Michael Lind pre-responds in Salon to Obama's State of the Union address conventional wisdom. Lind writes:
The claim that America’s K-12 system is inferior to that of other industrial nations is another myth whose purpose is to divert the attention of the American public from the real reasons for the offshoring of U.S. industry. Much has been made of the fact that, according to the Program for International Student Assessment (PISA), the U.S. ranks 12th in reading, 17th in science and 25th in mathematics. But the countries at the top of the list in 2009 -- Korea, Finland, Hong-Kong China, Singapore, Canada, New Zealand and Japan -- tend to be small or homogeneous or both.
The overall PISA scores of American students are lowered by the poor results for blacks and Latinos, who make up 35 percent of America’s K-12 student population. Asian-American students have an average score of 541, similar to those of Shanghai, Hong Kong, Japan and South Korea. The non-Hispanic white American student average of 525 is comparable to the averages of Canada (524), New Zealand (521), and Australia (515). In contrast, the average PISA readings score of Latino students is 446 and black students is 441.
Unlike Asian immigrants, many of whom are college-educated professionals, Latino immigrants tend to be less educated than the American average. And both Latinos and blacks are disproportionately poor. ... America’s public school system works quite well, for non-poor native students. It is overwhelmed by a disproportionately black poor population, which suffers the legacy of centuries of discrimination, and a disproportionately unskilled and illiterate foreign-born population. Instead of scapegoating America’s K-12 schools, we need to combat family poverty directly, by means of job creation programs and a living wage, while admitting fewer poorly educated immigrants.
... But American CEOs who offshore production have no right to complain that too few Americans are going into science and engineering. Why should young Americans commit career suicide by entering occupations that are going to be offshored?
American multinationals are not shutting factories in the U.S. and transferring production to China because of China’s superior innovation culture or superior educational achievements. Nor are low Chinese wages the major factor.
I'm not sure about that, but let's hear Lind out:
For the most part, multinationals are pressured or bribed by the Chinese dictatorship into producing in China. In some cases, U.S. multinationals are told they must produce inside China in order to have access to China's large and growing consumer market. In other cases, multinationals are bribed to relocate production to China by enormous subsidies from the Chinese government.
... Why has the Obama administration in general, unlike some members of Congress, shown such a lack of urgency in addressing the issue of China’s currency tariff (itself only one of many instruments of Chinese economic nationalism)? One answer is suggested by a recent Financial Times article by Alan Beattie: "While the drive for currency legislation is noisy and conducted by practiced lobbyists in industries in steel and textiles that have canvassed for protection against exports, many US multinationals are far more interested in investing in China than exporting there." (emphasis added).
It’s a sad reflection on America’s corporate leaders that instead of being honest with their fellow Americans about the true reasons for offshoring, they tend to blame America first, peddling the insulting story that we Americans are not innovative or educated enough to compete with a poor, dictatorial nation like China. The blame-America-first story is peddled as well by American politicians who receive corporate campaign donations and, after retirement, lucrative corporate board memberships, pundits who get paid on the corporate speaking circuit and academic economists with big corporate consulting contracts. These co-opted opinion leaders join the executives of U.S.-based multinationals in trying to divert the attention of the American people from the mercantilist industrial policies of countries like China that do not practice America’s version of free-market capitalism and have no intention of doing so.
... Innovation and education are red herrings, tossed out to distract the American public from the real problem. If we were serious about competing with China, we would copy their tactics. ...
But the U.S. could emulate China by telling corporations that if they want access to America’s consumers they must produce at least a portion of the goods sold in the American market within America's borders and employ American workers.
That's what Reagan did in 1982 with Japanese car imports, although the existence of a vast Japanese car industry within America seems to have disappeared off the radar. It doesn't work in theory, even though it seems to work in practice.
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86 comments:
Well, Lind's a sharp guy, and a pretty candid one (at least relative to DC elite constraints). I don't know whether I agree with most of the points he's making here, but I do take them seriously, unlike the endless blather that idiot Brooks tends to spout.
Michael Lind doesn't note where he got his PISA figures that break out US ethinic groups. He likely should have credited Tino at Super-Economy for the idea, even though his mumbers differ from the ones Tino calculated by a point or two.
Basically what Buchanan's been saying for years now. Things must be getting really bad for an outfit like Salon to start approaching the truth.
Two thoughts:
1) Wow - what a remarkably honest essay to have been posted at Salon, and
2) I actually think that the Japanese lucked into the best of all possible worlds - they now own pretty much of a monopoly on the manufacturing talent in the Red States - and I have long wondered why an American entrepreneur couldn't start his own car [or truck] company which used exclusively non-union Red State labor [but I guess maybe that at this point the start-up costs are just too steep].
And of course the realization of this - the magnificent wealth of manufacturing talent which America still possesses in the Red States - only serves to emphasize the terrible tragedy which socialism wreaked upon the once-mighty industries of the Blue States.
Wow. That was a dud of a speech. "Big things"? Like solar panels?
This guy is very small-minded and unable to really lead at a time we need a leader. He's a pol and one good enough to get elected, maybe even good enough to get re-elected, but a leader, he ain't.
