The boom of the global economy is virtually over. Now we are reliant and the how the busts go. Just look at the European banking crisis at the moment. This is just a mere prelude of what is to come. China will eventually hit massive inflation and a major recession. What has kept the world economy somewhat afloat over the last two years you ask? China. They've printed money galore and have been purchasing resources galore. You have already seen a major slowdown and how it's affected certain countries. German, huge exporter of machinery to China, last GDP growth was virtually zero. Australia and Brazil, huge resource exporters to China have seen their GDP slow dramatically. Why, because China is cutting back. We want to keep spending money out of thin air, but eventually China isn't going to buy our bonds and neither will other countries. When all this happens = (*)(*)(*)(*) hits the fan. Whatever, you all want to go on about theories and such, but reality should be your main theory. It is what it is. Our global economies are now very highly connected and as one section goes down, we all go down. It was all great when it was bubbling up, but as that bubble bursts, it will be that much worse. I don't think we can kick the can down the road far enough anymore for us not to care.
Doom and gloom based on zero understanding of trade analysis. Actually the biggest problem has been trade imbalances created by savings rates. As China's savings rates increase these problems will be eliminated. You're merely trying to excuse unsupportable rant
Because they had big motors...and a lot of companies were marketing custom parts The Japanese had a better product and they began to flood the market with smaller, more efficient, longer lasting autos, so the U.S. put a limit on the number of cars they could import to help domestic auto makers. So the Japaese began to build cars here. The domestic automakers began a slow steady move to other countries. Of any ten cars on the market you are more likely to support more American workers by buying a Japanese (or Korean) auto. A limit on imports can create American jobs.
That's a myth. Reducing imports will discourage competition and therefore lead to dynamic losses (and therefore destroy jobs)
That US structural problems, with her over-reliance on low wage labour, provides no excuse to hammer consumers and support inefficient trade policy. That they need to get their act in order and stop supporting a political consensus that supports neo-liberalism Then ensure job creation; not a policy that ultimately costs jobs
History with Japanese car makers seems to tell a different story. The imports were limited and the auto assembly jobs moved to the U.S. Because they wanted to expand their market and that was the only way. What also has to be considered is who is going to buy products when there is a major reduction in the income of the average American. We borrowed our way out the problem under Greenspan...but we can not borrow our way out of this one. Neither can Europe.
I do not think everything needs to be made in your same country, just other countries with similar wages, working conditions, and standards of living. I see no problem, for example, when outsourcing to Finland. Provided of course that Finland is not sub-outsourcing part of its own production to China.
But that would be taking one sub-sector in isolation. It wouldn't be about comparing employment rates. You're also focusing on intra-industry trade. There are, compared to inter-industry trade, actually fewer redistribution effects. Although competition will lead to a firm exit effect, there are then gains in terms of economies of scale and quality innovation.
When imports exceed exports in dollars. A country is spending more than it brings in. When you spend more than you bring in you have a problem.
But when taxpayer dollars are spent to create jobs the jobs should be created where the tax money comes from. Stimulus money was supposed to be spent to create U.S. jobs....not jobs in Finland.
We've rejected this reasoning since realising the incompetence of mercantilism. Trade isn't a zero sum game and deficits aren't a problem. Trade imbalances can be an issue but that reflects the potential destabilising effects from currency devaluations
The problem is they could have done this in a number ways, starting with the treaty negotiations, which involved complex concessions by China to accomodate our capital markets, but no concession about unions or worker protections. And that's because we didn't ask. Moreover, conservatives totally block all legislation that would increase the opportunities of low wage workers to prosper in a global environment. So if I were a low wage worker, my response to your argument would be: 1. Renegotiate the treaties with the same advocacy for US workers as we did for US capital. 2. Don't pass ANY such treaty until we have in place the kind of legislation that increases low wage worker opportunity. If the policy makers aren't willing to do that, then the low wage workers have no stake in that kind of trade. You're asking them to take the burden, but not get any substantial benefit. 3. Finally, making the rich richer has consequences that harm workers on their face, mostly in terms of political clout. So it is rational for low wage workers to totally oppose trade with sweat shop nations unless the above conditions are met.
