Bob,
One problem is that we have to think about what our fundamental goals are.
Is the goal to include the profits of US based businesses? Is the goal to
increase profits of multinational corporations? Is it to improve life for
the majority of Americans? Is it to improve life for the majority of the
world's people? Do we want to continue to exploit all natural resources
regardless of the consequences in order to keep businesses humming along?
Everything follows from what your ethical stance is. As far as I can tell,
there are lots of arguments about what means to use, but no one wishes to
deal with the fundamental questions. This is probably because most
governments and corporations are incredibly greedy and shortsighted and only
care about the immediate bottom line.
Miriam
From: blind-democracy-bounce@xxxxxxxxxxxxx
[mailto:blind-democracy-bounce@xxxxxxxxxxxxx] On Behalf Of Bob Hachey
Sent: Tuesday, March 21, 2017 8:21 AM
To: blind-democracy@xxxxxxxxxxxxx
Subject: [blind-democracy] The Complexities of the Blobal Economy
Hi all,
Here's an interesting piece on how making changes to our global economy
could have unintended consequences. Like many of you here, I'm skeptical of
things like NAFTA and the TPP. Looks like if you're going to make changes
here, you'd better know what the heck you're doing.
Bob Hachey
Trump could save jobs but hobble the economy
When you try to piecemeal improve the situation in one place, you can make
matters worse elsewhere QUICK STUDY . By Evan Horowitz Globe Staff .
President-elect Donald Trump is trying to remake the American economy one
business at a time. The strategy? Cajole and scold until companies
everywhere decide to make more things in America. In just the past week,
Trump used some of his newfound political capital - and some taxpayer
dollars - to keep Carrier Corp. from moving manufacturing jobs to Mexico
from Indiana, then over the weekend he threatened to apply a 35 percent tax
to every US company that shifts operations overseas. Can it work? Well, a
targeted, tough-minded approach like this raises two big concerns. One is
that it can't actually accomplish much. Trump saved about 800 at the Indiana
plant. But Indiana has lost 7,000 manufacturing jobs in the past year, and
the United States lost 4,000 in the past month. Perhaps the bigger concern,
though, is that when you try to improve the situation in one place, you
sometimes make matters worse elsewhere. Unintended consequences are
everywhere in an economy as large and complex as ours. And when you're
focused narrowly on this or that business, you risk setting off a cascade of
perverse effects. Stay with the Indiana plant for a second. How long until
other companies follow suit, threatening to leave the United States as a
ploy to attract attention and get a similar package of tax breaks? Or
consider Trump's threat of tariffs, where the risk may be even greater.
Across a series of weekend tweets, Trump said that he would impose a 35
percent tax on "any business that leaves our country for another country,
fires its employees, builds a new factory or plant in the other country, and
then thinks it will sell its products back into the US Now imagine you're a
company that's thinking of building a plant in China or Vietnam. The last
thing you want to do is pay a 35 percent tax to bring your goods back home.
So maybe you'll give up your plans. That's not necessarily a good thing, if
it means some other foreign firm will get to swoop in and pick up your
discarded business opportunity. Or how's this for a workaround: Why not
start a totally new company, headquartered overseas? The new company won't
have to pay tariffs, because it didn't break any of the rules about
outsourcing. That's a serious problem, because it gives American
entrepreneurs and American business a reason to recast themselves as foreign
entities. Of course, the Trump administration could close this loophole, say
if it decided to apply the tariff uniformly, to any company eager to ship
goods to America, foreign or domestic. Then you might set off a trade war,
where China or Europe responds to these far-reaching US tariffs with its own
tariff regime, sapping global trade and ultimately making everyone poorer.
And even if Trump's tariffs don't start a trade war, they might still prove
to be self-defeating. Why is that? Think of it this way. The goal of these
tariffs is to stoke domestic production, which gives investors a reason to
shift their money into the United States - rather than keep it in countries
likely to be hurt by the new rules, such as China and Mexico. But with
investor money flowing into the United States, the value of the dollar will
tend to go up, which (you guessed it) ultimately hurts American
manufacturers by making imports cheaper. What's particularly revealing about
this last example is that it's not intuitive in any way. Even for the most
thoughtful non-economists, it's virtually impossible to anticipate the
backfiring chain of cause-and-effect that reaches from the pro-manufacturing
ideals of Trump's tariff to the anti-manufacturing effects of a rising
dollar. This kind of counterintuitive result happens all the time in
economics. In fact, it is one of the most basic insights of the discipline:
the forest is not just the sum of all trees. Macro doesn't work like micro.
And there is no straight path from "what's good for this business" to
"what's good for the economy. There are parts of Trump's platform that make
room for this way of thinking, including his tax cuts, which are designed to
set off a chain reaction of investment and hiring that turbo-charges the
economy as a whole. But the evidence of last week suggests that Trump's
vision is still very much grounded in a business by business, job by job,
negotiation by negotiation approach to making things better for American
workers. That may benefit certain industries, or certain regions, but it
doesn't necessarily add up to a cohesive economic policy. Already,
congressional Republicans have started pushing back against Trump's plans.
But as president, he will have the power to enact certain kinds of tariffs
on his own, not to mention a lot of sway over the legislative agenda. And if
you're hoping that Trump's vision will be expanded by far-seeing advisers,
note that so far his team includes a lot of people with Wall Street
credentials and real expertise in how to make individual businesses
profitable - but a dearth of professional economists. Evan Horowitz digs
through data to find information that illuminates the policy issues. He can
be reached at evan.horowitz@xxxxxxxxx <mailto:evan.horowitz@xxxxxxxxx> .
Follow him on Twitter @GlobeHorowitz.
