C. Lowell Harriss, emeritus professor of economics at Columbia University, long ago offered this timeless thought about protectionism:
The general case for freedom in international exchange is like the case against putting sand in the gears of a machine.
(This quotation is found on page 826 of Prof. Harriss’s splendid 1953 book The American Economy.)
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"The general case for freedom in international exchange is like the case against putting sand in the gears of a machine."
How trite …
Globalization has shown that both Europe and America were unprepared for the consequences of cheap Chinese products flooding both markets resulting in significant dislocation of jobs (meaning serious unemployment and social upheaval).
Yes, protectionism is not the solution to that problem. But, neither is unconstrained free-trade. Unless, of course, you think that Chinese working at slave-labor rates, 12 to a room, is perfectly justified in light of the fact that either they accept these conditions or starve.
If America wants to indulge itself in a "race to the bottom" of wages, then that is precisely what it is embarking upon. For the moment, it is a matter of low-skilled assembly-line manufacturing jobs.
But, just wait until the Far East start tackling markets further up the technology ladder. It won’t be your Detroit car worker out of a job and flipping hamburgers at the local fast-food outlet. It will be trained engineers. (Just like the Silicon Valley systems analyst jobs at $80K that have been dislocated to India.)
Resuming trade policy to a trite little phrase that suits an ideology is NOT the solution. It's like a mindless sound-bite televised during an election year.
I repeat: Protectionism is NOT the response to the challenge. But restructuring American industry towards jobs and markets (in products and services) that can employ Americans at decent salaries IS the challenge.
And, that challenge is going to take a lot of courage to tackle.
'And, that challenge is going to take a lot of courage to tackle.'
I'm glad to see that you recognize the courage implicit in becoming an entrepreneur or opening a business. The risks you have to take with your own and others' money to build a successful enterprise. From your other comments here, I would not have guessed at that kind of open-mindedness.
Now, if government could just be restructured to be less of an impediment to these entrepreneurs and traders.
"if government could just be restructured to be less of an impediment to these entrepreneurs and traders."
If you want to see statism dulling entrepreneurial activity, come to Europe. And, particularly France.
Stop complaining. You're more lucky than you think in the US.
"Globalization has shown that both Europe and America were unprepared for the consequences of cheap Chinese products flooding both markets resulting in significant dislocation of jobs…"
I have to agree with Lafayette. I know 3 people who are having serious employment problems now after purchasing Chinese made Vizio HDTVs in the past two months. All 3 are retired yet can afford to splurge on 42" flat panels. It's a crisis.
BH: "It's a crisis."
I am sure.
My heart goes out to these poor, poor individuals – victims of cruel globalization.
I certainly hope thier hedge fund investments pay off sufficiently to give them some well-deserved Holiday cheer.
"Globalization has shown that both Europe and America were unprepared for the consequences of cheap Chinese products flooding both markets resulting in significant dislocation of jobs (meaning serious unemployment and social upheaval)"
Serious unemployment? I must be looking at the wrong numbers, since I thought the US was pretty close to full employment, even with all these extra illegals around, as well as competition from China.
"Unless, of course, you think that Chinese working at slave-labor rates, 12 to a room, is perfectly justified in light of the fact that either they accept these conditions or starve."
Your concern for the Chinese is touching, but they tried Communist starvation during the Great Leap, and they seem to prefer the opportunities and choices that you're trying to protect them from.
What exactly are you proposing as a solution? That the government develop an industrial policy such as the one that worked so well in Japan, to steer businesses in the direction that some bureaucrat thinks will "employ Americans at decent salaries"? As steep pointed out, the solution is for the US to continue to compete. It's not easy, but there isn't an easy path to permanent wealth.
Ann: "What exactly are you proposing as a solution?"
Glad you asked, because I wasn't posing a solution. It requires first to understand the problem. Protectionism IS part of the problem, not the solution … is what I was proposing.
Industrial policies have been tried and tried and tried again. They fail miserably, because industrial policies focus the initiative on state intervention into the marketplace. I dead set against such trickery, because it distorts markets.
There is no "quick fix" solution that Americans so cheerfully look for. This problem has been brewing for decades and the dot.com boom was a mirage that only furthered the final reckoning. A solution will take decades to evolve, it is that complex.
A reorientation of America away from light manufacturing seems obvious. But, to what? I have proposed craftsmanship (carpentry, masonry, electricians) as specific talents to be taught to youngster who can take their alleged brains out of a Game Boy for two seconds to think about what they want to do in life. I see damn few of this variety.
I have suggested infrastructural jobs that, beyond the initial contractual period, will morph into durable employment. Developing America’s nuclear competency, which it stupidly forsook after the Three-Mile Island accident, is one area. The world will need nuclear energy – as fossil fuels decrease – for a long time to come. Any renewable means of obtaining energy is worth developing.
Everyone talks about the services sector, so I will let that die. I don’t believe another generation at university taking Finance to become “Asset Managers” is what America needs. Assets must find projects to generate profits long before an asset manager sets their eyes on the available funds. But, which projects?
Transportation is an infrastructural project that has legs. (Pun intended). America is a perfect place for the third leg of the transportation triad (air, road and rail), the Hi-Speed Train working on long expanse journeys across America. (It would unclog airports and I know of no train that has been driven into a skyscraper.)
I could go on, but blogs are an ill-conceived medium for such lengthy discussions.
Ann: "Your concern for the Chinese is touching, but they tried Communist starvation during the Great Leap, and they seem to prefer the opportunities and choices that you're trying to protect them from."
You know seemingly little about China, so go take a trip through its countryside. People are still starving and public health care, once available, is now no where to be seen.
They send the kids into the sweatshops to help support the ones still back on the farms trying to survive.
I am protecting the Chinese from nothing. I have no reason to do so. But, this manic export driven economic growth cannot last forever, and China must create a middle-class consumer society that is stable. Only a viable domestic consumer-class can provide China with long-term stability.
I am not sure the gerontocracy in power is capable of innovating to that social dimension. Despite the growth, the statist government is hierarchically deadening, when it comes to management. Besides, if the Chinese ever get to know how corrupt its leadership class is, then China will be on the brink of an implosion.
But, the giant has finally awoken. It is a culture that is millenniums old – five or six, maybe? They could surprise us all.
Let's hope they do.
And, how about this below to indicate the need, as a monumental on-going project, to improve education in America.
Latest PISA scores from the OECD:
Ctry….. Math—Reading—Science—Problem Solving
USA……483……..495………..491………. 477
OECD..500…….494…………500………. 500
The fact that Americans fair well enough in reading indicates that blogs are probably a growing market niche.
Right? ; ^ )
I'm certainly not trying to defend China's current government and its (lack of a) plan for the future. "Crossing the river by feeling for stones" is just plain stupid, although it suits the Chinese Communist Party's political needs.
You seemed to be arguing that we should restrict free trade for the sake of poor Chinese people, and it reminded me of the special hatred and anger I saw from Asians for the whole anti-sweatshop movement. This was when I lived in Hong Kong in the 1990s – the general attitude seemed to be that the anti-sweatshop movement were rich Westerners trying to prevent poor Asians from getting ahead, while pretending that it was done out of concern for the poor Asians.
If we want to help poor people in third world countries, we should pressure their governments to adopt modern political, legal and financial systems. We shouldn't try to protect the poor from getting jobs.
Your overall theme seems to be that someone needs to direct the US economy in the right direction. Why not leave it to the market? Many hard-working entrepreneurs will bet their time and their savings on what each, individually, thinks is the most promising investment, and some of them will be right. That system isn't perfect but has worked better than any other so far. Why are you so worried by it now?