Call for Constructive Responses To the Jobless Economy

[jshore]

@John Mace

Appeal to emotion.

No, it is simply identifying your point-of-view for what it is, namely a quasi-religious beliefs that markets are basically, by definition, the only legitimate and efficient way for us to make any decisions in our society.

[/quote]

Your argument boils down to “companies and people don’t know what is best for them, so the government needs to decide for them”.
[/quote]

No…My argument boils down to “The market is not the only mechanism by which companies and people decide what is best for them. That is why we have invented self-government to take collective action in cases when the market fails or to help facilitate the conditions under which markets work efficiently.”

Apparently data is what one needs to contradict the religious orthodoxy that the market is perfect and omniscent?

The governement is in charge of almost all the K-12 education in the country. Are you going to argue that its performance in executing that task recomends itself to an expansion of government responsibility in education?

I won’t point out all the obvious fallacies in your logic here but will just stick to the fact that the point isn’t so much a matter of who is in charge but whether it might be proper to provide some subsidization for the attainment of education.

Note that the the university system in the US, which contains a great deal of free market competition, is generally recognized to be the best in the world.

The U.S. also has the best basic science research in the world…And, the basic science is funded in large part by the government (NSF, NIH, the Defense Dept’s various research agencies, DOE, NASA, …)

Companies, (especially the larger ones which can offord the expense), routinely finance continued education for their employees. I think you’d be hard pressed to find many Fortune 500 companies that don’t. A company that refuses to invest in its employees is going to find itself at a competitive disadvantage.

I work for one so I know this. However, the question is not whether they invest at all but whether this investment is adequate … or at the optimal level … so that no subsidization of education by the government is needed.

Market conditions are unpredictable enough without the gov’t adding to that unpredictability.

Well, this makes the assumption that government adds to the unpredictability. I would say that government actually smooths out business cycles, making things more predictable, by adding an influx into the economy when such stimulus is needed because there is economic slack. And, I challenge you to find many serious economists who say otherwise.

I have no idea what you’re talking about here. It sounds like you are advocating that the gov’t print “extra” money, but I can’t imagine that that is what you mean.

No, government doesn’t have to print extra money. It can simply invest, spending money by borrowing, in times when the private enterprise is not investing very much.

[Sam_Stone]

So let me get this straight: Belief that markets are the way to go is ‘quasi-religious’, despite the fact that we have reams of evidence and theory showing why the markets generally provide the best allocations of resources.

On the other hand, belief that government programs can miraculously solve all of these problems is founded in steely-eyed scientific rigor, right?

For all of you claiming that governments can solve unemployment, create wealth, stumulate research into the ‘proper’ forms of technology, and solve all these other problems, need to answer a pretty fundamental question: Why is it that the United States has one of the lowest unemployment rates in the world? Why is it that the U.S. has one of the highest per-capita incomes in the world?

Why is it that Canada, which has a larger social safety net than the U.S., which spends huge amounts programs to retrain workers, which engages in all kinds of government job creation schemes, and which has higher taxes on the rich and greater benefits for the middle class, has an unemployment rate of 7.4%? Why is is that over the past 25 years the per capita income gap between the two countries has widened so much that the U.S. per capita income is almost twice Canada’s? And this despite the fact that the U.S. spends over 4% of its GDP on the military and Canada spends 1/4 of that amount, and despite the fact that Canada has vast amounts of natural resources such as uranium, oil, natural gas, nickel, and other things?

[the_first_supraliminal]

The quickest way to reduce unemployment is stop processing any new alien work visas.

I’ve been involved in the process of hiring people with this system, and every employer must state that no possible citizens can do the job. Which of course is baloney. There are no jobs whatever, including rocket scientists and brain surgeons, where there aren’t citizens out of work right now who could do the job.

[Kimstu]

SS: Belief that markets are the way to go is ‘quasi-religious’ […]?

I think that what jshore is saying is that the belief that markets are the only way to go, or always the best way to go, is a “quasi-religious” conviction. People who can look at the innumerable instances of market failures, and the ways in which they are mitigated or compensated for by legislated government action, and still insist that it would somehow be better if the government never interfered with markets are not fiscal conservatives. They are market fundamentalists, and their convictions are founded on faith, not on data.

belief that government programs can miraculously solve all of these problems […]

…is not being professed or advocated by anyone here. That’s a red herring. The vast majority of people who object to market fundamentalism are not “government fundamentalists” (AKA, perhaps, pure communists/socialists) who insist that government planning is the only way to go, or always the best way to go.

