Free Trade Agreements = Evaporated Jobs Worldwide

Free trade agreements allow consumers access to the cheapest goods whether made in the USA or overseas. It allows products which America produces best to permeate distant shores, and displace local products of less value.

There is a dark side to free trade – workers in non-competitive industries lose their jobs. In my travels around the world, everyone complains about free trade causing unemployment in their country. The villain is always the USA. “The Americans are destroying our country – we have so many unemployed because of the free trade with America.”

But wait, isn’t this what Americans are complaining about? Aren’t imported products coming into America and destroying industry after industry (electronics, cars, textiles)? Can free trade really be causing worldwide unemployment? The simple answer is YES.

You do not have to be a genius to understand that job destruction is a consequence of free trade agreements. You just naturally assume that as many jobs are created as are destroyed. But consider this:

For America, all jobs in industries making products where labor is a significant portion of the selling price will be eventually destroyed. Products where Americans are competitive will be in sectors with significantly less labor content. So the natural consequence of free trade to America is significantly less employment.

Now globalize this phenomenon. There will always be displacement of employment from richer to poorer countries. As soon as a developing country’s wage rates increase, jobs will migrate to an even poorer country. Once a country gets a leg up, another country starts sawing on that leg.

Additionally, unemployment is resulting from productivity / automation differences between countries. As an example, Americans may make a widget with 0.5 man hours where Vietnam needs 30 man hours to make the same widget. When that product is imported to Vietnam, it destroys jobs at a 60X multiplier rate. The result of free trade is a net loss of jobs worldwide. Free trade is not a zero sum employment game.

The most feared American product of all – agriculture. Free trade with America literally destroys agrarian economies. Free trade agreements even with developed countries have had serious agriculture employment consequences. America is blessed with water, weather, automation, technology and incomparable land resources which make agriculture products cost the lowest in the world.

What is the theoretical end game result of free trade? I can postulate two:

• The equalization of labor rates around the world. Because of the need to be competitive, the equalization will be at the lowest wage, not the highest. Economists and business leaders will tell you all this is good - but you need to ignore the social upheaval caused by free trade to be convinced of this.

• The eventual elimination of employment. Computers controlling machines making machines. Picture HAL on 2001 – A Space Odyssey controlling the Star Wars Droid Army.

Neither of these evolutionary views of free trade are satisfactory.

Change is inevitable. Globalization and free trade will eventually happen regardless of protectionism. The bright, industrious, rich and powerful will always benefit from change. But what about the remaining sheep who need to work to survive? Not only is ignoring the consequences of free trade a risk to the consumer base (and therefore the economic base) – but also will become a major social issue causing unrest. Will there be uprising because of shortages of jobs?

There are some corrective actions which can begin to mitigate the unemployment effects of free trade.

Temporarily Halt Further Free Trade Agreements – the falling employment rate in America should be a concern to everyone. My position is that free trade is a major cause of this. If you are sawing wood and you feel a pain in your finger you stop sawing and examine your finger. Let us figure out why our finger hurts before we continue sawing.

Create Permanent Jobs – 2.5 million jobs will not even begin to fill the job destruction of free trade. The government needs to invest in research and development. America needs new products to create jobs. I will continue to insist that the stimulus packages I have seen so far will not create permanent jobs.

Retraining / Education – The displaced unemployed worker needs retraining. The government is really the only help these displaced workers can access as there are few NGO’s to fill this need.

Concentrate on Creation of Small business – Globalized corporations seek to maximize profits. Profits are always sensitive to labor costs. Jobs in globalized corporations will flow from the USA. Small business creates American jobs. Investor pools of money can be created to fund these new businesses. Bias tax laws towards small business. Mobilize a Peace Corp of retired businessmen to mentor these new businesses. Have universities assist new business in product creation. I personally believe small business creation is America’s major hope for jobs.

Reconsider Our WTO Options – We have always considered that what is good for big business is good for America. Finance and Manufacturing industries have lobbied heavily for free trade. The results have been dramatic increases in their profitability. More taxes are paid now by these corporations. However, employment is now the issue. We need to reprioritize focusing on employment – not profits. We need to stand back and reconsider the effects of free trade targeting the “net” loss of jobs issue. A shotgun approach such as requiring that trade between countries be balanced based on production man hours could be explored.

