Populism, NAFTA, And Robots

Free trade is a confused orphan of a political issue. Many in the Tea Party movement seem to despise the idea of free trade, especially NAFTA, even as the conservative movement has long embraced the idea. Democrats and independents who have become convinced of the economic utility of unhindered trade, are left to deal with the structural resistance from within the party driven by union opposition to the concept. Standing above all is the idea that America doesn’t build anything anymore, evidenced some say, but the burgeoning trade deficit.

The one critical item missing from most of the media conversations on trade, has been the facts. The media dutifully repeats the positions of the parties on trade, and records the voices of angry Americans regarding trade. What we don’t often here, are conversations on what causes trade deficits or facts supporting the notion that job loss is driven by free trade. This column will seek to define free trade, and will also look at the other important factors in this under-reported story.

The arguments over free trade are fueled, in part, by a regrettable tendency of economists to always (it seems) choose the wrong words to describe economic phenomena. By way of example, many economists described their “excitement” over the recent collapse of the housing bubble and associated economic calamities. Folks who lost their jobs are unlikely to pay specific attention to economists after statements fitting that description. In a similar vein, economists have repeatedly described, in abstract terms, the tendency of economies to evolve towards a service-driven model. Such a model describes a gradual reduction in living standard (service jobs typically pay less per capita than manufacturing jobs), and is precisely what is happening in our nation. Given that stark presentation, it would be logical to demand a closed border society, which is essentially the position of today’s economic populists.

Every choice has a cost, and the good folks in favor of limiting trade seem to consistently miss two major costs; the increase in prices in the domestic market, and the loss of jobs that would occur as other countries raised barriers to U.S.-made goods. With all of the talk about the U.S. trade deficit, it is easy to miss the fact that only two nations, China and Germany, export more annually than we do. We Americans, in fact, make a lot of stuff…or at least a lot of stuff is made in America. Jobs have been lost to developing nations because of cheaper land, labor, and capital, but the stunning reality is that more have been lost to a force inside the United States. Automation, we call it robots, has taken far more jobs from Americans than cheap labor in faraway countries. In fact, automation is taking manufacturing jobs away from workers in those faraway countries.

We have seen this trend before, in agriculture. Once representing 30% of the jobs in our nation, agriculture now accounts for fewer than 3%. Walk into a market or diner today in the heartland, and you will find an old man who can tell you about farming before automation and targeted herbicides. Walk into a small town square today in the heartland, and you can see U.S. communities laid waste by automation far before the Rust Belt earned its name. That the U.S. agricultural industry is financially healthy is not in doubt, but the cultural loss and community devastation caused by the economic evolution have been severe. Of interest is the point that agriculture is one area that has continued to be protected by the U.S. Large subsidies meant to protect U.S. farmers, have facilitated job losses in the United States and internationally.

Very few address the issues with automation, and those that do are often accused of being fringe alarmists. Given the historical trends and modern processing power, the prognostications and possibilities are indeed alarming. A article postulated the potential for computers with the processing power of the human brain in the next few decades, and the ability of robots using the technology to be as mobile as a human, or better. What is needed on these subjects is not panic or blatant political branding, but a reasoned consideration of the facts. Major legislation in our nation has a tendency to create blowback because it is often debated and passed in a vaccum. Asumptions are made and existing frameworkers are ignored.

Two problems typically cited with free trade are exploitation of uneducated labor in developing countries, and the abandonment of labor in developed nations. In the United States, blow-back from NAFTA exists because we never inoculated ourselves against the side effects of trade by increasing educational and redevelopment resources in areas of likely effect. Municipalities throughout our nation have given away the tax revenues created by major employers in an attempt to hold onto the factories. The lack of a strong basic education and a portable health care structure (whether public or private), limits the adaptability of both U.S. workers and U.S. small business owners. In the undeveloped countries, the lack of market pressure on those nations to extend property rights to individuals or to comply with the environmental regulations of developed nations destroyed much of the positive benefit.

