"Consumption is the sole end and purpose of all production; and the interest of the ****PRODUCER (manufacturing jobs)**** ought to be attended to only so far as it may be necessary for promoting that of the consumer.
The maxim is so perfectly self evident that it would be absurd to attempt to prove it. But in the mercantile system ****the interest of the consumer is almost constantly sacrificed to that of the producer; (protecting American jobs from outsourcing)**** and it seems to consider production (MANUFACTURING JOBS), and not consumption,(WALMART CHEAP CHINESE ITEMS) as the ultimate end and object of all industry and commerce."
Adam Smith, The Wealth of Nations, 1776
THE ECONOMIC SYSTEM WE ABANDONED
The American School’s key elements were promoted by John Q. Adams and his National Republican Party, Henry Clay and the Whig Party, and Abraham Lincoln through the early Republican Party which embraced, implemented, and maintained this economic system.
During its American System period the United States grew into the largest economy in the world with the highest standard of living, surpassing the British Empire by the 1880s……..
It is a capitalist economic school based on the Hamiltonian economic program. The American School of capitalism was intended to allow the United States to become economically independent and nationally self-sufficient.
THE ECONOMIC SYSTEM WE HAVE EMBRACED
The Chicago school of economics describes a neoclassical school of thought within the academic community of economists. The neoclassic approach included the work of Adam Smith.
Although neoclassical theory dominates the economics discipline it is actually a psychological theory:.................
At the core of the theory is a specific reductionist theory of human decision making and rationality that is then applied to economic (and other) phenomena.
**** All human decision making is assumed to be driven by the pursuit of individual pleasure/happiness.***
This pleasure is defined, within the theory, as utility. Thus, the economic man (homo economicus) is a utility maximizer. Market exchanges are defined as simple trades between equally powerless economic men trying to maximize their individual pleasure.
The only way to have a healthy economy in the long run is to create wealth. But how can America create wealth if our industrial base is being absolutely destroyed? According to Forbes, the United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.
the art of propaganda
THUGOCRACY WikiLeaks: China's Politburo a cabal of business empires. The damning description of China's secretive leadership machinations also described how the descendants of China's Communist revolutionaries – known as "princelings" – derided officials from less august revolutionary backgrounds as mere "shopkeepers".
The assessment of what motivates China's opaque top-level decision-makers was relayed to Washington in July 2009 in one of the 250,000 cables published by the WikiLeaks website.
"China's top leadership had carved up China's economic 'pie,'" the US embassy contact said, "creating an ossified system in which 'vested interests' drove decision-making and impeded reform as leaders maneuvered to ensure that those interests were not threatened."
#1 According to the U.S. Department of Commerce, the U.S. trade deficit for the month of March 2011 was $48.2 billion. That was up from $45.4 billion in February.
#2 The United States has had a negative trade balance every single yearsince 1976.
#3 Between December 2000 and December 2010, the U.S. ran a total trade deficit of 6.1 trillion dollars.
#4 The U.S. trade deficit with China in March was $18.1 billion. This is money that is not going to support U.S. businesses and U.S. workers. If that money was actually going to our businesses and to our workers it would increase tax revenues.
#5 Since China entered the WTO in 2001, the U.S. trade deficit with China has grown by an average of 18% per year.
#6 During 2010, we spent $365 billion on goods and services from China while they only spent $92 billion on goods and services from us.
#7 Since 2005, Americans have gobbled up Chinese products and services totaling $1.1 trillion, but the Chinese have only spent $272 billion on American goods and services.
#8 The U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.
#9 According to a recent report from the Economic Policy Institute, between 2001 and 2008 the United States lost 2.4 million jobs due to the growing trade deficit with China. Every single state in America experienced a net job loss due to our trade deficit with China during that time period.
#10 The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.
#11 The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.
#12 Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost.
#13 Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of the jobs in the United States are manufacturing jobs.
#14 China produced 19.8 percent of all the goods consumed in the world last year. The United States only produced 19.4 percent.
#15 According to the IMF, China is going to have the largest economy in the world by 2016.
#16 Nobel economist Robert W. Fogel of the University of Chicago is projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040 if current trends continue.
#17 Back in 1998, the United States had 25 percent of the world's high tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China's share had soared to 20 percent.
#18 Manufacturing employment in the U.S. computer industry was actually lower in 2010 than it was in 1975.
#19 In 2002, the United States had a trade deficit in "advanced technology products" of $16 billion with the rest of the world. In 2010, that number skyrocketed to $82 billion.
#20 Last year, China produced 11 times as much steel as the United States did.
#21 Do you remember when the United States was the dominant manufacturer of automobiles and trucks on the globe? Well, in 2010 the U.S. ran a trade deficit in automobiles, trucks and parts of $110 billion.
#22 In 2010, South Korea exported 12 times as many automobiles, trucks and parts to us as we exported to them.
#23 According to one recent study, China could become the global leader in patent filings by next year.
#24 China is now the number one supplier of components that are critical to the operation of U.S. defense systems.
#25 In 2010, the number one U.S. export to China was "scrap and trash".
#26 Thanks to our exploding trade deficit with China, the Chinese have accumulated nearly 3 trillion dollars in foreign currency reserves. That is the largest stockpile of foreign currency reserves on the entire globe.
#27 The amount of the trade deficit that can be attributed to foreign oil is at the highest level that we have seen since 2008.
#28 It is being projected that for the first time ever, the OPEC nations are going to bring in over a trillion dollars from exporting oil this year. Their biggest customer is the United States.
2010 Trade Balance Plus or Minus
Advance Technology Products…… -81.7 billion
2011 thru May -34.8 billion
ALL OF 2010 TRADE TOTALS. World, Not Seasonally Adjusted 2010 -633.904 billion
Click on the links for most up to date numbers.......