We are in a world of liberalized trade and I am not advocating a return to isolationism. I am suggesting tweaking the system to enhance the creation of jobs – both in America and worldwide.

Disclosure: no positions

Comments

[Jamaican in...:]

Goods and services produced (supply) respond consumer demand (disposable income, tastes and other factors) that is ralated to the marginal propensity to consume.
Free trade agreements reward efficiency, and force regions and countries to produce the goods and services that they have a competitive advantage in producing.
If everything is produced in a manner to maximize efficiency, then the production of goods and services minimizes waste and the cost of every product in the market place is reduced. The result is that natural resources, labor and capital are employed in such a manner to maximize return on investment.
If we are globally managing our resources in such a way to minimising waste, increase efficiency and provide the highest return we can on an investment, then all over the world consumers benefit from high quality good, produced at the lowest cost for all consumers and the highest profit for investors.
Please advise me why this is a bad thing.

2008 Dec 15 07:14 AM

[jamesa40:]

Temporarily halt free trade agreements? Did you not learn anything from the depression? Remember Smoot/Hawley? That anti-free trade policy is one of the leading causes of the depression. By creating an anti-trade policy, other countries responded in kind. Therefore, our continuing increase (and reliance) on exports in this recession today would evaporate, compounding the very problem you wish to cease.

2008 Dec 15 08:07 AM

[cptnproton:]

Hear! Hear! But I think the issue is not so much that of halting trade agreements, but examine what is and insist upon *fair trade*. It's not really fair for an American worker to compete against chikld slave labor in other countries that has no regulations about polluting the environment.

2008 Dec 15 08:35 AM

[john s. gordon:]

this is called the race to the bottom. it's been going on for a long time. how many vacant textile mills exist in new england states? in the u.s.a corporations move operations to states that have the lowest labor costs and lowest standard of living (i.e., dixie).
japan loses jobs to china.
taiwan loses jobs to vietnam.
who's next?
> jack

2008 Dec 15 08:50 AM

[Jamaican in...:]

John, please don't look at the short term. In the long term if we hope for efficient resource allocation, and therefore minize waste, we must embrace the idea that the most efficient regions will produce the goods and services that they are most capable of producing cheaply.
For example, America produces food, movies, medication and some manufactured good more efficiently than anywhere else in the world because of our good climate, abundant water, developed cinema industry, productive farmers, heavy investment in biotechnology and educated workforce.
If Japan that produces cars more cheaply decides to stop producing cars and employ thier citizens to produce wheat, the result would be fewer cars (and the price of each car would rise as it became scarce), expensive Japanese wheat and eventually unemployment.
Multiply the effect of the example I provided thousands of times and the world would suffer from poor allocation of resources, high costs, and many more hungry hungry children than we see on CNN every night.
First we have to recognize the benefits of free trade, and how it works, and use that understanding to put ourselves in a position to utilize that knowledge when advocating government and social remedies resulting from market forces.


On Dec 15 08:50 AM john s. gordon wrote:

> this is called the race to the bottom. it's been going on for a long
> time. how many vacant textile mills exist in new england states?
> in the u.s.a corporations move operations to states that have the
> lowest labor costs and lowest standard of living (i.e., dixie).<br/>japa...
> loses jobs to china.
> taiwan loses jobs to vietnam.
> who's next?

2008 Dec 15 09:09 AM

[MisterPhi:]

Jobs are being "bubbleized" as Cos race around the world to find the new lowest cost. You create a temporary bubble of manpower (not wealth, mind you) then you prick it when you move elsewhere.
Bottom line is: life is expensive, good quality stuff is expensive, well being is expensive all the things you cherish most, since they have a moral value they can be priced too (and they're expensive).
Maybe we should collectively accept the fact that spending the right amount of $$$ does indeed create wealth and well being, it reduces waste, does not consume natural resources as fast.
The diametrically opposite theory would arrive to consider the value of human life and accomplishments at zero, and therefore our lives would neet to be priced at liquidation value. Next thing you know we've all collectively eliminated each other....

2008 Dec 15 09:24 AM

[Gedankonomist:]

Smoot-Hawley did not cause the depression. The FED did.


