So free trade should remain something that remains in the first world. Besides throughout the cold war China has long been an major player exporting goods, as has much of south east asia.
Yes, that is a less-than-perfect-but-attainable solution. James Goldsmith proposed a system consisting of three free trade zones depending on the state of advancement of the economy of the participant countries. The idea is that free trade is good for the involved nations if and only if they are close to equilibrium. Anything else spurs unhealthy competition. Laissez faire was rendered obsolete in 1929, and I don't know why we should revive it in the XXI century.
True, but that's where we should have the goverment step in and crackdown. Of course, because of public apathy the goverment isn't held accountable for borderline corrupt practices, so in turn they don't hold the corporations accountable.
Good point. Actually, there's more to it. Quite a few congressmen are already millionaires, both Democrats and Republicans, hence you can guess what interests they represent.
The average US worker would be considered "rich" compared to many foreign workers. Do you feel that they should not have a better standard of living, if it possibly erodes yours?
If there is a way, and I think there must be, to pick them up without annihilate my way of life, that should be the road to take. Much of the pain in the third world countries comes from their own elites, although we selfish inhabitants of the first world inflict our not precisely modest share upon them. Erradicate corruption and we can start to talk of further improvements.
Ah, but that increases the price for a company to do business. Now they don't just have to account for wages, they must also spend money sponsoring schools. Also as the economy grows the value of the currency increases, and makes business more costly.
It depends. The typical CEO will grab the calculator, add the costs up, and if the total sum of hiring domestic workers exceeds the university funding plus wages plus other perks in a foreign country, he or she is not going to look back. Besides, the subsidization of education can be shared by corporations with common interests. Of course, a foreign government should be smart enough to plant the seed in the first place without the need of megacorps to intervene. But the point still holds. It is absurd to insist on rising domestic educational standards when it is only going to result in an overeducated waiter.
Eventually an equilibrium will be reached.
Yes, we agree on that. But how long until we reach the balance? 20, 30 years? As Keynes stated, "in the long run we are all dead".
I am not American, by the way. I live in one of those Western European countries with double digits in unemployment and laughable birth rates, that Malthus would say reflect poor confidence in the years to come. In fact, I will tell you a little secret. I earn a modest living as a computer programmer for an American corporation, and if I told you my salary, you might stone me too:-)
Yes, and the trade deficit is included in the GDP, which continues to grow. The trade deficit, which has existed for decades, has not drained the US of resources. The reason is because we apply those cheap goods towards more value added activities.
It has not taken its toll yet. But to paraphrase your words, eventually it will. The one thing that is holding back the depreciation of the dollar, which would automatically convert your cheap goods in not so cheap, is that your currency has managed to substitute the gold standard in the international market. This has the effect that it is difficult for it to lose value because so many foreigners are eager to hold dollars in reserve (China and Japan, most notably). Depreciation is the fast road to equilibrium, but it also spells depression.
Than you for an interesting discussion and sharing your insights with me. I am pretty much enjoying this private talk over a public forum.
As I pointed out the same pressures existed in the past.
Perhaps, but the situation is different this time around. Not too long ago, capital and technology where limited in their ability to move accross frontiers because of the political state of affairs. The Cold War and all it entailed prevented the things we are experiencing today from happening. Free trade existed mainly between the so called first world countries, with few exceptions to the general rule. The gates are wide open now.
The advent of the Internet, decreased network latencies, teleconferencing... These technologies are going to put a lot of pressure on more employees than you and I can imagine.
No it will flow to where production is cheapest.
I don't see how that contradicts my statement. I see output as a function of capital, technology and labor. Plus in some instances land, like in agriculture. Infrastructure is technology, so no point of discussion there. Regulation affects the freedom employers have in combining the factors of production to provide goods, so in that respect it is secondary. Besides, it can easily be circumvected. Not that I am advocating infringing the law, but how many companies dutifuly compensate their employees for overtime work?
Already in certain areas of India there are inflationary issues, and as the middle class there increases, there will be political pressure for improved worker conditions, environmental regulation
It goes both ways. Several people have pointed to eroding benefits elsewhere in this thread, like healthcare coverage, on the job training, or pensions. Anyway, India and China are attractive to offshorers partially because of the lack of western societies worker conditions. If by happenstance they improve in that regard, capital and technology will fly to the next cheap destination. But don't count on it. Two thirds of the world population live there. Labor is not that mobile as the other two factors because of immigration quotas and the reluctance of the worker to leave its roots behind.
