Has The American Dream Been Outsourced?

Economies grew much faster under regulated trade following the second World War then under the period of neoliberal free trade. Trade is helpful, but unregulated trade is not. Trade like capitalism needs to be regulated to ensure that it happens within healthy environmental and social limits. Large economies like the US have also been okay with less trade (I believe it accounts for under 30% of GDP but it was only half that size in the 80s when it was growing much faster)

Productivity affects wages but does not determine it. Worker productivity has increased by a third since the 80's and the top 1 percent have taken 65% of that increase in wealth while the wages of the bottom 60% have stagnated. This is because of power struggles between capital and labour. Ceo's have went from making 25 times the average worker to 500 times. This is not b/c of productivity differences but political change and unregulated trade.

Workers aren't stupid and lazy. Even prices aren't always cheaper as a result of globalization. It's true that to much increase in wages can lead to price inflation, but inflation isn't any slower today then the 50s or 60s.

Maybe you should start listening to the people complaining, and stop using your intelligence to justify your own worldview rather than being sensitive to the slow and unequal growth, the environmental unsustainability, and the breakdown in family structures that comes from your hypercompetitive picture of the world.

I am an economics major and so don't pretend that if people only new about economics they'd support the system that's not benefitting them.

how did you take from my post that i'm for "unregulated trade"? i've never been for an economy unregulated. you might be mistaking my personal ideology of a dog eat dog world for that of international trade.

and yes, productivity does determine wages. one word = google. i'd be happy to point out textbooks and studies. technical differences are arguable such as which deflator to use for real wages. also, benefits not included in wages such as healthcare aren't counted even though it (and others) should be counted in the wage returns as it used to be out of pocket.

your sentence "Trade like capitalism needs to be regulated to ensure that it happens within healthy environmental and social limits" is only a recent phenomenon of ideology. trade consistently gets tied to new social agendas depending on GATT and RTAA - what i like to call a hegemonic reciprocity. Also, think about economies growing after a world war.... doesn't it just seem intuitive that countries ravished and fighting wars would be more productive and grow more after a war has concluded??

it's not that large economies are "okay with less trade" it's that we are less dependent on it than developing countries. would we like to trade more, hell yes.

this isn't my own worldview. i'm no econ undergrad. i'm a phd student in new york. this is my full time job and i specialize in international trade and developing countries. there is a reason free trade and liberalization of trade has been the general trend since the 1800's with few blips, the biggest of which only lasted a few years - Smoot Hawley. there's a reason tit-for-tat protectionism isn't feasible.

what would you like to do? protect certain industries? which ones? how do you pick? how do you deal with the inevitable retaliation? how do you force other countries into our hegemonic conditions that you say are needed with environmental limits? these battles need to be fought carefully and delicately. free trade needs to be the end goal with very few protections along the way.

like i said, winners AND losers will be created. i'd rather not have a government subjected to special interest losers trying to make the rest of the country fall back. it's probably not your fault trade made you a net loser, but it's not the government's fault either. the only thing they can do is provide re-training and cushions for transition, but even then, we'll be paying for your loss and there's only so much i'm willing to pay for bad luck.

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Some other countries went further than the US. Japan severely restricted foreign direct investment, closing off most industries and imposing 49% ownership ceilings in other industries until the 1970s. Korea followed this model closely until it was forced to liberalise foreign investment after the 1997 financial crisis. Finland went a step further and officially classified all firms with more than 20% foreign ownership as 'dangerous enterprises' between the 1930s and the 1980s. Even countries that did not have such draconian controls put formal and informal conditions on what foreign firms could do. Most typically, they were required to buy more than a certain share of inputs from domestic suppliers, known as 'local contents requirement'.

The picture is clear. The rich countries have got where they are today through nationalistic policies, like protection, subsidies, state ownership of enterprises, severe regulation of foreign investment, and weak protection of foreigners' intellectual property rights.