On Dec 15 08:07 AM jamesa40 wrote:

> Temporarily halt free trade agreements? Did you not learn anything
> from the depression? Remember Smoot/Hawley? That anti-free trade
> policy is one of the leading causes of the depression. By creating
> an anti-trade policy, other countries responded in kind. Therefore,
> our continuing increase (and reliance) on exports in this recession
> today would evaporate, compounding the very problem you wish to cease.

2008 Dec 15 09:58 AM

[Gedankonomist:]

The whole purpose of "free trade" (nothing in life is free) is to break down national boundaries. Nations which have their economic sovereignty handed over to a supernational authority lose their independence. This helps to bring about regional governments such as NAFTA, African Union, EU, etc. Eventually these blocs will be merged into a single world government.

And if you wonder what kind of government, world government would be like, pick up a Franz Kafka novel, if reading the NAFTA or WTO charters bore you too much.

2008 Dec 15 10:02 AM

[GeminiAtlas:]

Food for petro-energy, sounds like a fair trade to me.
But seriously, the main issue is employability. Free trade should not be halted but indeed, must be accelerated. In the employability part, this is mainly a function of training and education. In that vein, the whole education system in the USA needs to be revamped. Less and less students are choosing to go into STEM (Science Tech Engineering Math) fields and into other fields. Who is going to do this R&D that would need to be done in order to create new products, technologies, whole new industries?
Permanent Jobs? I would say "continual employability" i.e. workers who keep learning new productivity enhancing skills. There is no such thing as a "permanent job." The only thing that is constant is change. Industries change, they get created, and then they get destroyed by newer, more efficient, innovative industries. I would also posit that many, many of those ~8.5M jobs were destroyed not be free trade, but by more and more automation. All those folks in manufacturing can lament that there are no jobs left for them, but they aren't coming back. Time to learn new skills and move onto something else.

2008 Dec 15 10:05 AM

[derryl:]

Jamaican in Africa writes,

"If we are globally managing our resources in such a way to minimising waste, increase efficiency and provide the highest return we can on an investment, then all over the world consumers benefit from high quality good, produced at the lowest cost for all consumers and the highest profit for investors.
Please advise me why this is a bad thing."

I'll answer that. It is a bad thing because unemployed people have no income to enjoy all these efficiently produced goods.

Besides theft, the only 3 ways people can get money to buy goods is to earn incomes by working or to borrow money or to share via redistributive taxation the incomes of other people.

Earned income is the only sustainable and morally noncontroversial source of consumer demand. Taxation robs Peter's income so Paul can have money to exist. Debt is temporary as loans must be repaid.

The globalist claim that these unemployed will be reemployed at more productive work is simply false. The very purpose of the drive to efficiency is to eliminate the need for labor while producing ever greater quantities of higher quality goods. But for the vast majority of people the only way to obtain the power to consume is by earning income through work.

How do people benefit from a global economy that is capable of producing plenty for all, if increasing numbers of people have no realistic opportunity to work and earn incomes to share in the production and consumption of this wealth?

Maybe 2 billion people should die off? 4 billion? 6 billion? Atlas Shrugged is the logical outcome of a morality where production is the only value and a ruthless drive to efficiency is the corresponding policy. This assumes that we live to work.

But what if we work to live? Then consumption becomes the value and production is just the means to that end. Furthermore, what if human nature is such that we actually need to work, not just consume? Then destroying jobs in the name of economic efficiency does not serve the interests of people, given the human nature that we actually have.

I think it is the case that people need to work to live. I think welfare is soul destroying. I think redistributive taxation is socially destructive because producers hate the 'worthless parasites' who consume their taxes and welfare recipients hate the 'greedy capitalists' who want to keep all the money they earned.

Industrialization has enabled humanity to produce everything we need and want without full employment. But for most people employment is the only means to earn the right to share in the goods.

We are highly advanced industrially/economica... and still moving fast forward on this front, but the evolution of human economic nature has not kept pace. We have a world where work is being eliminated but people still need to work.

If the fast forward pursuit of economic efficiency does not serve the interests of people, then maybe we should heed Mr. Hansen and rethink the virtues of this policy.

