Centerfield

Sorry to hear about your situation at present Rick. Ridiculous situation many of you have been placed in and hope you there's some type of rapid solution. "These are the times that try men's souls." Don't be too proud and don't let that work enter into your thinking. Need to do whatever is necessary to solve the problems. ( I am open to any use of my thinking for problem solutions. )

No, you're not wrong about the overall economic conditions.

Those are low level service jobs you mentioned. There are plenty of social programs and tax rebates out there for the lower levels. Many were put into govt. jobs, non-profits jobs, before and after hours babysitting programs at all the schools spots, bus driver jobs, etc.

What is developing is the have and have nots. But, govt. yuppy workers and univ yuppy types are in for a big surprise of retirement decline and big taxing of because the taxpayers can't afford their largess they gave themselves.
We have been largely living off the legacy handed by our great grandparents and grand parents. Most Americans have trouble facing reality before it's too late.

I am absolutely convinced this free trade, free market , and invisible hand garbage has been gutting the country while we're getting kicked in the gut and in the butt by other countries. There is no huge huge trade imbalance in Europe.
Do you people know what the Asian markets do to protect their markets from us?

I finally figured out that I was smarter all along.
I am disgusted with a country that has no planning and let everything go to some market theories with no controls. The univs an archaic model. There are also far fewer attorneys in Europe and Asia. Will not elaborate here.

Meanwhile, no immigration controls added in the mix. And, the attorneys and special interest groups even manipulated so that even govt. jobs, univ spots, and all kinds of govt. benefits were given to non-citizens who came over here. How stupid is that for a country?

Too many bought into the free trade, invisible hand, and let the markets decide baloney. Oh, there were controls all right, but not for the good of the country or the productive segments of the middle-class. I just hope that there are enough American citizens out there who care about the country and aren't too soft to bring about needed changes. It is foolish and utterly insane not to fight to protect your own country.

There were ways. Will not elaborate here.
One of which is that they all want to and are selling into this huge market.

I would call these so-called "American" corp execs, outsourcers, and money changers economic traitors.

Janus

Janus,

What in your infinite wisdom is the solution to the "problem" of lower overseas labor costs leading to "outsourcing?"

Here's what happens in my world. If we somehow proscribe American companies from using lower cost foreign labor, competition companies from other countries end up with a competitive advantage and are able to produce the good at a lower cost. If we then ban that country from selling that good in America, then the American company we're trying to protect usually ends up losing the right to sell their good in other countries. The result is decreased competition, higher prices, inferior products, and maybe even eventually a black market. The American company whose jobs are protected has its market limited and its growth limited and becomes stagnant. In case after case studied, protected domestic industry becomes bloated and inefficient. Overseas companies that stayed vital by competing produce a better product at a lower cost.

The point I'm trying to get at is that situations such as this are, in my view, best understood as conundrums or paradoxes. There is no simple solution. There are a variety of courses which can be taken, both of which will likely have some positive and negative effects. To dismiss free trade and the invisible hand as merely nonsense strikes me as peculiar. It's definitely not a "centrist" view, that's for sure.

Perhaps you'd be willing to explain in further detail why, in your view, protectionism is better than gradual movement towards ever-freer free markets. If you decide you'd like to tackle this, I'm hoping for insight a little bit more sophisticated than " It is foolish and utterly insane not to fight to protect your own country."

Because there are a LOT of people who think they ARE fighting to protect America's future by opposing protectionism.

All depends first and foremost whether you care about the country or just yourselves. National defense is first, but second is to national defense is a strong economy ( production and exports and savings with limited federal govt. , genuine personal accountability for results if in power positions, and citizens with moderate habits, self-discipline, and acountability for actions.

The econ theories are fallacious. You cannot leave a country's economy and jobs for its citizens to the wind. The theories worked to describe "afterward" what occurred to develop--as in developing country-- a country, for example. This is not the same type of country.
This is a developed country. Major re-adjustments should have been set in place by 1970. (Were involved in another very costly military venture then too.)

Vested interests lobbyists and the real money boys behind the scenes manipulated all to their benefit.
The tax system has been totally fixed to benefit themselves and not the country. For one example, remember that the S&L debacle cost U.S. taxpayers @200B and still paying for.

There is not persoanl genuine accountability. That all went by the wayside. Too many wannabe professionals allowed to control your lives. Too many accountants with vested interests in allowing such tax schemes and thousands of pages of regs. Too many shrink types. Too many overpaid govt. administrators types. Too many univ profs. and programs and subjects. Definitely too many attorneys screwing things up -- costing this country a bundle and in too many ways to mention here.
Another reason the other country's have stronger
economic output. And, the tyranny of attorneys monopoly business has ruined education and much more. (anything more than a year of bus. law is...

