Beating China's economy is very easy. Stop buying Chinese goods and push our allies to not buy Chinese goods by investing in both the US sectors and Mexico as a secondary manufacturing sector. Also heavily tariff all raw goods to China. Within a few years China will be bankrupt.
Most of the world's trade imbalances and dis-economies can be resolved through an effective taxation system. Tax companies that dissolve local manufacturing and terminate long-term employees. Why should the state pick-up the tab for retraining older worker's for jobs that are exported off-shore?
In the case of the recent Carrier plant transfer (2017-19) and projected job loses, it is Carrier that is expected to be the beneficiary from moving those jobs from Indianapolis to Monterrey. It is unfair to expect older workers - those over 40 seems more appropriate, to be tossed into a social welfare Black Hole conundrum.
Dogs and cats are domesticated animals. Living with one master within one home and community at a good standard of living results in reliance in a life relationship with the master. Normal people would not drop off their dogs and cats in the wilderness after long years of faithful companionship. Some younger dogs and some younger cats may survive in the wilderness. But older dogs and cats would likely die much sooner than expected.
The trauma and shock of a change from a faithful relationship with a long-term employer into a job market that doesn't offer similar work at reasonable pay would be very difficult for workers' in mid-life and older.
Relationships between pets and masters, workers and long-term employers, should inform legislative change. Companies that export jobs should be taxed to fund social-welfare plans to help displaced workers.
In the case of the recent Carrier plant transfer (2017-19) and projected job loses, it is Carrier that is expected to be the beneficiary from moving those jobs from Indianapolis to Monterrey. It is unfair to expect older workers - those over 40 seems more appropriate, to be tossed into a social welfare Black Hole conundrum.
Dogs and cats are domesticated animals. Living with one master within one home and community at a good standard of living results in reliance in a life relationship with the master. Normal people would not drop off their dogs and cats in the wilderness after long years of faithful companionship. Some younger dogs and some younger cats may survive in the wilderness. But older dogs and cats would likely die much sooner than expected.
The trauma and shock of a change from a faithful relationship with a long-term employer into a job market that doesn't offer similar work at reasonable pay would be very difficult for workers' in mid-life and older.
Relationships between pets and masters, workers and long-term employers, should inform legislative change. Companies that export jobs should be taxed to fund social-welfare plans to help displaced workers.
There was a “consensus that trade could be strongly redistributive in theory but was relatively benign in practice”? I think we're finding that it is exactly the other way around.
Not that I have ever understood why this was hard to grasp. Capital can easily cross borders. Labor can't. In fact, the profitability of outsourcing and globalization is expressly founded on that fact. Isn't that all we really need to know?
Not that I have ever understood why this was hard to grasp. Capital can easily cross borders. Labor can't. In fact, the profitability of outsourcing and globalization is expressly founded on that fact. Isn't that all we really need to know?
2
Free trade works, but congress won't fund a safety net for the losers, they blame them for being unemployed.
It's just like closing asylums for the mentally ill was a good idea, but then congress failed to fund community mental health so now we have a huge mentally ill homeless problem in NYC.
Displaced workers are a politically ignored population, promises to them are usually broken without consequence, until they do something drastic to be heard. That drastic move is unfortunately Donald Trump.
You can either have a safety net, relocation and training aid, or you can end up with Trump, the days of profiting from trade without compensating the losers are over.
It's just like closing asylums for the mentally ill was a good idea, but then congress failed to fund community mental health so now we have a huge mentally ill homeless problem in NYC.
Displaced workers are a politically ignored population, promises to them are usually broken without consequence, until they do something drastic to be heard. That drastic move is unfortunately Donald Trump.
You can either have a safety net, relocation and training aid, or you can end up with Trump, the days of profiting from trade without compensating the losers are over.
1
All of the trade treaties, IT conventions assume that the signatories are obeying the rules.
The Chinese haven't. Instead, they've been ferocious practitioners of mercantilism that has been met with a woefully inadequate response by the U.S. government over the course of the past 20 years -- fully equal to the failure over the same 20 years to revise our immigration laws and deport people not in the country legally.
To add to the mess, those ninnies in the Congress have maintained a ridiculously high corporate income tax rate to the point where U.S. firms are parking huge sums overseas and inventing the money there instead of here. Our tax code is benefitting our international competition.
This is the cluster screw-up which finally has resulting in both the Trump and Sanders party insurgencies.
The Chinese haven't. Instead, they've been ferocious practitioners of mercantilism that has been met with a woefully inadequate response by the U.S. government over the course of the past 20 years -- fully equal to the failure over the same 20 years to revise our immigration laws and deport people not in the country legally.
To add to the mess, those ninnies in the Congress have maintained a ridiculously high corporate income tax rate to the point where U.S. firms are parking huge sums overseas and inventing the money there instead of here. Our tax code is benefitting our international competition.
This is the cluster screw-up which finally has resulting in both the Trump and Sanders party insurgencies.
1
"For the Sake of the World's Poor, President Trump, Please Keep 'Losing' to China" via The International Political Economy Hub: https://ipehub.wordpress.com/2016/02/12/for-the-sake-of-the-worlds-poor-...
American economic policy makers never seem to calculate human tendencies in their economic models. When they advocated for lower taxes on the rich in order to get them to create more jobs, the rich just hoarded that money. When the same policy makers advocated for Congress to tax investment less than labor, Wall Street just turned their assets into rented assets, which created nothing. When they advocated for free-trade for all, industry ran away from America to our overseas competition. Instead of prosperity for all, these foreign nations just hoarded their assets, and they never traded back with us. Why should they be forced to do anything else? They are our COMPETITION.
Now I know, almost all of these ideas were cooked up in some think tank financed by the super wealthy. However, either the American people are stupid or they just love being made the fool, because they keep voting for these same policies, which makes everyone else prosperous, except for themselves.
Now I know, almost all of these ideas were cooked up in some think tank financed by the super wealthy. However, either the American people are stupid or they just love being made the fool, because they keep voting for these same policies, which makes everyone else prosperous, except for themselves.
2
Opening trade with China was misguided at best and criminal at worst. No one lives better because of trade with China except the Chinese. Worker displacement could have easily been foreseen. We have lost entire industries over the last 30 years. We've also lost institutional and technical knowledge. We no long know how to build things. We not only no longer manufacture shoes or apparel but, most importantly and critically, we no longer build the machinery and factories of those industries.
We don't engineer, design and build machinery used in those industries. That means we've lost technology and the ability to develop new technology. We can't even manufacture a sewing machine needle in America because we lack the knowledge and equipment to do that.
Industries across the nation face the same problem. We've lost expertise and technological knowledge of how to build and maintain industrial equipment and we've lost the skilled people that maintain and operate the equipment too. That has led to the almost total destruction of American industrial infrastructure.
We can have trade with China and other nations. But we must no longer take apart our factories and ship them overseas to drive down labor costs while at the same time throw people out of work expecting them to be retrained in other fields. That is what did not happen.
Our industrial base and infrastructure requires maintaining skills and technology here in America. Manufacturing must not be exported.
We don't engineer, design and build machinery used in those industries. That means we've lost technology and the ability to develop new technology. We can't even manufacture a sewing machine needle in America because we lack the knowledge and equipment to do that.
Industries across the nation face the same problem. We've lost expertise and technological knowledge of how to build and maintain industrial equipment and we've lost the skilled people that maintain and operate the equipment too. That has led to the almost total destruction of American industrial infrastructure.
We can have trade with China and other nations. But we must no longer take apart our factories and ship them overseas to drive down labor costs while at the same time throw people out of work expecting them to be retrained in other fields. That is what did not happen.
Our industrial base and infrastructure requires maintaining skills and technology here in America. Manufacturing must not be exported.
3
Without a major national effort to make the US cost competitive our middle class finances will decline further. Our elites won't acknowledge the problem - no one can admit that the US has lost market share in it's basic industries for 30 years because we aren't cost competitive. Even Trump can't speak that truth. Most people too busy blaming the 1% for our decline.
Several economic realities are at the crux. First, American consumers buy from Walmart at the lowest world price for acceptable value - they won't pay any premium for Made in USA, for union made, or made green. They buy at Walmart because declining incomes force them to conserve every dollar spent. Good luck getting them to pay for a 40% tariff on Asian goods. Second, billions of Asians, Indians, and Africans want to increase their income from $500 per year to $5,000 by moving up to manufacturing from subsistence agriculture, like the Chinese. Taiwanese and Korean entrepreneurs have invested $Trillions to create a supply chain that delivers manufactured goods to the US at a 40% lower cost than we can achieve here. US manufacturers need about 7% profit on sales. If US manufacturers met the Southeast Asia supply chain's prices, they'd lose 30% on sales and be out of business. It wasn't greed, but economic survival that forced US steel, electronic, textile, and similar manufacturers to off-shore production. American manufacturers want to compete, but can't be competitive a/c regulatory compliance costs and taxes
Several economic realities are at the crux. First, American consumers buy from Walmart at the lowest world price for acceptable value - they won't pay any premium for Made in USA, for union made, or made green. They buy at Walmart because declining incomes force them to conserve every dollar spent. Good luck getting them to pay for a 40% tariff on Asian goods. Second, billions of Asians, Indians, and Africans want to increase their income from $500 per year to $5,000 by moving up to manufacturing from subsistence agriculture, like the Chinese. Taiwanese and Korean entrepreneurs have invested $Trillions to create a supply chain that delivers manufactured goods to the US at a 40% lower cost than we can achieve here. US manufacturers need about 7% profit on sales. If US manufacturers met the Southeast Asia supply chain's prices, they'd lose 30% on sales and be out of business. It wasn't greed, but economic survival that forced US steel, electronic, textile, and similar manufacturers to off-shore production. American manufacturers want to compete, but can't be competitive a/c regulatory compliance costs and taxes
Beating is not the question. Three mammoth events are facing mankind: climate collapse, the debt volcano, and the disparity between the gilded few and the rest of us. These events are entirely man made and entirely interrelated. Wealth has been distilled out of our society and collected by the very few through complete disregard for the planet or any of the other people on it. The hundreds of trillions in debt and climate damage are there to be paid by the masses while the wealthy skate. While the world goes through the calamity of wiping unpayable debt off the books and paying the huge cost of retooling to low carbon economies it needs to get the wealth back from the elite through corrective taxation and other invasive means. Nations in economic free fall cannot be coining new billionaires every day. There are no miracles just the sound of most of us carrying the debt that made the very few untouchably wealthy.
So what if the US's economy doubled in size since 1976? American workers haven't seen a dime's worth of additional income for at least 30 years. We don't care if the economy tripled or quintupled - if we didn't see a dime of it. Averages are meaningless. For example, three guys are drinking in a bar. Bill Gates walks in. All of a sudden the 'average' net worth of people in the bar is $10 billion. Yeah, right. Bernie in '16!
9
The unwillingness of the U.S. to utilize the central government as a creator of jobs and services and infrastructure (in the manner that Europe and other Western economies act to bolster their economy and redistribute wealth) insures and exhibits the control that corporations have over our nation's economic behavior and wealth.
8
There is about two trillion dollars of infrastructure work that has to be done. We can use that to create high paying jobs with family leave etc. With that we can force the market to respond. People will want to go to the better paying jobs with benefits, putting pressure on the labor market. Look at what happened when Henry Ford paid his people a higher living wage so they could afford to buy the Model T. That was his real revolution, more than the assembly line. The infrastructure work can have "buy America" limitations, too. The government can offer companies that are hiding their profits overseas at a reduced rate to bring the profits back to the US by treating these taxable profits as an investment in the infrastructure, thereby giving them a tax break for the investment.
1
Why are having trade deficits with the 2nd and 3rd largest world economies? Am I missing something?
1
Oh yes, Ben Bernanke, we just need to urge countries like China more to change their ways. I think we are long since passed urging, gently prodding, talking to, etc. What we need is less talking and more action against China's predatory trade policies. The U.S. needs to be selfish and not worry about income growth for the world and worry about income growth for lower income and middle class Americans. Instead of constantly offering access to its market with virtually nothing to show for in return, the U.S. should demand greater access to other countries' markets and when it doesn't get it slap tariffs on that countries exports. The idea that free trade lifted millions of people out of poverty is a myth. Tariffs and protectionism lifted millions out of poverty. Countries like China did not ascend to economic prominence by opening their markets up to free trade, they did so by opening their markets up to investment while maintaining tariffs and other barriers. Economists should not be forgiven for constantly peddling the free trade lie because there is enough historical evidence of the failure of free trade over and over again. For the past fifty years proponents of free trade have arrogantly dismissed those who don't believe in their ideas and now they are being proven wrong. Free trade has never worked, it doesn't work now, and it will never work.
