Trade Paranoia Is A Dangerous Diversion
Some people on the left verge on paranoia in blaming trade for absolutely everything that ills us. Now trade is being blamed for the low wages at Wal-Mart.
Huh? Trade has certainly hurt many steel and textile workers, but how are service sector employees at Wal-Mart hurt by trade?
What's particularly depressing about this obsession with trade is not that it's misguided, but that it diverts well-intentioned progressive energy away from issues that could make a much bigger difference for workers at places like Wal-Mart.
This illustrates several points I've been trying to make:
- Trade just isn't the most important factor in job creation, destruction and wages. We have a lot more workers in service sector jobs that do not face global competition than in import-competing jobs. (Not to mention trade is also responsible for lots of great jobs in industries like computers and aerospace.)
- The best way to help Wal-Mart workers is the policies I've been advocating: a higher minimum wage, an expanded EITC, more progressive taxes, investments in education and universal healthcare, among others.
- A good way to hurt Wal-Mart workers would be to restrict trade, raising the price of the goods they buy. (And although including labor and environment in trade deals would have some benefits, let's not kid ourselves into thinking it would make a large difference for workers at Wal-Mart or elsewhere in the United States.)
- By putting lots of energy into trade, we are devoting less to the issues that matter a lot more to a lot more workers. Even if you think restricting trade would help, the gains are going to be much, much smaller than these other policies.
- We should all be a lot more humble about our understanding of complex phenomena. I don't know the reasons for stagnant wages. Trade might have played a role by reducing workers' bargaining power. But I really don't understand how anyone can be so absolutely certain that "corporate-written free trade deals" are a major culprit (especially in light of the rising real wages in the 1990s). Part of the advantage of universal solutions that are not trade specific is that they'll help regardless of the factors causing stagnant incomes. (And if it I were sure trade was the culprit, I still would advocate these solutions rather than restricting trade.)
Jason Furman is a Visiting Scholar and New York University's Wagner School and a Senior Fellow at the Center on Budget and Policy Priorities. He was Special Assistant to the President for Economic Policy in the Clinton Administration.
Frannkly, the paranoia isn't coming from those who question America's corporate-written "free" trade policy, because if that's paranoia, then polls show most Americans are "paranoid." The real paranoia is coming from those who have made their careers advocating for that "free" trade policy, who now get super defensive whenever that "free" trade policy is exposed as being insufficient for advancing the economic goals of ordinary people in today's world.
November 9, 2005 9:22 PM | Reply | Permalink
November 9, 2005 10:10 PM | Reply | Permalink
Dittos (of a sort) and a link to a nice op-ed piece by Robert Reich on your side of the debate: HERE.
November 9, 2005 11:01 PM | Reply | Permalink
Jason, the real point that is illustrated by your last post is that you are not really doing a very good job of stepping back from your point of view long enough to see the other side of the argument.
You say Now trade is being blamed for the low wages at Wal-Mart. Huh? Trade has certainly hurt many steel and textile workers, but how are service sector employees at Wal-Mart hurt by trade? and I can't help but wonder if you even thought about it before you typed it.
The point is that there's an awful lot of workers who now have no other choice than taking a low wage job at Walmart. Walmart has used the power of corporate-centric trade policy and decimated portions of the economy ranging from small mom and pop owned businesses to all manner of US based manufacturering operations which have had no choice but to offshore in order to "compete" (in the rush to the bottom.)
It's all a part of the interconnected whole.
You keep harping about the EITC but that's another area where you aren't nearly as clever as you think you are. Who pays the EITC? That's right, taxpayers pay the EITC. And what portion of the populace is carrying more and more of the overall tax burden? Well, with capital gain tax cuts and dividend tax cuts and estate tax elimination and Social Security being used as a giant piggy bank, it sure as heck isn't the people at the top of the pile so in effect what you are advocating is having the working class and the middle class make up the difference in the wages between what responsible corporations should be required to pay and what they are paying.
