Lol yes of course... I got so focused on answering accurately that I forgot to pay attention to what city I typed... lol then I tried to be clever... that'll show me
Quote from Denver »
Ah, but to say that one city should change itself to help it's locally based yet nationally reaching industry is a bit far-fetched, no? Granted, local government often times do act on the behalf of commerce or industry, I tend to think that there would have been little Michigan could have done to stop Asian and European cars. It would have had to have been a national thing. Unless, of course, GM and Ford went overseas to manufacture so that there products could be comparably priced and of comparable (poor) quality, but then we're back to where we were before. (I am aware that yes, Chevy and Ford do have overseas plants.)
No, I'm not saying that the government of Detroit ought to have tried to stop European and Asian cars at all! My point is rather that it ought to have helped the city adjust to an altered economic model now that the auto industry is not nearly so prevelant in Detroit as it once was.
Quote from Denver »
People working in Chinese industry: Many. Albeit low-skilled, low-payed peasants.
People working in American industry: Few. Albeit mostly-skilled, mostly well-payed middle class.
This is accurate, but I don't belive its bad or relevant to the free trade discussion.
Quote from Denver »
despite their apparent irrelevance, I see few ways to modernize factories and plants without an input of money from somewhere.
Of course that's true. I'm arguing however that a post-WWI depression (which began in Germany in the 20's, true, but worstened and spread globally in the 30's) is impossible under the current global situation because the circumstances are so very different.
Well, I think we've managed to hit the ball back and forth plenty, AI, and unless you want to continue to say the same things forever, I'll just call it quits. I'm certain neither of us will convince the other, and I'd much rather not offend anyone (which I'm prone to doing), so I'll just stop.
Well, I think we've managed to hit the ball back and forth plenty, AI, and unless you want to continue to say the same things forever, I'll just call it quits. I'm certain neither of us will convince the other, and I'd much rather not offend anyone (which I'm prone to doing), so I'll just stop.
(Just when you thought you were out of the fire...)
@ Alatar. That's a great post (#32 above). I've been pretty busy today and didn't have the time to post a proper reply, but here goes...
Quote from Alatar »
[reponse #1] Finally, the creation of a trade deficit is not explicitly harmful to the US economy; indeed, imports are arguably the entire point of trade.
You're right, trade deficits aren't bad, per se, but when it begins to impact domestic employment and income creation, then the trade deficit discourages foreign investors from buying US Treasury bonds. And the continued sale of stable treasury bonds are one of the ways we pay off our staggering debts, which is several trillion dollars at this point ($7.8 T to be more exact).
You can only shrug off the trade deficit to 'comparative advantage' because reckless consumer spending (which may create other negative externalities, environmental ones, mainly), of shoddy Asian goods allows you to accept the erosion of the manufacturing base that made this country such an economic juggernaut 60 years ago.
Yet the middle class, created out of the manufacturing orgy of the 1940-60s, is shrinking and no sane economist will disagree with this. And all of the cool high-tech "New Economy" jobs that were to sustain the middle class in a post-manufacturing economy are a bust as well. With the revolutions in global telecommunications, those jobs are being shipped to India and South America where US business can pay those workers $0.15 on the dollar. And without a middle class, who's going to buy homes, savings bonds, corporate stock, or invest in pension funds? And if those things aren't purchased what will happen to the bond market? Economic apocalypse, that's what.
The US economy is basically on a binge-and-purge cycle right now. Binging on cheap imports as we purge decent jobs that help people raise families and make durable good purchases (homes, cars, etc.) And we can see this inverse relationship by looking at the trade deficit.
Quote from Alatar »
Increased business competition results in an overall increase in labour standards over the long term.
First, we should confine the discussion to particular industries. Are we talking about textiles, disposable consumer goods, electronics? If so, I don't think competition, where businesses can let annual contracts expire and bid for the cheapest possible labor (which necessarily will include lower labor standards since an extra dollar spent on wages is a dollar not made in profits), increases living standards. It might if there were a labor shortage in third world countries, where the workers could demand better wages or working conditions through collective bargaining and unionism, but international businesses can just go elsewhere (and they do!!! -- Denver's points) if the workers are just too pesky and demanding.
Quote from Alatar »
No such pressure exists in the local markets of developing nations.
On the contrary, the pressure exists to keep working conditions poor and wages cheap, otherwise foreign investment will just go elsewhere to find the prices they're looking for.
Quote from Alatar »
Free Trade actually has inherently demonstrated a positive effect on environmental standards in the long term.
Have you read NAFTA? I'll admit I haven't read the whole thing. It's dense and the minutae is extremely boring. But at the heart of NAFTA and CAFTA, their raison d'etre, is investor protection rights. Chapter 11 of NAFTA, for instance, allows foreign investors to sue nations for imposing environmental restrictions on their oversees operations and lowering their investment return. It's these case studies of the actual applications of NAFTA that are the most enlightening on how NAFTA functions.
The basic facts concerning Mexico's growth in the post-NAFTA period are straightforward. Its growth has been extremely weak in this decade by any measure. While NAFTA may not be the cause of Mexico's weak growth, it is very hard to make the case that Mexico's aggregate economic performance would have been even worse without NAFTA. The World Bank analysis applies flawed econometric analysis that appears to make this case. When the flaws are corrected (or when the results are read more carefully), it turns out that in no version does the study show that NAFTA led to more rapid GDP growth in Mexico. While there are other bases for assessing the benefits and costs of NAFTA, the World Bank's analysis does not provide a basis for supporting claims that NAFTA increased growth in Mexico.
Trade arrangements are not a bad thing in themselves. It has been the practice of the human race for several thousands of years now. But the specific versions of trade agreements that are being ratified are designed to protect the investor -- in the event that a sovereign nation chooses to apply their labor and environmental laws -- at the expense of the populations of those countries. That's my chief problem with NAFTA and the like. They're deeply undemocratic and they're only worsening the erosion of the middle class, which all healthy and just economies and societies need.
Bardo, if you bring numbers or facts into a discussion of NAFTA, then you are no fun and need to be indoctrinated more [/sarcasm].
As an extension to some of Bardo's points, usually the bigger the middle class, the healthier the country is economically. It should be troubling that the trend has been a decrease in this economic strata. It might be comforting to policy-makers to think that these "fair" trade agreements help the little guys, but its naive and foolish to continure to think so.
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"I never allowed my schooling to interfere with my education" -Mark Twain
Quote from hybrid life »
The war is for oil..its one of the ways to make this huge operation worthwhile. People care more about lower gas prices than iraqis anyway.
What others say about me:
Quote from JayC »
You're obviously an ignorant conservative. I blame your hill-billy Mom and Dad.
wow, this grew pretty quick while i was gone, hehe.
Quote from AlatarIstarion »
Within the US, for example, Iowa has a rather severe trade deficit with California; Iowans buy all manner of electronics and techonological services from California, far more than the corn and pork that Californians buy from Iowa. Yet, would the Iowa be better off if they instituted tarrifs on Californian technology in an attempt to increase home-grown "Silicon Plain" electronics manufacturing? Hardly. Indeed, Iowa explicity benefits by not having to do this. Instead, they can focus on those areas of their economy in which they have a comparative advantage and buy their software from the West Coast.
i believe you are confusing the economy with the culture. obviously the culture of the united states (or any country for that matter) benefits from having access to foreign goods. while i have spent a fair amount of time arguing against trade deficits, i don't think trade surplus is good either, as it inherently means another country is "losing" the situation. if zero-balance trade could be reached then the situation would be as you describe, with the simple result of more product diversity and countries exercising their comparative advantages in certain areas.
the problem is one of infrastructure. in order for a country to continue and thrive, it must have universities (and colleges), and hospitals, and research facilities. these are all based on infrastructure and public investment, as well as the ability to create such institutions based on the general public skill base (arguably making higher education the most important on the list). public investement in infrastructure is directly linked to the economy. so, while the idea of importing is good, importing more than exporting lessens the general money total amongst big business and renders them incapable of investing in infrastructure.
(aside: in general, lower prices will make it appear that people have more money, so the economy is better. this is not the case however, since the a million people saving a dollar does not influence public investement, but a company having an extra million dollars to invest does. microeconomics of the region may benefit slightly, but macroeconomics have a much larger influence, and eventually determine the limits on microeconomies they encompass.)
your example of iowa vs. california (see, there was a reason i quoted it, hehe), does not apply, since both states share infrastructure. they are encompassed by the same federal government, and technology as well as skilled persons can freely move between the two. in fact, many people may now live in one, having gone to school in the other (much more than say u.s. vs. honduras). because of this free flow of technology and human resources, iowa would be capable of producing the products it gets from california, it's just more convenient to have specialized regions. poor countries are not capable of creating such products, because there is no free flow of cultural resources and information.
if free trade was replaced with a fully realized version of globalization (both economic and social), then this would not be a problem. the problem is that the economic side is opening up but the social side, which includes technology and education, is not. this sets up a situation where companies can exploit trade deficits, thus making poor countries dependant on them. the reality is that those poor countries are not getting the public investment required to advance them socially (which eventually renders them capable of honest competition). if a requirement for setting up a steel refinery in a country was to also set up a school that taught the native populace how to produce, engineer, and market the cars made from that steel, then we would have shared infrastructure and there would be nothing wrong with free trade.
though most would argue that a requirement like that wouldn't actually be free trade, hehe.
