One thing I should clarify - my reference to the Cambodia accord was meant not as a criticism of YOU, Gene. In fact, I believe it is something you should be proud of. My mention of it in that context was in contrast to many Democrats in Congress who do not insist other trade deals be similar. But it wasn't meant to be criticism of YOU. If that wasn't apparent, I apologize.

Mr. Sperling, I admire your sense of decency and willingness to engage any and everyone, but honestly, engaging a troll like David Sirota like this is beneath you.


David Sirota, in my opinion, has the most juvenile political mind of any of the well known liberal-progressive pundits. His inane diatribes read more like an SNL satirization of the oppostional posturings of politically clueless adolescents, than what one might expect from a fellow at the Center for American Progress.

Gene writes: 

Recently, however, we have seen disturbing developments: e.g. falling wages amidst higher productivity and solid GDP growth and deeper income declines for even the most highly educated dislocated workers.

No kidding?  Well, let's think about what happens when one injects productivity-enhancing technology into a labor market.  Productivity will rise; wages will fall.  GDP will grow, but it won't benefit workers, who will be losing their jobs en masse.  The most highly educated, so-called "information workers" will be amongst the first and most seriously affected - which may seem paradoxical, but it's not at all: the core products they produce are one-time, or at least long-term, and by producing them, they go a long way towards making themselves obsolete.

How many computer operating systems are on the market?  How many people use them?  How many workers make a living wage from them? How many people's wages are negatively impacted even by the perception that they improve worker productivity?

I'm not an economist - I'm a computer scientist who writes OS code that I can't get paid for writing - but I do know what theories of value are, and that they are about perception as much as reality.  In the modern world, businesses no longer look first to hire the best and brightest; they look to find technology that allows them either to replace those people or to hire less skilled people.

Multinational corporations are able to exploit lower-skilled labor markets in the first instance because technology takes up the slack in the skills department.  Companies aren't paying people more for their increases in productivity because it isn't because of their people - it's because of improvements in technology.

And so on...

Technology devalues labor.  Technology is literally killing capitalism.

Is this cyclical?  NO.

This is the future.  No, that's not right; it's the recent past already.  I've been seeing it happen for the last 30 years.  And all these supposedly brilliant capitalism-worshipping economists seem to be like ostriches with their heads in the sand, ignoring the obvious because it doesn't fit with their presumptive world view.  Your world is disappearing before your very eyes, and it's more than a shame that you see it no better than you see your own chins.

Gene Sperling

Thanks for the cogent response. It's sad one even has to debate with hacks like Sirota. I've yet to see him discuss policy in any meaningful way. He just throws rhetoric about.

Note to TPMC: can TPMC please remove windbags like Sirota from the discussion and replace them with factual and substantive debaters, from all POV? What good does his rhetoric do anyone?  Surely there is someone who could take his POV with better arguments.

Grrrr - the browser crashed as I was just about to post.  Bottom line - every econ student in the past fifty years, including this former econ student, has been taught the "short term pain, long term gain" mantra. 

But it's a very open question whether that theory is true.  There's tons of good evidence otherwise - but I don't have the time to sort it out for you and everyone else.  Nor am I an expert.  And that's exactly my point: there's a handful of people in this entire country who get paid to argue the fair trade stance... that's it.  

In contrast, the free trade side has a zillion wonks who make bank off of the party line.  Yet it still doesn't win - and I think that says something.

Everyone supposedly loves an underdog - but in the real world, our side can't moblize the same resources.  And that tilts the intellectual playing field. 

Trade policy isnt an economic policy all by itself.  There is a lot more to it and that means that arguing about trade policy in isolation will not lead you to a reasonable solution or agreement.  The basic problem we have is that trade opening always results in winners and losers but the POLITICAL problem is that the losers are far more readily identifiable than the winners are, even when the gains outweigh the losses (as is often the case). 