You and the rest of the "it looks great in theory" bunch need to come down out of your ivory towers. You are out of touch and ignorant of reality. That's why poll after poll of average working Americans is so opposed to buying what it is that you are peddling. That's why even in a time when we are told that unemployment is a mere 5 percent and GDP is growing like gangbusters we still have so many people who are so disatisfied with the economy and the direction of the country. Think about it.
November 10, 2005 12:54 AM | Reply | Permalink
I compleletely oppose the tenor of your remarks, but I couldn't care less about trade.
Huh, you say?
You're right, trade does not cause problems per se. However, why, whenever we want to talk about the gutting of labor and enviromental standards, the increasing regressivity of taxes, the absolute renegging on corporate pension promises, we're blamed for being against "trade"?
It's not trade we're against, it's the imposition of third-world standardsof living by lies, fraud, and broken promises on the American middle classs. And if it is impossible to sustain that standard of living over the long haul, then why don't we hear ANY talk from the "progressive free traders" about shared sacrifice. If the architects of this misery don't want the abuse, let them get down in the gutter with the folks they kick there.
And if you progressive free-traders don't like that, go join the Republicans and get the hell out of the way.
November 10, 2005 5:36 AM | Reply | Permalink
Imagine that all the theories about the harm of trade is correct. Now imagine we got lots of labor and environmental standards into trade agreements, like the Cambodia agreement that David Sirota praised. I hate to tell you, but the benefits would still be very, very small. (Personally, I have no problem improving labor and environment as part of trade deals, although I suspect my conditions are less stringent than David Sirota's. But I don't kid myself into thinking that it will make a big difference.)
Now imagine we made the tax system more progressive, raised the minimum wage, expanded the EITC, and pushed for universal healthcare. These benefits would be much, much larger.
So let's put less energy into the first and more energy into the second.
November 10, 2005 6:46 AM | Reply | Permalink
"Jason, the real point that is illustrated by your last post is that you are not really doing a very good job of stepping back from your point of view long enough to see the other side of the argument."
I think Mr. Furman is quite familair with the 'other side of the argument' he's just unconvinced by it and grows weary of it.
"The point is that there's an awful lot of workers who now have no other choice than taking a low wage job at Walmart."
So what you are saying is that if it weren't for Walmart, that kindly old man greeting me at the door would be pulling down 50'000 a year at some hi-tech firm?
"You keep harping about the EITC but that's another area where you aren't nearly as clever as you think you are. Who pays the EITC? That's right, taxpayers pay the EITC. And what portion of the populace is carrying more and more of the overall tax burden? Well, with capital gain tax cuts and dividend tax cuts and estate tax elimination and Social Security being used as a giant piggy bank, it sure as heck isn't the people at the top of the pile so in effect what you are advocating is having the working class and the middle class make up the difference in the wages between what responsible corporations should be required to pay and what they are paying."
Do you think that Democrats and Liberals support shifting the tax burden to the poor and and middle class? This is hardly an argument against the EITC. If you oppose the EITC on the grounds that working and middle class people are partially paying for it (which they always have) then the Republican party might be more up your alley. The state doesen't have alot of leverage coercing private companies to pay 'what they think they ought to pay', but they do have some legitimacy by supporting a program that aids low income workers and rewards the work they do.
"You and the rest of the "it looks great in theory" bunch need to come down out of your ivory towers."
This argument is the last refuge of morons. Which is primarily why it's utilised more and more often by Republicans. Those people in their 'ivory towers' , or in Gene's case, a fellowship for the progressive think tank the center for American progress, these people have studied the very issues you repreatedly harp on from every angle, ad nauseum. And they generally know more about these issues than you do.
November 10, 2005 7:00 AM | Reply | Permalink
The most obvious change in the past 30 years has been the large increase in wealth disparity. The US is wealthy enough to provide an adequate standard of living for everyone.
That we are not doing so is a political choice. The fact that this arrangement is not supported by the majority of the population is a clear indication that the ruling elite is pursuing policies counter to the popular will.
That's the definition of an oligarchy, not a democracy. Policy wonks can discuss various tweeks to the present system: tax adjustments, trade policies, social service programs, etc., but the real issue is how does the majority of the population regain control over the direction of society?