Afghanistan….. +2.1 billion
Africa…… -56.9 billion
Antigua and Barbuda…..+152.9 million
British Indian Ocean Terr......-$100,00
British Virgin Islands……+125 million
Burma (Myanmar)….+9.7 million
Cape Verde….+8.6 million
Cayman Islands……+570.5 million
Central African Republic….+4.7 million
Christmas Island….+1.2 million
Cocos (Keeling) Island……-1.4 million
Colombia ….-3.6 billion
Congo (Brazzaville)……-3.1 billion
Congo (Kinshasa)……-434 million
Cook Islands…..+2 million
Costa Rica……-3.5 billion
Czech Republic…..-1.04 billion
Dominican Republic…..+2.81 billion
East Timor….+4.3 million
El Salvador…..+225.5 million
Equatorial Guinea….-1.9 billion
European Union…..-79.8 billion
Falkland Islands……-2.7 million
Faroe Islands…..-70.2 million
Fedrated States of Micronesia…..+38.3 million
French Guiana……..+35.5 million
French Polynesia……+69.1 million
French Southern and Antarctic…..+600,000
Gaza Strip admin. by Israel….-1.4 million
Heard and McDonald Islands…..+3.7 million
Hong Kong…..+22.265 billion
Ivory Coast….-1.014 billio
Kenya +10.8 million
Korea, South -10 billion
Kosovo +11.1 million
Kuwait -2.6 billion
Kyrgyzstan +74.5 million
Laos -47.1 million
Latvia +150.9 million
Lebanon +1.755 billion
Lesotho -287.6 million
Liberia +10.1 million
Libya -1.45 billion
Liechtenstein -183.3 million
Lithuania -8.3 million
Luxembourg +992.9 million
Macao +83.9 million
Macedonia (Skopje) -3.3 million
Madagascar +7.6 million
Malawi -34.7 million
Malaysia -11.99 billion
Maldives +26.7 million
Mali +31 million
Malta +161.8 million
Marshall Islands +80.8 million
Martinique +276.6 million
Mauritania +30.6 million
Mauritius -156.3 million
Mayotte +6.3 million
Mexico -66.33 billion
Moldova +25.5 million
Monaco +25.7 million
Mongolia +103.3 million
Montenegro +10.5 million
Montserrat +4.2 million
Morocco +1.261 billion
Mozambique +160.3 million
NAFTA with Canada -60.298 billion
NAFTA with Mexico -140.705 billion
Namibia -85.2 million
Nauru +2.3 million
Nepal -32.2 million
Netherlands +15.964 billion
Netherlands Antilles +1.89 billion
New Caledonia +37.8 million
New Zealand +52.7 million
Nicaragua -1.025 billion
Niger +23.3 million
Nigeria -26.426 billion
Niue +1.5 million
Norfolk Island +700 thousand
North America -94 billion
North Korea +1.9 million
Norway -3.48 billion
OPEC -95.645 billion
Marlon Brando explains the American Dream. Watch the video clip from the movie The Formula (1980). Here is the scene with Brando and George C. Scott when Brando says the above Jefferson Quote. http://www.youtube.com/watch?v=NQ03IbEa1Bw
Oman +328.8 million
Pacific Rim -327.326 billion
Pakistan -1.609 billion
Palau +14 million
Panama +5.69 billion
Papua New Guinea +95.1 million
Paraguay +1.749 billion
Peru +1.656 billion
Philippines -609.4 million
Pitcairn Island 0.0
Poland +15.6 million
Portugal -1.077 billion
Qatar +2.699 billion
Republic of Yemen +219 million
Reunion -1.1 million
Romania -279.2 million
Russia -19.717 billion
Rwanda +9.1 million
San Marino +200,000
Sao Tome and Principe +1 million
Saudi Arabia -19.829 billion
Senegal +212.6 million
Serbia -60 million
Seychelles +6 million
Sierra Leone +32.1 million
Singapore +11.61 billion
Slovakia -821.9 million
Slovenia -137.3 million
Solomon Islands +4.1 million
Somalia +1.3 million
South Africa -2.577 billion
South and Central America -7.53 billion
Spain +1.67 billion
Sri Lanka -1.568 billion
St Helena -6.5 million
St Kitts and Nevis +80.8 million
St Lucia +383.7 million
St Pierre and Miquelon -1.8 million
St Vincent and the Grenadines +84.2 million
Sudan +107.5 million
Suriname +170.3 million
Svalbard, Jan Mayen Island +7.6 million
Swaziland -98.8 million
Sweden -5.865 billion
Switzerland +1.562 billion
Syria +82.1 million
Taiwan -9.879 billion
Tajikistan +55.3 million
Tanzania +120 .7 million
Thailand -13.712 billion
Togo +160.6 million
Tonga +18.9 million
Trinidad and Tobago -4.694 billion
Tunisia +165.7 million
Turkey +6.342 billion
Turkmenistan -8.5 million
Turks and Caicos Islands +177.9 million
Uganda +36.7 million
Ukraine +262 million
United Arab Emirates +10.493 billion
United Kingdom -1.258 billion
Uruguay +738 million
Uzbekistan +33.2 million
Vanuatu +17.4 million
Vatican City +1.2 million
Venezuela -22.113 billion
Vietnam -11.157 billion
Wallis and Futuna +800,000
West Bank admin. by Israel -2.6 million
Western Sahara +200,000
Zambia +26.9 million
Zimbabwe +8.6 million
"For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill."
HOW TO WIN A WAR 101........Destroy a nations manufacturing base.
Intelligence Community Fears U.S. Manufacturing Decline
Feb. 14 2011 Forbes By LOREN THOMPSON
****The manufacturing decline has now progressed to a point where the U.S. intelligence community has become concerned. Richard McCormack reported in Manufacturing & Technology News on February 3 that the Director of National Intelligence has initiated preparation of a National Intelligence Estimate to assess the security implications of waning manufacturing activity in America. National Intelligence Estimates are the most authoritative analyses prepared by the intelligence community, definitive interagency products typically reserved for the most serious threats. So the fact that the nation’s top intelligence official thinks a National Intelligence Estimate is needed for manufacturing isn’t a good sign. It suggests that America’s industrial decline is approaching the status of a crisis.****
How Can America Create Wealth If Our Industrial Base Is Destroyed? 50,000 Manufacturing Jobs Have Been Lost Every Month Since 2001
Any economy that constantly consumes far more wealth than it produces is eventually going to be in for a very hard fall. Many point to relatively stable GDP numbers as evidence that the U.S. economy is doing okay, but the truth is that we have had to borrow increasingly massive amounts of money to keep GDP numbers up at that level. The U.S. government is going to run an all-time record deficit of about 1.65 trillion dollars this year and average household debt in the United States has now reached a level of 136% of average household income. But borrowing endless amounts of money and consuming massive amounts of wealth with that borrowed money is a road that leads to economic oblivion. The only way to have a healthy economy in the long run is to create wealth. But how can America create wealth if our industrial base is being absolutely destroyed? According to Forbes, the United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001. Hundreds of formerly thriving industries in the United States are being totally wiped out. China uses every trick in the book to win trade battles. They deeply subsidize their domestic industries, they openly steal technology, they blatantly manipulate currency rates and they allow their citizens to be paid slave labor wages. So yes, the products coming from China are cheaper, but in the process tens of thousands of factories in the U.S. are shutting down, millions of jobs are being lost and the ability of America to create wealth is being compromised.
During 2010, we spent $365 billion on goods from China while they only spent $92 billion on goods from us.
Does a 4 to 1 ratio sound like a "fair and balanced" trade relationship to anyone out there?
Our trade deficit with China in 2010 was the largest trade deficit that one country has ever had with another country in the history of the world.
In fact, the U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.
Needless to say, that is not a good trend.
Our industrial base and our ability to create wealth is being wiped out so rapidly that it has now become a very serious threat to our national security.
According to Forbes, there is only one steel plant inside the United States that is still capable of producing steel of high enough quality to meet the needs of the U.S. military, and even that plant has been bought by a European company.
Meanwhile, China produced 11 times as much steel as America did last year.
Not only that, China is now the number one supplier of components that are critical to the operation of U.S. defense systems.
How in the world did we let that happen?
So what happens if we have a conflict with China someday?
But of more immediate concern is the loss of jobs that the destruction of our industrial base is causing.
For example, the Ivex Packaging Paper plant in Joliet, Illinois just announced that it is shutting down for good after 97 years in business. 79 good jobs will be lost. Meanwhile, China has become the number one producer of paper products in the entire world.
But China is not just wiping the floor with us when it comes to things like steel and paper.
The truth is that China has now become the world's largest exporter of high technology products. Back in 1998, the United States had 25 percent of the world’s high tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China's share had soared to 20 percent.
So how is China doing it? Well, as noted above, they are pulling every trick that they can think of.
Most Americans think that we have "free trade" with nations such as China. That is a complete and total lie and anyone that believes that we have "free trade" with China does not know what they are talking about.
China subsidizes their domestic industries to such an extreme extent that many global industries no longer even come close to resembling "free markets" as a recent story in Forbes noted....
According to a story in the January 20, 2009 New York Times, government subsidies so thoroughly disrupted pricing in the global market for antibiotics that many western producers had to either move facilities to Asia or exit the business entirely. The reason this might matter to intelligence analysts is that the last U.S. source of key ingredients for antibiotics — a Bristol-Myers Squibb plant in East Syracuse, New York — has now closed, leaving the U.S. dependent on foreign sources in a future conflict.
Our politicians and our business leaders have pursued economic policies that are so self-destructive that it defies explanation.
How in the world could anyone be so stupid?
Since 2001, over 42,000 U.S. factories have closed down for good. Millions of jobs have been lost. The ability of the once great American economic machine to create wealth has been neutered.
The business environment in America is completely and totally pathetic at this point. The number of small businesses that are being created is also way, way down.
According to the U.S. Census Bureau, only 403,765 small businesses were created in the 12 months that ended in March 2009. That was down 17.3% from the previous year, and it was the smallest number of small businesses created since records began being kept in 1977.
