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How the status quo can kill: the example of free trade

Tony Wikrent's picture

[Welcome, Naked Capitalist readers! And Merry Christmas, Yves! -- lambert]

There is a fault line running through the left. It becomes particularly visible when a debate ignites over whether President Obama has “sold out.” A number of issues have become combustible agents for these conflagrations, most especially the financial bailout, the decision to escalate in Afghanistan, and most recently, the President’s perceived unwillingness to fight for “real reform” in health care. Glenn Greenwald has noted The underlying divisions in the healthcare debate in which Greenwald references a recent article in The New Republic by Ed Kilgore, Managing Editor of The Democratic Strategist.

In my own diaries and comments on DailyKos, in which I have been extremely critical of the President’s economic and financial policies, which I see as working to preserve the status quo, I certainly see a pattern.

It appears to me that many of those who argue against me in defense of the President’s policies are vested in the status quo. A few have made comments with references to their careers in finance or law, and it reminds me of the observation by early twentieth century progressive Upton Sinclair, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" Or as one commenter noted in a blog elsewhere that took an extreme position on HCR, “They don’t want to connect the dots, because they are part of the picture.”

I see more of a class divide than does Greenwald and others. Seems to me that people who have secured comfortable positions in “managerial class” and “creative class” occupations tend to support the President and an incrementalist approach to addressing the nation’s problems. They tend to be reflexively hostile to any sweeping changes, such as actually annihilating the health insurance companies, or actually doing away with the big financial houses like Goldman Sachs, Citigroup, and Morgan Chase. They seem to insist on solutions that rely as much as possible on market mechanisms, such as cap and trade to deal with climate change. They recoil in horror at the suggestion that “the system” itself is the problem. Generally, they appear to be economic neo-liberals, who have actually become acclimated to the results of the Reagan Revolution.

And there is one economic policy above all others that they believe in. Free trade.

You’ve probably heard about how free trade has hurt American workers. Maybe you don’t really believe it. Maybe you think that the benefits of free trade – cheaper goods, more choices – outweigh the costs. Maybe you don’t really feel like your job or livelihood is subject to overseas competition. But free trade does affect you. To tell the truth, free trade is probably killing you.

Free trade has become such an axiomatic fixture of establishment economic thinking, that even American labor unions find it is suicidal to attack free trade head on. Instead, they declare that American workers are able and willing to compete with anyone anywhere, so long as trade is “fair.” The unions are definitely pulling their punches, but attacks on free trade also definitely get you frozen out of the policy process.

The economic theory behind free trade is elegant and convincing. Even some of the most progressive economists, such as Robert Reich, are adamant free traders. What I find is that these people, however brilliant and accomplished they are, do NOT seem to have a good grasp of what actually happens down in the trenches of the real economy: the factory and warehouse floors, the farms and hospitals, where, in our complex technologically advanced society, little, even minuscule, details often make the difference between life and death.

I have a friend who has been helping “liquidate” the actual machinery of America’s industrial base for the past three decades. A factory shuts down, and what happens to all the lathes, milling machines, planers, shapers, power presses, and other equipment that sits on that factory floor?

He can, and has, told stories about cavernous, vacated building in Brooklyn and the Bronx, and in the industrial zone stretching from Patterson, New Jersey, to Reading, Pennyslvania, containing dozens or even hundreds of machine tools and other equipment so huge that no one wanted to buy it. Not even for scrap. It would cost more to rig it and move it than the scrap value of the metal in the machine.

Bliss LARGE press making truck brake drums

Just a few months ago, he was down south, where an elderly gentlemen – let’s call him Russ - had decided to shut down his company. It was the largest manufacturer in the world of shaped cardboard boxes. You know – the boxes shaped like hearts holding a pound of Valentine’s Day candy, or the boxes shaped like a big fat guy with the big Santa Claus chocolate inside. As corporate America goes, it was not a huge operation – it employed around 150 people, including all the people on the production line, all the managers, all the sales people. It wasn’t high tech, but there was always a good demand for these shaped boxes, and it provided a good living and benefits for its workers, by far the best in the private sector in the area where this company was located. It was a large, but not giant, facility, and there was some interesting machinery in there. My friend walked around inside, studied the machines on the production line, and concluded that most of the machines were just too specialized; designed and built for precision cutting and shaping of cardboard, not plastics, or composites, or metals. How many other people were there in the U.S that had use for these types of machines?

