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Author
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Topic: Making Indian girls cry, part deux
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Stephen Gordon
rabble-rouser
Babbler # 4600
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posted 23 January 2005 07:52 PM
Since it’s largely my fault that the original thread was closed, I guess I have to take the responsibility for starting up a follow-up. There were a couple of points that I wanted to address.I’ve made the point that the biggest winners from free trade are poor-country workers, and I’m going to go out on a limb and claim that this point has been generally accepted. But now the battlefield has shifted, yet again:
"AutarkyTM! It’s a redistribution policy! No, It’s a stabilisation policy! No, it’s a dessert topping!" First you set out your policy goal, and then you use that policy goal to justify your choice of policy instrument. Just because GWB gets away with it (‘Tax cuts for the rich increase productivity!’ ‘No, they’re a recession-fighting policy!’ ‘No, they’re an integral part of the Fight Against Terrorism!’) doesn’t mean it makes sense to reverse that order of events. Uncertainty is unpleasant, and if it’s possible to reduce it, we should. But we’ve found that fiscal and monetary policy tools are best suited for moderating fluctuations in employment. I’ve never heard anyone seriously claim that protectionism should be used as a stabilization policy instrument.
From: . | Registered: Oct 2003
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Mandos
rabble-rouser
Babbler # 888
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posted 23 January 2005 08:14 PM
Here's the thing: you also have to propose a stabilizer for workers that is actually likely to occur given the (political) conditions that lower trade barriers. I'm afraid I still don't see how laissez-faire capitalism internationally can also allow policies that are, frankly, uncompetitive to survive nationally.The same problem does not exist to the same extent within the framework of trade liberalization caused by the European Union. The EU effectively creates a federal government to make sure that uncompetitive--but worker-friendly--policies can, in fact, be implemented in economies that lose jobs to cheaper jurisdictions. This same situation does not and cannot exist in trade with Asia. So here is my policy goal: raising the standard of living in poor countries without causing uncertainty for workers in rich countries, and making the rich in rich countries pay for it. But the entire theory of trade liberalization under current conditions rests on an incentive to move to poor countries, and that incentive is higher profits on behalf of the Masters of the Universe, and given this condition, the policy goal cannot be satisfied. Not only that, it's hard to make an argument that the gains aren't much more than temporary---as Indian labour becomes more expensive, other cheaper jurisdictions will open up, leading to a vicious circle (or virtuous depending on your point of view).
From: There, there. | Registered: Jun 2001
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Stephen Gordon
rabble-rouser
Babbler # 4600
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posted 23 January 2005 09:25 PM
But the labour market has always been subject to shocks, especially those associated with technological change. According to this study, something like one Canadian worker in 15 loses her job each year. And that figure seems to have been quite stable over time. But these losses are more than offset by the creation of new jobs. Once someone is unempoyed, the probability that she'll find a job in a given month is around 0.25-0.33 - that is, the average duration of a spell of unemployment is 3-4 months.In that context, the job losses due to outsourcing are almost imperceptible, and they are more than compensated by the rate of job creation. As you'll recall from those graphs I posted in the other thread, the Canadian and the US economies have consistently generated jobs at a rate faster than population growth. The dislocated worker problem is real enough, but it's much smaller than what a casual glance at the headlines would suggest. It can be dealt with directly without monkeying with trade policy.
From: . | Registered: Oct 2003
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Stephen Gordon
rabble-rouser
Babbler # 4600
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posted 23 January 2005 09:59 PM
This is an important point (DrConway raised it in the other thread), and I don't have a conclusive answer. One part of it is almost certainly a participation rate story, largely generated by the decision of more women to enter the labour market - an increased supply of labour means lower wages. Another part is a well-documented productivity slowdown since the 1973 oil shock. And yet another part could simply a data issue: CPI inflation generally overestimates the true rate of increase in the cost of living, especially when new products are being introduced. The most often cited number is an overestimate of 0.5% a year, so it could well be that real wages have increased by %15 since 1973.Maybe some of those Wal-Mart workers had been laid off from better-paying jobs, and are worse off than before. But there are also people who got laid off from their old jobs and found employment in expanding export sectors. And there are also Wal-Mart workers who had no job at all before. All of these scenarios are possible, but you have to go to the data to determine which ones are worth worrying about. The concerns you raise are real, but from what I gather, they're simply not important enough to justify halting trade with India and China.