The truth is that the U.S. economy is dying.
We continue to consume about the same amount of wealth that we always have, but our net worth is declining.
According to the Federal Reserve, more than two-thirds of Americans have seen their net worth decline during this economic downturn. In fact, the Fed says that between 2007 and 2009, the wealth of the average American family declined by 23%.
So if it seems like your family and everyone around you is getting poorer, that is because it really is happening.
We really are becoming poorer as a nation.
We can see evidence of this all around us. Just consider a few of the examples that have been in the news in recent days....
*One school district in the Chicago area is laying off 363 teachers.
*The U.S. Postal Service is offering $20,000 buyouts to thousands of workers as they attempt to slash 7,500 good paying jobs.
*The city of Detroit, once a shining example of middle class America, is now a rotting cesspool of economic decline and it saw its population decline by 25 percent over the decade that recently ended.
CLICK ON THE PHOTO TO SEE MORE OF DETROITS DECAY
Americans are not feeling the full impact of America's industrial decline yet because we have been filling the gap in wealth creation with massive amounts of debt.
In the years since 1975, the United States had run a total trade deficit of 7.5 trillion dollars with the rest of the world. That 7.5 trillion dollars could have gone to support U.S. businesses and U.S. workers, but instead it left the country and went into the hands of foreigners that do not pay taxes.
Therefore, the U.S. government, state governments and our local governments have had to borrow massive amounts of money to make up the difference.
Most people do not realize it, but the destruction of America's industrial base has played a very significant role in the government debt crisis we are facing today.
In addition, the millions upon millions of workers that have lost their jobs as America's industrial base has been destroyed are now a drain on the system. Instead of creating wealth and being involved in economically productive activity, millions of American workers are now totally dependent on the U.S. government for survival.
Do you think that it is just some sort of accident that we have 44 million Americans on food stamps?
Don't you think that a large percentage of those people would actually like to have good jobs that would enable them to sufficiently feed their families?
If we continue on the path that we are currently on we are not going to have much of an economy left.
Not that all trade is bad. Certainly not. For example, trade with Canada is generally a very good thing.
However, the horribly unbalanced and unfair trade relationships that we have with nations such as China are ripping our industrial base apart. Our politicians have not been telling us the truth about what the "global economy" will mean for American workers. Most U.S. workers never realized that globalism would mean that they would be competing for jobs with workers willing to work for one-tenth the pay on the other side of the globe.
Those people that believe that we can indefinitely maintain an economy where we consume far more wealth than we create are completely and totally delusional.
Until the American people wake up and start demanding change from our politicians on these issues, 50,000 (or more) manufacturing jobs will continue to fly out the doors every single month and even more Americans will become dependent on government welfare.
Is that what you want?
Brazil Hits China With Tariffs as Potholes Erode New Silk Road. The biggest threat to a revolution in emerging market trade may be the emerging markets themselves as Brazil slaps import curbs on Chinese toys, Russia claims China dumps cold-rolled steel and China keeps its currency undervalued.
Such barriers to commerce are digging potholes in the “New Silk Road,” the name given by economists to the burgeoning trade between developing nations that is forecast to be larger than that among advanced nations by 2015.
Unions demand good jobs as study shows openings pay little. A task force of union and foundation leaders is pushing a comprehensive plan for creating new well-paying middle-class jobs - even as a separate report reveals what most workers already know: Those jobs that have been created since 2001, in recession or in recovery, pay little. "Industries that once were great contributors to our country - auto, shipbuilding, machine tools and even electronics - are shadows of what they once were,"
US debt deal will hold back its economy 2011-08-03 11:26 (chinadaily.com.cn)The outcome of the negotiations between President Obama and congressional leaders on the US federal debt ceiling is a Republican policy victory. But it will do nothing to solve the US economy's problems.
Revaluation of the Chinese Yuan Would Improve the U.S. Trade Balance
Posted: 8/1/11.....In a recent report, I showed that full revaluation of the yuan and other undervalued Asian currencies would improve the U.S. current account balance by up to $190.5 billion, increasing U.S. GDP by as much as $285.7 billion, adding up to 2.25 million U.S. jobs and reducing the federal budget deficit by up to $857 billion over 10 years.
U.S. credit card firms want to get more plastic into Chinese wallets. Jin Jitao, an editor at a textbook publishing house, may be the prototype of China’s new urban consumer. Although he had never even heard of credit cards until 2004, he now has 79.
Monday, 1 August 2011
Not only debt ceiling deal but worsening trade deficit negative for US growth......Numerous commentators have analysed the negative implications for US growth of the debt deal between President Obama and Republican leaders in the US Congress – this is considered below. But an aspect which should be integrated into analysis is that the drag on growth represented by the cuts in government spending in a debt deal will interact with another negative trend – the widening US trade deficit.
FIX AMERICA’S SELF-INFLICTED TRADE DEFICIT And Retire Inflation
Posted on 29 July 2011 by Ellen Croibier. America’s spectacular 100 year growth, from an agrarian nation in 1850 to the world’s leading economic, financial, industrial, and trading nation, was based upon two simple root causes (principles) – national trade policy and world class technology delivery. Beginning in 1950, both were inadvertently changed. The United States now leads the world in annual trade, energy and federal budget deficits along with the massive export of vital manufacturing jobs.
When Nixon 'temporarily' closed gold window what didn't change? "Let me lay to rest the bugaboo of what is called devaluation," Richard Nixon told his fellow Americans on August 15 1971.The 37th President had just announced the US would "temporarily" close the gold window.
Why We Need a National Manufacturing Technology Strategy
WEDNESDAY, JULY 27, 2011. BY ROBERT D. ATKINSON
From January 2000 to January 2010, the number of U.S. manufacturing jobs fell by 6.17 million, or 34 percent.
The Council of Foreign Relations has released a new study with the benign title, The Evolving Structure of the American Economy and the Employment Challenge. Contained within are some horrifying statistics for American workers. From 1990 to 2008, all of the job growth was in non-tradable jobs. In other words, your suspicions are true, any job that could be offshore outsourced....was offshore outsourced. You were traded for a cheaper offshore counterpart.
"New Normal" is Result of Failed U.S. Trade Policies. There is no question that America’s economy could use a shot in the arm. In the past couple of decades, that shot in the arm has largely come from debt-driven consumer spending, which we can no longer rely on. The answer must come from fixing our failed trade policy and rebuilding our industrial base.
Free Trade Deals: Lobbying Fever Foreshadows Winners, Lose. The three major free trade agreements Congress will soon consider are being promoted as a big win for American workers. But take a good look at who's lobbying for them most enthusiastically, and it becomes evident that the biggest winners will be giant multinational corporations -- and the countries on the other end of the deals.
U.S. shale gas boom could tilt global ‘petro-power’ balance. There’s a geopolitical dimension to the rising tide of U.S. gas production. By some recent estimates, shale-gas production will quadruple by 2040, to more than 40 billion cubic feet per day. And that level of production has the potential to affect Russia’s ability to wield an “energy weapon” over its European customers, according to a recent study by the Baker institute.
Can the U.S. Export Its Way Out of the Slump? Federal Reserve officials, including Chairman Ben S. Bernanke and Federal Reserve Bank of New York President William C. Dudley, are touting a bright spot in the economic data: rising global demand for U.S. products.
China and the US: Friends or rivals? The massive US trade deficit with China has led many American politicians to accuse Beijing of undervaluing its currency to keep Chinese exports cheap. Unions say competition from China is costing American jobs. But in Oregon, trade between the US West Coast and China is growing rapidly and a lot of the goods are flowing towards the Chinese.
Trade deficit impacts U.S. jobs, corporate income. In May, the U.S. trade deficit increased by 15.1 percent to reach $50.2 billion, the biggest gap in almost three years.
U.S. Trade Deficit Surges in May.