8
Lots of great discussion here, but one important fact that so often gets overlooked is this:
In rough round numbers, the U.S, economy doubled its inflation-adjusted size over the past 40 years. In other words, we built a whole 'nother USA in addition to the one we had in 1976. In other words, we didn't lose at all.
However, the income of 90% of Americans has not doubled like our economy. In fact, it hasn't increased at all.
People are familiar with the second part (the "loser" part), but much less aware of the first part. This makes them hopeless and angry. Instead of figuring out how to take ownership of the 2nd America we've built, they rage at America's supposed loss of wealth and status, and blame China. Instead of celebrating the greatest liberation from starvation in human history, we're (understandably) resentful at the decay of the American middle and working class.
Part of the solution is in imposing wage and working condition requirements on importers. Part on imposing the same (at higher levels) on domestic employers (through collective bargaining and statute). And part on taxing the hoard of wealth and using it to employ and rebuild our country. But it starts with acknowledging that the USA is richer than it has ever been. What's missing is not wealth, but commonwealth (in every sense of the word).
In rough round numbers, the U.S, economy doubled its inflation-adjusted size over the past 40 years. In other words, we built a whole 'nother USA in addition to the one we had in 1976. In other words, we didn't lose at all.
However, the income of 90% of Americans has not doubled like our economy. In fact, it hasn't increased at all.
People are familiar with the second part (the "loser" part), but much less aware of the first part. This makes them hopeless and angry. Instead of figuring out how to take ownership of the 2nd America we've built, they rage at America's supposed loss of wealth and status, and blame China. Instead of celebrating the greatest liberation from starvation in human history, we're (understandably) resentful at the decay of the American middle and working class.
Part of the solution is in imposing wage and working condition requirements on importers. Part on imposing the same (at higher levels) on domestic employers (through collective bargaining and statute). And part on taxing the hoard of wealth and using it to employ and rebuild our country. But it starts with acknowledging that the USA is richer than it has ever been. What's missing is not wealth, but commonwealth (in every sense of the word).
9
That sounds like if my neighbor is very wealthy and I am not the average is ok. Depends on who you ask.
The 'USA' isn't richer. The 0.01% is fabulously richer. If you and Bill Gates happen to share an elevator the average net worth of the people in that elevator is $22 billion. Ever hear of a more meaningless statistic?
5
Bill Gates created a company that employs 118,000 employees, all living reasonably prosperous lives, raising children, supporting local businesses, paying taxes etc. It is estimated that Microsoft directly created at least 12,000 millionaires within their own employee pool through equity stakes. And he has pledged giving away the vast majority of his wealth to all kinds of worthy causes. We should be doing all we can to create more people like Bill Gates.
“A lot of the companies doing the exporting are U.S. companies. So it’s not China, it’s our companies. Walmart has low-cost supply chains throughout China.”
Yes, it is what I have been angry about all along. I don't shop at Walmart and I don't buy any Fortune 500 products. Or at least practically none of them if it is avoidable and believe me I check. And I know that they hide behind independent "hippie" sounding brands. I drop it like a hot potato once it gets bought out by the evil doers (our American companies).
Yes, it is what I have been angry about all along. I don't shop at Walmart and I don't buy any Fortune 500 products. Or at least practically none of them if it is avoidable and believe me I check. And I know that they hide behind independent "hippie" sounding brands. I drop it like a hot potato once it gets bought out by the evil doers (our American companies).
5
As economist Dani Rodrik has pointed out, other economically advanced countries all take steps to make sure the negative impacts of trade agreements on their workforce are not too harsh. By doing so, those governments are assured of the public's support for trade agreements. Unfortunately, US policymakers seem to lack the foresight to take similar precautions.
One simple measure to US could take to eliminate almost all public resistance to free trade would be to guarantee a living wage job to anyone who wanted to work.
http://www.thenation.com/article/job-guarantee-government-plan-full-empl...
One simple measure to US could take to eliminate almost all public resistance to free trade would be to guarantee a living wage job to anyone who wanted to work.
http://www.thenation.com/article/job-guarantee-government-plan-full-empl...
3
Why is there a focus on China alone. What has happened to our overall foreign trade imbalances? What about Bangladesh, India, Mexico, Pakistan, Israel,...
do we have a trade "surplus" with any nation?
do we have a trade "surplus" with any nation?
1
I think you have one with my country, Australia.
Part of the reason being despite having a "free" Trade Agreement with the U.S since 2005 and even signing the shameful TPP, American Tariffs, Protections and Market Access restrictions ensure Australian Beef , Sugar and Banana exports to the U.S are restricted and not allowed or able to compete against the protected U.S agricultural interests that we would have if Free Trade actually was occurring. The fact that we are a much richer Nation than the U.S (Mean Income per Capita/Mean wealth per capita) with much higher worker pay , benefits and protections and can STILL undercut U.S Producer prices in these and other areas , says a lot about the huge profits being made in America going to owners (at taxpayers expense) and not the workers which as most know is a very depressingly common theme that is more and more becoming a defining negative attribute of the American experience.
Part of the reason being despite having a "free" Trade Agreement with the U.S since 2005 and even signing the shameful TPP, American Tariffs, Protections and Market Access restrictions ensure Australian Beef , Sugar and Banana exports to the U.S are restricted and not allowed or able to compete against the protected U.S agricultural interests that we would have if Free Trade actually was occurring. The fact that we are a much richer Nation than the U.S (Mean Income per Capita/Mean wealth per capita) with much higher worker pay , benefits and protections and can STILL undercut U.S Producer prices in these and other areas , says a lot about the huge profits being made in America going to owners (at taxpayers expense) and not the workers which as most know is a very depressingly common theme that is more and more becoming a defining negative attribute of the American experience.
2
When you call for customer service, do you ever hear a United States citizen answer? Global telecommunications advances have made the thousands of miles between the correspondents vanish. Technical jobs in IT, especially, have moved overseas or been replaced by cheaper H-1B visa recipients. The recent "flap" over Disney's replacing its IT staff is not unique. By my experience, this has been going on for almost 25 years. It is not just assembly line "piece work" that has gone overseas, it is jobs once held by professionals holding advanced college degrees as well.
3
China has few - if any - enforceable protections for either worker safety or health. Greedy Steve Jobs fully exploited a prison-like environment to force the slaves in his iPhone factories to "jump". Jobs' slaves were locked up so they could not escape fires and explosions. It isn't just China, as many greedy corporate honchos are now moving to even lower labor cost markets. Bangladesh has had far too many factory fires, collapses, explosions,... too. Israel exploits the non-Jewish population of the occupied territories, too.
The recent stalemate in Oregon was exascerbated by a depressed labor market.
We cannot always find new places for workers to move since our entire country is heading downhill - rapidly.
The recent stalemate in Oregon was exascerbated by a depressed labor market.
We cannot always find new places for workers to move since our entire country is heading downhill - rapidly.
3
The thousands of Chinese students studying economics in the U.S. give a wink and a nod to lecturing professors waxing poetic over the benefits of "Comparative Advantage", while their policy has always been Mercantilism.
This is an old story. To the chagrin of 17th Century governments, the Dutch and British East India Companies reported that other than precious metals, there was nothing the Chinese wanted to buy against the flood of manufactured goods flowing towards Europe. Finally, the Jesuits happened upon intricate European clocks, which the Chinese called, "self-ringing bells".
History repeats itself. Only now, the Chinese knock-off any product where we are naive enough to transfer the technology and production to China. There are already a half-dozen potential local "Apple-killers". And as soon as a Joint Venture auto plant opens, the models are copied.
And in addition to prime real estate and agricultural tracts and processors (Smithfield Hams), they use the billions of recycled trade dollars to buy up our manufacturing base (IBM Laptops, Hummer, G.E. Appliances).
"Goods" where we do hold a comparative advantage -- entertainment, software, patents -- are too nebulous and easy to exploit without royalties to do us any good. Like Europe's 17th Century clocks, the only import the Chinese will buy are tangible items of demonstrable technological superiority. That means you can bet that when they are able to make jumbo jets, they'll stop buying our Boeings too.
This is an old story. To the chagrin of 17th Century governments, the Dutch and British East India Companies reported that other than precious metals, there was nothing the Chinese wanted to buy against the flood of manufactured goods flowing towards Europe. Finally, the Jesuits happened upon intricate European clocks, which the Chinese called, "self-ringing bells".
History repeats itself. Only now, the Chinese knock-off any product where we are naive enough to transfer the technology and production to China. There are already a half-dozen potential local "Apple-killers". And as soon as a Joint Venture auto plant opens, the models are copied.
And in addition to prime real estate and agricultural tracts and processors (Smithfield Hams), they use the billions of recycled trade dollars to buy up our manufacturing base (IBM Laptops, Hummer, G.E. Appliances).
"Goods" where we do hold a comparative advantage -- entertainment, software, patents -- are too nebulous and easy to exploit without royalties to do us any good. Like Europe's 17th Century clocks, the only import the Chinese will buy are tangible items of demonstrable technological superiority. That means you can bet that when they are able to make jumbo jets, they'll stop buying our Boeings too.
7
following on from their love for European Fine Clockworks, the Chinese also loved the elite and high end market of Automaton design and manufacture.
These were exquisite handmade one off clockwork/analog "robots" which to this day the few surviving examples of are simply magnificent and astounding in both design and capability.
The Chines craved these objects of Beauty more than anything else.
These were exquisite handmade one off clockwork/analog "robots" which to this day the few surviving examples of are simply magnificent and astounding in both design and capability.
The Chines craved these objects of Beauty more than anything else.
Economists were half right. Free trade did lower consumer prices. Something that comes in handy when your income is driven down by 20%. It seems pretty clear that economists have no clue when it comes American working class culture. It's not the same as people with college degrees that are more mobile. Neither were the the job opportunities in the South and South West in the late 70's 80's, etc. as obvious and as plentiful as in the late 19th and early 20th century. Besides I'm not sure what is accomplished when you have factories and workers moving en mass from one area of the country to another. Not everyone leaves and they are left behind to clean up the mess of having to support an infrastructure that was built on a much larger population. Trade may be inevitable but the U.S. needs to slow down and take a deep breath!
2
I am amused by some of the posted comments. For those readers who complain unfair trade connecting to this article, let me ask a question - how many times they have voluntarily bought goods made in China because they are not willing to pay for similar items made in the USA at a higher price? China did not force us to buy goods manufactured there and we did it out of our own economic interest. Be logical, one cannot have the cake and eat it too.
5
Individually we benefit but the US economy did not replace the jobs lost with similar jobs in pay-scale. This has put the economy into a slow death spiral with current growth at 2-3% when 3-4% was the norm. If we can not figure out how to produce jobs with the same pay-scale to those lost thru globalization this will not end well... for any of us.
5
Agreed. Seems to me that there are a lot of Americans who want 99-cent flip-flops, $1.99 umbrellas, and $3.99 5-pack of white tube socks. Do they know what those items REALLY cost?
1
If we want to level the playing field, we should do as our founders did - put a high enough tariff on imported goods to make it profitable to make them here at competitive prices. Its way past time to abandon so-called free trade and way overdue for some "FAIR TRADE." The challenge is to get the Corporate owned politicians to do something for their constituents rather than their "owners."
1
The people who run this country don't think "free trade" needs to be fixed. It's working fine for them.
In fact hurting people is what "free trade" is for.
Moving income from the pockets of furniture workers in Virginia and auto parts workers in Michigan to the pockets of bankers on Wall St and retail titans in Bentonville (by paying subsistence wages to furniture workers in China and auto parts workers in Mexico) is a deliberate strategy. It's a feature, not a bug.
As this article points out, it isn't really even trade. We're not filling our stores with Chinese products. We're filling them with American products manufactured in China. And we're doing it to so that a new class of robber barons can rise up to replace the one pushed down (at least a little) by 60 years of "socialist" government expansion under Teddy Roosevelt, FDR, JFK and LBJ.
We're going back to the world you'll find in the early 20th century novels of Dos Passos, O'Farrell and Dreiser.