True, but most of the workforce is not made of geniuses.
For every American there is an equally capable foreign worker able to do the job overseas for less pay. Even in the case of geniuses, though you never have enough of those.
You can't just sit somebody in front of a computer and expect code to come out. Training (education)is an important aspect of a high level economy, and is something that should be focused on in the US.
Training is no solution either. In an extreme example you can have corporations investing overseas to fund universities and reap the fruits of the low paid foreign worker (in quantitative terms, purchasing power is likely to be higher there). Wages are going to decline over large sectors of the economy, there's no way to stop that.
Corporations have not changed.
The world has. Nowadays multinationals have more power. Nation states are becoming increasingly irrelevant. If the government decides to tax too much of the corporate profits or enforce regulations that protect the environment, they will move on to the next country.
The auto industry lost jobs to foreign competition, then Japanese car makers began opening plants in the US because it was cheaper.
Japan, unlike China, was already a first world country. It is going to take a long time until Chinese corporations invest heavily in the US because workers there are cheaper (or production, for that matter).
Current? You mean the one that's existed since 1976? Not many seemed to mind in the mid-80's or mid-90's.
Offshoring increases the trade deficit. What was once domestic production it is now charged as imports. An wages, a fundamental aspect of a high growth economy (see Keynes's multiplier), are paid overseas.
It depends. If the US economy did not use cheaper goods to grow, then yes there will be severe economic issues.
The problem is that there is an incentive to shift ANY high productivity job now and in the future. So you may say, no problem, we'll come along and invent new technology and hence new business opportunities. But when capital and technology are mobile, those flashy new professions will flow to where labor is cheapest.
Higher order learning is not a key advantage to exclude other groups (poor nations) from entering the game. Geniuses are born everywhere, not only in America. US corporations today are engaged in labor arbitrage, buying low and selling high. In essence, they are sucking more wealth from the middle and lower classes than they used to.
Offshoring increases profit margins at the expense of society at large. See the current huge trade deficit. The nation is living on credit and future generations will have to pay for this massacre.
On the other hand, the unfavored social layers, in order to keep up with their living standards, are more leveraged than ever. The future does not look pretty to me.
Slashdot Mirror
So free trade should remain something that remains in the first world. Besides throughout the cold war China has long been an major player exporting goods, as has much of south east asia.
Yes, that is a less-than-perfect-but-attainable solution. James Goldsmith proposed a system consisting of three free trade zones depending on the state of advancement of the economy of the participant countries. The idea is that free trade is good for the involved nations if and only if they are close to equilibrium. Anything else spurs unhealthy competition. Laissez faire was rendered obsolete in 1929, and I don't know why we should revive it in the XXI century.
True, but that's where we should have the goverment step in and crackdown. Of course, because of public apathy the goverment isn't held accountable for borderline corrupt practices, so in turn they don't hold the corporations accountable.
Good point. Actually, there's more to it. Quite a few congressmen are already millionaires, both Democrats and Republicans, hence you can guess what interests they represent.
The average US worker would be considered "rich" compared to many foreign workers. Do you feel that they should not have a better standard of living, if it possibly erodes yours?
If there is a way, and I think there must be, to pick them up without annihilate my way of life, that should be the road to take. Much of the pain in the third world countries comes from their own elites, although we selfish inhabitants of the first world inflict our not precisely modest share upon them. Erradicate corruption and we can start to talk of further improvements.
Ah, but that increases the price for a company to do business. Now they don't just have to account for wages, they must also spend money sponsoring schools. Also as the economy grows the value of the currency increases, and makes business more costly.
It depends. The typical CEO will grab the calculator, add the costs up, and if the total sum of hiring domestic workers exceeds the university funding plus wages plus other perks in a foreign country, he or she is not going to look back. Besides, the subsidization of education can be shared by corporations with common interests. Of course, a foreign government should be smart enough to plant the seed in the first place without the need of megacorps to intervene. But the point still holds. It is absurd to insist on rising domestic educational standards when it is only going to result in an overeducated waiter.
Eventually an equilibrium will be reached.
Yes, we agree on that. But how long until we reach the balance? 20, 30 years? As Keynes stated, "in the long run we are all dead".
I am not American, by the way. I live in one of those Western European countries with double digits in unemployment and laughable birth rates, that Malthus would say reflect poor confidence in the years to come. In fact, I will tell you a little secret. I earn a modest living as a computer programmer for an American corporation, and if I told you my salary, you might stone me too :-)
Yes, and the trade deficit is included in the GDP, which continues to grow. The trade deficit, which has existed for decades, has not drained the US of resources. The reason is because we apply those cheap goods towards more value added activities.
