Amrica the Land of Opportunity--Not
Find a Conversation
| Fri, 02-20-2004 - 4:33pm |
Dark Side of Free Trade
By BOB HERBERT
he classic story of the American economy is a saga about an ever-expanding middle class that systematically absorbs the responsible, hard-working families from the lower economic groups. It's about the young people of each successive generation doing better than their parents' generation. The plotline is supposed to be a proud model for the rest of the world.
One of the reasons there is so much unease among voters this year is the fact that this story no longer rings so true. Books based on its plotline are increasingly being placed in the stacks labeled "fantasy."
The middle class is in trouble. Globalization and outsourcing are hot topics in this election season because so many middle-class Americans, instead of having the luxury of looking ahead to a brighter future for the next generation, are worried about slipping into a lower economic segment themselves.
This is happening in the middle of an economic expansion, which should tell us that the terrain has changed. In terms of job creation, it's the weakest expansion on record. The multinationals and the stock market are doing just fine. But American workers are caught in a cruel squeeze between corporations bent on extracting every last ounce of productivity from their U.S. employees and a vast new globalized work force that is eager and well able to do the jobs of American workers at a fraction of the pay.
The sense of anxiety is growing and has crossed party lines. "We are losing the information-age jobs that were supposed to take the place of all the offshored manufacturing and industrial jobs," said John Pardon, an information technology worker from Dayton, Ohio. Mr. Pardon described himself as a moderate conservative, a longtime Republican voter who has become "alienated from the Republican Party and the Bush administration" over the jobs issue.
Mr. Pardon does not buy the rhetoric of the free-trade crusaders, who declare, as a matter of faith, that the wholesale shipment of jobs overseas is good for Americans who have to work for a living.
"There aren't any new middle-class `postindustrial' or information-age jobs for displaced information-age workers," he told me. "There are no opportunities to `move up the food chain' or `leverage our experience' into higher value-added jobs."
The simple truth, as Mr. Pardon and so many others have found through hard experience, is that enormous numbers of well-educated, highly skilled white-collar workers are having tremendous trouble finding the kind of high-level employment they've been trained for and the kind of pay they feel they deserve.
The knee-jerk advocates of unrestrained trade always insist that it will result in new, more sophisticated and ever more highly paid employment in the U.S. We can ship all these nasty jobs (like computer programming) overseas so Americans can concentrate on the more important, more creative tasks. That great day is always just over the horizon. And those great jobs are never described in detail.
These advocates are sounding more and more like the hapless Mr. Micawber in "David Copperfield," who could never be swayed from his good-natured belief that something would "turn up."
We've allowed the multinationals to run wild and never cared enough to step in when the people losing their jobs, or getting their wages and benefits squeezed, were of the lower-paid variety. Now the middle class is being targeted, and the panic is setting in.
No one really knows what to do — not the president, not John Kerry or John Edwards, and most of all not the economists and other advocates who have been so certain about the benefits for American working men and women of unrestrained trade and globalization.
What happens when the combination of corporate indifference and the globalized pressure on jobs and wages becomes so intense it weakens the very foundations of the American standard of living?
The fact that this critically important issue is finally becoming an important part of the national conversation is, to borrow a phrase used in another context by the chairman of the president's Council of Economic Advisers, "a good thing."
Perhaps an honest search for solutions will follow.

The Economics of Progress
By George F. Will
Friday, February 20, 2004; Page A25
It is difficult to say something perfectly, precisely false. But House Speaker Dennis Hastert did when participating in the bipartisan piling-on against the president's economic adviser, who imprudently said something sensible.
John Kerry and John Edwards, who are not speaking under oath and who know that economic illiteracy has never been a disqualification for high office, have led the scrum against the chairman of the president's Council of Economic Advisers, N. Gregory Mankiw, who said the arguments for free trade apply to trade in services as well as manufactured goods. But the prize for the pithiest nonsense went to Hastert: "An economy suffers when jobs disappear."
So the economy suffered when automobiles caused the disappearance of the jobs of most blacksmiths, buggy makers, operators of livery stables, etc.? The economy did not seem to be suffering in 1999, when 33 million jobs were wiped out -- by an economic dynamism that created 35.7 million jobs. How many of the 4,500 U.S. jobs that IBM is planning to create this year will be made possible by sending 3,000 jobs overseas?
Hastert's ideal economy, where jobs do not disappear, existed almost everywhere for almost everyone through almost all of human history. In, say, 12th-century France, the ox behind which a man plowed a field changed, but otherwise the plowman was doing what generations of his ancestors had done and what generations of his descendants were to do. Those were the good old days, before economic growth.