Russ was truthful, and in answering that question and a few others, provided my friend a pretty good picture of what the shaped cardboard box industry in the U.S. looks like (this one company was pretty much it, at least for big production runs of 1,000 to 1,000,000 boxes) how it was doing (not well), and what had happened to it (read on for the details).

The boxes this company made were, as you can imagine, sold mostly to candy companies that used them to package candy according to seasonal themes, or sometimes topical themes, like a box shaped like a NASCAR racecar stuffed full of what are claimed to be Richard Petty’s favorite pralines. Over the past twenty years, Russ explained, there had been a noticeable shift in the buyers of the candy in these specially shaped candy boxes. This shift had accelerated the past few years, and now one large national retail chain, notorious for the pressure it puts on vendors and suppliers to sell to the chain cheaper, cheaper, and ever cheaper, was the largest seller, and hence buyer, of candy packaged in specially shaped boxes.

Back sometime in the summer, representatives of one of Russ’s largest customers, a candy manufacturer, visited to place its order for the boxes it needed to package its Christmas candies. An annual tradition. Russ gave them a quote, and the candy maker representatives frowned. The price had to come down; the large national retail chain, notorious for the pressure it puts on vendors and suppliers to sell to the chain cheaper, cheaper, and ever cheaper, had demanded that it buy its packaged candies a few cents cheaper than last year, and was not budging. In fact, Russ’s customer had even signed the contract, and now were looking to suppliers, such as the maker of shaped cardboard boxes, to also knock down their prices a bit.

Russ picked up his pencil, and ran through the numbers again. This kind of pressure was not new; he had held down his prices for many years, even while the costs of manufacturing inputs, especially fuel and electricity, had soared. In fact, he had not really given himself any pay the past two years, and had deferred a lot of maintenance on the factory and its equipment. Sighing resignedly, he said he would try to work up some new numbers, and get back to them. No, sorry, he would not sign a contract right now. He really needed to work on the numbers. Yes, he knew he had signed during this visit for the past twenty-something years, but now they were asking him to sell at a price he was not sure he could. So, sorry, no, he was not signing anything right now.

A few days later, the representatives of another large candy maker arrived, also with contracts in hand. And with the same demand for lower prices. And for the same reason: the large national retail chain, notorious for the pressure it puts on vendors and suppliers to sell to the chain cheaper, cheaper, and ever cheaper, was putting the squeeze on them to. Russ told them the same thing he had told the others a few days before: sorry, he would not sign a contract right now, but would get back to them.

The next day, representatives from another large candy maker arrived, and the scene repeated itself. In between these increasingly painful meeting, the Russ had walked the floor of the factory he had built and run for nearly three decades. He looked at each machine, and considered. This line of cutters were losing their tolerances, and should have had their shaft bearings replaced a year or more ago. He had saved $3,500 by not doing that. This gluing machine had become very variable in the thickness of the bead of glue it applied; the entire hydraulic pressure system needed to be checked and parts of it probably replaced. It would cost $150 just to get a good technician to walk in the door, then $100 an hour in billable time, plus whatever the parts would cost. A thousand dollars, easily. Same with this gluing machine. And that folding machine. And that label applicating machine.

There really was no where else Russ was willing to cut costs. He had worked hard, like many owners, putting in 60 or 70 hours a week. He had enough to retire on now, but that nest egg would rapidly dwindle if Russ tried to keep the company going at the prices his customers were demanding. His kids, thank god, had no interest in manufacturing – who wants to get their hands dirty in this day and age? Sadly, Russ concluded his life's run had reached the finish line. Either he would sell the company, or liquidate it.

There were no buyers for the business, so Russ called my friend. After my friend visited, and told Russ there basically was no market for these box making machines in the United States of America, Russ was pretty much forced to sell everything for its scrap value.