The United States trade deficit jumped 15 percent in May, topping $50 billion for the first time since October 2008, according to the U.S. Department of Commerce last week. Total May exports dropped from $175.8 billion in April to $174.9 billion in May and imports rose from $219.4 billion in April to $225.1 billion in May, resulting in a goods and services deficit of $50.2 billion, up from the revised $43.6 billion total in April.
Korea-U.S. free-trade agreement will cost jobs
posted 6-March-2011, San Francisco Chronicle Korea-U.S. free-trade agreement will cost jobs. The Obama administration’s trade policy has a huge flaw. It promotes exports but fails to address imports, which is a big mistake. This flaw is highlighted by Undersecretary of Commerce Francisco Sanchez’s image of "trucks traveling down the (Highway) 101 loaded with everything from produce to electronics," as it neglects the job-killing side on trade. In his op-ed, Sanchez fails to mention the less photogenic images of thousands of manufacturing plants closed since the North American Free Trade Agreement (NAFTA) took effect in 1994.
Free Trade Has Hurt the U.S. Beef Industry by Dustin Ensinger on March 3, 2011. Mark down the U.S. beef industry as another economic sector struggling to compete due to America’s failed trade policies.
A new report released by R-CALF USA found that America has amassed huge trade deficits in both beef and cattle with its 17 free trade agreement partners.
In the past 22 years alone, the U.S.’ trade deficit with those partners has resulted in a deficit of $41 billion. By contrast, America’s trade deficit in beef and cattle with the rest of the world is just $20 billion.
John McCain Demonstrates YET AGAIN His Cluelessness About Trade And ManufacturingBy Steven Capozzola
March 7, 2011.... Hey everyone: QUICK TRIVIA QUESTION: Where are iPads and iPhones manufactured?...Need we even tell you the answer? Aren't all of you quite obviously aware that these omnipresent, hi-tech gizmos are "Made in China?"Brace yourself: In an interview on ABC This Week, Sen. John McCain (R-AZ) stated that iPads and iPhones are manufactured in the U.S.
Divide and conquer: the union protests In Wisconsin and Ohio are increasing the hate between the left and the right. What is the perfect way to get the eyes of the American people off of the real economic problems that this country is facing? Get them fighting with each other of course. And what is one issue that is sure to get the left and the right screaming at each other like cats and dogs? Unions.
Stop arms sales to Taiwan: China NEW PROSPECTS:An upbeat assessment of US-China relations by the foreign minister was a big improvement on last year when Beijing suspended military exchanges
The G-20 Meetings: Bernanke on Capital Flows
Posted on 7 March 2011 by Elliott Morss
Introduction At the recent G-20 meetings in Paris, Fed Chairman Ben Bernanke gave a talk that summarized research he has done on international capital flows over the last 20 years. His points are interesting and important. Capital flows are as important in determining the value of the dollar as the US trade deficit. Below, I summarize his points and provide data on a number of the key issues. On a related note, I show why the US savings rate has appeared to have been so low in recent years.
Read it from CATO institute....
May 30, 1988
The Reagan Record On Trade:
Rhetoric Vs. Reality THE CATO INSTITUTE
by Sheldon L. Richman
When President Reagan imposed a 100 percent tariff on selected Japanese electronics in 1987, he and the press gave the impression that this was an act of desperation. Pictured was a long-forbearing president whose patience was exhausted by the recalcitrant and conniving Japanese. After trying for years to elicit some fairness out of them, went the story, the usually good-natured president had finally had enough.
If President Reagan has a devotion to free trade, it surely must be blind, because he has been off the mark most of the time. Only short memories and a refusal to believe one's own eyes would account for the view that President Reagan is a free trader. Calling oneself a free trader is not the same thing as being a free trader. Nor does a free- trade position mean that the president, but not Congress, should have the power to impose trade sanctions. Instead, a president deserves the title of free trader only if his efforts demonstrate an attempt to remove trade barriers at home and prevent the imposition of new ones.
By this standard, the Reagan administration has failed to promote free trade. Ronald Reagan by his actions has become the most protectionist president since Herbert Hoover, the heavyweight champion of protectionists.
THE ENTIRE ARTICLE IS HERE http://www.cato.org/pubs/pas/pa107.html
THE NEOLIBERAL HEIST OF AMERICA'S MIDDLE CLASS
Neoliberalism” is not based on Adam Smith, as is often claimed for it by the libertarian propaganda, but is, in reality, based largely on the ideas of an Austrian economist, Friedrick Hayek, who had written in the 1930’s that the control of an economy by a government is the “road to serfdom,” as he titled his treatise. Asserting that human rights sprang from property rights, he claimed that a society could be no more free than its economy. The two principal failures of his analysis, were of course, first, the premise that human rights are a function of property rights, and that a society that planned its economy was doomed to serfdom. What Hayek never considered is that the obverse of such a policy is obviously that someone who has no property, has no rights, which means that person is, quite obviously, vulnerable to the very serfdom that Hayek claimed to fear. Witness the millions in debt-slavery in India and much of the rest of the world – the very serfdom that Hayek claimed to be repulsed by. The second major error was the assumption that corporations were entitled to the same property rights as individuals, and yet somehow deserved an exemption from liability that individuals do not enjoy – a basic inequality of rights. But nevertheless, his ideas had a great deal of resonance among social libertarians, who were highly enamored of an economic theory that corresponded to their social theories. It also found additional resonance in the writings of the Russian philosopher and popular novelist, Ayn Rand, and became the basis of her philosophical celebration of what can only charitably be described as selfishness.
The conservatives of the Republican Party in the U.S. in the 1960’s and 1970’s used that period of slow economic growth as a means of persuading policymakers that Keynesian economics had somehow failed, and that only a turn to the deregulation advocated by Hayek could solve the problems of “stagflation” that had become such an intractable problem. So, claiming that Keynes was dead, “neoliberal economics” was born, brought to life in America by a bald, mousy-looking economist from the University of Chicago, by the name of Milton Friedman. Friedman knew that Hayek’s ideas were functionally anti-egalitarian, regardless of the title of his most famous book, yet Friedman privately, but freely admitted that he was not an egalitarian and didn’t care about fairness. This made him the instant darling of the “neo-liberals.”
Friedman was the undying, sworn enemy of Keynesian economics. He widely publicized what he considered to be a need to return to the “unseen hand” of the market to cure the “stagflation” of the time. His ideas were exactly what the right-wing rich elites needed in an economic theory. It was simple, easy to understand, superficially reasonable and logical, and above all else, suited their need for an economic theory, which, if implemented, would enable them to accumulate wealth and thereby transfer its accompanying power to themselves without restraint. It suited their desire for revenge and their greed and avarice beautifully. Friedman very quickly became their darling, lavishly gifted, and being driven around the University of Chicago campus in a chauffeured limousine. Paul Samuelson, Friedman’s long-time rival and the principal advocate of careful, sensible regulation of business and government intervention in the market in the Keynesian mold, tirelessly warned of the anti-egalitarian dangers of Friedman’s approach, but amidst the propaganda, he was largely forgotten, even though it was his ideas that had not only prevented a return to business cycles, but had created a vast middle class in America in just a couple of decades following world war II.
STUPID IS AS STUPID DOES said forrest gump and it looks to me like both of our political parties have a lower IQ than forrest…
Economist Paul Samuelson evidently agrees.
A big government man from way back–in an edition of his best-selling college textbook Economics, he argued that “the remarkable fact is not how much government does to control economic activity, but how much it does not do”– Samuelson, now 93, gave an interview not long ago. The current crisis, he claimed, validates his own economic views–and invalidates those of his longtime rival, the late free-market economist Milton Friedman.
“Today we see how utterly mistaken was the Milton Friedman notion that a market system can regulate itself,” Samuelson said. ” … Everyone understands now, on the contrary, that there can be no solution without government. The Keynesian idea is once again accepted that fiscal policy and deficit spending has a major role to play in guiding a market economy. I wish Friedman were still alive so he could witness how his extremism led to the defeat of his own ideas.”