And apparently that's the only Change We Can Believe In.
In fact hurting people is what "free trade" is for.
Moving income from the pockets of furniture workers in Virginia and auto parts workers in Michigan to the pockets of bankers on Wall St and retail titans in Bentonville (by paying subsistence wages to furniture workers in China and auto parts workers in Mexico) is a deliberate strategy. It's a feature, not a bug.
As this article points out, it isn't really even trade. We're not filling our stores with Chinese products. We're filling them with American products manufactured in China. And we're doing it to so that a new class of robber barons can rise up to replace the one pushed down (at least a little) by 60 years of "socialist" government expansion under Teddy Roosevelt, FDR, JFK and LBJ.
We're going back to the world you'll find in the early 20th century novels of Dos Passos, O'Farrell and Dreiser.
And apparently that's the only Change We Can Believe In.
12
Spot On.
America, thine Greatest Enemy has always been thee.
America, thine Greatest Enemy has always been thee.
1
From every end of the political spectrum Americans feel sold-out to foreign competition and outsourcing. This is not "trade" or "free trade" but simply the latest dastardly effort by certain members of the wealthy few to take money, jobs, opportunities and power away from ordinary people. Detroit was a marvel of middle class jobs, lost its tax base and became bankrupt. Trump talked more about preventing jobs from being moved overseas, in the early phase of his campaign. This heinous selling-out of this country is the real reason for the political upheaval we are seeing, and a major reason for Trump's surge. Jobs and opportunities should stay in America. There is almost no public/media discussion of this and the US companies that outsource everything feed the US populace a steady stream of lifetyle ads here while they build schools to educate their future workers in India. We've been sold down the river all the way to China and the tired theories about how globalization is great for everyone are just so worn out.
12
And to add insult to injury a lot of these U.S Company's then "Invert" so that they then no longer have to even pay Taxes!
At every point and every level, they get exactly what they want and get these things most often at the cost /to the cost of everybody else except them.
Vampire Capitalism on Hyper Steroids multiplied to the Nth Degree.
At every point and every level, they get exactly what they want and get these things most often at the cost /to the cost of everybody else except them.
Vampire Capitalism on Hyper Steroids multiplied to the Nth Degree.
2
The issue that causes all of this is that China is a one-party state with no elections. And because of this, corruption is endemic to the system. No one really knows what their GDP is, what their growth rate is, and so on.
China is not the nearly the only country in the world without a democracy and with a system that is is inherently corrupt. But it's the most populous such country and has a commensurate impact on the world's economy.
China is not the nearly the only country in the world without a democracy and with a system that is is inherently corrupt. But it's the most populous such country and has a commensurate impact on the world's economy.
1
China's industries generate huge costs that never go on their balance sheets, that they never have to pay, and that allow them to sell their goods at low prices, even without currency manipulations. I am talking about the environmental costs of Chinese industries, which manifest as polluted air, poisoned water, ruined farm land, and tainted food. The Chinese government won't account for these costs, and it creates an unfair trade advantage. Therefore, we should account for these costs through selective tariffs. Level the playing field, in effect. Yes, US consumer prices would rise, but so would good-paying jobs. And the global environmental burden would fall over time.
15
In a global economy, it is not quite meaningful to just look at bilateral trade imbalance. If country A exports a lot from country B than it imports from B but imports a lot more from country C than export to it, the global trade imbalance for country A could be zero. In fact, China is running a persistent trade deficit with many countries, including Germany and oil producing countries. For many years, the total trade surplus China is having with the US is much larger than its overall trade imbalance globally. Looking at the global situation, one may come away with a different conclusion. Instead of losing to China, the US is losing its competitive advantage in the global economy. As long as we focus only on one country to blame for our problems, Japan in the 80 and 90s, China now, we will not find the correct solution. In the 60s, it was one of the top career choice for a college graduate to find an engineering job. Government put up a lot of resources in the development of technology, especially in defense related fields. Now this country is training a lot less engineers and scientist than China and many other developing countries. The funding in science is a lot scarce, the industrial and civil infrastructures are deteriorating. Our politicians are defending the multinational corporations rather than defending the citizens of this country. Our problem is not primarily external but internal. We need a leader like FDR. Do we see anyone like that during the GOP debate?
6
If I'm not mistaken, Bernie Sanders seems to be the one who has taken F.D.R as his role-model.
1
One of the economists who strongly agreed with statement
"Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment."
also said
"If that's not right, almost all of economics is wrong."
And this is exactly why economists should have much less influence in politics and finance than now.
Most major economists are not willing to consider any evidence that would be against the theories they are championing
"Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment."
also said
"If that's not right, almost all of economics is wrong."
And this is exactly why economists should have much less influence in politics and finance than now.
Most major economists are not willing to consider any evidence that would be against the theories they are championing
10
I have always found these ramblings entertaining. When the textile mills closed in New England to move to the south, only the people who were left behind cared. They were told this was progress. But when the same industry moved to Asia, I remember a politician from the south droning on that this was a "National Tragedy". I just thought it was payback...
5
We have to be honest with ourselves. How much of it has to do with unfair trade practices and currency manipulation? And is there a chance that our segments of our economy are simply not competitive in a global economy?
I hear a lot about the China's currency manipulation. It's true in the sense that it trades within a fixed range. However, the currency has been, if anything, artificially propped up because of our political pressure. The Euro has devalued much more in recent years than the RMB. We have critics asking for the RMB to float freely--be careful for what you ask for, we may see the RMB devalue sharply and that will only result in even cheaper Chinese exports.
We also sneer at the idea of cheap Chinese knock-offs and bad quality. Is that really true anymore? My iPhone, laptop and household appliances rarely breakdown, if ever.
I hear a lot about the China's currency manipulation. It's true in the sense that it trades within a fixed range. However, the currency has been, if anything, artificially propped up because of our political pressure. The Euro has devalued much more in recent years than the RMB. We have critics asking for the RMB to float freely--be careful for what you ask for, we may see the RMB devalue sharply and that will only result in even cheaper Chinese exports.
We also sneer at the idea of cheap Chinese knock-offs and bad quality. Is that really true anymore? My iPhone, laptop and household appliances rarely breakdown, if ever.
3
last I looked key intellectual property components of iPhones were manufactured outside of China - in the US, Taiwan, or Korea for example - and China mostly 'assembled' the components - not a lot to go wrong there.
There are many whom are not aware of how effectively and systematically Asian societies such as south Korea and China have been organizing themselves so that they compete not just in terms of cost, but also in productive efficiency. If Americans think that these societies want and desire to remain low cost, think again. Taiwan and south koreea used to be low cost manufacturing hubs but have since moved high up the production chain. These societies are generally authoritarian and less antagonistic, making it comparably not just cheaper but safer for companies to shift production. Although most companies are themselves also American companies, these profits earned from lower cost is transferred upwards due to the major tax loopholes and incentives that wealthy individuals have and use back home.
1
Fair trade is great – there is as much free trade as there are free lunches. Each country has its own agenda that is either independent or conflicting with other nations. It is a government's role to protect its citizens interests.
Trump and these economists have a point – labor is gummy. It has to be, otherwise it would not extract much value for anything but a very brief time. As many note, firms arbitrage labor by playing different government's interests off each other – citizens lose out big. Labor needs to be empowered again to have a seat at the table.
Trump and these economists have a point – labor is gummy. It has to be, otherwise it would not extract much value for anything but a very brief time. As many note, firms arbitrage labor by playing different government's interests off each other – citizens lose out big. Labor needs to be empowered again to have a seat at the table.
3
"Yet Mr. Baker still endorses the idea that a frank negotiation that puts the weight on the right issues could improve American workers’ trading position with China."
What's that called again, when you keep doing the same thing over and over and expect the result to change?
Economists are largely useless in real life and politicians not much better on trade/economic issues. Trump may be a buffoon, but once you experience firsthand what mainland Chinese "businessmen" are doing to us, you understand the problem. And a gradual, negotiated fix won't solve a thing.
Taking a page from his immigration songbook (which he'll back down from some if he gets into the White House), Trump should just say we're banning all trade from China. That'll never happen, but it will get the right conversation going. American labor is being screwed by American CEOs. It's time for that to stop.
What's that called again, when you keep doing the same thing over and over and expect the result to change?
Economists are largely useless in real life and politicians not much better on trade/economic issues. Trump may be a buffoon, but once you experience firsthand what mainland Chinese "businessmen" are doing to us, you understand the problem. And a gradual, negotiated fix won't solve a thing.
Taking a page from his immigration songbook (which he'll back down from some if he gets into the White House), Trump should just say we're banning all trade from China. That'll never happen, but it will get the right conversation going. American labor is being screwed by American CEOs. It's time for that to stop.
At last, perhaps, some vindication of what the common men and women have known for some time, without any economics training. At last, perhaps, something to support those steadfast American manufacturers who saw fit to try to keep Americans employed. At last, politicians - at both ends of the spectrum - willing to speak truth to the establishment. No wonder they are getting the headlines, people recognize the validity to their positions. Can we keep the discussion from being quashed by election day? Time will tell.
1
"In fairness to the economics profession..."
The post-World War II "thirty glorious years" was an anomaly fueled by reconstruction, rearmament and Keynesian full employment policies. Economists who attributed unusually easy adjustment to the "magic of the market" were deceiving themselves and setting the stage for a world of pain.
The post-World War II "thirty glorious years" was an anomaly fueled by reconstruction, rearmament and Keynesian full employment policies. Economists who attributed unusually easy adjustment to the "magic of the market" were deceiving themselves and setting the stage for a world of pain.
4
I have been exporting American-made products to China for more than 100 U.S. companies since 1981. I have played a small role in balancing our trade deficit with China. People laugh at me for my willful, Sisyphean task. But manufacturing is the source of good jobs and one of several cornerstones of decent living. China cares too much about China to listen to America's spiel that they should consume more and export less. We should wake up to reality.
13
Considering Mr. Bernanke and most of his colleagues are trained in quantitative viewing of economics all of this is stunning. Maybe these folks are playing dumb bcos they cannot openly tell working-class Americans it was necessary to export their jobs to China in order to fight the Cold War and stabilize the world towards a new world order (all lowercase letters, please note.)
Pre-Nixon goes to China, America was dealing with nations of populations less than the US population (UK, France, Germany, Japan) and which had bilateral trade before WWII (except Japan). So as we pumped in American investments, knowhow and opened American markets to their products and services, we inflicted only a small perturbation in the US economy. Over a couple of decades the cost of living and standard of living in those countries caught up and we had better balance of trade (not so much with Japan, initially.)
China has nearly 4 times the US population, and their avg income is a tenth or lesser. So we opened a really large pipeline of jobs towards their economy from the US, and its impact HAD to be significant and lasting. Economists glibly talk about how trade will balance things out - on the ground it means tens of thousands of families in North and South Carolina, Tennessee, etc would have to retrain and move to other states since they lost their jobs in the furniture industry. Now how was that going to happen? Magic?
Different "flows" have different levels of "friction". Capital vs labor.
Pre-Nixon goes to China, America was dealing with nations of populations less than the US population (UK, France, Germany, Japan) and which had bilateral trade before WWII (except Japan). So as we pumped in American investments, knowhow and opened American markets to their products and services, we inflicted only a small perturbation in the US economy. Over a couple of decades the cost of living and standard of living in those countries caught up and we had better balance of trade (not so much with Japan, initially.)
China has nearly 4 times the US population, and their avg income is a tenth or lesser. So we opened a really large pipeline of jobs towards their economy from the US, and its impact HAD to be significant and lasting. Economists glibly talk about how trade will balance things out - on the ground it means tens of thousands of families in North and South Carolina, Tennessee, etc would have to retrain and move to other states since they lost their jobs in the furniture industry. Now how was that going to happen? Magic?
Different "flows" have different levels of "friction". Capital vs labor.
2
"... because the exact source of the imbalance is a “puzzle,” much of it far removed from what you would traditionally think of as trade policy"
Wow. Just wow. Is it really puzzling that it's an unfair competition when China has lax environmental laws, low wages, manipulates its currency, and steals on a vast, unprecedented scale through massive, state-sponsored industrial espionage, and unpunished piracy of American products like software and movies by millions of Chinese citizens?
