August 1, 2010

The dogma of globalism

"Skeptical Economist" emails:
I think a useful question is how 'free trade' became such a cult in the U.S. Clearly, it wasn't the dominant ideology until quite recently. Notably the Reagan administration did all sorts of things (trade barriers, domestic content, devaluation) that the current crop of Republicans (and Democrats) regard as 'Unthinkable'. A few conjectures.

1. The current elite cohort took enough economics in school to understand comparative advantage and production possibility frontiers. As a consequence they think they know enough about trade to have a settled opinion. Of course, they don't have a clue what the current account is or the definition of purchasing power parity. But a little bit of knowledge that supports one's prejudices is a powerful thing.

2. The 'Smoot Hawley' caused the Great Depression meme somehow became the accepted wisdom of American society. Stated differently, 'protectionism' became the ultimate no-no with SH and the Great Depression as the justification. The funny thing is that very few people (even the opponents of SH) saw it that way back in 1929/1930. Nor did Frederick Lewis Allen (Only Yesterday) writing in the 1930s. Nor did Galbraith a generation later. Nor did later economists such as Friedman or Bernanke all of whom devoted a large fraction of their careers to studying the Great Depression. Yet by the early 1990s, Al Gore felt he could refute Ross Perot by holding up a picture of Smoot and Hawley.

Clearly, Jude Wanniski's 'discovery' that the stock market crash was caused by Smoot-Hawley was enormously influential. The subsequent refutations got lost in the noise. Since the substance of Wanniski's argument wasn't great, his vast influence must be derived from something else. I would argue that elite society was looking a rationale for its policy preferences.

3. The ideology of globalization has become dominant in much of U.S. society. Arguably, it is THE ideology / religion of the elite. The vast and favorable response to Thomas Friedman's book The World is Flat tells us far more about prevailing ideas than the content of the book. One economist noted that in a book of 672 pages, the phrase 'trade deficit' never appears. The phrase 'free trade' shows up 30 times. The word 'trade' doesn't even appear in the index, 'free trade' does though.

4. The cosmopolitan idea/ideal has made considerable inroads in recent years. Clearly this is not unrelated to the ideology of globalization. What is different is that influential figures now boast about being 'cosmopolitans'. For example, see "Cosmopolitanism" by Matthew Yglesias. In the past, cosmopolitan was an avoided label and definitely used as an insult. Robert Shiller (Irrational Exuberance) wrote a good essay on "The New Cosmopolitans". He understands that he is one, but his interpretation is somewhat critical. It can be argued that Obama is our first truly cosmopolitan president. Famously, he showed his disdain for ordinary Americans with his line about bitter people in small towns.
"and they cling to guns, or religion, or antipathy toward people who aren't like them, or anti-immigrant sentiment, or anti-trade sentiment as a way to explain their frustrations."

Obama offered these candid words in private with no expectation that they would ever be disclosed. ...  What isn't so well know is where these notorious words were spoken. That part of the scandal never gained any notice. It turns out that it was on Billionaires Row in San Francisco. 
Conversely, his speech in Berlin on July 24th, 2008 was overtly public. It was also deeply cosmopolitan at many levels. My favorite lines are
"That is why the greatest danger of all is to allow new walls to divide us from one another.

The walls between old allies on either side of the Atlantic cannot stand. The walls between the countries with the most and those with the least cannot stand. The walls between races and tribes; natives and immigrants; Christian and Muslim and Jew cannot stand. These now are the walls we must tear down."

5. Samuel Huntington wrote about the denationalization of U.S. elites in "Who Are We." A major theme of his book was declining elite loyalty in the United States. Of course, this enables elites to espouse ideas that are bad for the U.S, but good for them.

6. A critical difference between this period and earlier eras of trade conflict (notably the 1980s with Japan) is the shift in corporate sentiment. In the 1980s, corporations and workers viewed the Japanese as essentially a threat. Rightfully so. Japan never made any material effort to co-opt the business elite and make U.S. economic decline privately profitable, even if publically disastrous. As a consequence, they were quite willing to support trade restrictions that protected both them and the U.S. from the foreign onslaught. Now we have a large segment of the corporate sector (Wal*Mart, Apple, etc.) dependent on policies that are highly detrimental to the U.S. I quote from Stephen Roach:
"In my view, this underscores a key element of tension in America’s current backlash against globalization that was not evident in the late 1980s.  Today, the pressures are being borne disproportionately by labor, whereas 20 years ago, capital and labor were in the struggle together.  In the late 1980s, many of the once proud icons of Corporate America were fighting for competitive survival at the same time that US workers were feeling the heat of global competition.  The pain was, in effect, balanced.  Today, US companies, as seen through the lens of corporate profitability, are thriving as never before while the American workforce is increasingly isolated in its competitive squeeze.  In essence, capital and labor are working very much at cross purposes in the current climate, whereas back in the late 1980s they were both in the same boat."

7. Somewhere from the 1990s onward, U.S. elites became convinced that they are so 'good' (superior, competitive,etc.) that they will come out on top in a globalized world, even if ordinary Americans and America as a whole suffers. For some of them, this is probably true. However, the class that worships Alice in Wonderland goes far beyond the infinitesimal number of hedge fund traders who can float back and forth from London to Greenwich, CT as tax rates and opportunities dictate.

Part of this is reasonable of course. Globalization (presumably) inflates the value of scarce skills while making unskilled or semi-skilled labor less valuable. However, the elite embrace of this mindset goes far beyond any rational calculation of interest. It is ultimately part of the bubble of American supremacy. 

A few years ago, Stephen Roach of Morgan Stanley asked one of Bush's Treasury Secretaries (not Henry Paulson) how America would earn its way in the world after our productive sector collapsed. The answer was that we (the U.S.) would act as 'capital allocator to the world.' Of course, this insane dialog attracted zero attention at the time or subsequently. The only good news is that U.S. credibility as a 'capital allocator' is within rounding error of zero.

In the same period the U.S. trade deficit reached its zenith (breaking every record for such things, by far), the standard explanation was that 'this was proof how of attractive the U.S. is to invest in'. Completely delusional but the received wisdom of the time. ...

A few years ago, a very good guy, Brad Setser wrote that U.S. policy towards China appeared to incorporate tradeoffs that reflected a subjugation of the general interest for narrow elite interests. At the time, the U.S. was pressing China quite hard to open its financial markets to U.S. investment bankers. The quid pro quo was continued, unconstrained Chinese access to U.S. consumer markets. This was a dismal tradeoff back in the Zeros. Of course, China won't give U.S. I-bankers the time of day at this point. Nor should they. 
"A cynic might interpret the huge windfall gains that China has provided Goldman (and others) as the danegeld that China pays Goldman (and others) to use their political clout to fend of the protectionist hoards in the industrial Midwest.   So far, that strategy has worked."

8. To a degree, elites have embraced 'free trade' as a way of weakening labor interests in the U.S. Some of this is very explicit and tangible. Factories moving abroad chasing cheaper labor. However, at a deeper level 'free trade' can be seen as both a way of making labor dispensable and a rationale for doing so.

9. The current generation of elites are largely divorced from the actual production of anything. They may have come from families that worked in the productive sector. However, they typically advanced via academic skills, not entrepreneurship or corporate careers. Many, if not most, have spent their entire careers in government, academia, think tanks, etc. Perhaps the only private sector activity they embrace / esteem is predatory finance. Predictably, finance is staffed by the 'best and brightest' from the same Ivy League skills and faces no serious competition from outside of the Anglosphere, at least so far. That finance is fantastically lucrative, urban, smokestack free and devoid of blue collar workers are just additional charms.

This looks like correlation of forces. A combination of economic interest, social preference, and ideology have made 'free trade' the mantra of our times. The good news is that this alignment is relatively new and deeply contrary to U.S. history. By contrast, 'free trade' has been the dominant ideology of the UK for 150+ years. The UK has deviated from 'free trade' occasionally (and successfully), but the ideology has remained dominant all the way to the present. For example, in the 19th century Dickens supported free trade for essentially liberal (in the modern sense) reasons. Free trade was supposedly good for workers and represented 'progress'.

As mentioned above, the U.S. adopted and relentlessly pursued 'protectionist' policies as recently as the 1980s. Clinton was able to avoid confronting these issues (and passing NAFTA) because the U.S. was enjoying  a vast boom / bubble. Bush conjured up the housing bubble to create the illusion that 'free trade' and prosperity might be compatible. Obama is in a tighter box. His only bubble is Federal debt. A few off-the-deep-end Democrats are trying sell the notion that trillions of dollars in deficit spending are (almost) "free". I quote from Krugman:
"Let me start with the budget arithmetic, borrowing an approach from Brad DeLong. Consider the long-run budget implications for the United States of spending $1 trillion on stimulus at a time when the economy is suffering from severe unemployment.

That sounds like a lot of money. But the US Treasury can currently issue long-term inflation-protected securities at an interest rate of 1.75%. So the long-term cost of servicing an extra trillion dollars of borrowing is $17.5 billion, or around 0.13 percent of GDP. "

Will Obama break from 'free' trade? More broadly which party will turn against trade first? My guess is that it will be the Democrats because of their labor ties. However, it won't be easy for the Dems. The Dems are dominated by cosmopolitans who regard any hint of protectionism as an anathema. Obama did run against NAFTA in the primaries. However, that was clearly just a pretext for bashing Hillary (ironically, Hillary apparently opposed NAFTA when Bill was in office). Indeed, his economic advisers actually told the Canadians that this was all for show (a memo that was meant to remain secret leaked). Of course, Obama is the ultimate cosmopolitan at many levels.

The administration has promised to "double exports" and focus on manufacturing. So far, this is just mindless lip service devoid of any actual policies. Andy Grove advocates the kinds of things that might actually work. However, an administration comfortable with Timothy Geithner as the Secretary of the Treasury isn't going to cause any hard feelings in Beijing.

This could be a great opportunity for the Reps. However, a combination of corporate connivance, free market idolatry, and anti-government animus makes it almost impossible for the Reps to exploit this political opportunity. A related point it that a focus on domestic manufacturing (and production generally) would be a great opportunity for the Reps to broaden their base. The notion that Republicans can out-La Raza the Democrats is crazy. However, aggressive trade policies have vast potential for appealing to minorities as Americans. Notably, it worked 100 years ago in the era of McKinley and Teddy Roosevelt.

My guess is that the U.S. will languish for some number of years until 'something' forces a real shift in policy. What 'something' will be I do not know.

P.S. An associate sent me a copy of an essay asserting that Obama is a Marxist. I replied that describing Obama as a Marxist is factually wrong and likely to detract from any critique of Obama's policies. I pointed out that technically, Obama is a neoliberal. However, 'neoliberal' doesn't set off any alarm bells in the U.S. By contrast, 'cosmopolitan elitist' is a stab wound that hits home.

140 comments:

Anonymous said...

Economic creationism.

Get off this topic. It's not your forte.

John said...

Anon #1. Economics is not difficult. No specialists are needed. Don't gate-keep. It's annoying.

Anonymous said...