The electoral process is so distorted that there is no chance for populists, working class people, or those with unconventional ideas to get elected. When Bloomberg can spend $70 million on an election that was never projected to be close, something is drastically wrong.
We are on the verge of "voting" ourselves into becoming a banana republic run by a permanent wealthy elite. That is the road to economic ruin. Try Columbia or Panama as exemplars...
November 10, 2005 7:20 AM | Reply | Permalink
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Wrong.
I just posted a comment on the blog before yours, from the Labor table blog post, which illustrates adding a fair trade "shariff" (my own word, maybe not the best but couldn't think of anything else) of, for example, 25 cents on a T-Shirt selling for $11.25 at Walmart, that goes entirely to the seamstress in India's paycheck, would make a world of difference for the seamstress in India, while the 25 cents would make no difference to America.
The seamstress can only afford to buy rice and lentils to feed her family at the wage she is getting now from the Walmart purchased T-Shirts. The profit gap between what Walmart pays for the T-shirt and what it sells the T-shirt for is ridiculous.
Yet the only victim is the seamstress in India. So we need to make a very small change such as having her sew on a Fair Trade Certified label on the T-Shirt, so that 25 cents per T-Shirt goes to her, and American consumers know that they are now paying $11.50 instead of $11.25 - with a quarter going to the seamstress. I really dont' think it'll affect the demand for the T-Shirts one iota.
(You are also forgetting the mom and pop stores where business ownership has been steamrolled by large stores like walmart, but i wont' get into that argument as the consumer deserves to buy for lower price if they want to. I am moderate enough to admit that. And a consumer movement could address consumer buying power in terms of "made in america" and "mom and pop".)
November 10, 2005 8:48 AM | Reply | Permalink
<i>Imagine that all the theories about the harm of trade is correct. Now imagine we got lots of labor and environmental standards into trade agreements, like the Cambodia agreement that David Sirota praised. I hate to tell you, but the benefits would still be very, very small. (Personally, I have no problem improving labor and environment as part of trade deals, although I suspect my conditions are less stringent than David Sirota's. But I don't kid myself into thinking that it will make a big difference.)</i>
You've said that benefits would be negligible several times with no supporting evidence anywhere on this page as I post this. I mean, I don't watch you carefully, maybe you have good reasons for believing that, but you sure do your cause disservice anytime you say that without evidence.
But since you don't want to bother insisting that products sold on American shelves were made by laborers paid above minimum wage, why bother insisting that we have a minimum wage domestically?
And it's even stranger how you're so vocal in demeaning policies that you apparently don't actually disagree with--like fair trade agreements. In fact in terms of policy it seems like we're pretty much in agreement across the board. So why pick an intra-progressive fight over how important one is versus another? Why the hell can't we have fair trade agreements and health care? Campaign on both, then after victory let the victor decide which is worth expending effort on. If anything, fair trade is more popular than the stuff you're talking about. Instead of resisting it, you should leverage it.
November 10, 2005 8:55 AM | Reply | Permalink
We have a lot more workers in service sector jobs that do not face global competition than in import-competing jobs. (Not to mention trade is also responsible for lots of great jobs in industries like computers and aerospace.)
Do you really think Free Trade agreements get Boeing 747s sold to the UAE? And I thought vast subsidies, political pressure,and a huge highly trained (at public expense) workforce made it happen. Note that the EU has much more restrictive trade than the US and an equivalent aerospace export industry.
As for the "service sector", hundreds of thousands of clerks processing paper at Insurance companies don't add value to the economy, they just redistribute wealth.
November 10, 2005 8:56 AM | Reply | Permalink
I am unclear on your point. Is trade really the biggest source of Wal Marts ascendency?
One thing that does not get mentioned too much is that textiles and shoes were first outsourced or moved when those industries moved from New England to the American South. This cost many jobs and they moved because the South was not unionized, had cheaper power, land and taxes. It illustrated the problem of basing a labor policy on being the low cost performer.
