"Thriving in a Global Economy: The Truth about US Manufacturing and Trade" by Daniel J. Ikenson (of the Cato Institute) was apparently written by another of those "statistical economists" who (1) haven't noticed that every manufactured consumer good in the U.S.A. comes from China or another country; and (2) don't realize that the manufacturing of consumer goods generates wealth that is, in effect, shared by the workers within the country the manufacturing takes place in; and (3) overlook the fact that low priced imported manufactured consumer goods do not, in any appreciable way, increase the wealth of the ex-manufacturing-workers and would-be-manufacturing workers in the U.S.A.; (4) all the while quoting stats on how well U.S. manufacturers are doing after 54 years of the progressive loss of manufactured consumer goods to first Japan , then Korea, now China while those U.S. manufacturers either teamed up with the overseas manufacturers or built their own factories overseas retaining only offices and possibly small assembly plants in the U.S.A. (5) Sure, those "manufacturers" are making terrific profits, but those profits are dependant on a U.S. marketplace where the consumers don't have access to the degree of wealth generation (from manufacture) that they once had. (6) In the absence of stay-at-home manufacturing, a wartime economy does not make for a sustainable marketplace, and the only advantage (propaganda-wise) of a wartime economy is to trick those economists into thinking that the U.S. economy is thriving.
sorry if im misunderstanding you, to clarify;
are you saying that if the free market decides the USA should have less factories than before, then thats a bad thing?
are you also suggesting that cheap imports into the USA in some way hurt the USA ?
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
nirgrahamUK :
During this period of transition, (1) brought about by the rapid industrialization of Japan, Korea, China and India, (2) where zillions of Chinese peasants are competing for jobs with their kinsmen in the cities thereby keeping wage hikes in China to very low levels, (3) where Chinese and Indian labor / financial / environmental, regulations don't impose near the impositions of U.S.A. regs., (4) a very long period will probably transpire before conditions in China match conditions in the U.S.A. to effectively equalize the advantages of manufacturing consumer goods between the U.S.A. and China,(5) but in the meantime Chinese prosperity will increase while worker prosperity in the U.S.A. will decrease because when previous loosers (Chinese coolies) as competitors in the labor market, become winners while the previous winners (U.S. manufacturing workers) as competitors in the labor market, become losers until the situations equalize.
The only reason US workers would be losers is if the government chokes off opportunity here for their reemployment. So yes, until opportunity is sufficiently stifled in other markets so that the US again becomes competitive, Us workers will suffer. That's completely avoidable: stop stifling opportunity at home.
to gethky
im trying to improve my abilities as a classifier of economic thought.
is it true to say that you arent Austrian?
also that you arent neo-classical?
i dont see where you are coming from. your arguments arnt convincing. also your response to my two question didnt take the form of two answers, or even one answer. sort of a roundabout restatement of what you said before....
xahrx :
As more and more U.S. consumer manufactering workers have been (in effect) replaced by workers in China, the wealth-creation sector of the U.S. economy has diminished.
The typical libertarian stance on free trade is overly optimistic. I'm merely pointing out an obvious transitional glitch that is blithely ignored.
Words such as 'bad' and 'hurt' are terms I'd rather not use except to comment on my physical condition.
A nation can be quite prosperous without manufacturing. Take, for example, the Vatican, which specializes in religious services.
>The typical libertarian stance on freee trade is overly optimistic.
Then what do you advocate? Unfree trade? You are certainly welcome to not purchase things from China, but why should I be denied free access to cheap Chinese imports? Maybe that's too much freedom to be allowed in this country.
BTW, if an uneducated Chinese peasant is able to replace you, what does that say about you?
>the only advantage (propaganda-wise) of a wartime economy is to trick those economists into thinking that the U.S. economy is thriving.
Imagine how the economy would thrive if the government didn't confiscate public funds and spend them on goods that self-destruct.
Baxter:
Generating wealth may lead to prosperity, but prosperity is not necessarily caused by generating wealth.
To admit the transitional effects of free trade is not to disavow its long-range effectiveness.
I admit to being disgustingly plebian!
Imagine how the economy would thrive if the government didn't confiscate.
So, are you proposing a specific intervention to mitigate the transitional effects? Do you want to establish a tariff on the foreign goods, so that the price I have to pay for them increases? Or do you want to confiscate property to help subsidize domestic manufacturing?
How can you calculate what opportunities are lost due to the artificially inflated prices, or the seized funds? What price are you fixing for the foriegn goods, or for the domestic labor? Which mechanism is better for calculating prices than the cumulative decisions of free market participants?
Are buggy whip manufacturers accounted for in the subsidies?
baxter:
All I'm proposing is that libertarians be honest about the effects of this particular transition.
