Posted on 02/06/2004 8:39:32 PM PST by luckydevi
An unfortunate consequence of learning Bastiat's "Broken Window Fallacy" is the accompanying frustration of seeing this age old economic fallacy reappear ad nauseam. One of the latest, and indeed most vocal rock throwers, is the United States manufacturing sector.
Those with even a cursory knowledge of current affairs should be able to recite the recent plight of the manufacturers:
Since January of 2001, 2.7 million "well paying manufacturing jobs" have been lost. Free trade with global competitors is putting American manufacturers at a competitive disadvantage. If manufacturing continues to be exported to "third-world countries," America will place itself in grave danger. Individuals and camps in both the conservative and liberal wing of the political spectrum have agreed on the need to plug the leak of economic sovereignty. And while the causes of manufacturing's slow, cacophonous death are many, there is only one cure: intervention by the federal government.
This past December a coalition of manufacturers, including the National Tooling & Machining Association and the American Manufacturing Trade Action Coalition, called for a halt on trade agreements, asking congress to end further trade liberalization. In an issued statement the coalition incredulously warned, "We are extremely alarmed at the rapid disintegration of our manufacturing base resulting in part from past trade liberalization agreements and legislation."
Trade, and it seems in particular the trade deficit, is "hollowing out" this vital industry. To some, we are trading ourselves into an economic third-world. As one pro-manufacturing lobbying group wrote, "The arithmetic of trade is quite simple. More U.S. exports increase American jobs. More foreign imports destroy American jobs."
As with health care, the crux of the argument for protecting the manufacturing sector is that it is somehow different from all others.
Pat Buchanan and the staff at Crafted With Pride in the USA, Inc. contend that the flight of manufacturing jobs represents a security threat to America's sovereignty. Without manufacturing, how can we produce the tools and supplies we need to defend ourselves? Certainly, we can't buy heavy machinery from China to built rockets when we are at war with them.
Such bellicose fears are as unwarranted as they are dangerous. Certainly one could argue that there are many sectors and goods that are even more vital than the manufacturing of arms and textiles. The surest and easiest way to inflict mass casualties on the American people would be through the food or drinking supply. And what's more, there is nothing more important than food and water for human survival.
The greatest force for the limitation of miliary aggression is trade, both in goods and ideas: it is the ultimate pacifier. The trading of diapers and jeans is equally as important as the trading of computers and heavy machinery, for when we are busy making money and buying DVD players, we have no stomach for war. It is only if we follow the advice of Mr. Buchanan and close our borders from the outside world that our peace and prosperity would vanish in a cloud of barbarism.
Another bogeyman for manufacturing is productivity, an odd notion unless you look at production as being its own end. As reported by the Washington Post, "From 1979 to 2000, U.S. factory output nearly doubled while the number of manufacturing jobs fell by 2.3 million." By and large, this reduction in labor force was driven by gains in productivity. By cutting labor costs, American manufacturers have been able to compete with the dominant players in the global marketplace, such as China and India.
In addition, workers who remain in the industry, however many or few, enjoy the increased wages that accompany greater output. For example, according to the Bureau of Labor statistics, manufacturing productivity rose by over 9 percent in the third quarter of last year. During that same time period, the hourly compensation for workers rose by over 4 percent. As F.A. "Baldy" Harper wrote, "wages parallel productivity." There is no 1:1 relationship in the movement of wages and productivity, but in general as productivity increases so too do wages.
What the manufacturing lobby fails to realize is that the excess jobs will be shed from the industry, regardless of the wants and desires of the workers. The forces of economics, much like the wind and water, cannot be ignored. Productivity will continue to increase so long as companies want to compete in the open marketplace. As long as the quantity demanded for any product is limited, and as such, the production of that particular product increases only insofar as demand does, the increased productivity to workers obviates the need for the same number of employees, thus the shedding of labor. If the excess laborers are not fired, global competition will insure that those with swollen payrolls with pay the price on the market.