2008 Dec 15 10:16 AM

[john s. gordon:]

i am reminded of martin luther's principle of the dignity of all work in the eyes of God. he was complaining about the useless aristocracy of this time who did no work.
> jack

2008 Dec 15 10:46 AM

[Joyful Alte...:]

Retraining is generally silly; by the time a laid-off worker finishes a retraining program, the jobs are gone. Retired businesspeople aren't much help to entrepreneurs, either, and the SBA already has a corps; things move fast in business these days. And as Gemini just said, "permanent jobs" don't exist; we need to aim at "continual employability," with ongoing skill upgrades. That's what I've had to do, on my own as a self-employed person, to sustain my viability.

As far as biasing tax laws toward small businesses, what we small businesses (and no, that's not my small business on my link; that's my hobby) need is universal single-payer health insurance. Many would-be entrepreneurs are stuck in jobs they hate because they need that employer-sponsored health insurance plan for their families. I personally know dozens who want to be or were self-employed but can't do without the health insurance, so there might be millions out there with great or foolish plans who'd jump at the chance if they didn't have to worry about a child developing cancer or a spouse becoming "uninsurable."

And after that, some tax code changes, particularly in recordkeeping. Some of the rules my accountant explains are just plain dumb for a small business.

2008 Dec 15 11:21 AM

[xmplary:]

Interesting article. I wrote an article about automation robots, which is another factor in the quest for reducing that we hardly talk about cost xmplary.blogspot.com/2... Retraining in the skills of tomorrow is the only way for survival for most workers.

2008 Dec 15 12:09 PM

[hanson001:]

Free trade has increased the world's welfare. Allowing the free market to work would be best, but mankind will never allow it to work due to greed and fear. Thing is, it's the best model known to man and we must use it.

With free trade, you need perfect transparency. In the long-run, do you think politicians, businesses, and governments want transparency? I don't think so because of self interest and competitive advantages.

If someone figures out how to achieve perfect transpareny the free market will be the best thing since sliced bread. Consumers can be informed, investors can be informed, entrepreneurs can be informed, and scientist and researchers can be informed. Man! Talk about global growth. Like the X-Files, "The Truth Is Out There." Like many of you, I spend countless unproductive hours trying to figure it out. Most times thinking I know, only to find out much later, after much wasted effort, that behold I do not know.

The job situation is indeed troublesome. Someone getting left behind after trying his/her best is most cruel. But we must agree that a great deal of our fellow man do not go into action until it is too late. We must do something about our educational system in the U.S.

While the perfect transparency problem gets worked out, the educational problem was pointed out above and I agree with those thoughts. But we need to have a voucher system and choice so those who want to survive and take responsiblity for their presence can succeed. At the secondary education level, we need to deploy, I hate to say, a more socialist system (since we don't have perfect transparency)like the primary system but with choice. Every person that educates his/herself helps me and you.

Let's face it. Most working people will need to be retrained all their working life. This education must be free to the person missing out on greater income due to the retraining. The education is the only thing that should be free to this person. No other subsistence should be given.

2008 Dec 15 12:45 PM

[shaunwalton:]

ok..this is not difficult, one society cannot possibly have "free trade" with another society where the median income levels can be thousands of times lower...hence the move for corporate america to search for the cheapest labor, thus vaporizing jobs here in the U.S.A. This can only go on for so long, and now it catching up with us. As far as education and training, all that is well and good, however, I seriously doubt that anyone is going to move from this country over to India to assemble widgets. The bottom line is we have to bring manufacturing back to this country, some people would be happy with making $20/hr. working on an assembly line.
Some people do not have the mentality to go to college, nor do they want to. It is time that we learn from the greatest generation this country has ever known, the WW II generation, they sacrificed, improvised, overcame and adapted, until we learn from their example, we will forever be chasing an illusive dream of "free-trade".

2008 Dec 15 01:01 PM

[Number Jockey:]

Wow. Way to be incredibly close-minded... You look solely at manufacturing jobs and the fact that those specific numbers are decreasing. Why should you not consider the engineering jobs created as production is automated? Should the assembly line never have been invented? American manufacturing does remain where quality is vital or highly technical individuals are required. But as far as simple, unskilled workers... yes those jobs are not the strength of the United States. There are, however, opportunities in engineering, health care, and accounting even still. The lesson should be if you are in the US... stay in school and learn a profession. Nations specialize and the world as a whole benefits. China and India's real incomes are increasing and can afford luxuries like animal protein more and more, and Americans have cool toys to play with, better medicine, and cheap DVDs.

