29 ms·

Workers See Costs, Not Benefits, to Global Trade

119 points by JamilD 11y ago

ap22213 11y ago
40 years old here, and I have seen much more pain than benefit over the last 30 years. Early in my youth I was exposed to libertarianism, and I was taken in - it sounded so simple and logical and effective. But, over time I saw the effects of globalization, free trade, and deregulation. They've been selling us, the masses, on it for 40 years. Why haven't salaries and demand for jobs increased? They always say it's because of the existing tariffs, regulations, unions, etc. 'Trust us,' they say, 'just a little bit longer - more deregulation and free trade, and it will happen. Trust us.' I've literally heard that same claim for as long I can remember. Maybe I'm a minority. I'm the first college educated person in my family (most with 'gifted' level IQs - like that matters!). The rest were working class. Then, I've seen them slowly lose jobs, fall below the poverty line. Now, I make a good salary, and I have to send money back to my family because they're unable to find jobs, pay for transportation, pay for education or health care or housing. Luckily, they are still able to pay for food! It's like I'm an immigrant in my own country, sending money back to the old country. Just weird. I am very happy that we have been able to raise standards of living for many who had been earning less than a dollar a day. But, this has come at the expense of the working and middle class in many 'rich' countries. There were and are much better ways to achieve the same goal. Instead of pressuring the benefiting countries to migrate to democracy and rule of law, we instead caved into our primal demand for low-cost junk. (Yay! $5 t-shirts. Thank you, Stefan Persson) Now, we have autocratic and corrupt countries with as much leverage as we used to have. The capitalists have been selling us Powerball tickets for 40 years, and we keep lining up to buy them.
- yummyfajitas 11y ago
  Why haven't salaries and demand for jobs increased? Because non-wage compensation is tax advantaged so it's cheaper for companies to increase compensation there. If they spent $1 more on health care, you get $1 more worth of health care. If they spend $1 more on wages, you get $0.80 in your take home pay. Real compensation per hour has increased, both across the economy and in manufacturing. https://research.stlouisfed.org/fred2/series/COMPRNFB https://research.stlouisfed.org/fred2/series/COMPRNFB https://research.stlouisfed.org/fred2/series/COMPRMS https://research.stlouisfed.org/fred2/series/COMPRMS That increase just comes in the form of health benefits/retirement/etc. If you want to fix this, eliminate the Obamacare employer mandate and push everyone to the exchanges and increase taxes on non-wage benefits. (You can make it revenue neutral by reducing taxes on wages commensurately.) There were and are much better ways to achieve the same goal. What are some of these "much better ways" to reliably and effectively achieve the same goal?
  - astazangasta 11y ago
    The problem is increased payments to a bloated health care sector with costs growing faster than inflation does not actually amount to a real increase in compensation.
  - ap22213 11y ago
    For one, we should not allow trade with countries that do not have some base level of rule of law, human rights, anti-corruption, safety nets, military control, and democratic rule. Capitalism is a game, and games still work even when there are rules in place. The rules just have to be consistent and enforced. I'm not against people getting rich. Some people like that. But, allowing those people to make us throw out important rules of the game just because it makes the game harder for them is really short-sighted.
    - fidget 11y ago
      Why is it better to be repressed and out of work than be repressed and in work?
  - ap22213 11y ago
    Also, I've seen your posts before. Often, you post links to data. I like data, and each time you post a link, I check it out. But, in the past I've been convinced that you had cherry picked your data or misrepresented it. But, when I've queried you about it in the past, I'd gotten no response.
    - refurb 11y ago
      He's linking to data from the Federal Reserve. What makes you think it's cherry picked? The fact that total compensation has increased over the past 20-30 years is not a secret. It's well known.
      - ap22213 11y ago
        Cherry picking means presenting one set of data that supports an argument while ignoring others that don't. The data isn't from the fed but from BLS. And, a reading of the descriptions of what that data contains shows that it includes all non-farm works, including managers and executives, and even private business owners. http://www.bls.gov/opub/mlr/2005/05/art1full.pdf http://www.bls.gov/opub/mlr/2005/05/art1full.pdf
- deleted 11y ago
  [deleted]
- ricw 11y ago
  This isn't a 40 year old trend but rather has been happening ever since weavers were replaced by machines some 200 years ago (ever since the industrial revolution). The trends of rationalisation, automation, economies of scale and now globalisation all have the same effect. Replacing low value labour with higher value labour. That's what competitive economies do and keeps them competitive (vs others, such as Cuba that just stay stuck in time). It's for the greater good, even if some temporarily will hit hardship. Understandably though, this isn't how people who are hit by this hardship think of globalisation..
  - ap22213 11y ago
    I think most of us get that. But, the goal of all of this should be improvement of general well-being. And, clearly that's not happening. Sure, some people are getting crazy rich, but it's not trickling down into the general population.
    - ricw 11y ago
      I disagree. In absolute terms we have never been richer. And that's really what counts. Relative richness is "just jealousy" and not a real measure of wealth. Though people do of course compare themselves through relative means..
      - gnaritas 11y ago
        > In absolute terms we have never been richer. Simply not true; there was a time in this country when a middle class lifestyle worked on one income leaving one parent free to raise kids. Those times are over, the middle class has been virtually destroyed and two income families are now the norm just to get by. That's not a relative comparison, that's an absolute decrease in lifestyle. That technology has progressed making computers cheap means diddly squat.
      - chillwaves 11y ago
        Any incremental progress over time results in increased wealth, but that's a rather low bar. Should think of how much better or worse things could be, not just that they improved. Technology has been increasing, innovation has been increasing (with time). That's a very low standard of expectation.
- johngalt 11y ago
  What would it cost to have a device similar to an android tablet 40 years ago? Billion dollars? Now you can get them for $100. What would it cost to have access to the sum of human knowledge instantly 40 years ago? In video/text/audio form? Now they hand out wifi free in coffee shops. In each case people/industries were displaced while generating enourmous wealth. The value of your paycheck may be lower, but what it can buy is incalculably more valuable. I would rather been poor now than rich 40 years ago.
  - hiram112 11y ago
    The value of my paycheck can not buy an average home in my city. I'm not talking about a large McMansion, but a house built in 1940. It's great that I can buy an IPhone, but basic necessities in life like shelter, children, etc. are being priced above the middle class in many area. Sure I could move to a cheaper area, but then I wouldn't have a job.
