The ideology of "Free trade" is Killing America's Economy

The ideology of free trade has completely taken over the economics departments in university academic institutions in the Western countries. The ideology is essentially being presented as undisputed fact in school textbooks, telling economics students that free trade is always good. These free-traders hold international conferences where they discuss how to further spread their ideology, despite numerous protests from anti-free trade protesters. The free-traders have gained considerable influence in politics, in both the progressive, but especially in the conservative parties.

http://www.huffingtonpost.com/ian-fletcher/the-theory-thats-killing-_b_846452.html

The danger in free trade is that jobs will be exported to other countries with subsistence level wages, and little to no workplace protections or environmental regulations. Workers in the West are increasingly being forced to compete with low-wage workers in the third world. Free-traders say that more new jobs will be created, but we can see that that simply is not reality. Wages are being driven down by increased competition.

Free-traders warn of the "dangers" of protectionism, trying to educate the public in magazines and warn politicians. The problem is that the free-traders, for the most part, have a blind ideology that only sees things in terms of comparative advantage. They warn of a "trade war" with China if the USA tries to put up protective tariffs. But how much does the USA really have to lose if China put up its own tariffs? The USA has far more to gain than it does to lose from lost Chinese markets.

The truth is that free trade mostly benefits large international corporations. Whatever lower costs consumers see are more than offset by job losses and depressed wages.

All accross the world people are protesting against "Free Trade"! Free-trade economists usually just brush it all off as merely the "ignorance" of the masses.





It is not only many progressive organisations (environmentalists, feminists, Communists) that oppose free, but also large numbers of popular conservatives, who are frustrated at what they see their elected politicians doing. The free-trader economists would have these politicians believe that all their constituents are just ignorant and naive and should be ignored for their own good.

It is not only wealthy countries that free trade can hurt. Farmers of wheat and rice in India and Mexico are being driven off their farms by falling prices, and are being forced to take even more unpleasant menial jobs in overcrowded cities, where the cost of housing is less affordable. The poor in Mexico cannot afford their traditional food, tortillas, because American companies are buying all the mexican corn to make ethanol and corn syrup. Unfortunately corn is a more demanding crop than wheat (consumes much more water), and cannot be grown in most of the abandoned wheat fields. No doubt this is just driving even more illegal immigration over the border.


It is not just low-wage jobs that are being lost. Real unemployment for skilled engineers is on the rise in the USA, as everything is increasingly manufactured in China. It is not coincidence that most of the engineering degrees granted by American universities are to foreigners, mostly in the countries that are now manufacturing everything.

 

This is just repetition of anti-intellectualism where you fail to provide any relevant economic theory or empirical evidence, relying instead on nationalist emotionalism to promote economic irrationality. That wealthy countries have benefited from trade liberalisation (note that, whilst free trade is the first best outcome, it is not achievable) is an undeniable fact. We know that comparative advantage increases consumption. We know that economies of scale increases choice and reduces price. We know that competition has improved investment and ensured substantial economic gains.

The only rational argument for protectionism is the infant industry hypothesis. Even then we have to be careful as, without multilateralism, it can be used merely as an excuse for continued political manoeuvring at the expense of the populace.

 

Why are you being such a socialist?

Free markets have enormous power to improve the world. They integrate economies and bring domestic problems closer to the international stage, which is good because it means richer, more powerful states can more readily address the problems of others for the fact they are closer politically. The free market allows for the diffusion of poverty by providing property rights to build personal wealth and open markets for fair competition. Free markets encourage personal responsibility and creativity; the building blocks of a productive and progressive society.

Free markets are the cornerstone of capitalism.

 

Rubbish! Capitalism is built on coercion. We see that, for example, with how developing countries have suffered because of imposed neo-liberalism. The problem here is that neither you are using economics with any validity

 

Well no. Imposing neo-liberalism on people is not my idea of capitalism. Countries should be left to introduce themselves into the world economy as they see fit. Imposing anything on anyone is immoral, but it isnt capitalist. BUT the not having a free market, by definition, means a country is not capitalist.

 

Capitalism is “an economic system in which surplus value is extracted in the production process by using wage labour and utilized in the circulation process to sustain capital accumulation”. We can of course refer to economic history and refer to how it has evolved over time. Thus, We could then talk about 'classical capitalism' where we have concentrated private property and labour relations are characterised by the bourgeoisie buying control of the proletariat in exchange for a wage. We could then ramble on about how things have changed, given some diffusion of financial wealth. The definition of capitalist then just has to refer to the capital accumulation process, i.e. quoting Screpanti (1999, Capitalist forms and the essence of capitalism, Review of International Political Economy) capitalists are "the material subjects of capital accumulation" and are the "functionaries of capital". But we have one common aspect: that process is built on coercion and theft of labour's output

Free markets, in contrast, are compatible with market socialism. Indeed, it provides one mechanism to eliminate the problems associated with the dispersed nature of knowledge (eliminating problems associated with economic planning and the information overload generated)

 

For those who already have money. No wonder the most ardent supporter of free trade are the wealthy elite!