It should be remembered that the British Empire had their "free Trade" fanatics too. "Free Trade" was great for the UK when they were the Dominant manufacturing power 1830-1890 but once the USA/Germany/etc. began erecting tariff barriers and competing for export markets the UK was screwed. Eventually, the British Empire learned their lesson and put their own tariff walls but they were 30 years too late.

Great analysis Steve.

Anonymous said...

Don't kid yourself - the unions killed America's manufacturing base.

Come to Red State America, and you can still find plenty of manufacturing jobs.

Anonymous said...

The degree of free trade idolatry among economists cannot get enough blame for the destruction of our industrial and technological base. I have spoken to many many leading economists, including Nobel winners, and there is an almost universal uncritical belief that free trade must be good for the United States - a belief that they have ingrained in the politicians they advise and students they educate. As Paul Samuelson, the Nobel economics winner, text-book author, and great idolizer of free trade said:

"I don't care who writes a nation's laws. or crafts its advanced treatises, if I can write its economics textbooks"

Economics is by far the most popular major at the most elite universities in the US, such as Harvard and Stanford, where students are inculcated with this dogma and study economics with no relation to the real world.

Also, some things need to be added to your correspondent's list:

1. The elite belief that we must continue to move up the food chain as we did from agrarianism to the industrial revolution to the computer age to the internet age... they believe manufacturing no longer matters and we will continue to perform high-end engineering and design here (i.e., move up the food chain) even as everything gets made in China.

2. The short-termism of our corporations that cut corners at every turn and lay off people with decades of industry skills and institutional knowledge for short term profit. As just one example, I know are industrial chemical industry is in a sorry state with companies today unable to understand or improve many processes that were developed in prior decades, not to mention completely lacking the ability to develop new ones. And most leading universities in the US no longer train chemical engineers to design industrial processes, but focus on biotech and related niche technologies that are glorified science projects that will never see the light of day or contribute anything substantial to GDP.

Anonymous said...

A problem with "cosmopolitan elitist" is that used as an epithet cosmopolitan" is understood as antisemitic.

Anonymous said...

"Anon #1. Economics is not difficult. No specialists are needed. Don't gate-keep. It's annoying."

Seriously?

It's not difficult?

Then why does he keep epic-failing at it?

Whiskey said...

Obama is indeed a Marxist. Not the least of which is redistribution of wealth along racial lines. Like his father.

Ironically, I have a post up on my site detailing the folly of Hollywood's globalism.

Short story, the breakdown of ticket sales by nation is so small (China and India, the "growth" markets are less than 5%) and requires so much "boots on the ground" for no cheating, etc. that its not worth it. AVATAR for example in gross ticket sales made 27% of the money in the US, the rest overseas.

Other "fun facts" are Black actors don't sell well overseas, TV had more Black leads in widespread viewership in the 1970s, when the US was 87% White (Sanford and Son was often the #2 show), and the sale of Miramax putting a value of about $900 K per film on its library (it has no other assets to speak of).
-------------------
Reps and Dems are transforming themselves. Dems are the party of Kerry and his Yacht worth millions, evading taxes, Reps are Brown and his pickup truck. Dems cannot and will not change to be protectionist, not the least of which is the elites, hate manufacturing.

Reps are slowly but surely tossing out insiders for insurgents like Rand Paul and others. While McCain may hang on, for now, even Grahamnesty is running scared. The Tea Party movement promises to get rid of much of the elite cronyism for small business oriented stuff.

Manufacturing on a large scale moved to China fifteen years ago or more, so its not coming back, from Caterpillar or GM or Boeing (which makes its wing assemblies in Vietnam, even cheaper than China). The only hope is small business growing into larger ones.

It will take economic collapse, a task Obama is certainly up to creating.

Anonymous said...

Wealth by itself means almost nothing, at least for most people, who are not like Scrooge McDuck. Relative welth on the other hand means almost everything. Money means power also in international relatioships. In the first world our basic needs have been satisfied perfectly for a long time, but Marx was right in that capitalism constantly creates new needs. So the distribution of wealth is what matters.

ATBOTL said...

Before neo-liberal dogma, there was laissez-faire dogma in the the 19th and early 20th Centuries. It would be good to look into how the religion of free markets was undermined and overthrown by progressives, labor activists and others. In the US, Midwestern farmers were one of the groups who fought against paleo-liberalism. Basically, all the Red State types were Democrats against big business, banks and free trade and the Blue State types were laissez-faire Republicans. Some things change and others stay the same.

Red State manufacturing workers still enjoy many benefits that the unions won, like the 40 hour work week and the idea that one shouldn't die on the job due to poor safety. The bosses didn't do any of that stuff because they were nice, they were forced to by a militant union movement.

Work before 1900 was not much better than slavery. Do a little reading about what life was like for industrial workers before unions, it will change your mind about a lot of things.

Anonymous said...

Interesting that you mention free trade in Victorian England.
Now that was an entirely different deal.
In those days, Britain was the ONLY exporter of engineering and manufactured goods in the world.What trade restrictions that did exist prohibited the import of cheap food for the workers, thus keeping small English farmers solvent.Hence the famous 'corn laws'.
I this particular context free trade was beneficila for England, as it had a virtual monopoly of machine building.

Anonymous said...

To the two bickerers, I refer you to the Stanlislaw Ulam quote.
Now Stanislaw Ulam, THERE was a real master-mind - the man who did the physics for the A-Bomb and H-Bomb.
He should know what is trivial and what is non-trivial.

Anonymous said...

If you guys think the USA doesn't "manufacture" anything anymore, then you need to spend some time in a hospital and check out the shiznat that the radiologists and OB/GYNs and gastroenterologists and cardiologists deploy in order to peer inside of their patients - we're talking physical sensors and algorithmic software packages which simply knock the socks off of anything that anyone else is doing anywhere in the rest of the world.

But it takes a Masters or a PhD in a pretty serious major [Physics, Math, EE, Comp Sci, etc] to be able to help design and produce those rigs.

Which doesn't leave much work for the average high school graduate to perform.

Heck, you practically need an undergraduate degree in Physics just to grow up to be the radiologist who deploys the machine.

Anonymous said...

The highest industrial growth rates Britain ever experienced were not in Victorian times as most people assume, but strangely enough, during the world depression of the 1930s.
And its no coincidence that during that brief period Britain ran perhaps its only modern day experiment with economic protectionism.It was during this period that all of the modern industries (now mostly gone), such as motor vehicles, electrical engineering, precision engineering, aircraft etc really took root in Britain, all these industries served Brtain well in the war and thrived up to the 1970s.
Also during this time Britain undertook a massive house-building program (no, it didn't end in teras like the USA), the likes of which have never been seen before or since.
In fact most Britons live in 1930s houses.

Anonymous said...

Free trade is probably always better for some random unselected person, somewhere in the world than a protectionist regime. If you have a cosmopolitan utilitarian ethic where it's not okay for you to care more about a fellow citizen's welfare than a foreigner's (that would be "bigotry") then naturally you will prefer it to a protectionist regime. Contrarily, if you aren't this but are an extreme individualist and you only care about your own welfare then free trade can at least appear to maximise your possibilities of getting what you want (travel, stuff moving to you, opportunity).

In neither instance do you really care much about any group larger than your self, but smaller than the entire world. (In fact, you probably regard being part of such a group as undeserved because it's "arbitrary" [being not based on your utilitarian ethic but rather tradition and the things we can't articulate easily because they are quantitative - like race] or reject it because it didn't involve your choice and intention for your own benefit [thus affronting your individualism]).

Most elites are some blend of these two ethics. It's really difficult to convert people away from cosmopolitan utilitarianism, so the best path is to appeal to their individualist ethics and make them understand how superfluous they would be in a "free" world. Unfortunately, if you do this they will likely deflect away to some elite cartel/class, rather than the nation as a whole (which is fortunately at least at present a minority tendancy).

headache said...

Great read Steve. Even the open-borders/free-trade fanatics in the EU are applying soft tariffs against Asia, Africa and the US.



Yet by the early 1990s, Al Gore felt he could refute Ross Perot by holding up a picture of Smoot and Hawley.

Is there a PC-topic you cannot find Gore in? He should stick to molesting masseuses.

Anonymous said...

An interesting anecdote from 1930s Britain.
During that time there was a prominent British newspaper publisher,magnate and right-wing populist named Horatio Bottomley.Bottomley was eventually jailed for a ponzi-scheme type rip-off.Anyhow, Bottomey was opposed to Britain's then lef-wing Labour Party, and in particular to one prominent Labour activist, the Yorkshireman George Smilley.Now Smilley was on of those old-school, bolshy, bloody-minded trade union activists that did so much to destroy Britain's industrial base back in the 1970s.
"Stop Smilley's Smelly Sentiments", ran a banner headline in Bottomley's 'John Bull' publication.
To those the dour Yorkshireman Smilley replied publicly to a packed meeting of Trade Unionists (best thought of in your best Yorkshire accent)
"Bottomley? - well, that's about as close to bum* as you can get without being rude, so he should know what stinks."
To which remark the packed meeting hall collapsed in peals of laughter.


*British vernacular,exactly equivalent to 'butt' in the USA.Not meaning 'tramp'.

dearieme said...

"it's not okay for you to care more about a fellow citizen's welfare than a foreigner's": well, if your fellow citizen is a foreigner, what sense would it make?

l said...

I don't think that transferring several trillion $s in wealth from the middle class to bankers is either 'free trade' or socialism.

Jeff said...

The very first thing I learned in both my economics classes in high school and college was the production possibility curve (proof that free trade is good for everyone).

We learned that before learning basic definitions like supply and demand, marginal, opportunity cost etc...

Anonymous said...

"Never mind the bollocks, here's the facts".

(As the Sex Pistols might have said).

During the period of the USA's rise to industrial supremacy in the 2nd half of the 19th century, the strictest regime of tarriffs on imported manufactures was in place.It was during this period that the foundation of the USA's rise to economic supremacy and pre-eminence was laid - the great cities were founded, the great inventions (automobiles, sewing machines, reaping machines, gramophones, telephones etc etc)were made and exploited in huge factories, 'ethnic' Eurpeans immigrated en masse to man the industries, and the USA has dined out on that period ever since.If that period had never occurred, the you'd all be sitting in another Mexico, Argentina and Brazil right now.Those coutries were all level pegging with the USA up to 1850s, but they never managed to industrialize - for what ever reason.

Average take home pay for your typical American worker HAS NOT INCREASED BY ONE CENT since 1972, which curiously is around the same time as 'liberal free trade policies' took root amongst elites.
Although wages haven't increased, living expences have - and massively, hence the mortgage meltdown and subsequent global economic catastrophe (which is far, far worse than the 30s debacle), that not has taken down the USA but stuffed most of the world with it too.Oh, while I am at it, a few other things too.The canny Chinese are still pulling in 10% growth rates admist America's doom (according to the freetraders taht should pull America up and out of it, but it hasn't), and America's super-rich have accrued ALL of the wealth increase of the past 40years to themselves.Witness Clinton's disgusting 'let them eat cake' wedding the other day to a banker, no less, whilst tens of million workers starve and live in cars.
Now, the proof of the pudding is in the eating, as they say, and the only justification whatsoever of any economic policy or of the subject of economics itself is to boost income per head of the average citizen - that was what Adam Smith was all about.
NNT and all the other clap-trap peddled by the charlatans claerly is just a load of worthless, useless guff.

cherub's revenge said...