  - collyw 11y ago
    The "sum of human knowledge" is not available on the internet. A lot of it yes, but not everything. And there is also plenty of misinformation on the internet as well. 30 years ago my library did a good job of coming up with most of the information that I needed.
- griffordson 11y ago
  > Luckily, they are still able to pay for food! It's like I'm an immigrant in my own country, sending money back to the old country. Just weird. Well said. I don't have any answers, but wanted you to know that you are not alone in that feeling. It is incredibly disorienting to see the impact of income inequality so clearly in your own family in a single lifetime. It is even worse when you know that your children aren't interested in pursuing one of the few paths that can lead to financial security and are going to face a very difficult future if you aren't able to provide them with a safety net of your own.
nugget 11y ago
There's no doubt that free trade is a big net positive for the US. But one of the major oversights of the last few decades of public policy is the failure to reallocate some of the net benefits of free trade more directly to the losers, e.g. lower middle class working people in the US. Maybe they figured these people would never organize or vote in serious numbers. Bernie Sanders and Donald Trump might prove otherwise.
- bjshepard 11y ago
  "Free trade" is a misnomer for what is, in practice, freedom of capital to cross borders in search of lower labor. The dynamic certainly helped transform the lives of many people here in China for the better -- many people made rich from creating basically widjets for walmart, but in the US, many working class people lost both their jobs and their entire communities when Capital left.
  - marcoperaza 11y ago
    It's not a misnomer. The free movement of capital leading to more efficient allocation of labor is one aspect of free trade. But it is not the totality of it. For example, no country has as much incoming foreign direct investment as the United States.
    - jordanb 11y ago
      In recent years free trade can better be seen as regulatory arbitrage: companies close down worksites in places with strong environmental and labor protections and move work to places that have neither. We've seen talks about CO2 emissions and the resistance of Asian countries against agreeing to a framework that puts the same restrictions in place for them as for the west. They clearly understand that a comparative lack of emission controls puts them at a competitive advantage. Wage arbitrage is absolutely also a factor and the western world's working class absolutely have reason to resist that because they will not come out better off in that exchange.
      - 11y ago
Vlaix 11y ago
You can't expect the people who are the adjustment variable of worldwide unimpeded trade to applaud with both hands.
api 11y ago
This is the entire reason for Trump being a viable candidate at all, let alone winning.
- caseysoftware 11y ago
  That is what people here are missing. It's easy for us to criticize and complain about the economy but we only see our thin slice most of the time. Odds are most of the people active here don't know a plumber or a cop, let alone a factory worker and don't know someone directly affected by these changes or they're isolated to the hometowns we left long ago. We just move in wildly different circles. I think this article is less about free trade and its ramifications and more about communicating "and here is why labor favors Donald Trump.." If AFL-CIO comes out for Trump, the election is effectively over. That siphons a huge amount of cash and ground organization from the Democrats.
  - twoodfin 11y ago
    If AFL-CIO comes out for Trump, the election is effectively over. This will, not to put too fine a point on it, never happen. The AFL-CIO would never burn their bridges to the Democratic party, particularly not for a Republican candidate likely to lose in a landslide. If Trump does get the GOP nod, it's going to be great fun for us sensible Republicans to watch the parade of theories of how he will still win despite being down in the RCP average by what I expect will be an easy 8-10 points.
    - hiram112 11y ago
      I wouldn't count Trump out. They've been saying there's no way he'll win since the moment he entered. And the media certainly has done everything they can to stop him. The fact of the matter is that Hillary has had it easy with Bernie. Trump will destroy her as she won't be able to hide behind politics as usual since Trump is self funded. Should be interesting...
      - twoodfin 11y ago
aab0 11y ago
Summers: "Like experts in many fields who give policy advice, the authors show a preference for first-best, textbook approaches to the problems in their field, while leaving other messy objectives acknowledged but assigned to others. In this way, they are much like those public finance economists who oppose tax expenditures on principle, because they prefer direct expenditure programs, but do not really analyze the various difficulties with such programs; or like trade economists who know that the losers from trade surges need to be protected but regard this as not a problem for trade policy."
icebraining 11y ago
The latest Econtalk episode was an interview with the mentioned professor of economics at MIT - David Autor - about the loss of US low-skilled manufacturing jobs to China. http://www.econtalk.org/archives/2016/03/symposium_autor.html http://www.econtalk.org/archives/2016/03/symposium_autor.htm...
sjg007 11y ago
Free trade is fine but you need free and high quality education from daycare on up to make up for it.
- gedy 11y ago
  "Education" does not magically create a high paying job for you though, especially when you are talking about 10s or 100s of millions of people.
  - collyw 11y ago
    http://www.theguardian.com/uk-news/2016/mar/12/uk-education-reforms-not-helped-social-mobility http://www.theguardian.com/uk-news/2016/mar/12/uk-education-...
cynical_sheet 11y ago
Americans are living way above their means with rampant entitlement mentality. You see a lot of these paper-shuffling office jobs where nothing of value is produced; people studying worthless subjects(sociology, political science, gender studies etc.) plus there is an assumption that everyone needs to go to college; trades are looked down upon; push for $15/hour minimum wage; entitlement mentality with welfare etc. You have very little of that in China + some other countries and that is their appeal.
- drewrv 11y ago
  I don't want to live in a world where people only study what "the market" considers valuable.
  - maxerickson 11y ago
    Any reasonable definition of the market includes the people making choices about what to study. If people are buying whatever degrees, economics says that those people are buying a degree that they consider valuable. They are paying 'the market' price for the degrees, they can't be separated from it. It's easy to observe that other actors place far less value on the degrees than the people buying them, but those people are not setting the market price for the degrees.
    - shawn-furyan 11y ago
      We should be careful when talking about market characteristics of the market for college degrees, at least in the US. It is one of the markets that is most heavily skewed by government subsidies. The US approach to Government subsidies on the consumer side of privately supplied markets in college and health care mostly seems to accomplish raising the prices of college and healthcare as market providers raise prices to what the relatively hotter markets will bear.
      - maxerickson 11y ago
