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Economically speaking free trade is equivalent to technological growth. A machine that turns corn into cars is the same as a country that trades corn for cars.

Economically speaking free trade is equivalent to technological growth. A machine that turns corn into cars is the same as a country that trades corn for cars. The theory of free trade works because in free trade there is more efficiency (and thus wealth) than there was before so even though some people loose jobs immediately there are more jobs created and everyone ends up better off. The big problem is the 40 yo and up demographic. I think I speak for many of hn'ers when I say that if AI made programmers obsolete tomorrow it would suck, but it wouldn't ruin me. I'm young enough and financially well off enough that I could weather that storm. When I get to the point where I'm too old for entry level work and too young for retirement, that storm becomes a much bigger deal. This isn't just theoretical. By and large the biggest "fix" to the problems of the rust belt have been younger people moving to greener pastures. Indeed its happened before with the industrial revolution causing urbanization. You don't need to dig far into the stats to notice that most of America's post-industrial towns skew older. The issue is the political class (either for lack of wisdom or excess of greed) didn't prepare any plan for the older demographic when they made deals like NAFTA. Its a very tricky problem to solve. The old jobs aren't coming back and the old people aren't going away. The only solution I can think of is government make-work programs available exclusively to people living in certain areas and above a certain age. But making such a program is its own political challenge. Would the people who benefit from it even vote for it or is it too "communist"?

wslh 9y ago
> even though some people loose jobs immediately there are more jobs created and everyone ends up better off. That is wishful thinking: free trade creates innovation and innovation not only concerns new products but also new processes. If, for example, someone came up with a cost-wise way to replace all Foxconn workers or factory workers in general then these workers would be jobless. As many others pointed out companies like Google have more revenue with less people, and what is worse is that if you want to create ten Googles there are not enough trained people to hire. In simple game theoretical terms we assume that because we have some simple rules in capitalism we can predict the outcomes when indeed the game possible moves and ramifications are hyper complex.
- IIAOPSW 9y ago
  Right but the money saved will now be spent someplace else instead thus creating new jobs. It will never be the case that a company will say "let's just sit on this money we used to spend on the old process". Sure in your example foxconn fires all its workers. Now foxconn has a pile of money. Either they spend that doing some other thing (which requires labor) or their executive's go out on a personal spending spree creating a demand for labor in the leisure sector. Free trade can't kill employment. Only technology can kill employment in the long term. And technology only starts killing jobs after its played a ton of sector-to-sector automation whack-a-mole.
  - ryandvm 9y ago
    > It will never be the case that a company will say "let's just sit on this money we used to spend on the old process." Don't be so sure. As of last year, Apple was sitting on a quarter of a TRILLION dollars in the bank.
    - IIAOPSW 9y ago
      For an example in the opposite direction look at Amazon. Amazon spends practically every penny of excess on expanding. This brings their on-paper earnings down to laughably low levels and nets them a seemingly absurd P/E ratio. Amazon is projected to overtake Apple as biggest tech firm. Seems to me that sitting on cash is a dumb medium-long term strategy, and companies which do it will eventually be out-competed by those which don't.
  - wslh 9y ago
    > Right but the money saved will now be spent someplace else instead thus creating new jobs. It will never be the case that a company will say "let's just sit on this money we used to spend on the old process". We are living in a post scarcity world (take it with a grain of salt) in the sense that a lot (really a lot) of capital is unallocated or (the same) only allocated in portfolios but bot producing anything in a direct way. I always share this example which happen alnost everyday in my software development company: if my customer is technical (another software company) they care (even not explicitly) about HOW I am charging them "per resource per hour" and less thinking in terms of pure ROI. When the deal involve financial people trying to leverage their capital they care more about the ROI and see the service as an investment when they don't need to go into so many details. In this case the same service can be charged with a much higher multiplier that makes you think the value they put to money is less significant. Indeed there is a third case when finance people think they have more power because they just have money, I pass those.
maxerickson 9y ago
During the industrial revolution, people weren't really displaced off of farms, they left them because factory jobs were better opportunities. As the US industrialized, it also had the Homestead Act and pretty open immigration.

wslh 9y ago

> even though some people loose jobs immediately there are more jobs created and everyone ends up better off. That is wishful thinking: free trade creates innovation and innovation not only concerns new products but also new processes. If, for example, someone came up with a cost-wise way to replace all Foxconn workers or factory workers in general then these workers would be jobless. As many others pointed out companies like Google have more revenue with less people, and what is worse is that if you want to create ten Googles there are not enough trained people to hire. In simple game theoretical terms we assume that because we have some simple rules in capitalism we can predict the outcomes when indeed the game possible moves and ramifications are hyper complex.

IIAOPSW 9y ago
Right but the money saved will now be spent someplace else instead thus creating new jobs. It will never be the case that a company will say "let's just sit on this money we used to spend on the old process". Sure in your example foxconn fires all its workers. Now foxconn has a pile of money. Either they spend that doing some other thing (which requires labor) or their executive's go out on a personal spending spree creating a demand for labor in the leisure sector. Free trade can't kill employment. Only technology can kill employment in the long term. And technology only starts killing jobs after its played a ton of sector-to-sector automation whack-a-mole.
- ryandvm 9y ago
  > It will never be the case that a company will say "let's just sit on this money we used to spend on the old process." Don't be so sure. As of last year, Apple was sitting on a quarter of a TRILLION dollars in the bank.
  - IIAOPSW 9y ago
    For an example in the opposite direction look at Amazon. Amazon spends practically every penny of excess on expanding. This brings their on-paper earnings down to laughably low levels and nets them a seemingly absurd P/E ratio. Amazon is projected to overtake Apple as biggest tech firm. Seems to me that sitting on cash is a dumb medium-long term strategy, and companies which do it will eventually be out-competed by those which don't.
- wslh 9y ago
  > Right but the money saved will now be spent someplace else instead thus creating new jobs. It will never be the case that a company will say "let's just sit on this money we used to spend on the old process". We are living in a post scarcity world (take it with a grain of salt) in the sense that a lot (really a lot) of capital is unallocated or (the same) only allocated in portfolios but bot producing anything in a direct way. I always share this example which happen alnost everyday in my software development company: if my customer is technical (another software company) they care (even not explicitly) about HOW I am charging them "per resource per hour" and less thinking in terms of pure ROI. When the deal involve financial people trying to leverage their capital they care more about the ROI and see the service as an investment when they don't need to go into so many details. In this case the same service can be charged with a much higher multiplier that makes you think the value they put to money is less significant. Indeed there is a third case when finance people think they have more power because they just have money, I pass those.

maxerickson 9y ago

During the industrial revolution, people weren't really displaced off of farms, they left them because factory jobs were better opportunities. As the US industrialized, it also had the Homestead Act and pretty open immigration.