2008 Dec 15 02:09 PM

[shaunwalton:]

Hey Number Jerky,

As I stated not everyone is going to be an engineer, I am however, one that is an Environmental Engineer. Apparently you didn't read my comment in its entirety. Some people don't have the capacity for higher education, some people don't want higher education, furthermore until we accept the fact that a society cannot exist within the service sector alone, we might as well put our heads in the sand and ignore the problem. By the way, who is the one being closed minded??? The only things we need to import are those items that we have no natural resource to make ourselves. GET A CLUE, GET A GRIP, GET A LICENSE TO GET A CLUE OR A GRIP....you are so closed minded that you are one of those that think "education, education, education...please give me a break...all the education in the world won't help anyone if they can't get a JOB!!!!!!!!!!!!!!!!!!!

2008 Dec 15 02:52 PM

[Socialism c...:]

I would agree in principle...but with the side-note that Luther was not the originator of that notion!!


On Dec 15 10:46 AM john s. gordon wrote:

> i am reminded of martin luther's principle of the dignity of all
> work in the eyes of God. he was complaining about the useless aristocracy
> of this time who did no work.

2008 Dec 15 05:27 PM

[Socialism c...:]

Education is the individual's responsibility!! As is everything needed for that person to remain alive. Want something? Go earn it. The notion that the state should pay for anything i need is the biggest Ponzi scheme of all, and the reason we are in this economic mess!!! Personal responsibility, people!!

> Let's face it. Most working people will need to be retrained all
> their working life. This education must be free to the person missing
> out on greater income due to the retraining. The education is the
> only thing that should be free to this person. No other subsistence
> should be given.
>

2008 Dec 15 05:30 PM

[John Lounsbury:]

There are some common threads running through these comments that I want to elaborate on. I apologize in advance for not giving individual attribution to the many thoughts expressed above in what follows.

Free Trade does contribute to the problem everyone is discussing (employment), but it is not the only source of lost jobs. It may not even be the major source in some cases. Telephone operators did not lose their jobs because of out-sourcing. They lost their jobs to switchboard technology.

Steve Hanson mentions this in the article:

"The eventual elimination of employment. Computers controlling machines making machines. Picture HAL on 2001 – A Space Odyssey controlling the Star Wars Droid Army."

The profit motive causes a constant search for greater productivity, more production for less cost. When man is more expensive than machine, machine wins, whether he is in Ohio or China. Thus, technolgy advances enable the production of more and more, for less and less. If the means of production end up employing fewer and fewer people, the demand for production goes down (the market is diminished). Then the investment in technology can not pay for itself and a bubble collapses.

The only way we avoid this dismal scenario is for innovation to produce new products and services that will employ the retrained displaced workers. Then the productivity cycle starts anew in another industry, but the mature industry now still has customers, just not their own workers as before, but someone elses (perhaps their own retrained former employees).

The term for this virtuous cycle is "creative destruction". I apologize for not giving attribution, but I don't remember who coined the phrase. (Possibly Peter Drucker?) I believe Tom Friedman has used the term.

I'll borrow a line from a 1960's song: "The answer, my friends, is writtten on the wind": Innovate, adapt, and then innovate again. As Eleanor Roosevelt said, "It is better to light a candle than to curse the darkness."

To those who believe that we owe something to those who "are not suited to retraining", I disagree. I'll offer the Darwin model, survival of the fittest. Adaptation, survival, moving on and moving ahead is how this country became the greatest nation in history. Now you want to change a proven process?

2008 Dec 15 05:56 PM

[shaunwalton:]

I agree with retraining, however, lets not kid ourselves. If anyone thinks that retraining is going to be "free" think again...