Quote from koelkastmagneet »
And on a side note. Most research will stay in the western world (America/Europe/Japan), because the education is the best in those countries. And special and real high quality products will also remain mostly in those countries.
research will follow education (as you noted), but education will follow the economy and public investment. to assume that the current centers of economy will remain that way is simply arrogant. economic development works in cycles, and migrates. during mercantilism, the united kingdom, france, and spain were the center of the world. now it's america and japan (europe has lost the majority of its hold, historically speaking). in the future it will be china and india (we can already see this happening).
things always change. to assume you will forever be on top, just because you are now is ludicrous.
That paper is HORRIBLE! It draws so many rediculous conclusions it's not even funny. Here is one of my favourites:
Since Mexico's growth rate has been so much slower in the post-NAFTA period, than in the period from 1951 to 1979, it is difficult to believe that NAFTA led to any substantial increase in growth. This growth is especially bad since developing countries should have much more rapid growth than rich countries.
Any intelligent economist would agree that this is a rediculous statement to make, especially this one:
Check page three. Note that he isn't a proponent of free trade, but comparing the post NAFTA economy to "Mexican Miracle" era Mexico is a rediculous proposition, and then saying that because it isn't growing as fast, NAFTA isn't creating any growth is clearly fallicious. This is especially so because Mexico recently emerged from a huge debt-related recession. This article then stealthily groups the whole period after NAFTA into one "growth bar" pegging the overall growth at 1.8%. This is misleading, mainly because you usually don't want to take an average of the whole period of time you are analysing, it would really make much more sense to go year by year, or analyse 2-3 year blocks, so that you can see how it is growing i.e. is it growing faster in 2005 than it was in 1995? If it is, then it doesn't make a whole lot of sense to average it with the post-recession economy of 1995. The only reason I can think of why you would do this would be to prove a point. But this source isn't that credible at all, so let's take a look at what multiple credible analysts are saying about mexico's economic future:
Hmmm.... REAL economists, making pretty rosy predictions about Mexico's economic future, and these just aren't point-proving "research" articles, these are businesses with money riding on the backs of these predictions, giving them much more clout. Those were 2004 predictions, but let's take a look at what the growth actually was:
WOW! That's a whole lot more than 1.8%! 4.9% real GDP growth...... This is higher than the analysts predicted, and well above lots of other developing nations. Let's check out another source to get that "surround sound" feeling:
And also, let's just do away with the article you posted altogether:
Following a 6% decline in 1995, the data show annual growth of only 2.1% from 1996-2003, driven primarily by a 9.5% jump in 2001. Since NAFTA went into effect in 1994, Mexico has averaged 1.8% real per-capita GDP growth. By contrast, through much of the sixties and seventies Mexico had per capita GDP growth that often exceeded 4 percent, and in some years exceeded 7 percent.
The 2001-2003 slump was a result of having an economy that is intrinsically tied to the US, which was also slumping (911, whatnot), this pattern can be seen in another country, Canada:
The article you gave ignores the reasoning for the downturn, and simply attributes it to NAFTA not doing it's job. I think that this is because people would sort of figure out some of the circumstances regarding the 2001-2003 downturn, but the article never mentions it! Hmmmmmm.... I wonder why? Is it because they wanted to average those low percentage points into their 1995-2004 growth bar? This would be akin to mapping out Indonesia's economic growth in one ten year growth bar, looking at it and saying, "Oh jeeze, only 1.8% growth rate? This must be because of it's trade agreement with China." when it was actually the huge negative growth caused by the 2004 tsunami.
This is all besides the point though, because now that we will have two years of plus 4% growth, we can simply ignore this article completely, because it admits that over 4% was the norm "back when mexico was doing well".
The conclusion I would draw from this would be that "something" about Mexico is allowing them to grow their economy faster than other developing nations in the region. I think it has something to do with the free trade agreement with the US.
EDIT:
It might be comforting to policy-makers to think that these "fair" trade agreements help the little guys, but its naive and foolish to continure to think so.
Lay off the ad-hominem attacks, because I am neither naive nor foolish (you may think I'm misguided, but that's different).
It takes a while. I hope it will take long enough for me to retire then...:p
me too, or long enough for me to learn cantonese.
an interesting side note to do with the economic shift to asia: imagine how strange it would be to look at a "made in china" tag as a sign of higer than average quality. hehe.
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"There's no 'I' in 'team,' but there's a 'we' in 'weapon.'"
-Catapult Master
There's nothing like waking up to a bracing Free Trade discussion first thing in the morning! This is an in-depth attempt to clear up a number of the misconceptions that have been floating around.
First though, @Alfred: Thanks for taking care of that one for me. That article was indeed exorbitantly silly :-).
Quote from Jedit »
That's a nice, bloodless way of describing business speculation using a million lives as playing chips.
No matter how beneficial things are in the long term, in the short term - and by short term here we're talking at least five to ten years - the working classes get the purple shaft. After that, the outcome is still not certain to be good for the economy.
First off, its not the "working class" as a whole that gets the proverbials "shaft", as you put it, only specific sectors of manufacturing. People like to toss around phrases like "this is bad for the Working Class" without any real justification; its by no means bad for the entire sector. Second and more important however, every new change and inovation brings temporary hardship to some group of people somewhere; the advent of iron smelting harmed bronzeworkers, the development of textile manufacturing harmed the home weaving sector, and the development of cell phones harmed the payphone industry, yet in the end each of these developments wound up helping the vast majority of society. It might sound cold and heartless, but its the way things are.
Quote from bardo_trout »
@ Alatar. That's a great post (#32 above).
Thanks! Your latest was as well.
Argument: Free Trade Agreements erode the manufacturing base of a nation and its middle class, thereby harming it in the long term and only helping evil corporations.
Made in the following post exerpts:
Quote from bardo_trout »
You can only shrug off the trade deficit to 'comparative advantage' because reckless consumer spending (which may create other negative externalities, environmental ones, mainly), of shoddy Asian goods allows you to accept the erosion of the manufacturing base that made this country such an economic juggernaut 60 years ago.
Yet the middle class, created out of the manufacturing orgy of the 1940-60s, is shrinking and no sane economist will disagree with this. And all of the cool high-tech "New Economy" jobs that were to sustain the middle class in a post-manufacturing economy are a bust as well. With the revolutions in global telecommunications, those jobs are being shipped to India and South America where US business can pay those workers $0.15 on the dollar. And without a middle class, who's going to buy homes, savings bonds, corporate stock, or invest in pension funds? And if those things aren't purchased what will happen to the bond market? Economic apocalypse, that's what.
The US economy is basically on a binge-and-purge cycle right now. Binging on cheap imports as we purge decent jobs that help people raise families and make durable good purchases (homes, cars, etc.) And we can see this inverse relationship by looking at the trade deficit.
Quote from Jedit »
CAFTA is an extension of NAFTA. NAFTA did not achieve anything other than to increase the profits of a few big corporations at the cost of sending thousands of American small farmers into receivership.
Capisce?
Aside @Jedit: Try to make arguments that aren't just a regurgitation of political slogans; criticising something for harming the "working class" as a whole (above) and then claiming that something only helps a few big heartless and evil corporations isn't terribly helpful for debate
Response: This argument is indicative of historic paranoia, particularilly in the US, of having jobs "stolen away by dirty foriegners", whether they be Irish, Chinese, Hispanic or South Asian. In reality however, this argument has little basis in fact. In the US, for example, free trade agreements have become increasingly common over the last decade, yet the US economy continues to grow robustly (as reported by the AFP just yesterday and boasts one of the lowest unemployment rates among developed nations. All this in spite of numberous free trade agreements and a brief recession in 2001.
Furthermore, the existence of NAFTA and other free trade agreements have not resulted in overall detrimental harm to the US manufacturing sector. While there has indeed been a shift in the number of manufacturing jobs in the US (temporarilly unfortunate but beneficial in the long-term, as discussed above), this has not been because of an overall weakness in US manufacturing. Rather, globalization has allowed US companies to become more efficient, thereby actually improving the strength of the sector (albeit not the number of employees), as reported by the Congressional Budget Office (http://www.cbo.gov/showdoc.cfm?index=5078&sequence=0):
Quote from Congressional Budget Office »
Over recent decades, U.S. manufacturers have continually invested in more and better capital goods and manufacturing techniques in order to remain competitive in world markets. That investment has enabled them to raise their output and keep pace with overall economic growth without a corresponding increase in the number of workers that they employ. Since 1979, the productivity of manufacturing workers has grown at an average annual rate of 3.3 percent, significantly faster than the 2.0 percent growth of labor productivity in the nonfarm business sector overall.