An unstated assumption about the benefits of overall growth in global trade is that all parties operate under essentially equivalent rules, and operate in good faith. Incompetent American officials have never made a serious attempt to account for China's unequal rules and bad faith, or compensate for it by changing the terms of our dealings with them. They are playing us and robbing us blind and that will continue until we are smart enough and assertive enough to effectively stand up to them and protect our interests. It is not in the American interest to achieve an overall increase in global trade by subsidizing Chinese economic growth at our expense due to allowing their parasitic, predatory behavior to continue.
Wow. Just wow. Is it really puzzling that it's an unfair competition when China has lax environmental laws, low wages, manipulates its currency, and steals on a vast, unprecedented scale through massive, state-sponsored industrial espionage, and unpunished piracy of American products like software and movies by millions of Chinese citizens?
An unstated assumption about the benefits of overall growth in global trade is that all parties operate under essentially equivalent rules, and operate in good faith. Incompetent American officials have never made a serious attempt to account for China's unequal rules and bad faith, or compensate for it by changing the terms of our dealings with them. They are playing us and robbing us blind and that will continue until we are smart enough and assertive enough to effectively stand up to them and protect our interests. It is not in the American interest to achieve an overall increase in global trade by subsidizing Chinese economic growth at our expense due to allowing their parasitic, predatory behavior to continue.
2
1. Give labor all the freedoms of capital. Get rid of passports and visas which serve the state. 2. China produces “things”. We produce ideas and services, movies, etc. One is easily stolen or doesn’t last and is not a basis for a solid economy. All 3rd world countries steal from 1st world countries. Note the refusal of many countries to recognize drug patents. When Charles Dickens visited the U.S. in the 1800s he was surprised to be greeted as a ‘rock star’ because he had not received one dime for his copyrights from the U.S. 3. The “findings” of these economists are common knowledge among the working class, so why are they getting rewarded for this? Whatever happened to common sense? 4. These trade agreements were forced down our throats by lying politicians and a crooked political system. Who remembers the widespread protests against the GATT in Seattle? 5. Our system chooses winners and losers and the winners are being taxed to help the losers. The winners offshore their profits while the losers end up homeless. No other country in the world lets foreigners buy residential property without restriction. 6. Finally, no other country has created so much paper money which has contributed to more economic distortion. Do we need another “study” for this? 7. Is it any wonder why the outliers of the democratic and republican parties are both leading?
3
Ross Perot understood this long before our country was led by false, economic prophets who oversold the benefits to outsource millions of American jobs to China. They kept repeating the lie that globization would benefit the America worker until our towns and cities across America were just ghosts of themselves and their citizens were not able to provide for themselves. Our homeless across America has grown exponentially, our public schools are underfunded, NIH is underfunded and necessary research has been gutted, our roads and bridges are not adequate. We had necessary funds when Americans had their jobs and before our politicians pushed disastrous trade agreements that caused millions of outsourced jobs to be lost to China ! You can't have a strong democracy / country if you sell out the American people . That "HOPE" was that we didn't notice they sold us out and they continue to sell us out with TPP.
6
Glad to hear some admission that some of Trump's ideas are actually correct. The notion that if it's coming from Trump it's a bad idea, is moronic. The would-be intellectuals are now finding that their rhetoric is false, another reason to lump them in with the "establishment" and reject their ideas.
8
Yes Walker, this is such a hugely important issue and only Trump or Sanders have a hope of delivering on it. So I go for Sanders but stand up for Trump because he is correct here. Terrible that the press is so blindsided by PC meets free trade dogma.
4
I think this quote from Dean Baker reveals some of the "politically correct" (and imo socially naiive) mindset of intelligent people in the elite.
“Characterizing it as ‘us versus China’ is inflammatory, jingoistic, if you like, racist,” Mr. Baker said.
Racist? Anything can be construed as racist. But this is an economic argument. Questioning the integrity and loyalty of Chinese Americans would be racist. Questioning the creativity and honesty of Chinese people could be racist. Questioning economic policies and saying one side is taking advantage or even has an unfair advantage is hardly an issue of race or ethnicity. Why the confounding of unrelated things when things are pretty complicated to start with.
It is noble that we are bringing 1.4B Chinese into the global economy and I look forward to the day when every nation on every continent is prosperous, stable and people can travel and trade freely. I really do, but we cannot get there being childish and overly defensive. We need to be open and frank.
“Characterizing it as ‘us versus China’ is inflammatory, jingoistic, if you like, racist,” Mr. Baker said.
Racist? Anything can be construed as racist. But this is an economic argument. Questioning the integrity and loyalty of Chinese Americans would be racist. Questioning the creativity and honesty of Chinese people could be racist. Questioning economic policies and saying one side is taking advantage or even has an unfair advantage is hardly an issue of race or ethnicity. Why the confounding of unrelated things when things are pretty complicated to start with.
It is noble that we are bringing 1.4B Chinese into the global economy and I look forward to the day when every nation on every continent is prosperous, stable and people can travel and trade freely. I really do, but we cannot get there being childish and overly defensive. We need to be open and frank.
7
What everyone, including the Chinese, Japanese, Mexicans, and, yes, Donald Trump is that trade deficits are good and trade surpluses are bad. A nation that is running a trade deficit is getting a lot of stuff for essentially nothing.
1
"Free trade" in the post WWII era has always been about undercutting labor power. The economic orthodoxy justification was just a polite veneer applied.
3
"... economists have generally thought workers who lost their jobs because of imports would move fairly rapidly into other, expanding economic sectors. Any dislocation would be minor relative to the benefits, they said.
Now, some minds are changing."
Now some minds are changing? The fact is any of these economists who said otherwise would have and still will lose their jobs, grants or hiring prospects. They either had to get with the program, blessing offshoring for investor profits, or get out of the profession. Offshoring is still continuing, for the same reasons as always, greater quick profits for shareholders, and anybody in these organizations who doesn't go along gets fired or sued. These same investors have bought off our politicians, media and academics to allow and promote offshoring (and inshoring of cheap labor on work visas). So in effect, our investors and their bought politicians, pundits and professors are acting in tacit alliance with the Chinese government, in throwing American workers and national interest to the curb.
Now, some minds are changing."
Now some minds are changing? The fact is any of these economists who said otherwise would have and still will lose their jobs, grants or hiring prospects. They either had to get with the program, blessing offshoring for investor profits, or get out of the profession. Offshoring is still continuing, for the same reasons as always, greater quick profits for shareholders, and anybody in these organizations who doesn't go along gets fired or sued. These same investors have bought off our politicians, media and academics to allow and promote offshoring (and inshoring of cheap labor on work visas). So in effect, our investors and their bought politicians, pundits and professors are acting in tacit alliance with the Chinese government, in throwing American workers and national interest to the curb.
10
It is not just China that runs current account surpluses. Most of the emerging economies do it. China just happens to run the largest. And regardless of what Mr. Bernanke says, he and the Fed are partly responsible for it. This is a point that India’s central bank chief, Raghuram Rajan has been hammering on about for the last several years.
Unconventional monetary policy by the Fed (zero percent rates, quantitative easing etc), and uncertainly about the Fed rate environment create asset and currency bubbles in emerging markets, as short term capital chases the best yield available. For years, because of zero interest rates in the US, capital has been flowing into emerging economies countries like Brazil, India and many others. Last year when Janet Yellen indicated that the Fed was ready to raise rates, most of these markets had a “currency tantrum” where their currencies dropped precipitously, as the short term capital suddenly started to leave en mass. In such a situation, what is an emerging economy to do, other than build up foreign currency reserves to protect itself from Fed moves that it has no control over?
Unconventional monetary policy by the Fed (zero percent rates, quantitative easing etc), and uncertainly about the Fed rate environment create asset and currency bubbles in emerging markets, as short term capital chases the best yield available. For years, because of zero interest rates in the US, capital has been flowing into emerging economies countries like Brazil, India and many others. Last year when Janet Yellen indicated that the Fed was ready to raise rates, most of these markets had a “currency tantrum” where their currencies dropped precipitously, as the short term capital suddenly started to leave en mass. In such a situation, what is an emerging economy to do, other than build up foreign currency reserves to protect itself from Fed moves that it has no control over?
3
Wow; Economists that never heard of Ricardo's theory. Which in simple terms states that if you have a workforce that can be truly move able. Meaning replace workers for less money. Wages in that industry will proceed to level off at subsistence level. Wages will go down to where you may or may not able to survive.
7
I think another name for Ricardo's theory is "common sense", which a lot of economists aren't aware of either.
1
Conflating simplistic free market misconceptions with racism is how we got into this mess. Simple immutable facts:
1. Free trade lowers prices and increases consumption because the country with the lower costs produces the stuff it does best. This means deflation.
2. This however means that if the China produces everything cheaper then they will. And this means the shutting of industries here. The US labor force is not as mobile as money so it remains in the US, unemployed lowering our GDP.
VOILA We have high unemployment and deflation.
If we put tariffs on goods our price for stuff would go up, but so would wages and jobs would come home - it is in fact the exact thing that we need. Trump is right. Dead right.
As far as how China got to be world leader and where from here. Rapid industrialization causes rapid growth. It did in England in the 19th C Germany and Japan in the 20th. The problem is that surplus is dangerous. It has to be a surplus with someone and it has to go somewhere so it is US government Treasuries.
China will not rebalance to a service economy because it has a greater corruption problem than we do and the kronies want to keep the money themselves rather than giving it to the middle class. So it wont rebalance. It will have decades of slow growth and we can all hope not- civil unrest.
I only hope that they dont start a war like Germany did as a way of keeping the masses minds off the economy. Geopolitics not just trade.
1. Free trade lowers prices and increases consumption because the country with the lower costs produces the stuff it does best. This means deflation.
2. This however means that if the China produces everything cheaper then they will. And this means the shutting of industries here. The US labor force is not as mobile as money so it remains in the US, unemployed lowering our GDP.
VOILA We have high unemployment and deflation.
If we put tariffs on goods our price for stuff would go up, but so would wages and jobs would come home - it is in fact the exact thing that we need. Trump is right. Dead right.
As far as how China got to be world leader and where from here. Rapid industrialization causes rapid growth. It did in England in the 19th C Germany and Japan in the 20th. The problem is that surplus is dangerous. It has to be a surplus with someone and it has to go somewhere so it is US government Treasuries.
China will not rebalance to a service economy because it has a greater corruption problem than we do and the kronies want to keep the money themselves rather than giving it to the middle class. So it wont rebalance. It will have decades of slow growth and we can all hope not- civil unrest.
I only hope that they dont start a war like Germany did as a way of keeping the masses minds off the economy. Geopolitics not just trade.
7
The problem is mainly trade policy IMO as someone engaged in that field for over 30 years. The U.S. trade adjustment program for displaced workers and communities is woefully underfunded and weak. A worker who loses a good job owing to imports has no probability of getting a new good one. China gets away with blatant mercantilism in partnership with the Walmarts, Targets, and electronic companies of the world. Trade policy insiders champion the interests of transnational corporations and capitalists whose interests are antithetical to the workers. This model of trade is now disintegrating since it is unviable since workers without jobs can't buy stuff made in the U.S. or abroad.
6
"Reallocation" of workers is much more difficult than economists seem to think. The pro-trade line goes something like this: "trade allows each country to focus on what it does best, boosting efficiency and increasing wealth".
However, countries are not groups of homogeneous experts. Countries are complex societies, made up of individuals with various skills, proclivities, and intellectual interests. A skilled worker in a car manufacturing plant may not be well suited or interested in a desk job at an insurance company.
If trade shifts an industry overseas, workers may be able to relocate fairly easily to other industries within the same sector. However, when trade cripples an entire sector of the economy, as has been the case with American manufacturing, a whole way of being is crushed. Those individuals within our complex society who are well suited and satisfied by that way of being find themselves with increasingly bleak options.
A healthy society should promote the full range of human endeavor. When trade winnows away our options, we do not benefit.
However, countries are not groups of homogeneous experts. Countries are complex societies, made up of individuals with various skills, proclivities, and intellectual interests. A skilled worker in a car manufacturing plant may not be well suited or interested in a desk job at an insurance company.
If trade shifts an industry overseas, workers may be able to relocate fairly easily to other industries within the same sector. However, when trade cripples an entire sector of the economy, as has been the case with American manufacturing, a whole way of being is crushed. Those individuals within our complex society who are well suited and satisfied by that way of being find themselves with increasingly bleak options.
A healthy society should promote the full range of human endeavor. When trade winnows away our options, we do not benefit.