An old man gloating that he has outlived an antagonist: If that were all there were to it, we could wish Samuelson well for the rest of his time here below and let the matter drop.
But Samuelson and Friedman represent two of the most influential economists in the history of the discipline. Samuelson won the Nobel Prize in Economics in 1970; Friedman in 1976. Samuelson achieved wide influence through Economics, still a popular textbook decades after he introduced it; Friedman through books such as Capitalism and Freedom, his column for Newsweek and his PBS television series, Free to Choose.
If events have indeed refuted Friedman–if Samuelson is right to say “I told you so”–then we must promptly put out of our minds much that we thought we learned over the last half century about the importance of limited government and individual liberty.
For decades, the orthodox view on free trade has been strong and simple: countries do what they do best, and everyone ends up a winner. But now, an economist who literally wrote the book on economics is demanding a rethink.
Nobel Prize-winning economist Paul Samuelson is challenging conventional “win-win” assumptions about free trade. The low-wage, high-innovation economies of China and India, he says, demand a second look. Americans may be losing big and Samuelson is out to set the record straight.
September 27, 2004. Hear a discussion with Paul Samuelson on the case against unbridled free trade.
Paul Samuelson was the winner of the 1970 Nobel Prize in Economics. He is professor emeritus of economics at MIT, where he has taught for six decades.
Listen here at this link to what he has to say about THE DANGERS OF FREE TRADE……
Ever since the period of stagflation (slow growth and high inflation) in the 1970s, Keynesian economics and the role of government have been in decline. Economic theories emphasizing the importance of unfettered, entrepreneurial “free enterprise” replaced the role of government as the supposed engine of high growth, low inflation and low unemployment – all of which were thought necessary to remain competitive in the world economy. Variants of these theories were embraced by the business-oriented Republican party, and more conservative, business-oriented Democrats. These variants of Republican “conservative economics” and Democratic “neoliberalism” remain the dominant overall economic theories influencing Jimmy Carter, Ronald Reagan, Bill Clinton, both Bushes and Barack Obama (neoliberalism US style; neoliberalism towards other countries is much harsher). These “supply side” theories are dominant today, even though the financial bust of 2008, and the resulting “Great Recession” in 2008, temporarily brought Keynesian “demand side,” massive government deficit spending back with a vengeance to try to deal with the continuing deep recession.
Giving free reign, with virtually no regulations, or only modest regulations, to capitalists, in order to maximize their profitability, even at the expense of gutting the US manufacturing economy, and dislocating millions of American workers, is now standard fare with both Republican and Democratic administrations.
Republican “conservative” economics and Democratic “neoliberalism” have much in common; and to some degree they differ. In outline form, you can decide whether there’s more than “a dimes worth of difference” between the two parties; or whether, in economic theory and policy, in essence, the two parties are basically “tweedle-dee” and tweedle-dum.”
In this case, you can decide whether the two parties ultimately just represent the interests of big financial and corporate interests, at the expense of the rest of us, or whether one party places the interests of the average “Main Street” American, over the interests of “Wall Street.”
Similarities/Differences: Conservative/Neoliberal Economics
Conservative economics results in capitalism being given free reign in the upswing of a business cycle (with a corresponding privatization, of course, of profits); during the downswing, the crisis stage, the government may let companies fail (as happened, e.g., in the Savings and Loan meltdown in the early 1980s) or it may decide to bail out the most powerful financial institutions (Bush’s Secretary of the Treasury Paulson (formerly head of Goldman Sachs) giving Congress an ultimatum to bail out the largest banks, and investment firms on Wall Street (with the government, and the US taxpayers socializing wall Streets’ losses) – witness the Troubled Asset Relief Program (TARP); workers, on the other hand, are basically forced to fend for themselves as unemployment rises, and unemployment benefits remain small, and the time frame for workers to receive these benefits remains fairly short; under Republican conservative economics there is no real safety-net for workers (in a quite literal sense, workers are forced into a Darwinian survival of the fittest).
Conservative economics – exploitative capitalism without much of a human face
Clintonism, Obamaism (neoliberal economics) – also emphasizes free trade, deregulation (in post-financial crisis, and post-BP/Gulf crisis reintroduction of some regulations), protecting the rights of capital to exploit the lowest paid workers anywhere in the world. Just as supportive as conservative economics of “free tade,” with little regard or enforcement of decent labor or environmental standards; resulting in de-industrialization in higher-wage countries; capitalism given free reign in the upswing of a business cycle (privatization of profits); during the downswing, the crisis stage, the state bails out the most powerful financial institutions and multinational corporations, witness Obama’s policies toward Wall Street (socialization of losses).
Neoliberal economics, as opposed to conservative economics, rather than workers having to fend totally for themselves, is willing to provide a basic safety-net of unemployment benefits, food stamps, job retraining, or college assistance for jobs that may never come back to the US, the right to now access health-care, if you can afford it, or, depending on income, accessing health care with government subsidies.
The state will be used to try to mitigate crisis (stimulus, deficit spending, e.g.); but the state doesn’t challenge the right of capitalists to cause inevitable crises in the first place.
Neoliberal economics – exploitative capitalism with a more human face
Current neoliberal orthodoxy (with a reluctant return to bastardized Keynesian economics during the latest economic crisis – so that capitalism can quickly get back to “free market” principles once again) is minimally preferable, given the fact that there are no other current alternatives to choose from, to “conservative economics” – if for no other reason than neoliberalism is prepared to deal with some of the negative effects of “free-market” capitalism on workers/the middle class (but, again, neoliberalism doesn’t challenge, and in fact encourages the workings of the so-called free-markets that caused/causes the crisis in the first place); while conservative economics is all about letting unfettered capitalism be, well, unfettered capitalism – to do, pretty much, whatever it pleases.
But let there be no doubt about it, both of the dominant Democratic and Republican economic orthodoxies continually prioritize the interests of capitalists/big business/the wealthy to run roughshod over the rest of us……
hence the weak economy and why the corporations have a couple of trillion in the bank, wall street got bailed out and the people get the bill, the shaft and extended unemployment checks with a bad jobs climate.
obama just negotiated a deal with the GOP on latin america trade that will offer money (borrowed of course) to the workers for extended unemployment to cover their being outsourced because the trade deals will kill their job.
The History of Neoliberalism
Neoliberalism has not always existed. Actually, it is quite a young system of thought - it became the dominant economic ideology only within the last twenty-five or thirty years. The previous system, which dated from approximately the end of the 1930s until the late 1970s, was formed in large part by the ideas of the English economist, John Maynard Keynes, and by his influence which is known as "Keynesianism." Without rejecting capitalism, Keynes decided that the State should take an active role in managing the economy of its country. In Keynesianism, the State imposes rules and supervises the market to direct the economy towards priorities it previously determined. The State was never intended to supplant the market, but rather to regulate it. For example, the State could require that a part of the profits of foreign investors must be re-invested within the country; or it could impose tariffs on foreign products to protect national industries; or the State could invest in its national markets to promote public objectives. In conclusion: in Keynesianism, the market was subordinate to the power of the State.
But while Keynesianism dominated the global economy, another very influential economist, Milton Friedman, proposed an economic model based on principles that are practically contrary to those of Keynes - a model that forms the base of what is now known as neoliberalism.
Friedman proposed that the State should almost never intervene in the national economy - which is to say that the control of the economy would be in the hands of private capital and not in the hands of the State. It criticized national governments for its enormous and inefficient bureaucracies that impeded the optimal functioning of the market. As advisor to US Presidents Richard Nixon and Ronald Reagan, Milton Friedman came to have a decisive influence over the structuring of the global economy. The latter, accompanied by his counterpart, Margaret Thatcher, Prime Minister of the United Kingdom, began to put Friedman's economic theories into practice. With the objective of permitting corporations and investors to maximize their profits by operating freely in any part of the world, these two leaders promoted the policies of free trade, deregulation, privatization of public enterprises, lower inflation, the unrestricted movement of capital, and balanced budgets (by spending what is collected in taxes)......