As for steel like cars were for years protected. Managements acted as if they had nothing to learn from the Japanese. Slowly but surely the Japanese took world market away from American steel and auto makers.
Most people in this debate seem to assume that America and America alone determines the lines of this debate. What makes America so powerful as negotiator is that we are the great consumers in the world and the great borrowers. On top of that we are the great technological innovators. None of this suggests that worrying about China, India, Bangladesh or other relatively poor nations is going to do much for American workers.
November 10, 2005 9:06 AM | Reply | Permalink
Frannkly, the paranoia isn't coming from those who question America's corporate-written "free" trade policy, because if that's paranoia, then polls show most Americans are "paranoid."
Remember, if you say "corporate-written free trade policy" often and loudly enough, you are excused from actually demonstrating whether that trade policy improves, harms, or is irrelevant to, American living standards.
November 10, 2005 9:06 AM | Reply | Permalink
The point is that there's an awful lot of workers who now have no other choice than taking a low wage job at Walmart. Walmart has used the power of corporate-centric trade policy and decimated portions of the economy ranging from small mom and pop owned businesses to all manner of US based manufacturering operations which have had no choice but to offshore in order to "compete" (in the rush to the bottom.)
No, the point is that WalMart's labor practices have nothing to do with trade policy. Even if the US set up autarkial trade barriers, they would still engage in operations that undermine mom and pop stores. It doesn't matter who their suppliers are. They'd still engage in policies to lower their other costs of production, and they'd still engage in policies to acquire goods at lower prices than their competitors.
WalMart's practices preceded the emergence of China as a source of cheap goods, and will continue--regardless of their wholesale costs.
That's the central point. These are not trade issues.
November 10, 2005 9:13 AM | Reply | Permalink
I'm still waiting to hear why we'd expect corporate written fair trade policies to be any different.
To the degree the current trade policy regime has been captured by corporate interests, it has been to advance precisely the goals you've outlined--tariffs and restrictions on foreign competition, and the imposition of American law on other countries.
Saying you oppose corporate written free trade policy is like saying you oppose corporate written environmental policy. Well, who wouldn't? But the point is that the cental assertion is oxymoronic; no corporation advocates free competition. They advocate interventions in their interests. They may call it "free" whatever, but that's never an accurate rendition of what they propose--just as those who advocate "fair" don't really mean "fair." They mean biased in favor of the status quo at the expense of the currently downtrodden.
November 10, 2005 9:21 AM | Reply | Permalink
God I am so sick of the liberal-lite crowd telling us we're paranoid. Or when we're against the Iraq war that we're "unserious." Or that we're loonies.
You wonder why we're getting punchy? You helped make us this way.
November 10, 2005 9:22 AM | Reply | Permalink
If these are your issues:
However, why, whenever we want to talk about the gutting of labor and enviromental standards, the increasing regressivity of taxes, the absolute renegging on corporate pension promises, we're blamed for being against "trade"?
Why are you talking about trade at all? Why aren't you advocating
a higher minimum wage, an expanded EITC, more progressive taxes, investments in education and universal healthcare
Isn't your point the same as Jason's? That the problems lie here?
Whence arises this jingoistic desire to take it out on the Chinese worker who just saw his annual income quadruple? Why don't you want the Ghanian peanut farmer to have the opportunity to sell to the American market? How does letting him make a better living undermine your goals of better environmental and labor standards in the US?
November 10, 2005 9:27 AM | Reply | Permalink
Robert Reich is totally wrong there.
Of COURSE consumers will pursue the smallest prices. All consumers do. Robert does, you do, I do, union members do.
It's a classic "Voter's Paradox" game scenario. I want everyone else to shop at the high-wage shop so I can get a job there and take my wage and go to the low-wage shop. We'd all be better off if we all shopped at the high-wage shop, but we each want to be the sole defector and go to the low wage shop. Since we are all so numerous, the various Iterated Prisoner's Dilemma strategies do no damn good at all--we all defect, and in this case those who would benefit the most--the poorest--are also the most desperate to defect.