Here’s the kicker. My friend told me this story a few weeks after he had visited Russ’s plant. Since he had left, the riggers had come in, ripped out all the electrical, hydraulic, and water connection, put all the machines on flatbeds, and hauled it away. A few days after that, a large candy maker called Russ in a panic. The large national retail chain, notorious for the pressure it puts on vendors and suppliers to sell to the chain cheaper, cheaper, and ever cheaper, had helped them find a maker of shaped cardboard boxes in China. The candy maker had placed a rush order for a half million boxes, and were delighted when the order arrived in time.

How fast can you make us 500,000 boxes? They asked Russ. You name the price. Even last year’s price.

What’s wrong? I thought you were getting your boxes from China.

We did. But all the boxes smell. Of solvent, or glue, or something. We can’t use them.

Russ explained that he couldn’t help. His factory was shut down, and literally, the machines had been pulled out of it and sent to a scrap dealer.

Of course, my friend wanted to know what the candy company did with its smelly boxes. According to Russ, they unpacked them all, separated them all, then spread them all over the candy factory to air out, while candy piled up in standard cardboard boxes. When the shaped boxes only smelled so bad that you had to hold them close to your nose to notice, then they paid the workers overtime to fill all the shaped boxes, still smelling slightly of solvent or glue or whatever, and finish the production run and ship them to the large national retail chain, notorious for the pressure it puts on vendors and suppliers to sell to the chain cheaper, cheaper, and ever cheaper.

At the end of November, I tried peddling my books at a horse, mule, and carriage auction in a little town about a half hour’s drive north of Charlotte. I had never tried selling at an event like this, but I figured I had some books on carriage making and wheelmaking, as well as raising farm animals. Plus I have lost of books on old farm machinery, including a few hundred manuals for old tractors. Allis-Chalmers, Case, Cockshutt, Farmall, Ford, International Harvester, Massey-Harris, Oliver. Yeah, a lot of those companies are long gone. You would be amazed at the number of people who are still using farm tractors that are fifty years old or more.

The guy next to me was selling saddle horses. Not real horses; wooden ones, on which you can put your saddle after you take it off your horse. On a few of them, he had attached a horse head and a tail, to make them look cute. He also has two old-fashioned rocking horses, which are really quite nice. Those were the first to sell.

Not a lot of people were wandering into the glorified barn called “The Exhibit Hall,” and even less were making it all the way down the hall to look over my books. So I wandered over to say hi and admire the nice craftsmanship. Let’s call my retail neighbor for this weekend “Mike.” A few pleasantries, and we start talking about why we’re there as itinerant peddlers.

Mike was trying to make some extra money so he can buy Christmas gifts for his kids. I ask him what he does for a living. “Oh, I help retrofit airliners with those canard wingtips,” he replies. “The airline can save up to 17 percent of the fuel with those wing tips. They cut down a lot of turbulence and make the airflow over the wing much more stable.”

I knew that those winglets helped save fuel, but I didn’t realize it was that much. According to Boeing, and WikiAnswers, a 747 uses almost one gallon of jet fuel every second. Over the course of a ten-hour flight, that means burning 36,000 gallons. According to Boeing's web site, the 747 burns approximately 5 gallons of fuel per mile. In 2008, U.S. airlines spent $36 billion on jet fuel.

Mike described for me what he does. The wing skins need to be taken completely off, and all the hydraulics and electrical sub-systems removed, the end spars and ribs reinforced; then the winglets installed, everything put back together, and new wing skins glued on.

I express my surprise. “That sounds like a job you’d get paid really well for.”

Mike laughed, with a trace of bitterness. “Oh, no, not really. I mean, I get better than working at a gas station, but my wife’s a nurse, and she makes almost a half more than I do.”

Then Mike says something I key in on. “I’m not happy about it, but at least I have my job back.”

“What do you mean?” I ask.

“Oh, I used to make almost $30 an hour. Same job. But they figured they could do it cheaper overseas. They were sending the airplanes to India for a couple of years. But they were fucking the job up so bad over there, it was taking them a week or more to get it done. We can get ‘em in and get ‘em out in a day and a half. Over there, lots of times, the plane couldn’t even take off. They had to take the whole wing apart again, to find out what was wrong. Just stupid shit. Motors weren’t connected. Positive wires were crossed with negatives. Brackets were missing. We found a wrench in one wing, which had gotten banged around, and kinked a hydraulic line pretty bad. I remember one plane came in, we got the skin off, and there were two bolts left holding the outer flap on.”