Finally, the overall benefit to the US economy of NAFTA specifically (and free trade agreements in general) is indeed measurable. On top of that, the benefits to less economically powerful nations is even more pronounced and also provides additional benefits that I discussed above in post #32. This has also been measured by the Congressional Budget Office, for anyone who's interested in such things (http://www.cbo.gov/showdoc.cfm?index=4247&sequence=4)
Quote from Congressional Budget Office »
Applying the ratio to the estimates from CBO's model leads to the conclusion that NAFTA has increased U.S. GDP, but by a very small amount--probably no more than a few billion dollars, or a few hundredths of a percent (see Table 2). The trade increases wrought by NAFTA raised Mexican GDP by much larger percentages than they raised U.S. GDP--quite likely 16 to 21 times the U.S. percentages--because of the much smaller size of the Mexican economy.
Argument: Trade deficits are bad because they increase the US treasury deficit.
Quote from bardo_trout »
You're right, trade deficits aren't bad, per se, but when it begins to impact domestic employment and income creation, then the trade deficit discourages foreign investors from buying US Treasury bonds. And the continued sale of stable treasury bonds are one of the ways we pay off our staggering debts, which is several trillion dollars at this point ($7.8 T to be more exact).
Response: This is another very common argument based on general misconceptions of the nature of the US treasury deficit. People like to say things like "deficit" and become incredibly paranoid, but there are few very important points that must be made.
First, when judging the deficit it is important to look not at raw dollar amounts but rather as the deficit as a percent of GDP, for obvious reasons; if a country has a debt of $1 million and a GDP of $2 million, this is far different from the same raw dollar amount in a country with a GDP of $200 million. Looking at the US then, the current budget deficit is significantly smaller as a percent of GDP than it was for most of the 1980s (though the dollar amount is higher due to inflation and the growth of the US economy). This can be easily visualized in the following chart: http://traxel.com/deficit/deficit-percentage-50-years.png
Second, deficit spending is not inherently bad provided it is a relatively small percent of GDP (as the US deficit has always been). Indeed, the vast majority of people run "deficit spending" in their daily lives; anyone who has a home mortgage, for example, yet continues to buy other products before they pay it off in entirity is engaging in "deficit spending", yet this doesn't cause problems. Indeed, it is often the best way to grow your personal microeconomic "economy". Problems only arise when your debt become an overwhelming percentage of your gross income. The same is true of nations, and with the US deficit under four percent of GDP and shrinking, this is not a terribly dangerous problem.
Finally, the power of the US economy and its ability to sustain a deficit are fueled by globalization. Contrary to what critics claim, Free Trade does not hurt the US economy by creating a deficit; rather, the US economy runs a deficit because Free Trade allows it to do so, spending money to build up domestic and global infrastructure. David H. Levey and Stuard S. Brown argued this most eloquently in the March/April 2005 edition of Foreign Affairs:
Quote from Foreign Affairs »
The United States continues to reap major gains from what Charles de Gaulle called its "exorbitant privilege," its unique role in providing global liquidity by running chronic external imbalances. The resulting inflow of productivity-enhancing capital has strengthened its underlying economic position. Only one development could upset this optimistic prognosis: an end to the technological dynamism, openness to trade, and flexibility that have powered the U.S. economy. The biggest threat to U.S. hegemony, accordingly, stems not from the sentiments of foreign investors, but from protectionism and isolationism at home.
Argument: Evil companies export workers abroad.
Quote from bardo_trout »
On the contrary, the pressure exists to keep working conditions poor and wages cheap, otherwise foreign investment will just go elsewhere to find the prices they're looking for.
Response: This argument, though it may sound quite seductive to someone convinced of the evil inherent in making money, is empirically disproven. Lets begin at the beginning however. First off, it is certainly true that companies move to undeveloped nations out of a desire to make money. This however is not evil; its the way companies work. The point of a business is to make money.
Now, the reason they move to these undevloped nations is because making money is easier. Why is this the case? Primarilly due to lower competition for workers and a lower cost of living This lower cost of living in turn makes lower wages possible; but this too is not evil. While the fact that people in some countries make less than people in others seems to offend the sensabilities of some, this isn't as aweful as some would love to belive. Although I'm sure it would give said individuals a wonderful and fuzzy feeling to give hundreds of thousands of dollars and a new Lexus to Nike workers in south asia, this wouldn't actually solve any of the long-term economic issues faced by that nation and indeed would cause all manner of problems.
But what happens when these vile companies move into undeveloped nations with their insidious money-making ways? Well, in order to make said money they need a somewhat educated workforce and therefore set the foundations for a modern infrastructure. In addition, inspite of the relatively low wages, they do indeed put money into the local economy. These factors in turn make the nation even more attractive to foreign investment, now from smaller companies, for much of the initial infrastructure has been laid. Eventually, home-grown infrastructure and education begins to develop.
"Oh, hold on now", you say. "This is just wishful thinking and theorizing, but it doesn't happen in real life. Why don't you look at what really happens in actual examples". Alright then, lets. Take if you will a variety of impoverished, undeveloped islands and peninsulae in east Asia. The time is the 1950s and the nations are South Korea, Taiwan, Singapore and Hong Kong. All are in various states of disarray and suffering from a massive lack of infrastructure and education. Undeveloped and economically week, they have been pawns in wars and colonialism for over a century. Yet their leaders pursue an open economic model, choosing to encourage foreign investment rather than engaging in protectionism with local industries. The result? Today each of these nations is easily fit in the category of well developed nations with standards of living equivalent to Western Europe and the US.
But why aren't all nations this well off? Converse examples hold the answer. At the same time that several of its neighbors were opening their economies, China, India and North Korea engaged in severe protectionism and nationalization of native industries. The consequence? None of these three nations grew at the rate of their Asian neighbors and remained undeveloped. But wait! Aren't China and India doing well economically today? Indeed they are, and the reason only goes further to prove my point: In the 1980s, China and India both reversed course and began opening their economies to foreign investment and trade. Consequently, while each nation is about 25 years behind South Korea, Taiwan, etc, they are now experiencing massive economic growth and an increase in living standards. Left out of this picture is South Korea, which has been isolated in terms of trade throughout its entire existence, as well as nations in the Middle East and Africa which have suffered from violent uprisings and protectionist totalitarian rulers which prevented the growth of trade. See a pattern?
I quote myself from my above post #32:
Quote from AlatarIstarion »
For the first time in the history of mankind, mass poverty is explicitly avoidable and has been or is being eliminated in a sizable portion of the world.
First off, its not the "working class" as a whole that gets the proverbials "shaft", as you put it, only specific sectors of manufacturing. People like to toss around phrases like "this is bad for the Working Class" without any real justification; its by no means bad for the entire sector. Second and more important however, every new change and inovation brings temporary hardship to some group of people somewhere; the advent of iron smelting harmed bronzeworkers, the development of textile manufacturing harmed the home weaving sector, and the development of cell phones harmed the payphone industry, yet in the end each of these developments wound up helping the vast majority of society. It might sound cold and heartless, but its the way things are.
In this particular case only specific sectors are affected, but the overall trend of a race to the bottom of the wage pool affects all workers.
Quote from AlatarIstarion »
Argument: Free Trade Agreements erode the manufacturing base of a nation and its middle class, thereby harming it in the long term and only helping evil corporations.
It erodes the living standards of workers, and if taken too far, puts the fate of a country's economy in the hands of foreign governments.
Quote from AlatarIstarion »
Aside @Jedit: Try to make arguments that aren't just a regurgitation of political slogans; criticising something for harming the "working class" as a whole (above) and then claiming that something only helps a few big heartless and evil corporations isn't terribly helpful for debate
Distorting someone else's argument by injecting cute little words like "heartless" and "evil" don't help your argument either.
Again, this particular case only hurts certain people in the working class. But the general trend hurts the entire working class.
I for one, am not arguing that it's "better" to protect the interests of workers than the interests of the upper class. I am arguing that it's a clash between competing interests. I, and many others on this board, are in the working class, and that's why we take this side. One must also wonder why, if the majority of Americans are workers, our government policy doesn't reflect our interests.
Quote from AlatarIstarion »
Response: This argument is indicative of historic paranoia, particularilly in the US, of having jobs "stolen away by dirty foriegners", whether they be Irish, Chinese, Hispanic or South Asian. In reality however, this argument has little basis in fact. In the US, for example, free trade agreements have become increasingly common over the last decade, yet the US economy continues to grow robustly (as reported by the AFP just yesterday and boasts one of the lowest unemployment rates among developed nations. All this in spite of numberous free trade agreements and a brief recession in 2001.