There were many ways to adjust and protect our citizens without the swear word of protectionism.
Besides, changing tax structure. One huge solution that I would have put in place by 1970 is : profit-sharing and sharing the profits by companies?

Why is paying workers $1 hr to be accepted as a good for our country to attempt to compete with? Compete?

Why is the greatest good for the country gorging on cheaply made foreign made goods?

Many companies were profitable, yet still closed up and put thousands out of work and ruined communities.

What do you call a country that feels it must be a military daddy protection for 135 countries that we are in? Unless exact tribute (as in from Japan, for one while kicking our butts in so-called free trade theories) that country is stupid and led by damn fools.

More at any time.

Janus

[We are becoming a country of haves and have nots, with all the yuppies and boomers desiring to live like the princely lifestyles of the Fr and Eng in the 18th century. America was not to be a country of princes and princeses. That is not what led to this wonderful country and great experiment.

I have been more correct than even I knew all along. Must find compatible and very smart non-partisan thinking types out there. It has been much too frustrating not to be able to influence due to special interests and power control freaks in both parties and types they put in office, their partisn staffs, and vested interest special interest spending lobbies on outside. Paid too much a price and no revenue generating options available. to do so.

Janus

Janus,

Thanks for the kind words.

Brian,

I understand the textbook argument that free trade makes more sense and that protectionism eventually leads to decrepit industries that produce inferior products. But I'm not sure the traditional arguments work as well with human capital.

Is it really beneficial for America for its workers to transfer their knowledge to Indian workers, and then be laid off? (see April Fast Company Magazine cover story) Maybe it is, but I'd like to see more studies that relate specifically to human capital and intellectual property, rather than relying on economic modeling of the manufacture of durable goods.

Janus,

if you want some credibility for your notions, you have to do more than call the economic explanations fallacies, you have to explain why you think so. I'm sorry to say so, but what you've given instead seem to me more like half-baked platitudes.

Profit-sharing? This may perhaps be an idea with some merit. Several points though. If you work for a publicly-traded company, all you have to do if you want to share profit is buy some company stock. And another economic idea that I don't think is a fallacy is the idea of tying risk to reward. If you want to participate in profit-sharing, which is a reward, are you willing to participate in risk-sharing?

And if you think profit-sharing is an idea with merit, why not start a company that does this, and wait for the labor to flock to you? Company A pays 20 bucks an hour. Your company B pays $18 per hour and offers profit AND loss sharing. If the company make money, workers get extra, and if it loses money, they get a bill. Sound like a better deal?

Rick,

Your question is very fair and worth investigating. I'm not a free-market true-believer or free trade zealot by any means. I just know that protectionism doesn't seem to work.

You hint at some of the things that I think DO make sense if part of policy is to AVOID protectionism: expect labor upheaval and design government policy to mitigate the costs incurred on the individual level when someone loses a job. We do this to some extent with unemployment, but one big problem thus far poorly addressed is the loss of health insurance, which is a huge cost if you lose your job and have a family, are older, etc.

And you are absolutely right to suggest that some of the paradigms that held true for manufacturing may not be so true with intellectual property based industry. Because other nations can catch up faster, among other things. This is in fact something which I'm looking to see what economists say about, becauseI think economists are largely relying on faith based on what was true in the past, even though economists are the ones who are the first to stress that past performance is no guarantee of future returns.

Whenever I talk about free trade or a free market, I'm really talking about "whatever currently passes for the free market or for free trade." it's not the case that I'm suggesting that there actually is perfect freedom. But it's equally not the case that other countries engage in forms of protectionism but we don't, as you suggest.

So I think it's just silly to say that if you are against increasing protectionism, then you are "just throwing your country's economic well-being to the wind." Rather, it's the case that, absent past examples where increased protectionism has lead to a growth in general economic well-being, we're sticking with the idea that free trade will in general continue to do what it has in the past. (Unless new evidence overall teaches us something different, as opposed to "evidence' from individual tragic cases.)

Of course this IS something of an assumption, and it IS based on faith at least in part. You maintain that ideas that made sense for a developing country do not make sense for a developed country, but you marshall no evidence that suggests that this is so.