2008 Dec 15 06:16 PM

[fran:]

steve--

i agree with your broad focus. but until the citizenry demands from their gov't a prioritization and longevity of national objectives, including detail "how to" plans at election times, not much will change. what we expect from gov't is too broad, too varied, and subject to emotional pandering by politicians. gov't can't be all things to all people, but too many have evolved to tis expectation--especiall... at the national level. too many solutions with too much money gravitates upward, results become shallow and effective results deluted.

we should have a referendum on the eight thing we want at each level of gov't to provide/be accountable for providing. do this at each gov't level. what gets undone by the gov't, individuals must handle or gorget about. i believe years ago, we started this way.

perhaps citizens, politicians, ideologs, pacs, etc could sort things easier and have more effective dialogue. perhaps a politician would receive fewer votes on "charism" and more on substantive commitment, upon which their performance could be measured.


signed: GERRY MANDER

2008 Dec 15 08:10 PM

[Jamaican in...:]

I disagree with you.

Please let us take the example of commercial agriculture in the United States. A single American farmer can sow seeds across thousands of acres in a day because he employs mechanization. Let us say he earns $35/hour, or in a 10 hour day $350.

In Africa our subsistence farmers with their wives and children in tow can probably pluogh a half an acre and plant seed over it over two days, and would probably never cultivate much more than a ten acre plot in a given growing season, even while keeping his children out of school during planting and harvest time.

The American farmer will use hybrid seeds, and fertilizers that will enable his fields to produce 10 - 20 times the number of bushels per acre as his African competitor; his seeds will also germinate to become crops that are disease and pest resistant.

During the growing season, the American farmer will employ sophisticaed irrigation techniques, while his African counterpart will use a watering can, ask his wife to help and tell his children that they cant go to school all the while praying for rain to prevent the threat of famine.

Well at harvest time, the American farmer cleans the combine and harvests in one day what it would take an entire village a week to harvest.

So despite working fewer hours, the American farmer will have greater yields per acre, employ fewer people and not hinder the development of the next generation.

So yes, with education, mechanization, biotechnology and sophisticated use of software you can overcome many of the advantages built into a low income workforce. Just because an African farmer earns less than $3.00 per day does not make him a competitor to the American farmer who earns $80,000 per year. Infact, in many nations, farmers complain that American agriculture is destroying thier local agricultural industry.

Because someone works under difficult conditions for a small salary does not mean they are more productive than the educated worker in a developed nation who uses the available technology to his advantage.

In the international marketplace Free trade simply rewards the most prodcutive means of producing goods and services.

Why do you think that most of the profitable movies are made in Hollywood rather than India where the actors earn a lower salary? The answer: better trained script writers, better directors, better special effects.. all a product of education, technology and infrastructure.

Ok better still, why are most of the worlds medication made in the US? Certainly, there are places around the world where they can get people to press a button and put medication into a bottle more cheaply than they can in the US. Again the same reason.

Please do not be afraid to compete, the American people are innovative and are capable of finding simple solutions to vexing problems. In the word of a great American President:"We have nothing to fear, but fear itself."
On Dec 15 01:01 PM shaunwalton wrote:

> ok..this is not difficult, one society cannot possibly have "free
> trade" with another society where the median income levels can be
> thousands of times lower...hence the move for corporate america to
> search for the cheapest labor, thus vaporizing jobs here in the U.S.A.
> This can only go on for so long, and now it catching up with us.
> As far as education and training, all that is well and good, however,
> I seriously doubt that anyone is going to move from this country
> over to India to assemble widgets. The bottom line is we have to
> bring manufacturing back to this country, some people would be happy
> with making $20/hr. working on an assembly line.
> Some people do not have the mentality to go to college, nor do they
> want to. It is time that we learn from the greatest generation this
> country has ever known, the WW II generation, they sacrificed, improvised,
> overcame and adapted, until we learn from their example, we will
> forever be chasing an illusive dream of "free-trade"...

2008 Dec 16 10:21 AM

[Jason Rines...:]

In general Jamaican, what you describe is not bad thing in and of itself. What should have happened is a very slow but steady progression that the American government controlled very tightly. American government needed to slowly but surely conduct globalization in such matter as to protect it's citizenship which is it's true role and function. Since this did not happen and instead, American government and banking colluded not only on this issue but many others, America has gone bust. Why should we care now? Because Mr. Hansen was mild in his language when he describes social unrest. In America, this is the stuff of Revolutions. The citizenship started one in 1776 with the British Empire for much less then what the American citizen has had to contend with this last decade. An American Revolution part two would be VERY bad for the entire planet.