An important implication is that if you open your economy AND DO NOTHING ELSE then there are going to be people who suffer and complain and they are right to do it.  For us (or anyone) to actually take advantage of freer trade we need to invest in human capital and physical capital to give ourselves the progress in productivity that will allow it.  What does that mean for the USA?  It means first and foremost that we need to invest in education.   That means paying what is needed to make ALL of our schools decent and to allow EVERYONE to go to college whether they are rich or not.  It also means investing in innovation and R & D and not just hoping corporations will do it (how about some stem cell research please?  How about some new energy technologies please?  the list goes on and on)

 In short, if we had a decent labor policy and a decent education policy and a decent policy on investment in productive areas and decent macro policy then there wouldnt really be much of a debate about freer trade because when it happened most people would actually benefit from it.  As it is, it shouldnt be a surprise to anyone that many people oppose it because the government simply refuses to do the things that might make it attractive to them.

Steve Kyle 

Let's take a few of your arguments one at a time Gene:
<BLOCKQUOTE><span class="Apple-style-span">Low-cost imports can cause job dislocation and real pain, but it is also the case that the higher prices that come from trade barriers can be like a regressive tax that hits poorer families four times harder than well-off families.</span&gt</BLOCKQUOUTE>
That is a false dichotomy that assumes trade barriers are the only alternative to allowing developing and third world countries access to our market. Everything hits poorer families four time harder than well-off-families. The solution to that domestic problem is adopting a host of kitchen table economic issues that raise the standard of living of low income working Americans.
<BLOCKQUOTE><span class="Apple-style-span">Trade barriers can work in the short-to-median term to protect some workers, but they can also lead to retaliation and higher input prices that can cost other workers their job.</span&gt </BLOCKQUOUTE>
See above. Trade barriers are not the solution. You are stuck in the mindset of free market protectionists, who do not seek free trade, but protection of corporate profits at the expense of everybody.
<BLOCKQUOTE><span class="Apple-style-span">Fighting for labor standards in trade agreements is completely justifiable, but it is also the case that <B>many poor nations</B> think such calls are heavy handed impositions on their sovereignty or back-door measures to keep their products out of our markets - which is why positive partnerships like those with Cambodia are so important.</span&gt</BLOCKQUOUTE>
I don't know anything about our Cambodia agreement that you helped negotiate Gene. When you refer to "many poor nations" are you referring to political leaders and corporate robber barons who have their own agenda and use sovereignty as an excuse to continue to exploit their own people, or are you referring to the citizens of those countries? 
The second part of your argument is correct. Nearly every so called free trade agreement America negotiats benefits American corporations far more than the citizens of either country. American political and business leaders have very little or no interest in allowing trade that interferes with their bottom line.
<BLOCKQUOTE><span class="Apple-style-span">Trade opening can exacerbate inequality especially in the short-term, but there is no question that there are millions of workers in Africa and South Asia who see greater access to US markets as a means to escape poverty.</span&gt</BLOCKQUOUTE>
I'm not even sure that is a coherent sentence. There is not necessarily a causal connection between the first part of your sentence and the second part. Workers in Africa and South Asia will not escape poverty through conventional trade agreements. They will continue to be expoited by both American corporations and the companies that employ them. 
You hinted at the core problem with this discussion. Free traders and fair traders have different trade models that give different meaning to the same language. We usually end up talking past each other, because we are operating from a different set of economic assumptions. 
It looks to me like you are engaging in the same type of legalistic arguments that you accuse Sirota of employing.
(I see this site is still hostile to Apples and inserts that strange <apple span> html. What's up with that?)

Gene,

I'm having a few prblems here.  First, one of the premises for the benefits of free trade is that it allows companies to exploit greater efficenices by reducing labor, regulatory compliance costs.  The companies will, in time, use the capital saved to fund investments here in the US that will create more jobs and benefit those US workers who lost their jobs.

OK, I understand that theory.  But right now there is no capital shortage.  In fact as far as I can tell from the low intrests rates and high real estate/commody prices there already is a bunch of capital that has nowhere to go.  An increase in the supply of capitial does nothing to help workers unless there is adequate demand for that capital.

So I guess my question is, what sort of measures can the government take to increase demand for capital, rather than the supply?  Savings exemptions, capital gains breaks and other such measures do very little to increase demand for capital. 