If there's anyone who hates America more than leftists it's mainstream economists. Nothing else can possibly explain how they cling to "comparative advantage" and other Corn-law-era dictums in the face of 40 years of continuous trade deficits. Almost completely uninterrupted since Nixon pulled the country off the gold standard in 1971. But not a single one publicly recognizes that for comparative advantage to work the currency has to be allowed to trade freely. If your trading partners view your best exports as government and housing-backed bonds then it's no surprise that the finance and public sector industries are the ones that thrive.
Thanks for the summary and the link, Steve. I went over to Salon to read it, but came back because the comments over there were so low quality.
And of course the realization of this - the magnificent wealth of manufacturing talent which America still possesses in the Red States - only serves to emphasize the terrible tragedy which socialism wreaked upon the once-mighty industries of the Blue States.
----
Socialism? Faith in free trade and profits above all is what ruined--and is ruining--our manufacturing and technology base - moron
The claim that America’s K-12 system is inferior to that of other industrial nations is another myth whose purpose is to divert the attention of the American public from the real reasons for the offshoring of U.S. industry.
Then he goes on to explain that the school system is not inferior, the students are. Which, as far as the reasons for offshoring are concerened, makes absolutely no difference.
I'm astonished that can run in Salon. In particular, the direct statements that blacks and Hispanics pull down otherwise-respectable educational scores and that the U.S. needs to quit letting in low-skilled immigrants. I'm also astonished -- and BTW I don't agree with some of Lind's arguments and attitudes -- at how closely this resembles an essay by Pat Buchanan.
lind is great--a true leftist
-cryofan
Innovation is no longer an advantage for us because the Chinese will just form a joint venture with a major U.S. multinational and absorb our new technology/idea/technique. We need to somehow use the government to control the extent to which companies can shift know-how overseas.
We also have to put up trade barriers and restrictive trade policies to protect and encourage domestic companies.
East Asia has combined protectionism with capitalism, very effectively, for many decades. I might also mention that they don't take too many immigrants either.
Truly, as the Right and Left bend towards some basic truths: the time for Populism is now.
The elite economic powers are using their establishment media to do everything they can to suppress the populist upsurge.
Because of their iron-tight grip on campaign financing (as well as the media), their reign of terror has been perpetuated beyond reasonable bounds.
And of course the realization of this - the magnificent wealth of manufacturing talent which America still possesses in the Red States - only serves to emphasize the terrible tragedy which socialism wreaked upon the once-mighty industries of the Blue States.
I guess Germany and Japan are outliers, because their auto industries seem to be highly regulated and unionized... Maybe 'socialism' only works for other countries.
http://www.prdailysun.com/index.php?page=news.article&id=1293410167
Puerto Rico has a murder of 25 per 100,000. Among African-Americans, 19 per 100,000 are murdered each year.
China doesn't play economic fairness. It doesn't like that game.
If we adopted Chinese-style co-ordination and focus, we'd crush the Chinese easily.
There are whole villages and counties in China that specialize in producing one type of object - and all other concerns be damned.
They take factories and ideas and borrow or steal them wholesale. They have not a smidgen of respect for trademarks or patents.
If we play Laissez-Faire, the Chinese will just bury us. Our ideology is both stupid and delusional.
BTW, is "Sputnik moment" as close as a politician is allowed to come to nostalgia for the 50s?
HAHAHAHAHa...
Here are the reasons for moving manufacturing to China:
1- cheap abundant labor
2- cheap infrastructure due to government programs and lax laws
3- to hide inventory from US financials
Negs of China:
1- Lots of work to get quality
2- Labor force is not as productive as American workers.
3- Corruption and payoffs at every level with suppliers and government
4- workers super specialize and are not very versatile
Sherwood Smith
South China
If you accept the idea put forth by Dinesh D'Souza that Obama views the U.S. and other western nations as neocolonialists and he (and other top Dems) want to destroy their economic power, then you wouldn't expect him to do anything positive about offshoring.
i find it very remarkable: the marriage between nationalism and socialism on this very site.
apparently, you're all for 'freedom' but only for yourself, other ppl need to behave according to your senseo rightness
America has always been oriented towards freedom (for the average man to live as he pleases, mostly) by constructing massive tariffs.
New England Puritans who wanted the State to direct every bit of life to provide a perfect morality have always wanted a tightly urbanized life with massive social control, but relatively little tariffs. The Quaker/Industrialists from the Midlands wanted moderate to heavy tariffs to protect their industry (they were not traders like the New Englanders). The Aristocrats of the Coastal South wanted slave labor in massive plantations and no protectionism.
The balance came from Border "trash" like Andrew Jackson's followers who chose protectionism and tariffs. Hamilton's tariffs on imported goods helped both Atlantic manufacturers (including "intruders" manufacturing in New England like Colt, Smith and Wesson) and the Border Scots-Irish who could sell hand-crafted goods, and whiskey (subject of eternal battles over tariffs) without much foreign competition.
Tariffs are as American as Alexander Hamilton and Andrew Jackson.
Lind is talking a lot of rubbish.
I won't even begin challenging the 'legacy of centuries of discrimination' tripe, but on China, trade and multinationals he's just dead wrong.
All talk of the Chinese government paying 'enormous bribes' to foreign industry to set up shop is just pure BS - just show me a scrap of evidence, Mr. Lind.
But more importantly, business is purely self-motivated and solely motivated for the quest for profit.For whatever reason (and this MUST have something to do with the Chinese work ethic and ingenuity), business goes to China because it sees fat profits there.