Lastly, many blame the trade deficit for the bleeding of manufacturing jobs. Yet most American's lives are filled with trade imbalances. As I have just moved to Irvington-On-Hudson, I have trade deficits with every store I have visited. Today I bought a slice of pizza with currency. I imported food, exporting nothing, yet I feel none the poorer for it. In addition, the United States is largely a free trade zone within its borders. My family back in Vermont has an extremely large trade deficit with the surrounding town of Shelburne. To date, the citizens of Shelburne have purchased nothing from me or my ilk.
That being said, there are certainly some "unfair" forces at work against the manufacturing industry, and the federal government claims responsibility for most of them. The regulatory burden placed upon manufacturers leaves them at a severe disadvantage with the rest of the global playing field. Countries that don't have the list of draconian environmental and workplace regulations, not to mention mandated benefits and compulsory unionization, reap the benefits of flexibility. Abating these onerous dictates would go a long way toward improving American manufacturers' chances in the world economy.
Trade, like all human endeavors, is not utopian. The "great churn" (in the description of the Dallas Fed) propels an economy forward, yet not without downsides. When advocates for free markets laud the "moral superiority of capitalism" it is not without an understanding of the pitfalls that bedevil human action. Ethical behavior for the individual, Hazlitt wrote, can only occur when the long run outcomes are accounted for. Workers who seek to use the manacles of politics to infringe upon the freedoms of others, for their own short-term economic gain, have no claim upon righteousness, no matter what President Bush or others may say.
That's true, but those selling us the DVD players may have other ideas, if they are part of a totalitarian regime, which in most cases they are, to a greater (Red China) or lessor extent. Then while we have no stomach for it, they will stick a bayonet in what stomach we do have.
You exported this article, which is also a load of crap. Worst article I've seen this year - broad generalities, no facts. Nice spelling, though.
...and our government spending spree is keeping the GDP numbers in balance.
Last year's $450 billion trade deficit was subtracted from the Gross Domestic Product, but that number was cancelled out by our government spending $450 billion that it didn't have. Just a coincidence, I'm sure.
If for no other reason, isn't the export of market capitalism a positive externalities of trade? Capitalism leads to freedom inspired revolutionary forces. I guess what protectionists are most afraid of is a world becoming more free and capitalistic. It kind of takes us off of our perch of the "haughty".
This is the same line
Thomas Watson used when he
fronted for Hitler.
(If corporations
are making cash from "evil
empires," businessmen
will use all their might
to protect evil empires.
Does anyone hear
Scott McNealy say
anything bad about slaves
struggling in China?!)
for when we are busy making money and buying DVD players, we have no stomach for war
Or you can believe Plato:
Only the dead have seen the end of war
Which is it free traitors?
Valley Girl certainly is giving Plato a run for the money!
False Dilemma Definition:
Putting issues or opinions into "black or white" terms is a common instance of this fallacy.
(ii) America: love it or leave it. (iii) Either you are with Valley Girl, or you are with Plato. (iv) Every person is either wholly good or wholly evil. |
Valley Girl takes the lead.
Perhaps not. They might change the totalitarian regime to a talkitarian republic.
Meanwhile we can keep our guard up, militarily, with selective civilian boycotts of the worst rights-abusing companies.
This canard has been promoted by free traders ad nauseaum as a reason to open up our markets.
There is no historical basis in fact for that statement. When Kissinger landed in China in 1973 one of the arguments for better relations with China was that if we opened up the country to trade our ides and trade would eventually result in democratic change and China would join the rest of the world as a democracy. Of course the Communist regime (USSR) that fell was the one with whom we had limited trade. The other one gave us Tienanmen Square and a military industrial complex that believes in the inevitability of war with the US and that we are it's mortal enemy.
If we go back to the 1930's trading with Germany as nations began to slowly get out of the depression merely enriched and enhanced the industrial capacity of Germany to wage war.