The free traitors keep telling us America is the greatest flea market in the world; the one that every vendor is dying to get in to. But God forbid we charge a fee to set up a booth here.

Graham Asher said...

"Economic creationism.

Get off this topic. It's not your forte."

+1 to that. I don't know why Steve quoted the post. Steve, please get back to giving us original insights into stuff you know about.

JJW14 said...

If you want to describe Obama, I think the term is "Tranzi" taken of course from John Fonte's term "Transnational Progressive."

Glossy said...

"But the US Treasury can currently issue long-term inflation-protected securities at an interest rate of 1.75%. So the long-term cost of servicing an extra trillion dollars of borrowing is $17.5 billion"

Does that mean that once the general level of interest rates in the economy goes back up, the Treasury will still be able to only pay its creditors 1.75% on those bonds? I'm asking because I read somewhere recently that interest payments on the federal debt are expected to balloon once the general level of interest rates goes up. Whoever wrote that (unfortunately forgot the source) seemed to contradict what Krugman is saying here. Does anyone know who's right on this?

Anonymous said...

Good comments, except the flippant Krugman quotes. People like Krugman and Dean Baker have been saying, truthfully, that to fix long term budget problems "all you have to do is fix..." the healthcare system. Unlike the AYHDOIF education for NAMs crowd, lower cost high quality healthcare has been shown to work around the world.

Anonymous said...

one of the most succinct things you are have written... now.. what do we do about it!

Anonymous said...

Steve,
Sort of OT but could be pretty relevant. Perhaps you could comment on the states with the lowest unemployment rates. With the exception of Hawaii, all of these states have shockingly low levels of immgration.

http://www.businessinsider.com/10-best-states-for-employment-2010-7#10-oklahoma-1

Yes, I know these are commodity heavy areas of the country, but they also still value manufacturing and assembly. Someone should send Jason Riley from the WSJ or Dan Griswold from the Cato Institute to tell them how much better they would be if they all quadrupled their population of low and semi skilled foreigners. Just look at the wonderful quality of life in Queens and Jersey City!

Also, Joel Kotkin has written some good stuff on the re-birth of the "zone of sanity" (stretch of middle American from North Dakota to Texas). I think alot of iSteve readers probably agree with alot of what Kotkin has to say about industry, geography, elites, etc. However, alot of us just can't get over his desire for 400 million Americans. Nevertheless, some of his articles can be quite good:

http://www.newgeography.com/content/001653-the-great-great-plains

Steve Sailer said...

Dean Baker has a good track record.

The All We Have to Do Is Fix Health Care argument is, indeed, more plausible than most of the other All We Have to Dos. I don't have the knowledge to contribute much to the health care debate, unfortunately, so I don't write about it much.

Anonymous said...

When analyzing free trade, one first needs to understand what true free trade is, and the best example today of free trade is that which exists among the fifty states. Since our founding, the states have enjoyed free trade which means free movement of goods, services, capital and LABOR. There are some exceptions to services, but there is no exception to the free movement of labor. Anyone in any state can move to another state without prior approval.

If you ever want to know what the US could have been like without such internal free trade, read some of the descriptions of labor and trade restrictions that existed within European nations 300 years ago by Adam Smith.

When people say the United States is the richest nation on Earth because of free trade, it is due to the free trade that exists among our states. The Founders never intended for the US to engage in free trade with the world. In fact the US practiced a form of protectionist foreign trade policy that was later emulated by Germany, and then again by Japan, South Korea and China. However, supporters of free trade won't acknowledge that fact. Instead they try to set up the argument as free trade versus no trade.

I cannot support international free trade because I cannot support the free movement of labor across international borders. Imagine anyone anywhere being able to move to the USA anytime they wish as easily as someone moving from Florida to Colorado. In a way we already have that situation given the fact the Feds refuse to enforce our border. But at least the newcomers are supposedly in the shadows. Just think if they never had to worry about being in the shadows in the first place. It would blow the doors off any semblance of keeping the USA the USA.

Anyone who tells you the free movement of labor is not on the agenda is lying. Each round of trade talks has whittled away at more and more items. First it was manufactured goods, later financial services and now they are working out agricultural policies. Labor will eventually be discussed because free trade can't exist without the free movement of labor.

Anonymous said...

"Other "fun facts" are Black actors don't sell well overseas, TV had more Black leads in widespread viewership in the 1970s, when the US was 87% White (Sanford and Son was often the #2 show), and the sale of Miramax putting a value of about $900 K per film on its library (it has no other assets to speak of)."

I live in Asia, and several Asians I have spoken with recently are noting a decline in interest in the United States. People are not as interested in travelling there, for instance. "It is no longer so mysterious", they say. Is having a black president bad for U.S. global brand image?

- Rudy

Tom Piatak said...

An excellent post.

Anonymous said...

This could be a great opportunity for the Reps. However, a combination of corporate connivance, free market idolatry, and anti-government animus makes it almost impossible for the Reps to exploit this political opportunity.




Which is another way of saying that the GOP, lke the Democrats, is run by and for the Ruling Class.

Anonymous said...

The "free trade" which our elites are suhc fans of is not free trade at all. It's nothing like what Adam Smith would have considered free trade.


You can't have "free trade" when one party involved is not free. Americas trade ralationship with China is "managed trade" - managed with the agreement of the eites in both countries for their own mutual benefit.

Anonymous said...

Get off this topic. It's not your forte



Why don't you dazzle us with your brlliant economic treatise? Either that or get off this topic.

Anonymous said...

When analyzing free trade, one first needs to understand what true free trade is, and the best example today of free trade is that which exists among the fifty states.



And why is that the "best example"?


I cannot support international free trade because I cannot support the free movement of labor across international borders.


Can you cite any major free trade economist in history who thought that "free trade" meant the free movement of labor across internatonal borders?

As Milton Friedman put it, "the movement of goods is a substitute for the movement of people."

The entire point of free trade is that you do NOT need "the movement of people". Instead of having Swiss watch makers move to every place on Earth and make watches everywhere, the people everywhere trade with Swiss watch makers in Switzerland for their watches. That is what was always understood by free trade.

Anonymous said...

And BTW, over 1000 economists signed a letter to Hoover begging him not to sign Smoot Hawley. It is not a recent revelation that it was a terrible bill with obvious negative consequences - sensible people not in the thrall of social engineering mania saw it at the time.

Anonymous said...

Wall Street:

"Free trade for thee, but not for me".


Why can't Chinese banks set up shop here? Whats the difference between Chinese and Indian banks opening up ATMs and branches here and having customer-support centers located in Mubai and manufacturing in obscure Chinese provinces?

I have a feeling a Chinese bank wouldn't want a $20-a-month fee to have a checking account like Bank of America does.


By the way.........the companies pushing immigration "reform" the hardest according to my local newspaper were Oracle, Walmart, Microsoft, & TYSON foods. You can pretty easily avoid Tyson foods and Walmart. I am.

Tino said...

I think free trade is good, on the whole, for the U.S.

But the total damage of Globalism (unskilled immigration, current account deficits, elites more loyal to elites in other countries compared to non-elites in America) is so large that it totally dwarfs the benefits of free trade, compared to having some restrictions.

P.S

I have training in economics from the Stockholm School of Economics and the University of Chicago. In my opinion at least, Steve understands economics better than most economists I have encountered.

Mr. Anon said...

"Anonymous said...

Economic creationism.

Get off this topic. It's not your forte."

What did he say that was wrong? Or do you just want to throw around credentials, rather than arguments?

I've found more insight in what Steve has written about economics than in what (so-called) Nobel laureates like Paul Krugman have written.

You econ guys like to think you're smart. You ain't that smart, and your field is largely h**seshit. It's a way for non-technical people to delude themselves into thinking they have a highly technical job.

Anonymous said...

It only took me until item #2 to realize that "Skeptical Economist" doesn't know what he is talking about. Different economic schools continue to have opposing theories as to what caused the Great Depression (or rather, what exacerbated a "normal" economic downturn into a deep and prolonged depression).

Liberal/Keynesian types still argue that Hoover did not increase government spending enough to offset the drop in aggregate demand (the federal budget increased by about 50% during Hoover's term). The more neoclassical and monetarist types point to Smoot-Hawley and the Fed's decision to reduce the monetary supply when they should have been expanding liquidity.

But the assertion that critics of Smmot-Hawley at the time didn't argue that protectionism would make the downturn worse is pure historical ignorance. Over a thousand economists wrote an open letter to Hoover asking him not to sign the bill (that would be a large portion of the profession at the time). Major corporations that had heavy exports lobbied hard against the bill. They all made the same argument: that SH would result in retaliatory actions that would result in a sharp decrease in US exports. They were right. Exports dropped by 40%. It's a rare event in economics when a particular prediction can be put so clearly to an empirical test.

Finally, whatever one thinks of Jude Wanniski as an economist (and it's been years since I read any of his stuff), I'm sure even he would not blame the stock market crash of 1929 on the Smoot-Hawley tariff of 1930. He might have been dead wrong on every other matter, but I'm willing to bet that he could look up dates. Unlike "Skeptical Economist".

Anonymous said...

Globalization is not so much about exporting jobs to other countries as it is creating new consumers to replace and/or supplement the worn-out, overly-indebted ones in the US.

The middle-class experiment is about over. The ruling classes saw the danger that a well-educated, relatively prosperous citizenry represented to their hold on power. They are replacing this group with a vast worlwide semi-literate proletariat, condemned to consume junk food, junk media, and junk products made by the cheapest labourer.

Almost as bad as that 'boot forever stamping a face', isn't it ?

Anonymous said...

What could possibly motivate your protectionist anti-globalist view other than your insistence that some people are more morally worthy than others??


hm??


just come out and say it.

travis said...

This looks like correlation of forces. A combination of economic interest, social preference, and ideology have made 'free trade' the mantra of our times. The good news is that this alignment is relatively new and deeply contrary to U.S. history.

Does the Nullification Crisis and the subsequent War between the States not qualify as a part of U. S. history? Tariffs were put in place to benefit the Yankee industralists who had seized power. Now the holders of power, Yankee finance, no longer benefit from tariffs, thus we have free trade. It's all perfectly cut and dry. Get over it and accept Progress.

Anonymous said...

Mr. Anon wrote:

"You econ guys like to think you're smart. You ain't that smart, and your field is largely h**seshit. It's a way for non-technical people to delude themselves into thinking they have a highly technical job."

The first two sentences might or might not be correct, but the third is exactly wrong. Economics as it's practiced today is a mathematically technical discipline. Not string-theory or proof-of-Fermat level of sophistication, but it certainly requires the facility with differential equations and the like that you would find in engineering.