Of course I asked. There’s supposed to be eight.

“And both of those had worked themselves loose already. We figured one or two more flights, and that plane would have crashed.”

Well, free trade in aircraft wing retrofits did not work out so good, so the company brought the work back to Mike’s town. The company tried to hire back all the former employees (probably to save money – it costs a lot to train somebody to do work like this to the level of perfection that it won’t kill people; but that’s just my guess), but Mike said a lot of them had left town, or had other jobs, and with the company offering less than half what they were making before, many workers were already making just about the same, or even more. And, there were a lot of bitter feelings – people had lost their pensions and benefits, and the company was making no offers to restore them.

When I talked to Mike, I made an assumption about what nurses earn in North Carolina, did the calculation, and figured Mike is getting about $12 an hour to take apart airliner wings, make some major internal modifications to attach a canard winglet, and then make sure it all gets put back together again. Correctly. Without missing brackets or missing bolts or wires attached wrong.

Turns out I was off a bit. Mike is probably making more like $14 an hour. I’m sure that will make you feel a lot better as you peer out your little window at the wing of the airliner you’re flying on this holiday season.

In late September, I was at a blacksmithing event in the Midwest. It was held in a pleasant little town, situated on a small river with just enough depth for keelboats, but never steamboats, back a century ago, before roads and internal combustion engines solved the problem of knitting together a trans-continental republic. There is a large supplier of welding equipment located in this town – or used to be: most of the manufacturing operations have been relocated to Mexico, and in the past couple of years, China. But the research lab remains, and, the customer service staff. The two often work together, as an attendee of this blacksmithing event – let’s call him Ed - told me. Ed has a few years before retirement, which the company is letting him spend helping in the research lab, though he is no scientist, or even researcher. But, he knows welding, and his expertise has been crucial in the research lab a number of times as it struggled to solve various problems customers have brought to it.

Ed told me about one particularly vexing problem he helped solve. Some aircraft manufacturer had outsourced the fabrication of a particular part to a place in China. This part is made of titanium. Titanium weighs a little less than half the weight of steel, but is three times stronger, so titanium is used a lot in many high-stress structures of aircraft. But titanium is a reactive metal, which means that it reacts with other elements to quickly form compounds and alloys. Those sparkling strings shooting off of fireworks? Lots of that is titanium. So the stuff is rather explosive in certain conditions.

But the reactive nature of titanium is also what makes it so resistant to corrosion. At room temperature, titanium reacts quickly with oxygen to form titanium dioxide, creating a passive, impervious coating that resists further interaction with the surrounding atmosphere. A slight corroding of titanium, in other words, leads to a state in which no further corrosion is possible.

Of course, all this means that titanium is a real bitch to deal with in a manufacturing environment. Any coating of oxide must be completely removed before titanium can be welded. Titanium dioxide has a much higher melting point than the base metal, so if you don’t clean the oxides away thoroughly, you will get little specks of it in the welding puddle, creating discontinuities in the weld that will quickly lead to cracking and failure. Even worse, a way must be found to prevent air, and especially oxygen, from getting at the titanium while it is being welded. The preferred way to weld titanium is by blowing an inert (non-reactive) gas, like argon, alongside the welding arc (you can’t use a welding torch, because the combusting gases in the flame will react with the titanium). To create an arc, you need an electrode, and the best for welding found so far is tungsten. Hence, TIG welding, or Tungsten Inert Gas welding.

Well anyway, this shop in China was welding these titanium aircraft components, and the welds were having a 100% failure rate. And they could not figure out was going wrong. Finally, they called the research lab in this pleasant little town in the American Midwest, where they used to manufacture all the welding equipment.

Ed and the other people in the research lab drove themselves nearly nuts trying to figure out what the problem was – there’s still a decent work ethic that survives down here at the bottom of the dung heap that America has become. Ed and his co-workers made sure that the Chinese were properly applying the argon, including to the backside of the welded area. They set up a makeshift gas chamber with gloves reaching in to perform the weld in, and walked the Chinese through each step to recreate the gas chamber and test it. Twice. Three times. Still all welds failed.