It has not taken its toll yet. But to paraphrase your words, eventually it will. The one thing that is holding back the depreciation of the dollar, which would automatically convert your cheap goods in not so cheap, is that your currency has managed to substitute the gold standard in the international market. This has the effect that it is difficult for it to lose value because so many foreigners are eager to hold dollars in reserve (China and Japan, most notably). Depreciation is the fast road to equilibrium, but it also spells depression.
Than you for an interesting discussion and sharing your insights with me. I am pretty much enjoying this private talk over a public forum.
It's bad netiquette to reply to oneself, but before you get too hung up on my ignorance, it's one third, not two, of course :-)
As I pointed out the same pressures existed in the past.
Perhaps, but the situation is different this time around. Not too long ago, capital and technology where limited in their ability to move accross frontiers because of the political state of affairs. The Cold War and all it entailed prevented the things we are experiencing today from happening. Free trade existed mainly between the so called first world countries, with few exceptions to the general rule. The gates are wide open now.
The advent of the Internet, decreased network latencies, teleconferencing... These technologies are going to put a lot of pressure on more employees than you and I can imagine.
No it will flow to where production is cheapest.
I don't see how that contradicts my statement. I see output as a function of capital, technology and labor. Plus in some instances land, like in agriculture. Infrastructure is technology, so no point of discussion there. Regulation affects the freedom employers have in combining the factors of production to provide goods, so in that respect it is secondary. Besides, it can easily be circumvected. Not that I am advocating infringing the law, but how many companies dutifuly compensate their employees for overtime work?
Already in certain areas of India there are inflationary issues, and as the middle class there increases, there will be political pressure for improved worker conditions, environmental regulation
It goes both ways. Several people have pointed to eroding benefits elsewhere in this thread, like healthcare coverage, on the job training, or pensions. Anyway, India and China are attractive to offshorers partially because of the lack of western societies worker conditions. If by happenstance they improve in that regard, capital and technology will fly to the next cheap destination. But don't count on it. Two thirds of the world population live there. Labor is not that mobile as the other two factors because of immigration quotas and the reluctance of the worker to leave its roots behind.
True, but most of the workforce is not made of geniuses.
For every American there is an equally capable foreign worker able to do the job overseas for less pay. Even in the case of geniuses, though you never have enough of those.
You can't just sit somebody in front of a computer and expect code to come out. Training (education)is an important aspect of a high level economy, and is something that should be focused on in the US.
Training is no solution either. In an extreme example you can have corporations investing overseas to fund universities and reap the fruits of the low paid foreign worker (in quantitative terms, purchasing power is likely to be higher there). Wages are going to decline over large sectors of the economy, there's no way to stop that.
Corporations have not changed.
The world has. Nowadays multinationals have more power. Nation states are becoming increasingly irrelevant. If the government decides to tax too much of the corporate profits or enforce regulations that protect the environment, they will move on to the next country.
The auto industry lost jobs to foreign competition, then Japanese car makers began opening plants in the US because it was cheaper.
Japan, unlike China, was already a first world country. It is going to take a long time until Chinese corporations invest heavily in the US because workers there are cheaper (or production, for that matter).
Current? You mean the one that's existed since 1976? Not many seemed to mind in the mid-80's or mid-90's.
Offshoring increases the trade deficit. What was once domestic production it is now charged as imports. An wages, a fundamental aspect of a high growth economy (see Keynes's multiplier), are paid overseas.
It depends. If the US economy did not use cheaper goods to grow, then yes there will be severe economic issues.
Quite frankl
The problem is that there is an incentive to shift ANY high productivity job now and in the future. So you may say, no problem, we'll come along and invent new technology and hence new business opportunities. But when capital and technology are mobile, those flashy new professions will flow to where labor is cheapest.
Higher order learning is not a key advantage to exclude other groups (poor nations) from entering the game. Geniuses are born everywhere, not only in America. US corporations today are engaged in labor arbitrage, buying low and selling high. In essence, they are sucking more wealth from the middle and lower classes than they used to.
Offshoring increases profit margins at the expense of society at large. See the current huge trade deficit. The nation is living on credit and future generations will have to pay for this massacre.
On the other hand, the unfavored social layers, in order to keep up with their living standards, are more leveraged than ever. The future does not look pretty to me.