From: . | Registered: Oct 2003
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Mandos
rabble-rouser
Babbler # 888
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posted 23 January 2005 10:11 PM
quote:
Maybe some of those Wal-Mart workers had been laid off from better-paying jobs, and are worse off than before. But there are also people who got laid off from their old jobs and found employment in expanding export sectors. And there are also Wal-Mart workers who had no job at all before.
This is the central question here. Let us assume that people are fungible and we can replace dislocated workers with other workers in "expanding export sectors". The problem facing the American economy in particular is: what expanding export sectors? There was the tech bubble, but we discovered it was offshorable. There actually isn't much that the American worker can do, even in terms of intellectual labour, that can't be done cheaper elsewhere. Over time, this means that the US in particular must bleed jobs, particularly since they can't do what Canada does and export resources... If you can find a replacement, your alternative explanations might hold. At the moment, though, it's hard to see how current depreciation of wages can possibly avoid being affected by these factors. And all the while the most important factor being missed: the gap between rich and nonrich is increasing. But all that assumes the fungibility of displaced workers. The fact is, the very existence of displacement makes workers insecure. At what point do workers become secure? You may suggest that this is no different from shocks due to technological advances, but at least technological advancement creates employment opportunities in itself...
From: There, there. | Registered: Jun 2001
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Stephen Gordon
rabble-rouser
Babbler # 4600
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posted 23 January 2005 10:37 PM
Well, if you want to wait 120 days, you can read it for free on his website.I suspect that he supports it for the same reasons I do. [ 23 January 2005: Message edited by: Oliver Cromwell ]
From: . | Registered: Oct 2003
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Stephen Gordon
rabble-rouser
Babbler # 4600
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posted 23 January 2005 11:03 PM
Fixed it - but for some reason, your General Glut link won't work. I'm pretty sure you got the URL right, so maybe it's just a server problem there. I've looked at it, but it's not on my list of favourites...MaxSpeak is, though since I don't like the way his page is set up, I never spend much time there. I don't like scrolling down through articles that are 5 cm wide... [Ah - now it works. Never mind.] [ 23 January 2005: Message edited by: Oliver Cromwell ]
From: . | Registered: Oct 2003
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blueskyboris
rabble-rouser
Babbler # 7764
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posted 24 January 2005 12:56 AM
This has got to be the longest string of delusion I have read in a long time. quote:
I’ve made the point that the biggest winners from free trade are poor-country workers, and I’m going to go out on a limb and claim that this point has been generally accepted.
WRONG. Jobs downsized in North America are contracted to foreign-owned factory owners. These bidders go to great lengths to underbid each other so they will be awarded the contract. This competition, out-sourcing as it is called, guarantees that the wages of the workers hired will be VERY, VERY low, because those contractors who win must profit from the contract. So, in short, the workers in NA lose their jobs and unprotected workers in the South are paid shitty wages. Who wins? The transnationals.
quote:
But now the battlefield has shifted, yet again:"AutarkyTM! It’s a redistribution policy! No, It’s a stabilisation policy! No, it’s a dessert topping!"
The battlefield never shifted and empty verbiage will not win the argument.[ 24 January 2005: Message edited by: blueskyboris ]
From: Nova Scotia | Registered: Dec 2004
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Rufus Polson
rabble-rouser
Babbler # 3308
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posted 24 January 2005 02:30 PM
quote:
Originally posted by Oliver Cromwell:
I’ve made the point that the biggest winners from free trade are poor-country workers, and I’m going to go out on a limb and claim that this point has been generally accepted.
Good lord! It has? Who on earth's been arguing with you, Oliver? . . . Oh, wait, just checked the thread. It hasn't. That's quite a limb you're out on, there, Mr. Cromwell. Mind you, with respect to the specific case of call centres and certain computer-related things, in the specific country of India, you may have a point. But call centres are something of a corner case when it comes to the outsourcing trend. Please, show me an example of a poor country in which there has been free trade and subsequently the standard of living among the workers there has improved. Not, mind you, where the GDP has gone up, which (a) it may well have, because (b) it generally seems to, somehow, practically everywhere no matter how horrible things are getting. I dunno, there may be one somewhere. But there's certainly plenty of cases where free trade has been followed by vast increases in poverty among the country's workers. Well, and peasants. And peasants who were forced to become workers.