It's one thing for the US economy overall to grow, and another for the living standards of the average person to rise with it. Obviously, giving what used to be middle class jobs to people in other coutries who work for a fraction of the pay, and illegal immigrants here who work off the books for a fraction of the pay, is not in the interests of working class Americans, which is the majority of us. Again, we're only arguing for own interests, not the meaningless concept of "the good of the country".
Quote from AlatarIstarion »
Furthermore, the existence of NAFTA and other free trade agreements have not resulted in overall detrimental harm to the US manufacturing sector. While there has indeed been a shift in the number of manufacturing jobs in the US (temporarilly unfortunate but beneficial in the long-term, as discussed above), this has not been because of an overall weakness in US manufacturing. Rather, globalization has allowed US companies to become more efficient, thereby actually improving the strength of the sector (albeit not the number of employees), as reported by the Congressional Budget Office (http://www.cbo.gov/showdoc.cfm?index=5078&sequence=0):
Emphasis mine. When you say "efficiency", you mean to imply that the consumer gets lower prices. But what "efficiency" really means is increased profits. If the goal was to bring the lowest price to the consumer, corporate profits would be zero. Obviously, the goal is maximizing price, and minimizing wages.
Quote from AlatarIstarion »
Response: This is another very common argument based on general misconceptions of the nature of the US treasury deficit. People like to say things like "deficit" and become incredibly paranoid, but there are few very important points that must be made.
First, when judging the deficit it is important to look not at raw dollar amounts but rather as the deficit as a percent of GDP, for obvious reasons; if a country has a debt of $1 million and a GDP of $2 million, this is far different from the same raw dollar amount in a country with a GDP of $200 million. Looking at the US then, the current budget deficit is significantly smaller as a percent of GDP than it was for most of the 1980s (though the dollar amount is higher due to inflation and the growth of the US economy). This can be easily visualized in the following chart: http://traxel.com/deficit/deficit-percentage-50-years.png
Second, deficit spending is not inherently bad provided it is a relatively small percent of GDP (as the US deficit has always been). Indeed, the vast majority of people run "deficit spending" in their daily lives; anyone who has a home mortgage, for example, yet continues to buy other products before they pay it off in entirity is engaging in "deficit spending", yet this doesn't cause problems. Indeed, it is often the best way to grow your personal microeconomic "economy". Problems only arise when your debt become an overwhelming percentage of your gross income. The same is true of nations, and with the US deficit under four percent of GDP and shrinking, this is not a terribly dangerous problem.
Finally, the power of the US economy and its ability to sustain a deficit are fueled by globalization. Contrary to what critics claim, Free Trade does not hurt the US economy by creating a deficit; rather, the US economy runs a deficit because Free Trade allows it to do so, spending money to build up domestic and global infrastructure. David H. Levey and Stuard S. Brown argued this most eloquently in the March/April 2005 edition of Foreign Affairs:
You ignore one very important point, and that is our deficits have continued over decades, and we now have a debt of close to
8 TRILLION* DOLLARS
which costs us
OVER 300 BILLION* DOLLARS A YEAR IN INTEREST
I'm sure there's nothing better we could be doing with that money.
Quote from AlatarIstarion »
Argument: Evil companies export workers abroad.
Relative to middle class workers, yes, this is "evil" because it is against our interests.
Although I think a case can be made for a family of four losing their house so some manager can buy that second Lexus being objectively labeled "evil". :slant:
* for our international audience: 8 trillion is 8,000,000,000,000 and 300 billion is 300,000,000,000
Emphasis mine. When you say "efficiency", you mean to imply that the consumer gets lower prices. But what "efficiency" really means is increased profits. If the goal was to bring the lowest price to the consumer, corporate profits would be zero. Obviously, the goal is maximizing price, and minimizing wages.
Not true. Profit is the motivating factor behind all decisions a corporation makes, but that doesn't mean that if they pay Mexicans half as much as they would pay Americans that they can pocket the difference. The competition would eat them up. Rather, the savings are more or less passed on directly to consumers.
Wall-Mart, that most evil of evil corporations, in fact has one of the lowest profit margins of all companies, certainly the lowest of stores in its category. Wall-Mart makes a profit because they sell goods with almost no mark-up. They provide the greatest value to their customers, which is why they are successful. They are successful because they rely on globalization and free trade to allow for more effecient production and sale of goods.
That's how economics works. Protectionism has been shown time and time again, as AlatarIstarion points out, to be the wrong approach to economic development. Embrace free trade, get rich. It's how the US got where it is today and it's how the rest of the world is catching up. It's amazing how long it takes to convince people of this simple concept.
Not true. Profit is the motivating factor behind all decisions a corporation makes, but that doesn't mean that if they pay Mexicans half as much as they would pay Americans that they can pocket the difference. The competition would eat them up. Rather, the savings are more or less passed on directly to consumers.
Wall-Mart, that most evil of evil corporations, in fact has one of the lowest profit margins of all companies, certainly the lowest of stores in its category. Wall-Mart makes a profit because they sell goods with almost no mark-up. They provide the greatest value to their customers, which is why they are successful. They are successful because they rely on globalization and free trade to allow for more effecient production and sale of goods.
It's true Wal-Mart does have a very low mark-up, but they still make a nice profit, and that money goes straight to the top.
Quote from Darth Cow »
That's how economics works. Protectionism has been shown time and time again, as AlatarIstarion points out, to be the wrong approach to economic development. Embrace free trade, get rich. It's how the US got where it is today and it's how the rest of the world is catching up. It's amazing how long it takes to convince people of this simple concept.
"Embrace free trade, get rich". You say it as if everyone involved it prospering. Free trade is great if you're at the top living the good life off other people's sweat and tears. Not so much for everyone else.
Again, I must emphasize I am arguing on the basis of the self-interests of the working class, not some BS concept of the greater good, or good vs. evil.
In this particular case only specific sectors are affected, but the overall trend of a race to the bottom of the wage pool affects all workers.
Do you have any proof to back this argument up?
Again, this particular case only hurts certain people in the working class. But the general trend hurts the entire working class.
What cases do you know of where this happened?
If the goal was to bring the lowest price to the consumer, corporate profits would be zero. Obviously, the goal is maximizing price, and minimizing wages.
Do you not realize that profit can be made on products when offering the lowest possible prices? Do you realize that if certain companies do not offer the lowest prices, competition and consumers will trample them? Super simplified, the goal of business is to make more money. You have listed 2 ways of achieving this, raising price, minimizing wages, but obviously you missed probably one of the most important aspects of making money: providing a cheap, good service so that people want to buy your product. This is the balance. Obviously the push and pull between Companies, their customers and the people they imploy makes things a bit more complicated than what you first believed.
but the overall trend of a race to the bottom of the wage pool affects all workers.but the overall trend of a race to the bottom of the wage pool affects all workers.
When did the "race to the bottom" start? What policies and trends started companies on this dark road down into the pit of despair? What time period started up the trend of companies wanting to spend as little as possible and gain the most return? How long has this steady march into the latrine of capitalism been going on?
8 TRILLION* DOLLARS
which costs us
OVER 300 BILLION* DOLLARS A YEAR IN INTEREST
Red, Giant, bolded, underlined words! Screaming your point at someone doesn't seem to be the best way of communicating, even over the internet. This is especially true when it looks like Satan himself opened a portal from hell directly to this thread, and then started explaining the interest rate the US has to spend on it's deficit. But I am totally dumbfounded by what this Billion and Trillion you speak of are......
* for our international audience: 8 trillion is 8,000,000,000,000 and 300 billion is 300,000,000,000
Darrr, des number shor are confoosing! Dem zeros added on 2 the end of dat number dere is making me brain hurts.
No, I'm sorry, you're right. A person losing his or her job to a foreigner or immigrant and having to go out and find a lower paying job has absolutely no effect on that person's standard of living. In fact, this is a good thing, and they should be happy about it.
Quote from Alfred »
Do you not realize that profit can be made on products when offering the lowest possible prices?
If the company makes a profit on it, then that's not the lowest possible price, simply by definition. The lowest possible price would only cover expenses.
Quote from Alfred »
Do you realize that if certain companies do not offer the lowest prices, competition and consumers will trample them? Super simplified, the goal of business is to make more money.
I don't think I said otherwise.
Quote from Alfred »
You have listed 2 ways of achieving this, raising price, minimizing wages, but obviously you missed probably one of the most important aspects of making money: providing a cheap, good service so that people want to buy your product. This is the balance. Obviously the push and pull between Companies, their customers and the people they imploy makes things a bit more complicated than what you first believed.