It really is as low and simple as that.
I think an argument could be made for more Amy Chua style schooling, but I think our current educational system isn't bad.
"Nothing else can possibly explain how they cling to "comparative advantage""
They forget what it even means. California producing wine is an example of comparative advantage. China making cheap sneakers isn't, it's just wage arbitrage.
Steve,
The Japanese car plants on US soil are actually far less productive than the native car plants of Japan, there fore they are a liability to the Japanese.
Their existence is a kind of 'good-will hidden tarrif' to placate hostile opinion.
Of course, if the Japanese were really mean they would interpret WTO rules (which the American political class strove might and main to introduce), to the letter and keep on exporting in their merry little way.
Mr. Lind is obviously an American supremacist/nationalist. He would rather an American worker get paid 20% more than to feed 10 starving people in a much poorer country.
you americans have plenty already and it's Mr. Lind's intention to never share it with anyone.
unlike the endless blather that idiot Brooks tends to spout.
Brooks, like Tom Friedman, is an adherent of the stream-of-conscience school of writing, in which you're free to invent feel-good stories as you go provided you scrupulously steer clear of the truth.
"i find it very remarkable: the marriage between nationalism and socialism on this very site.
apparently, you're all for 'freedom' but only for yourself, other ppl need to behave according to your senseo rightness"
Nice choice of words, BTW. We've got to find some new moniker for a populist, pro-American economic policy. I kind of liked 'producerism'.
Countries seek their own advantage at the expense of other countries since Ug and his boys tried to club the cavemen next door. If we let the CEOs sell us out, the Chinese will just overcome us.
" Why should young Americans commit career suicide by entering occupations that are going to be offshored?"
I finished my degree in Computer Science right when the news of all of the programming jobs being transferred to India and Russia hit. Bill Gates said that the jobs had to go overseas because nobody wnet into computer science anymore. But nobody goes into it because there are no jobs in it because he and other captains of the computer industry sent all of the jobs overseas!
The U.S. government(s) need to quit selling debt in order to force those who hold dollars to purchase the results of our labor, rather than a promise of labor sometime in the future.
All this "stealing our technology" whining - you guys do realise that that's how the USA behaved in the 19th century, don't you?
I am glad that Lind, Tino and Steve have broken down the various educational stats by country/continent of origin.
It cuts through the liberal propaganda in an important way: American whites do better than European countries, American blacks do better than black countries, American Hispanics do better than Hispanic counties, and American Asians do better than Asian countries.
The lessons are that (1) racial/ethnic differences arise in the native cultures, (2) America improves all racial/ethnic groups, and (3) there is only so much America can do. The American experience cannot equalize all groups.
The final question for me is what would America's average score be without the 1965 Hart-Cellar Immigration Act.
Take the relative racial/ethnic components of America in 1965 (prior to Hart-Cellar) and multiply them by the racial ethnic scores that Lind/Tino/Steve have worked out.
This would tell us whether America is smarter or dumber due to Hart-Cellar.
Unfortunately, I cannot find the white/black/Asian/hispanic stats for 1965. Can anyone help?
Anonymous:
> Maybe 'socialism' only works for other countries.
In his latest post, Moderate Tax Sweden, Tino explores this theme. Basically, he concurs with you (assuming absence of sarcasm on your part).
Anonymous:
I think you've got it backwards w.r.t. innovation. Information and ideas produced here can and will be used elsewhere. That's not a matter of our having bad policy, it's a matter of the rest of the world having the ability to do the same kind of manufacturing as we do. Even if we had high trade barriers, a new invention or technology used commercially here would ultimately be picked up by companies in other countries.
In some sense, we were spoiled by the post-WW2 world, where most of the first-tier industrial powers have been flattened or buried in debt. The US in 1950 was in an absolutely incredible position of strength, one that we will probably never experience again.
In 2011, we don't live in that world. Many countries can do precision manufacturing at a level that lets them make modern cars and consumer electronics and such. Many countries also have large research communities which can drive their own industry, as well as ultimately ours and that of the rest of the world.
The place where trade barriers can affect things is, as far as I can see, to create an incentive to shift or keep some production here instead of overseas. But that comes at a potentially rather high cost--it makes products sold here more expensive, decreases profits of domestic companies, and worst of all, is very much subject to being hijacked by interest groups to benefit themselves at the expense of the rest of the country.
Wow, Lind's "American corporate leaders" sound a hell of a lot like "cognitive elitists"!
It doesn't work in theory, even though it seems to work in practice.
Ahahaha, verrry nice one.
Anonymous:
Do you really expect magic word arguments--labeling someone's ideas "socialist" without any other discussion--to convince anyone? Pretty much everyone here has already ignored the magic-word arguments of "racist" against paying attention to hbd.
This kind of labeling argument is deeply stupid. Free trade and open borders may be better policies than some level of trade barriers and restricted immigration. But you will not convince me of that by calling any alternative to free trade and open borders "socialism." You have to come up with some evidence or arguments instead.
At some point, we're arguing over both values (how should we value the well-being of the left side of the bell curve relative to the right side?), and predictions about reality (will free trade or some trade barriers or high trade barriers lead to better outcomes?). Labeling the positions according to whose team says what tells us *nothing* about the rightness or truth of the arguments.
Then he goes on to explain that the school system is not inferior, the students are. Which, as far as the reasons for offshoring are concerened, makes absolutely no difference.