After two grueling weeks of trying everything they knew, it occurred to Ed to ask the Chinese if they were using the proper polarity. The electricity going through the electrode to create the welding arc: in which direction was it flowing? They didn’t know. Ed talked them through the basic set up, and discovered that they had the current flowing from the cathode to the anode, instead of the other way around. What was happening was that the electric arc, flowing in the wrong direction, was picking up microscopic pieces of the tungsten electrode, and depositing them in the weld bead. Put the finished part in a wing, let air flows flex the wing a few times, and SNAP, the weld failed, cracking from one little group of tungsten molecules to the next.

Ed, it turned out, was a fire-and-brimstone religious wrong-winger. He does not like free trade, but he also did not like it when I tried to tie together free trade and free markets, and the whole conservative drift of U.S. economic policies the past three decades. But, as you get on an aircraft to fly to see loved ones this holiday season, I’ll leave you with what Ed said to me as he ended his story. “Every time I’m on an aircraft, I look out the window at those wings, and I wonder: who welded it?”

Have a nice trip. Even if the status quo is being good to you. After seeing the fights on DailyKos, the leading progressive blog, all I can say is: Enjoy it while it lasts. Oh, and that gift-wrapped box of candy in your suitcase or under your arm - you better take a good sniff before you place it under the tree.

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Salmo's picture
Submitted by Salmo on

Here's the thing. Those guys sending jobs to India and China; they know what will happen. The wings will be bad and maybe fall off, the welds will fail, and the candy boxes will be unappealing. That's OK for two reasons: 1) senior management will not be held accountable, and 2) Mike's and Ed's wages and benefits will be dramatically reduced, and Russ's workers (and the rest of the labor pool) will be much more exploitable. Killing unions means the ownership classes get to choose how the economic pie will be sliced, and free trade is the best thing yet for tilting power away from labor.

basement angel's picture
Submitted by basement angel on

Great post. I don't think I've ever seen a blog post go from blacksmithing in the US to titanium welding in China before.

Okay, so what is the solution? What would be the most constructive way to look at trade?

jumpjet's picture
Submitted by jumpjet on

Our goal should be to get as close to maximum employment and manufacturing self-sufficiency as possible. We should manufacture everything in the United States that could possibly be made in the United States, and we should sell the bulk of those manufactured goods in the United States.

To that end, we must make the U.S. market much less open than it has been to this point. Every product imported into the country should have a tariff on it. Products in core industries, like automobiles and computers, should also be subject to quotas setting how many can be imported each year.

The rest of the world might not like it, but I don't care.

letsgetitdone's picture
Submitted by letsgetitdone on

I'm a political scientist, not an economist by training, though I've read a good deal in economics and think I have a pretty good understanding of the theory. I think the problem with the theory of free trade is that it considers the international economic system as an autonomous black box. However, it's not that. it's part of the International Social System which has economic, political, cultural, ecological and many other components.

The political component of the International System is very primitive. It is informal and elitist, and national interests stand between individuals in the system and the informal political coalitions that govern the system. These coalitions also are dominated by corporate economic interests that have no counter-weights in a democratic international political system. The international economic system and its markets have completely inadequate and primitive regulatory mechanisms, since the people who are victimized in that system have little control over international economic elites.

One thing, we've learned over the last century, is that economic systems that rely on the market alone are unstable. They are subject to concentration of economic power and wealth, and to boom and bust cycles, and to the victimization of working people.

To maintain market economies, some component of Government activity, and of serious and effective regulation preventing undue concentration and providing serious safety nets that can buffer society against boom and bust cycles, are all necessary. Since the International economic system lacks a political system sophisticated enough to provide that kind of regulation, and since national political systems will game the international market economy every chance they get without regulating it to facilitate truly competitive markets, free trade ideology when applied in today's international system is just mythology used by people who are benefiting from today's oligarchic economic activity. Their ideology should not be taken seriously as a description of what goes on, or as a prescription for what ought to go on.

