Outsourcing Gone Wild...

There certainly is evidence in support of it (its really just an understanding of how specialisation impacts on relative factor demands). There isn't, however, evidence of factor price equalisation.

Wrong! Specialisation towards goods that are relatively labour intensive will lead to wage gains.

Unions will reduce the magnitude of economic rents, allowing for efficient redistribution from capital to labour. However, even in their absence, the labour demand shift created through the production of labour intensive product will lead to wage gains.

Labour will lose out in a capital-abundant country. There's no need to make comment over unions in developing country. However, as already noted, US's trade is focused more on intra-industry trade. Here, the redistribution effects are minor and the important factor is the skills set.

Tariffs, except in the infant industry case, will eventually harm the worker. The redistribution is then between workers, with a minority gaining at the majority's expense.

 

Depends totally on the political economy. In China, the rise of labor intensive industries built by foreign capital has a working force largely made up of internal immigrants, who have no negotiating power, no social safety net (China claims they are "illegally" in the cities), and no hope for better wages.

A large number of these internal immigrants are displaced rural citizens who have had their land taken, or who have faced a form of social services starvation by the Chinese government.

For instance, the government has defunded public schools in many rural areas as a means to force people to move to cities (illegally) where they can be exploited by foreign capital.

Now of course, some workers want to move to the cities, and many workers are urban dwellers already and are making more money now than in the past. Nonetheless, to aggregate these with purposely displaced rural workers, who are ruthlessly exploited with no means of protection, is simply denialism.

But let me make clear -- I am not advocating protectionism. I am saying, however, a policy of tariffing sweatshop nations in not irrational to solve the problem at hand (though there are better ways).

 

Well, to paraphrase Keynes, eventually were all dead. If tariffs give workers in America more negotiating power with American industry and hence higher wages, that's a good thing.

Moreover, I don't think there is any real studies of tariffs in an advanced economy like ours competing with highly capitalized sweatshop nations. This is a new development, and there is good reason to believe tariffs in this new context would be good for the economy as a whole.

If the problem is unemployment and falling wages, than one solution is tariffs on sweatshop nations. It will have burdens, but if it benefits workers more than capital, it's probably a good thing in the current context. In any case, I don't think studies of tariffs from the 60s are relevant to what is happening now.

 

Haven't had the chance to read the article (as I'm a tad busy at the mo), but there's one pertinent piece of info in Yin (2007, Who is Better Off from Trade Liberalization? An Experience from Urban China, Vol. 21 Issue 3, pp 283-299): Results show that trade liberalization that occurred in China between 1988 and 1995 was responsible for an average increase of 28.73 yuan (approximately 20 percent of the total increase) in average monthly wages.

Wage gains from specialisation are often found. This isn't surprising as we're factoring in straight-forward supply and demand. I'd suggest the real issue is why factor equalisation isn't possible and why wage differentials react differently between labour abundant countries

 

All you really have is the 'optimal tariff' stuff (which is essentially beggar thy neighbour). The benefits from tariffs are focused on developing countries: from support of the infant industry to the bureaucratic ease for revenue raising (and the subsequent funding of key public goods).

 

Trust me, I am not going to argue that real income hasn't risen in China since the 80s. Frankly it almost had to rise give their starting point. I wouldn't dispute that the modernization program of the Chinese government wasn't a good thing. It was. I'm glad China is becoming a strong modern economy -- it's good for us in the long run.

But as far as that goes, US real income has also risen. But that's the problem with aggregates -- differential increases in various percentiles give a false picture of what's going on at other percentiles.

We know, for instance, that the bottom percentiles of US wage earners have seen a decrease or stagnation of real income over the past 30 years or so. And of course these are the very people who need increasing income -- we don't need policies that increase the income of rich people. It's a "problem" we don't have to solve. Yet our trade policy is designed almost exclusively to benefits owners of capital in this country.

China is more complex because there are not only percentiles but different classes of workers -- and the internal immigrants have apparently fared badly in comparison with your typical urban industrial worker, who has of course benefited from industrialization.

Further, part of the problem is it's hard to tell what is happening at that level, given the control of the Chinese government over their economic statistics.

 

We don't just have it rising. We have, as expected, a proportion of the rise caused by trade liberalisation. Of course we can't just refer to wages to understand the complexities of the well-being effects on any individual country. However, we do have evidence that disputes the 'only benefits capital' claim (as we'd expect with inter-industry trade and the effects of specialisation)

 

I wouldn't deny for a second that trade liberalization increased real income in China. It's clearly the case. And that's good thing.

Nor would I deny that much of the benefits of increased real income have been recognized by the lower income brackets (assuming they have brackets in China, I don't actually know their tax system).

But I don't think anybody can deny that more benefit would accrue to workers in China if they had the right to unionize. Indeed, the whole purpose of not allowing unions is to prevent higher wages and worker protection, so foreign capital can obtain higher profits margins. That's not a good thing. The workers there (as here) should have the right to negotiate from the strength of collective bargaining, and determine for themselves what benefits they want to negotiate for. If that results in an environment less attractive to foreign capital and hence less investment, that's for them to decide. And we should support their decision with policies that promote the right to unionize. Until we do both Chinese and American workers pay a price -- and they are exactly the people who shouldn't pay a price for trade.

 

I'd certainly agree that unions provide a valuable means to reduce economic rents. I suppose the interesting aspect is whether in less developed countries we get more traditional 'monopoly union' approaches (where wage maximisation to the detriment of employment levels are pursued) or whether we also get the productivity gains that are often associated with union activity.