It reduces the price of labor, that is for sure. But it has resulted in price increases in other areas. Corn has become unaffordable for many Mexicans now. In several oil producing countries, with larger populations, free trade has raised the cost of fuel making it more difficult for the poor, while all the profits go to a select few. And the profits from free trade tend to concentrate into the hands of the wealthy, who have bid up the price of land, making the cost of living less affordable for others in their country.

It might increase choice for the consumer, but it drives down wages and can cause unemployment for the worker.

Here is an economic analysis that shows outsourcing causes lack of employment stability:
http://www.sciencedirect.com/science/article/pii/S0927537107000553

Another study found that outsourcing, although advantageous for the individual firm, may have sub-optimal societal effects:
"Outsourcing: The Hidden Costs", Eugene Garaventa, Thomas Tellefsen, St. John's University, College of Business Administration

Free trade can lower wages:
http://qje.oxfordjournals.org/content/105/2/255.short

http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0270.1996.tb00545.x/abstract

 

The Fair Trade Fraud, by James Bovard
http://www.amazon.com/Fair-Trade-Fraud-James-Bovard/dp/0312061935

Here is a summary of the book:
http://www.thefreemanonline.org/col...tes-american-competitiveness-by-james-bovard/

 

This is drivel. For economies of scale to operate we only have to refer to monopolistic competition. We are therefore talking about any manufacturing product.

You've already made this error. Heckscher-Ohlin will inform us that wages will rise in developing countries (you're therefore in favour of imposing greater absolute poverty!). However, we can't make a simple conclusion over wages in the developed world. A static analysis will inform us of wage reductions. However, we also know that there will be productivity gains and- despite you previously making a very silly error over supply and demand- we know that will positively impact on wage rates.

Repetition of error, nothing more. You can't show that protectionism increases employment. Try Smoot-Hawley!

I very much hope you have read the article. If you had you'd know that it can't be used to support your 'argument':

"Finally, it is important to stress that the present analysis only focuses on one side of the labor market adjustment process, namely on out of employment transitions. While we can provide evidence that outsourcing uniformly raises the risk of leaving employment, the number of reported transitions in the GSOEP data are to small to analyse whether outsourcing also has a direct effect on the probability of re-entering employment.

We therefore just have an article that makes an obvious point: with greater capital mobility we'd expect an increase in labour turnover. We certainly can't use that to argue that unemployment rises. We can, however, use it to show the problems generated in 'low skilled equilibrium' countries such as the UK with an over-abundance of low skilled labour (a problem which won't be solved through cretinous policies such as protectionism)

 

But prices in developing countries will also rise. Higher wages might not be enough to offset increasing cost of living. You are also ignoring quality of employment. Farming may be preferrable to a slightly higher paying job in the city with fast-paced work and lack of independance over working pace or working conditions.

But the question is how much will potential productivity gains make an impact on wages? That is the question.

Several economic analyses has actually found an inverse relationship between productivity and wages, in certain situations.
http://www.jstor.org/discover/10.2307/1815688?uid=3739560&uid=2&uid=4&uid=3739256&sid=47699087965317
http://www.nber.org/papers/w5081
Indeed, Marxist economics clearly emphasises the connection between rising productivity and unemployment/falling wages.

 

Depends how and from what you derive a definition of capitalism. I'm simply using the dictionary definition, which I think adequately describes the theory of capitalism as an economic system.

In my opinion, it is not theft if the source of the labor, ie the labourer, freely consents.

Didnt say they weren't.

I agree.

 

No, the question is why are you making opinion without any understanding of the economics involved? Your suggestion of conspiracy is cretinous as you're merely misrepresenting the evidence. A country such that as the US, with its capital abundance and an ageing population, will assuredly see general gains from trade.

A Marxism reference to stagflation? Golly, you really are blindly copy and pasting!

A paper that actually just dismisses a long term productivity-unemployment tradeoff. You again show an inability to find evidence that actually supports your position!

