The Question Is Not "Free Trade" and Globalization, It Is Free Trade and
Globalization Designed to Screw Workers
Published on
Wednesday, April 27, 2016
by
Beat the Press
The Question Is Not "Free Trade" and Globalization, It Is Free Trade and
Globalization Designed to Screw Workers
by
Dean Baker
The abandoned Packard Plant in Detroit in 2012. (Photo: Kyle J.
Schultz/flickr/cc)
Why are none of the "free trade" members of Congress pushing to change the
regulations that require doctors go through a U.S. residency program to be
able to practice medicine in the United States? Obviously they are all
protectionist Neanderthals.
Will the media ever stop the ridiculous charade of pretending that the path
of globalization that we are on is somehow and natural and that it is the
outcome of a "free" market? Are longer and stronger patent and copyright
monopolies the results of a free market?
The NYT should up its game in this respect. It had a good piece on the
devastation to millions of working class people and their communities from
the flood of imports of manufactured goods in the last decade, but then it
turns to hand-wringing nonsense about how it was all a necessary part of
globalization. Actually, none of it was a necessary part of a free trade.
First, the huge trade deficits were the direct result of the decision of
China and other developing countries to buy massive amounts of U.S. dollars
to hold as reserves in this period. This raised the value of the dollar and
made our goods and services less competitive internationally. This problem
of a seriously over-valued dollar stems from the bungling of the East Asian
bailout by the Clinton Treasury Department and the I.M.F.
If we had a more competent team in place, that didn't botch the workings of
the international financial system, then we would have expected the dollar
to drop as more imports entered the U.S. market. This would have moved the
U.S. trade deficit toward balance and prevented the massive loss of
manufacturing jobs we saw in the last decade.
The second point is political leaders are constantly working to make patents
and copyrights stronger and longer. This raises the price that ordinary
workers have to pay for everything from drugs to computer games. The result
is lower real wages for ordinary workers and higher incomes for the
beneficiaries of these rents. It also slows economic growth since markets
are not smart enough to distinguish between a 10,000 percent price increase
due to a tariff and a 10,000 percent price increase due to a patent
monopoly. (In other words, all the bad things that "free trade" economists
say about tariffs also apply to patents and copyrights, except the impact is
far larger in the later case.)
Finally, the fact that trade has exposed manufacturing workers to
international competition, but not doctors and lawyers, was a policy choice,
not a natural development. There are enormous potential gains from allowing
smart and ambitious young people in the developing world to come to the
United States to work in the highly paid professions. We have not opened
these doors because doctors and lawyers are far more powerful than
autoworkers and textile workers. And, we rarely even hear the idea mentioned
because doctors and lawyers have brothers and sisters who are reporters and
economists.
Addendum:
Since some folks asked about the botched bailout from the East Asian
financial crisis, the point is actually quite simple. Prior to 1997
developing countries were largely following the textbook model, borrowing
capital from the West to finance development. This meant running large trade
deficits. This reversed following the crisis as the conventional view in the
developing world was that you needed massive amounts of reserves to avoid
being in the situation of the East Asian countries and being forced to beg
for help from the I.M.F. This led to the situation where developing
countries, especially those in the region, began running very large trade
surpluses, exporting capital to the United States. (I am quite sure China
noticed how its fellow East Asian countries were being treated in 1997.)
C 2014 Center for Economic and Policy Research
Dean Baker
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The Question Is Not "Free Trade" and Globalization, It Is Free Trade and
Globalization Designed to Screw Workers
Published on
Wednesday, April 27, 2016
by
Beat the Press
The Question Is Not "Free Trade" and Globalization, It Is Free Trade and
Globalization Designed to Screw Workers
by
Dean Baker
. 7 Comments
.
. The abandoned Packard Plant in Detroit in 2012. (Photo: Kyle J.
Schultz/flickr/cc)
. Why are none of the "free trade" members of Congress pushing to
change the regulations that require doctors go through a U.S. residency
program to be able to practice medicine in the United States? Obviously they
are all protectionist Neanderthals.
. Will the media ever stop the ridiculous charade of pretending that
the path of globalization that we are on is somehow and natural and that it
is the outcome of a "free" market? Are longer and stronger patent and
copyright monopolies the results of a free market?
. The NYT should up its game in this respect. It had a good piece on
the devastation to millions of working class people and their communities
from the flood of imports of manufactured goods in the last decade, but then
it turns to hand-wringing nonsense about how it was all a necessary part of
globalization. Actually, none of it was a necessary part of a free trade.
. First, the huge trade deficits were the direct result of the
decision of China and other developing countries to buy massive amounts of
U.S. dollars to hold as reserves in this period. This raised the value of
the dollar and made our goods and services less competitive internationally.
This problem of a seriously over-valued dollar stems from the bungling of
the East Asian bailout by the Clinton Treasury Department and the I.M.F.
If we had a more competent team in place, that didn't botch the workings of
the international financial system, then we would have expected the dollar
to drop as more imports entered the U.S. market. This would have moved the
U.S. trade deficit toward balance and prevented the massive loss of
manufacturing jobs we saw in the last decade.
The second point is political leaders are constantly working to make patents
and copyrights stronger and longer. This raises the price that ordinary
workers have to pay for everything from drugs to computer games. The result
is lower real wages for ordinary workers and higher incomes for the
beneficiaries of these rents. It also slows economic growth since markets
are not smart enough to distinguish between a 10,000 percent price increase
due to a tariff and a 10,000 percent price increase due to a patent
monopoly. (In other words, all the bad things that "free trade" economists
say about tariffs also apply to patents and copyrights, except the impact is
far larger in the later case.)
Finally, the fact that trade has exposed manufacturing workers to
international competition, but not doctors and lawyers, was a policy choice,
not a natural development. There are enormous potential gains from allowing
smart and ambitious young people in the developing world to come to the
United States to work in the highly paid professions. We have not opened
these doors because doctors and lawyers are far more powerful than
autoworkers and textile workers. And, we rarely even hear the idea mentioned
because doctors and lawyers have brothers and sisters who are reporters and
economists.
Addendum:
Since some folks asked about the botched bailout from the East Asian
financial crisis, the point is actually quite simple. Prior to 1997
developing countries were largely following the textbook model, borrowing
capital from the West to finance development. This meant running large trade
deficits. This reversed following the crisis as the conventional view in the
developing world was that you needed massive amounts of reserves to avoid
being in the situation of the East Asian countries and being forced to beg
for help from the I.M.F. This led to the situation where developing
countries, especially those in the region, began running very large trade
surpluses, exporting capital to the United States. (I am quite sure China
noticed how its fellow East Asian countries were being treated in 1997.)
C 2014 Center for Economic and Policy Research