Employing cheaper labor is not about lowering the price for the consumer, it's about increasing the profit margin, i.e., raising the standard of living for managers and stockholders, and lowering the standard of living for workers. This is not an argument I have to prove, it's a statement of fact.
Quote from Alfred »
When did the "race to the bottom" start? What policies and trends started companies on this dark road down into the pit of despair? What time period started up the trend of companies wanting to spend as little as possible and gain the most return? How long has this steady march into the latrine of capitalism been going on?
Is there a point to all that?
Quote from Alfred »
Red, Giant, bolded, underlined words! Screaming your point at someone doesn't seem to be the best way of communicating, even over the internet. This is especially true when it looks like Satan himself opened a portal from hell directly to this thread, and then started explaining the interest rate the US has to spend on it's deficit.
Well I'm sorry if you got offended by the large red letters, but I get pissed off when idiots try to make a serious problem facing my country out to be no big deal, or even something good. :mad1:
Quote from Alfred »
But I am totally dumbfounded by what this Billion and Trillion you speak of are......
***
Darrr, des number shor are confoosing! Dem zeros added on 2 the end of dat number dere is making me brain hurts.
Not everyone on this board is American. Other people reading this might have different definitions of billion and trillion.
idiots try to make a serious problem facing my country out to be no big deal, or even something good.
I hate it when people automatically think other people are idiots when they hold opinion different from theirs. This thread has gone distinctly downhill since you launched your tirade that belittles the opinions of others, screams in giant bold red text and still fails to provide any of us with any hard information to back up the attack.
Quote:
Originally Posted by Alfred Do you have any proof to back this argument up?
***
What cases do you know of where this happened?
No, I'm sorry, you're right. A person losing his or her job to a foreigner or immigrant and having to go out and find a lower paying job has absolutely no effect on that person's standard of living. In fact, this is a good thing, and they should be happy about it.
See, these questions were actually designed so that you could flesh your arguments out better with actual data (instead of blatant sarcasm), so that this could actually be an interesting debate.
Is there a point to all that?
The point of the questions that I asked was so that you could answer them, and again, perhaps make this a debate that looked less like the WWE.
I hate it when people automatically think other people are idiots when they hold opinion different from theirs. This thread has gone distinctly downhill since you launched your tirade that belittles the opinions of others, screams in giant bold red text and still fails to provide any of us with any hard information to back up the attack.
The reason I think his opinion regarding deficits it idiotic is because it is.
Anyone that tries to make case for throwing away $300 billion a year on interest being a good thing is either an idiot, or has a poorly hidden agenda.
Quote from Alfred »
See, these questions were actually designed so that you could flesh your arguments out better with actual data (instead of blatant sarcasm), so that this could actually be an interesting debate.
I assume people taking part in this discussion are aware of what's going on in the world. Most of us are aware of the growing trend of middle class workers getting laid off and not being able to find jobs at similiar pay.
Quote from Alfred »
The point of the questions that I asked was so that you could answer them, and again, perhaps make this a debate that looked less like the WWE.
So the point you were trying to make is that because capitalism is inherently driven towards profit, and always has been, the working class should not bother to look out for it's own interests?
The reason I think his opinion regarding deficits it idiotic is because it is.
You countered my argument with your Circular Logic!
So the point you were trying to make is that because capitalism is inherently driven towards profit, and always has been, the working class should not bother to look out for it's own interests?
No no, since you realize that the "race to the bottom" has been going on since capitalism has been adopted, every decade afterwards was somehow worse than the decade before it?
You countered my argument with your Circular Logic!
Then please explain how spending $300 billion a year on interest payments is a good thing.
Quote from Alfred »
No no, since you realize that the "race to the bottom" has been going on since capitalism has been adopted, every decade afterwards was somehow worse than the decade before it?
Not necessarily, as long as workers were protecting their interests.
Argument: Trade deficits are bad because they increase the US treasury deficit.
Response: This is another very common argument based on general misconceptions of the nature of the US treasury deficit. People like to say things like "deficit" and become incredibly paranoid, but there are few very important points that must be made.
First, when judging the deficit it is important to look not at raw dollar amounts but rather as the deficit as a percent of GDP, for obvious reasons; if a country has a debt of $1 million and a GDP of $2 million, this is far different from the same raw dollar amount in a country with a GDP of $200 million. Looking at the US then, the current budget deficit is significantly smaller as a percent of GDP than it was for most of the 1980s (though the dollar amount is higher due to inflation and the growth of the US economy). This can be easily visualized in the following chart: http://traxel.com/deficit/deficit-percentage-50-years.png
Second, deficit spending is not inherently bad provided it is a relatively small percent of GDP (as the US deficit has always been). Indeed, the vast majority of people run "deficit spending" in their daily lives; anyone who has a home mortgage, for example, yet continues to buy other products before they pay it off in entirity is engaging in "deficit spending", yet this doesn't cause problems. Indeed, it is often the best way to grow your personal microeconomic "economy". Problems only arise when your debt become an overwhelming percentage of your gross income. The same is true of nations, and with the US deficit under four percent of GDP and shrinking, this is not a terribly dangerous problem.
First, some definitions and numbers:
Deficit = the amount we have overspent out budget in a given year. For example, if you earn $40,000 in a year, but have spent $42,000 (by using credit cards, etc.) in that year, then you have run a deficit of $2,000, or about 5%.
Debt = the total amount we owe that has accrued over the years due to deficit spending. To continue our above example, if we ran a deficit of 5% for 20 straight years, we would have a debt that is 100% of our yearly income. In the example, this would mean we owe $40,000 to credit card companies or other financial institutions.
Numbers:
The total GDP for 2005 is projected to be 12.4 trillion dollars.
The total deficit for 2005 is projected to be somewhere between $350 billion and $400 billion, or 2.8% to 3.2% of our GDP.
The total accrued debt as of May 2005 is 7.8 trillion dollars, or 62.9% of our annual GDP.
Now, lets take apart your response, one piece at a time:
Quote from AlatarIstarion »
Second, deficit spending is not inherently bad provided it is a relatively small percent of GDP (as the US deficit has always been).
This is misleading. Deficit spending is not inherently bad as long as the *total debt* is a relatively small percentage of GDP, and there are plans in place to stop deficit spending and run a surplus to pay off the debt within a reasonable timeframe. Continued deficit spending means that the total debt keeps accruing until it is an unhealthy percentage of your GDP.
Quote from AlatarIstarion »
Indeed, the vast majority of people run "deficit spending" in their daily lives; anyone who has a home mortgage, for example, yet continues to buy other products before they pay it off in entirity is engaging in "deficit spending", yet this doesn't cause problems.
This is a very flawed example. First, it has nothing to do with buying other products while having an outstanding loan. Second, it would be deficit spending only in the year they bought the house, and then would be running a surplus in order to pay off the house loan in a timely manner. Finally, buying a house is an extremely bad example because houses appreciate and are fairly easily liquidatable. Getting a house loan is more like putting money into a savings account than it is spending.
A better analogy would be if someone was to buy a house that is outside their means, with loan payments that are higher than they can afford. They then put the excess onto credit cards and have a steadily growing credit card debt. It should be obvious to everyone that this is not sustainable.
Quote from AlatarIstarion »
Problems only arise when your debt become an overwhelming percentage of your gross income. The same is true of nations, and with the US deficit under four percent of GDP and shrinking, this is not a terribly dangerous problem.
I love how you switch between the terms deficit and debt to confuse the issue. The fact that the US is running a deficit *at all* means that the debt is growing. It is already at 63% of our GDP, and it is project to be over 70% by 2010. The debt already is an overwhelming percentage of the GDP, and it will just get worse unless we start running a negative deficit (i.e. a surplus) and start reducing the debt.
You're extremely naive if you think that any company is going to pass any more of those increased profits onto customers than they can avoid. If company X can save 60% on its overheads but only has to drop its prices 20% to be well ahead of the pack, I can assure you it won't drop them 60%.
So company X drops prices 20%. Company Y decides that they can save just as much money by going to China, too, and steal all company X's customers if they drop prices by 40% and they'll make even more money...
The fact is that globalization and modern free markets have dropped prices to consumers far, far more than they have raised corporate profits. Corporate margins are no or little greater than they were prior to the global era of free trade we are now entering.
Rather, those who will benefit are the citizens and workers of the world, yes, especially those in the countries being "exploited" but even those in countries like the United States.
Okay, I've had my say. I guess we'll find out before too long who's right :).
Company Y decides that they can save just as much money by going to China, too, and steal all company X's customers if they drop prices by 40% and they'll make even more money...
I wouldn't put it quite like that. [Company Y] needs to lower their unit-cost to maintain market share with [Company X], lest they go out of business. Often, there's not much of a decision to be made -- it's a matter of survival.
Quote from Darth Cow »
The fact is that globalization and modern free markets have dropped prices to consumers far, far more than they have raised corporate profits.