For instance, while the NAFTA experience could charitably be called ambiguous for Canada, Mexico has seen a rapid drop in wages and a massive increase in poverty under NAFTA (beginning slightly before NAFTA, but then, "free trade" policies resulting in the maquiladoras also began before NAFTA). Have Indonesia or Haiti seen increases in the people's prosperity as free trade policies are adopted? How about Bolivia? Brazil?
China seems to have enjoyed considerable export-driven prosperity. But then, China has not adopted free trade policies. Indeed, none of the Asian countries which have developed did so by adopting free trade policies. And when they did begin allowing unrestricted investment, it shortly came back and bit them on the butt in a huge crisis.
Consider Cuba economically. Economically--yeah, politically it's a one-party state with dictatorial rule and I'm not megahappy about that, and a certain bureaucratic sclerosis has set in as a result. But consider--economically, we're looking at a small island with two traditional exports--sugar and tobacco. They have zip-all foreign investment, nothing resembling free trade, and indeed major, cumbersome restrictions on trade, period. And it's true that the Cuban standard of living is not as good as that of the United States, leading some people to emigrate. But compared to other places in the region with similar levels of resources, Cuba is in amazing shape. Living standards in Cuba are way better than pretty much anywhere else in Latin America. And this was by no means true at the time of the Cuban revolution. Clearly, Cuba has developed its economy better than most other places in the region. But how? They have no foreign-owned factories, no influx of foreign capital, the US is cut off to them both as an import and export market. If Mr. Cromwell is correct that only foreign capital can allow improvements in living standards for poor-country workers, there is surely something wrong with this picture. It's true that for a while the USSR was helping them out, but I find it hard to believe this accounts for all the difference. After all, the US routinely gives massive aid to selected allies in the region, and they always seem to end up basket cases.
For that matter, take Argentina. Now, Argentina never had a government I'd have been happy with were I Argentinean. But under some of the more benign Peronists, Argentina built up a locally-owned manufacturing sector and a fairly solid standard of living. This was not done under free trade. Under a US-backed corrupt military regime the economy was badly mismanaged and then the neoliberals tried IMF free trade policies. The locally-owned manufacturing sector was decimated and the standard of living went blooey. To go much more general, third world economies in general grew much faster in the sixties and seventies than they have since--in some areas, economic growth has gone negative. At the same time, inequality has soared even higher than it was before. World Bank studies have concluded that free trade policies account for some of the change. So. Right. Biggest winners from free trade policies are poor-country workers. No. Maybe in the case of call centres, which require a population speaking accentless English--such centres have to attract the most educated segments of the population in a country like India, where most don't speak English. On the other hand, I do wonder whether the most educated segments of the Indian population might not be contributing more to India doing something other than wiping North Americans' noses for them on support lines, with any profits leaving the country. I also wonder whether they're really a portion of the Indian population that would have been likely to be unemployed if those savior call centres had not come along. But even taking the best spin on it, call centres are a corner case in their requirement for an educated population; the bottom is not quite as far down as for garment work and parts-assembly.
From: Caithnard College | Registered: Nov 2002
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Negad
rabble-rouser
Babbler # 7863
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posted 24 January 2005 03:43 PM
quote:
Originally posted by Mandos:
So here is my policy goal: raising the standard of living in poor countries without causing uncertainty for workers in rich countries, and making the rich in rich countries pay for it.
Ok, now our goals seem to have some common threads. You know what my approach would be? I would deal with the root causes of problems, fo course as I see it, such as "Mansantos,.." who drive farmers from their lands (mass murders,..) in differnt parts of the world and the very same people have to move to urban area to look for jobs even if the job happen to be outsourced such as call centres.
So imagine if "Monsato..s" are not taking away people's livilihood, would they have wanted to work on an outsourced job? I doubt it.
What would be the result: people in countries such as guatemala, Elsalvadore,... would work on their own lands and would be able to use their own seeds to grow crops and jobs adn outsourced jobs wouldn't really have any taker adn have to remain in Canada and workers would not be facing insecurity. Dealing with the root cause of the problem may in fact bring international solidarity amongst workers.
those economists; need to come up with formulas that take people into the consideration or infact see it as the centre point. I am a scientist and realize that we are thought science without any mention of reality of people's lives however we neverthe less have a resonsibility to get out of formulas and see the reality fo peopel's lives and change our formula's accordingly,... so on so forth.
From: Ontario | Registered: Jan 2005
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Stephen Gordon
rabble-rouser
Babbler # 4600
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posted 26 January 2005 05:13 PM
quote:
Originally posted by Rufus Polson:
That's quite a limb you're out on, there, Mr. Cromwell.