These are important issues for Americans, especially in the working class, because the economic growth of the developing world is the best defense against crime, terrorism, and open warfare. Those three factors represent the largest recipients, by far, of federal tax dollars. We live, whether we want to admit it or not, in an interconnected world. This is not the result of some vague conspiracy or “new world order”; it is the logical result of our most human attributes. Human beings are social animals, it is against our nature to live in isolation. In any case, Republicans in particular seem to have forgotten the last time a major party was pro-isolationism; it was the Republican Party in the 1930’s, and it didn’t work out so well.

My last point relates to the oft-reported trade deficit. It is important to all Americans, but not for the reasons most reported. The trade deficit is critical because it is the precursor to federal budget deficits. By definition, trade deficits mean the movement of money out of the economy; less money in the economy means less demand, less development, and less tax revenue. Our trade deficit is not driven by a lack of competitiveness (although it is a factor in some industries), it is driven by the over-valued U.S. dollar. Because of the high relative value of our dollar versus currencies like the Chinese yuan, their products are far cheaper for us to buy, than our products are for them to buy. A gradual reduction in the value of the U.S. dollar, in relative terms, is a positive event for our nation. Ask yourself if you have gotten that impression from the media.

It is the position of The Rational Middle that:

  • Open trade, in and of itself, is a positive concept for the United States
  • Negative effects of open trade, in the United States, can be resolved by better universal education, portable health care, and a favorable environment for locally owned and operated firms
  • Negative effects of open trade, in the developing world, can be resolved by an insistence by the U.S. market that firms operating in both the U.S. and the developing world respect the environmental, individual, and operational norms of the developed world
  • The trade deficit is a critical precursor to the budget deficit, and is the product of an over-valued U.S. dollar
  • The principle driver of job loss and wage degradation is the shift to a service economy; a shift that could be mitigated by a focus on local products and open market processes in regards to wage levels

There are no easy answers, and my principle hope in this column (and the series of bullet points above) is to inspire a dialogue on the topic. If a cable news outlet, radio host, or Op-Ed columnist is screaming about this topic, or carrying on in sarcastic tones, the likelihood is that they are glossing over critical facts.

The Rational Middle is listening…

(Publisher’s note- the RM has grown dramatically over the past 2 months, and I want to thank those readers who have read, commented, or shared this space with others. I am especially gratified by the contrary opinions and criticisms given to the space by conservative readers…although I would like more from my progressive friends :). Remember, it is the mission of the RM to encourage reasonable conversation on our democracy. Please continue to read, jump in with comments, and share the content through email links, Digg, Facebook, or Twitter. RSS subscriptions are available and are free. The RM is a passion of mine, but I do appreciate when my readers click on relevant advertising on its pages. Also, if you so desire, you may choose to click on the “donate” tab towards the top of the page. Either way, readership and comments are my greatest reward, and I want to thank you all once again!-MC)