        Yeah, I think the structures that make buyers less price sensitive are a pretty terrible idea, but the government incentives/subsidies/etc don't change the fact that students are part of the market and are the ones setting prices (it just screws up the prices they set).
canistr 11y ago
Funny enough, you could probably apply this line to a bunch of different industries/practices. "Workers see costs, not benefits, to _______". For instance, investing in security. "Workers see costs, not benefits to security".
raldi 11y ago
...but only if workers in poor countries don't count. I'd like to see a video of the Mexicans receiving the news that a factory is opening in town, and it's going to need lots of employees.
- jordanb 11y ago
  I would think that the Mexicans should expect their elected government to look after their interests above those of workers in some foreign country.
  - raldi 11y ago
    That's absolutely true. If you consider the plight of Mexicans less important than the plight of Americans, the factory moving to Mexico is a bad move. And I'm not being sarcastic here; such a bias is exactly what the US government is supposed to have. But as an individual, that's not my perspective on the world. Tell me if a person considers themself foremost an American or a citizen of the world, and I'll tell you their opinion on free trade agreements.
    - twoodfin 11y ago
      I'm foremost an American, and I'm enthusiastically for free trade agreements. The US government is looking out for its citizens, who on the whole will benefit greatly even if particular factory workers suffer. (Also very happy that the rest of the world benefits, and not a little selfishly. I don't think people have a good conception of just how incredible life will be in a world economy where the average Chinese or Indian worker produces and earns as much as the average American worker today.)
      - raldi 11y ago
        Would you support a federal handout to former employees of factories that move operations to other countries? As you say, a small group of Americans is suffering for the benefit of the country at large; this is a way the country at large could help make up for that.
andrewclunn 11y ago
Health care coverage requirements + environmental regulations + other nations without these things that you can ship your goods to the US from without paying a tax penalty... The US citizens don't need cheaper iPhones, they need decent paying jobs. The average citizens DOES NOT benefit from free trade deals. The average international company does. If these other nations had the same regulations, then it wouldn't be cheaper to move the jobs there either. Free trade is bad for the environment and bad for domestic low skilled workers. And with all the unemployed college students around, its clear that educating people for jobs that aren't there won't fix the issue. You're selling out your citizens for your corporate overlords, and now that Bernie is all but out of the running Trump is the only one left speaking the truth about this.
pessimizer 11y ago
Workers are probably just forming knee-jerk opinions based on all of the evidence and all of the theory. It probably helps to calm them down that the NYT consistently equivocates between the entire concept of international trade, actual trade agreements (which are highly protectionist and monotonically increasing protection on copyrights, patents and professional services), and general lowering of tariffs.
bko 11y ago
It is important to note that practically no economist believes that free trade is not a net positive for all countries. In a recent survey of economists, two questions were asked, of which 95% of those surveyed either strongly agreed or agreed, while the remaining 5% were uncertain (none disagreed). Question A: Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment. Question B: On average, citizens of the U.S. have been better off with the North American Free Trade Agreement than they would have been if the trade rules for the U.S., Canada and Mexico prior to NAFTA had remained in place. I find it ironic that publications such as the NYT which often (rightfully IMO) put a lot of weight on the scientific consensus on issues such as climate change, are much more reactionary when it comes to issues such as free trade, relying more an personal antidotes and political rhetoric. [0] http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_0dfr9yjnDcLh17m http://www.igmchicago.org/igm-economic-experts-panel/poll-re...
- hudibras 11y ago
  Question A was about consumers and Question B was about "on average, citizens of the U.S." Too bad this article, as it says right in the headline, is about workers and not consumers or the average U.S. citizen. Nice try, though.
  - noobermin 11y ago
    Therein lies the conundrum that we face: while the net is good for society, there will always be people who get burnt while rest of society benefits. You saw this at the advent of the automobile which left the horse and buggy industry in the dust and it is what we see now with "green" tech and fracking leaving oil and coal industries in the dust, not to mention the current hubbub of Uber/Airbnb vs Taxis/Hotels... Given a large enough N, there is bound to be a sizable subset[0] who will get hurt when society advances. It's hard to argue about this though with people that is better because it comes off as economist being elitist and unconnected with the person you're in fact hurting. The best corollary I can imagine for me is if there was an influx of cheap PhD labor for doing science and putting me out of a job or forcing me to take >20K per year. But would it be better for science? Of course! But it would suck for me... And I'm not sure of anything that could solve this problem. This is just the reality of the economics effects of any advancement. [0] Small subset normalized to the total N, but a large subset compared to say, the number of fingers on one's hands.
Dowwie 11y ago
Autor spoke about his findings on EconTalk last week: http://www.econtalk.org/archives/2016/03/nations_gain_wh.html http://www.econtalk.org/archives/2016/03/nations_gain_wh.htm...
chdjcnx 11y ago
All I ever see from globalization advocates are a bunch of hypotheticals and never any actual quantitative data. Kind of concerning, considering how widely accepted the assumption "globalization=good" is.
- hiram112 11y ago
  You're not supposed to point that out. If ALL economists say free trade is good, who are we to question their wisdom? And if you do, you're obviously a [racist, xenophobe, uneducated, commie, etc].
facepalm 11y ago
It's democracy and everybody is entitled to vote for their own benefit. When cars where invented, horse breeders should have voted for laws against cars. Still, not sure if the typical worker can really be sure they are a net loser? They might have less money in the pocket, but if the TV they want costs only 10% of what it would cost without global trade, maybe they are still in the positive overall? The problem is the world is always changing, and people and nations always have to try to keep up and adapt. Or maybe not, looking at the example of the Amish? What would happen if everybody would become Amish overnight?
- griffordson 11y ago
  > What would happen if everybody would become Amish overnight? How much land would that take? How would these new Amish afford the $10K/acre that the best farm land in the US can cost?
  - facepalm 11y ago
    Well you could just say we are an Amish country now, and divide everything by Amish rules. Are there too many people already for all of them to be able to go Amish? I've read sometime ago that the Amish population doubles in regular intervals, so in theory they should own the whole country after some time?
karmacondon 11y ago