But, you just can't consider consumer price savings in a vacuum. Those savings have to be analyzed with the loss of middle class jobs that are the natural outcome of those savings.
I mean, sure, it's nice to save $0.65 on a toilet plunger, but if you're paying for those savings with the loss of your $20/hour + benefits jobs (that's allowed you to buy house and help put your children through college), what have you really gained? It's a complex picture and just looking at point of sale transactions isn't all that enlightening.
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Lol yes of course... I got so focused on answering accurately that I forgot to pay attention to what city I typed... lol then I tried to be clever... that'll show me
No, I'm not saying that the government of Detroit ought to have tried to stop European and Asian cars at all! My point is rather that it ought to have helped the city adjust to an altered economic model now that the auto industry is not nearly so prevelant in Detroit as it once was.
This is accurate, but I don't belive its bad or relevant to the free trade discussion.
Of course that's true. I'm arguing however that a post-WWI depression (which began in Germany in the 20's, true, but worstened and spread globally in the 30's) is impossible under the current global situation because the circumstances are so very different.
Fair enough!
@ Alatar. That's a great post (#32 above). I've been pretty busy today and didn't have the time to post a proper reply, but here goes...
You're right, trade deficits aren't bad, per se, but when it begins to impact domestic employment and income creation, then the trade deficit discourages foreign investors from buying US Treasury bonds. And the continued sale of stable treasury bonds are one of the ways we pay off our staggering debts, which is several trillion dollars at this point ($7.8 T to be more exact).
You can only shrug off the trade deficit to 'comparative advantage' because reckless consumer spending (which may create other negative externalities, environmental ones, mainly), of shoddy Asian goods allows you to accept the erosion of the manufacturing base that made this country such an economic juggernaut 60 years ago.
Yet the middle class, created out of the manufacturing orgy of the 1940-60s, is shrinking and no sane economist will disagree with this. And all of the cool high-tech "New Economy" jobs that were to sustain the middle class in a post-manufacturing economy are a bust as well. With the revolutions in global telecommunications, those jobs are being shipped to India and South America where US business can pay those workers $0.15 on the dollar. And without a middle class, who's going to buy homes, savings bonds, corporate stock, or invest in pension funds? And if those things aren't purchased what will happen to the bond market? Economic apocalypse, that's what.
The US economy is basically on a binge-and-purge cycle right now. Binging on cheap imports as we purge decent jobs that help people raise families and make durable good purchases (homes, cars, etc.) And we can see this inverse relationship by looking at the trade deficit.
First, we should confine the discussion to particular industries. Are we talking about textiles, disposable consumer goods, electronics? If so, I don't think competition, where businesses can let annual contracts expire and bid for the cheapest possible labor (which necessarily will include lower labor standards since an extra dollar spent on wages is a dollar not made in profits), increases living standards. It might if there were a labor shortage in third world countries, where the workers could demand better wages or working conditions through collective bargaining and unionism, but international businesses can just go elsewhere (and they do!!! -- Denver's points) if the workers are just too pesky and demanding.
On the contrary, the pressure exists to keep working conditions poor and wages cheap, otherwise foreign investment will just go elsewhere to find the prices they're looking for.
Have you read NAFTA? I'll admit I haven't read the whole thing. It's dense and the minutae is extremely boring. But at the heart of NAFTA and CAFTA, their raison d'etre, is investor protection rights. Chapter 11 of NAFTA, for instance, allows foreign investors to sue nations for imposing environmental restrictions on their oversees operations and lowering their investment return. It's these case studies of the actual applications of NAFTA that are the most enlightening on how NAFTA functions.
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Trade arrangements are not a bad thing in themselves. It has been the practice of the human race for several thousands of years now. But the specific versions of trade agreements that are being ratified are designed to protect the investor -- in the event that a sovereign nation chooses to apply their labor and environmental laws -- at the expense of the populations of those countries. That's my chief problem with NAFTA and the like. They're deeply undemocratic and they're only worsening the erosion of the middle class, which all healthy and just economies and societies need.
As an extension to some of Bardo's points, usually the bigger the middle class, the healthier the country is economically. It should be troubling that the trend has been a decrease in this economic strata. It might be comforting to policy-makers to think that these "fair" trade agreements help the little guys, but its naive and foolish to continure to think so.
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i believe you are confusing the economy with the culture. obviously the culture of the united states (or any country for that matter) benefits from having access to foreign goods. while i have spent a fair amount of time arguing against trade deficits, i don't think trade surplus is good either, as it inherently means another country is "losing" the situation. if zero-balance trade could be reached then the situation would be as you describe, with the simple result of more product diversity and countries exercising their comparative advantages in certain areas.
the problem is one of infrastructure. in order for a country to continue and thrive, it must have universities (and colleges), and hospitals, and research facilities. these are all based on infrastructure and public investment, as well as the ability to create such institutions based on the general public skill base (arguably making higher education the most important on the list). public investement in infrastructure is directly linked to the economy. so, while the idea of importing is good, importing more than exporting lessens the general money total amongst big business and renders them incapable of investing in infrastructure.
(aside: in general, lower prices will make it appear that people have more money, so the economy is better. this is not the case however, since the a million people saving a dollar does not influence public investement, but a company having an extra million dollars to invest does. microeconomics of the region may benefit slightly, but macroeconomics have a much larger influence, and eventually determine the limits on microeconomies they encompass.)
your example of iowa vs. california (see, there was a reason i quoted it, hehe), does not apply, since both states share infrastructure. they are encompassed by the same federal government, and technology as well as skilled persons can freely move between the two. in fact, many people may now live in one, having gone to school in the other (much more than say u.s. vs. honduras). because of this free flow of technology and human resources, iowa would be capable of producing the products it gets from california, it's just more convenient to have specialized regions. poor countries are not capable of creating such products, because there is no free flow of cultural resources and information.
if free trade was replaced with a fully realized version of globalization (both economic and social), then this would not be a problem. the problem is that the economic side is opening up but the social side, which includes technology and education, is not. this sets up a situation where companies can exploit trade deficits, thus making poor countries dependant on them. the reality is that those poor countries are not getting the public investment required to advance them socially (which eventually renders them capable of honest competition). if a requirement for setting up a steel refinery in a country was to also set up a school that taught the native populace how to produce, engineer, and market the cars made from that steel, then we would have shared infrastructure and there would be nothing wrong with free trade.
though most would argue that a requirement like that wouldn't actually be free trade, hehe.
research will follow education (as you noted), but education will follow the economy and public investment. to assume that the current centers of economy will remain that way is simply arrogant. economic development works in cycles, and migrates. during mercantilism, the united kingdom, france, and spain were the center of the world. now it's america and japan (europe has lost the majority of its hold, historically speaking). in the future it will be china and india (we can already see this happening).
things always change. to assume you will forever be on top, just because you are now is ludicrous.
-Catapult Master
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(-.-) he fell asleep reading a textbook
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That paper is HORRIBLE! It draws so many rediculous conclusions it's not even funny. Here is one of my favourites:
Any intelligent economist would agree that this is a rediculous statement to make, especially this one:
http://www.iadb.org/regions/re2/santafin.pdf#search='mexican%20economic%20growth'
Check page three. Note that he isn't a proponent of free trade, but comparing the post NAFTA economy to "Mexican Miracle" era Mexico is a rediculous proposition, and then saying that because it isn't growing as fast, NAFTA isn't creating any growth is clearly fallicious. This is especially so because Mexico recently emerged from a huge debt-related recession. This article then stealthily groups the whole period after NAFTA into one "growth bar" pegging the overall growth at 1.8%. This is misleading, mainly because you usually don't want to take an average of the whole period of time you are analysing, it would really make much more sense to go year by year, or analyse 2-3 year blocks, so that you can see how it is growing i.e. is it growing faster in 2005 than it was in 1995? If it is, then it doesn't make a whole lot of sense to average it with the post-recession economy of 1995. The only reason I can think of why you would do this would be to prove a point. But this source isn't that credible at all, so let's take a look at what multiple credible analysts are saying about mexico's economic future:
http://home.att.net/~ckf_forecasting/wsb/DJ_MorningStar_150604.PDF#search='mexican%20economic%20growth%202005'
Hmmm.... REAL economists, making pretty rosy predictions about Mexico's economic future, and these just aren't point-proving "research" articles, these are businesses with money riding on the backs of these predictions, giving them much more clout. Those were 2004 predictions, but let's take a look at what the growth actually was:
http://www.wachovia.com/ws/econ/view/0,,2324,00.pdf#search='mexican%20economy%202005'
WOW! That's a whole lot more than 1.8%! 4.9% real GDP growth...... This is higher than the analysts predicted, and well above lots of other developing nations. Let's check out another source to get that "surround sound" feeling:
http://www.odci.gov/cia/publications/factbook/geos/mx.html
Let's see how that compares to other growth in other developing countries:
http://www.odci.gov/cia/publications/factbook/geos/es.html
http://www.odci.gov/cia/publications/factbook/geos/bh.html
http://www.odci.gov/cia/publications/factbook/geos/gt.html
And also, let's just do away with the article you posted altogether:
The 2001-2003 slump was a result of having an economy that is intrinsically tied to the US, which was also slumping (911, whatnot), this pattern can be seen in another country, Canada:
http://en.wikipedia.org/wiki/Economy_of_Canada
(Read relations with US paragraph)
The article you gave ignores the reasoning for the downturn, and simply attributes it to NAFTA not doing it's job. I think that this is because people would sort of figure out some of the circumstances regarding the 2001-2003 downturn, but the article never mentions it! Hmmmmmm.... I wonder why? Is it because they wanted to average those low percentage points into their 1995-2004 growth bar? This would be akin to mapping out Indonesia's economic growth in one ten year growth bar, looking at it and saying, "Oh jeeze, only 1.8% growth rate? This must be because of it's trade agreement with China." when it was actually the huge negative growth caused by the 2004 tsunami.
