On Mon, Mar 01, 2004 at 09:38:00AM -0700, Michael Harney wrote: > No, it's not nonsense, it's the only way that we can keep jobs in the > US, make it more expencive to off-shore work than to contract locally. > I never said they couldn't off-shore work, I just said there should be > fines associated with that to make it less cost effective.
.... > Did I say forbid it? No, in fact I stated to the contrary: "not > forbidding, just restricting". And what kind of restriction did I > say was needed? Corperate resopnsability laws. Not taxes, not red > tape, just corperate responsability laws to protect the rights of the > outsource workers. I'm not sure what you are proposing here. First you say there should be fines to "make it less cost effective" then you say "not taxes, not red tape". Are you saying that free-trade can proceed as usual in all cases where workers rights are not being violated and environmental laws are equivalent to those in America? If that is your proposal, then you would not make much of a dent in unemployment in the US, since the loss of jobs in those specific instances are only a small fraction of the jobs lost in the last couple years. Restricting free trade is like eating your seed corn -- it may feel good now, but you'll be sorry later. It is to everyone's long-term advantage to allocate the world's resources in the most efficient way possible. And history has shown repeatedly that the best way to do this is a free market -- so you have every person in that free market trying to find the most efficient use for their labor or capital. That is billions of people, all working to optimize the system. If you try to manage a large economy, you will inevitably have only a relatively small number of people working to optimize things, and history has shown that managed economies fail miserably when matched against a free market economy (most dramatic recent example is of course the US vs. USSR; another good example is how China has been booming since loosening their markets). Why do comparatively rich Americans deserve a job, but dirt poor people in other countries, who are willing and able to produce the same thing for less money, do not? Shouldn't the job go to the person who is the most cost-effective, the person who produces the most for the least cost? If we can simultaneously cut our costs AND benefit those workers in other countries who are desperate to work, why should we deny people the opportunity? And denying some the opportunity you will be, even if you raise tariffs or taxes on globalization rather than instituting an outright ban. The net result is that costs will be higher in America and some people in foreign countries will not have a job that they otherwise would have had without the tariffs. The farm subsidies and agricultural tariffs the US continues to employ fall the hardest on economically disadvantaged countries which have a comparative adavantage in farming, and they simultaneously raise the prices that Americans have to pay for food. Would you like to live in a place like Iain Banks' Culture? The only way to get there is to keep our productivity, roughly GDP per head, increasing as fast as possible. And the main way to do that is to invest in more and better capital. But someone has to design, build, and operate that capital to make more capital to increase productivity further. To keep this cycle going as fast as possible, we need to allocate our resources in the most efficient manner to increase productivity. David Ricardo explained, two hundred years ago, that even if a country can make every product cheaper than another country, that BOTH countries can still benefit from trade -- each area/group should work making the goods or providing the services in which they have a comparative advantage. And as new capital and new ideas accumulate, the comparative advantages for each group or country change. Jobs shift. But long-term, everyone is better off when this happens, since it is the most efficient way to create new capital and increase productivity. Do you want to pay more for your DVD player? Free trade has been largely responsible for the drop in prices of equipment such as DVD players, TVs, and computers. And it doesn't just benefit consumers with lower prices on consumer electronics. Cheaper computers, for example, all the inexpensive Dells manufactured in China, allowed companies to invest in IT and get more capital for the buck, thus increasing their workers productivity. And remember that productivity increases are the only way to increase the long-term standard of living. The drop in employment in the past couple years cannot be attributed wholely, nor even largely, to offshoring or globalization. Unemployment in the US was only 4.0% at the end of last decade. That is significantly below the "natural" unemployment rate of about 5%. The late nineties are well known to have been a booming economy, in fact, an unsustainable boom known as a "bubble". Starting in 1997, the private sector was a net borrower, something that hasn't happened since before 1970 (and the public sector was actually a net lender for a couple years there). Clearly, the 90's were unusual. In the bubble, the private sector borrowed a lot of money and invested it, increasing capital. Overinvesting, in fact. And the businesses hired a lot more people than could be sustained long-term, particularly in IT and dot-com areas. As a result of all the new capital, productivity shot up and fewer workers were needed to produce the same GDP. That, combined with some areas already having an unsustainable number of workers, caused unemployment to rise rapidly. In short, the majority of the 2 million jobs that have been lost in the past couple years are cyclical losses rather than structural, i.e., temporary losses due to the recession, not permanent lossed due to globalization. By the way, only in 2003 did the private sector get back into the black, saving more than investing. It may take a year or two longer for unemployment to get back to 5% in the cycle. America has historically been one of the most open markets in the world, and historically, America has created a lot more jobs than have been lost. Between 1980 and 2002, America's population grew at an annualized rate of 1.0% per year, while the number of employed Americans grew at 1.5% per year. This may not sound like much, but it is the difference between 59% of the adult population being