There is one clear benefit to global trade: It makes things cheaper. The problem is that it only makes things a little bit cheaper, and it's difficult for most people to see the effect in their daily lives. In broad strokes, free trade is essentially a trade off between some US workers losing their jobs and reducing the cost to make everything that people buy at Walmart. I can understand that most people on hn don't shop at Walmart, and wouldn't even notice if prices for consumer goods went up by 5-10%. But the rise in household costs due to ending free trade would have a major impact on the poorest and most vulnerable citizens. A single mother with multiple children and one income simply can't afford to pay X% more for everything that her family buys. And for what? So that a factory worker in Michigan or Ohio can have their union job back? That just seems like fighting progress. Those jobs are gone, mostly due to advances in technology and global connectivity. It makes sense to build things where it's most efficient to do so and to replace humans with robots wherever possible. Why increase prices on everything and hurt national and global economic growth just so that some people can keep the jobs that they're used to having? And unfortunately, "re-training" programs tend to work out better on paper than they do in reality. The fact is that no one wants to throwaway a lifetime of work in a given industry in order to start all over again in another. It's not just learning new skills, it's years of meeting the right people, learning new cultures and customs, etc. So few people want to do that, it's just not human nature to start over from scratch. HN is starting to sound like a broken record, but a Basic Income is probably the best solution. I believe that some politicians are also proposing a kind of "workers insurance", to help people who lose their jobs due to changes in technology or culture. Either of these would be a better solution than forcing price increases onto the millions of people who have jobs but still barely make enough to get by.
iamleppert 11y ago
Some choice quotes: “We’ve shifted an abundant part of our manufacturing footprint to relatively lower cost countries, about two-thirds,” said Mr. McDonough, president of the climate, controls and security division of United Technologies. “Still, there’s some opportunity there.” .. “Our company, with American workers,” he added, “builds a heck of a lot of stuff in the U.S.” I feel really bad they have to resort to these kinds of tactics to increase shareholder value. I guess when you have a really banal business making things like air conditioners that hasn't innovated in years the only thing left is to reduce costs to stay competitive? Methinks they should outsource the managements' jobs too.
chasecache 11y ago
There are too many termites in the trade system.
jcoffland 11y ago
The root problem is not jobs moving to poorer countries it's that manual labor is losing its value and will continue to do so as technology advances. A huge problem with capitalism is that it has no solution for what to do with the masses once a days labor is no longer worth a days living expenses. We are heading in this direction and are already there in many parts of the world. Education is a good solution but at some point demands for higher-level skills outpace the capacity of the average human brain. I'm not a big advocate of government run welfare but pure capitalism leaves many the gutter.
- roblev 11y ago
  Although a similar argument could have been made as societies industrialised, that once the value of farming work fell (which nearly everyone did), then there would be mass unemployment. It didn't play out that way.
pink_dinner 11y ago
Global trade is very similar to the Music (and software) revolution that happened over the last 15 or so years. The original creators of creative works were upset because free music, software diluted the value of the original work and it would make it more difficult to sell it in the future because most people would just get it for free. These companies essentially needed to compete against the same software/music they were selling, but free. The same thing is happening now, but with jobs. Companies are going overseas for workers and Americans now need to compete over a worker that can essentially do the same job, for a lower wage. Many people here have defended software and music piracy and even said things like "I wouldn't have purchased it anyway". Well, companies "Wouldn't have hired Americans anyway". It's ironic that so many of those same people are now clamoring for government protection when they fought against patents and copyrights for so long. Instead of complaining, you basically need to compete and offer companies something that they can't get overseas. This is exactly what the software and music industries have both needed to do to survive.
Futurebot 11y ago
As many others have stated in these comments, free trade doctrine makes the assumption that the gains from said trade will be redistributed to the losers (if we did this properly there would be far, far less opposition to the system.) That we do not actually do very much (our "Trade Adjustment Assistance" programs are incredibly weak and stingy) is probably well known. What's less appreciated is that some to much of what we have doesn't even meet the Ricardian definition of Free Trade. "Few economists have bothered to think about the issue of offshoring, preferring to dismiss concerns about it as manifestations of the old protectionist fallacy. They learned in graduate school that free trade is always mutually beneficial and ceased to think when they passed their exams. This is especially true of “free market economists” who believe that economic freedom, which they identify with the freedom of capital, is always good. Thus, most economists mistakenly believe that offshoring is protected under the authority of free trade doctrine. However, free trade doctrine is based on the assumption that domestic capital seeks its comparative advantage in its home economy, specializing where its comparative advantage is best and, thereby, increasing the general welfare in the home economy. David Ricardo, who explicated the case for free trade, rules out an economy’s capital seeking absolute advantage abroad instead of comparative advantage at home. ...offshoring, or the pursuit of absolute advantage, breaks the connection between the profit motive and the general welfare. The beneficiaries of offshoring are the corporations’ shareholders and top executives and the foreign country, the GDP of which rises when its labor is substituted for the corporations’ home labor. Every time a corporation offshores its production, it converts domestic GDP into imports. The home economy loses GDP to the foreign country which gains it." - Paul Craig Roberts, former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal.
- Futurebot 11y ago
  This is all yesterday's news, though. Even if we ripped up all our FT agreements, those jobs are gone permanently. The debate at this point is largely academic. Instead, we should focus on how to help those who lost their jobs with what we have to work with now (free training, free college, cash, etc.)
raincom 11y ago
It is true that Americans can buy cheap goods; but we need to calculate the differential good. Differential good for the blue collar workers vs differential good for the elite (capital holding class). This distribution of differentials is skewed: the elite is getting the most of the it. While I can buy cheap stuff from Walmart, most of my income goes to rent. There is no free trade for rent and health care, while most of an average worker makes go for rent and insurance.