I think this a worthy post that thinks through the issue honestly. I agree with much of what you write. While, in theory, I favor free trade, I also think that people who favor free trade acknowledge that it requires certain kinds of conditions to work. That third world countries need to have a sufficient degree of control over their economies and the ability to regulate the influx of foreign capital/corporations into the country, as well as selectively use tariffs.
This is the strategy that basically every country that has become wealthy has pursued. While nations like Japan, S Korea, China, and did and do engage in a certain degree of free trade, they also used tariffs to their advantage and were/areable to maintain a fair degree of economic sovreignty over what kinds of foreign capital was allowed into their country. What frustrates me about free trade dogmatists is that they never acknowledge this fact, nor do they acknowledge how a policy of high tariffs were an essential component of the United States rise to economic superpower in the late 19th and early 20th century - and American history textbook will tell you this. 
To sum up: while free trade is an ideal, one should not be blinded to the ideal, either, and recognize that human behavior is too complicated to be reduced to an introductory microeconomics class. In other words, one has to be flexible and pragmatic in implementing economic policy

Short term pain, long term gain. I think history will look back on the Bush administration as a coalescing of many of the toxic strains which have been circulating within the national bloodstream, so that they can be flushed. I was quite happy to see him win the last election. Can you imagine Kerry as president, with this Republican Senate and Congress?

Liberalism is social expansion and conservatism is civil consolidation. Those institutions which expand knowledge/power, such as education, media, sciences, tend to be inherently liberal. Those which consolidate this energy, such as business and government, tend to be inherently conservative. The government social programs of the last century created a form of conservative liberalism, often referred to as PC. The reaction to this was a liberal conservatism, otherwise known as libertarianism, which sought to redistribute civil control back to the presumably more culturally conservative local level. Having been originally based on a simplistic rejection of government, now this movement has matured and coalesced, it is in trouble because it lacks any core civil philosophy, leaving its social conservatives and economic conservatives little more than a toxic coalition of greed and cultural rigor mortis.

The communists spent seventy years finding that destroying the individual doesn't create a better society. We are simply exploring the opposite proposition and will learn that better individuals don't come at the expense of society.

The economy is a convective cycle, with energy in the form of labor, materials and ideas rising up, while wealth, civil order and social security precipitate down. Supply side theory has created a situation where more has been rising then is effectively used or precipitating down and the results are large storm clouds of surplus currency boiling over a parched economy. For reference, consider where the money the government borrows would go, if it were not being recycled through the public sector. We already have a situation of serious asset inflation and this money would just increase the effect. Government borrowing is effectively a nationalization of surplus wealth, but rather than actually taking it, the revenue stream of the government is being transferred to those with surplus wealth in the first place, which only adds to the problem.

In 1996, Bob Dole had a campaign slogan, "We want you to keep more of your money in your pocket." My first thought was, Well thank God it isn't my money, or it would be worthless." The logic of this is that as a medium of exchange, money is actually a form of public commons, much like the highway system. Under our current ideology of individualism, we assume it is private property. To use the roads as an analogy, it would be as if every time a new road was built, everyone tried to claim as much as possible. The eventual result would be that everything would be paved over and no one would be able to get anywhere.

The fact that Social Security is a direct transfer is one of the primary reasons it is so efficient. Only as much money can be saved as can be invested and there is a dearth of investment vehicles, relative to the amount of surplus currency in circulation. It is a situation similar to the electric industry. As it would be prohibitively expensive to build the battery storage for the amounts in question, it has to be used as it is generated. Creating the investment vehicles necessary to store private accounts would be like storage batteries for the electric industry.

Money and government are two sides of the same coin. One is rights, the other is responsibilities. Money is like processed sugar, so if we were to learn to maintain a more organic, holistic society and maintain wealth and value within every aspect of our lives and not continually drain reductionistic units out to put in some bank, then government would be forced to organize itself along similar lines. The hippies and the libertarians are not so far apart.

