New World Order: It's Worse Than You Think
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  • Brock

    Neal Stephenson called it back in the early 90s. From “Snow Crash”-

    “When it gets down to it—we’re talking trade balances here—once we’ve brain-drained all our technology into other countries, once things have evened out, they’re making cars in Bolivia and microwaves in Tadzhikistan and selling them here—once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel—once the Invisible Hand has taken all those historical inequities and smeared them out into a broad global layer of what a Pakistani bricklayer would consider to be prosperity—y’know what? There’s only four things we do better than anyone else

    music

    movies

    software

    high-speed pizza delivery”

    Welcome to living like a Pakistani bricklayer.

  • Larry, San Francisco

    The last thing we need to do is to throw away our advantages. We are rich in natural resources and agriculture. We should not throw those assets away in our quest for “Green” jobs that show no indication of actually appearing.

  • David

    What you didn’t mention is that Chinese growth at the expense of US workers didn’t just magically happen: it is the product of Chinese neo-mercantalism, centered on a devalued currency and capital controls designed to foster exports. The supine US approach in the face of these controls, in part because of deep arguments in the US about whether neo-mercantalism can work, will hopefully be addressed by a future administration.

  • Luke Lea

    Textbook economics really. Free trade is premised on the idea of trade between equals, not a world divided into rich and poor countries. Ironically enough, in a lopsided world like the one we live in, it is the rich who win in the rich countries and the poor who win in the poor countries.

    That makes the rich feel like they are doing a good deed I suppose. Let’s you and him share has become their new motto.

  • Luke Lea

    BTW, protectionism IS the answer for keeping manufacturing jobs at home. A stiff tariff on goods manufactured in low-wage countries in Asia would do wonders. Free trade with Europe on the other hand makes good Ricardian sense.

    I would cut a deal with Mexico on the other hand, if only to slow down the rate of illegal immigration. The poor things thought they were getting a sweet deal with Nafta but then Gatt came along and all those new factory jobs got shipped off to China. It truly is a race to the bottom.

    Heckscher-Ohlin trade theory, btw, as in “standard neoclassical economics.” Politicians who ignore the laws of supply and demand are like aeronautical engineers who ignore the law of gravity. Nature cannot, and will not, be fooled.

    I suggest you go get your copy of World Trade and Payments, Prof. Mead. Time to wake up and smell the coffee.

  • Jobs were going to be lost anyway as India and China joined the world economy. The US losses were just brought forward by the recession. The downward pressure on wages will be followed by accumulation of capital looking for investment as the new low-rent competition prospers. Meanwhile, some misery. Suggested by Professor Freeman, Harvard.

  • There is no “trade protection” that works. The competition may be wrenching and expensive, but the alternative – protecting “old” jobs for “new” ones – is far worse.

    How would forcing every American to pay more for a microwave manufactured here prevent China from becoming a better manufacturer? It doesn’t.

    Free trade is like gravity. It works. Attempting to counteract it is merely attempting to retard a natural flow, usually at great expense to the retarder.

    To ameliorate the problems caused by free trade, let me give you an idea worthy of being stolen by a presidential campaign.

    We all read the recent article showing how Fed and Gov. retraining programs were ineffective at best, corrupt and wasteful at worst.

    America has the best “jobs training” base in the world. It’s our employers. Instead of taxing people to create absurdly wasteful programs, why not just subsidize jobs training for the employer.

    1. If a business hires an unemployed worker (any worker, not one displaced by trade), any money spent training them gets them a tax credit equal to what they spent. (there is already a bureaucracy in place to manage this)

    a) consider abolishing the minimum wage for these hires, as long as they document the cost and outcomes of the training.

    b) Create form/questionnaire that takes an inventory of what the hire knows and doesn’t know. Track the program by what gets checked off over time.

    c) Create a partnership with community colleges and digital learning companies to allow for course reimbursement.

    2. To qualify, the hiree must come off the unemployment rolls or directly . They cannot come from another employer, or from high school or college graduation.

    ____

    There are already programs in place that work along these lines.

    There will be fraud, but there is fraud now.

    Rather than bureaucrats shuffling government dependent drones, this puts workers willing to work in touch with employers willing to train them.

    I know y’all could shoot 1000 holes in this, but it’s better than CETA, et. al.

  • Rohan Swee

    B. Behrend: “There is no “trade protection” that works.”

    Simply not true – not now, not historically. While it should surprise no one that governments are capable of implementing stupid protectionist policies, governments throughout the world (including the U.S., historically) do use and have used a plethora of strategic protectionist policies to successfully build industries and capture market share. (None of which, I note, have anything to do with protecting the jobs of buggy-whip makers, which seems to be the street lamp under which inebriated theoreticians of “free” trade always want to restrict the search for the keys.)

    That the result is always worse than what could hypothetically be achieved in a perfect system of pure free trade is irrelevant – the U.S. doesn’t exist in such a perfect system and never will.

  • Rohan Swee

    B. Behrend: “There is no “trade protection” that works.”

    Simply not true – not now, not historically. While it should surprise no one that governments are capable of implementing stupid protectionist policies, governments throughout the world (including the U.S., historically) do use and have used a plethora of strategic protectionist policies to successfully build industries and capture market share. (None of which, I note, have anything to do with protecting the jobs of buggy-whip makers, which seems to be the street lamp under which inebriated theoreticians of “free” trade always want to restrict the search for the keys.)

    That the result is always worse than what could hypothetically be achieved in a perfect system of pure free trade is irrelevant – the U.S. doesn’t exist in such a perfect system and never will.

  • ANOTHER one I missed. DogGONit. Anyhow, great final paragraph, plus some wonderful, well-though-out comments. And for the record (@ #3), WRM DID use the term “neo-mercantilist” on several occasions to describe post-Red Chinese economic policy. And I think he’s the first pundit I’ve read who had the historical sense to use the term.

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