This is all besides the point though, because now that we will have two years of plus 4% growth, we can simply ignore this article completely, because it admits that over 4% was the norm "back when mexico was doing well".
The conclusion I would draw from this would be that "something" about Mexico is allowing them to grow their economy faster than other developing nations in the region. I think it has something to do with the free trade agreement with the US.
EDIT:
Lay off the ad-hominem attacks, because I am neither naive nor foolish (you may think I'm misguided, but that's different).
me too, or long enough for me to learn cantonese.
an interesting side note to do with the economic shift to asia: imagine how strange it would be to look at a "made in china" tag as a sign of higer than average quality. hehe.
-Catapult Master
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(\ /) this is my bunny, avi
(-.-) he fell asleep reading a textbook
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First though, @Alfred: Thanks for taking care of that one for me. That article was indeed exorbitantly silly :-).
First off, its not the "working class" as a whole that gets the proverbials "shaft", as you put it, only specific sectors of manufacturing. People like to toss around phrases like "this is bad for the Working Class" without any real justification; its by no means bad for the entire sector. Second and more important however, every new change and inovation brings temporary hardship to some group of people somewhere; the advent of iron smelting harmed bronzeworkers, the development of textile manufacturing harmed the home weaving sector, and the development of cell phones harmed the payphone industry, yet in the end each of these developments wound up helping the vast majority of society. It might sound cold and heartless, but its the way things are.
Thanks! Your latest was as well.
Argument: Free Trade Agreements erode the manufacturing base of a nation and its middle class, thereby harming it in the long term and only helping evil corporations.
Made in the following post exerpts:
Aside @Jedit: Try to make arguments that aren't just a regurgitation of political slogans; criticising something for harming the "working class" as a whole (above) and then claiming that something only helps a few big heartless and evil corporations isn't terribly helpful for debate
Response: This argument is indicative of historic paranoia, particularilly in the US, of having jobs "stolen away by dirty foriegners", whether they be Irish, Chinese, Hispanic or South Asian. In reality however, this argument has little basis in fact. In the US, for example, free trade agreements have become increasingly common over the last decade, yet the US economy continues to grow robustly (as reported by the AFP just yesterday and boasts one of the lowest unemployment rates among developed nations. All this in spite of numberous free trade agreements and a brief recession in 2001.
Furthermore, the existence of NAFTA and other free trade agreements have not resulted in overall detrimental harm to the US manufacturing sector. While there has indeed been a shift in the number of manufacturing jobs in the US (temporarilly unfortunate but beneficial in the long-term, as discussed above), this has not been because of an overall weakness in US manufacturing. Rather, globalization has allowed US companies to become more efficient, thereby actually improving the strength of the sector (albeit not the number of employees), as reported by the Congressional Budget Office (http://www.cbo.gov/showdoc.cfm?index=5078&sequence=0):
Finally, the overall benefit to the US economy of NAFTA specifically (and free trade agreements in general) is indeed measurable. On top of that, the benefits to less economically powerful nations is even more pronounced and also provides additional benefits that I discussed above in post #32. This has also been measured by the Congressional Budget Office, for anyone who's interested in such things (http://www.cbo.gov/showdoc.cfm?index=4247&sequence=4)
Argument: Trade deficits are bad because they increase the US treasury deficit.
Response: This is another very common argument based on general misconceptions of the nature of the US treasury deficit. People like to say things like "deficit" and become incredibly paranoid, but there are few very important points that must be made.
First, when judging the deficit it is important to look not at raw dollar amounts but rather as the deficit as a percent of GDP, for obvious reasons; if a country has a debt of $1 million and a GDP of $2 million, this is far different from the same raw dollar amount in a country with a GDP of $200 million. Looking at the US then, the current budget deficit is significantly smaller as a percent of GDP than it was for most of the 1980s (though the dollar amount is higher due to inflation and the growth of the US economy). This can be easily visualized in the following chart: http://traxel.com/deficit/deficit-percentage-50-years.png
Second, deficit spending is not inherently bad provided it is a relatively small percent of GDP (as the US deficit has always been). Indeed, the vast majority of people run "deficit spending" in their daily lives; anyone who has a home mortgage, for example, yet continues to buy other products before they pay it off in entirity is engaging in "deficit spending", yet this doesn't cause problems. Indeed, it is often the best way to grow your personal microeconomic "economy". Problems only arise when your debt become an overwhelming percentage of your gross income. The same is true of nations, and with the US deficit under four percent of GDP and shrinking, this is not a terribly dangerous problem.
Finally, the power of the US economy and its ability to sustain a deficit are fueled by globalization. Contrary to what critics claim, Free Trade does not hurt the US economy by creating a deficit; rather, the US economy runs a deficit because Free Trade allows it to do so, spending money to build up domestic and global infrastructure. David H. Levey and Stuard S. Brown argued this most eloquently in the March/April 2005 edition of Foreign Affairs:
Argument: Evil companies export workers abroad.
Response: This argument, though it may sound quite seductive to someone convinced of the evil inherent in making money, is empirically disproven. Lets begin at the beginning however. First off, it is certainly true that companies move to undeveloped nations out of a desire to make money. This however is not evil; its the way companies work. The point of a business is to make money.
Now, the reason they move to these undevloped nations is because making money is easier. Why is this the case? Primarilly due to lower competition for workers and a lower cost of living This lower cost of living in turn makes lower wages possible; but this too is not evil. While the fact that people in some countries make less than people in others seems to offend the sensabilities of some, this isn't as aweful as some would love to belive. Although I'm sure it would give said individuals a wonderful and fuzzy feeling to give hundreds of thousands of dollars and a new Lexus to Nike workers in south asia, this wouldn't actually solve any of the long-term economic issues faced by that nation and indeed would cause all manner of problems.
But what happens when these vile companies move into undeveloped nations with their insidious money-making ways? Well, in order to make said money they need a somewhat educated workforce and therefore set the foundations for a modern infrastructure. In addition, inspite of the relatively low wages, they do indeed put money into the local economy. These factors in turn make the nation even more attractive to foreign investment, now from smaller companies, for much of the initial infrastructure has been laid. Eventually, home-grown infrastructure and education begins to develop.
"Oh, hold on now", you say. "This is just wishful thinking and theorizing, but it doesn't happen in real life. Why don't you look at what really happens in actual examples". Alright then, lets. Take if you will a variety of impoverished, undeveloped islands and peninsulae in east Asia. The time is the 1950s and the nations are South Korea, Taiwan, Singapore and Hong Kong. All are in various states of disarray and suffering from a massive lack of infrastructure and education. Undeveloped and economically week, they have been pawns in wars and colonialism for over a century. Yet their leaders pursue an open economic model, choosing to encourage foreign investment rather than engaging in protectionism with local industries. The result? Today each of these nations is easily fit in the category of well developed nations with standards of living equivalent to Western Europe and the US.
But why aren't all nations this well off? Converse examples hold the answer. At the same time that several of its neighbors were opening their economies, China, India and North Korea engaged in severe protectionism and nationalization of native industries. The consequence? None of these three nations grew at the rate of their Asian neighbors and remained undeveloped. But wait! Aren't China and India doing well economically today? Indeed they are, and the reason only goes further to prove my point: In the 1980s, China and India both reversed course and began opening their economies to foreign investment and trade. Consequently, while each nation is about 25 years behind South Korea, Taiwan, etc, they are now experiencing massive economic growth and an increase in living standards. Left out of this picture is South Korea, which has been isolated in terms of trade throughout its entire existence, as well as nations in the Middle East and Africa which have suffered from violent uprisings and protectionist totalitarian rulers which prevented the growth of trade. See a pattern?
I quote myself from my above post #32:
In this particular case only specific sectors are affected, but the overall trend of a race to the bottom of the wage pool affects all workers.