My previous paragraph doesn't prove that we'd be better off shopping at high-wage stores, it assumes that. However, it demonstrates the fallacy of Robert Reich and some Wal-Mart defender's argument--that low income workers shopping at Wal-Mart is proof that Wal-Mart's existence helps low-wage workers.
Hey, in some theoretical situations, collective government action produces more efficient outcomes than systems of negotiated prices. That's just the way the backwards-induction cookie crumbles.
The real argument is whether we happen to be in such a situation now. But if you assume that my behavior in the system as it is demonstrates that I like the system as it is, you are making a huge misunderstanding of the nature of rationality.
Consider if burglary were legalized, and everyone immediately started stealing from each other's houses. That wouldn't mean everyone likes burglary, it just means they don't want to be the only poor bastard not doing it.
See also campaign finance reform "hypocrisy".
This idea that living wages should just be a present from consumers--like purchasing vegan food or something--just demonstrates how broken the game is now. Unless high wages are the results of an improved negotiating position on the part of workers, workers will never find the dignity in the service sector that they lost when automation took their jobs. I simply don't see how that could result from any kind of attempt to make consumers pay the "total cost".
Usually Robert Reich is brilliant. No one's perfect.
November 10, 2005 9:28 AM | Reply | Permalink
November 10, 2005 9:28 AM | Reply | Permalink
<i>To the degree the current trade policy regime has been captured by corporate interests, it has been to advance precisely the goals you've outlined--tariffs and restrictions on foreign competition, and the imposition of American law on other countries.</i>
Nonsense, corporations would want both tariffs and the ability to evade American law by building factories overseas to sell into America. Tie the consumer's hand, but leave theirs free.
That's the exact opposite of what I would consider fair trade, which would be no tariffs but labor and environmental regulations.
November 10, 2005 9:44 AM | Reply | Permalink
Actually, no, I'm wrong, Robert Reich is still totally awesome. I am ashamed of how far I misread him, now that I reread him.
The problem is, the choices we make in the market don't fully reflect our values as workers or as citizens. I didn't want our community bookstore in Cambridge, Mass., to close (as it did last fall) yet I still bought lots of books from Amazon.com. In addition, we may not see the larger bargain when our own job or community isn't directly at stake. I don't like what's happening to airline workers, but I still try for the cheapest fare I can get.
The only way for the workers or citizens in us to trump the consumers in us is through laws and regulations that make our purchases a social choice as well as a personal one. A requirement that companies with more than 50 employees offer their workers affordable health insurance, for example, might increase slightly the price of their goods and services. My inner consumer won't like that very much, but the worker in me thinks it a fair price to pay. Same with an increase in the minimum wage or a change in labor laws making it easier for employees to organize and negotiate better terms.
Which I guess is exactly what I was saying, except he puts it much better. That was foolish of me, but I am still young.
No cookie for me today :(
November 10, 2005 9:50 AM | Reply | Permalink
Whoa.
That's the exact opposite of what I would consider fair trade, which would be no tariffs but labor and environmental regulations.
How would you enforce the regulations?
November 10, 2005 9:55 AM | Reply | Permalink
SPERLING, FURMAN, and BLINDER are arguing against some on the far left who truly do not appreciate the size of gains or losses from efficient trade policy and, in my experience in ward, county, and state politics, from sound market, financial, labor, or environmental regulation either. But, those leftists are a Straw Men.
What do TPMCafe's three luminaries have to say to me?
All these author/apologists seem to know -- that I do not -- are Washington-centric political patronage and campaign finance -- the highest echelons and biggest amounts of which are associated with "trade deals" and the continuous bail-out of perpetually improvident "financial institutions", now re-defined to include anything involving merely rich people.
These luminaries are hiding their own neglect of the size of gains and losses, but even more so, the catastrophic risks that are associated with international financial deals, arms-barter, mis-regulated capital markets, indemnification of improvident bankers, and protection of professional concession-tenders, all of which explosively thrived under the Clinton Administration.
These, not "dinky" commodity tariffs or "technical" non-tariff barriers to trade in industrial goods, are the stuff of "trade-deals" that have long totally consumed, especially, the DCCC, the DLC, and the rest of the Corcoran/Clifford legatees at the top of the Democratic Party.