119 points by JamilD 11y ago

40 years old here, and I have seen much more pain than benefit over the last 30 years. Early in my youth I was exposed to libertarianism, and I was taken in - it sounded so simple and logical and effective. But, over time I saw the effects of globalization, free trade, and deregulation. They've been selling us, the masses, on it for 40 years. Why haven't salaries and demand for jobs increased? They always say it's because of the existing tariffs, regulations, unions, etc. 'Trust us,' they say, 'just a little bit longer - more deregulation and free trade, and it will happen. Trust us.' I've literally heard that same claim for as long I can remember. Maybe I'm a minority. I'm the first college educated person in my family (most with 'gifted' level IQs - like that matters!). The rest were working class. Then, I've seen them slowly lose jobs, fall below the poverty line. Now, I make a good salary, and I have to send money back to my family because they're unable to find jobs, pay for transportation, pay for education or health care or housing. Luckily, they are still able to pay for food! It's like I'm an immigrant in my own country, sending money back to the old country. Just weird. I am very happy that we have been able to raise standards of living for many who had been earning less than a dollar a day. But, this has come at the expense of the working and middle class in many 'rich' countries. There were and are much better ways to achieve the same goal. Instead of pressuring the benefiting countries to migrate to democracy and rule of law, we instead caved into our primal demand for low-cost junk. (Yay! $5 t-shirts. Thank you, Stefan Persson) Now, we have autocratic and corrupt countries with as much leverage as we used to have. The capitalists have been selling us Powerball tickets for 40 years, and we keep lining up to buy them.

yummyfajitas 11y ago
Why haven't salaries and demand for jobs increased? Because non-wage compensation is tax advantaged so it's cheaper for companies to increase compensation there. If they spent $1 more on health care, you get $1 more worth of health care. If they spend $1 more on wages, you get $0.80 in your take home pay. Real compensation per hour has increased, both across the economy and in manufacturing. https://research.stlouisfed.org/fred2/series/COMPRNFB https://research.stlouisfed.org/fred2/series/COMPRNFB https://research.stlouisfed.org/fred2/series/COMPRMS https://research.stlouisfed.org/fred2/series/COMPRMS That increase just comes in the form of health benefits/retirement/etc. If you want to fix this, eliminate the Obamacare employer mandate and push everyone to the exchanges and increase taxes on non-wage benefits. (You can make it revenue neutral by reducing taxes on wages commensurately.) There were and are much better ways to achieve the same goal. What are some of these "much better ways" to reliably and effectively achieve the same goal?
- astazangasta 11y ago
  The problem is increased payments to a bloated health care sector with costs growing faster than inflation does not actually amount to a real increase in compensation.
- ap22213 11y ago
  For one, we should not allow trade with countries that do not have some base level of rule of law, human rights, anti-corruption, safety nets, military control, and democratic rule. Capitalism is a game, and games still work even when there are rules in place. The rules just have to be consistent and enforced. I'm not against people getting rich. Some people like that. But, allowing those people to make us throw out important rules of the game just because it makes the game harder for them is really short-sighted.
  - fidget 11y ago
    Why is it better to be repressed and out of work than be repressed and in work?
- ap22213 11y ago
  Also, I've seen your posts before. Often, you post links to data. I like data, and each time you post a link, I check it out. But, in the past I've been convinced that you had cherry picked your data or misrepresented it. But, when I've queried you about it in the past, I'd gotten no response.
  - refurb 11y ago
    He's linking to data from the Federal Reserve. What makes you think it's cherry picked? The fact that total compensation has increased over the past 20-30 years is not a secret. It's well known.
    - ap22213 11y ago
      Cherry picking means presenting one set of data that supports an argument while ignoring others that don't. The data isn't from the fed but from BLS. And, a reading of the descriptions of what that data contains shows that it includes all non-farm works, including managers and executives, and even private business owners. http://www.bls.gov/opub/mlr/2005/05/art1full.pdf http://www.bls.gov/opub/mlr/2005/05/art1full.pdf
deleted 11y ago
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ricw 11y ago
This isn't a 40 year old trend but rather has been happening ever since weavers were replaced by machines some 200 years ago (ever since the industrial revolution). The trends of rationalisation, automation, economies of scale and now globalisation all have the same effect. Replacing low value labour with higher value labour. That's what competitive economies do and keeps them competitive (vs others, such as Cuba that just stay stuck in time). It's for the greater good, even if some temporarily will hit hardship. Understandably though, this isn't how people who are hit by this hardship think of globalisation..
- ap22213 11y ago
  I think most of us get that. But, the goal of all of this should be improvement of general well-being. And, clearly that's not happening. Sure, some people are getting crazy rich, but it's not trickling down into the general population.
  - ricw 11y ago
    I disagree. In absolute terms we have never been richer. And that's really what counts. Relative richness is "just jealousy" and not a real measure of wealth. Though people do of course compare themselves through relative means..
    - gnaritas 11y ago
      > In absolute terms we have never been richer. Simply not true; there was a time in this country when a middle class lifestyle worked on one income leaving one parent free to raise kids. Those times are over, the middle class has been virtually destroyed and two income families are now the norm just to get by. That's not a relative comparison, that's an absolute decrease in lifestyle. That technology has progressed making computers cheap means diddly squat.
    - chillwaves 11y ago
      Any incremental progress over time results in increased wealth, but that's a rather low bar. Should think of how much better or worse things could be, not just that they improved. Technology has been increasing, innovation has been increasing (with time). That's a very low standard of expectation.
johngalt 11y ago
What would it cost to have a device similar to an android tablet 40 years ago? Billion dollars? Now you can get them for $100. What would it cost to have access to the sum of human knowledge instantly 40 years ago? In video/text/audio form? Now they hand out wifi free in coffee shops. In each case people/industries were displaced while generating enourmous wealth. The value of your paycheck may be lower, but what it can buy is incalculably more valuable. I would rather been poor now than rich 40 years ago.
- hiram112 11y ago
  The value of my paycheck can not buy an average home in my city. I'm not talking about a large McMansion, but a house built in 1940. It's great that I can buy an IPhone, but basic necessities in life like shelter, children, etc. are being priced above the middle class in many area. Sure I could move to a cheaper area, but then I wouldn't have a job.
- collyw 11y ago
  The "sum of human knowledge" is not available on the internet. A lot of it yes, but not everything. And there is also plenty of misinformation on the internet as well. 30 years ago my library did a good job of coming up with most of the information that I needed.
griffordson 11y ago
> Luckily, they are still able to pay for food! It's like I'm an immigrant in my own country, sending money back to the old country. Just weird. Well said. I don't have any answers, but wanted you to know that you are not alone in that feeling. It is incredibly disorienting to see the impact of income inequality so clearly in your own family in a single lifetime. It is even worse when you know that your children aren't interested in pursuing one of the few paths that can lead to financial security and are going to face a very difficult future if you aren't able to provide them with a safety net of your own.