Ronald Reagan said, "What is a conservative after all but one who conserves, one who is committed to protecting and holding close the things by which we live.
To conserve is to protect and Reagan was a protectionist therefore a "conserve" ative
In 1973 President Richard Nixon cut U.S. tariffs to all time lows, which moved the United States further in the free market direction, and away from its American School economic system.
The term “American System,” was coined by Clay to distinguish it, as a school of thought, from the competing theory of economics at the time, the “British System” represented by Adam Smith in his work Wealth of Nations.
It represented the legacy of Alexander Hamilton, who in his Report on Manufactures, argued that the U.S. could not become fully independent until it was self-sufficient in all necessary economic products.
The American School included three cardinal policy points:
Support industry: The advocacy of protectionism, and opposition to free trade – particularly for the protection of “infant industries” and those facing import competition from abroad.
The Republicans have had the equivalent of the Invasion of the Body Snatchers since Nixon and the invaders are neoliberals.
Republicans like me who have not been snatched are now the enemy of "republicanism" and called socialists.
As we ship our wealth, our factories and our jobs out of the country, America is getting poorer.
That means that individual Americans are getting poorer.
According to one estimate, between 1999 and 2009 real median household income in the United States declined by 5.0%.
Read more: http://www.ibtimes.com/articles/145484/20110513/america-rapidly-bleeding-wealth-and-jobs.htm#ixzz1MKd03E4a
Every republican in the race and Obama are neo-liberal Confederates and their voters are clueless. Free Trade is neoliberalism period
Nobel economist Milton Friedman (Nixon), proposed an economic model based on principles that are practically contrary to those of Keynes - a model that forms the base of what is now known as neoliberalism.
Milton Friedman is most known as being the architect behind the neoliberal shift in economic policies, advocating extreme government deregulation and laissez-faire capitalism that allowed business to operate with virtually no governmental oversight.
From Wiki...Free trade in America is the policy of economics developed by American slave holding states and protectionism is a northern, manufacturing issue.
Historically, southern slave holding states, because of their low cost manual labor, had little perceived need for mechanization, and supported having the right to purchase manufactured goods from any nation. Thus they called themselves free traders.......
****Lincoln promised not to interfere with slavery, but he did pledge to “collect the duties and imposts”: he was the leading advocate of the tariff and public works policy, which is why his election prompted the South to secede.****
In pro-Lincoln newspapers, the phrase “free trade” was invoked as the equivalent of industrial suicide. HELLLOOOO!
Why fire on Ft. Sumter? It was a customs house, and when the North attempted to strengthen it, the South knew that its purpose was to collect taxes, as newspapers and politicians said at the time.
To gain an understanding of the Southern mission, look no further than the Confederate Constitution.
It is a duplicate of the original Constitution, with several improvements.
In the Confederate Constitution is a clause that has no parallel in the U.S. Constitution. It affirms strong support for free trade and opposition to protectionism: "but no bounties shall be granted from the Treasury; nor shall any duties or taxes on importation from foreign nations be laid to promote or foster any branch of industry."..........
My new favorite quote
“thank god I'm no free trader, the pernicious indulgence in the doctrine of free trade seems inevitably to produce fatty degeneration of the moral fiber.”
President Reagan’s pragmatism contrasted strongly with the utopian dreams of free traders. Ever since Edmund Burke criticized the French philosophers, Anglo-American conservatism has rejected ivory-tower theories that disregard the realities of everyday life.
Modern free traders, on the other hand, embrace their ideal with a passion that makes Robespierre seem prudent. They allow no room for practicality, nuance or flexibility. They embrace unbridled free trade, even as it helps China become a superpower. They see only bright lines, even when it means bowing to the whims of anti-American bureaucrats at the World Trade Organization. They oppose any trade limitations, even if we must depend on foreign countries to feed ourselves or equip our military. They see nothing but dogma — no matter how many jobs are lost, how high the trade deficit rises or how low the dollar falls.
Conservative statesmen from Alexander Hamilton to Ronald Reagan sometimes supported protectionism and at other times they leaned toward lowering barriers. But they always understood that trade policy was merely a tool for building a strong and independent country with a prosperous middle class.
****The largest transfer of wealth in history has gone from the America Middle Class into the pockets of multinational corporations, global elites & despots.****
US World Trade deficit 1987 - 2010
Negative 8.8 trillion dollars
METHODS FOR ADDRESSING DOLLAR DRAIN
Governments experiencing dollar drains are left with limited options. They can attempt to control imports through tariffs or barriers to foreign trade; existing agreements may make this option impractical, however.
DOLLAR DRAIN DEFINITION
The accepted dollar drain definition applies to economies throughout the world, not only those using the dollar as a unit of currency. Dollar drains are trade deficits that result when imports exceed exports in monetary terms. For instance, a country that imports more goods from overseas than it exports to foreign countries is, in effect, sending its currency overseas in return for those goods. This can lead to a shortage of currency in circulation at home, creating a tight money situation in which companies have difficulty obtaining the loans and funds they need to grow or to continue operations. Consumers feel the effects of dollar drains as well, since they cannot obtain loans for the purchase of property or for other immediate needs; a shortage of currency in the home economy affects every aspect of that economy.
MAJOR RISKS OF DOLLAR DRAINS
A ready supply of circulating money is necessary for economies to engage in setting monetary policies; loosening or tightening the supply of money in the market is one of the most important tools government has in determining fiscal policy. When there is a shortage of currency in the economy, the government cannot exercise this control over the economic situation. If the dollar drain continues for a significant length of time, the government may be forced to curtail foreign purchases or to borrow heavily from other countries in order to meet its obligations. This can lead to inflation and devaluation of the currency on the international FOREX market.
**Most analysts believe the long-term solution to dollar drain is to promote and encourage consumers to purchase goods manufactured in their own country where possible; this can stem the flow of currency out of the country and lessen the trade differential over time.**
The Trade Act of 1974
The act delegated significant power to the president to invoke measures to protect American industries from increased imports from other nations, whether or not injury was being caused by unfair trade practices.
The act’s primary importance lies in Title II, Section 201, which gives the PRESIDENT the authority to take actions to protect U.S. businesses from injury caused by increased quantities of imports, even though the increase in imports violates no ban on unfair trade practices.
THE PRESIDENT CAN JUST DO IT
CONSTITUTIONAL BASIS FOR THE ACT
Article II of the U.S. Constitution has been interpreted to vest authority to conduct foreign policy in the president, but Article 8, Section 1 gives Congress the power to lay and collect duties and the power to regulate foreign commerce. Therefore the power to regulate trade with other nations must be delegated by Congress to the president.
Section 301 expanded presidential authority to retaliate against trade practices by other nations that unfairly burden or restrict U.S. commerce, whether through high tariffs or through nontariff trade barriers. The president may suspend trade concessions, impose new higher tariff rates on a selective basis
Impact of the Act
Primarily because of Section 301, the Trade Act has been used more to open foreign markets to U.S. exports and investments than to protect American industries from unfair competition. Section 301 is a unilateral provision in U.S. law that can be invoked irrespective of any remedies available under the multilateral GATT or WTO.
Here again is the Free Traders Dogma
Neoliberalism describes a market-driven approach to economic and social policy based on neoclassical theories of economics that stresses the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the political and economic priorities of the state.
The term "neoliberalism" has also come into wide use in cultural studies to describe an internationally prevailing ideological paradigm that leads to social, cultural, and political practices and policies that use the language of markets, efficiency, consumer choice, transactional thinking and individual autonomy to shift risk from governments and corporations onto individuals and to extend this kind of market logic into the realm of social and affective relationships.