Despite this history, over the past two and half decades, the rich countries have been recommending to, or even forcing upon, developing countries policies that go directly against their historical experience. Through International Monetary Fund (IMF) and World Bank loan conditions as well as the conditions attached to their aids, the rich countries have imposed trade liberalization on developing countries. The World Trade Organisation (WTO) has significantly reduced tariffs and other trade restrictions in most developing countries. Rich countries are trying to reduce industrial tariffs of developing countries even more through new negotiations in the WTO, as well as bilateral and regional free-trade agreements. Most subsidies have been banned by the WTO -- except ones that rich countries still use, such as subsidies on agriculture and research and development (R&D). The WTO has made most of restrictions on foreign investment, such as local contents requirement, illegal, while the IMF and the World Bank have constantly put pressure on developing countries to liberalize foreign investment. The WTO has also tightened intellectual property rights laws, essentially asking all but the poorest developing countries to comply with US standard of intellectual property rights protection -- protection that even many Americans themselves consider excessive.

Why are they doing this? In 1841, a German economist, Friedrich List, criticised Britain for preaching free trade to other countries, while having achieved its economic supremacy through high tariffs and extensive subsidies. He accused the British of 'kicking away the ladder' that they had climbed to reach the world's top economic position: '[i]t is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him [italics added]'.

Today, there are certainly some people in the rich countries who preach free market and free trade to the poor countries in order to capture larger shares of the latter's markets and to pre-empt the emergence of possible competitors. They are saying, 'do as we say, not as we did' and act as 'Bad Samaritans', taking advantage of others who are in trouble.1 But what is more worrisome is that many of today's Bad Samaritans do not even realise that they are hurting the developing countries with their policies. The history of capitalism has been so totally re-written that many people in the rich world do not even perceive the historical double standards involved in recommending free trade and free market to developing countries.

http://current.com/items/91629440_free-trade-as-new-imperialism-the-myth-and-rea...

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The developing countries have been doing very poorly during the last two and half decades despite adopting 'good' policies, like liberal foreign trade and investment and strong protection of patents. The annual per capita growth rate of the developing world has basically halved during the latter period, compared to the 'bad old days' of protectionism and government intervention in the 1960s and the 1970s. And even that is only because the average includes China and India, two fast-growing giants, which certainly liberalised their economies in many ways but refused to fully embrace the orthodox neo-liberal recipe.

Growth failure has been particularly noticeable in Latin America and Sub-Saharan Africa, where neo-liberal programmes were implemented more thoroughly than in Asia. In the 1960s and the 1970s, per capita income in Latin America was growing at 3.1% per year, slightly faster than the developing country average. Brazil especially was growing almost as fast as the East Asian 'miracle' economies. Since the 1980s, however, when the continent embraced neo-liberalism, Latin America has been growing at less than 1/3 the rate of the 'bad old days'. Even if we discount the 1980s as a decade of adjustment and take it out of the equation, per capita income in the region during the 1990s grew at basically half the rate of the 'bad old days' (3.1% vs. 1.7%). Between 2000 and 2005, the region has done even worse; it virtually stood still, with per capita income growing at only 0.6% per year. As for Sub-Saharan Africa, its per capita income grew relatively slowly even in the 1960s and the 1970s (1.6% a year). But since the 1980s, the region has seen a fall in living standards. This record is a damning indictment of the neo-liberal orthodoxy because most of the Sub-Saharan African economies have been practically run by the IMF and the World Bank over the past quarter of a century.

Fucking exactly peter, you responded better than I ever could.

Free trade apologists make me sick. Go tell your bullshit to the people of Haiti outtheinside, ask them how much they loved being slaves to Walt Disney.

i like the article, except that it doesn't answer any of the questions i asked about how you backtrack off globalization, how to choose who is protected, and how you deal with retaliation. it's a history lesson that denies economics. it makes the case for all growth - positive or negative - based solely on trade. has that ever been the truth? it ignores politics and government in each of the countries. it makes a case for negative U.S. interference on policy when a lot of it was gladly embraced by other countries as THE model because no better alternative was known then. the 80's were considered a lost decade in latin america solely because of their protectionist policies.