nugget 11y ago

There's no doubt that free trade is a big net positive for the US. But one of the major oversights of the last few decades of public policy is the failure to reallocate some of the net benefits of free trade more directly to the losers, e.g. lower middle class working people in the US. Maybe they figured these people would never organize or vote in serious numbers. Bernie Sanders and Donald Trump might prove otherwise.

bjshepard 11y ago
"Free trade" is a misnomer for what is, in practice, freedom of capital to cross borders in search of lower labor. The dynamic certainly helped transform the lives of many people here in China for the better -- many people made rich from creating basically widjets for walmart, but in the US, many working class people lost both their jobs and their entire communities when Capital left.
- marcoperaza 11y ago
  It's not a misnomer. The free movement of capital leading to more efficient allocation of labor is one aspect of free trade. But it is not the totality of it. For example, no country has as much incoming foreign direct investment as the United States.
  - jordanb 11y ago
    In recent years free trade can better be seen as regulatory arbitrage: companies close down worksites in places with strong environmental and labor protections and move work to places that have neither. We've seen talks about CO2 emissions and the resistance of Asian countries against agreeing to a framework that puts the same restrictions in place for them as for the west. They clearly understand that a comparative lack of emission controls puts them at a competitive advantage. Wage arbitrage is absolutely also a factor and the western world's working class absolutely have reason to resist that because they will not come out better off in that exchange.
    - 11y ago

Vlaix 11y ago

You can't expect the people who are the adjustment variable of worldwide unimpeded trade to applaud with both hands.

api 11y ago

This is the entire reason for Trump being a viable candidate at all, let alone winning.

caseysoftware 11y ago
That is what people here are missing. It's easy for us to criticize and complain about the economy but we only see our thin slice most of the time. Odds are most of the people active here don't know a plumber or a cop, let alone a factory worker and don't know someone directly affected by these changes or they're isolated to the hometowns we left long ago. We just move in wildly different circles. I think this article is less about free trade and its ramifications and more about communicating "and here is why labor favors Donald Trump.." If AFL-CIO comes out for Trump, the election is effectively over. That siphons a huge amount of cash and ground organization from the Democrats.
- twoodfin 11y ago
  If AFL-CIO comes out for Trump, the election is effectively over. This will, not to put too fine a point on it, never happen. The AFL-CIO would never burn their bridges to the Democratic party, particularly not for a Republican candidate likely to lose in a landslide. If Trump does get the GOP nod, it's going to be great fun for us sensible Republicans to watch the parade of theories of how he will still win despite being down in the RCP average by what I expect will be an easy 8-10 points.
  - hiram112 11y ago
    I wouldn't count Trump out. They've been saying there's no way he'll win since the moment he entered. And the media certainly has done everything they can to stop him. The fact of the matter is that Hillary has had it easy with Bernie. Trump will destroy her as she won't be able to hide behind politics as usual since Trump is self funded. Should be interesting...
    - twoodfin 11y ago

aab0 11y ago

Summers: "Like experts in many fields who give policy advice, the authors show a preference for first-best, textbook approaches to the problems in their field, while leaving other messy objectives acknowledged but assigned to others. In this way, they are much like those public finance economists who oppose tax expenditures on principle, because they prefer direct expenditure programs, but do not really analyze the various difficulties with such programs; or like trade economists who know that the losers from trade surges need to be protected but regard this as not a problem for trade policy."

icebraining 11y ago

The latest Econtalk episode was an interview with the mentioned professor of economics at MIT - David Autor - about the loss of US low-skilled manufacturing jobs to China. http://www.econtalk.org/archives/2016/03/symposium_autor.html http://www.econtalk.org/archives/2016/03/symposium_autor.htm...

sjg007 11y ago

Free trade is fine but you need free and high quality education from daycare on up to make up for it.

gedy 11y ago
"Education" does not magically create a high paying job for you though, especially when you are talking about 10s or 100s of millions of people.
- collyw 11y ago
  http://www.theguardian.com/uk-news/2016/mar/12/uk-education-reforms-not-helped-social-mobility http://www.theguardian.com/uk-news/2016/mar/12/uk-education-...

cynical_sheet 11y ago

Americans are living way above their means with rampant entitlement mentality. You see a lot of these paper-shuffling office jobs where nothing of value is produced; people studying worthless subjects(sociology, political science, gender studies etc.) plus there is an assumption that everyone needs to go to college; trades are looked down upon; push for $15/hour minimum wage; entitlement mentality with welfare etc. You have very little of that in China + some other countries and that is their appeal.

drewrv 11y ago
I don't want to live in a world where people only study what "the market" considers valuable.
- maxerickson 11y ago
  Any reasonable definition of the market includes the people making choices about what to study. If people are buying whatever degrees, economics says that those people are buying a degree that they consider valuable. They are paying 'the market' price for the degrees, they can't be separated from it. It's easy to observe that other actors place far less value on the degrees than the people buying them, but those people are not setting the market price for the degrees.
  - shawn-furyan 11y ago
    We should be careful when talking about market characteristics of the market for college degrees, at least in the US. It is one of the markets that is most heavily skewed by government subsidies. The US approach to Government subsidies on the consumer side of privately supplied markets in college and health care mostly seems to accomplish raising the prices of college and healthcare as market providers raise prices to what the relatively hotter markets will bear.
    - maxerickson 11y ago
      Yeah, I think the structures that make buyers less price sensitive are a pretty terrible idea, but the government incentives/subsidies/etc don't change the fact that students are part of the market and are the ones setting prices (it just screws up the prices they set).