That, really, is the problem. That economists like other social scientists have "physics envy". They want economics to be a predictive science in the way that physics or chemistry are, and that will never be. There are precious few economic principles that could rise to the level of a "law" in the sense of a physical law. (I would suggest the dependence of price on the relationship of supply and demand as an example). But even these are not predictive in the way that the law of gravitation is. Circumstances are never the same, so there can never be repeated experiments like in a lab.

Fewer equations and more understanding of human nature(s) are called for. Maybe that's what Mr. Anon was getting at, but I just wanted to point out that economics as it's currently practiced is a mathematically demanding discipline.

bluto said...

For anyone wondering about first world manufacturing watch some shows like "How it's made" or "Unwrapped". Note that aside from luxury items, products are manufactured with human hands touching them less than twice and one of those is an inspection.

Free trade didn't end US manufacturing, there's still lots and lots of it (more than anywhere else). Technology ended US manufacturing jobs.

Anonymous said...

What could possibly motivate your protectionist anti-globalist view other than your insistence that some people are more morally worthy than others??



Oh, no! Not the belief that some people are more morally worthy than others! Not that!

There's something less than human about ideologues like you. I certainly consider you to be less "morally worthy".

Rohan Swee said...

They all made the same argument: that SH would result in retaliatory actions that would result in a sharp decrease in US exports. They were right. Exports dropped by 40%. It's a rare event in economics when a particular prediction can be put so clearly to an empirical test.

The counter-argument is that exports were going to go off a cliff, anyway, from other factors already baked in the cake, and that retaliatory tariffs caused a much smaller percentage of that decline than the conventional wisdom holds. In other words, "they were right" in the same way that a cock is right about his effecting the sun's rise.

dearieme said...

Is there any way known by which Americans can be persuaded that the notion that the automobile is an American invention is false?

Rohan Swee said...

Thanks, SE. Interesting comment.

"Free" trade may be the religion of the elite, but that unreflecting faith is apparently the one bit of "trickle-down economics" that has been trickling down in the last few decades.

If you follow articles concerning trade in the NYT or WaPo over time, you will note that, invariably, commenters will quickly turn up tut-tutting the author's ignorance of economics and suggesting that he "read up on Smoot-Hawley" or get an Econ 101 text and inform himself about Comparative Advantage.

Actually, the form of the comment is more often "!!!SMUTE-HARLEY!*!!!" or "COMPARTIVE AVANTIGE!!!!", the very mention of which is apparently supposed to settle the argument definitively and smite the ignorant heretics.

Anonymous said...

"What could possibly motivate your protectionist anti-globalist view other than your insistence that some people are more morally worthy than others??"

LOL. Steve, are you aware that some people consider you to be a racist? Because I think this person is trying to call you a racist.

KissTheGoat said...

The idea that free trade benefits both sides is an oversimplification.

Gomory and Baumol have an analysis that takes more detail into account in the book 'Global Trade and Conflicting National Interests', lending theoretical support to what we can actually see, more here:

http://www.thenation.com/article/establishment-rethinks-globalization

Anonymous said...

I like Dean Baker too, but I feel like he misled me about Social Security, which he insists is basically solvent, and not a scam.

Anonymous said...

The original free trade theorists of the late 17th early 18th century (Smith, Ricardo and Hume) assumed that trade would be kept in balance by the exchange of gold.

As described by David Hume, a surplus in trade would increase the gold stock of the country in surplus because the country in deficit would be forced to give up part of its gold stock. Back in Hume's time, gold was money and money was gold since fractional reserve banking hadn't been invented yet and a country's central bank was a strongbox. Eventually, the country in deficit would be unable to buy any more because it had no gold to exchange.

Today, trade is settled with fiat currency, mainly dollars, which allows the USA to run unlimited trade deficits until the dollar collapses. The only question is when not if.

Anonymous said...

Martin Kelly, A Scot's blogger is always saying that globalization is a policy not a process.

True , at least, of the UK.

JeremiahJohnbalaya said...

[Annonymous]whatever one thinks of Jude Wanniski as an economist (and it's been years since I read any of his stuff), I'm sure even he would not blame the stock market crash of 1929 on the Smoot-Hawley tariff of 1930. He might have been dead wrong on every other matter, but I'm willing to bet that he could look up dates. Unlike "Skeptical Economist".

OTOH, you could spend two minutes and learn that Wanniski theorized that "that the U.S. Senate's floor votes on the Smoot-Hawley tariff legislation coincided day-to-day with the Wall Street stock market Crash of 1929."

Canadian Cincinnatus said...

While it is certainly true that Americans have consume too much and manufacture too little, blaming free trade is kind of like the social conservatives who want to stop the rot in our culture (which is real enough) by banning sex and swearing movies. This won’t work because the sex and swearing are not the cause of the rot but the symptoms.

The same is true for the balance of payments and trade policy. It must be remembered that in a free economy without government interference, the payments are always balanced. A dollar of spending out must lead to a dollar of spending (or capital inflow) in.

The root problem with the US balance of payments is twofold.

First the US government has in place policies that encourage spending and discourage savings and work (relative to its trading partners). These would be policies such as a high corporate tax credit (currently the highest in the G7), huge regulatory barriers on manufacturing, the Community Reinvestment Act (which encouraged people who couldn’t afford to buy houses) to buy houses, a tax deduction on mortgage payments (which encourages home equity loans to facilitate frivolous spending) and tort law that cripples manufacturers. All of these things mean that Americans will tend to spend more and manufacture less than their competitors. As a result the dollar spent on foreign goods will tend to counterbalanced by a dollar in foreign loans rather than dollar in American goods.

Second, the Fed had kept an excessively low interest rate policy that has led to a constant creating of cheap money. This excess money does not originate from savings but can be spent just as if it had. This money has not resulted in a high CPI because a lot of the money simply flows out of the country to foreign manufacturers.

The solution to the US balance of payments problem?

Get rid of these policies and replace them with tight money and policies that encourage work and savings. Do that and the balance of payments will take care of itself. In this scenario, the only way for Americans to spend a dollar abroad is if they export a dollar in goods.

How do I know this will work?

Because this has been the Canadian policy in the past two decades. We have embraced free trade but at the same time have policies that encourage work and savings (at least more so with respect to our trading partners such as the US). The result has been prosperity for us.

Anonymous said...

Can you cite any major free trade economist in history who thought that "free trade" meant the free movement of labor across internatonal borders?

Although Friedman did not support open borders so long as we had a welfare state, others do. I would suggest that support of open borders by many mainstream economists is tantamount to support for free movement of labor across borders because the point is to increase the labor supply to decrease wages. The open border movement from the business Right is basically support for the free movement of labor.


The entire point of free trade is that you do NOT need "the movement of people". Instead of having Swiss watch makers move to every place on Earth and make watches everywhere, the people everywhere trade with Swiss watch makers in Switzerland for their watches. That is what was always understood by free trade.

We've purchased Swiss watches from Swiss watch makers in Switzerland since before we ever pushed free trade. So if that's the point of free trade, why bother, we've already been doing it.

On the other hand, Swiss watch makers can't pick our tomatoes or clean our buildings from Switzerland. For that matter no one physically outside the immediate area could do it.

In the past when a labor market tightens, wages rise. When that happens industry looks to innovate with new technology. You can see this with construction jobs and the prevalence of Bobcat-type skid steer loaders.

But with free movement of international labor you don't have to worry about mechanization. More folks from outside come into the labor market driving wages down, and with it the need to mechanize.

If anyone is interested, here is a nice article showing the increased use of mechanization in tomato harvesting necessitated by the ending of the Bracero program in 1960.

Tod said...

"Get off this topic. It's not your forte."

Maybe, but there are people who understand these things far far better than Steve - or you - who say much the same thing.

Gabor Steingart on the Lou Dobbs Show.

Gabor Steingart

Christopher said...

Anonymous said...
"What could possibly motivate your protectionist anti-globalist view other than your insistence that some people are more morally worthy than others??

"hm??

"just come out and say it."

Say what? Who is more morally worthy to me than others? My mom? My brother? My relatives? My neighbors? Who are these others? Can there be no moral ranking, no prioritizing by me amongst my fellow humans?

And more morally worthy of what exactly? My taxes? My charity?

Come out and say it, you ask? You first.

Anonymous said...

When analyzing free trade, one first needs to understand what true free trade is, and the best example today of free trade is that which exists among the fifty states.

And why is that the "best example"?

First, I have first hand experience with the USA. Second, this free trade zone in the USA covers 300 million people, has a 14 trillion dollar GDP, one common language and one common currency.

I suppose Canada is similar but on a much smaller scale. I also believe nations like China put restrictions on the movement of people and thus try to prevent as much as possible the country folks from heading to Shanghai.

If you can think of a better example, please let us know.

Jim Bowery said...

Walls are evil because the provide experimental controls that test working hypotheses aka "religions".

That means walls are blasphemy.

Oh, well its also true that walls prevent contagion. But lets face it, if you don't have either immunity to anything the world might throw at you, or aren't willing to die to achieve what Spielberg describes at the end of War of the Worlds:

From the moment the invaders arrived,
breathed our air, ate and drank, they
were doomed. They were undone, destroyed,
after all of man's weapons and devices
had failed, by the tiniest creatures
that God and his wisdom, put upon this
earth. At the toll of a billion deaths,
man had earned his immunity, is right
to survive among this planet's infinite
organisms. And that right is ours against
all challenges, for men do not live
nor die in vein.


Hallelujah, Brother Spielberg!

Anonymous said...

"Free trade is probably always better for some random unselected person, somewhere in the world than a protectionist regime. If you have a cosmopolitan utilitarian ethic where it's not okay for you to care more about a fellow citizen's welfare than a foreigner's (that would be "bigotry") then naturally you will prefer it to a protectionist regime. Contrarily, if you aren't this but are an extreme individualist and you only care about your own welfare then free trade can at least appear to maximise your possibilities of getting what you want (travel, stuff moving to you, opportunity).

In neither instance do you really care much about any group larger than your self, but smaller than the entire world. (In fact, you probably regard being part of such a group as undeserved because it's "arbitrary" [being not based on your utilitarian ethic but rather tradition and the things we can't articulate easily because they are quantitative - like race] or reject it because it didn't involve your choice and intention for your own benefit [thus affronting your individualism]).

Most elites are some blend of these two ethics. It's really difficult to convert people away from cosmopolitan utilitarianism, so the best path is to appeal to their individualist ethics and make them understand how superfluous they would be in a "free" world. Unfortunately, if you do this they will likely deflect away to some elite cartel/class, rather than the nation as a whole (which is fortunately at least at present a minority tendancy)."

Wow. I am a little humbled by that - I tend to think I am pretty smart but that is dense and SMART writing in a style that I envy. How old are you, where are you from, what do you do?

Anonymous said...


Is there a PC-topic you cannot find Gore in? He should stick to molesting masseuses.


He was exonerated by the Seattle police :-)

Anonymous said...

When considering the benefits of free trade, you can't just look at jobs/income. You also have to look at the cost of the goods/services you purchase. Seems to me that free trade has, for the most part, brought down the cost of goods/services and increased supply, putting more goods/services within the reach of lower income people.