According to E. K. Hunt, classical liberals made four assumptions about human nature: People were "egoistic, coldly calculating, essentially inert and atomistic". Being egoistic, people were motivated solely by pain and pleasure. Being calculating, they made decisions intended to maximize pleasure and minimize pain. If there were no opportunity to increase pleasure or reduce pain, they would become inert. Therefore, the only motivation for labor was either the possibility of great reward or fear of hunger. This belief led classical liberal politicians to pass the Poor Law Amendment Act 1834, which limited the provision of social assistance. On the other hand, classical liberals believed that men of higher rank were motivated by ambition. Seeing society as atomistic, they believed that society was no more than the sum of its individual members. These views departed from earlier views of society as a family and, therefore, greater than the sum of its members.
Classical liberals agreed with Thomas Hobbes that government had been created by individuals to protect themselves from one another. They thought that individuals should be free to pursue their self-interest without control or restraint by society. Individuals should be free to obtain work from the highest-paying employers, while the profit motive would ensure that products that people desired were produced at prices they would pay. In a free market, both labor and capital would receive the greatest possible reward, while production would be organized efficiently to meet consumer demand.
Adopting Thomas Malthus's population theory, Classical liberals saw poor urban conditions as inevitable, as they believed population growth would outstrip food production; and they considered that to be desirable, as starvation would help limit population growth. They opposed any income or wealth redistribution, which they believed would be dissipated by the lowest orders.
****Meet the heterodox economists challenging globalism.*****
By Eamonn Fingleton
“I don’t care who writes a nation’s laws, or crafts its advanced treatises, if I can write its economics textbooks.” So said one of the greatest textbook writers of them all, Paul Samuelson.
But even Samuelson didn’t live forever—he died in 2009 aged 94—and now others decide what the rising generation is reading. It is a fair bet that, on one of the most critical issues of modern economic policy, his successors’ books would not meet with the master’s approval. That issue is trade.
Although Samuelson spent most of his life promoting unqualified free trade, he came close in his declining years to admitting he was wrong. In a paper in 2004, he suggested that there might be some circumstances in which a nation did not benefit from free trade. His analysis was carefully hedged; but, given his unique status not only as a textbook writer but as the first American economist to win a Nobel Prize, the effect on the faithful was as if the pope had conceded there might not be a God after all.
The interesting thing is that Samuelson’s doubts have not merited so much as a footnote in most of today’s top selling textbooks. This is not an isolated oversight. The textbooks have overlooked many other key developments, not least the work of Ralph Gomory and William Baumol, who have posited a much more widely applicable, if equally mathematically watertight, challenge to conventional trade theory. These omissions are all the more surprising for the fact that economics textbooks are constantly revised and updated, the better no doubt to keep sales ticking.
Robert Prasch, an economic historian at Middlebury College and a prominent critic of the free-trade consensus, puts it succinctly: “The economics profession generally is probably 15 years behind reality, and the textbook writers are a further 15 years behind the profession.”
When will the dismal science catch up with reality? Judging by my inquiries, probably not anytime soon—and maybe not before its adepts have vaporized what little is left of American economic prowess.
In the reality-based community, the attitude towards the economics profession could hardly be more sullen. Thom Hartmann, a talk-show host and author who ranks as one of the American media’s most impassioned critics of globalism, points out that, in marked contrast to economic theoreticians, ordinary Americans have long sensed there is something wrong with trade policy. “To the extent there is a trend, it is at the grassroots,” he says. “People have seen the factories go, and now many of the jobs that cannot be exported are being filled by illegal’s. Ordinary Americans don’t understand the theoretical issues but they are gravitating to a very simplistic nationalism reminiscent of Europe in the 1930s.”
Many of America’s thinking classes are no longer willing to drink the Kool-Aid. As the most recent presidential administrations have staggered from one economic debacle to another, economists have found themselves pilloried not only for failing to offer timely warnings of the dangers ahead but, in far too many cases, for the erstwhile rapture with which they endorsed the policies that resulted in the Wall Street train wreck. The result, as the Washington-based commentator James Fallows has pointed out, is that there is increasing doubt these days about almost every aspect of established economic wisdom. Fallows, an author on East Asian trade who learned his economics as a Rhodes scholar at Oxford, adds: “I don’t think that anything as coherent as a new view, or systematic critique, has emerged. It’s more an inchoate sense that the established ‘laws’ and principles are increasingly mismatched to the observed realities.”
Although the number of economists prepared to question conventional trade theory openly has steadily risen in recent years, they remain a small minority—and a marginalized one. Even as evidence mounts that the profession is presiding over one of the most remarkable fiascos in intellectual history, many factors discourage waverers from breaking ranks.
Most obviously, the textbook industry’s self-censorship makes it difficult for even skeptical teachers to provide a balanced, nuanced account. Young teachers aspiring to tenure are well advised to keep their more heterodox opinions to themselves.
“Change does not come easily in academic life,” says Prasch. “For the most part we will have to await the gravedigger’s shovel. Guys in their fifties rarely admit that what they have been teaching all their lives is balderdash.”
Darker forces may also be at work. Paul Craig Roberts, a principal architect of Reaganomics who in recent years has become one of the right’s most penetrating critics of globalism, has suggested that many globalist-leaning economists are “bought and paid for.” What is clear is that academics who aspire to moonlight as corporate consultants have little choice but to endorse orthodox views on things like off shoring. And, of course, no analyst flourishes in Wall Street’s gravitational field without toeing the line.
Nonetheless, turmoil is evident just below the surface. The metaphor of a volcano about to blow is overworked but it well describes the intellectual pressures that have been building for several decades.
The earliest rumblings came from economists on the left, some of whom began focusing on trade’s impact on jobs as far back as the 1970s. Most such skeptics—they included Jeff Madrick, Jeff Faux, Barry Bluestone, Bennett Harrison, and Robert Reich, and they were soon joined by younger colleagues such as Dean Baker, Laura Tyson, and Ira Magaziner—were advocates of industrial policy. That stance almost by definition implied a wary view of free trade. It also made them easy to marginalize. Such is the esteem with which free trade theory is viewed by almost the entire economics profession, in the early days proponents of industrial policy shrank from an all-guns-blazing assault on the consensus.
As the years have gone by, however, they have not only become more emboldened but have been joined by some on the right. Hence the sight today of President Reagan’s assistant Treasury secretary Paul Craig Roberts making common cause with liberal peers such as James K. Galbraith, Herman Daly, and Ronald Baiman, not to mention journalist Alexander Cockburn. (It should be noted, however, that Roberts draws a sharp distinction between traditional free trade and the recent phenomenon of offshoring. Roberts argues that off shoring is not true free trade as understood by classical economists. So while he opposes off shoring, he upholds the classical version of free trade, which assumed among other things that all a nation’s capital would be invested at home.)
Among the earliest challengers, two names particularly stand out—Robert Kuttner and John M. Culbertson. They both threw down the gauntlet in 1984. Kuttner came from the industrial-policy school and was then just starting to make a name for himself as an economic journalist.
Culbertson was a more startling case. Having worked as a young economist for the Federal Reserve System, he later taught at the University of Wisconsin-Madison. Previously known for rather staid work on monetary policy, he crossed a professional Rubicon with the publication of International Trade and the Future of the West. The profession’s response can be aptly summed up in the Japanese term mokusatsu—“killing with silence.” A search of LexisNexis reveals just two reviews, in National Journal and Foreign Affairs, and in the latter case his apostasy was dismissed in just five sentences.
Indeed, so out of step was he with all respectable opinion that he had to resort to publishing the book himself—a gambit that all but guaranteed his slightly amateurish-looking effort would be consigned unopened to literary editors’ garbage cans. Such editors are of course busy people and in reflexively ignoring self-published authors their instinct is almost always right. But Culbertson has proved a spectacular exception. With each passing year his challenge to the consensus is looking more inspired. He predicted that low-wage foreign competition would precipitate the collapse of the American middle class—the so-called race to the bottom that has recently been the subject of an eponymous book by Alan Tonelson.