4 thoughts on “Populism, NAFTA, And Robots

  1. JUST WANTED TO ADD:GO TO PBS: INDEPENDENT LENS AND WATCH OR PURCHASE “CHINA BLUE”. A CHINESE WORKER, WHO COULD HAVE BEEN KILLED FOR DOING SO, DID SNEAK
    IN A VERY SMALL HIDDEN CAMERA FOR ALMOST 2 WEEKS SO AMERICA AND THE WORLD COULD SEE WHAT “FREE TRADE” MEANT TO THEM. THIS FACTORY MADE JEANS FOR THE US MARKET. NO JEANS ARE MADE IN THE US ANYMORE……
    ALMOST, IF NOT ALL ARE MADE IN CHINA. 5 WOMEN ARE PAID $.25 FOR EACH PAIR THEY MAKE OR TOTAL LABOR COSTS OF $1.25 PER PAIR OF JEANS MADE–NO MATER WHAT KIND OF JEAN IT IS. THEY LIVE IN THE FACTORY AND EAT IN THE FACTORY BUT THEY HAVE TO PAY A PORTION OF WHAT THEY MAKE FOR RENT AND FOOD. THEY WORK AS MANY HOURS AS NEEDED TO GET THE ORDER DONE–17 HOURS WITH NO EXTRA PAY FOR OVERTIME. IF THEY GET SICK FOR EVEN 1 DAY THEY ARE FIRED AND REPLACED. THAT IS NOT A LEVEL PLAYING FIELD.
    MOST OF AMERICA’S TAX DOLLARS ARE SPENT ON MORE WEAPONS, MORE BOMBS, MORE DESTRUCTIVE EQUIPMENT, SOMETIMES EQUIPMENT THAT THE MILITARY DOESN’T EVEN WANT BUT GET ANYWAY BECAUSE THE MILITARY BUSINESSES
    NEED TO MAKE THE BIG PROFITS ALSO. The NEW REPUBLICAN PARTY (NEO MEANS “NEW” AND NEWT GINRICH WANTED TO DROP THE “GOP” LABEL BECAUSE THEY ARE NOT “THE Grand OLD Party” anymore. When Newt was Speaker of the House he said that their parties agenda was:
    1. TO GET RID OF EVERY PROGRAM PUT INTO PLACE BY FDR
    LIKE “SOCIAL SECURITY” AND “NATIONAL PARKS SYSTEM”
    AND EVERY PROGRAM PUT IN PLACE BY LBJohnson’s WAR
    ON POVERTY LIKE 1) MEDICARE 2) MEDICAID 3) FOOD
    STAMPS 4) UNEMPLOYMENT BENEFITS 5) FOSTER CARE
    SYSTEM…….EVERY SINGLE “SAFETY NET” THAT HELP OUT
    THE POOR, THE MIDDLE CLASS, THE ELDERLY. THE NEO-
    CONS WANT TO HAVE AN EMPIRE–JUST LIKE THE ENG
    LISH. I GUESS THAT’S WHY WE HAVE 735 BASES
    AROUND THE WORLD–WHY?? WE DO NOT NEED THAT
    MANY. HOW MUCH CASH DOES IT TAKE TO RUN ALL
    THOSE BASES–WEAPONS,PLANES, FOOD, HOUSING,
    SUPPLIES.ETC. WE NEED TO CLOSR MANY OF THOSE
    BASES AND BRING OUR SOLDIERS HOME. I FEAR OUR
    COUNTRY WILL TURN INTO A 3RD WORLD COUNTRY IF
    THE PEOPLE DON’T HEAR THE TRUTH BEFORE IT’S TOO
    LATE!!

  2. Carol…where to begin? Well, first, let me thank you for reading and commenting…welcome to The Rational Middle. Second, in internet etiquette, all caps is equated with yelling your point. You don’t need to yell at the RM to be heard. Third, it is clear that you started with free trade and ended up covering most of what has bothered you over the past thirty years of politics.

    I am ok with that in principle, I have (as have other loyal readers) had occasion to vent. Venting is acceptable in the RM (providing you aren’t yelling) :). Might I encourage you, however, to read some of the other articles located at this space…several cover topics you touched on. I would start with “The War on the Working Class”…it is applicable to many of your points. Incidentally, Ayn Rand (as many of my readers can attest, is not my favorite person.

    While you make many fair points Carol, a good fair few are both overblown and unsubstantiated. For one, China is a communist country, but does not generally employ slave labor. Secondly, many other nations have benefited from jobs formally worked by the American middle class, third, American car-makers (and other industrial interests) are in China, lastly, the United States does remain the third largest exporter in the world (and some of that produce does indeed go to Red China).

    The loss of manufacturing jobs to automation is well documented Carol; I sited for convenience, but a simple search will reveal hundreds of studies done on job loss in our nation that find automation to be a far greater threat than free trade.

    We entered into a more aggressive free trade posture without making the necessary improvements to our infrastructure that allow for a mobile workforce. This needs to be addressed. Trade itself, good or bad Carol, is toothpaste that is out of the tube; there is no going back without adding further pain to working class Americans.

    Again, please do come back in to the RM and comment again…just leave the caps button off. Thank You!