 

Well, it may indeed by the former. The point is, however, that that's for working people in the economies like China to decide. If workers in China want to price themselves out of some of the foreign market, that should be their choice to make. If on the other hand they are agreeable to low wages and limited worker protection in order to maximize employment, that's OK with me, so long as it's a policy they choose, rather than having it imposed on them.

I have no qualms about competiting with people who make democratic choices. I do think, however, it is an oxymoron to talk about free trade in the context of 1/4 of the world's population not being allowed to unionize.

 

I'm not sure how they behave. There is some evidence that they're rather useful for the development process. Whilst its a little out-of-date, Fashoyin (1986, Trade Unions and Economic Development in Africa, International Studies of Management & Organization, Summer86, Vol. 16 Issue 2, pp 59-78 ) concludes:

In African countries that have gone no farther than developing partnership relationships with trade unions, that is, have avoided co-opting or subordinating them to the state/party system, unions are playing an important role in the development process. They do, in the manner most appropriate for them, align themselves and what they do with the development programs of the state and those of industrial employers, attempting to adjust their objectives to those of the state and industry and, where and when necessary, criticizing them. Unions can perform this most useful development function only as independent institutions.

Independent institutions? A proper threat, but rather useful for the pursuit of economic opportunities!

 

You make too much sense and are too well informed for me to disagree with you too much, Reiver. I just think we have too little knowledge about tariffs in the current environment to state categorically that they shouldn't be in our policy quiver, even if only as a threat. But like you I don't think they are generally a good idea, and I would use the threat sparingly, if at all.

 

Oh really?

http://www.fastcompany.com/1749952/the-problem-with-chinas-high-speed-rail


http://www.fastcompany.com/1749952/the-problem-with-chinas-high-speed-rail


http://www.globalpost.com/dispatch/...c/china/110728/china-train-crash-design-flaws


http://www.japantoday.com/mobile/view/china-tries-to-muzzle-reporting-on-train-crash


http://www.japantoday.com/category/world/view/china-high-speed-train-crash-fuels-safety-concerns


http://www.voanews.com/english/news...s-With-Outcry-Over-Train-Wreck-126400298.html


http://www.nytimes.com/2011/02/18/world/asia/18rail.html?pagewanted=all

 

The problem is that even rational consideration of tariffs can be a bad idea. It subsequently gives too much leeway to the economic nationalist, utilising fake rationale to impose policies consistent with their outdated mercantilist thinking

 

Exactly!! +1

Free market means free global market. Can you handle it?

 

"Free global market" means eventual world government to regulate said "free global market". The robber barons of the early 20th century gave way to all the national regulations of the American market. Today, the whole world is feeling the effects of global robber barons. One goes hand-in-hand with the other. I think the Americans and Europeans see no threat with world governance as they perceive that world government will be as susceptible to corruption as their national governments. I think they will be in for a rude awakening.

 

Multilateralism doesn't derive a world government so that's a red herring! In fact multilaterialism is key to minimise the threat of a true problem: regionalism through preferential trade agreement

 

We must have free trade(global robber barons) or the world will have world war 3 is the red herring.

 

You haven't even tried to respond to my comment. Regionalism has been the 'true' problem. See, for example, how it has maintained 'Old Europe' with imperialist practices replaced with equally damaging neo-liberalism

 

You're a proponent of neo-liberalism. The only thing to contain neo-liberalism gone wild is world government, something 80% of every nation would support at this point. Scary to say the least. Since people such as yourself argue that globalism is as natural as the sun rising in the morning, and going back to protectionism isn't an option, especially when those who write legislation are on the payroll.

There is only 2 options for all the leftists who argue for free trade. Either you all are puppets for the elitist rich, or you know world wide socialism is the eventual outcome of their greed, and are letting them walk into the trap. Don't be bashful or coy. State your purpose.

 

Nonsense! I simply see the gains available, particularly in terms of economic development, from multilaterialism. That will include, by definition, some level of protectionism as dynamic comparative advantage needs to be delivered.

I'm simply able to refer to economic analysis without resorting to non-economic cliché. Without multilateralism we will assuredly be left with the continuation of the North-South divide. The petty left that ignore that reality are tacit supporters of absolute poverty, using fake tears over big bad capitalists to play silly blighters!

 

Invest in China? Yep.

 

Please. Supporting protectionist policies of developing nations while wanting no tariffs in western nations means you're a traitor to your nation's workers, all the gains they have made nationally, just happen to want EXACTLY what the elite of every western nation want, and justify it with the slaves of the east getting a penny more an hour. Hardly noble. Supporting "comparative advantage" simply means you care about no one but the top, and like using economic tongue to mask it in hopes the serfs of the world won't catch on. You have read so many books on economics you have become the monster that is the average economist. Congratulations, I suppose.

 

Just more non-economic comment. Sorry, I'm just not interested in the inability of those amongst the left to understand simple trade theory

It means I have an understanding of how the developing world can benefit from trade. That you're not interested in absolute poverty shows a disagreeable feature of the petty left: they're prepared to go for sound bite in order to ignore economic reality/

And now anti-intellectualism! How ugly

 

I'm a nationalist capitalist. A paleo-con. I don't find loyalty to one's nation a dishonorable characteristic. I also know that workers, when not working, are the consumers. One can't have a market without workers making money. You are no capitalist and you know it. You never have been. To all reading, notice on this subject how the "global left" are exactly the same as the "global right". If they can work together, so can nationalists of all kinds. All western nations have a traitor problem that needs to be resolved. Quit letting them divide and conquer us. The time is now.