some of the article has merit but not all of it, and like i said, if the entire world is moving towards freer trade, why would we move backwards? the article also uses stats that change constantly over specific year periods. i'd like to know why those specific dates were used in the chart.

obviously there have been problems with a developed over developing (hegemonic) power struggle for who gains the most from trade concessions or lowering of tariffs, but these problems have lessened over time. look at the tariff rates of the U.S. over the last few decades to see how unprotected we are. yes, there are some sectors still protected here, but i am obviously opposed to them.

i think the main difference between you and i is that you believe free trade is a zero sum game. it is definitely not. another difference is that trade is not the end all be all to growth. it is one factor. to take trade and blame it solely as the rise and fall of countries is a horrible mistake. what about exchange rate regimes? what about political regimes? what about long-term growth and human capital?

as trade stands, the broad consensus is that removing unnecessary costs over the long-term will benefit all. in the short-term, maybe some protections are needed, but the article we are posting on lambasts free trade as a pure outsourcer of jobs with no positive impact which is clearly not the case.

the article that you posted talks about the WTO making the rules. the WTO has changed over time from a group with no enforcement (countries could oppose ramifications without problems) to a rule-making group that has its authority purely on those signed up. it has reciprocity, as in if country A drops tariffs on good X for country B then country B is expected to drop tariffs on another good Y for country A. this then translates as a Most Favored Nation status to all other countries in the WTO. the WTO is not some foreign agency making these rules. negotiations are between countries and then bound by a signature to the WTO. it is progress and not geared only to dropping developing country tariffs like the article says.

in all, the article is a far cry from the reality of things. there are better history books of this progress. try a textbook: Global Political Economy by John Ravenhill. It's far more factual and in depth than the article you posted to me.

first off, peter replied with an article and not his own words which is exactly why you could never say anything compared to it.

second off, look up something called poverty traps. that will explain haiti for you. go explain your awesome protectionist theory to the Dominican Republic and ask them how they're doing so well when their neighbor on the same island isn't. it won't be because of protectionist bull shit.

The stats on tariffs aren't controversial. I don't know why the particular years were chosen because i did not write the article but it is generally recognized by historians that the UK and then the US had proportionally higher tariffs then the rest of the world. That countries are moving towards freer trade is not an argument for the fact that it is better or not. Mexico was growing at between 6 and 8 percent a year during it's Import Substitution stage. When the oil prices increased it thought it would grow more quickly and overborrowed ending in a debt crisis. It was this debt crisis that allowed the IMF in, which forced on Mexico free trade policies. In general like poor persons (as is recognizable in the housing crisis) poor countries are more susceptible to crisis, and when interest rates went up during the oil crisis balance of payment problems were used to force on these countries structural adjustment policies including free trade. These were not chosen but forced in many cases through US supported coups and dictatorships. It was not that other policies weren't working. It's that the debt crisis brought on by exponential increases in interest rates left the poorer countries in need of help, and the IMF and WB used it to manipulate most of these countries against their will.

Asian countries have slowly reduced tariffs only as their industries have become competitive. They have nurtured their industries behind tariffs, and only allowed them to compete when they are ready. Thus their tariff rate slowly declines, but it does not mean they are developing through free trade but through a mix of trade and protectionism (Compare China with Russia, or South Korea with Mexico, and most of the rest of Asia). Asia has also grown through a huge degree of interregional trade.

I think trade can be quite beneficial when it happens between countries at comparable places in their development. Then it allows for specialization, competition necessary in remaining efficient.

I think trade between countries at different places in development has to negotiated carefully. Educated developing countries have the comparative advantage in almost everything and so it just cuts investment and growth in most areas from developed countries. We are only competitive in the US in our military research and high tech, medical research, and finance. All these industries are heavily subsidized through the military or through university funding, or through guaranteeing bailouts in the case of failures. This allows them to compete but mostly because of the degree of subsidization. Not only that the size of the financial sector and it's emphasis on short term speculation is actually parasitic to the rest of the economy. However without these interventionist measures they would be a fraction of the size. Not to mention that we also create artificial barriers to competition (patents) to further make these government supported industries competative. We also have the highest tariffs in agriculture and textiles the two areas were developing countries are most competitive. Thus even if we pretend free trade we would never allow it for ourselves. Even with this we can not compete with manufacturing from Asia.