  3. I am a watcher of C-Span because I want to see and hear what my government is actually doing and for what purpose is this legislation being proposed. These are my observations based on what I saw in Congress when the Republicans were all for “Free Trade”. Before listing my points–let me go back in time to see how this concept came to be. What bothers me the most about anyone who
    writes about “free trade” and CHINA is that all forget to add
    one word before the name of CHINA and that is:COMMUNIST. IT IS COMMUNIST CHINA WHERE MOST OF OUR FACTORY JOBS HAVE GONE. Some have gone to Mexico,
    a few to India, a few to other countries.
    In the 1992 Presidential Debates between Bill Clinton,President George H.W. Bush, and Ross Perot ( a wealthy businessman who financed an “attempt” to have a 3rd Party in the U.S. said in one of the debates that if NAFTA
    was passed: “There would be a giant sucking sound as American Factories and Jobs left America.” He indicated they would go where labor was cheap–NO UNIONS–to protect workers safety, the paying of a “living” wage, and to
    prevent a worker being fired “without cause”. COMMUNIST CHINA DOES ALL THOSE THINGS TO ITS “WORKERS” AND MORE.
    In your article you never mentioned the Libertarian (and
    Republican economist, Ayn Rand, who among other things
    believed: That there should be NO LAWS REGULATING BUSINESS…THAT IF A BUSINESS WAS OUT OF LINE IN THEIR PRACTICES–THE OTHER BUSINESSES WOULD STEP IN AND
    SHUT THEM DOWN. THAT BUSINESS COULD REGULATE ITSELF- A CONCEPT EMBRACED BY THE REBUBLICANS AND SOME DEMOCRATS THAT THEY CONVINCED. THE “FED” CHAIRMAN: ALAN GREENSPAN WAS ONE OF HER DISCIPLES
    AS WELL.
    You negelected to note the RADICAL CHANGE IN THE REPUBLICAN PARTY starting with the Presidency of Ronald
    Reagan who was the first American President to “BREAK A
    UNION OF AIR TRAFFIC CONTROLLERS”–not only firing them for asking for an increase in wages BUT BANNING THEM FROM EVER WORKING AS AIR TRAFFIC CONTROLLERS
    AGAIN. During his ADMINSTRATION THERE WERE 2 THEORIES
    THAT EMERGED THAT EFFECTED THE U.S. FINIANCIAL CONTROL—“TRICKLE DOWN ECONOMICS” &THE “UNITARY EXEUCUTIVE” dealing with “wealth transfer” and the President, ignoring the Constitution and ignoring the Congress (THE PEOPLE) & running ALL the DEPARTMENTS MADE TO HELP PROTECT THE PUBLIC (like the Justice Dept)
    for the WISHES OF THE PRESIDENT-EVEN DECLARING WAR–
    OR TO CARRY OUT THE IDEALOGY OF HIS PARTY. President
    Reagan was ALSO THE FIRST PRESIDENT TO COME FROM THE
    “NEW REPUBLICAN PARTY-ON LONGER THE “GOP”-WITH SMALLER GOVERNMENT AND LESS SPENDING AND WAS THE FIRST PRESIDENT TO COME OUT OF MEETINGS OF THOSE WHO CAME UP WITH WAYS TO KEEP REPUBLICANS IN POWER IN ALL BRANCHES OF GOVERMENT: PRESIDENCY, BOTH HOUSES OF CONGRESS AND THE COURTS–CALLED ” THE SOUTHERN STRATEGY” which you are seeing in action today.