Nor should we believe that the international economic system benefits American working people, when we see in front of us the destruction of their jobs and the stagnation in wages we have seen for for the past 35 years or so. The facts are there for us to see. The "free trade" system we see benefits the rich among us, but it does not benefit the middle class and the poor. Also, it's not good for American National Security, since it hollows out manufacturing capability we may need for defense production. At a minimum then, we have to protect those industries that are important for national defense, and also those industries that promise an abundance of jobs for the future, and also an industrial base for the future, and I personally don't understand a national economic policy that simply allows the international market, influenced by other nations who are unwilling to rely on it, to decide which industries, skills, and competencies will exist in the United States. We can't allow that to happen. We can't allow the international market to allocate things like the skills and competencies of our people until the international political system is fully democratic and a Government that we can grust is in control of it.

Since there is no chance in the short run of creating such an international government, it is highly inappropriate to advocate subjecting the American economic system to the forces governing the international economic system. Globalism is an ideology that cannot be allowed to prevail, because it advocates subjection to the international economic system without World Government to keep that system in check and responsible the people. It must not be allowed to prevail.

Tony Wikrent's picture
Submitted by Tony Wikrent on

I quite agree. The question, of course, is the feasibility of a one world government. Given the apparent ease with which corporate and oligarchic factions have captured various instruments of certain countries - certainly the U.S. - and given the ease with which corporate and oligarchic factions can interact with international policy making bodies (and especially given the difficulty a citizen in, say, Brazil, has in making his or her voice heard in, say Basel, or Geneva, or Rome), I think it is safe to set aside the idea of a one world government as not only unreachable and impractical, but probably serving only the interests of a corporate international oligarchy. In fact, was it not David Rockefeller, in his memoirs, that admitted to thinking and acting to achieve exactly that goal? And it is interesting to think of an education at a few institutions in the world -- Harvard, Yale, Princeton, Cambridge, and Oxford come immediately to mind -- as being designed and managed to create, consciously and deliberately, an international elite class. Jim Sleeper recently had a very good blog about this on TPMCafe, and Chris Hedges, I believe, wrote a scathing review of these elites last year.

I believe the plain and simple fact is that the institution of the sovereign nation-state remains the highest political development thus far for debating, considering, and carrying into effect, as democratically as possible, the popular will of the people of a nation. The problem, of course, is that the sub-components of the sovereign nation-state can be, and in the case of the U.S., have been, essentially hi-jacked by forces of concentrated economic power -- especially in our era of mass communications, scientific poll sampling, and extraordinarily effective marketing.

For now, I believe that our only real option is to continue to debate and discuss these issues in this new medium, the internet, as a means of educating our fellow citizens. The Presidency of Barack Obama, even if it continues to disappoint as it already has, will still serve the useful purpose of forcing into the open the cleavages and fault lines on the left that will haev to be addressed and reconciled in order to have the option of being effective come the next large financial crisis (which could be the collapse of commercial real estate in the next few months if holiday sales are so bad as to force many retailers into retrenching or even bankruptcy; or in about six to twelve years, after the reaction against Obama brings to power the final play act of Republican wrong-wing idiocy, gross economic mismanagement, and outright looting). In effect, I think what we are seeing now (such as with the furor over health care reform, or Jane Hamsher's consorting with Grover Norquist) is a sorting of the real progressives from those who only are progressive on a few issues of special interests to themselves.

As for an industrial policy, it is very clear to almost everyone except the wrong wingers, and certain corporate oligarchic elites, that the United States desperately needs some sort of concerted national effort to move out of the fossil fuels era. To this end, I think one of the most important things that needs to be done, right now, is to educate ourselves and our fellow citizens on the 1800s programs of internal improvements that actually created the modern United States. For example, I have in the works an article in the Army Corps of Topographical Engineers, which played a crucial role in pushing the frontier ever westward by mapping out the trails and sites of sustenance pioneers needed. After Lewis and Clark, there were about two dozen other expeditions that were sent out to explore and map various parts of the west.