I would desire free trade just for the competition it forces corporations to engage in.

Anonymous said...

Anon says:


Finally, whatever one thinks of Jude Wanniski as an economist (and it's been years since I read any of his stuff), I'm sure even he would not blame the stock market crash of 1929 on the Smoot-Hawley tariff of 1930. He might have been dead wrong on every other matter, but I'm willing to bet that he could look up dates. Unlike "Skeptical Economist".


Nice strawman you have there. Have you considered auditioning it for The Wizard of Oz?


Clearly, Jude Wanniski's 'discovery' that the stock market crash was caused by Smoot-Hawley was enormously influential. The subsequent refutations got lost in the noise. Since the substance of Wanniski's argument wasn't great, his vast influence must be derived from something else. I would argue that elite society was looking a rationale for its policy preferences.


Note that 'discovery' is in scare quotes. Note also the text that says "amid rumors that Hoover would not veto Smoot-Hawley" and the date here:

Wall Street Crash of 1929

In particular:


In the days leading up to "Black Thursday" (called "Black Friday" in Europe due to the time difference) and "Black Tuesday" the following week, the market was severely unstable. Periods of selling and high volumes of trading were interspersed with brief periods of rising prices and recovery. Economist and author Jude Wanniski later correlated these swings with the prospects for passage of the Smoot–Hawley Tariff Act, which was then being debated in Congress.


It is clear that you can look up dates, but it also seems clear that you simply cannot understand the substance of the arguments being made.

Anonymous said...

Can someone explain what "AYHDOIF" means? This thread is the only Google hit for it.

Anonymous said...

It's impressive that this guy can write such a long essay about elitism/cosmopolitanism without mentioning the Jewish influence in this movement.

Famously, he showed his disdain for ordinary Americans with his line about bitter people in small towns.

Just because something is famous doesn't mean it is true.

Obama quite clearly was doing the opposite of disdaining ordinary Americans. The mostly Jewish elites he was hobnobbing with in San Francisco disdain ordinary Americans. They think Joe Sixpack clings to "bad" ideas because he is inherently stupid. Obama was explaining to them that Joe Sixpack is simply reacting to the horrible treatment he has received by the American elites.

The widespread misinterpretation of Obama's remark is clearly intentional.

headache said...

Whiskey sez:
Boeing (which makes its wing assemblies in Vietnam, even cheaper than China).

My aeronautics prof in Germany told me that Boeing has it's wings made in Italy, and its fuselage in Japan. The undercarriage is from Liebherr (German), and the engines from P&W (Canada) or RR (Britain). The only thing they still make themselves is the rudder. I guess the electronics and controls are US made.

headache said...

Mr. Anon sez:It's a way for non-technical people to delude themselves into thinking they have a highly technical job.

I agree. Economists are the closest thing to egnineering that social scientists can get. They like to deride technical people but the real reason is they are too dumb for technical persuits.

corvinus said...

If your country is losing its manufacturing base and runs chronic trade deficits, free trade is bad.

When free-traders bring up Smoot-Hawley, they hardly ever also bring up that the USA was running a trade surplus back then.

Sure, it would be ill-advised to put punitive tariffs on your trading partners if you yourself have a large trade surplus. But what's the problem if you have a large trade deficit, as we do now?

It's time to bring back Smoot-Hawley, I say.

Conservative said...

Until recently, a number of constraints hindered outsourcing jobs and the factors of production to lower cost overseas labor markets. Immigration was also more under control. American companies were essentially forced to generally hire American workers, so both groups were in favor of domestic protectionism. To the extent that there was a trade in goods/services, it was American workers that would produce those goods/services for American companies.

Now our companies can outsource or easily bring in foreign labor (illegal, legal, and visa). So the bond between workers and companies is not the same, whic is why the divergence on free trade has arisen. The economic elite and common class are not on the same team anymore.

By the way, the immigration cut off (1924-1965) and the low level of illegal immigration until 1982 were both essential in creating a tight labor market. Combine this with the difficulty in outsourcing jobs, and you have a recipe for high wages, plentiful jobs, and incentives for employers to train workers on the job. The era of mass legal and illegal immigration, especially post-1990, and outsourcing have hammered blue collar workers hard. Now it seems the white collars are going to be feeling the pain.

The elite don't care because many of them are in government, media, and academic institutions. Or they have connections in large multinational businesses. Or they have stock in these big companies and actually profit from free trade. They also have a lot of inherited wealth. So they're insulated from the follies of their actions.

There's also been an ideological shift in how elites think. Patriotrism aint hip no more. Our current elites like to sit around Kennenbunkport and feel good that they're embracing multiculturalism, diversity, and globalization.

Sure our elites could feel bad that they're sacrificing the industrial and economic future of our country, but they're not gonna. They're global citizens and if stuff goes bad here, they'll move.

America's elites are not like Israel's elites. It'd be nice if they were, though.

Anonymous said...

"A problem with "cosmopolitan elitist" is that used as an epithet cosmopolitan" is understood as antisemitic."

That's a valid point or at least it was. Indeed, when I first saw the phrase used, some folks clearly upset by what they saw as an anti-semitic reference.

However, the context where I saw the word used was Shiller's essay on "The New Cosmopolitans". I don't think anyone thinks Shiller is anti-semitic. Indeed, I haven't seen any criticism of Shiller on such grounds.

Of course, Obama isn't Jewish so the inference wouldn't apply to him. More broadly, I think 'cosmopolitan' has lost its anti-semitic connotations. Note that Yglesias appears to be proud to be a 'cosmopolitan' and clearly doesn't regard the word as derogatory.

dallas flooring said...

C'mon guys, give Steve a break, I don't think he's saying what you think!

Whiskey said...

Globalism is an act of faith among the elites. There's a story (just reprinted press release fluff) on DHD (sadly gone downhill since Finke sold it) that has growth rates in global box office of say, 347% in China. What it does not say is that the global box office contribution is STILL less than 5%. But people want to believe in a religion:

*America is bad, because it is still majority White (filled with original sin).
*The promised land is non-White, where non-Whites act like staid Swiss Calvinists, only with "soul."
*It is America's destiny to bow down to the promised land as India and China, repositories of moral wisdom and wealth, lead the planet into a glorious, unified future.

It is as stupid as imagining strawberry pickers can pay off $700K loans, but people believe it.

Most of America's elite are stupid.

elvisd said...

The discussion by the various "Anonomi" about the economics discipline leads to one of my fav topics: the natural science/social science dichotomy, or, "How 'scientific' are the social sciences?"

Anonymous said...

You have to ignore LOADS of evidence to be an economic creationist. Oh well. No one's perfect.

Steve, I really wish you'd read up a little more on this. You have so many insights in so many other areas, but this is one of those topics you're so backwards on that it makes it easy for people dismiss you entirely rather than dealing with all your other valuable and solid arguments.

Anonymous said...

Off Topic:

From Red State: Some minority voters moving back to GOP? during debate on Arizona?

http://tiny.cc/xx5n7

Anonymous said...

The one major truth free-traders typically deny is that there are negative externalities that result from cognitively low functioning immigrants. This is something economists and libertarians just ignore. Other than that, they're pretty much right and Steve is pretty much wrong.

Anonymous said...

Steve Sailer said...

Dean Baker has a good track record.

The All We Have to Do Is Fix Health Care argument is, indeed, more plausible than most of the other All We Have to Dos.


I take it you mean that that we need to stop paying health care for illegals and endless birthright citizenship.

Anonymous said...

To Anon,

People do not have different intrinsic worth. We do have different obligations to people. Such as you should take care of grandma rather than put her in a nursing home or feed your kids first then worry about your neighbor.

Just as we should worry about our own citizens first and the rest of the world later.

Anonymous said...

Skeptical Economist:

YEAH, HOORAH, AWESOME, THANK YOU!!

So nice to see it stated so plainly. Andy Grove is right on the money, isn't he? I wish he were 35 and running for Governor of California.

I'm related to Frederick Law Olmsted, who in addition to being the preeminent landscape architect and a Puritan decendant, in 1850 wrote a scathing indictment of the devastating impact of free trade on farmers in the 19th century England:

http://www.amazon.com/Walks-Talks-American-Farmer-England/dp/1558493808

As an engineer who has seen the raping and pillaging of Silicon Valley in the last then years, I thank you for your insightful comments.

pd in sf

James Kabala said...

"Basically, all the Red State types were Democrats against big business, banks and free trade and the Blue State types were laissez-faire Republicans."

Not quite true - the Democrats were against big business and banks but supported free trade, believing that tariffs hurt the farmer. William Graham Sumner, the leading advocate of laissez-faire economics, was a Democrat. The Republicans supported big business and banking and also supported high tariffs.

"[Wanniski] might have been dead wrong on every other matter, but I'm willing to bet that he could look up dates. Unlike 'Skeptical Economist.'"

I admit I never read Wanniski's original article, but from some of the other things on the subject I have read, I believe Wanniski argued that nervousness on the part of stockbrokers as the bill made its way through Congress helped cause the crash. I believe he (or one of his followers) linked up key dates in the bill's progress with bad stock market days.

Anonymous said...

Trade is a settled issue. You will find very, very few professional educated economists who oppose the concept. Those who favor protectionism are largely squishy pinko liberals and their cohort of labor unions along with the occasional sprinkling of paleocons.

Here's a survey of AEA economists... something like 90% of them favor complete, unrestricted free trade.

Skeptical Economist said...

A few notes

"Don't kid yourself - the unions killed America's manufacturing base."

That might or might not be true. However, huge net manufacturing job losses nationwide, show that jobs are being lost in blue states far faster than they are being created in red states. See "Why is the American Jobs Machine Broken?" (http://bit.ly/9dTgAr) by Tim Duy (Fed Watch) for a taste of what the grim reaper has wrought.

"As Paul Samuelson, the Nobel economics winner, text-book author, and great idolizer of free trade said:"

That's mostly true. However, Paul Samuelson wrote an important paper before he died showing that globalization may well be detrimental to nations such as the U.S. See "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization" (http://www.econ.jhu.edu/people/barnow/samuelson.pdf)

"The elite belief that we must continue to move up the food chain as we did from agrarianism to the industrial revolution to the computer age to the internet age... they believe manufacturing no longer matters and we will continue to perform high-end engineering and design here (i.e., move up the food chain) even as everything gets made in China."

This is part of the bubble of elite supremacy. The notion that China will either be content with low value added assembly, or incapable of moving up the value food chain is absurd, but still highly prevalent. Note how often Thomas Friedman exhorts America to solve its economic problems with "innovation", as if the U.S. had a permanent monopoly on such a thing.

Skeptical Economist said...

A few more notes

"Now that was an entirely different deal.In those days, Britain was the ONLY exporter of engineering and manufactured goods in the world."

That's true and does account (to some extent) for Britain's quasi-religious adoption of 'free trade'. Indeed, a certain John Bowring claimed that "Jesus Christ is Free Trade, and Free Trade is Jesus Christ". John Bowring practiced what he preached. He was the Governor of Hong Kong during the Second Opium War (the Chinese resisted 'free trade' in narcotics) that included the burning of Summer Palace.