9
Barro touches on the one things I've wondered about - the cessation of China's One Child policy. Children turn everyone into consumers, no? In a few months (9 IIRC) we'll see what happens to demand.
American people are at fault for a lot of this. You consume, spending your money, driving this surplus.
I can tell you I rarely buy "stuff" or fill my place with "garbage" I don't need. Besides some electronics, nothing else is really bought from China recently.
Lower your consumption. I've gotten great deals on high quality clothes from thrift stores. Reuse material, recycle it, don't just keep buying stuff from stores. There's thousands of Walmarts and Targets in peoples' garages they don't use or need. Freecycle, Craigslist, mailing lists, whatever, there's really no need to keep buying stuff if our population growth is stagnant save for inflation.
Make "stuff" last, don't constantly upgrade. Save that money and you'll realize you can save for retirement and be more financially secure.
A lot of problems can be solved if we all just changed our consumption habits. Buy more services done by Americans, stop buying stuff you don't need.
There's too much "stuff", reduce your stress by selling it.
I can tell you I rarely buy "stuff" or fill my place with "garbage" I don't need. Besides some electronics, nothing else is really bought from China recently.
Lower your consumption. I've gotten great deals on high quality clothes from thrift stores. Reuse material, recycle it, don't just keep buying stuff from stores. There's thousands of Walmarts and Targets in peoples' garages they don't use or need. Freecycle, Craigslist, mailing lists, whatever, there's really no need to keep buying stuff if our population growth is stagnant save for inflation.
Make "stuff" last, don't constantly upgrade. Save that money and you'll realize you can save for retirement and be more financially secure.
A lot of problems can be solved if we all just changed our consumption habits. Buy more services done by Americans, stop buying stuff you don't need.
There's too much "stuff", reduce your stress by selling it.
3
Food company lobbies have pushed Congress to remove country of origin labels, so you may be eating things grown in China and not realize it.
2
Try and buy farm to table from local sources when possible. Support our small farmers not the guys who are selling compromised food from China. China is riddled with corruption, there is no way to guarantine safe, good quality food from there.
4
Thank, NYT, for finally admitting that Trump has identified an important matter - trade with an economically less-developed country, such as China, hurts our working class.
Could you now please take an objective look at another problem identified by Trump - the impact of illegal immigration on our working class?
Could you now please take an objective look at another problem identified by Trump - the impact of illegal immigration on our working class?
12
Today's free trade should work like this:
We make something, you make something, we trade.
Manufacturing is one of the few things that creates wealth directly. Take away manufacturing and eventually we suffer, whether society wide or the lowering of the middle class.
Without manufacturing, the younger generations will lack opportunity. Is this what we want for our young people?
We make something, you make something, we trade.
Manufacturing is one of the few things that creates wealth directly. Take away manufacturing and eventually we suffer, whether society wide or the lowering of the middle class.
Without manufacturing, the younger generations will lack opportunity. Is this what we want for our young people?
5
Every society has people that can't do much more than put a square peg in a square hole. Natural endowments, mistakes during youth, getting mixed up in drugs, lack of motivation - there are people who aren't going to be able to do any more than show up reasonably regularly and put a nut on a bolt and tighten it.
Regardless of who "wins" a trade war with China, we either tax ourselves to support people that can't do more complex tasks. Or we set up our trade regimen so there are always simple tasks with which people can support themselves.
Regardless of who "wins" a trade war with China, we either tax ourselves to support people that can't do more complex tasks. Or we set up our trade regimen so there are always simple tasks with which people can support themselves.
7
Bill Gates's copyrights and Goldman Sachs are important trade issues, I would start by asking -- and trying to address -- why China does not allow a level playing field for world-beating American companies like Google, Facebook, Twitter, and Amazon (when their companies can compete here).
1
I guess this is why economists are called "theorists", never have to be held accountable for anything that happens in real time ..... funny to read all this theorization which can be boiled down to one "policy": we have to turn all chinese people into Americans! what I don't get is what kind of "policy" do they foresee that can possibly force people who are polar opposite from Americans to spend (aka consume) incessively? has any policy in this country been succesful to change the consumerism culture and convince people to spend less?! for thousands of years, chinese worked, saved (even when there was nothing to save) and spent money on better education --- the villagers send their kids to the city, the city people send their kids to Peking and Tsinghua; the wealthy send their kids to Harvard and Stanford, the really wealthy send their kids to elite high schools in the US. imposing tarriff? well, try that, then you'd hear the same economists crying about slowing GDP (which to a large part driven by consumer spending), stock market crash because most people can no longer afford buying all the clothes, big TV, electronics, and all the tools and toys.
5
"Save money, live better" - who's catch phrase is that? Funny though, when you look at the impact of demanding cheaper and cheaper products coupled with demands for higher and higher profits, it's really not so cheap. Perhaps a slight modification - "Save money so you can just live" would be more appropriate as the jobs that produce these goods move overseas. We're even exporting food grown here to be processed overseas and shipped back here - and they're making enormous profits. This is a surprise to anyone? Except those already hammered by this, they already feel the pain.
6
Wow. Some economists have just realized that China's export economy has hurt the American job market. Isn't it amazing how ignorant some of these academic people are? Anyone who has passed thru Elmira, NY knows that the exportation of manufacturing has Devastated the working class. Most economists live in the better neighborhoods and don't know much about working class America.
And no, making it easier for working class people to move to new jobs in other areas, as suggested in this article, will not help. Many working class people stay near their family ties and will remain where they grew up.
It's clear that many economists spend too much time in their offices, when they should be out on the street. Maybe that's why so many of them failed to anticipate the crash of 2007 or the negative impact of falling oil prices on the American economy.
One answer to our trade problem is to get tough with export economies who refuse to open their markets to American products. And Chinese government owned steel companies should not be allowed to destroy the American steel industry by exporting steel into the U.S. for less than its cost to produce. Free trade does not mean that we must keep our markets open to countries that refuse to play fair or to open their markets to our products. China, Japan and South Korea....I'm talking about you!
And no, making it easier for working class people to move to new jobs in other areas, as suggested in this article, will not help. Many working class people stay near their family ties and will remain where they grew up.
It's clear that many economists spend too much time in their offices, when they should be out on the street. Maybe that's why so many of them failed to anticipate the crash of 2007 or the negative impact of falling oil prices on the American economy.
One answer to our trade problem is to get tough with export economies who refuse to open their markets to American products. And Chinese government owned steel companies should not be allowed to destroy the American steel industry by exporting steel into the U.S. for less than its cost to produce. Free trade does not mean that we must keep our markets open to countries that refuse to play fair or to open their markets to our products. China, Japan and South Korea....I'm talking about you!
7
I think that the answer is easy.
China killed an entire class of specialized mid-level manufacturers, because, courtesy of lax enforcement of IP there, your patents are worth nothing, and they will kill anything cheaper. It is also using the promise of big market and big sales to force companies to locate manufacturing there through non-market measures, while strategically using state support to kill competition elsewhere (as is evident, for example, with rare earths and solar panels).
"Winning" the war with China will mean:
- Strict enforcement of IP, particularly in manufacturing processes
- Investigation of all alleged state manipulations, from steel overinvestment to controlled trade, and broad use of tariffs to retaliate
- Retaliation for attempts to move manufacturing to China through non-market measures
- Going after China in cases of political corruption in third countries
It will also mean a number of measures to stimulate manufacturing and development at home, but that's a separate topic
China killed an entire class of specialized mid-level manufacturers, because, courtesy of lax enforcement of IP there, your patents are worth nothing, and they will kill anything cheaper. It is also using the promise of big market and big sales to force companies to locate manufacturing there through non-market measures, while strategically using state support to kill competition elsewhere (as is evident, for example, with rare earths and solar panels).
"Winning" the war with China will mean:
- Strict enforcement of IP, particularly in manufacturing processes
- Investigation of all alleged state manipulations, from steel overinvestment to controlled trade, and broad use of tariffs to retaliate
- Retaliation for attempts to move manufacturing to China through non-market measures
- Going after China in cases of political corruption in third countries
It will also mean a number of measures to stimulate manufacturing and development at home, but that's a separate topic
3
it is like locking the stable doors after all horses are stolen. i think. china has already stolen all that is worth stealing. now with airbus a320 being assembled in china, over 100 years of western technology is at the feet of the chines to study, copy and build in a new factory, across the street from where airbus is assembled. for less thatn half the price. for a short term gain of sellilng 1000 planes to china, the europeans have transferred immeasurable wealth of knowledge. i don't know what to call this.
2
Why buy Chinese-made clothes when Bengladesh makes them so much cheaper?
1
Outsourcing to Bangladesh (more generally, managing various Asian outsourcing strategies) is apparantly handled best through China.
Mr. Barro would do well to write a followup article describing the rapid growth in Asian and European transplant auto factories in the United States, growth that came about not from the natural interplay of market forces, but from intense political pressure and calls for import barriers to Japanese and German cars.
3
Don't forget that lots of USA citizens have jobs in the importing business because of trade with China. I don't think you can put restrictions on China as it is a sovereign nation. The only restrictions you could impose would be tarrifs on imports and then the USA would be manipulating the market just like you accuse China of doing.
importers dont create high quality high paying jobs. they are only conduits for selling. maybe the individual importer makes money. but the society as a whole loses.
1
Only George Costanza had a job with an importer. Or maybe it was an importer/exporter.
The EPA tells our US companies they can't do this and can't do that. China has cheaper labor and they can seemingly pollute at will. How are we supposed to compete with that? And we will not be reducing our carbon footprint by sending the carbon emissions to China. Unless there is an equal playing field I am all for tariffs.
10
One major problem is out of control spending by the Federal Government which in turns requires us to sell bonds to finance a trillion dollar deficit. In effect we have artificially injected a trillion or so dollars annually into our economy which has the effect of raising prices across the board as there is more money to bid on commodities and stocks than would occur without the borrowing. Prices and wages go up and we remain noncompetitive.
1
china and usa are tied at the hips. china cannot afford to unbundle the trillions of dollar bonds as this would depress the dollar, and make all their hard earned wealth devalued. the usa cannot stop spending as they are hooked on to it. this spending by americans, and the buying of u.s. dollar bonds by chinese, keeps the u.s. dollar artificially high. creates havoc on nations like canada, and gives an illusion to the americans that a strong dollar is a reflection of a strong economy.
NZ newspapers gets great perspectives on China and oh so different to the USA one! NZ has great trade relations with China and lots of kiwis have businesses there and are up with the play. Chinese economy is not going backwards because it has a growing middle class and they are now allowed to have two children instead of one. There is room for economic growth in China, in the future, as the government can put no limits on how many children you can have. I heard on the nz news that Iran has just done a massive trade deal with China that is worth billions of dollars.
"'We have a list of things,' he said. 'We want you to respect Bill Gates’s copyrights, we want you to respect patents, Goldman Sachs wants more access.'"
I predict that of those three things, only Goldman Sachs will get what it wants.
As always.
I predict that of those three things, only Goldman Sachs will get what it wants.
As always.
6
The world is not unified, open, and homogeneous. Surely such dislocations are inevitable during this transitional period of history.
Many Americans probably don't know Chinese people like American good in general. To them "made in America" means good quality. But China is still a relatively poor country, with per capita GDP of a little over $8,000 a year, how much can they buy from America? And if the Trump America imposes 45% tariff and stops buying from China, the Chinese will buy even less from America.
Furthermore, if the Chinese are saving for their own future, can we really blame them for that? Don't we wish our younger generation save some of their income rather than live paycheck by paycheck?
I think Bernanke is right. Trade imbalance should be a matter of international diplomacy.
Furthermore, if the Chinese are saving for their own future, can we really blame them for that? Don't we wish our younger generation save some of their income rather than live paycheck by paycheck?
I think Bernanke is right. Trade imbalance should be a matter of international diplomacy.
1
The fact that the heirs to the Walmart fortune are consistently ranked among the top ten wealthiest people in the world, is really all you need to know about the way the U.S. political class, both Republican and Democrat, has betrayed the working people of America.
By off-shoring manufacturing, paying the vast majority of its workers peanuts, denying them health and pension benefits, and discouraging attempts to organize unions, Walmart epitomizes the way the executive class exploited the venality of Congress to transfer all the gains of trade upward and all the costs downward.