You missed the point. *Some* (a minority) of the students are, but focusing on these students hides the fact that there are *many* who are not and who are still having their jobs offshored. Many Wall Street financial analysts could be physicists with the right incentives.
Repeated "advertisment" of a good book by Robert Weissberg "":
http://www.amazon.com/Bad-Students-Not-Schools/dp/141281345X/ref=sr_1_1?s=books&ie=UTF8&qid=1296060157&sr=1-1
Respectfully, Florida resident.
'I'm astonished that can run in Salon.'
I'm not. It's understood that the achievement gap is Our Fault.
"Innovation is no longer an advantage for us because the Chinese will just form a joint venture with a major U.S. multinational and absorb our new technology/idea/technique."
They do this even in tiny niche industries like HDSLR video accessories. US companies design and innovate great products and Chinese companies than spit out rip-offs at less than half-price and 2/3 the quality.
So let me get this right… we send China green pieces of paper and they send us ipads and you think we're getting the short end of the stick? Well if you really think China subsidizing our consumption is a good deal for the Chinese I'd be very happy to have any unemployed contractors out there build me a new home for half the going rate.
On a related note… you China-phobes do realize that all this deflationary talk about balancing budgets and stopping inflation, does nothing but make the pieces of paper we've sent to the Chinese more valuable. In politics it's always good advice to follow the money.
There's a great book published in 1989 called " More Heat than Light" by an economist named Mirowski. He details the theoretical muddle of neo-classical economics and the vain attempt by economists to model economics on physics.
"i find it very remarkable: the marriage between nationalism and socialism on this very site.
apparently, you're all for 'freedom' but only for yourself, other ppl need to behave according to your senseo rightness"
Yup. And you can't do anything about it, can you? El-Oh-El.
If you want to imagine the future, Anon, imagine a boot, stamping on "other peoples" faces, forever. Then imagine us, who combine nationalism and socialism, enjoying our face-stamping freedom, forever.
So, tell me, Mr. Troll, how do ya like them (poisoned) apples?
If you accept the idea put forth by Dinesh D'Souza that Obama views the U.S. and other western nations as neocolonialists
How are Switzerland and Ireland (just to pick two examples) supposed to be "neo-colonialists?"
What has been screwing over high tech workers for the past decade is not offshore outsourcing, but rather the special privilege employers have to import high tech workers. Employers right now are trying to turn this restricted privilege into an unrestricted privilege--and if they win, this will be the nail in the coffin of US high tech careers.
The MSM has the attitude that if it looks like a problem caused by immigration, find something else to blame.
Greg Marquez:
So let me get this right… we send China green pieces of paper and they send us ipads and you think we're getting the short end of the stick? Well if you really think China subsidizing our consumption is a good deal for the Chinese I'd be very happy to have any unemployed contractors out there build me a new home for half the going rate
-------
How much moronic nonsense can be said with respect to one post?? How sustainable do you think sending over green pieces of paper for stuff is? In the short term, the Chinese are giving us stuff at a discount while we transfer our business capital, manufacturing and technology to China... In the long run, we have much less capital, manufacturing or technology that interests the Chinese, and they cut us off and leave us broke
"Of course, if the Japanese were really mean they would interpret WTO rules (which the American political class strove might and main to introduce), to the letter and keep on exporting in their merry little way."
No. If the Japanese were really *stupid* they would interpret WTO rules to the letter and keep on exporting.
WHY do you think the Japanese are willing to accept the "goodwill tariff"? Because they want access to American markets, duh. If they didn't give over the "goodwill tariff" they'd lose access to our markets, (Americans would boycott them, as was going on during Reagan admin, which is why those factories on American soil got built) and THAT they DON'T want.
The Japanese car plants on US soil are actually far less productive than the native car plants of Japan, there fore they are a liability to the Japanese.
I think a study showed a 10% gap, and this was accounted for by the inexperience of the workers. The transplants are still more productive generally than domestic automakers.
Transplants also offer a number of other benefits beyond base productivity due to their proximity to the largest market in the world. It costs a lot of money to ship assembled cars across the ocean, for example. They're not as space efficient as parts.
One of the other ways of maximizing their overall efficiency is to have the U.S. plants build bigger autos (of which they sell far more here) and ship a few back to Japan, while the Japanese plants focus on the smaller vehicles that sell better there, along with the high end luxury brands.
The Japanese aren't the only ones building transplants, too. The Koreans and the Germans are doing so as well. It can't just be good will as no one was hating on the Koreans or the Germans like they were on the Japanese during the 80s. I suspect Tata will probably set up a plant of their own if they ever get serious about entering the U.S. market.
Well, I' one of the few people who will admit he doesn't know much about economics, but what does it say about Salon that they publish Lind at all? The Vietnam War is the foundation for the Left's hatred of America, probably the source of today's Left's hatred of America, and Lind wrote a book arguing that that war was both just and necessary. So if they're the partisan ogres we all thought, Lind be anathema over there. Maybe we should be giving credit.
http://www.prdailysun.com/index.php?page=news.article&id=1293410167
"Puerto Rico has a murder of 25 per 100,000. Among African-Americans, 19 per 100,000 are murdered each year."
Lots of Puertos are black or mulatto.