Let's not forget the crippling effects of unions on the manufacturing industry.
Catoites are not generally as thorough as Austrian scholars, so don't expect miracles out of them.
libertyboom:
I have mentioned (above) labor regulations as being impositions.
Whats wrong with the manufacturing workers voluntarily joining a group and for that group and the manufacturer to voluntarily come to mutually satisfactory agreements without any governmental intervention?
Inquisitor:
My issue is also with Austrian scholars who apparently base their opinions on free-market rhetoric rather than the government statistics so loved by certain economists, or even the present-day facts that I try to base my non-expert opinions on.
gethky: My issue is also with Austrian scholars who apparently base their opinions on free-market rhetoric rather than the government statistics so loved by certain economists, or even the present-day facts that I try to base my non-expert opinions on.
You can be an Austrian and a libertarian (classical liberal), but you don't have to be a libertarian, just because you favour the Austrian approach and praxeology in economics. I for example consider my self an Austrian Institutionalist. I would use a praxeological line of thinking, but also consider cultural and instinctual traits of humans. For me the conflict is not between governmental and private agents, but rather between bureaucracy and informal institutions. To me the market isn''t the answer to everything, but I would say that social action by the community is favoured over governmental management by a bureaucracy.
Your "issue" is a red-herring. Leaving aside the fact that government statistics are merely collections of data and thus cannot interpret themselves (all facts are theory laden), it is essential to have a notion of how a free market would contrast to the present, and then go on to analyze how the two differ. Many Austrians are painfully aware of the impediments to free trade currently extant, and are critical of institutions such as the WTO and IMF, and statist economists. If you're going to make such assertions, be more specific which economists you mean. It is true that certain Austrians are a bit unrealistic about (unfree) trade, as is also the case with some neoclassical economists.
How well versed are you in writings on method? A lot of people, I have noticed, who take issue with the Austrian method have no clue of what it really consists in. Torsten's response is also worth paying attention to.
Torsten & Inquisitor:
As to the rhetoric of Austrian scholars (vs "statistical/Catoite economists") re the transition I've been discussing, here are a few random examples from Mises.com:
"What I look to do is to point out how Austrian Theory not only debunks the fallacies that the anti-outsourcing advocates have been spawning, but also points out why the process makes sense economically, and not just for the countries where the investment takes place, but also the nations where the final goods are sold." - The Economics of Outsourcing By William L. Anderson Posted on 4/21/2004 at http://www.mises.org/article.aspx?Id=1488
"In fact, when it comes to overall U.S. living standards, there is nothing special about outsourcing software technology. All that matters in this case is whether the Chinese and Indians sell for less than what current American software producers could earn in their next most lucrative employment. If so, outsourcing enhances U.S. living standards." - Perils of Outsourcing By T. Norman Van Cott and Cecil Bohanon Posted on 2/11/2004 at http://www.mises.org/story/1443
"After all, why shouldn't firms outsource? Why shouldn't the worker who is willing to render the best services for the least pay be the one who gets the job? Instinctively, most of us recoil in disgust at the suggestion that wages should reflect nothing more than the cold calculus of supply and demand. Yet few of us realize just how essential this "cold calculus" is for the long-run welfare of laborers themselves." - In Defense of Outsourcing By Steve Piraino Posted on 1/23/2002 athttp://www.mises.org/story/877
> Whats wrong with the manufacturing workers voluntarily joining a group and for that group and the manufacturer to voluntarily come to mutually satisfactory agreements without any governmental intervention?
IMHO, there is absolutely nothing wrong with this. Likewise, it's also morally acceptable for the employer to fire all of the employees simultaneously and replace them with cheaper workers. Or to fire them and use workers from China. Or for multiple employers to get together and choose what wages the laborers shall work for.
> Instinctively, most of us recoil in disgust at the suggestion that wages should reflect nothing more than the cold calculus of supply and demand.
That's why I oppose minimum wage laws, which keep local people unemployed, harm the poor, encourage outsourcing and illegal immigration, and increase the costs of goods and services I need.
I don't know why you oppose outsourcing. Apart from it being morally wrong to inflict your opinions on party A and keep them from hiring party B, is there a proof of outsourcing's supposed overall damaging effect on the economy? What is the numerical value in dollars of the damage outsourcing does to our economy? Or is it a net benefit? Even if outsourcing were a net cost, I would still support it for moral reasons alone.
Do you wish to forbid other countries outsourcing their labor here? Or do you only want to stop it in one direction? Why should I be forced to pay more when I buy something at Walmart just so you can have food on your table instead of someone in China having it? Why should I care??