By off-shoring manufacturing, paying the vast majority of its workers peanuts, denying them health and pension benefits, and discouraging attempts to organize unions, Walmart epitomizes the way the executive class exploited the venality of Congress to transfer all the gains of trade upward and all the costs downward.
14
Don't trade with them. That's how you "beat" China.
Any time you trade with a poorer, economically suppressed country, all you're going to get in return is job losses and cheap junk.
I imagine a majority of the cheap junk that we get from China could stop arriving tomorrow and it would not effect anyone in America one iota.
Any time you trade with a poorer, economically suppressed country, all you're going to get in return is job losses and cheap junk.
I imagine a majority of the cheap junk that we get from China could stop arriving tomorrow and it would not effect anyone in America one iota.
1
Tell that to Apple, which generated over $18B in revenue from China in just the past 90 days (or to the hundreds of other similar American companies)...
Josh Barro knows better than I do that China is only a place-holder here. A more accurate and more useful conclusion is something like "globalization is beating us" and China, for various reasons including especially its size, is the main country that is benefitting. If China had not existed, the same effects would have happened vis-a-vis India, Bangladesh, Viet Nam, Malaysia, etc. etc. And in fact they are happening!
The lesson for policy is that acting against competing countries (which as Barro notes often means acting against USA-based companies' plants in those countries) can't do our workers any good. Helping our workers is the way to go -- both directly through some of the instruments mentioned by Hanson (and many others), and indirectly through improving our physical infrastructure, legal framework for doing business, and education systems.
We have met the enemy and he is us. Let's get our own house in better condition and earn a bigger share of the increased pie that globalization provides.
The lesson for policy is that acting against competing countries (which as Barro notes often means acting against USA-based companies' plants in those countries) can't do our workers any good. Helping our workers is the way to go -- both directly through some of the instruments mentioned by Hanson (and many others), and indirectly through improving our physical infrastructure, legal framework for doing business, and education systems.
We have met the enemy and he is us. Let's get our own house in better condition and earn a bigger share of the increased pie that globalization provides.
3
It is hard to believe that academic economists were unaware of how difficult job dislocation is. They have been hiding their heads in the sand, for all they had to do is look at all their graduate students who did not get tenure or who for one reason or another (and not always because of competence) did not get jobs. There are gobs of them struggling as adjuncts--after years of study to get their PhDs! Yikes! Deliberate ignorance.
4
Trade theory is being challenged at its core. The win-win assumption is based upon a few underlying false assumptions that were not tested. (1) Labor markets will adjust, so there is no job loss, just job reallocation. The paper in the article shows how this is not true. (2) Trade imbalances must not persists, there must be balance. The paper does not fully discuss this false assumption, but labor markets can't adjust if there is unbalanced trade. (3) Rational markets exist rather than national strategies and state-influenced political economies. The US persists in believing other countries are like us. But China, Vietnam, Germany, Japan all use tools ranging from state-capitalism to industrial policy to benefit their state-owned, state-influenced or national champion industries. The tactics are designed to make them win the balance of trade and competition for jobs game for a period of years. Free market theory has nothing to say on these issues because it assumes them away.
8
Where does anyone get the weird idea that the economic law of comparative advantage isn't going to hurt American workers in many traditional, particularly labor intensive, industries when subjected to competition from places like China? Of course it is. And China isn't the first. Or hasn't anyone noticed those empty mills across New England. The question is how do you ameliorate this? Having been involved in running a business with exactly this challenge I understand the size of the problem. The US with it's open and relatively laissez faire approach to business isn't very well equipped to deal with this and doesn't really have the right mindset with its obsession with obtaining the cheapest possible. Germany in particular has been much more effective at protecting its manufacturing base through a combination of government action and national psychology which is basically rather chauvinist in these matters.
6
You mean Ross Perot was right along? What a surprise!
Conveniently though in the interim, the wealth has been vacuumed up to the top and tucked neatly away overseas. As an added advantage, workers’ leverage is completely undermined because of labor surplus and since the means of production has been shifted overseas beyond the reach of labor action.
There was a different Globalization model. US Companies could have invested overseas to build overseas economies rather than to ship cheap goods to the US. Oh well.
The path forward is pretty obvious. We need to rebuild a localized US economy that achieves ecological sustainability and shared economic prosperity. Whatever policies are consistent with those goals should be pursued, and paid for by a rebalancing of wealth distribution within the US. I know…but I can dream can’t I?
Conveniently though in the interim, the wealth has been vacuumed up to the top and tucked neatly away overseas. As an added advantage, workers’ leverage is completely undermined because of labor surplus and since the means of production has been shifted overseas beyond the reach of labor action.
There was a different Globalization model. US Companies could have invested overseas to build overseas economies rather than to ship cheap goods to the US. Oh well.
The path forward is pretty obvious. We need to rebuild a localized US economy that achieves ecological sustainability and shared economic prosperity. Whatever policies are consistent with those goals should be pursued, and paid for by a rebalancing of wealth distribution within the US. I know…but I can dream can’t I?
7
Any company that plans to do business in China must give up a 51% ownership stake in the venture before they can start manufacturing anything. It allows the government to lower wages and not lose income from a dirt-poor tax base.
How can we compete with that? How can an American wage earner pay their bills, while our industries tank our wages so they can compete? Communism owns the means of production. They can afford to run a top-down business culture that only profits the few at the cost of the many. America cannot.
We need to recognize that monopolies and vertically integrated industries are failing us and they a ruining our economy. Diversifying our business sectors so distributors and manufactures are separate from each other and from our retail markets is critical or our economy will continue to dry up and disappear.
How can we compete with that? How can an American wage earner pay their bills, while our industries tank our wages so they can compete? Communism owns the means of production. They can afford to run a top-down business culture that only profits the few at the cost of the many. America cannot.
We need to recognize that monopolies and vertically integrated industries are failing us and they a ruining our economy. Diversifying our business sectors so distributors and manufactures are separate from each other and from our retail markets is critical or our economy will continue to dry up and disappear.
The greatest thing to corporations selling products is access to the US markets and its’ vast population of consumers. Why not charge a market access fee to any corporation that does not manufacture in the US? US firms that stay local, are registered as US companies and pay US taxes and employ US citizens for 80% of their work force and earning 80% of the wages and declare 80% of their gross income as US and pay full taxes on that 80% (need multiple check points to avoid tax evaders) get a free pass. But US corporations that set up shop in Ireland or other tax havens or manufacture off shore get hit with the fee on all imported goods or services.
10
It doesn't take brains to figure out that outsourcing jobs to China , India or any other third world countries will destroy the quality of life and the standards of American and European workforce. The numbers don't compute.
The fact that we don't create anything here is going to greatly limit our ability to problem solve in more than one way. Problem solving is based on trial and error based on real things built incrementally over centuries of knowledge. once a link in that chain is cut everything falls apart. The more we ship away The more we are going to become vulnerable, and whoever holds the means of production will be able to crush us.
The fact that we don't create anything here is going to greatly limit our ability to problem solve in more than one way. Problem solving is based on trial and error based on real things built incrementally over centuries of knowledge. once a link in that chain is cut everything falls apart. The more we ship away The more we are going to become vulnerable, and whoever holds the means of production will be able to crush us.
7
One solution, which is in the power of the Us to implement, is to impose a VAT
Tax on all consumer goods, except food, the great majority of which are produced overseas. Use the proceeds of the VAT to pay for , or subsidize health care insurance for everybody. Since we get cheap goods from overseas,
We can certainly afford a tax on these cheap goods. As for goods made in the US, the reduction of the health insurance cost from manufactured gods would
Enable US mfrs to reduce their prices to partially or totally offset the VAT.
US goods would also be more competitive in overseas markets (without the burden of health care costs added to product prices), as well as in the US.
Let's play the game as other countries do, since we are playing in the global arena. It's not economic theory. It's using policy to effect change.
Tax on all consumer goods, except food, the great majority of which are produced overseas. Use the proceeds of the VAT to pay for , or subsidize health care insurance for everybody. Since we get cheap goods from overseas,
We can certainly afford a tax on these cheap goods. As for goods made in the US, the reduction of the health insurance cost from manufactured gods would
Enable US mfrs to reduce their prices to partially or totally offset the VAT.
US goods would also be more competitive in overseas markets (without the burden of health care costs added to product prices), as well as in the US.
Let's play the game as other countries do, since we are playing in the global arena. It's not economic theory. It's using policy to effect change.
3
when even the poorest american, who would benefit the most from a single payer health system, is convinced, by the moneybags propaganda, that it is a sin to be taxed, i dont think the concept of VAT would fly anywhere in the usa
Bernstein and Baker are advocacy economists who have spent most of their careers working for labor-funded think tanks.
The consensus among academic economists would be something as follows: Trade benefits all trading countries in aggregate but also exacerbates income disparity in developed nations, since great pools of low-wage labor in developing countries will put downward pressure on the wages of low-skill labor in rich countries. That doesn't mean that these workers will earn less, but their rages are likely not to rise as fast as those with higher skills. On the other hand, on the consumer side of things, those with lower incomes will benefit from trade more, since they spend a larger share of their incomes on manufactured goods and food, which have dropped in price due to trade in comparison to services.
Most economists would say that several factors are responsible for growing income disparities, including some combination of the following: technology, assortative mating, social mores, immigration, stalled education gains, and, yes, globalization and trade. As a single factor, however, trade's role here is likely much smaller than its impact on increasing low-income people's purchasing power as consumers.
Don't throw out the baby with the bath water. Tax the rich and redistribute. Don't attack trade.
The consensus among academic economists would be something as follows: Trade benefits all trading countries in aggregate but also exacerbates income disparity in developed nations, since great pools of low-wage labor in developing countries will put downward pressure on the wages of low-skill labor in rich countries. That doesn't mean that these workers will earn less, but their rages are likely not to rise as fast as those with higher skills. On the other hand, on the consumer side of things, those with lower incomes will benefit from trade more, since they spend a larger share of their incomes on manufactured goods and food, which have dropped in price due to trade in comparison to services.
Most economists would say that several factors are responsible for growing income disparities, including some combination of the following: technology, assortative mating, social mores, immigration, stalled education gains, and, yes, globalization and trade. As a single factor, however, trade's role here is likely much smaller than its impact on increasing low-income people's purchasing power as consumers.
Don't throw out the baby with the bath water. Tax the rich and redistribute. Don't attack trade.
4
"Bernstein and Baker are advocacy economists who have spent most of their careers working for labor-funded think tanks." I'm uncertain why you point that out, but it's interesting that the truth of the arguments they and the unions have made for years is finally being recognized by academic (ivory tower?) economists.
And one of those truths is that low-skill labor in rich countries - if that's how you chose to characterize workers in the manufacturing sector - don't just face their wages rising more slowly, they see complete elimination of those good-paying jobs. As a result, there are a lot more people "enjoying the benefits" of the lower-priced imported goods that are all they can afford.
There's a great line I read somewhere: "Henry Ford paid his workers so they could afford to buy one of his cars. The Waltons pay their employees so they have to shop at WalMart." That's the New Economy, thanks in large part to trade agreements (NAFTA, TPP, etc.) that cater to corporate interests while throwing the middle class under the bus.
And one of those truths is that low-skill labor in rich countries - if that's how you chose to characterize workers in the manufacturing sector - don't just face their wages rising more slowly, they see complete elimination of those good-paying jobs. As a result, there are a lot more people "enjoying the benefits" of the lower-priced imported goods that are all they can afford.
There's a great line I read somewhere: "Henry Ford paid his workers so they could afford to buy one of his cars. The Waltons pay their employees so they have to shop at WalMart." That's the New Economy, thanks in large part to trade agreements (NAFTA, TPP, etc.) that cater to corporate interests while throwing the middle class under the bus.
4
I agree, though you left out the fact that the benefits of trade are widely dispersed across all people, but the costs are concentrated among the workers in non-competitive industries. So an individual losing a 40k a year job may have several thousand dollars a year worth of benefits from free trade, but they are still in the negative. The solution to this, as you say, is altering the tax code, increasing taxes on the well-to-do (those with net benefits from trade), and redistributing the benefits to ensure that the costs are dispersed as well as the benefits (widely distributed, everyone's share of the cost will be less than their share of the benefits). Failure to do that means increased inequality, and it means that the small group that bears the larger costs finds it easier to politically unite and attempt to change policy than the large majority that has net benefits--which risks the whole system.