The disappearance of whole categories of jobs can be desirable for reasons other than economic rationality. The economist Irwin Stelzer recalls that John L. Lewis, the fire-breathing leader of the United Mine Workers of America from 1920 to 1960, said that he hoped to see the day when no man would make his living by going underground.
For the highly competent workforce of this wealthy nation, the loss of jobs is not a zero-sum game: It is a trading up in social rewards. When the presidential candidates were recently in South Carolina, histrionically lamenting the loss of textile jobs, they surely noticed the huge BMW presence. It is the "offshoring" of German jobs because Germany's irrational labor laws, among other things, give America a comparative advantage. Such economic calculation explains the manufacture of Mercedes-Benzes in Alabama, Hondas in Ohio, Toyotas in California.
As long as the American jobs going offshore were blue-collar jobs, the political issue did not attain the heat it has now that white-collar job losses frighten a more articulate, assertive social class. But an old lesson applies to this new situation.
The welfare state, beginning with unemployment relief, was pioneered in part by European conservatives, Disraeli and especially Bismarck, to reconcile people to change -- to the frictions and casualties of economic dynamism on which, such enlightened conservatives saw, national greatness would depend in the industrial age. It is sound social policy, and simple justice, that the party benefiting from free trade -- the nation as a whole -- should be taxed to ameliorate the discomforts of those who pay the short-term price of progress.
That is the case for education and job training for persons needing to change their skills. Such assistance is especially imperative when the casualties of change bear no responsibility for their fate -- unlike, say, U.S. steelworkers, whose overreaching in collective bargaining deepened the problems of their industry.
Kerry says offshoring is done by "Benedict Arnold CEOs." But if he wants to improve the health of U.S. airlines, and the security of the jobs and pensions of most airline employees, should he not applaud Delta for saving $25 million a year by sending some reservation services to India?
Does Kerry really want to restrain the rise of health care costs? Does he oppose having X-rays analyzed in India at a fraction of the U.S. cost?
In November, Indiana Gov. Joseph Kernan canceled a $15 million contract with a firm in India to process state unemployment claims. The contract was given to a U.S. firm that will charge $23 million. Because of this 53 percent price increase, there will be 8 million fewer state dollars for schools, hospitals, law enforcement, etc. And the benefit to Indiana is . . . what?
When Kernan made this gesture he probably was wearing something that was wholly or partly imported and that at one time, before offshoring, would have been entirely made here. Such potential embarrassments are among the perils of making moral grandstanding into an economic policy.
http://www.washingtonpost.com/wp-dyn/articles/A56316-2004Feb19.html
By Martin Crutsinger
AP Economics Writer
Friday, February 20, 2004; 1:53 PM
WASHINGTON -- Federal Reserve Chairman Alan Greenspan warned on Friday that "protectionist cures" being advanced to deal with the country's job insecurities would make the situation worse.
Entering the politically charged debate over U.S. service jobs being shipped overseas, Greenspan said that it was a lack of adequate educational training rather "outsourcing" which posed the greatest threat to future American prosperity.
Greenspan, speaking to the annual meeting of the Omaha Chamber of Commerce, said that it was not surprising that there was a high level of job insecurity in the country at present when more than 2 million people in the work force have been unemployed for more than a year.
He predicted, as he did in congressional testimony last week, that the strengthening economy should lead to stronger employment growth in the months ahead.
"We have reason to be confident that new jobs will displace old ones as they always have," Greenspan said, "but America's job-turnover process is never without pain for those in the job-losing portion."
The issue of how -- how to create them, find them and keep them -- has dominated the Campaign 2004 early primary season talk. Sen. John Edwards, now the chief challenger to front-runner Sen. John Kerry, has sought to highlight the issue repeatedly at various stops.
The Bush White House has backtracked on a forecast in the president's economic report to Congress which said 2.6 million jobs should be created this year.
Greenspan, without referring directly to the political campaign or the individual candidates, said that the current anxiety about losing jobs to other countries is not new. There were fears about losing jobs to low-wage Japan in the 1950s and 1960s and to low-wage Mexico in the 1990s and more recently to low-wage China, he said.
However, Greenspan also said the recent migration of service sector jobs, such as employees working in telephone call centers, to India is a new phenomenon. But he cautioned that any answer that involved erecting trade barriers in this country would be wrong.
"The protectionist cures being advanced to address these hardships will make matters worse rather than better," he said
http://www.washingtonpost.com/wp-dyn/articles/A57717-2004Feb20.html
I call this the buggy whip vs auto argument. In the past emerging markets displaced the old one. This is not the situation today. There are no emerging markets driving out the old; corporations are moving oversease to benefit their bottom line. With no emerging markets, is it still reasonable to be confident that new and better jobs will emerge? Aren't circumstances different?