Ulysses S. Grant had a very astute observation on this subject that bears repeating.

“For centuries England has relied on protection, has carried it to extremes and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it thinks that protection can no longer offer it anything. Very well then, gentlemen, my knowledge of our country leads me to believe that within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade.”

Grant was off by around 100 years.However, his prescience is impressive.

Skeptical Economist said...

A few mores notes

"But the assertion that critics of Smmot-Hawley at the time didn't argue that protectionism would make the downturn worse is pure historical ignorance."

The substantive merits of Smoot-Hawley are not really the issue. See http://bit.ly/cE9Dg2 for a descent discussion. The issue is the elite consensus that Smoot-Hawley caused the stock market crash and the Great Depression. Not 'a cause' but 'the cause' or at least 'a major cause'. For example, see "Smoot-Hawley Revisited ' (http://gregmankiw.blogspot.com/2009/12/smoot-hawley-revisited.html). Note that Mankiw is overstating Sumner's position (see TheMoneyIllusion.com), but that's a different matter.

"Finally, whatever one thinks of Jude Wanniski as an economist (and it's been years since I read any of his stuff), I'm sure even he would not blame the stock market crash of 1929 on the Smoot-Hawley tariff of 1930."

See "What Do We Know About The Crash" (http://www.heartland.org/custom/semod_policybot/pdf/21226.pdf). I quote

"If the stock prices were not way out of line with genuine business opportunities in September of 1929, as both theory and evidence suggest, then what could have happened to change the prospects so suddenly and dramatically? The answer was provided Jude Wanniski in The way the World Works: the stock market crash was caused by the increasing likelihood that the Smoot-Hawley tariff would pass."

From a number of sources, I have daily stock market prices (including Saturdays) going back to 1885. In some cases, a reaction to Smoot-Hawley related news can be observed. However, many other influences are clear as well. The market crashed after Briand's government fell. Black Monday and Black Tuesday followed anti-trust related news. Events in Germany moved the market (not enough as subsequent history shows). If anyone is interested I can send the entire data series in .xls format.

"When free-traders bring up Smoot-Hawley, they hardly ever also bring up that the USA was running a trade surplus back then."

Quite true, but it was small compared to China's surpluses now.

Paul Mendez said...

When arguing the benefits of "free trade," most people do not understand the difference between "comparative advantage" and "labor rate arbitrage."

Anonymous said...

I notice how all these insuffereably pompous people who keep berating Steve that 'he knows nothing about economics' and should 'stick to something he knows about' , therefore trying to stifle the debate - web fascism - cannot and will not answer THE only operative question, viz:

If the globalized free trade policies that the elites have foisted upon America have worked so damn well, why have median US wages stagnated for 40 years?
- Surely the name of the game of economics is to increase incomes - that's what it's all about, don't let anyone obfuscate otherwise.Just how do you wriggle, sophisize and talk your way out of that one?
Most probably you won't even attempt to try.Just airily and pompously accuse Steve of 'economic creationism' - whatever that means - sounds big and pompous but means nothing - the actual ORIGIN of life has never been explained.

Anonymous said...

If 90% of professional economists (a breed that cannot agree, generally, on anything - to half of them 'up' is 'down', 'left' is 'right'), then that's a sure-fire reason to oppose unrestricted 'free trade'.
That is my opinion of that profession.
Lower than a charlatan , a bit above a snake-oil salesman.

Skeptical Economist said...

A few more notes

"But the assertion that critics of Smmot-Hawley at the time didn't argue that protectionism would make the downturn worse is pure historical ignorance."

The substantive merits of Smoot-Hawley are not really the issue. See http://bit.ly/cE9Dg2 for a descent discussion. The issue is the elite consensus that Smoot-Hawley caused the stock market crash and the Great Depression. Not 'a cause' but 'the cause' or at least 'a major cause'. For example, see "Smoot-Hawley Revisited ' (http://gregmankiw.blogspot.com/2009/12/smoot-hawley-revisited.html). Note that Mankiw is overstating Sumner's position (see TheMoneyIllusion.com), but that's a different matter.

"Finally, whatever one thinks of Jude Wanniski as an economist (and it's been years since I read any of his stuff), I'm sure even he would not blame the stock market crash of 1929 on the Smoot-Hawley tariff of 1930."

See "What Do We Know About The Crash" (http://www.heartland.org/custom/semod_policybot/pdf/21226.pdf). I quote

"If the stock prices were not way out of line with genuine business opportunities in September of 1929, as both theory and evidence suggest, then what could have happened to change the prospects so suddenly and dramatically? The answer was provided Jude Wanniski in The way the World Works: the stock market crash was caused by the increasing likelihood that the Smoot-Hawley tariff would pass."

From a number of sources, I have daily stock market prices (including Saturdays) going back to 1885. In some cases, a reaction to Smoot-Hawley related news can be observed. However, many other influences are clear as well. The market crashed after Briand's government fell. Black Monday and Black Tuesday followed anti-trust related news. Events in Germany moved the market (not enough as subsequent history shows). If anyone is interested I can send the entire data series in .xls format.

"When free-traders bring up Smoot-Hawley, they hardly ever also bring up that the USA was running a trade surplus back then."

Quite true, but it was small compared to China's surpluses now.

Anonymous said...

If anyone is interested I can send the entire data series in .xls format.


Publicly accessible Google spreadsheet is our friend.

Anonymous said...

Oops, I forgot to provide a link to the AEA survey.

http://www.bepress.com/ev/vol3/iss9/art1/

They do one every year or so I believe, and the results are always essentially the same. Overwhelming support for free trade.

Rohan Swee said...

SE: This is part of the bubble of elite supremacy. The notion that China will either be content with low value added assembly, or incapable of moving up the value food chain is absurd, but still highly prevalent.

Remarkably so, since China has long since started moving up the value food chain.

Anonymous: Here's a survey of AEA economists... something like 90% of them favor complete, unrestricted free trade.

And 90% of Marxist intellectuals think communism works, it's just that true communism has never been implemented.

ben tillman said...

The issue is the elite consensus that Smoot-Hawley caused the stock market crash and the Great Depression.

Those are two separate events. The Great Depression's proximate cause was government intervention in the economy; FDR used the government-created problems (as such problems are used today) to centralize power using disastrously counterproductive policies akin to today's idiotic "stimulus" and "banker bailout" bills.

Alan Greenspan blamed it on the Fed.

ben tillman said...

Economic creationism

Why don't you explain WTF you mean by that term so we can rip your straw man to shreds?

Skeptical Economist said...

"Publicly accessible Google spreadsheet is our friend."

To big to convert. .xls format.

http://bit.ly/9KRZye

Skeptical Economist said...

http://bit.ly/8YL8jf

Anonymous said...

I'm still waiting for the economic smartypants to explain what the hell "economic creationism" is.

Rohan Swee said...

Anonymous: When considering the benefits of free trade, you can't just look at jobs/income. You also have to look at the cost of the goods/services you purchase. Seems to me that free trade has, for the most part, brought down the cost of goods/services and increased supply, putting more goods/services within the reach of lower income people.

Yes, that is the theory. The point is to demonstrate that the lower cost of goods and services make up for the negative consequences, not merely to reiterate the theory. (N.B.: Man does not live by cheap flat-screen TVs alone.)

The cheapness of some categories of goods and services doesn't matter if you don't have a job, and doesn't matter if other, important categories of goods and services (housing, medicine, education) are becoming more expensive. (And N.B., Part II: the elites are never gonna "redistribute the gains of trade" from themselves to the losers, no matter how many economists keep bleating that that's all we need to do to fix the unforeseen creation of so many damned losers.)

I would desire free trade just for the competition it forces corporations to engage in.

Yeah, that is the theory. In the real world, protectionist policies sometimes turn companies into subsidy-sucking dogs, and sometimes they nurture world-beaters into existence. So obviously something more than merely "free trade" vs. protectionism is going on here.

Anonymous said...

When considering the benefits of free trade, you can't just look at jobs/income. You also have to look at the cost of the goods/services you purchase. Seems to me that free trade has, for the most part, brought down the cost of goods/services and increased supply



I don't see how you can say that, because we don't HAVE free trade. What we have is trade with China, which is as far from free trade as it is possible to get. What we have is mercantilism, on the part of China, and eager cooperation with that mercantilism by America.

SFG said...

As for the dogma of globalism: good for elites, bad for the common man. So the elites love it because (a) it's good for them and (b) they can show how superior they are to those benighted proles who don't understand how great it is.

Like Steve says, it's a status competition.

"At the toll of a billion deaths,
man had earned his immunity, is right
to survive among this planet's infinite
organisms. And that right is ours against
all challenges, for men do not live
nor die in vein."

"Hallelujah, Brother Spielberg!"

Um, that was in the book by H.G. Wells.

The Wobbly Guy said...

When talking about wages, are we talking about absolute numerical figures, or purchasing power?

I happen to agree that purchasing power has probably decreased in the past few decades, but this decline is less due to free trade than the central banking policy that has seized on inflation and outrageous consumption as 'economic development'.

In fact, it may be argued that if not for free trade, or even a limited version of it as practiced nowadays, the purchasing power of the american worker could be worse.

The best of both worlds is of course a 'hard' money policy, free banking system (banks and savers are free to choose their preferred interest and reserve rates), and free trade that taps comparative advantage.

Hubertus Bigend said...

Churchill saw this all coming. From a postwar speech:

"Like the other poor devils in China, India, and Japan - a great new field for sweatshops to be opened up so that these new industries which we were creating in Britain today will be destroyed as the old industries were - simplified, rationalised machinery with a few white surveyors and then the masses of cheap coloured labor torn off the land and taken into the sweatshops to work and labor and cough their guts out with tuberculosis until they too are thrown on the scrapheap of the sweatshops.

Is that worthy of Britain? Is that to be the future of Europe? And is this competition to be organized within our European brotherhood bringing in these sweat fields in Africa into our Europe civilization so that the financial power in one European country can use it against the financial power in another?

All the great financial central power of the world now shifted from the city of London to Wall Street New York shall be able on the mass of money of wealth and of power which money brings to it again and again and again to exert its influence in politics until as you see today, it is childish nonsense to say that a British Government rules Britain - it's nothing to do with British government or the British People. The government of the world is the financial government, the power of money and of money alone."

Anonymous said...

WOW!

the victimization in this thread is reallllll strong!!!


apparently, the USA never has its interest in mind when it interacts with other nations.

there is apparently no benefit to our business interactions with China.

Nope. none.

they're screwing us!!!

everyone is screwing us!! and we're taking it lying down!!!

David Davenport said...

A problem with "cosmopolitan elitist" is that used as an epithet cosmopolitan" is understood as antisemitic.

That's merely an attempt to tell people who don't flatter rich Jews to shut up. Jewish cosmopolitan elitism is a legtimate issue.


Basically, all the Red State types were Democrats against big business, banks and free trade and the Blue State types were laissez-faire Republicans.

No, Old south Democrats were for free trade, and Republicans back then were for traiffs. The sainted Abe L:incoln was for tariffs.