Chinese workers, through higher wages, have benefited from trade. In contrast, the US continues to lack mobility and continues to have an abundance of working poverty. The two can be easily separated: support trade liberalisation whilst also adopting domestic active labour market policies No, I'm asking for rational policy that increases economic well-being. I'm asking for the correct policy option to be chosen where they are problems, rather than joining the folly of the economic nationalist unholy alliance. Nope. In the long run (not the Keynes' version!) they suffer. In the long run protectionism only benefits the producer reliant on low wage labour.
U.S. gov't borrowing money from Federal reserve, Quantitative Easing of banks. Talk about currency devaluations......
Macroeconomic stabilisation is completely different to a currency devaluation required to eliminate a 'long term' trade deficit
But the Keynesian sense is relevant here. The short run burden for working people, in light of the short and long run benefits bestowed up the better-off, make it irrational to support that policy. Having a lower standard of living for 5 years, 10 years, in order to prevent economic dislocation, what?, 15 years in the future, makes no sense for somebody who is raising a kid or wants a better life now and is at the bottom of the economic ladder. This is especially true since studies show that underemployment for entry level workers has long term inpacts on their standard of living. They never really catch up.. IF the policymakers are unwilling to take into consideration the burdens on unskilled workers now, saying that they will ultimately suffer otherwise, is hardly a convincing argument if you're an unskilled worker. I'm a skilled worker (at least arguable so, an attorney), and I'm not convinced by it. By the way, can you identify with more particularity how unskilled workers would be worse off in the long run, given the dislocations directly caused by globalizing capital? I frankly don't see how they could be worse off even in the long run.
The Keynesian stance can only be used to show that mercantilism is not automatically cretinous. That's about it Keynesian long run is 'we're dead'. Protectionism will encourage the continuation of working poverty; its a means to maintain the status quo. We know that economic gains are the result of trade liberalisation. The idea of lower living standards is a myth. There are visible losers (a clear minority mind you!), but that again only details the political consensus that exists in the US: where equity criteria aren't pursued.
Not if you're an unskilled worker, who is harmed right now by a policy which if not pursued may or may not harm him years later. That's my point. Globalizing capital harmed unskilled worker right now. The data is indisputable. Whether failure to globalize capital might harm them a decade from now is not a persuasive counterargument to their current suffering. Again the issue is not the gains, but the distribution of the benefits and burden. It is indisputable that the gains flowed mainly to the upper brackets (i.e., those with capital) and the burdens fell mostly on unskilled workers. I agree they are a minority and I agree the way to handle that would be policies that invest in their productivity, not in tariffs. However the thought experiment here is that I am asking you to convince an unskilled worker of the benefits of globalizing capital. I really don't think your arguments are cogent as to that audience. In a related matter, leaving a large portion of our working population to the dogs, while beneifiting those who are already better off, seems to be not only immoral, but economically unsound in the long run. The rich do fine. The middle class gets along OK. Burdening them will not strap our economy. But creating tens of millions of workers with declining real income -- I wonder what the longterm effect of that will be on our economy and the ultimate standard of living of the rich and middle class. The scenario I might imagine would result in declining overall standard of living except for a small class of the very rich. And in fact, we seem to be seeing the stirrings of this very development. I'm a well off person, and I for one would oppose globalizing capital if the issue came up for a vote, unless and until the burdens on unskilled workers are specifically address. I say that not only out of a moral stance, but self interest. I think declining income for unskilled workers will ultimately affect my standard of living, if not the stability of the nation as a whole.