    I believe that on his watch “THE FAIRNESS DOCTRINE” was also done away with allowing “hate based radio and sometimes television shows where “OPINIONS” could be stated as TRUTH WITH NO FACT CHECKING…AND WHERE STATING BOTH SIDES OF AN ISSUE WAS NO LONGER NECESSARY–THUS IT’S INTENTIONS TO DIVIDE THE AMERICAN HAS WORKED WELL–BUT MAY LEAD TO OUR DOWNFALL. A NATION DIVIDED against itself CANNOT STAND. ON “FREE TRADE”:
    1. American workers living in a Democracy cannot compete
    with workers living in a Communist Country…all the power on wages, hours, working conditions, rights are all up to the Chinese Communist State Government Officials WHO ARE THE OWNERS OF THE BUSINESSES. (Very similiar to the “RIGHT TO WORK” LAW IN MANY OF THE SOUTHERN & WESTERN STATES WHERE THE OWNERS DECIDE EVERYTHING
    INCLUDING SALARIES, PAY FOR OVERTIME, IF ANY, WHETHER THEY CAN HAVE A UNION, WHETHER OSHA WILL ALLOWED
    INTO A PLANT TO CHECK ON SAFETY! This is in the USA and
    along with “Free Trade”–another Republican idea that does the same thing as “Free Trade” in other countries–Gets rid of Unions that made the Middle Class in this country–who might vote Democratic in an election–but whose wages, decided by the owners, will take them down to the poor class…just like it was in the 1930s–The “Robber Barons” Rich and the poor who will have to take any job to survive along with children who have to go into the “mines” and “CHILD LABOR” will be born again. GO TO PBS, THEN TO FRONTLINE AND WATCH THE VIDEO–McWADE PIPE, based in Alabama but with other factories over the U.S. and see what happened to safety there after the “Right To Work Act” went into effect and what it took to make the Owners CHANGE THEIR COMPANY FOR THE BETTER. PBS: FRONTLINE: A BUSINESS REVISITED-McWADE.
    2. COMMUNIST CHINA “COPIES” EVERYTHING WE SEND OVER TO BE MANUFACTURED AND SELL IT TO THERE OWN PEOPLE. THEY COPIED “MOVIES” AND “MUSIC ALBUMS,CD’S, VIDEOS FOR YEARS. The “COMMUNIST CHINESE STATE LEADERS” DO NOT ABIDE BY COPYRIGHT LAWS OR PATENTS.
    In fact, sometimes they make “FAKES” AND SEND THEM BACK INTO THIS COUNTRY AND OTHER COUNTRIES AND SELL THEM AS THE “REAL” PRODUCT AND MAKE EVEN MORE MONEY.
    3. COMMUNIST CHINA DOES NOT LIKE “COMPETITION”
    AS WE SAY WE DO IN THE U.S. THE U.S. CAR MAKERS CANNOT GET INTO THE COMMUNIST CHINA AND SO THEY ARE AT A DISADVANTAGE WHILE THE REPUBLICAN PASSED LEGISLATION ALLOWED FOREIGN CAR COMPANIES TO COME INTO THE UNITED STATES (MOSTLY THE SOUTHERN U.S.) SAYING THAT IF THEY CAME TO THE SOUTH OR SOME WESTERN STATES WITH THE RIGHT TO WORK ACT–THEY
    WOULD NOT HAVE TO WORRY ABOUT UNIONS, SAFETY EXPECTIONS, GET INTO THE US MARKET IN A BIG WAY W/O PAYING AN TARIFFS AS GM WOULD HAVE TO DO TO GET A CAR INTO COMMUNIST CHINA. THEY WERE ALSO GIVEN TAX BREAKS, THE LAND ON WHICH TO BUILD THEIR FACTORIES @
    A VERY LOW COST. In Japan they built up a legacy of Quality
    but, as another example of why businesses need regulation look at what has happened to their reputation to their cars built here….to make MORE MONEY.