You also point to trade imbalances that other nations do not have and we do as a reason to suggest that our wealth is simply leaking out of the balloon. Now I don't simply dismiss the idea that there may be reason to be concerned with things such as a trade deficit. But I think you assume that there is always a fixed amount of air in the balloon.

But value/money/whatever is not a fixed concrete quantity. It's very malleable. It is itself based in large part, even PRIMARILY on faith. To the extent that the US will continue to be able to thrive despite a huge trade deficit, it will be because we continue to create additional value, that the rest of the world will continue to have faith in the value that we create.

I may be wrong, but I am pretty sure that the US doesn't have a fixed number of dollars. Instead, we steadily increase the number of dollars by doing things like issuing bonds etc. But we increase the total number of dollars in the world in a way that is commensurate with the worlds percwption of the additional value we create. In this way, faith in the existence of the value of dollars is sustainable.

To people who haven't thought much about it, this idea is disturbing and uncomfortable and sounds wrong. The fact is that if the rest of the world decided tomorrow that dollars aren't worth anything, then they wouldn't be, and the US would be SOL. Fortunately for us, the rest of the world is right in the shizzit with us, up to their necks.

What do you say to a guy crying in the front of his house because he can't support his family?
Well one thing I would do is tell them the truth as best I understood it, even if it hurt. This would differ depending on the details of his actual circumstances. But I wouldn't promise to him that his way of life should or could necessarily be indefinitely sustainable in a competitive and ever-changing world.

Suppose he worked for a company that was 100% employee-owned and they still discovered that the widget factory was unsustainable in the face of competition from other companies. Suppose they slashed costs and wages. Who's to blame then? Suppose politicians put a big tariff on foreign widgets, and other countries do the same, and the total market for widgets is thus capped, making growth impossible. Then suppose some of the raw materials needed for widgets comes from overseas because we used up all the supplies in the United States, or the US price is just much higher. And they can't buy it lower overseas anymore because of retailiatory tariffs. Then they are left either not making widgets at all or tripling the cost. Then lots of people either decide they don't need widgets, or buy them on a black market. What they don't do, though, is just keep buying those widgets at 3 times the cost unless there is absolutely no other choice. They definitely DON'T just keep paying that tripled price out of patriotism. It just doesn't happen.

Note that in contrast to value/money, which is very malleable and can grow indefinitely with faith, natural resources are NOT malleable, they exist in fixed amounts. That's one reason why a developed country has to move away from basic industries...as supplies INEXORABLY grow more scarce, the basic industry become unsustainable.

The US is not a nation of have and have-nots but a nation of haves and have mores.

Even poor people in this coutry can afford to get fat, have cars, TV's VCR's, cable TV's and internet connections.

Yes, there may be a large gap between the highest and lowest but most of us are still well off.

BTW, I just lost my job in an industry devasted by foreign competition (rubber) but am still optimistic for my future. And I do not support protectionism, even for my old industry.

I think tallan makes a good point about the gap between "have-not" in the US versus in other countries.

if we are to continue to try to examine the nation's economic condition in a serious way, part of that examination should include looking at the sorts of things that "have nots" in America do have, compared to past Americans and to other nations. And to do it in a comprehensive and fair-minded way.

As BK noted, we don't have really have free trade, we have trade that is more free than most. And that's a major part of the problem.

I hate to trot out the old "level playing field" objection, but it's applicable. When U.S. companies operate here under more stringent requirements (environment, minimum wage, Equal Opportunity, etc.) than companies in other nations, or vice versa, it's not free trade. It's comparitive trade.

We have significant distortions built into U.S. law and tax policy that in many ways we encourage outsourcing that has nothing to do with "free trade." Some of those distortions make sense. There is no compelling reason (other than corporate profits) to remove many of our environmental protections. There are very compelling reasons to amend our disgustingly convoluted and politically-distorted tax code, especially where it encourages outsourcing.

But every action has a reaction, if not an equal and opposite one as in Newtonian physics. When health care costs go up, more jobs are outsourced to places where health care is cheaper. When transportation costs go down, more basic industry can stay or develop here. When domestic goods are subsidized, either through restrictive tariffs or price supports or tax breaks or even cash-in-hand from the government, we keep some jobs but the actual price to the American consumer will be higher.

And so on. The point is, free market competition is good for everyone, when you actually have it. But how to get it? And free market competition applies only in the absence of oligopolies and monopolies. Where the market is dominated by either a major supplier (or group of suppliers) or a major buyer (or group of buyers) you don't have free-market competition.

And when those big players have the ears and votes of government players, it's an uphill battle to get a free market.