Other possible stories that need to be told: the Coast Geodetic Surveys. The lighthouse and harbor improvement programs. The river navigation improvement programs, and canals. The National Road. In the early 1900s, the Good Roads movement, which created the road infrastructure that made possible the mechanization of transport. The Air Mail program which was used to create the airline industry. And of course, the government programs and land-grants that supported the building of the railroads. The point is that it was not really "free market" policies that created the modern United States, but a combination of national goals set by the citizens, through THEIR government, that created new opportunities for free enterprise to thrive. It was both government, and free market forces, acting at the same time, with government giving general direction, but not top-down orders, to the development of free enterprise.

The same symbiotic development is present in the development of radio after World War I, of computers after World War II, and the development of the internet after ARPANET in the 1960s. The role of the Apollo moon program as a "science driver" of the economy (i.e. technological spinoffs) should not be overlooked.

letsgetitdone's picture
Submitted by letsgetitdone on

Tony. This is a wonderful program and also a great follow-on comment. I also agree with you that World Government is out of the question right now. In fact, I think it was far more possible just at the end of WWII when a good part of the world was prostrate than it is now.

For the United States which was a fairly well-developed political system circa 1970, globalization has undermined social democratic gains that were very hard won. Any world government now would have to be based on authoritarian elitist principles, which would deprive the citizens of developed nations of right and social safety nets they fought hard to get. I don't think world Government will be possible until there is a great more economic equality across the world and a great deal more democracy across nations.

In the meantime elites in those nations that have made progress toward democratic open societies have an obligation to protect the progress made in those societies, even if protecting that progress costs them money.

selise's picture
Submitted by selise on

subjecting the American economic system to the forces governing the international economic system.

uh, the forces governing the international economic system are primarily American. it (neoliberalism at the barrel of a gun) wasn't called the washington consensus because it came from bolivia.

i'm against what is typically called corporate globalization, but globalization in general is a train that has already left the station. imo that is mostly a good thing. do you want a lawless world where the bully always wins? no icrc, no who, etc? and most importantly, how are we going to deal with climate change (both prevention and mitigation) if not through global institutions? i can't go along with that unless you have an alternative solution to work for. we don't need a full blown world gov (thank goodness) but we do need global institutions and working to make them representative of all vs just the powerful is something we must imo take some responsibility for.

Pacific John's picture
Submitted by Pacific John on

My response over at Alegre's Corner was similar, that Greenwald and Kilgore were oblivious to the Democratic class rift.

In the details of free trade, though, I'm ambivalent, and don't have the answers. In my own experience, owning a medical electronics company, no other countries can compete with us in our market, and looking at other markets, I'm sure that American workers and manufacturers would similarly kick ass on a level field. The problem happens when you have global firms with their thumb on the scale. There was a great Fast Company article a few years ago showing the mechanics of Wal Mart forcing companies to off-shore in cases that a traditional market would not. How often is your biggest customer willing to set up a Chinese factory to compete with you explicitly to force you to move to China too?

As to answers, I have the sense that domestic production is very sensitive to that thumb on the scale, and that minor improvements in global labor, health and environmental standards would create a US manufacturing boom in new products, in the same way that the Wal Mart effect rapidly gutted manufacturing. The competition just isn't all that formidable, and only succeeds when they essentially cheat. (Kinda like domestic companies, when they get their asses kicked, try to become more competitive by cheating their employees of benefits).

But. I don't think global companies would ever let the rules prevent cheating on labor standards, etc., not if it costs them an extra $0.015 per unit in supply chain costs.

Salmo's picture
Submitted by Salmo on

Free Trade was the mantra a little over a decade ago, when a predatory attack on our steel industry closed most of our plants. The mill in PA where I used to sell scrap steel closed, and thousands of workers were out of a job. Shortly afterwards, the paper mill where I sold most of my scrap newspapers closed, and with the same rationale. As my former buyer told me, they removed the machinery even when it was uneconomical to do so in order to be sure that whoever bought what was left of the property could not reopen a mill and compete. In both cases, we knew that the "market" price signals were artificial and that as soon as the predatory period was over, price would return to much higher levels (especially where no domestic competitor existed). Interestingly, the Canadian mills in both industries did not suffer the same fate. That was no accident. We do not have to look around to identify a country facing almost identical market conditions whose industrial policies work far better for its citizens. Just as with health care, there are models from which we could learn.

selise's picture
Submitted by selise on

enjoyed the post, so please forgive me for commenting only on where i think i disagree.