1
JRB, you think most academic economists would agree that, "great pools of low-wage labor in developing countries will put downward pressure on the wages of low-skill labor in rich countries".
Wouldn't they also say that great pools of low-wage illegal immigrants' labor in the U.S. puts downward pressure on the wages of low-skilled citizens and of legal immigrants?
Ordinary Americans, who have no more than a high school diploma, have to compete with both cheap laborers in other countries and with illegal immigrants in our country.
Wouldn't they also say that great pools of low-wage illegal immigrants' labor in the U.S. puts downward pressure on the wages of low-skilled citizens and of legal immigrants?
Ordinary Americans, who have no more than a high school diploma, have to compete with both cheap laborers in other countries and with illegal immigrants in our country.
The key issue is the trade imbalance and its mercantilist origin. The nations of Southeast Asia and China pursued policies to generate massive current account surpluses with the US beginning in the late 1990's. SE Asian countries wanted to build up a reserve of dollar assets as a cushion against a future run on their currencies; China needed to promote net exports to maintain full employment in the face of huge over-saving. The consequent drain on US demand is the ultimate source of the secular stagnation it has experienced.
In my recently published 'The Financial Crisis Reconsidered: The Mercantilist Origin of Secular Stagnation and Boom-Bust Cycles' (Palgrave-Macmillan). I propose a novel theory to account for the ultimate origins of secular stagnation and economic volatility. I show how Accumulation, which occurs when a person or country earns more than it ever plans to spend, generates both an excess of saving and a deficiency in demand. While savings provide the funds to promote booms, under-consumption ensures that these booms will turn bust and that the economy will fall short of its potential growth rate. I argue that mercantilists and top income earners engage in Accumulation, and that the influence of both types has grown in recent decades.
In my recently published 'The Financial Crisis Reconsidered: The Mercantilist Origin of Secular Stagnation and Boom-Bust Cycles' (Palgrave-Macmillan). I propose a novel theory to account for the ultimate origins of secular stagnation and economic volatility. I show how Accumulation, which occurs when a person or country earns more than it ever plans to spend, generates both an excess of saving and a deficiency in demand. While savings provide the funds to promote booms, under-consumption ensures that these booms will turn bust and that the economy will fall short of its potential growth rate. I argue that mercantilists and top income earners engage in Accumulation, and that the influence of both types has grown in recent decades.
4
For 50 years after WWII mainstream economists preached the virtues of free trade and low tariff barriers as the keys to economic growth. For 50 years after WWII, Asian countries, including Japan, Singapore, Taiwan, South Korea and now China, ignored that advice and practiced the opposite - higher barriers to manufactured imports, dumping and massive subsidies to growing industries trying to gain a foothold in advanced markets, and hugely undervalued exchange rates. What happened? Those same countries experienced the most rapid growth every seen in world history. China is simply following in the footsteps of its Asian neighbors in ignoring economic theory, and profiting as a result.
15
During their industrialization periods, western countries also protected their domestic companies with high tariffs on imported goods.
1
I would take issue with Mr Hansen's assertion, "The problem is that labor market adjustment is too slow.” Close to a billion people left rural villages in 10 years in China to work in Chinese manufacturing. That's not slow.
To blame any one for drowning because they couldn't out run a tsunami is imperious language, and to label drowning as "distributional effects", is dehumanizing the "disaster".
In the same 10 years the bottom fell out of the market for highly trained US engineers in network and data hardware. China no longer imports high tech US equipment. They build it themselves, and they now sell it throughout Asia-Pacific, the BRIC countries, any place that is, in fact, still building large national data networks.
So much for re-training workers, unless you mean taking an unemployed engineer in laser driven optical fiber networks and teaching them to make Latte's.
To blame any one for drowning because they couldn't out run a tsunami is imperious language, and to label drowning as "distributional effects", is dehumanizing the "disaster".
In the same 10 years the bottom fell out of the market for highly trained US engineers in network and data hardware. China no longer imports high tech US equipment. They build it themselves, and they now sell it throughout Asia-Pacific, the BRIC countries, any place that is, in fact, still building large national data networks.
So much for re-training workers, unless you mean taking an unemployed engineer in laser driven optical fiber networks and teaching them to make Latte's.
21
That China has an absolute advantage instead of a comparative advantage (in econ speak) is and has always been perfectly obvious. American capitalists apparently never got over their loss of free labor in 1865 and never got over the ability to openly dump toxic waste into the nearest river. Hopefully soon, after wages equalize (i.e., workers in the US get poorer) and environmental standards are lowered in the US, manufacturing will come back here. All the establishment politicians will say that all this couldn't be helped, as if markets and trade are forces of nature that can't be shaped through the legislative process. And economists will still be busy making up theories justifying the will of the rich and powerful.
8
Though not quite Harvard, I graduated from Wheaton Elementary near Wheaton Maryland. There I learned basic arithmetic - lessons still useful today.
For example, since 1980 we've run a $13 trillion cumulative merchandise trade DEFICIT. (I had to wait until attending Wheaton High to learn the meaning of that word.) DEFICIT, in this context, means we imported far more goods than we exported - i.e. a net job loss and tax revenue loss for America.
Perhaps a simpler analogy would help. While taking containers to/from the Long Beach port, I found that ALL containers coming into the U.S. were loaded with goods, but only about one-third leaving the country were. Further, a sizable proportion of those leaving the country were loaded with scrap - NOT valuable produced goods. Thus, again indicative of both a net job loss and lessened tax revenues than if imported goods had instead been made in America.
Hopefully, my Wheaton Elementary and Wheaton High education is helpful to all those economists who did go to Harvard.
For example, since 1980 we've run a $13 trillion cumulative merchandise trade DEFICIT. (I had to wait until attending Wheaton High to learn the meaning of that word.) DEFICIT, in this context, means we imported far more goods than we exported - i.e. a net job loss and tax revenue loss for America.
Perhaps a simpler analogy would help. While taking containers to/from the Long Beach port, I found that ALL containers coming into the U.S. were loaded with goods, but only about one-third leaving the country were. Further, a sizable proportion of those leaving the country were loaded with scrap - NOT valuable produced goods. Thus, again indicative of both a net job loss and lessened tax revenues than if imported goods had instead been made in America.
Hopefully, my Wheaton Elementary and Wheaton High education is helpful to all those economists who did go to Harvard.
29
What everyone seems to know implicitly but that economists tend to gloss over is that when we're talking about "free trade" that most gains in trade are coming from regulatory arbitrage and not really true comparative advantage.
In college economics you learn that comparative advantage is what drives gains from trade - I specialize in what I'm good at (i.e. what i can do cheaply), you specialize in what you're good at, and then we trade and the output of the two of us together as specialists is greater than before.
But what we have in the real world isn't really that the Vietnamese (or Chinese, or whoever) are specializing in making clothes because they've developed skills or technology to do it cheaper. They just do it cheaper because they have a fraction of the worker and environmental protections that we have in the west and almost no social safety net. Then western companies (and consumers) just take advantage of regulatory arbitrage in worker wages. The west really shouldn't be trading with countries that refuse to have decent worker protections. Such refusal to trade would save domestic jobs and encourage low-wage countries to have better worker protections too.
In college economics you learn that comparative advantage is what drives gains from trade - I specialize in what I'm good at (i.e. what i can do cheaply), you specialize in what you're good at, and then we trade and the output of the two of us together as specialists is greater than before.
But what we have in the real world isn't really that the Vietnamese (or Chinese, or whoever) are specializing in making clothes because they've developed skills or technology to do it cheaper. They just do it cheaper because they have a fraction of the worker and environmental protections that we have in the west and almost no social safety net. Then western companies (and consumers) just take advantage of regulatory arbitrage in worker wages. The west really shouldn't be trading with countries that refuse to have decent worker protections. Such refusal to trade would save domestic jobs and encourage low-wage countries to have better worker protections too.
36
While I champion your insight on the regulatory arbitrage that contributes to the comparative economic advantage, I would like to remind all that lower government environmental and occupational regulatory requirements aren't the predominant reason for the "cheaper" production costs in developing countries. The expected gain (or the desired pay) is also much lower for workers in developing nations, therefore the cheaper production cost. I challenge any fair mind to deny the fairness of asking less for winning business. When has Economics granted rich countries the privilege of earning more for the same production? Isn't cost competition good for forcing the more expensive to be more productive? If you had seen how inefficiently construction workers, protected by the minimum wage law, do work in New Orleans, you would have supported the labor imports (not merely goods imports) from other developing countries, so the lazy would be sifted out. Such is the blessing and definition of fair trade and competition.
1
This reminds me of trying to determine who let the horse out of the barn 20 years after he left.
The capitalists and America's richest people decided to do away with hundreds of years of manufacturing in the US in order to take it to China for cheaper labor. They believed that the service industries in the US could be enriched by offshoring our manufacturing to places like China and South Korea. It worked. But now manufacturing has disappeared (except for armaments) and these capitalists (including the multinational corporations) have richly benefited in extracting their profits and pleasing the stock market, which relishes profitability at any expense.
Our country has been devastated by loss of wages and the deterioration of our greatest manufacturing cities.
Perhaps now we should seek retribution by leveling a 65% tariff on all goods brought back into this country and by finding a way to tax the greedy capitalists to make up for the harm they've done to this country. Perhaps reparations are in order.
The capitalists and America's richest people decided to do away with hundreds of years of manufacturing in the US in order to take it to China for cheaper labor. They believed that the service industries in the US could be enriched by offshoring our manufacturing to places like China and South Korea. It worked. But now manufacturing has disappeared (except for armaments) and these capitalists (including the multinational corporations) have richly benefited in extracting their profits and pleasing the stock market, which relishes profitability at any expense.
Our country has been devastated by loss of wages and the deterioration of our greatest manufacturing cities.
Perhaps now we should seek retribution by leveling a 65% tariff on all goods brought back into this country and by finding a way to tax the greedy capitalists to make up for the harm they've done to this country. Perhaps reparations are in order.
32
Having lived near rust belt cities and seen what damage the de-industrialization of the USA has cost, it is important to know who in the USA aided and abetted this process.
A friend used to work as a design engineer at West Bend Appliances in West Bend, WI. Their biggest customer was wal-mart and they were told by wal-mart they must lower their prices and wal-mart would help them do that. Well wal-mart provided the contacts for small electrical devices in China and when they got their production up and running, they were told that wal-mart would now buy directly and as a result West Bend Appliance manufacturing facility was closed down and the workers lost their job.
Had to be in West Bend, drove to the east side of town and there behind a rusty fence with a rusty chain locking it was the West Bend factory.
Workers in the USA are not stupid and this is why people like the donald and the likes of sarah palin - "I can see Russia from my kitchen window" are now knocking on the WH door.
Fair Trade yes - free HA HA HA
A friend used to work as a design engineer at West Bend Appliances in West Bend, WI. Their biggest customer was wal-mart and they were told by wal-mart they must lower their prices and wal-mart would help them do that. Well wal-mart provided the contacts for small electrical devices in China and when they got their production up and running, they were told that wal-mart would now buy directly and as a result West Bend Appliance manufacturing facility was closed down and the workers lost their job.
Had to be in West Bend, drove to the east side of town and there behind a rusty fence with a rusty chain locking it was the West Bend factory.
Workers in the USA are not stupid and this is why people like the donald and the likes of sarah palin - "I can see Russia from my kitchen window" are now knocking on the WH door.
Fair Trade yes - free HA HA HA
4
Global trade has never served the average American worker. It serves corporations and the wealthy quite well. I always try to buy products that were NOT made in China, but sometimes it's difficult to get that information. And, now it looks like businesses manufacturing products in China may not be helping Chinese citizens, either. The game is always rigged in favor of the wealthy. I'm sick of it. People are allowed to be rich, but not at the expense of those at the bottom of the heap. It's un-American.
38
Uh...global trade, particularly with China, serves the average American consumer (worker - those with income) quite well. I think it's great that you try buy products not manufactured in China but the reality is that their cheap manufacturing translates into lower prices for consumers in America. There's always going to be a trade-off, but to act like there is no benefit to American consumers (poor, middle class, wealthy) is to leave out inconvenient information that doesn't support your argument.
4
I am not sure there is a benefit. I get to buy two sweaters manufactured in china but i lose my job and my middle class status. Plus my government does not make the countries who have taken my job play fair so there is an imbalance of more exports to us and less imports. Manufacturing has always been the wealth creation machine and we gave it away. I think we are down to 11% of GDP.
