allowed to use the meat in any way, not shipped to people who are starving and could never afford to buy it anyway, not for the local poor..just destroyed. But the government then turns around and pledges money to feed the starving of the world. Right. I guess that makes economic and humanitarian sense to somebody.. and fwiw, whoever they are, I bet they have university degrees.

[Winstonm]

kenberg, on May 17 2008, 08:00 PM, said:

Perhaps. For clarity, subsidy should mean subsidy. Definitely the current situation provides at least some motivation for some companies to move outside of US borders. Although I think the picture is hazy with lots if subtleties, or so I understand.

To clarify, I meant tax incentives and not actual subsidies.

[Al_U_Card]

It is sick, and bizarre, and unfortunate and the only reason it "works" is that the "interested" continue to gain and the "disinterested" (read unknowing or that don't understand as the only uncaring are the "interested"...) don't notice the difference enough for it to make a serious impact on their lives.

The "real" reason for tariffs etc. is to level the playing field. Add the cost of complying with environmental regulation and of wage parity and of quality inspection and safety and product reliability etc. etc. and then the "costs" come more into line.

People are not thieves by nature, but they are scavengers by design and when something is there for the taking and no one either objects nor claims it....what do you expect?

[kenberg]

Economic reality evolves. Wishing away globalization is like wishing away nuclear weapons. Won't happen.

Now here is a difference between free trade and globalization. We can pass laws killing free trade (for better or, more likely, for worse). Laws against globalization are apt to be as effective as laws forbidding gravity.

So what should we do? Well, I doubt many of us want to spend five years preparing to be trade experts. We can try to sort out our priorities and try to insist that those who lead us pay some attention to reality. Already that's tough enough.

Probably there are people on this Forum who know more about the history of the America labor movement than I do, but my understanding is that it is one of the great success stories of the first half of the twentieth century. Conditions for workers in 1900 were horrible, conditions in 1950 were pretty good. The leaders were hardly universally loved. John L. Lewis may have been hated or feared, but definitely not loved. Except by his miners. Many labor activities were, in the beginning, illegal. This was a consequence of the the Golden Rule: He who has the gold makes the rules. The success of the labor movement benefited not only the workers, but the country as a whole.

Can something like this happen again? I wouldn't place any heavy bets on it. I would bet that the forces of reality will trump the forces of abstract logic and fairness.

[luke warm]

mike777, on May 17 2008, 08:13 PM, said:

"was in favor of nafta at first, but i think it's been a failure... if the income gap continues to grow and if america's base commodity leans more and more toward service rather than manufacturing, the failure will be more apparent - but imo we'll recognize it too late (luckily by that time we'll have 8 lane highways from canada to mexico) {"



1) Lets assume future America that the income gap(whatever that means) increases...or at least does not decrease.
2) Lets assume future America GNP means more service .....and less manufacturing....whatever that means......
3) lets assume 8 lane hwy from mexico to Canada


These 3 points seem good not bad...compared to
1) smaller income gap
2) more manuf
3) 7 lane hwy.

btw side note...I have real doubts that the medium PHD makes more than the medium expert/good ..Plumber..... If helene makes more...cool but i have my doubts that is standard.

well mike, i remember most people laughing at perot's "giant sucking sound" pov re: nafta, but i think it's fair to say he was right... whether being right was in our best interests or not is the question... what i don't remember him mentioning, and what seems to have been happening in waves ever since, was the backlash of illegal immigration with all the problems it brings...

it's a matter of philosophy, imo... some want more and more immigrants, sanctuary cities, "see no evil, etc", even allowing non-citizens the rights of citizenship (voting, among others)... some think a country is defined by borders, a common culture, a common language, and citizenship and some don't

which is better? well i don't think it much matters, do you? i only know which is coming, and it can't be stopped... too many of us only care about it enough to answer polling questions on the subject

[Al_U_Card]

The US was arguably in its "finest hour" when its borders were open and the crucible of the "melting pot" was forging a frontier mentality that engendered all kinds of innovation and expansion (both good and horribly bad). The purebred becomes quickly inbred and the various weaknesses and diseases become glaring.

Despite the actuality, in those days the perception of equality and equanimity as well as potential (remember the original american dream?) drove the engine of society. It is that drive and potential that has become sadly lacking as the elite (financial, political and social) suck the life and breath and especially money out of the masses.

Now we have the added ingredient of perspective that we fail to use to our advantage with nauseating repetition.

[luke warm]

there was a difference, al... at that time the immigrants coming here actually wanted to assimilate into american culture, they wanted to learn the language, they were actually proud to be called americans... most importantly, imo, they came legally

[hrothgar]

luke warm, on May 18 2008, 05:56 PM, said:

there was a difference, al... at that time the immigrants coming here actually wanted to assimilate into american culture, they wanted to learn the language, they were actually proud to be called americans... most importantly, imo, they came legally

Ignorant nativists have been making the same asinine claims for 200+ years.

Jimmy's arguments are almost identical to ones advanced by the "Know Nothings" back in the 1850s.

The immigrants aren't assimilating
They aren't learning the language
They're loyal to the pope
They're all a bunch of lazy drunkards
God help us if they ever start voting

The only "difference" is that this drivel gets placed on the Internet forums rather than newsprint.

[Al_U_Card]

The point is that you don't want assimilation, you want invigoration.

The hybridization that results from the input of new ideas and new approaches is what improves the mix, not making everything into one bland vanilla-like blend.

They were "legal" because the laws didn't restrict their entry to the same extent. Fear drives those restrictions and it is an irrational fear at that. Conservatives want to keep what they have....as in to keep it away from those that might get a chance to access it by their own merit or contribution.