Greg Marquez: So let me get this right… we send China green pieces of paper and they send us ipads and you think we're getting the short end of the stick?
Just be patient and eventually people will, like you, finally understand that there is such a thing as a free lunch, and what can't go on actually will go on.
dearieme: All this "stealing our technology" whining - you guys do realise that that's how the USA behaved in the 19th century, don't you?
Yes. Your point?
Whiskey got it right.
How about this? Cut taxes on American businesses and individuals, but put higher tarrifs on foreign goods? Let's shift the tax burden to the Chinese.
"So let me get this right… we send China green pieces of paper and they send us ipads and you think we're getting the short end of the stick?"
What happens when they no longer want those green pieces of paper? They are willing to loan us money and subsidize our consumption now, because they think they can get something for that money in the future. What happens when they realize we will have nothing to offer them?
The endgame here is grief for both us and the Chinese. The Chinese will have scrimped for years, only to find their savings are worthless. We will have landfills full of Chinese-made molded plastic, and realize that we can no longer make many of the things we want or afford to buy them from other countries.
Greg:
Those green pieces of paper (or more typically, investments in US companies, loans to the US government or entities backed (officially or unofficially) by it, etc., aren't some kind of useless abstraction. The Chinese can use them to make claims on stuff we have or make in the future.
Holding US debt means a promise to take their current good fortune, which is surely transient (they're not going to be growing at 10% per year forever; that's only possible because they're climbing out of a deep hole) and send it forward into the future. It also means access to US schools, products, media, and politicians today. (Contrast the kind of influence China can buy with the kind of influence Haiti can buy.) And it allows a kind of insurance; in the event of some kind of big economic slowdown clobbering China, presumably the Chinese government would use those reserves to try to pay for whatever goodies it might need to get out to keep the people from losing faith in it.
Whiskey got it right.
Somewhat. He put a neo-con spin on it, of course. Here is a quote from the historian Clyde Wilson that's closer to the truth:
"In my opinion it is not a question of free trade versus non-free trade. It is a matter of who profits from whatever policy. For a long period of U.S. history we had high tariffs. They were very profitable to Northern capitalists and a serious burden to everyone else. (The notion that American propserity was due to tariffs, so often claimed here, is nonsense. Tariffs cannot create prosperity—they can only transfer wealth to the protected industries. We had prosperity because of immense natural resources and a hard-working inventive people.) Now we have “free trade” (so-called) because it is highly profitable to Northern capitalists though a loss to everyone else. It is a question, as always, of who has the power to decide the policy for their own benefit. It is the question of who is calling the shots that needs to be addressed. Further, our discussions are much confused because we now judge good and bad economics by meaningless numbers rather than by the sense of well-being. And we can’t really know whether Americans are well-off or not because we no longer no who is an American."
Maybe we should be giving credit.
Uhh, I think the entire purpose of this thread is that we are giving them credit - that we're simply flabbergasted that something like this could see the light of day at Salon.
"The Japanese aren't the only ones building transplants, too. The Koreans and the Germans are doing so as well. It can't just be good will as no one was hating on the Koreans or the Germans like they were on the Japanese during the 80s."
When you are manufacturing complex, high-margin products, it makes sense to have factories in your largest markets. It gives you an inherent operational hedge against currency fluctuations, because most of your costs are denominated in the same currency as your local revenues.
If you accept the idea put forth by Dinesh D'Souza that Obama views the U.S. and other western nations as neocolonialists
How are Switzerland and Ireland (just to pick two examples) supposed to be "neo-colonialists?"
Ireland is seen by them as a colonial victim of the English. Switzerland is populated by evil white men who WOULD have been colonialists if they had had access to the sea.
Re: Non-Moron, Free trade destroyed Detroit? Really, not spoiled rotten unions and brain-dead management who allowed foreign competition to go from 10% of the market in 1960 to 55-60% of the market in 2010. Free trade certainly didn't destroy the Japanese and German auto industries which are thriving for the most part even in the recession.
And exactly how did the U.S. have free trade in autos when the government capped the number of Japanese autos that could come into the U.S. market for a decade and erected massive barriers to foreign built trucks and SUV's ( Thereby allowing the Big 3/UAW to continue to goof off for another 20 years until that market inevitably collapsed and nearly sunk two of them. ) Detroit's problems had to with management and labor battling each other for 50 years while treating the American consumer like a non-entity unworthy of their time, not free trade.
How about this? Cut taxes on American businesses and individuals, but put higher tarrifs on foreign goods? Let's shift the tax burden to the Chinese.
Bingo. Call it the fair trade tax cut.
"The Buffett Plan for Reducing the Trade Deficit"
http://www.levyinstitute.org/publications/?docid=1077
anon said, Free trade certainly didn't destroy the Japanese and German auto industries which are thriving for the most part even in the recession.
I guess it helps when you can practice free trade in somebody else's market while practicing protectionism at home. Given over 30 years of free trade worship on our side, foreign car makers still can't crack the the Japanese, or South Korean markets. I doubt that can be explained away as a case of inferior foreign autos. Even if one believes Asian cars are superior, wouldn't Japanese and Korean manufacturers be able to obtain more than 5% of each other's markets? This suggests that Japan and Korea are not just playing unfair with Uncle Sam, they don't play fair with anyone.