It erodes the living standards of workers, and if taken too far, puts the fate of a country's economy in the hands of foreign governments.
Distorting someone else's argument by injecting cute little words like "heartless" and "evil" don't help your argument either.
Again, this particular case only hurts certain people in the working class. But the general trend hurts the entire working class.
I for one, am not arguing that it's "better" to protect the interests of workers than the interests of the upper class. I am arguing that it's a clash between competing interests. I, and many others on this board, are in the working class, and that's why we take this side. One must also wonder why, if the majority of Americans are workers, our government policy doesn't reflect our interests.
It's one thing for the US economy overall to grow, and another for the living standards of the average person to rise with it. Obviously, giving what used to be middle class jobs to people in other coutries who work for a fraction of the pay, and illegal immigrants here who work off the books for a fraction of the pay, is not in the interests of working class Americans, which is the majority of us. Again, we're only arguing for own interests, not the meaningless concept of "the good of the country".
Emphasis mine. When you say "efficiency", you mean to imply that the consumer gets lower prices. But what "efficiency" really means is increased profits. If the goal was to bring the lowest price to the consumer, corporate profits would be zero. Obviously, the goal is maximizing price, and minimizing wages.
You ignore one very important point, and that is our deficits have continued over decades, and we now have a debt of close to
8 TRILLION* DOLLARS
which costs us
OVER 300 BILLION* DOLLARS A YEAR IN INTEREST
I'm sure there's nothing better we could be doing with that money.
Relative to middle class workers, yes, this is "evil" because it is against our interests.
Although I think a case can be made for a family of four losing their house so some manager can buy that second Lexus being objectively labeled "evil". :slant:
* for our international audience: 8 trillion is 8,000,000,000,000 and 300 billion is 300,000,000,000
Wall-Mart, that most evil of evil corporations, in fact has one of the lowest profit margins of all companies, certainly the lowest of stores in its category. Wall-Mart makes a profit because they sell goods with almost no mark-up. They provide the greatest value to their customers, which is why they are successful. They are successful because they rely on globalization and free trade to allow for more effecient production and sale of goods.
That's how economics works. Protectionism has been shown time and time again, as AlatarIstarion points out, to be the wrong approach to economic development. Embrace free trade, get rich. It's how the US got where it is today and it's how the rest of the world is catching up. It's amazing how long it takes to convince people of this simple concept.
It's true Wal-Mart does have a very low mark-up, but they still make a nice profit, and that money goes straight to the top.
"Embrace free trade, get rich". You say it as if everyone involved it prospering. Free trade is great if you're at the top living the good life off other people's sweat and tears. Not so much for everyone else.
Again, I must emphasize I am arguing on the basis of the self-interests of the working class, not some BS concept of the greater good, or good vs. evil.
Do you have any proof to back this argument up?
What cases do you know of where this happened?
Do you not realize that profit can be made on products when offering the lowest possible prices? Do you realize that if certain companies do not offer the lowest prices, competition and consumers will trample them? Super simplified, the goal of business is to make more money. You have listed 2 ways of achieving this, raising price, minimizing wages, but obviously you missed probably one of the most important aspects of making money: providing a cheap, good service so that people want to buy your product. This is the balance. Obviously the push and pull between Companies, their customers and the people they imploy makes things a bit more complicated than what you first believed.
When did the "race to the bottom" start? What policies and trends started companies on this dark road down into the pit of despair? What time period started up the trend of companies wanting to spend as little as possible and gain the most return? How long has this steady march into the latrine of capitalism been going on?
Red, Giant, bolded, underlined words! Screaming your point at someone doesn't seem to be the best way of communicating, even over the internet. This is especially true when it looks like Satan himself opened a portal from hell directly to this thread, and then started explaining the interest rate the US has to spend on it's deficit. But I am totally dumbfounded by what this Billion and Trillion you speak of are......
Darrr, des number shor are confoosing! Dem zeros added on 2 the end of dat number dere is making me brain hurts.
No, I'm sorry, you're right. A person losing his or her job to a foreigner or immigrant and having to go out and find a lower paying job has absolutely no effect on that person's standard of living. In fact, this is a good thing, and they should be happy about it.
If the company makes a profit on it, then that's not the lowest possible price, simply by definition. The lowest possible price would only cover expenses.
I don't think I said otherwise.
Employing cheaper labor is not about lowering the price for the consumer, it's about increasing the profit margin, i.e., raising the standard of living for managers and stockholders, and lowering the standard of living for workers. This is not an argument I have to prove, it's a statement of fact.
Is there a point to all that?
Well I'm sorry if you got offended by the large red letters, but I get pissed off when idiots try to make a serious problem facing my country out to be no big deal, or even something good. :mad1:
Not everyone on this board is American. Other people reading this might have different definitions of billion and trillion.
I hate it when people automatically think other people are idiots when they hold opinion different from theirs. This thread has gone distinctly downhill since you launched your tirade that belittles the opinions of others, screams in giant bold red text and still fails to provide any of us with any hard information to back up the attack.
See, these questions were actually designed so that you could flesh your arguments out better with actual data (instead of blatant sarcasm), so that this could actually be an interesting debate.
The point of the questions that I asked was so that you could answer them, and again, perhaps make this a debate that looked less like the WWE.
The reason I think his opinion regarding deficits it idiotic is because it is.
Anyone that tries to make case for throwing away $300 billion a year on interest being a good thing is either an idiot, or has a poorly hidden agenda.
I assume people taking part in this discussion are aware of what's going on in the world. Most of us are aware of the growing trend of middle class workers getting laid off and not being able to find jobs at similiar pay.
So the point you were trying to make is that because capitalism is inherently driven towards profit, and always has been, the working class should not bother to look out for it's own interests?
You countered my argument with your Circular Logic!
No no, since you realize that the "race to the bottom" has been going on since capitalism has been adopted, every decade afterwards was somehow worse than the decade before it?
Then please explain how spending $300 billion a year on interest payments is a good thing.
Not necessarily, as long as workers were protecting their interests.
First, some definitions and numbers:
Deficit = the amount we have overspent out budget in a given year. For example, if you earn $40,000 in a year, but have spent $42,000 (by using credit cards, etc.) in that year, then you have run a deficit of $2,000, or about 5%.
Debt = the total amount we owe that has accrued over the years due to deficit spending. To continue our above example, if we ran a deficit of 5% for 20 straight years, we would have a debt that is 100% of our yearly income. In the example, this would mean we owe $40,000 to credit card companies or other financial institutions.
Numbers:
The total GDP for 2005 is projected to be 12.4 trillion dollars.
The total deficit for 2005 is projected to be somewhere between $350 billion and $400 billion, or 2.8% to 3.2% of our GDP.
The total accrued debt as of May 2005 is 7.8 trillion dollars, or 62.9% of our annual GDP.
Now, lets take apart your response, one piece at a time:
This is misleading. Deficit spending is not inherently bad as long as the *total debt* is a relatively small percentage of GDP, and there are plans in place to stop deficit spending and run a surplus to pay off the debt within a reasonable timeframe. Continued deficit spending means that the total debt keeps accruing until it is an unhealthy percentage of your GDP.
This is a very flawed example. First, it has nothing to do with buying other products while having an outstanding loan. Second, it would be deficit spending only in the year they bought the house, and then would be running a surplus in order to pay off the house loan in a timely manner. Finally, buying a house is an extremely bad example because houses appreciate and are fairly easily liquidatable. Getting a house loan is more like putting money into a savings account than it is spending.
A better analogy would be if someone was to buy a house that is outside their means, with loan payments that are higher than they can afford. They then put the excess onto credit cards and have a steadily growing credit card debt. It should be obvious to everyone that this is not sustainable.
I love how you switch between the terms deficit and debt to confuse the issue. The fact that the US is running a deficit *at all* means that the debt is growing. It is already at 63% of our GDP, and it is project to be over 70% by 2010. The debt already is an overwhelming percentage of the GDP, and it will just get worse unless we start running a negative deficit (i.e. a surplus) and start reducing the debt.
The fact is that globalization and modern free markets have dropped prices to consumers far, far more than they have raised corporate profits. Corporate margins are no or little greater than they were prior to the global era of free trade we are now entering.
Rather, those who will benefit are the citizens and workers of the world, yes, especially those in the countries being "exploited" but even those in countries like the United States.
Okay, I've had my say. I guess we'll find out before too long who's right :).
But, you just can't consider consumer price savings in a vacuum. Those savings have to be analyzed with the loss of middle class jobs that are the natural outcome of those savings.
I mean, sure, it's nice to save $0.65 on a toilet plunger, but if you're paying for those savings with the loss of your $20/hour + benefits jobs (that's allowed you to buy house and help put your children through college), what have you really gained? It's a complex picture and just looking at point of sale transactions isn't all that enlightening.