Why anyone shops at Walmart is a mystery to me.
Why anyone shops at Walmart is a mystery to me.
29
Manufacturing has not always been the wealth creation machine, especially low end manufacturing. The riches countries per capita income are Qatar, Monaco and Lichtenstein, and collectively they barely make any products.
China has lost vastly more manufacturing jobs than USA in the last ten years. Germany is the ideal model of a mature industry with open borders, open trade a strong services industry and high end manufacturing. Note they make CT scanners and Mercedes and not two sweaters.
China has lost vastly more manufacturing jobs than USA in the last ten years. Germany is the ideal model of a mature industry with open borders, open trade a strong services industry and high end manufacturing. Note they make CT scanners and Mercedes and not two sweaters.
1
I agree with many of the comments that highlight that the US has not had domestic policies to support our "free trade" philosophy. We have a centrally planned semi-captailistic country trading with the US. As we move to constantly promote more free trade (change the rules between countries), there is no plan to change the rules in support of the workers displaced when the new rules kick in. We basically are saying to the affected workers, tough, wrong place wrong time for your job skills. Someone in another country can do your work for a fraction of the price. This relaxed approach has decimated small town and big city America as companies close down manufacturing sites, take tax deductions and move on. If our capitalistic society cannot or will not invest in small town America, who will? America is only as strong as our least skilled workers. If we cannot create work then the dignity of having a job and being a contributor to our society is lost. There are domestic consequences to more free trade and we need to address them. The windfall of more and better paying jobs just never seems to materialize. Besides it is very difficult to educate and skill up if you are over 40, and impossible if over 50. Just ask the hiring managers.
24
In a "free market" for labor, workers are always losers. The company owners - capitalists - have the money and therefore the economic and political resources to minimize wages. Workers had made gains in the US and other industrialized countries by collective action - forming unions and just forcing legislatures to pass laws on limiting hours and other reforms. International trade allows companies to evade these things. The real conflict is not between countries, it is the classic one between capitalists and workers. It is remarkable how little supposedly liberal economists have learned about this.
68
You've been reading too much marx, buddy. The recycling factor or a fair, capitalist economy is the manufacturers. additionally, in this status quo world, employers -- calling employers, "capitalists" shows a ton of marxism bias -- and workers respond to the main assumption of capitalism... incentives. So i agree with you that not dealing with collective action is a positive incentive to outsource, but a larger incentive would be a drastically increased bottom line.
Many times companies who are not public and are succeeding dont feel much pressure to outsource except from retailers. Retailers always want to lower prices for consumers -- walmart -- and if they hold enough pressure over the manufacturer, can force them to make decisions that would not otherwise be considered.
thus the problem is within the relationship between the manufactures and the retailers, not the employer and the employee.
Many times companies who are not public and are succeeding dont feel much pressure to outsource except from retailers. Retailers always want to lower prices for consumers -- walmart -- and if they hold enough pressure over the manufacturer, can force them to make decisions that would not otherwise be considered.
thus the problem is within the relationship between the manufactures and the retailers, not the employer and the employee.
1
The 'supposedly liberal economists' are paid to not know this.
The less talked about negative aspect of the headlong jobs rush into China was that it was a betrayal of NAFTA, particularly Mexico. If the US has taken more of an "oil stain" approach when offshoring jobs (into contiguous neighbors) instead of China we wouldn't have had nearly the huge influx of undocumented workers coming here and taking yet a whole other class of jobs away.
It was a classic pincer move.
It was a classic pincer move.
17
Trump is right. We have a lot of weight we could throw around with China. We could say we will put a tariff on your goods, we can say we will put a quota on your goods. If they couldn't sell to the West, they'd be ruined, so they'd have to compromise.
9
To what industries will all of the dislocated workers be "reallocated"? Basic needs are being met--food, shelter, clothing, transportation--with fewer workers due to efficiencies and automation. What else do we "need"?
And how long can we run a trade deficit?
And how long can we run a trade deficit?
13
Wow, what a surprise.
When the housing bubble collapsed no one at the Treasury Dept, the Federal Reserve, or any elite college's Economics Department lost their job for incompetence.
Anyone who didn't say that America's free trade policies were hurting large segments of the American working class were either idiots or profiting from it.
When the housing bubble collapsed no one at the Treasury Dept, the Federal Reserve, or any elite college's Economics Department lost their job for incompetence.
Anyone who didn't say that America's free trade policies were hurting large segments of the American working class were either idiots or profiting from it.
53
Globalization, automation, supply chain logistics and production systems borrowed from the Japanese have all had a tragic effect on many US manufacturing workers. Off-shoring call centers, IT and back office functions has also been a body blow to some US workers.
And the transition to other kinds of jobs has been a big problem. Just ask someone who hires repair technicians or construction workers. These good paying jobs are hard to fill because qualified candidates, with problem solving skills and "show up every day" behaviors are surprisingly hard to find.
The US was poorly prepared for the predictable transformation of the world when the 1970s OPEC oil shocks first hit, when Nixon went to China and the Soviet Union collapsed.
Our education system failed many future workers in part because the brightest women had better opportunities and left traditional teaching careers. But it also failed because too many families placed a low value on it and sacrificing for the next generation fell out of fashion. Discrimination and low expectations played a part.
My best lesson in how to succeed in America is learned in the back seat of a cab. Invariably, drivers are 1st generation minority immigrants who have lived in poor communities, worked hard to put their kids through school and had high expectations for them, all while sending money back to their home country.
Take a ride in a cab and have a talk instead of looking at your phone.
And the transition to other kinds of jobs has been a big problem. Just ask someone who hires repair technicians or construction workers. These good paying jobs are hard to fill because qualified candidates, with problem solving skills and "show up every day" behaviors are surprisingly hard to find.
The US was poorly prepared for the predictable transformation of the world when the 1970s OPEC oil shocks first hit, when Nixon went to China and the Soviet Union collapsed.
Our education system failed many future workers in part because the brightest women had better opportunities and left traditional teaching careers. But it also failed because too many families placed a low value on it and sacrificing for the next generation fell out of fashion. Discrimination and low expectations played a part.
My best lesson in how to succeed in America is learned in the back seat of a cab. Invariably, drivers are 1st generation minority immigrants who have lived in poor communities, worked hard to put their kids through school and had high expectations for them, all while sending money back to their home country.
Take a ride in a cab and have a talk instead of looking at your phone.
2
Look Ahead
WA
The furniture industry didn't disappear from first Michigan and then the Carolinas (who had an internal comparative advantage over Michigan) because people were looking at the phone. And to claim that sacrificing for the next generation has fallen out of fashion when most parents are totally obsessed with their children and their prospects seems a bit questionable.
WA
The furniture industry didn't disappear from first Michigan and then the Carolinas (who had an internal comparative advantage over Michigan) because people were looking at the phone. And to claim that sacrificing for the next generation has fallen out of fashion when most parents are totally obsessed with their children and their prospects seems a bit questionable.
19
"Instead, China has run a persistent trade surplus. What that really means is that Chinese consumers save much of their income from export industries instead of using it to consume imports." Actually, China's savings rate is so high (nearly 50% of GDP) because inequality in China is so high, much higher than in the U.S. It's not because those Chinese factory workers are choosing to save rather than consume but because the Chinese billionaires are saving.
11
Economists are shocked that "trade" (that is, U.S. producers and retailers replacing reasonably paid U.S. workers with effectively cost-free labor in Asia) actually lowers wages and raises unemployment -- and anger -- in the U.S.. As Mark Twain would say, they are like Christian Scientists with appendicitis. The average U.S. high school dropout perceives the obvious more clearly: U.S. workers (including many immigrants) were dumped overboard in the millions, because formerly U.S. (now global) executives saw the opportunity to earn unbelievable amounts of money.
55
All of these trade and currency models are built on the same faulty premise. They imagine a world where 400 million members of the Chinese middle class along with 300 million members of the emerging Indian middle class can increase consumption whether in domestic or imported good just as the America's middle class has done over the last fifty years.
While this might work out in some economic formulas, it will doom the planet through global warming, species extinction and depletion of essential resources such as water.
The real challenge we face is how to create a new economic model for a sustainable future. The current models of ever increasing consumption are simply no longer viable. Our trade problem is not trade imbalances, but that the entire global capitalist system has created a sustainability imbalance that perils us all.
While this might work out in some economic formulas, it will doom the planet through global warming, species extinction and depletion of essential resources such as water.
The real challenge we face is how to create a new economic model for a sustainable future. The current models of ever increasing consumption are simply no longer viable. Our trade problem is not trade imbalances, but that the entire global capitalist system has created a sustainability imbalance that perils us all.
16
In fairness to the economics profession? You are kidding, right?
Bernstein is more than right when he says “The idea that trade competition with China has hurt various workers and communities is nothing new and extremely well known to people and voters in those communities."
I did sociological fieldwork in the late 1980s documenting the impact of the collapse of the textile industry in in rural eastern Tennessee. The process of "labor market adjustment was pretty grim" then, had economists been willing to look. More than one worker I knew of "adjusted" by dying of heart attacks after their jobs of 30 years disappeared almost overnight. It was grim years before in the steel-producing parts of Pennsylvania, and since the "end" of the recession.
What's shocking is that it's taken this long for the minds of some economists to understand current realities.
Bernstein is more than right when he says “The idea that trade competition with China has hurt various workers and communities is nothing new and extremely well known to people and voters in those communities."
I did sociological fieldwork in the late 1980s documenting the impact of the collapse of the textile industry in in rural eastern Tennessee. The process of "labor market adjustment was pretty grim" then, had economists been willing to look. More than one worker I knew of "adjusted" by dying of heart attacks after their jobs of 30 years disappeared almost overnight. It was grim years before in the steel-producing parts of Pennsylvania, and since the "end" of the recession.
What's shocking is that it's taken this long for the minds of some economists to understand current realities.
69
What are jobs? BP, British Petroleum, employs thousands of Americans to drill for oil in the US and sell it back to Americans and soon, to Europeans. BAE System, another British multinational, employs thousands of other Americans building and, for more than a decade, selling more arms to the Pentagon than it does to its own British Ministry of Defense.
What exactly are jobs?
What exactly are jobs?
2
Surprising that a piece about trade imbalances with China does not mention the salient fact that both the USA and China are members of the World Trade Organisation. That meant, among many other things, that in 2009 the USA dropped its quota and visa requirements on Chinese apparel and textile products and they have flooded into the commerce of the USA in unheard-of amounts ever since. While China insisted that the USA drop these requirements, once part of our Customs regime for their imports, it has done nothing on its part to lower the prohibitive tariffs it imposes on American products. Faustian bargains are unpleasant, but we need to examine this one and also question why Congress has permitted a United States entity (US Customs & Border Protection) whose mission is to protect the commerce of the USA to kowtow so shamelessly to China. Who are the beneficiaries of these unilateral trade deals? The amoral multinational corporations and their investors here and elsewhere.
50
American industry has used moves to cheap labor markets consistently. The New England cotton mills moved to the South with gifts of tax relief in addition to cheaper labor. AT&T moved manufacturing to Mexico. Today in Florida Gov. Scott touts government cash and tax gifts to attract industry and it works. Global companies move fictional headquarters to low tax countries and stash profits abroad. The capitalist system dictates doing whatever it takes to increase profits including "buying" state legislatures. Thus we have a predominance of Republican states. An added bonus with that control you can vitiate EPA regulations so extractive and manufacturing industries can pollute without "regulation". Musk and other AI developers are funding research to insure that when the Singularity occurs it will be friendly to humans. We need to imbue the Capitalist system with ethics that are friendly to a workforce which is now powerless without unions. China is not the enemy, they have learned the lesson of exploiting weaknesses.
33
All true Chuck T but nothing approaches the impact of China in terms of sheer scale. There is no historical precedent for a country absorbing ALL net FDI to developing nations over a 25 year period.
Americans were told:
1) Our (whatever that means) companies would gain access to 1.3 billion new consumers, and
2) Our investment in China would help foster democracy and human rights there.
Whoops! That's a big negatory on both counts.
Americans were told:
1) Our (whatever that means) companies would gain access to 1.3 billion new consumers, and
2) Our investment in China would help foster democracy and human rights there.
Whoops! That's a big negatory on both counts.
9