canistr 11y ago

Funny enough, you could probably apply this line to a bunch of different industries/practices. "Workers see costs, not benefits, to _______". For instance, investing in security. "Workers see costs, not benefits to security".

raldi 11y ago

...but only if workers in poor countries don't count. I'd like to see a video of the Mexicans receiving the news that a factory is opening in town, and it's going to need lots of employees.

jordanb 11y ago
I would think that the Mexicans should expect their elected government to look after their interests above those of workers in some foreign country.
- raldi 11y ago
  That's absolutely true. If you consider the plight of Mexicans less important than the plight of Americans, the factory moving to Mexico is a bad move. And I'm not being sarcastic here; such a bias is exactly what the US government is supposed to have. But as an individual, that's not my perspective on the world. Tell me if a person considers themself foremost an American or a citizen of the world, and I'll tell you their opinion on free trade agreements.
  - twoodfin 11y ago
    I'm foremost an American, and I'm enthusiastically for free trade agreements. The US government is looking out for its citizens, who on the whole will benefit greatly even if particular factory workers suffer. (Also very happy that the rest of the world benefits, and not a little selfishly. I don't think people have a good conception of just how incredible life will be in a world economy where the average Chinese or Indian worker produces and earns as much as the average American worker today.)
    - raldi 11y ago
      Would you support a federal handout to former employees of factories that move operations to other countries? As you say, a small group of Americans is suffering for the benefit of the country at large; this is a way the country at large could help make up for that.

andrewclunn 11y ago

Health care coverage requirements + environmental regulations + other nations without these things that you can ship your goods to the US from without paying a tax penalty... The US citizens don't need cheaper iPhones, they need decent paying jobs. The average citizens DOES NOT benefit from free trade deals. The average international company does. If these other nations had the same regulations, then it wouldn't be cheaper to move the jobs there either. Free trade is bad for the environment and bad for domestic low skilled workers. And with all the unemployed college students around, its clear that educating people for jobs that aren't there won't fix the issue. You're selling out your citizens for your corporate overlords, and now that Bernie is all but out of the running Trump is the only one left speaking the truth about this.

pessimizer 11y ago

Workers are probably just forming knee-jerk opinions based on all of the evidence and all of the theory. It probably helps to calm them down that the NYT consistently equivocates between the entire concept of international trade, actual trade agreements (which are highly protectionist and monotonically increasing protection on copyrights, patents and professional services), and general lowering of tariffs.

bko 11y ago

It is important to note that practically no economist believes that free trade is not a net positive for all countries. In a recent survey of economists, two questions were asked, of which 95% of those surveyed either strongly agreed or agreed, while the remaining 5% were uncertain (none disagreed). Question A: Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment. Question B: On average, citizens of the U.S. have been better off with the North American Free Trade Agreement than they would have been if the trade rules for the U.S., Canada and Mexico prior to NAFTA had remained in place. I find it ironic that publications such as the NYT which often (rightfully IMO) put a lot of weight on the scientific consensus on issues such as climate change, are much more reactionary when it comes to issues such as free trade, relying more an personal antidotes and political rhetoric. [0] http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_0dfr9yjnDcLh17m http://www.igmchicago.org/igm-economic-experts-panel/poll-re...

hudibras 11y ago
Question A was about consumers and Question B was about "on average, citizens of the U.S." Too bad this article, as it says right in the headline, is about workers and not consumers or the average U.S. citizen. Nice try, though.
- noobermin 11y ago
  Therein lies the conundrum that we face: while the net is good for society, there will always be people who get burnt while rest of society benefits. You saw this at the advent of the automobile which left the horse and buggy industry in the dust and it is what we see now with "green" tech and fracking leaving oil and coal industries in the dust, not to mention the current hubbub of Uber/Airbnb vs Taxis/Hotels... Given a large enough N, there is bound to be a sizable subset[0] who will get hurt when society advances. It's hard to argue about this though with people that is better because it comes off as economist being elitist and unconnected with the person you're in fact hurting. The best corollary I can imagine for me is if there was an influx of cheap PhD labor for doing science and putting me out of a job or forcing me to take >20K per year. But would it be better for science? Of course! But it would suck for me... And I'm not sure of anything that could solve this problem. This is just the reality of the economics effects of any advancement. [0] Small subset normalized to the total N, but a large subset compared to say, the number of fingers on one's hands.

Dowwie 11y ago

Autor spoke about his findings on EconTalk last week: http://www.econtalk.org/archives/2016/03/nations_gain_wh.html http://www.econtalk.org/archives/2016/03/nations_gain_wh.htm...

chdjcnx 11y ago

All I ever see from globalization advocates are a bunch of hypotheticals and never any actual quantitative data. Kind of concerning, considering how widely accepted the assumption "globalization=good" is.

hiram112 11y ago
You're not supposed to point that out. If ALL economists say free trade is good, who are we to question their wisdom? And if you do, you're obviously a [racist, xenophobe, uneducated, commie, etc].

facepalm 11y ago

It's democracy and everybody is entitled to vote for their own benefit. When cars where invented, horse breeders should have voted for laws against cars. Still, not sure if the typical worker can really be sure they are a net loser? They might have less money in the pocket, but if the TV they want costs only 10% of what it would cost without global trade, maybe they are still in the positive overall? The problem is the world is always changing, and people and nations always have to try to keep up and adapt. Or maybe not, looking at the example of the Amish? What would happen if everybody would become Amish overnight?