If centrists, like my own goodself, are going to grow a any constituency at all for what the Princeton crowd and other party or academic elitists call Liberal Internationalism, we are going to need (a) a return to some of the policy fundamentals of progressive populism and (b) a few of the old institutions of a republic:
Under (a), I would heartily recommend a return to Common Carriage principles of regulation, specifically, telecomunication regulation. These are and have been "global" for way over a century and were "admiralty law" for many centuries before then. But, SPERLING and FURMAN abandoned and betrayed this building- block of the old liberal internationalism and nationalism, for that matter, under the Bush-Clinton heading of "deregulation" in order to finance campaigns, marginal budget items in government, set-asides for a few black people who got rich while working people and small businesses generally got screwed on their watch.
Under (b), I am still waiting for Enron's, LTCM's, now REFCO's enablers among the banks, lawyers, and accounting firms to be decisively prosecuted, like the pirates and slavers they are, instead of being rolled-over, covered-up, and indemnified by the Fed, which has now substituted financial deregulation for economic stabilization and, something they never cared for, full employment.
No, instead, the Washington elite keeps coming up with new trade deals and hire folks like SPERLING and BLINDER to write promotional material for them.
Here is a far-fetched but actually related question: How many of the petro-dollar merchant-banks, tax-havens, or law-firms that al-Qaida and Halliburton use in common have been collaterally damaged by the Navy or the Marines since -- on SPERLING's and FURMAN's watch -- KOBAR TOWERS and the USS COLE were hit? Which of the CinC's lost his command over either of those?
None.
The opacity and self-indulgent opportunism the Clinton Administration's elite, the DCCC's, and such, with their delicate senstivity about the merely rich, are not a viable alternative to the radicalism of the present adminstration or of some leftist counter-administration. And, that is all the intellectual foundation rotten trade deals or, now, the perpetual warfare they and their apologists are complicit in and supportive of ever had.
Here is something Michel LIND points out: Jefferson and Hamilton were both economic liberals who FDR drew on and in one respect or another to regulate both trade and finance effectively. At the heart of it all were John Kenneth GALBRAITH, Lucius D. CLAY, and Will CLAYTON -- not lawyers. They made institutions of liberal internationalism, new and old, work. They did not reduce them to lawyer-ridden trade-deals founded on little more than bi-partisan concession-tending and its attendent campaign finance.
That is all I hear SPERLING, FURMAN, and BLINDER peddling. And, that is all anybody is going to hear unless and until they stop railing against "protection" in the abstract and tell us which of their own damn patrons they are going to stop protecting and indeed who or what on earth they are going to prosecute by any or all means.
I am not ignorant or parochial or any sort of leftist. But, I am mad and ready to throttle the next "Hold Harmless" wonk or lawyer or academic I can get my hands on.
November 10, 2005 10:59 AM | Reply | Permalink
"I amI am not ignorant or parochial or any sort of leftist. not ignorant or parochial or any sort of leftist."
You could certainly pass for one on TV.
November 10, 2005 1:15 PM | Reply | Permalink
That's why poll after poll of average working Americans is so opposed to buying what it is that you are peddling.
50% of Americans support CAFTA.
46% think NAFTA has been good; 41% say it's been bad.
72% support the growth of international trade, some with restrictions.
66% support the lowering of trade barriers, although most of these people would like to see government programs for the workers unsettled by it.
I'm just curious which polls show opposition to these things.
November 10, 2005 4:37 PM | Reply | Permalink
That's the exact opposite of what I would consider fair trade, which would be no tariffs but labor and environmental regulations.
>How would you enforce the regulations?
The same way we enforce anti-dumping regulations. You file a case with the Dept of Commerce. If they find a country is engaged in dumping, they impose a tariff to compensate. Or we could enforce it the way we enforce food safety regs, and just ban imports from the offending country until the problem is remedied.
Difficulty of enforcing regulations is a conservative shibboleth.
November 10, 2005 8:57 PM | Reply | Permalink