For most foreign brands, Japan remains one of the toughest markets on earth to sell cars. In the fiscal year through March 2009, just 3% of sales in Japan were accounted for by foreign carmakers. Partly because of the recession, that's down from 5% just a few years ago. It also makes Japan an even tougher market for foreigners than Korea, where about 5% of sales are made to non-Korean automakers.
This is a continuation of the previous comment on foreign market share in the Japanese and Korean markets.
Contrast the foreign market share in Japan and South Korea to Germany. Foreign makes have a much higher presence in Germany.
On a related note… you China-phobes do realize that all this deflationary talk about balancing budgets and stopping inflation, does nothing but make the pieces of paper we've sent to the Chinese more valuable. In politics it's always good advice to follow the money.
Who's a China-phobe? I'm the real "cognitive elitist"; I want to do the same things the Chinese, Indians, and Israelis are doing.
Real "cognitive elitists" are racist, protectionist, and nationalist.
Real "cognitive elitists" are racist, protectionist, and nationalist.
We're not "racist" in any sense of the word. We're political moderates that want to take net immigration to zero, protect our borders, enforce our laws, and take back the size of government to more moderate levels. Essentially, we'd like America to return to where it was mid 1960s. That's moderate. The extremists are the liberals/neoconservaatives that want a tidal wave of immigration at home and out of control government. The liberals are also racist, as they seek to pursue demographic policies that alter the makeup of the country. We, on the other hand, don't want immigration policies that advance any group.
Never refer to us as racists. It's bad tactics and untrue. If we ever want conservative ideas to be implemented on a national level, we need to portray our liberal/neconservative establishment as extreme and ourselves as sensible centrists.
Good point about Japan and Korea not having much of each other's markets. I think that East Asians are, at their core, very insular and conservative people that shun outsiders - outside people, outside ideas, outside goods. Once in a while, if their government forces it, they'll change, but the fundamental trend is to keep to the familiar and be afraid of the foreign. Protectionist policies combined with an insular culture are a good combination for keeping foreign goods unpopular.
Heck, Microsoft can hardly sell any XBoxs in Japan, despite bringing on tons of Japanese developers and Japanese-focused exclusive killer apps. Why? It's foreign and the Japanese want their own domestic companies (Nintendo, Sony). Even without strident protectionism, the Asians have a culture that protects the home market. We don't, so our companies get screwed.
Free trade policy doesn't adjust for culture.
Re: Anon, missing the point, like I pointed out before, the most profitable lines for the Big 3 over the last 20-25 years were trucks and SUV's which like I mentioned before were heavily protected. This gave the Big 3 huge profits until the price of oil inevitably went up after declining for 15-20 years. What did they and UAW do with this extra time and money? Nothing to improve their management and workforce structure, nothing to improve their relative quality compared to the Japanese and Germans, nothing to reduce their number of brands because of their declining overall market share.
You mention a lack of access to Japan and S. Korea, I might agree with S. Korea, but seriously do you think the average Japanese would by the crap the Big 3 make? especially when for years they didn't make cars w/right hand drive and the fact that Big 3 can't even make quality small cars profitably in their own market which are the bread and butter of the Japanese market? From what I understand BMW does quite well relatively speaking in Japan but they have both a reputation for quality and prestige that the Big 3 lack. I'm not saying the Japanese haven't put up barriers, but it's not like North American built Big 3/UAW cars sell like hot cakes everywhere else in the world but East Asia.
Almost all GM and Ford cars sold in Europe are made in European factories with European workers and designed by separate European divisions. The reason? GM and Ford's European cars have a higher level of quality that Europeans demand, which is why the new " Buick Regal " is actually being made by GM's European division Opel and being re-branded a Buick. GM did the same thing a few years ago when re-badged the Pontiac G8 from their Australian division, Holden. GM and Ford can actually build high quality cars, they just don't make them in North America with UAW contracts. Yet this same American workforce does produce high quality cars for Japanese and German companies, it's just that none of them are organized by the UAW.
But more importantly, business is purely self-motivated and solely motivated for the quest for profit.
Sure, but you're saying that bribes don't count as profit?
Tariffs cannot create prosperity—they can only transfer wealth to the protected industries.
The trick, as the late UK economist Wynne Godley advised both Britain and the US, is to impose nondiscriminatory tariffs (so hits every import equally and doesn't single out shoes or tires) and use the revenue to cut taxes. That's the gist of the "Buffett Plan" I linked to above.
As a nitpick, we don't have free trade. We have heavily-negotiated trade, with all sorts of regulations, quotas, etc., enacted to protect domestic industries. "Free trade" is a slogan, not a description of US policy. (Similarly, "fair trade" means, in practice, something more like pushing the slider bar a bit further toward "protect US industry," not some fundamental change in how we're doing things.) Among other things, this is why corn syrup is used so heavily for junk food in the US; we impose tariffs on sugar to protect domestic sugar growers.
Protectionism can help your companies do well, under some circumstances. I gather one really good place to use it is to allow some industry to grow in your country till it's big enough to compete with foreign competitors.
But it also involves a transfer of wealth from the protected companies' customers to them. Raise tariffs on foreign cars, and you can force me to buy a domestic car. But since that wasn't my first choice, you made me poorer in order to make the domestic car maker richer. (Perhaps the American car cost more, perhaps it was lower quality and so worth less.)