 

I refer directly to political economy. The idea that you can use a dictionary really isn't cunning. Your definition is essentially no different to the "government is socialism" error favoured by the silly right. Its simply a corruption of the economic spectrum, ranging from laissez faire to command economy. That cannot be used to define capitalism or socialism. Its simply a vehicle to show different levels of extra-market interference (which can occur in most economic paradigms)

Underpayment wouldn't exist if could be purely understood in terms of exchange. Coercion must necessarily be part of the labour contract

 

Even for progressives that support free markets, there can still be arguments made against unrestricted free trade. Those environmental and worker protections will be much less effective in the presence of trade with another country that does not have similar protections. Indeed, all the protective regulations will have the effect of diverting jobs away to the country with fewer regulations. This is exactly what we are seeing with trade between the USA and China. Imposing limits on carbon dioxide emissions could actually result in an increase in carbon dioxide emissions if it raises costs and pushes more production to China, a country with very few environmental regulations (the ones it does have are rarely enforced).

 

Wrong again! The issue of worker protection is a red herring for two reasons. First, we're typically referring to inter-industry trade (so the developed country will be specialising towards capital intensive product requiring a completely different skills mix). Second, we know that trade will typically improve worker result in the labour abundant country. Chinese wages, for example, have grown because of trade effects (as the Heckscher-Ohlin model describes)

Environmental issues is an issue for multilateralism. It doesn't provide a rationale for protectionism. Golly, we'd have introduced protectionism against the poor ole Americans for yonks if that was the case!

 

growing wages in China will not necessarily be a good thing for Americans. Americans will have to be taxed more to pay for military spending to counter China's growing military and ambitions.

and growing wages may not be as beneficial to the Chinese as you may think, the price of housing will also go up. With many of the Chinese migrating to the cities where the jobs are, there is a limited availability of land, and much of the wages of a typical worker go to paying for their housing. As the wealth being transferred to China has not been spread equally, the wealthy will bid up the price of land, which could make the poor worse off. Many farmers are being driven off their family farms, without compensation, when the land is confiscated by local governments to sell to developers. Certainly we are seeing the growth of an upper and middle class in China, but what is happening to the greater number of people at the bottom?

 

The Chinese buying America's capital intensive product? Oooo, dangerous stuff!

The US already substantially stands out in its military burden. That has been a positive (at least for the status quo), given civilian expenditures (which are superior at stabilising demand) can have unfortunate effects, such as helping to empower workers.

Basic error. Poverty analysis considers housing costs as a matter of standard.

 

On the subject of "free trade", just what has this done for the US? (other than to increase our trade deficit)
Though just a cut-and-paste from a recent article, it is worth reading.

“The entry into force of the U.S.-Korea trade agreement on March 15, 2012, means countless new opportunities for U.S. exporters to sell more made-in-America goods, services and agricultural products to Korean customers — and to support more good jobs here at home.”

Thus did the Office of the U.S. Trade Representative rhapsodize about the potential of our new trade treaty with South Korea.

And how has it worked out for Uncle Sam?

Well, courtesy of Martin Crutsinger of The Associated Press, the trade figures are in for April, the first full month under the trade deal with South Korea.

And, surprise! The U.S. trade deficit with Korea tripled in one month. Imports from South Korea jumped 15 percent to $5.5 billion in April, while U.S. exports to South Korea fell 12 percent to $3.7 billion. Suddenly, the U.S. trade deficit with Seoul surged to an annual rate of $22 billion.

Shades of NAFTA. When it passed in 1993, we had a $1.6 billion trade surplus with Mexico. By 2010, our trade deficit with Mexico had reached $61.6 billion.

There is other news of interest in those trade figures for those who chronicle the industrial decline of the United States.

In 2011, America ran the largest trade deficit ever with a single nation, $295.4 billion, with China. But this year, the U.S. trade deficit with China is running 12 percent ahead of 2011.

And the U.S. trade deficit with the world is now back up over $600 billion a year."

Full article:
http://buchanan.org/blog/now-korea-is-cleaning-our-clock-5102

 

Significantly increased choice, whilst reducing price. A horrible business!

 

The ideology of "Free trade" is Killing America's Economy

Case unproven ,imo .
As long as the US competes against a country where the average working wage rate is six and a half times lower ( adjusted ), the US is doomed ---unless it can find new and niche markets or develop top price point products with undisputed USPs within existing mass markets .
Equally ,Protectionism will not work now that China is the greater power and has $3,5 trillion cash and America has zero. China and Asia hold the Aces .Dramatically China could cut off all Rare Earth Element exports and America would come to a grinding halt . Or , still export , but put export prices up 100%
For America to survive , it needs a radically new Trade Strategy .
I doubt if America even has the means to bleed China from required Oil and Gas supplies .
Russia will be filling that need soon

 

Comparative advantage says otherwise

Utter garbage based only on not understanding trade

 

You are right and don't ever gie in to stupidity.

 

The only thing that will level the playing field is tariffs. So easy!

 

How successful was Smoot-Hawley?

 

Monopolistic competition? You don't subscribe to the definition of a monopoly as something lacking competition? Looks like an oxymoron to me.