Jeff said...
The very first thing I learned in both my economics classes in high school and college was the production possibility curve (proof that free trade is good for everyone).


Jeff, please give us a quick summary of the production possibility curve.

Eric said...

The idea the US is some kind of paragon of free trade is laughable on its face. The federal government throws all sorts of barriers in front of foreigners who'd like to compete in the US, from "anti-dumping" tariffs to agricultural subsidies to tax breaks for car companies in the South to low-interest loans to Boeing.

The free trade "idolatry" is just for public consumption. If you were a farmer in Africa you'd find as a result of agricultural subsidies American farmers can grow and ship grains to your country and undercut you on price.

FuturePundit said...

To all the guys who post as anonymous: You can choose Name/URL and then type in your own unique pseudonym. Your failure to do so makes it very difficult to discern who is disagreeing or agreeing or what various individuals are saying.

Claverhouse said...

dearieme said...

Is there any way known by which Americans can be persuaded that the notion that the automobile is an American invention is false?

Nah. They're just like the Chinese or the Muslims when it comes to an impenetrable solid certainty of all invention.

They also invented radio, trains, steamboats, submarines, telephones, television, computing, electricity, electric motors, helicopters, tanks, roller skates, the plough, the clock ( in 1750 ), the light bulb, the electric telegraph, false teeth, reaping machines, threshing machines, typewriters, defibrillation, sewing machines, canned food...

I can't continue googling since just looking at the list so far causes utter despair...

steve wood said...

I'm curious to know what people mean by "the elite(s)." If defined by income and education - surely two reasonable factors - I suspect that quite a few Stevosphere regulars would fit the category. And yet, the conversation here is always about "the elites" as though they were some remote, hostile group. Perhaps the elite are always the group making just a bit more money and who went to just a bit more prestigious university than oneself.

Anonymous said...

headache: The only thing they still make themselves is the rudder. I guess the electronics and controls are US made.

As I was saying above [in regards to medical imaging hardware & software]: Never, ever misunderestimate the value [and the importance] of the software and the associated electronics.

If we are going to be restricted to producing only one aspect of the plane, then that's precisely the aspect which I would want us to be in charge of.

Uncle Sam said...

They also invented radio, trains, steamboats, submarines, telephones, television, computing, electricity, electric motors, helicopters, tanks, roller skates, the plough, the clock ( in 1750 ), the light bulb, the electric telegraph, false teeth, reaping machines, threshing machines, typewriters, defibrillation, sewing machines, canned food...

Damned straight.

And first-order predicate calculus, functional programming languages, almost all dimensions of the Poincare conjecture, Fermat's Last Theorem & Taniyama-Shimura, disparate differentiable structures on the 7-Sphere, the embedding of Riemannian manifolds in Euclidean space, etc etc etc.

Not to mention football and Coca-Cola and hamburgers and french fries and ketchup and pizza and television and videos and DVDs and MILFs and Cougars.

PS: Heavier than air flying machines, fake breasts, big hair, T&A, and the first man on the moon.

Mr. Anon said...

"Anonymous said...

I notice how all these insuffereably pompous people who keep berating Steve that 'he knows nothing about economics' and should 'stick to something he knows about' , therefore trying to stifle the debate - web fascism - cannot and will not answer THE only operative question, viz:

If the globalized free trade policies that the elites have foisted upon America have worked so damn well, why have median US wages stagnated for 40 years?"

Well said. And a related question: Why is it now impossible to buy sprinklers or toilet parts that aren't just crap? Free trade was supposed to offer us a cornucopia of stuff (and in some things, notably food, it does). But you go to Lowe's or Home Depot or......well, there's nowhere else to go anymore......to buy a garden hose or a sprinkler, and all they sell are the wares of a single manufacturer (chinese, of course), and they're crap.

And just what are most people supposed to do for a living? - the people who can't be entertainment lawyers, or patent attorneys, or mortgage underwriters, or arbitrageurs, or software engineers. What about them? What about the people who aren't cut out to be more than factory workers or menial laborers? Are they just supposed to dissappear, because they don't fit the economic model?

Dave said...

The problem with the idea that free trade leads to lower cost goods, which make up for lower wages, is that it doesn't apply to housing, health care, education, or local taxes, i.e., the bulk of the cost of living.

If we had free movement of labor with respect to qualified physicians, doctors would be lucky to make $100k and health care would be a lot cheaper. If we had it with education, we could import qualified foreign teachers for peanuts, which would lower our local tax burdens.

Instead, elites keep guild-like protections for teachers, government employees, and physicians, while the private sector middle class sinks.

Eric said...

If the globalized free trade policies that the elites have foisted upon America have worked so damn well, why have median US wages stagnated for 40 years?

Those globalized free trade policies did work well. They created demand for employees at all wage levels. At the high end it gave people more pricing power - in constant dollars, as a technical guy, I make almost 50% more than I would have made in the early '90s.

On the low end the additional demand that should have given rise to higher wages was swamped by illegal immigration. The jobs I did in high school to save for college pay about half what I made in constant dollars. There's your stagnation right there.

Mercer said...

Great post Steve. You should write more on this topic. I think many economists know our trade deficits with China is unhealthy but are afraid to offer concrete actions to deal with it because they don't want to be labeled protectionist.

Glossy said:

"But the US Treasury can currently issue long-term inflation-protected securities at an interest rate of 1.75%. So the long-term cost of servicing an extra trillion dollars of borrowing is $17.5 billion"

Does that mean that once the general level of interest rates in the economy goes back up, the Treasury will still be able to only pay its creditors 1.75% on those bonds? I'm asking because I read somewhere recently that interest payments on the federal debt are expected to balloon once the general level of interest rates goes up. Whoever wrote that (unfortunately forgot the source) seemed to contradict what Krugman is saying here. Does anyone know who's right on this?"

Most Treasury debt is issued for terms of less then five years. When this debt comes due it will be rolled over with new debt at whatever the current interest rate is at the time. Many people predict that rates will go up in the future.

Captain Jack Aubrey said...

The 'Smoot Hawley' caused the Great Depression meme somehow became the accepted wisdom of American society.

That's because just about everybody has seen "Ferris Bueller's Day Off" - most of us dozens of times.

My guess is that the U.S. will languish for some number of years until 'something' forces a real shift in policy. What 'something' will be I do not know.

I'm not suggesting that my predictive abilities are all-powerful, but I more or less foresaw the current trajectory - Obama victory, massive political overreach, failure of economy to rebound, and (hopefully) big Republican victories in the mid-terms. Granted that's not necessarily an unrealistic assumption for anyone who remembers the '92 and '94 elections.

I wanted McCain to lose because McCain, like Obama, would fail, only the (potentially) conservative party would get the blame, and then we'd really be hosed.

Predicting further that our economy will languish for a decade because neither party is willing to adopt the right policies isn't a real stretch.

Until Republicans get right on trade, taxes (i.e., not lowering them for the rich), immigration (legal and illegal), and race-discrimination policies (like affirmative action and CRA), this country is going nowhere.

Captain Jack Aubrey said...

The elite belief that we must continue to move up the food chain as we did from agrarianism to the industrial revolution to the computer age to the internet age... they believe manufacturing no longer matters and we will continue to perform high-end engineering and design here even as everything gets made in China.

Survey the list of the wealthiest countries and it's notable that, in spite of all the emphasis on technology, how many of them have disproportionately large per capita shares of natural resources. Natural resources still matter - a lot. Countries that drive down their per capita shares of resources, like, say, through mass immigration, are only impoverishing themselves in the long run.

Anonymous said...

I'm curious to know what people mean by "the elite(s)." If defined by income and education - surely two reasonable factors - I suspect that quite a few Stevosphere regulars would fit the category. And yet, the conversation here is always about "the elites" as though they were some remote, hostile group.

The elites would emphatically exclude any regular, approving reader of iSteve from the elites, no matter how rich, no matter how smart, no matter how famous. See: James Watson, and about a thousand others.

FuturePundit said...

When I was an undergrad taking econ courses a few decades ago a couple of econ profs claimed to us that if the US ever ran a large deficit the dollar would decline in value until our imports declined and exports increased. Then our trade would balance. That's what they taught.

The US is running a large sustained trade deficit. The automatic adjustment mechanisms claimed by the economists aren't happening.

This going deeper into debt with foreign governments and banks has to be bad for the American people in the long run. Yet economists seem to just ignore the trade deficit. What's with that?

I'm skeptical about the elite consensus of economists because:

- We are running a large chronic trade deficit. Yet they still just bleat about Ricardo.
- The Chinese are managing our trade with them via currency manipulations, IP theft, and other mercantilistic practices.
- The economists (with a few exceptions) can't recognize a huge financial bubble.
- The economists can't predict financial crises.
- The economy no longer delivers rising living standards for most people. Lowering trade barriers in the 1990s did not put an end to this living standard stagnation.

FuturePundit said...

dearieme,

Europeans and Canadians who feel a need to do status posturing by posing as more knowledgeable than Americans need to seek psychological counseling to work out the sources of their dissatisfactions and hopefully come up with ideas for how to feel better about themselves.

This would benefit not only those who feel unrequited desire for higher status but also many blog comment readers who will be saved from off-topic status posturing posts that are irrelevant to what is being discussed.

FuturePundit said...

steve wood,

Best to look at an example of elite behavior. The elites are, for example, the people who got together to cast James Watson into the wilderness. Hostile? You bet. They are a powerful group that marginalizes all those who do not accept their basic belief system.

Anonymous said...

Some here are bragging that free trade has increased their incomes in their highly specialized field.
But the point is this.Back in the day, free trade was sold to te people with the line that 'tarriffs keep Americans in bad jobs' ie the broad mass of factory jobs then done by Americans were 'bad' and better performed by cheaper foreigners and consequently Americans woud surely move into 'better' more productive employment.Apart from the fact that the policy of uncontrolled mass immigration introduced contemporaneously effectively negated the 'rise in productivity' argument, the experience of 40 years tells us that median incomes have not grown at all.

Anonymous said...

Well enough of pontificating about the wage stagnation (but not expense stagnation) in the USA and how it coincided exactly with the adoption of hardline 'free trade', I wish to move on to something even more important, namely how the USA is now the bond slave (literally) of China.
Amewrica has run massive, persistent and intractable trade deficits for decades now - sometthing that free trade theory actually tells us is impossible (another reason for ignoring the shrill screams and rants of the brainless), as deficits 'self-correct' in the fullness of time and an 'equilibrium' emerges, supposedly mediated by currency depreciation.
Annyhow, China now sits on a cash pile of upward of $2trillion, money which in the full crazyiness of free trade is lent back to Americans in order to fund the feeding frenzy of buying more Chinese goods! - How is this 'smart' or even defensible, not to mention sustainable.Much of Chinese cash pile was 'lent back' to fund supposedly 'cheap mortgages' to wage stunted US proles - look where that ended up.The crisis took a bad turn when the Chinese barked and growled that Fanny and Freddy wren't going to be bailed out - giving the US government the willies.
Now we all know who calls the shoots - a nation that 30 years ago couldn't harm a hair on America's head.After 30 years of free trade, the Chinese, if they so wished, could destroy the USA overnight by merely punching a few computer buttons.
But you've got to keep plugging the dogma, don't you, after all 90% of economists can't be wrong.