This may seem simplistic, given the extent to which society functions as a large organism, with individual specialization, but Humpty Dumpty is about to take a serious fall, given the current debt and political precipice we find ourselves on and the real questions will be when we do hit bottom, how do we start back up and what lessons we have learned. The essence of civilization is cooperation. Competition just defines the edges.

No, you’re mistaken again. You sound qualified to work in OS development and get paid to do so. Yet, you say you’re not. There is plenty of OS development happening in the US, even in Linux, certainly enough to accommodate PhD so something is missing from that puzzle.

You just like to tell people they're wrong, don't you?  I am an active Linux developer.  I know firsthand what development is ongoing - I'm involved in it.

It's free software, Nick.  Free.  Do the math.

RE: Linux Open Source, it’s is an entuiast/hobbyist OS. As a geek I happen to like Linux, and can even run one of my primary apps on it (out of several) but there is no way it’s a mainstream OS, only completely disconnected uber geeks think that. The only mission critical Linux boxes I’m aware of run commercial Linux and even then that’s hardly mainstream.

You just don't know what you're talking about.  Google runs on Linux - on the order of 100,000 servers, last I heard.  Oracle is developed on Linux - their GRID products are Linux based - Oracle is (or was) the second largest software company in the world.  All recent and new IBM server and workstation development is based on Linux - IBM has been at times the largest computer company in the world. The majority of the world's web servers run on Linux.  The list goes on and on.

"Commercial Linux" is Linux; distributions of open source packages collected by a distributor who may not write any of the software.  I've produced such distributions myself, for clients who didn't want to pay for "free software."  I've ported Linux kernels and written device drivers for custom Linux distributions.  But I'm not a name brand, and it's hard to make money in this niche.

But there are only two mainstream OSes still standing: Windows variants, and Linux.  And you don't know that?

Secondly, Linux is a Unix derivative, Unix being Bell Labs 1960’s as I’m sure you know. Hence my point about American prosperity and computers generally being largely due to that era of American innovation.

Yes, I've worked at Bell Labs. Writing standalone T1 drivers for mobile cells, among other things.  I had to be hired through an Indian consulting firm; they wouldn't hire me directly.  I later became a regular employee, and even then had Indian and Pakistani tech managers.

Again, where it came from doesn't matter now.  The 1970's (not the 1960's - I have several copies of the original BSTJ overviewing Unix) were 35 years ago.  Are you even that old?

All of which are wholly capitalistic albeit with government and consortium funding and steering.

Do you even read what you write?  Capitalistic albeit with government funding and steering?  That's socialism, Nick.

The enabling technology for the open-source movement is the Internet, though you obviously don't understand the scope and reach of open-source software, even in its role in the Internet infrastructure itself.  E.g., there are no proprietary domain name servers in widespread use, though MS once produced a version or two that weren't taken seriously.  The Internet was a federal initiative, patterned on the Interstate Highway system.  Capitalism is a newcomer to the party, relatively speaking.  But you apparently don't know or understand that, or you wouldn't argue so much about things I effectively agree with you about. 

So I understand your Linux enthusiasm, but no, by all accounts Linux is not the future. Whatever innovations Linux does create will be capitalized elsewhere, creating jobs.

You either don't read carefully, or you're intentionally creating a strawman.

My original comments were not about Linux.  They were about technology.  Not even just computers or computer software, but technology.

Productivity-enhancing technology is the near future.  Productive technology is the long term future, likely not involving significant human labor.

I'd bet you agree about that, Nick.  But do you understand its implications?  Those implications are what I'm talking about. 

Pete said short term pain, not gain.  Your response is about something he didn't write in the first place (as far as I can tell).

Maybe you should get your eyes checked, Nick.  Judging from the responses you've posted to me and others like Pete, you haven't even read what has been written before responding, which makes me wonder if you can read them clearly.

I'm not picking on you; seriously, maybe you should get your eyes checked.  I know this is way off topic, but I know how hard it can be to tell one has a vision problem.

If any TPM staff are reading this - it might be helpful for pages to have a font size selection on pages; I would certainly use it myself.

'Free Trade' means 'Free to trade' or 'open trade' not costless trade.