Now, you can imagine that this might work out for the best somehow--perhaps keeping that domestic car maker in business will long-term benefit me. But that's far from obvious. And given the way our political system works, political connections and donations drive the decisions of which industries and companies get trade protection, much as they do in determining which companies and industries get bailouts or favorable tax treatment or subsidies.
I think you can see that now. We subsidize corn ethanol and impose high tariffs on foreign biofuels, even though neither of these make any economic or environmental sense, because that works out politically. (If the Iowa caucus weren't so important in the presidential race, I wonder if there would be any corn ethanol in US fuel right now.)
Economic models need to be taken with a large grain of salt, but in this case, I think they give us a very good rule-of-thumb: it's really hard to grow richer by forbidding some transactions. You may forbid them on other grounds--moral, military, because of externalities that aren't accounted for in prices, whatever--but all else being equal, you're not going to make yourself richer by forbidding transactions people want to make.
anon said, You mention a lack of access to Japan and S. Korea, I might agree with S. Korea, but seriously do you think the average Japanese would by the crap the Big 3 make?
You missed the point I made. Let's assume US cars suck and their market share in Japan and Korea is zero. How does that account for the lack of Korean car sales in Japan? How does that account for the lack of Japanese car sales in Korea?
If German,Swedish and Korean brands sell well in the US, why would the cumulative total of German, Swedish and Korean brands not break 3% of the Japanese market? Ditto for the Korean market. Why would Swedish, Japanese and German cars not break 5% of the Korean market when they sell well in the US?
Puerto Rico has a 45 percent poverty rate. 30 percent of the income of the average Puerto Rican household comes from government transfers. Only 37 percent of the country is in the labor force. The economy is heavily dependent on welfare from the U.S. government, subsidizes, tax incentives, and tourism.
http://www.topuertorico.org/economy.shtml
"By some economists Puerto Rico's economy is considered somewhat fictitious. Puerto Rico has very few natural resources of economic value and its economy relies mainly on Federal Aid from the United States Government, which depends on the industrialization programs and the tax incentives that U.S. offers."
"Essentially, we'd like America to return to where it was mid 1960s."
In the mid-1960s we had higher income taxes, more manufacturing industries, and lower gaps in wealth. We also had a better funded public education system in the primary and secondary levels. I'd like to have that type of society but I would hardly call it conservative.
For what it's worth, Michael Lind is my favorite political commentator and I wish we could adopt just half of his policy recommendations.
Re: Anon, Yes in Japan the foreign market share is low, but Mercedes and BMW both sell about five times as many cars as Chevrolet did there in 2010 despite much higher prices. Volkswagen sells about 50 percent more in volume above that. Mercedes and BMW both sell around 30,000 cars which is only slightly less then Toyota's luxury flagship Lexus does which leads all high end brands in Japan. This also indicates that proportionately the Japanese don't buy a lot of bigger, more expensive cars. Sales for Lexus, Mercedes, and BMW are much higher in the US even after adjusting for population size.
This brings me back to one of my earlier points which is that small, fuel-efficient cars play a much larger role in the Japanese auto market than in other industrialized nation's auto markets. This also happens to be where the Japanese excel and where the Big 3 are terrible at competing even in their own home market. My guess as to why the Japanese prefer smaller cars probably has to do with the paucity of available space in Japan and the attendant traffic congestion which is legendarily bad, and the fact that Japanese rail service is probably the best in the world, which probably reduces the need to drive to work and hence to own a car.
Now as to S. Korea's low foreign sales, you are probably right, protectionism against everyone including the Japanese is probably the main reason, but S. Korea is not a huge market relative to Japan, North America, and Western Europe anyway.
anon said, This brings me back to one of my earlier points which is that small, fuel-efficient cars play a much larger role in the Japanese auto market than in other industrialized nation's auto markets. This also happens to be where the Japanese excel...
And it also happens to be where the Koreans excel. So discounting American cars as bad and German cars as too expensive, why can't the Koreans capture more than 3% of the Japanese market given their excellence in small, efficient cars?
I hate to use this term because I don't believe in AA, but this looks like a case of disparate impact in regards to free trade. Whatever the Japanese and Koreans are doing, whether or not they are even doing anything consciously to restrict trade, the fact that foreign makes only account for 5% or less of their markets looks like a case of disparate impact, given foreign market share in Germany and the USA.
I never said that South Korea didn't engage in protectionism, but that isn't why the U.S. auto makers are doing poorly worldwide. As to why S. Korean automakers don't do well in Japan, well it could very well be that the Japanese hate South Korean products because they despise Koreans. On the other hand maybe the Japanese don't view S. Korean cars as worth buying because they can get the same thing from domestic manufacturers. The general impression I get of Korean cars is that they are cheap knock-offs of Japanese cars, particularly the Big 3 makers in Japan: Toyota, Honda, and Nissan.
I think the underlying causes as to why both countries have low percentages of foreign cars is different however, despite superficial similarities. I think it is also abundantly clear that the South Korean government has been significantly more interventionist in it's economy all around than the Japanese have. The Japanese never heavily subsidized it's big companies like South Korea did. Considering that, it wouldn't be a stretch to assume that bureaucrats in Seoul also more heavily protected their "investment" from foreign competition.
"It's really hard to grow richer by forbidding some transactions".
What utter rot!!!
Only an economist could write something as crass, stupid, pompous and fundamentally wrong.