    4. THE COMMUNIST CHINESE KEEP THE VALUE OF THEIR CURRENCY LOW AND MANIPULATE IT ALL THE TIME. THEY BREAK MANY OF THE RULES OF THE WORLD TRADE ORGANIZATION WHICH THEY SIGNED AS WELL AS THE UNITED STATES, BUT WE NEVER BRING A CASE AGAINST THEM BECAUSE MOST OF AMERICAN BUSINESSES LOVE THE ARRANGEMENT BUT TEXTILES AND THE PRODUCTION OF STEEL ARE TWO EXAMPLES WHERE THOSE COMPANIES HAVE BEEN PRETTY MUCH BEEN WIPED OUT BY THE CHINESE AND OTHER COUNTRIES WHO USE “SLAVE LABOR” TO MAKE THOSE
    PRODUCTS AND THEN FLOOD THE U.S. MARKET WITH THEM.
    WE ALSO NEVER MAKE A CASE AGAINST THEM BECAUSE (AND
    I NEVER THOUGHT GROWING UPI WOULD EVER SAY THIS) WE HAVE BORROWED SO MUCH MONEY FROM THE CHINESE AND HAVE SUCH A TRADE DEFICIET WITH THEM–COULD CAUSE THEM TO (IN OUR MINDS) CAUSE THEM CALL IN ALL OR A PART OF THE DEBT THE US OWES THEM. IT IS STILL A MYSTERY WHY EVERY REPUBLICAN PRESIDENT SINCE RICHARD NIXON HAS BEEN IN LOVE WITH “COMMUNIST CHINA”. i JUST DON’T GET THAT.
    5. There used to be an “unwritten” agreement between American businesses and the American people. Businesses would make a safe product and a good product for the American people. They would hire American workers and pay a living wage and provide a safe work environment. They also worked together to make sure that business would make a decent profit so that everyone would share in the success of that business. When the “Walmart” business model was used to get things made even cheaper–in some cases–telling American businesses that if they couldn’t sell their products to Walmart at the price it wanted–the Walmart buyers told them to go to China and many of them did. At the Long Beach Dock they send the raw materials to China to make there products–3 billion of raw materials goes OUT and 35 BILLION OF PRODUCTS TO SELL TO AMERICANS MADE WITH SLAVE LABOR COME IN. NOTHING IS SENT FROM LONG BEACH FOR THE COMMUNIST CHINESE TO BUY FROM THE U.S.
    6. LASTLY. NAFTA ISN’T THE ONLY ONE–THERE’S CAFTA,
    and when the Democrats took over in 2006 the Republicans kept yelling at them to pass a free trade agreement with PERU. I THINK SEN.DICK DURBIN, D-IL SAID IT BEST WHEN HE SAID THAT DOING THAT WOULD SIMPLY ALLOW MORE OF OUR COMPANIES TO RELOCATE TO S. AMERICA AND TAKE MORE AMERICAN JOBS. HE SAID THE AVERAGE FAMILY INCOME IN PERU IS $600.00 PER YEAR. WHAT PRODUCTS WOULD THEY BE ABLE TO BUY FROM THE U.S.? NOTHING.
    THAT’S WHY WE NEED TO HAVE “FAIR TRADE”INSTEAD OF
    “FREE TRADE”. WE NEED TO INSIST ON A LEVEL PLAYING FIELD SO WE CAN COMPETE AND KEEP JOBS HERE WITHOUT THE DECK STACKED AGAINST THE AMERICAN WORKER. BESIDES BEING ADDICTED TO OIL IT SEEMS BIG BUSINESS
    AND WALL STREET WILL REMAIN ADDICTED TO BIG MONEY AND SLAVE LABOR. THE REPUBLICAN SUPREME COURT HAVE YET TO DECIDE A CASE FOR A WORKER. ALL THEIR DECISIONS WERE FOR OWNERS AND SHAREHOLDERS OF BIG BUSINESSES WHICH WITH THERE LOBBYIST RUN THIS COUNTRY. WHEN THE ROBERTS COURT OVERTUNED 100 YEARS OF SETTLED LAW AND SAID CORPORATIONS ARE JUST LIKE YOU OR ME–A VOTER–AND CAN USE ALL THERE MONEY TO ELECT GOVERNMENT OFFICIALS AND IN 37 STATES–JUDGES–IT WILL HARD FOR THE COMMON MAN TO GET A DECENT JOB–LET ALONE THEIR DAY IN COURT!

  4. Pingback: Tweets that mention Populism, NAFTA, And Robots « The Rational Middle -- Topsy.com

Comments are closed.