If outsourcing is so bad, should we forbid work from New York being outsourced to Maine? What about outsourcing from Seattle to Chicago? Exactly how many barriers do you want to errect?
I don't oppose free trade per se. What I do oppose are those free trade scholars/economists who ignore the vast difference between historic two-way trade and the present situation where Chinese manufacturing has become an ever-growing economic behemoth in such an incredibly short time to the point of worldwide ascendancy.
What this portends for the U.S. economy is (as I tried to explain above) an eventual lowering of the standard of living until a leveling/equilibrium is reached. Therefore the interim period (that I have tried to explain in the above posts) will be catastrophic, given the high standard of living enjoyed by the manufacturing workers only a few decades ago and the relatively low standard I expect at the point of the leveling/equilibrium.
The loss of wealth generation through manufacturing (that I predict) will lower the overall standard of living in the U.S.A.
It seem to me that you don´t see ALL the effects of outsourcing and specially it´s tremendous impact in the LOWERING PRICE OF CAPITAL GOODS (not just consumer goods). Thus the accumulation in the means of productions increases at a tremendous spead and the cost of production of any single good declines EVEN MORE in an exponential fashion (the marginal productivity of labour booming). You can see that for example in the unitary cost of information processing, data storing, voice telecomunication or whatever. The decrease in the unitary cost of any capital good makes its intensive use, more and more interesting (see for example Google with it´s scores of thousands of PCs working together). At this point a lot of projects that otherwise wouldn´t have been started became profitable and so generate good employment oportunities for more and more people. Toiling the soil was greatly outsourced by the lowering cost of british termal units (coal replacing man power, then oil replacng coal...) and of coordinating movements (the tractor and the harvester replacing man motion). This lowering in the cost of production of BTU and mechanic movement was the fuel of the industrial revolution that created massive markets for so mny new industries where all the well paid workers became possible. So look for all the opportunities and new industries that those newly so cheap complementary high-order goods re becoming to make possible.
josecas:
Sure, free trade has been efficacious historically and will no doubt continue to be so in the future, but what I'm discussing is the effect of free trade with China on the U.S. economy in the interim.
Exactly how is the U.S. economy's loss of wealth generation resulting from the loss of consumer-goods manufacturing offset by those other effects of free trade you cite?
You mentioned Google. Well, I use Google search, I have two gmail accounts, I have two Blogger (now owned by Google) blogs, I post my videos on Google Video & on You Tube (now owned by Google) all at no cost to yours truly. Google generates income by selling advertising space for me to see that is paid for by the advertisers of consumer products mainly made in China.
gethky:xahrx : As more and more U.S. consumer manufactering workers have been (in effect) replaced by workers in China, the wealth-creation sector of the U.S. economy has diminished.
I don't quite follow...How does cheaper goods make me less wealthy? Are you saying employment, not productivity, is what creates wealth?
"I cannot prove, but am prepared to affirm, that if you take care of clarity in reasoning, most good causes will take care of themselves, while some bad ones are taken care of as a matter of course." -Anthony de Jasay
Gethky, interesting quotes, but I do not see anything extreme or ignorant in any of them. The topic of free trade, and even semi-free trade is mired in misconceptions and outright nonsense, a lot of which does need to be debunked. That isn't to say the current situation is anywhere near ideal (the current monetary system is largely responsible for it.) I do take issue with some of Robert Murphy's writings, for instance, on trade between China and the US, because he seems to consider it largely consistent with genuine free trade. That said, free trade is simply the expansion of the division of labour on a planetary scale.
Solid_Choke:
Will you agree that wealth is created by producing goods that sell at a price voluntarily agreed to by both producers and the buyers?
Will you agree that, after moving such production facilities from the U.S.A. to China, at least part of that wealth is added to the Chinese economy and thereby subtracted from the U.S. economy?
Not really. Its merely shifted.
The Origins of Capitalism
And for more periodic bloggings by moi,
Leftlibertarian.org
Inquisitor
I don't oppose the theory of free trade. What I do oppose are those free trade scholars/economists who ignore the vast difference between theoretical free trade and the present situation where Chinese manufacturing has become an ever-growing economic behemoth in such an incredibly short time as to be approaching worldwide ascendancy.
Niccolò:
How then is wealth created?
I want to discuss a pertinent issue of the day, namely, the effect of the loss of consumer manufacturing on the U.S. economy. Do you?
gethky:Niccolò: How then is wealth created?
For one, you have to define what a worker is, but you can not differentiate between any labourer whether they be in management, capital production, or service when you simply refer to "American workers."Second, "overlook the fact that low priced imported manufactured consumer goods do not, in any appreciable way, increase the wealth of the ex-manufacturing-workers and would-be-manufacturing workers in the U.S.A." is just not an intelligent argument to make. A. What exactly would constitute an "appreciable increase in the wealth of a labourer?" B. What is wealth?C. What happens when prices of the general market decrease?