Clinias said...

I find it surprising that the Jews don't make a presence in the original post and only one commenter refered to them.

Globalization is Marxist. Karl Marx ended his Communist Manifesto with the call for all workers to unite. You have Rosa Luxemborg (Jew) writing a piece called The Nationalities Question in 1918 (or thereabouts). This is also a Masonic idea. Clearly, Cosmopolitanism is a Jewish idea.

With the Jewish ascendance and control of all cultural venues, it is no wonder that America is infused with Globalization. Why else the "Political Correctness" program? Why the "Multiculturalism" cult of academia, media, and political elites?

It is the Jews, Jews, Jews. And that is the Truth. (which everybody wants to run away from, scared they be accused by the Jews, "For fear of the Jews").

Rohan Swee said...

Anonymous: But the point is this.Back in the day, free trade was sold to te people with the line that 'tarriffs keep Americans in bad jobs' ie the broad mass of factory jobs then done by Americans were 'bad' and better performed by cheaper foreigners and consequently Americans woud surely move into 'better' more productive employment.[...]

But it has been kinda entertaining to observe the change in tone and content of the economic propagandists over time, though: "It'll be win-win for eeeeverybody!" eventually becomes "I'm sorry, but you just have to understand that we live in a globalized world and you're just going to have to accept that your standard of living is going to be adjusted significantly downward. Really, you lower quintiles of First World workers need to get over yourselves!"

Not that the transformation has been completely uniform and one-sided. There are still pockets of "but, but, it is, too, still win-win for eeeeverybody, you're just too ignorant of economic theory to realize how much better off you are!", to accompany the half-baked, fashionable utilitarian shillery parading as ethical concern, exemplified by Mr. "morally unworthy", above.

Rohan Swee said...

P.S. I second Futurepundit's call to choose a bloody pseudonym, damn it. You wouldn't think making up a name would be an insurmountable cognitive hurdle for Steve readers, but apparently it is.

Anonymous said...

An amazing argument from someone who largely subscribes to the Austrian business cycle theory. It really comes down to freedom - unless it's for our common defense, what right does our government have to interfere with who I trade with? Protectionism is basically like subsidizing Americans who are bad at their jobs and preventing me from trading with people who are good at theirs, making the entire nation, on net, poorer.

You may not agree with everything they say (I don't), but I recommend checking out the arguments at cafehayek.com. In general, I believe mainstream macroeconomics is about as believable as Lysenko's genetics.

Anonymous said...

I'm curious to know what people mean by "the elite(s)." If defined by income and education - surely two reasonable factors - I suspect that quite a few Stevosphere regulars would fit the category.




That's not a reasonable definition. To be part of the elite you have to work in certain sectors - the media, acadamia, politics. If in business you have to not just comfortable, but filthy rich. I suspect that few billionaires spend their time here.

Simply being intelligent does not make you part of the elite. In many cases its a hindrance rather than a help.

Anonymous said...

Those globalized free trade policies did work well. They created demand for employees at all wage levels.


Have you noticed the current unemployment levels?


in constant dollars, as a technical guy, I make almost 50% more than I would have made in the early '90s.

Why do you attribute that to free trade? Has it occurred to you that without "free trade" you might make more than you do?

Anonymous said...

Someone here mentioned the 'moral' argument that governments should not interfere with the rights of indivuals to trade with their own money.
Yes, all well and good, but before the invention pf paper money when all transactions were done in a limited stock of precious metals, many nations were literally 'drained' of their money stock - thus pauperizing every citizen of that nation.This was the justification of controlling imports.

Rohan Swee said...

Protectionism is basically like subsidizing Americans who are bad at their jobs and preventing me from trading with people who are good at theirs, making the entire nation, on net, poorer.

Well, no, that is not, as a matter of fact, how various forms of protectionism play out in the real world. Nations that have moved from poverty to First World status in the last half-century did not get there by free-trading (and neither did the original "First World".)

I recommend checking out the arguments at cafehayek.com.

Been there, done that, went out by the same door wherein I went.

ATBOTL said...

"Not quite true - the Democrats were against big business and banks but supported free trade, believing that tariffs hurt the farmer. William Graham Sumner, the leading advocate of laissez-faire economics, was a Democrat. The Republicans supported big business and banking and also supported high tariffs."

You're right. I guess I just bundled up all the things that are currently neo-liberal dogma.

Anonymous said...

Part of the problem is that the usual suspects have peddled snail oil like this and this for half a century - through novels, lectures, tapes, institutes, committees, "think" tanks, etc.

Never underestimate the influence of Jewish charismatic leadership on a populace of "idealistic" American boobs.

The roll call of the libertards' magical patriarchs and matriarchs includes Mises, who was (in real life, not in an Alissa Rosenbaum fantasy) run out of Austria for destroying its economy. He and his groupies put about a different tale after emigrating, of course.

Libertardism is just one of those 1960s spin-offs of the New Left. Neoconservatism is another. Both are as phony as a Liberty Dollar.

beowulf said...

Annyhow, China now sits on a cash pile of upward of $2trillion, money which in the full crazyiness of free trade is lent back to Americans in order to fund the feeding frenzy of buying more Chinese goods!

Its actually sitting in a federal reserve account, they can spend it on US goods or they can spend it on US Treasuries, in which in case its reserve account is debited and its securities account is credited. There's not thing China can do to us that wouldn't hurt them more. We traded the IOUs we printed for their manufactured goods they produced. The government could stop selling bonds at any time and life would go on just the same.

As Jamie Galbraith (a sharper economist than his illustrious father, not as tall) put it:

A government borrowing in its own currency need never default on its debts; paying them is simply a matter of adding the interest to the bank accounts of the bond holders. A government can only decide to default – an act of financial suicide – or (in the case of a government borrowing in a currency it doesn’t control) be forced to default by its bankers. But a US bank will always cash a check issued by the US Government, whatever happens.
http://seminal.firedoglake.com/diary/54561

Big Bill said...

"Anyone who tells you the free movement of labor is not on the agenda is lying. Each round of trade talks has whittled away at more and more items. First it was manufactured goods, later financial services and now they are working out agricultural policies. Labor will eventually be discussed because free trade can't exist without the free movement of labor."


It IS being discussed. It is called GATS - the General Agreement on Trade in Services. It is continuously discussed, secret negotiations are carried out by secret negotiators,, all the time, to break down barriers to trade in services -- people work.

The GATS template/master agreement was signed in 1994 after the Uruguay Round of trade negotiations. Each country makes "commitments", i.e. appendices to the master agreement in which they agree to let foreigners in to compete with local service providers.

Each round of negotiations is deliberately intended to expand these "commitments" until there is a free flow of people and business around the world.

Ultimately it will transfer virtually all sovereignty to GATS and the WTO.

This memo should give you a sense of what is up for grabs. In this memo, Europe demands the Feds b!tch slap the states until they bend over and take it up the keister, changing their laws on everything from real estate to the law in order to accomodate foreign multinationals who want unfettered access to America's service sector.

Remember "the Doha round"? that is what it is all about.

I predict that we will have Indian hospital corporations working in America, paying Indian nurses $3,000 a year (excellent Indian wages, by the way) to live and work as nurses in an Indian hospital located in America. Cheap medical care at wages American hospital cannot compete against. That is what "trade in services" means.

The Dude said...

"Annyhow, China now sits on a cash pile of upward of $2trillion, money which in the full crazyiness of free trade is lent back to Americans in order to fund the feeding frenzy of buying more Chinese goods!"

Actually the Chinese are buying up perhaps hundreds of square miles of choice farmland. They are doing it through third parties. They are contacting executive farmers to see if they will work the farms for the Chinese here in America.

Very few folks are tracking this, but word is leaking out. I heard from a farmer/engineer/senior manager who works for a large ag equipment company. He was wooed for months by the front men for the Chinese.

They are buying up rural America, they just need someone round-eye front men to manage it for them, to do the planting, cultivating, and harvesting.

Anonymous said...

>Here's a survey of AEA economists... something like 90% of them favor complete, unrestricted free trade.<

Argument from authority.

90% of biologists will tell you in a survey that there is no such thing as race.

90% of Medieval physicians believed in "Humors."

Yawn. For allegedly "Rational Beings," you Ayn Rosenbaumers commit the most rudimentary errors in argumentation.

jody said...

the united states does not function in an environment of free trade, so i don't know what this thread is even about. many developed nations with advanced industrial manufacturing have barriers and obstacles which greatly reduce or even nearly eliminate US exports.

there is no free trade right now. most english speaking economists are dead wrong, as usual.

the problem of course, is exactly what the economist who emailed steve had said: these people are too far removed from the actual "getting stuff done" part of industry and sales. like lawyers, they can now live almost their entire lives ensconced in an artificial world which exists only due to technology and fiat money. they can spend 30 years clicking keys on a computer in an air conditioned office, and hand people slips of green paper to get food, gasoline, and electricity in return. they then cook up this idea in their head that the US operates under free trade.

meanwhile, in the office building next to them, veteran engineers working for some other company, who know with 100% certainty which of their products cannot even be shipped to nations X, Y, and Z, do some educated guesstimation on the cost/benefit ratio of a new, expensive, and risky automobile platform. "Can we sell enough units in nation A to justify building a factory there, or are their restrictive laws going to make it not worth doing?"

listening to an economist's ideas on how the world works is merely humor, and akin to listening to white suburban fantasy football players evaluating prospects before even 1 game of preseason NFL football has been played. they have their formulas, methods, data, ratings, and they're ready to draft a team. they've played fantasy football for 10 years and this time, well this time, they know for sure how to win their league.

tapsearcher said...

Free trade is the major cause of our economic crisis. Free trade is not trade as historically practiced and defined. It is more about dividing production from investment and moving production from place to place anywhere in the world for the sake of cheaper labor. The investment communities win and everyone else loses.

Every buy affects us up and now the line.

Americans now vote more in the cash register line than they do in a voting booth on what kind of society they want to live in.
At the same time, they shop their way out of their jobs because there will always be someone willing to work for less in order to survive. This is an ugly way to deal with poverty. Workers in impoverished lands become wage slaves while in the more prosperous countries, new working poor classes are created.

Sooner or later the process cancels itself out. The working poor find it more and more difficult to even buy the cheaper imports while those making the products can not even afford to buy the things they make. Free trade economics is indeed is a race to the bottom.

President Obama bailed out the process when he took over but ignored all the suffering of those who lost everything due to free trade. In essence the bail outs are really tariffs on future workers.

Now our economies based on making money on money instead of making things are burning out.

The Great Depression continues in a silent controlled way.

See more at http://tapsearch.com/tapartnews http://ray-tapajna-info.net/flatworld and http://tapsearch.com/clinton Search under tapart news or tapsearch com or ray tapajna and add free trade or globalization for thousands of references and resources on this subject.
See also http://art-that-talks.filetap.com
Search under Double Talk American Dream Reversed and you will find millions of results.