Thursday, May 10, 2007

Who's Preying on Whom?

Robert Samuelson in yesterday's Washington Post:

"It is not "protectionist" (I am a long-standing free-trader) to complain about policies that are predatory; China's are just that."

Let's see. China sells American consumers and businesses cheap goods, often subsidized by the citizens/taxpayers of China with export subsidies, at prices lower than we could produce those goods ourselves. They also invest about $200 billion each year in our economy buying our financial assets (stocks and bonds).

Here's where I might agree with Samuelson: those results are "predatory," but "predatory" in the sense we are taking advantage of the Chinese, not that they are taking advantage of us. We take advantage of both their cheap goods and their capital investment in the U.S. economy.

Q: What if the China agreed to send us all of their production for free as a gift of foreign aid, would Samuelson still complain about "predatory" trade practices?


At 5/10/2007 10:45 AM, Anonymous Anonymous said...

We can easily emulate China in the United States.

All we have to do is throw a barbed-wire fence around a state and populate it with hostages taken at gun point from other states (slave labor). Next, we remove all protections usually expected in the United States such as the Constitution, labor laws, safety laws (OSHA), and environmental laws (EPA). Then, we sell the products of the slaves to other countries too stupid to realize that they are eliminating all their good paying jobs to buy the junk and support the totalitarian system. Finally, we invest the money earned in a stable country to earn money so that we can put barbed-wire around another state and expand the money-making operations.

If anyone complains about the harsh treatment and lack of human rights, we just explain that the people are so poor that anything is better than nothing. Besides, we say, you all are getting all this stuff cheap, so what’s the problem?

What state does everyone want to pick to try out our model? I never did like New Jersey myself, so let’s start there.

At 5/10/2007 11:04 AM, Blogger Unknown said...

Almost none of that is accurate. While there is prison labor in China, odds are the item you are buying from China was never touched by prisoner hands. This is because most chinese exports come from the Free Trade Zones and the Chinese are eager to minimize the exposure of this practice, so such prison labor never gets within a hundred miles of a free-trade zone.

Secondly, all the workers in America that lose their "good paying jobs" can just find new jobs. Or have you not noticed the 4.5% unemployment rate?

At 5/10/2007 1:03 PM, Anonymous Anonymous said...

You don't have to imprison workers to treat them badly. Even free-trade advocates admit China has an atrocious human rights' agenda. I don't think you would want to be a worker in China.

You might able to find a job, but you will not "just find" it. A lot of people are taking huge pay and benefit cuts when they find replacement work. Also, you can’t take a 4.5% unemployment rate and assume a 94.5% full-employment rate. For a lot of reasons: many workers are underemployed, working two jobs, or no longer in the workforce.

Possibly consumers may think they win by saving money, but you might want to double-check the label on your pet food.

At 5/10/2007 1:29 PM, Blogger Unknown said...

It is irrelevant what consumers think, all that matters is that they are made better off through Chinese imports, as the economic data suggests they are.

As for unemployment, yes; a 4.4% unemployment rate means that only 4.4% of America's workforce is seeking employment. This excludes homemakers, children, retired, etc. So what? This is understood by anyone that knows anything about such statistics. The point is, today fewer Americans are involuntarily unemployed than were before China became a major trading partner (the 80s, 70s, or 60s). As such, there is no statistical evidence to suggest trade with China destroys jobs.

As for Chinese workers themselves, exports to the U.S. invariably make them better off too, by providing alternative employment. If they were not working in export industries then they would need to find alternative employment in industries which would no longer need to compete with export industries for labor, driving down both wages and conditions. You are right that Chinese wages and working conditions are still appalling by American standards, but they are 10 times better than they were a decade ago. Wages are rising fast in China's free trade zones, and conditions are getting better too, that is because employers are being forced to bid against each other for workers. As the number of jobs continues to increase, outstripping the available workforce, wages and conditions will be forced to improve.

Look at it this way; American workers do not expect safe working conditions and high pay because of American laws. They expect them because Americans have lots of companies desperate for workers, which must provide these benefits or the workers will take a job with a competitor.

At 5/10/2007 2:04 PM, Anonymous Anonymous said...

We are definitely in uncharted waters here where the old economic models no longer apply. One thing’s for sure; there will be winners and losers during the change. It is not a zero-sum game for many folks.

At 5/10/2007 5:26 PM, Blogger Unknown said...

What models are those?

And, as usual, there will be winners and losers. Some investors will lose everything, some investors will get fabulously wealthy. And as always, the economy will adjust to provide a job for anyone that wants one at wages dictated by worker productivity.

At 5/11/2007 6:06 AM, Anonymous Anonymous said...

"What models are those?"

Post World War II economic models.

Using the term "worker productivity" makes workers sound lazy. Maybe you should just leave it at productivity.

I don't care how "productive" you are: How can anyone compete with wages in Indonesian shirt factories of 27 cents-per-hour?

I suppose the obvious answer is that no one should try unless they can find labor for 26 cents-per-hour or increase the number of pieces-per-hour each worker makes. This does open up opportunities for capitalists, but I'm not sure how much of this will trickle down to the masses.

I realize that employment outside of Michigan is at record levels, but until the health-care cost issue is settled we still have major problems for the average American workers to achieve the level of comfort their parents enjoyed.

At 5/11/2007 1:44 PM, Blogger juandos said...

walt g. says: "but until the health-care cost issue is settled we still have major problems for the average American workers to achieve the level of comfort their parents enjoyed"...

Hmmm, I don't know how old you are but I'm 55 going on 56...

My father who was a Border Patrolman for thirty years and quite well paid relatively speaking for the time, did not and could not afford MY present day lifestyle (that I've enjoyed for at least 15+years) and I only work thirty hours a week...

Health care took more net dollars out of his wallet than it does mine and the same is true for items like gasoline, groceries, and autos....

This of course isn't a blanket condition across the country but I do believe that its easier now then ever to get a job (assuming one wants to acquire the job skills there's a market for) and get all the items that my parents never really had a chance to get until much later in life than the average 30+ year old person has in this country today...

At 5/11/2007 1:56 PM, Blogger Unknown said...

Well, you have aknowledged healthcare costs, but you are still ignoring income tax avoidance impacts. For example, real wages may be stagnant, but real wages do not include such things as 401K retirement matching, which allows many workers to render a portion of their income untaxable. But it also has the effect of messing up the statistics to make it look like Americans are getting paid less than they are.

As for making shirts at 27 cents an hour: I don't need to. Let the indonesians make the shirts, I will engage in work that they could never do. The issue is capital.

As a capitalist, I can move a garment factory to indonesia, no bid deal. If the government takes it or the rebels burn it down, I'm out a hundred grand. But where should I build my billion dollar car factory? Not in indonesia: the urge for the local government to steal it would be too strong. Nope: I build my car factory in Kentucky. Billion dollar oil refinery? Texas. Billion dollar chip factory? Germany.

This is why industrialized workers are paid so much and do not need to fear losing their jobs; capitalists trust industrialized governments not to rob them.

Meanwhile, indonesians go to work every day for 27 cents making shirts, dreaming the impossible dream of going to work in a billion dollar car factory. But the only way that is going to happen is if they manage to jump ship to Kentucky.


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