There's no question in it. Keynesianism provides a means to show how a mercantilist approach can hypothetically reduce mass unemployment. The idea that you can use it for more general distributional issues is bogus. What indisputable data is this then? There is no notion that unskilled workers will necesarily be harmed by globalisation effects. We know that its been crucial in reducing absolute poverty rates. We also know that there isn't a relationship between working poverty rates and trade liberalisation. You have no means to quantify the distribution effects. We know, for example, that a developed nation's trade will be dominated by intra-industry trade. We cannot know the effects of such trade until we've quantified the economies of scale effects and any positive effects on productivity levels. There is only one economic rationale for tariffs: support of economic development (be it a cheap means to revenue raise for public good provision, or support of infant industries). All other explanations essentially come down to political explanations for allowing losses that harm worker well-being Joe Bloggs won't understand comparative advantage. Psychology will also encourage an irrational result where visible losses are weighted higher than general gains. They also will ignore economic reality, particularly when confronted with a manipulative political consensus. Irrational protectionism will always be sought, making multilateral solutions imperative. Zero to do with trade! The US hierarchy and her low wage abundance reflects her form of capitalism. Note, for example, the relatively low share of GDP going to imports and exports. Now we can make a case over neo-liberalism and its damaging effects. However, confusing neo-liberalism with trade liberalisation would be a deliberate use of shoddy definition.
The Feenstra-Hanson 1995 study comes to mind. But it has been confirmed by literally a dozen subsequent studies. Even conservative thinktanks like Cato acknowledge this fact. Feenstra showed that trade has the same impact on labor demand as does skill-biased technical change. Both shift demand away from low-skilled activities, while raising relative demand and wages for the higher-skilled. The result lower real income for unskilled workers in America, which has been measured and is undeniable. Are you actually denying this well established and measured effect of trade with sweatshop nations? If so what is your counter to the Feenstra study? As to whether income increases in the sweatshop nations, various studies call even that into question. But leave that aside, I'm talking about US policy to benefit the US, not China policy to benefit China. I think we have established that it has everything to do with trade since trade with sweatshop nations results in falling real income for unskilled workers, who are not a small portion of our economy or society.
Show me one study that links working poverty and trade liberalisation? The truth is that, because of intra-industry trade effects, straight forward effects (such as predicted in the isoquant analysis provided by Heckscher-Ohlin) are a fudge. I'm referring to the limitations of the Heckscher-Ohlin model and therefore the predictions from specialisation. Would a developed nation naturally see reductions in the demand for low skilled labour? I'd certainly expect so. Even if trade was a minor element of GDP (which it is for the US compared to most European countries), innovation should be shifting demand towards more skilled labour. The US's low wage abundance and her lack of upskilling demonstrates effects independent of trade. Note elsewhere that, without these structural problems, the specialisation process also encourages upskilling and a shift towards more efficiency practices (that also lead to higher wage rates) That China's wages have increased is supported by the evidence. Its important to refer to it as a standard complaint over trade liberalisation is that its about exploitation. Such charges can be made over aspects of multinational behaviour (particularly countries restricted to primary industry product), but trade reduces exploitation. And trade benefits the US. There's no studies that question that!
He can work 2 jobs, or he can find a new industry and start in an entry level position and through OJT increase his skill set. Even a job at a fast food restaurant can turn into a lucrative management career after a few years. People like you are too arrogant to just slum it for a few years until a new opportunity arises.
You keep dodging the issue, Reiver. The fall in real income for millions of low wage Americans is a real phenonemon. It is undeniable. It is certainly complex and technological innovation surely plays a major role. But it is also undeniable that trade with sweatshop nations does also. If you aren't willing to admit that, then there is little to discuss. As to China's income, it is much more dicey and nuanced than you claim, but like I say, I'm not making a case for China and its policies. I'm discussing our policies and how it affects millions of our citizens. By the way, I want China to succeed economically. It's good for us and the world. But that's not the issue. The issue is the terms of our trade policy, which we control. And one of those terms is building in worker protections for the Chinese, which by the way not only helps us but helps them!