Yeah, but I'm quite comfortable out here, and the view's fantastic.  I think there’s a semantics problem here, so from now on, I’m going to use the term ‘trade liberalisation.’ We know that there are serious transition costs, and that the jump to completely free trade in one go is likely to be catastrophic. I don’t seriously recommend that every country should jump straight to pure free trade, but that’s the direction they should be aiming. The claim is that trade improves welfare, everything else being equal – the famous certerus paribus condition. Economies are very complex, and are continually reacting to a myriad of shocks, some external, some internal, some the result of domestic policy-makers, some the result of foreign policy-makers. We can’t perform controlled experiments, so what we see is the result of trade liberalization mixed in with everything else. If I pointed to a case where things went well, you could (probably with more than a little justification) say that some other factor other than trade was the real reason What we end up doing is looking at cross-country comparisons, and using regression techniques (among others) to control for those other effects. From what I gather, the evidence is overwhelming: openness to trade increases output. And there’s even evidence that openness to trade increases growth rates, which is a stronger effect than what traditional trade theory predicts. If you want, you can start rootling around the couple of hundred studies that are listed on the World Bank archives. If you click on ‘Trade’ on this page, you get something like over 600 studies – and that’s just what the WB has. There’s lots more in the academic literature, and looking up a couple of those papers - this is as good a place as any to start - will point you to the major ones. As for your examples: Argentina is a classic case of many things happening at once. Trade liberalisation was being combined with privatisation, the convertibility law, and budget cutbacks. And for the first 5 or 6 years, things went really well. It’s not at all clear how the 2000-2 crisis can be blamed on trade – if the govt wasn’t having fiscal problems, and if they hadn’t had the fixed peg, they could have simply devalued and went on with their lives. Mexico was a victim of bad timing - basically, China ate their lunch. But it’s hard to see how they would have been better off without NAFTA. You have to be able to reconstruct a counterfactual in which the same shocks occurred to the Mexican economy, but since it hadn’t signed NAFTA, it was better equipped to handle them. Maybe it can be done, but I haven’t seen anyone claim to have done so. The thing about Cuba is that although it’s a one-party state, it actually ranks very low on the highly important Brutally Corrupt and Thuggish Leadership Index. This allows it to compensate to a great extent for other policy errors. It would do even better if it liberalised trade. And on to China. China these days is heavily involved in trade, to a degree even higher than the US. The usual trade dependence ratio of (exports + imports) as a % of GDP is something like 55% for China, compared to about 25% in the US and 75% in Canada. Although is has a huge trade surplus with the US, it has a trade deficit with the rest of the world, so it’s trade surplus is something like 2% of GDP, compared to Canada’s 5%.
quote:
To go much more general, third world economies in general grew much faster in the sixties and seventies than they have since--in some areas, economic growth has gone negative.
The thing is, rich countries grew even faster during the 60s and 70s; poor countries actually lost ground before the 80’s. [Actually, the 70’s sucked for everyone – nothing seemed to work.] Some places have done worse – but many/most of those cases involve war and disease, not trade. It’s only after 1980 do you see any sort of trend where some poor countries have managed to reverse that relative decline – and none of them did so by closing their borders to trade. [ 26 January 2005: Message edited by: Oliver Cromwell ]
From: . | Registered: Oct 2003
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blueskyboris
rabble-rouser
Babbler # 7764
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posted 27 January 2005 09:43 PM
Trade liberalization is only good if it increases the standard of living for working Canadians. Although liberal economists love to point to '10% economic per year' stats, these stats do not reflect wage value in relation to real costs and pretty much reflect growth for select classes. Moreover, the developed nations, Australia and the US in particular, stay richer by tariff and closed borders. To argue otherwise is idiotic. There is no doubt that the entire farming industry in the West would collapse if they were to be in competition with the South over the long-term. The issue is no better received if we limit it to North America. If we institute free trade in farming, Canada will lose all its farms. The US breadbasket is well-positioned to provide all of our food and put Canadian farmers out of business. I mean really. REALLY. Do you really think 'free trade' means free trade between Canada and the US? No. It means the US made trade concessions on specific issues provided that Canada opened its borders wideopen. The American-Canadian border is still a wall of tariffs. Using abstract statistics (%) that have nothing to do with real people is foolish and only serves to ignore the real issues. [ 27 January 2005: Message edited by: blueskyboris ]
From: Nova Scotia | Registered: Dec 2004
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