On Dec 15 07:14 AM Jamaican in Africa wrote:

> Goods and services produced (supply) respond consumer demand (disposable
> income, tastes and other factors) that is ralated to the marginal
> propensity to consume.
> Free trade agreements reward efficiency, and force regions and countries
> to produce the goods and services that they have a competitive advantage
> in producing.
> If everything is produced in a manner to maximize efficiency, then
> the production of goods and services minimizes waste and the cost
> of every product in the market place is reduced. The result is that
> natural resources, labor and capital are employed in such a manner
> to maximize return on investment.
> If we are globally managing our resources in such a way to minimising
> waste, increase efficiency and provide the highest return we can
> on an investment, then all over the world consumers benefit from
> high quality good, produced at the lowest cost for all consumers
> and the highest profit for investors.
> Please advise me why this is a bad thing.

2008 Dec 17 01:37 PM

[Jason Rines...:]

The article said 'tweaks' are required to our Free Trade agreements. Smoot/Hawley not mentioned. Learn to read the entire article. It was brilliant and dead on with it's analysis and for a nice change, suggestions of how to fix the American economy.


On Dec 15 08:07 AM jamesa40 wrote:

> Temporarily halt free trade agreements? Did you not learn anything
> from the depression? Remember Smoot/Hawley? That anti-free trade
> policy is one of the leading causes of the depression. By creating
> an anti-trade policy, other countries responded in kind. Therefore,
> our continuing increase (and reliance) on exports in this recession
> today would evaporate, compounding the very problem you wish to cease.

2008 Dec 17 01:42 PM

[Jason Rines...:]

Yes, this will be fine when we have one, true world government. For now, you have national interests. Americans going from 1st world status to 3rd in the process is not called progress. The American way of life was unsustainable, period. But as I stated in the other comment...


On Dec 15 09:09 AM Jamaican in Africa wrote:

> John, please don't look at the short term. In the long term if we
> hope for efficient resource allocation, and therefore minize waste,
> we must embrace the idea that the most efficient regions will produce
> the goods and services that they are most capable of producing cheaply.
>
> For example, America produces food, movies, medication and some manufactured
> good more efficiently than anywhere else in the world because of
> our good climate, abundant water, developed cinema industry, productive
> farmers, heavy investment in biotechnology and educated workforce.
>
> If Japan that produces cars more cheaply decides to stop producing
> cars and employ thier citizens to produce wheat, the result would
> be fewer cars (and the price of each car would rise as it became
> scarce), expensive Japanese wheat and eventually unemployment. <br/>Multiply
> the effect of the example I provided thousands of times and the world
> would suffer from poor allocation of resources, high costs, and many
> more hungry hungry children than we see on CNN every night.
> First we have to recognize the benefits of free trade, and how it
> works, and use that understanding to put ourselves in a position
> to utilize that knowledge when advocating government and social remedies
> resulting from market forces.

2008 Dec 17 01:47 PM

[Jason Rines...:]

Awsome comment GroOve. This is what is happening and mankind is on a path of societal evolution. The entire species doesn't get eliminated, my estimates are 1/3 in the next world war. Then man will move towards a world government using technology to modify some of the unecessary aggressive personality traits we no longer or will no longer need. Let's face it, this age and others before it those at the top call the shots to those down below. 'The Great Moderation' had nothing to do with true global equality for the species, it has everything to do with creating a Gods and Clods globe of rulers and serfs. Those kind of empires always crash hard to the ground.


On Dec 15 09:24 AM GroOve wrote:

> Jobs are being "bubbleized" as Cos race around the world to find
> the new lowest cost. You create a temporary bubble of manpower (not
> wealth, mind you) then you prick it when you move elsewhere.
> Bottom line is: life is expensive, good quality stuff is expensive,
> well being is expensive all the things you cherish most, since they
> have a moral value they can be priced too (and they're expensive).
>
> Maybe we should collectively accept the fact that spending the right
> amount of $$$ does indeed create wealth and well being, it reduces
> waste, does not consume natural resources as fast.
> The diametrically opposite theory would arrive to consider the value
> of human life and accomplishments at zero, and therefore our lives
> would neet to be priced at liquidation value. Next thing you know
> we've all collectively eliminated each other....