Therefore, we are all 'richer' because sub-prime transactions were permitted.
In their own way cheerleaders for the far right/libertarians are just as dangerous and destructive as the hard left.Of course the same people regard uncontrolled immigration as a 'transaction' of their great god, the market.
The wider point is for one reason or another many nations of the world experience balance of payments difficulties and foreign exchange crises.These are, in fact, the major cause of stunted growth and deflation across the world as in every case the chosen course of action for such a nation is to impose policies that deflate the economy (ie make people poorer).If one believes that allieviating poverty is the only justification of economics, then one must realise that governments have an interest in foreign trade.
More on that horribly pompous grandeloquent phrase 'forbidding transactions'.'Transactions' in such goods as alcohol, drugs and gambling are generally forbidden - for good reason.
"Pissed Off Chinaman said...
In the mid-1960s we had higher income taxes, more manufacturing industries, and lower gaps in wealth. We also had a better funded public education system in the primary and secondary levels. I'd like to have that type of society but I would hardly call it conservative."
Only if you define "conservatism" as "that economic regime that primarily benefits wealthy investors and bankers". Many of us don't. We do not see conservatism in solely economic terms.
nota: Economic models need to be taken with a large grain of salt, but in this case, I think they give us a very good rule-of-thumb: it's really hard to grow richer by forbidding some transactions. You may forbid them on other grounds--moral, military, because of externalities that aren't accounted for in prices, whatever--...
Sorry to pile on here, nota, but no. There is no need to look at economic models for "very good rules of thumb" when empirical data is available. And the data say that plenty of nations (including both the U.S. and some recently-poor-but-now-rich countries) grew rich by judicious protectionist policies, policies based for the most part on long-term dollars-and-cents thinking, not "other grounds". Or, conversely, suffered serious economic beat-downs by adhering to a disastrous "free" trade ideology. Sometimes, yes, protectionist policies are stupid. It all depends.
The one "very good rule of thumb" that applies to economics is "ideology has no place in non-insane economic thinking".
...but all else being equal, you're not going to make yourself richer by forbidding transactions people want to make.
Wait, wait. There are two, two very good rules of thumb re economics. Rule two is: Ceteris is never ever ever ever paribus.
P.O.C.:
For what it's worth, Michael Lind is my favorite political commentator and I wish we could adopt just half of his policy recommendations.
Which half?
And don't say "the good half" or "the right half" without explaining what you mean.
It's really hard to grow richer by forbidding some transactions.
Tell that to the Mafia.
Of course, it's not the Mafia(s) that have much power to forbid economic transactions. It's their buddies in the Religious Right. They make their "thou shalt nots" into laws, or pressure politicians into doing so. Organized crime are simply the vultures that profit from the resulting black market.
It was true in the Soviet Union when private capitalism was illegal. It was true in America when liquor was illegal.
The only reason Prohibition ended was because the mob was getting too strong; heaven forbid the ayatollahs in government expressed
"libertarian" principles such as
the peasants having a right to alcohol!
Lind's one of the few mainstream economists that doesn't believe the "education, education, education" BS. Only a small percentage of college graduates actually play a decisive role in wealth creation. Switzerland has one of the West's lowest rates of university participation yet is still one of the West's richest and most innovative countries. East Asian countries are educated because they love education, not because its essential to working on a Lexus production line. New Zealand's educated East Asians for example aren't actually doing much wealth creationg (their unemployment rate is twice that of whites.
The English-speaking West is following an indirect neoliberal model, which assumes that wealth creating industries will magically appear if you have an educated population and a free market (which explains why big business has been strangely quiet about the pointless BA production line in our universities)
However, not only does this model fail to create enough wealth creating industries, but it fails to supply the appropriate labour for those industries that do exist, because students are uncertain if these industries will still exist in 5 years time.
This model needs turning upside down, focus on supporting the wealth creating industries, and then develop an education system which provides the appropriate labour as needed, with some form of protection for those unable to compete in a globalised economy (ie, immigration restrictionism for all skills where there is no absolute shortage).
"It's really hard to grow richer by forbidding some transactions".
Unfettered free-marketeering ends up with human flesh on the restaurant menu.
"it's hard to grow richer by forbidding transactions".
Well, just look at the example of tobacco smoking.Basically,the smoker is paying shedloads of cash to feed an addiction that will eventually kill him.
The government and the tobacco companies benefit very handsomely from this arrangement, basically it's money for nothing.The poor old smoker is ripped off blind wasting money that he could have put to much better use for himself or his family.
One side of the transaction gets rich, the other doesn't, nay, its impoverished and eventually killed.
If you think hard enough , an infinite number of such transactions can be found.
Anon:
Yes, of course you're right. If only the government had somehow been involved in the subprime mortgage markets, we wouldn't be in this mess.
In fact, I propose a bold new step away from markets here. We should establish quasigovernmental agencies to provide a market for mortgages. Politicians should apply pressure to lower lending standards, so more people bece homeowners. In the astronomically unlikely event that things go wrong, maybe we should even bail out the losses of the biggest, most politically connected investors in this market.
What could possibly go wrong?
"And don't say "the good half" or "the right half" without explaining what you mean."
I meant that it would be great if the US government could adopt just some of Lind's policy positions although I would not mind too much if they adopted all of em. The only thing I really disagree with Lind on are environmental issues and investment in renewable energy.
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