employed in 1980 and 62.5% today (even after the 2 million jobs lost recently). In absolute terms it is even more impressive: there were 99.3 million Americans employed in 1980, and there are 138.6 million employed today! That is a lot more jobs created than lost! That is not to say that there wasn't pain along the way. More than 1 million jobs were lost in the early eighties, and another million+ in the early nineties. But they were replaced, and more! It is a cyclical, dynamic system. People are contstantly leaving jobs and entering new jobs where they can be more productive. There is a churn of about 2 million jobs per month in America! Think of it as human capital being reallocated to where they can be more productive. But that reallocation process can be painful. While the free trade may benefit each country as a whole, it frequently does not benefit the workers of each country so much as the wealthy capital owners. That is where governments can help. But not by restricting free trade! The best role for government is to help the displaced workers, preventing them from being mistreated, providing temporary living assistance, and helping them to learn new skills and train for new jobs: Certainly, a basic set of worker's rights should be enforced. If the workers in a country are willing and able to produce something for a lower price than Americans, then they should not be denied the opportunity by trade restrictions SO LONG AS THEY AREN'T BEING MISTREATED. We should not run a global competition to see who can work under th emost dangerous or inhumane conditions -- that is not progress. So, we should put trade restrictions on any countries that don't have a basic set of laws governing workers rights. Here's such a list, from a recent proxy statement of Sun Microsystems about its factories in China (which didn't pass, by the way). These things should not be up to the companies, this is the job of the governements, and the American government SHOULD place trade restrictions on countries that don't enforce these kinds of rules: No goods produced by the company or its suppliers shall be produced by bonded labor, forced labor or within prison camps. Wage and hour guidelines should adhere at least to those provided by China's national labor laws. Facilities and suppliers shall prohibit the use of corporal punishment and physical, sexual or verbal abuse. Facilities and suppliers shall use production methods that do not endanger workers safety or health. Facilities and suppliers shall not call on police or military to enter their premises to suppress workers rights. Employees shall have the freedom of association, assembly, of forming unions and bargaining collectively, of expression, and freedom from arbitrary arrest or detention. (This sort of clause always has to be read carefully, because sometimes human rights proposals are really mandatory unionization proposals in drag. It's completely appropriate for employees to have the right to unionize and bargain collectively, so long as a company is not prohibited from hiring non-union workers if reasonable agreements can't be negotiated. There's no mandatory unionization in this policy). Employees shall not face discrimination on the basis of age, gender, marital status, political or religious activity, or arrest for peaceful protest. Facilities and suppliers shall use environmentally responsible methods of production. Facilities and suppliers shall prohibit child labor, or at a minimum comply with guidelines on minimum age for employment within China's national labor laws. (Again, this one is not as obvious as it might seem. The absence of child labor is in some sense a luxury of prosperity, and in many underdeveloped countries, child labor is a factor in the survival of the family, as it was during the early agricultural development of the United States. Even so, child labor is largely the result of the unavailability of living wages for adult workers. American companies should not allow this situation within the scope of their foreign operations). The company will not provide products in China that can be used to commit human rights violations. The company will issue annual statements detailing its efforts to uphold these principles. We certainly could use a better safety net: some way of providing food, shelter, and very basic medical care to those who cannot buy it for themselves. Right now the unemployment system is quite fragmented -- I think it could be improved significantly by coordinating the efforts of states and municipalities on a federal level (I don't mean making a federal unemployment system, but rather coordinating things such as training programs and sharing ideas, perhaps taking advantage of downturns in one area and booms in another to smooth out funding, etc.); it would also be a good idea to decrease the dependence of health care on employment -- obtaining health care is very difficult if not impossible for most unemployed people. The cornerstone of a healthy, productive, advancing society is education, primary, secondary, and adult education. With regards to unemployment, we need education to help manage the constant churn in the labor market, It is to everyone's benefit for good education and training to be available for skills that are in demand or soon to be in demand. This category also includes work on improving our forecasting of what areas will be in demand in the future -- for example, it is obvious that health care providers will be in growing demand as the baby boomers age, but we can't all become doctors and nurses, so what other areas should we be training for? What areas is America likely to have a comparative advantage in the near-future, and which of those areas will have a shortage of skilled workers? We should be investing money in answering these questions. It might also be a good idea to greatly expand federal funding for community colleges -- in a competitive manner -- and provide federal scholarships to anyone who has lost a job and wants to learn a new skill in an area that is projected to be in demand in the near-future. Finally, if you'd like to read a good book about trade and some of the many fallacies that have been promulgated over the years, with a lot of empirical data and evidence to back up the claims, check out _Free Trade Under Fire_ by Douglas Irwin. -- Erik Reuter http://www.erikreuter.net/ _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
