|
I'm not an economist so I would like to hear from people who know more about this issue than I do -
I am not an economist either. But I think I can answer your questions, and maybe give out some ideas how to solve the problem. But first I would like to correct you on one thing. Your confession that you are not an economist seems to imply that only an economist can answer these questions. In fact, issues that you raised here are precisely what a democracy is all about, and are decisions that all of us should have a say in. Chances are that you know more than you think, when it comes to economics. And when it looks like tom-foolery, it probably is.
What are the relative advantages and disadvantages of using political policy to prevent the outsourcing of American jobs overseas? As far as I can see, Americans are getting screwed by free trade agreements such as NAFTA and WTO, and by corportate outsourcing in general, in terms of losing good middle class blue and white collar jobs. I understand why corporations and the free-trade crowd don't like protectionism, but why is it such a bad thing for the majority of Americans?
There seems to be two terms floating around for "protectionism." The standard term means gearing of trade policy to frustrate trade, and protect US corporations from competition from outside companies. Believe it or not, this isn't necessarily a bad thing, assuming that you have a thriving domestic capitalism to count upon that allows local competition. You are simply choosing to relay on domestic industry. But usually this is not the case. Protectionism is all about protecting corporations from outside competition, so protection from domestic competition can be presumed.
But the new definition of "protectionism" seems mean any trade policy that the corporations don't like. And it is now becoming another dirty word that the neo-cons jump on. And political solution is going to have to overcome that kind of fascistic resistance.
As for using political policy to "protect jobs." I would say that the true course of action is to use policy to not benefits or enable the exportation of jobs. This is actually what the "free trade" accords are all about. Free trade isn't really about trade at all, it's about a corporation bypassing duties and tariffs. It doesn’t held Hosea's Sugar Skull shop to sell his sugar skulls to Mexicans here in the US. If you did this, you would find out that the tariffs are very much in place.
To make senses with what is going on here, we have to cover some basics. In economics, there is something called an economy of scale. It reefers to the amount of circulating capital needed to support its population. To give you an example, a community living in rich fertile farmland that could grow its own food, has a relatively low economy of scale as oppose to a community found on a small island that has to import its food. A community found in a warm climate has a lower economy of scale than a community found close to the arctic circle because of the additional heating costs, and the need to burn more calories to stay warm. The result is that the lower economy of scale you are in, the cheaper things are. Like the village in the valley that grows its own food, its apples are going to be cheaper than the apples found on the island because of the added shipping costs.
The continental US has some dramatic shifts in economies of scale. It's highest along the coasts, and lowest in the mid west and south western states. New Mexico has the lowest economy of scale, while California has one of the highest. And it's this way for a lot of reasons.
But when you start traveling outside the US, the differences in economies of scale become even more dramatic. And this is where problems start to surface. Namely, cheep labor. With the widgets being equal one from Brazil build and ship a widget far cheaper than some one from New York, and still make a profit. Because of the economy of scale, his labor is cheaper, his rent is cheaper, and his raw materials are cheaper as well. The Brazilian widgets would undercut the New Yorker, and run him out of businesses.
This is where the trade tariffs come in. A tariff is set specifically for each importing country. In this case, our Brazilian widget. If they are set wisely, than the Brazilian would have to raise the price of his widget to be competitive with the New Yorker, while not impacting the Brazilian's profit margin. And there is its counter, not often talked about, called the export subsidy. That is where the New Yorker's export of widgets is subsidizes. This lets him sell his widgets to Brazil and be competitive there. In theory, the revenues from import tariffs should be used to fund the expenses in exporting subsidies. But of course spit in one hand, and theory in the other.
The function of this is to help isolate the two differing economies of scale. Remember that the difference is natural, and thus not theoretically correctable. But it is also theory that expansive trade will even out the economies. Do note that there are not tariffs or subsidies between New Mexico and California. Part of this is a result of having a common currency. But it's also because they evolved that way, in a state of balance between each other. New Mexico and California have been "free trading" for 100 years now. In theory, given free trade between the US, and Brazil, we should see a similar balance evolve here two.
That is the mentality that free trade hopes to exploit. They even give us the "humanitarian" angel that as we lose our jobs here, things are improving in Brazil, and in time, things will even out.
Of course, they are lying. The whole point of NAFTA, GATT, and the new CAFTA, is to let the US corporations buy pass the US's level tariffs. Before NAFTA, if Ford build a car plant in Brazil, they would effectively have to import these cars into the US, and pay the tariffs. Thus, illuminating the advantage they would see from cheap labor and materials.
But the corporations then argued that this was unfair to them. "Why should we pay to import Americana made cars into the US?" (Yep, they actually made that argument. And Clinton bought it.) The argument was that these tariffs were killing the corporations because it prevented effective coordination with over seas offices. For example, what if an office in Brazil was to shop several boxes of odd office supplies to an office in the US as some one was moving? We don't pay tariffs on this, so why should we pay tariffs on cars build in an American factory in Brazil, to an American warehouse in Kentucky? We are not selling the cars to ourselves as much as we are moving them internally, within the company.
So NAFTA drops all of these tariffs within company to company transactions. It also basically outlaws import, and export duties, as well as any type of export subsidy. The result is something called "the illumination of space and time." That is you can now ship 10,000 over a giant cargo ship, at zero expense. Or fly 50 tuns of Barbie dolls for absolutely nothing. And they will instantaneously arrive at their destination. As a result of both he change in time zones, as well as from speculative trading.) Of course what is happening is that they get to make things in the lower economies of scales, and sell them in the higher economies of scale with huge markups. Markups as high as 400%. Of course, they are not always so expensive. Especially when there is competition floating around. They have shown to be extraordinarily quick in undercutting local competition.
They even draw the shopper into the scheme. You've seen the "show us a lower price, and we will match it" adds from various retailers. This isn't a joke. When you report some one with lower pieces, they will automatically cut the price of that good. And with computer technology, they can do this within seconds, and have a sale ready the next day.
They try to tell us that this is just how competition works. But companies like Wallmart are only agreeable to competition when they are aloud such absence advantages.
I also hear lots of yapping about the need to create new jobs in new industries - always from people who would survive if they never collected another paycheck. I'd be curious to know what, if any, new industries are likely to support the creation of a lot of new American jobs in the near future (reasonably well-paying jobs, rather than minimum-wage service economy jobs).
The supply siders have given us examples of bio-tech, renewable energies, and wireless systems as the new frontiers. Of course, they are full of it. Wireless has already gone into its bust cycle with the collapse of the telecomm sector. Witch is only not just recovering. But even if these new fields were to result with new jobs, why would these new jobs also not be exported like we are now seeing with IT and the medical fields? You could be retraining for another lay off.
The truth is that this is only more self serving rhetoric on the part supply siders. They want to "subsidize" or "invest" in more of these technologies, arguing that this would "create jobs." When in fact what it creates is a market bubble doomed to collapse. These are also examples of a managed economy, something that supply siders say they don't want. But at the end of the day, this argument is nothing more than a "vote for me" sound bite.
I realize that different Democrats have varying opinions on this issue. Some, like Clinton, espouse free trade. Others are more willing to use protectionism. Nevertheless, the evisceration of the American middle class by corporations and their GOP enablers should be a key campaign issue for the Democrats this fall. Which of the Democratic candidates in your opinion has the best economic plan to maintain a healthy American middle class?
It was Clinton to started the jobs retraining programs that I mentioned above. It sounded like a good idea at the time. But we now know that it is a fatally flawed program. Any one who counties to argue for jobs retraining programs, is defecato pro "free trade"
|