Third, please... Look it up on the BLS homepage, how have average hourly earnings faired in the past ten years?Four, you're arguing from an inherently normative stand point as though the Chinese - and no the Chinese are NOT less regulated than America, if I have to explain that, then this doesn't matter, it won't get through to you anyways. I would just suggest that you apply for the director of SFDA instead - don't "deserve" as much as the American worker deserves.On that, you're wrong, Americans deserve what they get and also if China is such the desirable location for manufacturing labourers, I believe boats run across the pacific in California, I'll donate ten dollars for your way!
Will you agree that, after moving such wealth producing production facilities from the U.S.A. to China, at least part of that wealth is added to the Chinese economy and thereby subtracted from the U.S. economy?
Purchasing goods from China will stimulate further investments there. Not purchasing goods from a country will discourage it. So I'm getting the point you are trying to make Gethky. It is however that purchasing goods at cheaper prices (from another country) will lead to lower living and operational cost in that country for the time this kind of business is running. So actually both countries can benefit from this. There was a similar argument concerning the clothing industry in South Africa. Clothing made in RSA was much more expensive then clothing imported from China. The grade of clothing was however also lower. This lead to job losses in the industry, but on the other hand clothing became also affordable for the growing number of poor people in South Africa. Personally I don't think "free trade" (I'd reject this term) as such is the problem. One should rather ask, why the cost in Dollars for production are higher in some countries then in others. This could i.e. have to do with taxation, monetary policies, business culture, work ethics and many more. Also the fact that some political systems are more repressive then others can have an influence on the wages.
Gethky, where do you think Chinese firms will turn when they want highly skilled labour? Where do many firms already go?
Even current levels of trade have fomented an increase in jobs in the US, not the reverse (something Murphy illustrates in his The PIG to Capitalism.)
Torsten:
Yes, free trade usually works well, but China, being so very different than any other country, is the case in point. Unlike Japan, China didn't industrialize during WW2 because it was partly occupied by Japan (as was Korea).After WW2 Japan began exporting manufactured consumer goods, but China, then in the grips of a communist dictator, remained agrarian. Japan became a leading manufacturer of consumer goods, but was limited by its physical size and population. South Korea then stepped into the exporting limelight, after the Korean War, with TVs, cell phones and cars, but it also soon maxed out. By this time the Chinese communist government had mellowed enough to allow the first Westerners to bring in their factories, train the Chinese personnel and export their products. Before long Chinese entrepreneurs were starting up their own factories and vying for contracts with U.S. companies. China's manufacturing capacity won't soon max out because it is a huge country with a huge population. Prices for Chinese exports will remain low because of the huge backlog of potential factory personnel still in the countrysides of China (and attending Chinese engineering schools).
So, with this behemoth as a trading partner, the U.S. manufacturers of consumer products could not compete and either gave up, or moved their factories to China, or contracted with Chinese manufacturers. Isn't it something for the free trade scholars at Cato and Mises.com to mull over when the predominate consumer goods manufacturing nation in the world loses its consumer goods manufacturing to trading partners?
I understand that the Chinese are training quantities of engineers by orders of magniture over the enrollment of U.S. engineering schools.
How much of that job growth in the U.S.A. is due to the wartime economy?
gethky:Niccolò: Will you agree that wealth is created by producing goods that sell at a price voluntarily agreed to by both producers and the buyers? Will you agree that, after moving such wealth producing production facilities from the U.S.A. to China, at least part of that wealth is added to the Chinese economy and thereby subtracted from the U.S. economy?
No. I will not agree. Wealth is a state of mind, its not a physical quantity. Wealth is relative.
In response to the second question, no, no wealth is being subtracted from the economy and stop speaking in nationalist terms of "US Economy" or the "China economy" all economies are connected, there is essentially only one or over 6 billion.
Just because production of certain goods has been transfered to the geological region of China does not mean that production of other goods have not been transfered to the geological region of North America or created by they process of increasing market efficiency.
Will you agree that profit is created by producing goods that sell at a price voluntarily agreed to by both producers and the buyers?
Sure.
Profit is also created by dancing on one's head for one's own pleasure. What profit has to do with anything... I'm not sure.
Whatever the case may be, so far globalization has meant increased jobs on the whole for the US. Certainly workers and businesses in some sectors have been displaced by competition, but then even those losses have been outweighed by the gains. Removing certain impediments (e.g. the minimum wage) would further improve the situation.
On a lighter note:
http://www.youtube.com/watch?v=oSb1Orv_shE