griffordson 11y ago
> What would happen if everybody would become Amish overnight? How much land would that take? How would these new Amish afford the $10K/acre that the best farm land in the US can cost?
- facepalm 11y ago
  Well you could just say we are an Amish country now, and divide everything by Amish rules. Are there too many people already for all of them to be able to go Amish? I've read sometime ago that the Amish population doubles in regular intervals, so in theory they should own the whole country after some time?

karmacondon 11y ago

There is one clear benefit to global trade: It makes things cheaper. The problem is that it only makes things a little bit cheaper, and it's difficult for most people to see the effect in their daily lives. In broad strokes, free trade is essentially a trade off between some US workers losing their jobs and reducing the cost to make everything that people buy at Walmart. I can understand that most people on hn don't shop at Walmart, and wouldn't even notice if prices for consumer goods went up by 5-10%. But the rise in household costs due to ending free trade would have a major impact on the poorest and most vulnerable citizens. A single mother with multiple children and one income simply can't afford to pay X% more for everything that her family buys. And for what? So that a factory worker in Michigan or Ohio can have their union job back? That just seems like fighting progress. Those jobs are gone, mostly due to advances in technology and global connectivity. It makes sense to build things where it's most efficient to do so and to replace humans with robots wherever possible. Why increase prices on everything and hurt national and global economic growth just so that some people can keep the jobs that they're used to having? And unfortunately, "re-training" programs tend to work out better on paper than they do in reality. The fact is that no one wants to throwaway a lifetime of work in a given industry in order to start all over again in another. It's not just learning new skills, it's years of meeting the right people, learning new cultures and customs, etc. So few people want to do that, it's just not human nature to start over from scratch. HN is starting to sound like a broken record, but a Basic Income is probably the best solution. I believe that some politicians are also proposing a kind of "workers insurance", to help people who lose their jobs due to changes in technology or culture. Either of these would be a better solution than forcing price increases onto the millions of people who have jobs but still barely make enough to get by.

iamleppert 11y ago

Some choice quotes: “We’ve shifted an abundant part of our manufacturing footprint to relatively lower cost countries, about two-thirds,” said Mr. McDonough, president of the climate, controls and security division of United Technologies. “Still, there’s some opportunity there.” .. “Our company, with American workers,” he added, “builds a heck of a lot of stuff in the U.S.” I feel really bad they have to resort to these kinds of tactics to increase shareholder value. I guess when you have a really banal business making things like air conditioners that hasn't innovated in years the only thing left is to reduce costs to stay competitive? Methinks they should outsource the managements' jobs too.

chasecache 11y ago

There are too many termites in the trade system.

jcoffland 11y ago

The root problem is not jobs moving to poorer countries it's that manual labor is losing its value and will continue to do so as technology advances. A huge problem with capitalism is that it has no solution for what to do with the masses once a days labor is no longer worth a days living expenses. We are heading in this direction and are already there in many parts of the world. Education is a good solution but at some point demands for higher-level skills outpace the capacity of the average human brain. I'm not a big advocate of government run welfare but pure capitalism leaves many the gutter.

roblev 11y ago
Although a similar argument could have been made as societies industrialised, that once the value of farming work fell (which nearly everyone did), then there would be mass unemployment. It didn't play out that way.

pink_dinner 11y ago

Global trade is very similar to the Music (and software) revolution that happened over the last 15 or so years. The original creators of creative works were upset because free music, software diluted the value of the original work and it would make it more difficult to sell it in the future because most people would just get it for free. These companies essentially needed to compete against the same software/music they were selling, but free. The same thing is happening now, but with jobs. Companies are going overseas for workers and Americans now need to compete over a worker that can essentially do the same job, for a lower wage. Many people here have defended software and music piracy and even said things like "I wouldn't have purchased it anyway". Well, companies "Wouldn't have hired Americans anyway". It's ironic that so many of those same people are now clamoring for government protection when they fought against patents and copyrights for so long. Instead of complaining, you basically need to compete and offer companies something that they can't get overseas. This is exactly what the software and music industries have both needed to do to survive.

Futurebot 11y ago

As many others have stated in these comments, free trade doctrine makes the assumption that the gains from said trade will be redistributed to the losers (if we did this properly there would be far, far less opposition to the system.) That we do not actually do very much (our "Trade Adjustment Assistance" programs are incredibly weak and stingy) is probably well known. What's less appreciated is that some to much of what we have doesn't even meet the Ricardian definition of Free Trade. "Few economists have bothered to think about the issue of offshoring, preferring to dismiss concerns about it as manifestations of the old protectionist fallacy. They learned in graduate school that free trade is always mutually beneficial and ceased to think when they passed their exams. This is especially true of “free market economists” who believe that economic freedom, which they identify with the freedom of capital, is always good. Thus, most economists mistakenly believe that offshoring is protected under the authority of free trade doctrine. However, free trade doctrine is based on the assumption that domestic capital seeks its comparative advantage in its home economy, specializing where its comparative advantage is best and, thereby, increasing the general welfare in the home economy. David Ricardo, who explicated the case for free trade, rules out an economy’s capital seeking absolute advantage abroad instead of comparative advantage at home. ...offshoring, or the pursuit of absolute advantage, breaks the connection between the profit motive and the general welfare. The beneficiaries of offshoring are the corporations’ shareholders and top executives and the foreign country, the GDP of which rises when its labor is substituted for the corporations’ home labor. Every time a corporation offshores its production, it converts domestic GDP into imports. The home economy loses GDP to the foreign country which gains it." - Paul Craig Roberts, former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal.

Futurebot 11y ago
This is all yesterday's news, though. Even if we ripped up all our FT agreements, those jobs are gone permanently. The debate at this point is largely academic. Instead, we should focus on how to help those who lost their jobs with what we have to work with now (free training, free college, cash, etc.)

raincom 11y ago

It is true that Americans can buy cheap goods; but we need to calculate the differential good. Differential good for the blue collar workers vs differential good for the elite (capital holding class). This distribution of differentials is skewed: the elite is getting the most of the it. While I can buy cheap stuff from Walmart, most of my income goes to rent. There is no free trade for rent and health care, while most of an average worker makes go for rent and insurance.