In a field known for obscure language and ample resort to subordinate clauses, Culbertson’s writing style left nothing to the imagination. Here is a sample: “In economic affairs, the decades ahead must be a time of change and challenge, indeed a time of ‘sink or swim.’… Unless economic change is shifted to a new pattern, brought under intelligent control, the years ahead could bring cumulative deterioration and demoralization to the United States, the West, and to much of the world.”
He added: “Many economists wear blinders that will induce them to continue their crusade against ‘protectionism’ all the way to the sinking of the West. … Will the United States and the West … come to interpret international trade realistically, and respond intelligently to the situation that actually exists? This question is decisive for the future of the West.”
Like Culbertson, Kuttner issued his challenge via a book. In The Economic Illusion, he presented an analysis that went far further than that of other liberal economic commentators in targeting the core of the free-trade consensus. That core is, of course, the venerable theory of comparative advantage formulated by the British banker David Ricardo as far back as 1817.
Kuttner argued that the world had changed since Ricardo. While Ricardian theory assumed a static world in which the structure of trade reflected mainly each nation’s natural endowments—Ricardo famously cited Britain’s advantage in making woolen cloth versus Portugal’s in wine—Kuttner pointed out that, in modern manufacturing, nations can judiciously rig their markets to conjure up productivity advantages where none existed before. This is particularly likely—and is particularly consequential—in high-tech goods. With the help of an elaborate array of industrial policies, Japan, for instance, has come from nowhere in the 1950s to achieve dominance almost right across the board in advanced manufacturing, particularly in capital goods, which though invisible to consumers are essential for finished-goods producers such as those in China and other low-wage nations.
Kuttner also pointed out that Ricardo’s theory depends on other hidden assumptions that have become increasingly unrealistic over the years. The theory works as advertised only if there is no significant unemployment or unused production capacity, for instance. It is a long time since those conditions existed in America.
By the latter half of the 1980s, support for trade dogma began cracking eve among the American right. One of the first prominent conservatives to break with the consensus was Patrick Buchanan. Another notably early challenge came in 1986 from Pat Choate, an economist who advised TRW, then a major player in several high-tech industries. Choate, who had already identified himself as an advocate of industrial policy as far back as 1980, focused on the practical politics of trade, particularly East Asian mercantilism, which in its Japanese manifestation was already a red-hot issue.
Japan’s variously preposterous excuses for shutting out American goods had long become notorious. Most memorably, in comments that were clearly intended to drive a wedge between Republicans and Democrats, Tokyo blamed trade imbalances sometimes on incompetent American managers, who allegedly did not try hard enough to understand the Japanese market, and sometimes on American workers, who allegedly were lazy or uneducated.
Although the instinct in Washington, particularly among mainstream economists and other proponents of Ricardian doctrine, was to challenge every jot and tittle of Japanese rhetoric, Choate argued that the United States should simply accept that Japan did not believe in free trade and never would. Further efforts to remake Japanese society along American lines would be a fool’s errand and would only foster resentment and circumvention in Japan. Meanwhile the attempt would delay disastrously any effective remedy for American manufacturers, many of whom were already then on their last legs.
Thus, in a recommendation that scandalized orthodox American economists, Choate, who went on to achieve prominence as Ross Perot’s running mate in the 1996 presidential election, became one of the first proponents of “managed trade”: Washington should, he said, simply set targets for Japan’s imports and ask Tokyo to use its various industrial-policy levers to meet them.
But of all the challenges to the consensus, none has created more intellectual shockwaves than the Gomory-Baumol analysis. Although when it was first unveiled in 2000 it received far less publicity than Paul Samuelson’s similar later contribution would, within the economics profession many recognized it as having holed the orthodoxy below the waterline. Indeed, in the view of Paul Craig Roberts, Gomory-Baumol is probably the most important development in trade economics since Ricardo’s own theory.
The authors’ credentials are hard to shrug off. Gomory is a world-class mathematician who in a former life as director of research for IBM saw first-hand how sharply global competition in high-tech industries diverges from traditional theory. Baumol is a New York University economics professor who served as president of the American Economics Association in the 1980s.
The Gomory-Baumol analysis goes further than any other in examining the assumptions underpinning free-trade orthodoxy. In focusing on the role of assumptions, Gomory draws an analogy with how objects in the physical world behave under the influence of gravity. As he points out, in predicting the trajectory of falling objects, sometimes you have to take the effect of air into account—in addition to the force of gravity—and sometimes you don’t. But if you insist on ignoring air all the time you will end up predicting that airplanes won’t fly—that they will just fall to the ground.
Similarly with economic models, your assumptions have to be chosen with care. “The Ricardo model describes pure market forces acting in a world where production capabilities don’t change,” Gomory points out. “But today production capabilities do change. China is a great example.”
Gomory and Baumol used the Ricardo model; but they were able to consider not just one set of productivities but all possible productivities in different circumstances and at different times. Using the Ricardo model that way they could investigate, for example, how your trading partner’s economic development affects you as his productivities change. They got a very non-obvious answer: your trading partner’s economic development is at first good for you, and then, as your trading partner becomes more and more developed, bad for you.
And of course, as Gomory points out, market forces are not the only forces at work. Governments help their industries in many ways, from tax breaks to making technology transfer a prerequisite for market entry. These non-market forces are strong incentives affecting what companies do.
“The market forces are still there,” says Gomory “and we have to take account of them through models such as the Ricardo one, but if we don’t also take seriously the non-market forces, we may reach conclusions that may be as wrong as predicting that airplanes can’t fly.”
Airplanes do fly, of course. And mercantilism can work. Certainly the East Asian variety does.
As someone who has lived in Tokyo since 1985, I have long enjoyed a special vantage point from which to watch the trade debate. I am struck by how parochial are most Anglophone discussions and how little they take account of easily documented reality in other parts of the planet.
Certainly the world looks very different from Tokyo, not least because East Asian leaders are convinced that, in its ever more heedless commitment to laissez faire, the United States is digging its own grave. But of course, East Asians are discreet people and, short of being water boarded, they are unlikely to ever offer a frank opinion on an American mindset that happens to have done so much to transfer industrial leadership to East Asia.
It has long been obvious to Tokyo-based observers that, where trade is concerned, the world is divided into two economic camps—on the one hand, nations that generally run a trade surplus and on the other those that run chronic deficits. The United States, of course, now ranks as the all-time champion in the latter camp, but it shares its heedlessness with most of the English-speaking world, including the United Kingdom, Ireland, Australia, New Zealand, India, and Pakistan.
By contrast, nations that generally run surpluses include not only virtually all of the East Asians, but Germany, Sweden, Austria, Switzerland, the Netherlands, and other rich European nations.
Largely overlooked in the Anglophone media, the two camps are polar opposites in several policy matters, most obviously their approach to exchange rates. Anglophone nations have generally taken pride in strong—i.e., overvalued—currencies and have rushed to the barricades when threatened with depreciation. (This mindset was epitomized most absurdly by the “defend the pound” antics of a sickly post-imperial Britain in the 1960s and 1970s.) In contrast, the surplus nations have rejoiced in low exchange rates.
To be sure, the United States recently has undergone a partial change of heart with respect to the Chinese Yuan. But U.S. policymakers still show little interest in securing competitive exchange rates for their exporters against the Germans, the Japanese, and the Koreans.
The dichotomy in mindset between surplus and deficit nations raises many questions. Why, for instance, do Anglophone economists win so many Nobel Prizes and their peers in such robust surplus nations as Japan, China, Korea, and Germany so few? And, conversely, why are Japanese, Chinese, Korean, and German exporters so much more effective than their American and British counterparts in world markets? The answers will wait for another time, but it is a fair bet that there are more things in heaven and earth than are dreamt of in American economics textbooks.
INCREASE OR DECREASE IN PERCENTAGE OF ARMS 2000 - 2010
WORLDS LARGEST ARMS EXPORTERS
WORLDS LARGEST ARMS IMPORTERS
US +296% ***YEP WE WENT WAY UP***
CHINA -360% ****CHINA WENT WAY DOWN****
SAUDI ARABIA +983%
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