I think developing countries need to trade with eachother to achieve economies of scale and they need access to technologies in industrializing. I think this transfer can be encouraged by not protecting patents against developing countries and decent levels of aid. Trade should be encourage by countries at similar places in their development pushing for competition in production rather than over wages, etc.

Demand from the West that has fuelled Asian export growth has been fuelled by an incredible increase in personal, private and public debt and is not sustainable in the long run. Trade deficits mean we need to devalue the dollar (consume less and export more) which will not be popular given the slow growth in incomes for the bottom fifty percent of the population (see the Bartels chart above).

We emphasize medium term bilateral trade rules which may allow for a degree of protectionism between countries at different places in their economic development. When we need resources from developing countries we should have strong wage and environmental and tax guidelines that ensure the relationship is beneficial to the developping country.

All in all I think you overestimate the amount of public support for free trade in the developing world and I think similar things would be recognized by people in the US and Canada and other developped countries. I also think the last thirty years are marked by incredibly unequal and slow growth, and history has not made a strong case for neoliberal globalization.

This is exactly why I called you an apologist.

I don't care about your fucking bogus economics, statistics and GDP mean shit when you work 80 hours a week to STARVE because a foreign nation sent in a military to force you off of your subsistence farm and into a factory at the point of a gun.

You understand nothing about the world, you see meaningless statistics which track money circulation and not human nourishment and take government officials words to be representative of how people work.

They aren't, pick up a fucking history book. Learn something besides sociopathic and naive assumptions about an abstract concept like the "economy."

"Protectionism" is called such for a fucking reason, it's because people in this world care about more than the fucking stock value of some useless corporate entity.

People DIE in -large- numbers to support your free trade religion, you need to realize that.

Haiti is not IN a "poverty trap." Haiti has been invaded or otherwise subjugated by foreign nations for -centuries- since they had the audacity to free themselves from white slavery.

China still doesn't have freedom of speech in ANY form though!

Good, I don't need to hear them making fun of us.

Agreed! That neoliberal axiom is “that everyone is entitled to and needs higher education If only we could send everyone to college, no matter what the cost, societies problems will be solved."

Well as it turns out that axiom isn't even based on basic economic principles of supply and demand. We seeing the effects of this policy now as over 50% of recent college grads are unemployed. If every jerk off and their mother has a college degree the value of college is diminished as there is an over abundance of kids with college degrees.

Meanwhile these kids will end up being indentured servants to college loans for the rest of lives. Most probably have defaulted on them and declared bankruptcy because you have to make +$500 monthly payments six months after you graduate, which is impossible when you don't have a job.

I'm curious, when exactly did Obama say that college education should be mandatory?

Point taken, but within that era you can hardly argue with the results right? When else could people own their homes without debt on menial jobs like plumbing?

Joe the plumber might be menial, but plumbing is anything but menial. The person who brings water and gas into your home and takes your shit out so that you can have a nice day.

Plumbing is actually a very high-paying job, Because waste-disposal and drinking water is needed all the time, plumbers work 24/7, charging premiums for late night work. Just an FYI.

The only real reason the U.S. used to be on top in the first place was because it was the *only* economically dominant country for about a quarter century after the second world war. Its work force didn't really have anyone to compete with, so of course most of them had such a high standard of living.

That and people had a different set of values then. People wanted to work hard because they believed that it would make then successful, thus allowing them to provide for their families and have all around better lives. These days it's much harder to climb up the corporate ladder though hard work as it once was, and the fact is that people don't want to work hard anymore. Now it's how can I get rich quick; lotto, law suit, you name it. However, that said, the amount of money people are making these days does not match the cost of good and services, i.e. health insurance.

The main reason businesses that operate in foreign countries are able turn such big profits are because their wages are too low, they don't offer benefits to their employees, and because they pay foreign governments money to take the country's natural resources without any of that money going to the countrymen. I, for one, do not want to encourage that behavior - do you?