Wednesday, April 27, 2016
The Question Is Not "Free
Trade" and Globalization, It Is Free Trade and Globalization Designed to
Screw Workers
The abandoned Packard Plant in Detroit in 2012.
(Photo: Kyle J. Schultz/flickr/cc)
Why are none of the "free trade" members of Congress
pushing to change the regulations that require doctors go through a U.S.
residency program to be able to practice medicine in the United States?
Obviously they are all protectionist Neanderthals.
Will the media ever stop the ridiculous charade of pretending
that the path of globalization that we are on is somehow and natural and that
it is the outcome of a "free" market? Are longer and stronger patent
and copyright monopolies the results of a free market?
The NYT should up its game in this respect. It had a good piece on the devastation to millions of
working class people and their communities from the flood of imports of
manufactured goods in the last decade, but then it turns to hand-wringing
nonsense about how it was all a necessary part of globalization. Actually, none
of it was a necessary part of a free trade.
First, the huge trade deficits were the direct result of the
decision of China and other developing countries to buy massive amounts of U.S.
dollars to hold as reserves in this period. This raised the value of the dollar
and made our goods and services less competitive internationally. This problem
of a seriously over-valued dollar stems from the bungling of the East Asian
bailout by the Clinton Treasury Department and the I.M.F.
If we had a more competent team in place, that didn't botch the
workings of the international financial system, then we would have expected the
dollar to drop as more imports entered the U.S. market. This would have moved
the U.S. trade deficit toward balance and prevented the massive loss of
manufacturing jobs we saw in the last decade.
The second point is political leaders are constantly working to
make patents and copyrights stronger and longer. This raises the price that
ordinary workers have to pay for everything from drugs to computer games. The
result is lower real wages for ordinary workers and higher incomes for the
beneficiaries of these rents. It also slows economic growth since markets are
not smart enough to distinguish between a 10,000 percent price increase due to
a tariff and a 10,000 percent price increase due to a patent monopoly. (In
other words, all the bad things that "free trade" economists say
about tariffs also apply to patents and copyrights, except the impact is far
larger in the later case.)
Finally, the fact that trade has exposed manufacturing workers
to international competition, but not doctors and lawyers, was a policy choice,
not a natural development. There are enormous potential gains from allowing
smart and ambitious young people in the developing world to come to the United
States to work in the highly paid professions. We have not opened these doors
because doctors and lawyers are far more powerful than autoworkers and textile
workers. And, we rarely even hear the idea mentioned because doctors and lawyers
have brothers and sisters who are reporters and economists.
Addendum:
Since some folks asked about the botched bailout from the
East Asian financial crisis, the point is actually quite simple. Prior to 1997
developing countries were largely following the textbook model, borrowing
capital from the West to finance development. This meant running large trade
deficits. This reversed following the crisis as the conventional view in the
developing world was that you needed massive amounts of reserves to avoid being
in the situation of the East Asian countries and being forced to beg for help
from the I.M.F. This led to the situation where developing countries,
especially those in the region, began running very large trade surpluses,
exporting capital to the United States. (I am quite sure China noticed how its
fellow East Asian countries were being treated in 1997.)
© 2014 Center for Economic and Policy Research
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"The master class
has always declared the wars; the subject class has always fought the battles.
The master class has had all to gain and nothing to lose, while the subject
class has had nothing to gain and everything to lose--especially their
lives." Eugene Victor Debs
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