imo, it is a big mistake to focus on just american workers. first, because workers in other countries have suffered under corp. globalization's so called free trade far more than usa workers. second, because it's fundamentally about class warfare and not a national competition between workers in the usa vs elsewhere. when we forget that, we let ourselves been divided from our natural allies (the working classes in other countries) in a faux alliance with usa corporations (which are attempting a divide and conquer strategy via union pawns and "buy american" campaigns).

finally, economic nationalism plays to the nativism of the right and that's a dangerous play especially in times of economic distress.


btw, for a fun and quick economic take down of the supposed benefits of free trade, see steve keen's lecture on the subject (powerpoint):

letsgetitdone's picture
Submitted by letsgetitdone on

It does hurt workers everywhere. So, many other nations have sought to escape from it and institute trade practices that are more advantageous for their own development. We need to do that too. The bogey-man of a trade war will have to be avoided through careful negotiations among nations, which, of course, won't always work.

selise's picture
Submitted by selise on

by making unilateral trade moves, we can do even more damage if we're not careful about HOW we make changes. there are people who are now dependent on the trade regimes WE've created and imposed (sometimes at gun point) and imo it would be grossly immoral not to take those we may harm into account.

i'm not arguing against any particular changes, but i am arguing we must be very careful about HOW we make the changes. (particularly not abruptly or massively or without fair warning so other countries are able to prepare).

the other thing to consider is the status of the dollar as the world's reserve currency. just as we need our gov to deficit spend, the world needs the usa to be willing to run a current account deficit. if we create a new trade regime that prevents that, we would be creating deflationary pressures onto the rest of the world.

finally, we don't need protectionism to save jobs (making sure everyone has a job is under our control). using protectionism strategically as part of an overall industrial policy and national security policy is appropriate so long as we help other countries make that transition too (food security is hugely important and something we've forced other countries to undermine).

letsgetitdone's picture
Submitted by letsgetitdone on

Everything must be done with care for the consequences for others as well as ourselves. But we can't let those concerns result in our continuing to allow people to profit from arrangements that hurt American industry and workers. We need to enact taxes that take those profits back and allow us to re-invest them in new industries and re-inventing the economy.

selise's picture
Submitted by selise on

everything we've done in the last 20 years (so far as i can tell) has been with total disregard for the consequences our actions have on others -- which again have not been small with millions dead.

i'll believe that lack of regard has changed when i see posts on the problems of free trade, proposed solutions, etc that actually do take those consequences into account. that almost never happens. my guess is that's because there is a great deal of ignorance among americans about what we have done.


i'm not sure what you meant, but when you write "we can't let those concerns result in our continuing to allow people to profit from arrangements that hurt American industry and workers" that just pushes all my buttons. where is the empathy for the millions dead and massive suffering we've caused in that statement? where is the recognition of our responsibility to make amends / pay reparations? is it more important to save a few jobs in the usa than to save a million lives? not in my moral calculus. jobs can be replaced, people can't. how about saying instead that we will fight to stop people (americans and others) from profiting from those arrangements that cause harm to people everywhere and anywhere? that would be something i could sign up for.

jumpjet's picture
Submitted by jumpjet on

As a citizen of the United States, my primary concern has to be the economic well-being of the United States and her people. I care about the rest of the world, of course, but my first duty is to my native land.

selise's picture
Submitted by selise on

during the last 20 years we have killed many millions of people via a foreign policy of neoliberalism (shock therapy of privatization, free trade, financial deregulation) -- far more than we've killed in war.

very very few americans have shown any concern about this. we have no moral right to care about our economic well being by continuing to disregard how our actions affect others. i'm begging that we act responsibly -- for all our sakes.

btw, the "killing many millions" is not hyperbole. an example i've used before is that we killed about 3 million in russia alone in just a few years (see naomi klein’s the shock doctrine, joseph stiglitz’s globalization and it’s discontents, and an article in the jan 15, 2009 lancet, mass privatization and the post-communist mortality crisis: a cross-national analysis).

splashy9's picture
Submitted by splashy9 on

These are the kinds of stories that should be told, everywhere and anywhere, so people will understand what is lost when manufacturing is sent away.