2008 Dec 17 01:52 PM

[Jason Rines...:]

Fast forward pursuit does serve the interests of the people, it's called 1% of the entire global population. The other 99% of what is a global mob ultimately are the ones whom decide, despite where we are at right now in the process of those decisions. The rest of your comments were great!


On Dec 15 10:16 AM derryl wrote:
>
> If the fast forward pursuit of economic efficiency does not serve
> the interests of people, then maybe we should heed Mr. Hansen and
> rethink the virtues of this policy.

2008 Dec 17 02:05 PM

[Jason Rines...:]

We get the government we elect. American citizens will be fine when the pain mounts so much that they conduct due dilligence to vote out the bad guys and vote in some fresh new guys. If the American government is so big and cumbersome and has domination control of it's people, then a physical Revolution shall occur. You cannot fix the issue without first understanding the concept of Liberty. I have a feeling we share the same beliefs


On Dec 15 05:30 PM Socialism cannot compete! wrote:

> Education is the individual's responsibility!! As is everything needed
> for that person to remain alive. Want something? Go earn it. The
> notion that the state should pay for anything i need is the biggest
> Ponzi scheme of all, and the reason we are in this economic mess!!!
> Personal responsibility, people!!

2008 Dec 17 02:15 PM

[User 323968:]

1 % of our population made 8% of our nation's income 16 years ago. Now 1% of our population makes 25% of our nation's income. And COMMUNIST CHINA (the government not the people) has become very rich. Free Trade is fine if you are on a level playing field, but when you are trading with countries who use the profits for their government's self interests it will never work. And that is pretty much everyone who imports cheap goods. It is also impossible, an absolute joke to compare 1929 to now. The amount of items made overseas is so beyond what anyone in 1929 could even have imagined. I can't even find anything made in the USA at Walgrens beside the cereal. Free trade is no different than the bailout. Socialism. Capitalizing profits and socialing losses by costing the goverenment in unemployment, health care, food stamps and retraining. We are headed for a depression and I don't think it can be stopped. At least the 25% will be fine.

2008 Dec 22 01:05 AM

[Steve in Gr...:]

Joseph Schumpeter was the originator of the concept of "creative destruction" and is loosely associated with the Austrian School.

Speaking of Thomas Friedman, Schumpeter also theorized (quoting from Wikipedia) "...that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals..."


On Dec 15 05:56 PM John Lounsbury wrote:

> The term for this virtuous cycle is "creative destruction". I apologize
> for not giving attribution, but I don't remember who coined the phrase.
> (Possibly Peter Drucker?) I believe Tom Friedman has used the term.
>

2008 Dec 23 10:07 AM

[donzelion:]

One major factor in U.S. job loss that has nothing to do with "free trade" is our unique American tax on global income. An American working abroad pays both foreign taxes AND U.S. taxes. Everyone else pays only the foreign taxes.

This means that businesses will go to great lengths to hire non-U.S. citizens and put them in foreign posts - every single U.S. citizen costs from 15-35% more than a comparably skilled non-U.S. citizen.

It also means that every small business in America will be at a disadvantage to non-US small businesses IF the work involves income earned while physically present in another country for long-term posts.

Jan 08 06:41 AM

[2 Bizar:]

I agree with more of the blogs than the article itself. I think this proves one thing I have been saying for several months, people do not understand Free Trade and the media, I believe is a big part of the reason why, not to mention the UAW because they are afraid of it.

I would agree there are a lot of factors for our trouble and the taxes is definitely an issue. I also think that we have an unlevel playing field worldwide - this is my definition of Fair Trade. We have a 3% duty on Indian goods into the US but selling US goods into India could range from 12% - 150% duties = not free or fair trade. Same with China. Why can't we as a nation raise those duties on imports for countries that do not offer reciprocal rates? For example, Whiskey duties into India are over 100%, not positive on the exact amount, yet alcohol imports come in at 3%. HOw can any US alcohol manufacturer add jobs for sales outside of North America with duties like that?

I argue that our way out of the economic disaster we are in lies squarely on expanding our Trade Agreements and adjusting our importing structures for those countries not willing to play ball with the US.

We also need to educate the US government and all Americans on all the good things that our trade agreements such as NAFTA have brought us. No one ever talks about that...

Jan 15 06:01 PM