Fast forward to the present, in the middle east the country with one of the greatest per capita incomes and trade with the west is Saudi Arabia. Again we see how an influx of money and trade really brought that country out of the dark ages. It's wonderful people love us so much that 15 of them even volunteered to fly planes into New York.
Historically, trade does not mean peace, it is merely a precursor to war, invasion and conquest when the more militarily powerful nation decides to take over it's markets by force rather than trade.
Of course the exception to the rule in the 20th century has been trade among democracies. However, none of the threats we face is from old and stable democracies. Certainly not China anyway and we could argue whether any of these other third world cesspools where we are exporting jobs to fit a definition of "democracy" in a modern sense.
Look if you want to be truthful just tell the truth: Western workers will have to have a lowering of their standard of living so that Asians will have their standard of living improved. I mean, the bright side is that our standard of living may not fall as much as their's will rise.
I'm also tired of the same old thoughtless, meaningless rhetoric that libertarians spew out.
Ok, the truth. We have had one heck of a run caused by technological advances that have raised our productivity. Foreigners saw it and invested heavily in our securities markets and we’ve all benefited. True? Now comes the “catch-up effect” phenomena, as developing foreign countries will use that same technology – now not so new any longer but new for them – and increase their productivity and growth with it. As America shifts its resources through economic activity, hopefully with private and not governmental activity, we will go through a structural change that will pinch some of the members of our society. This will bring intermediate-term pains as the demographics of our society will determine the what that new economy structure will look like.
There is no historical basis in fact for that statement. When Kissinger landed in China in 1973 one of the arguments for better relations with China was that if we opened up the country to trade our ides and trade would eventually result in democratic change and China would join the rest of the world as a democracy. Of course the Communist regime (USSR) that fell was the one with whom we had limited trade. The other one gave us Tienanmen Square and a military industrial complex that believes in the inevitability of war with the US and that we are it's mortal enemy.
If we go back to the 1930's trading with Germany as nations began to slowly get out of the depression merely enriched and enhanced the industrial capacity of Germany to wage war.
Fast forward to the present, in the middle east the country with one of the greatest per capita incomes and trade with the west is Saudi Arabia. Again we see how an influx of money and trade really brought that country out of the dark ages. It's wonderful people love us so much that 15 of them even volunteered to fly planes into New York.
Historically, trade does not mean peace, it is merely a precursor to war, invasion and conquest when the more militarily powerful nation decides to take over it's markets by force rather than trade.
Of course the exception to the rule in the 20th century has been trade among democracies. However, none of the threats we face is from old and stable democracies. Certainly not China anyway and we could argue whether any of these other third world cesspools where we are exporting jobs to fit a definition of "democracy" in a modern sense.
Germany deeply resented having to pay reparations after WWI. However they paid that debt - probably in gold – and it left their economy in shambles. The resentment continued to build, fueled by the hyperinflation that occurred from the devaluation of their currency, the ensuing internal banking crises, and the loss of her sovereignty. Then up steps the National Socialistic Party with its “inspirational” message of taking their country back and putting people back to work and so on. Needless to say the people were “ripe” to be led down the treacherous path.
China on the other hand began to hate western style capitalism around about the same time that the western industrialized countries started to carve up their eastern ports, taking away their sovereignty, and collecting their resources while exporting them and keeping all the profits. Now, thanks to trade, China is moving toward a more open, market-based economy. Private property rights are the next logical step. In the mean time there is still deep distrust stemming from the last 100 years of our dealing with each other. Are they becoming more of a threat? The answer is, simultaneously, yes and no. Time and attitude will tell. They have – and still do - utilize unfair trading practices. I wonder how long they’ll leave their currency pegged to ours while the dollar is in free fall. I think the free fall is deliberate myself.
Saudi Arabia, well, you’ve got me on that one. But I think that Saudi Arabia’s over represented “contributions” to the terrorist assaults on America (not just New York) were more due to the ease of access to our country.
Historically, conditions of economic inequity and the ensuing emotions that those condition spawn have been the precursors to conflict, not trade.
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