Rather, most anti-market-fundamentalists support the concept of the mixed economy, in which voluntarily created and sustained private-sector markets are the main driver of economic activity, but government regulation of markets as well as tax-supported social benefits correct for market failures and mitigate the negative consequences of markets’ boom-bubble-bust cycles.

[Kimstu]

I figured that this issue was relevant to this thread because it’s related to the loss of manufacturing jobs and a proposed measure to make the wage playing field somewhat more level.

This measure is the AFL-CIO’s recently filed unfair-trade petition to the US government to threaten punitive trade reprisals against China unless it stops artificially depressing wages with quasi-slave-labor practices.

Corporations routinely petitioned our government to threaten other countries with sanctions if their products were being knocked off or undersold by foreign manufacturers with state subsidies, and our government frequently complied. […]

For the first time ever, the AFL-CIO filed the kind of unfair-trade petition that corporations commonly file, alleging that China’s repression of workers’ rights has displaced at minimum 727,000 U.S. jobs, and calling on the president to threaten China with tariffs until it stops artificially lowering its workers’ wages.

The idea that our trade statutes protect American workers from competition with repressed workforces overseas will surprise just about everybody, but in fact, these laws were enacted by Congress in the 1980s and signed by Ronald Reagan. For the past 15 years, unions have taken no action under the laws, because the U.S. job losses were hard to quantify.

Over the past year, however, Mark Barenberg, a Columbia University law professor, and Mark Levinson, chief economist for UNITE (the clothing and textile union), concluded that changes in the global economy were so huge that such a calculation was now possible – and necessary. In particular, there was the loss of nearly 3 million U.S. manufacturing jobs over the past three years, the concurrent explosion of Chinese manufacturing, the ballooning of the U.S. trade deficit with China and the abundant if largely ignored documentation of China’s semi-Stalinist labor system.

The 103-page AFL-CIO petition runs through an array of statistical analyses to come up with its figure of 727,000 displaced American manufacturing jobs. But its foremost achievement may be to encapsulate the vast literature that describes the part-feudal, part-communist labor system in which Chinese peasants must labor when they go to work in China’s export-sector factories. […]

Urban workers are free to apply for and leave jobs; they are entitled to state housing and pensions. Rural workers, however, need state permission to seek work in towns and factories. Once employed, they enter a bonded-labor arrangement in which they cannot quit unless they can pay their employer an amount plainly beyond their means. The hukou system forbids them to compete with urban workers for higher-paying jobs, and migrant workers without jobs are subject to arrest by the state’s public security bureau.

By state design, then, these workers have no power to affect their conditions of work. Though productivity in China has skyrocketed, they are routinely paid rural-level subsistence wages – as little as 15 to 30 cents an hour – when they are paid at all. Employers tend to recruit childless, young, single women, whom they pack into cement-block dormitories to which the women are commonly restricted when they’re not on the factory floor. They cannot leave. They organize at the peril of imprisonment or torture.

If corporations can petition (and under many trade agreements, even sue) for punitive tariffs against countries that use unfair subsidies to undercut their profits, why shouldn’t workers be able to demand the same actions against countries that unfairly subsidize the undercutting of their wages? And in fact, according to these Reagan-era laws, it seems that they can.

[Kimstu]

SS: Why is it that the U.S. has one of the highest per-capita incomes in the world?

Didn’t catch this pseudo-argument earlier. Sam, per capita income is simply the total income of a region or country divided by its total population. It doesn’t say anything about how well off the average person is. For example, a population group composed of me, you, jshore, and Bill Gates would have an astronomical per capita income, even if the three of us here were all starving in the gutter. Would that be a reliable indicator of the health of our four-person society?

All that a high per capita income by itself indicates is that at least some people in a society have managed to acquire oodles of money. And nobody’s denying that unchecked capitalism enables some people to acquire oodles of money. What we’re saying is that that is no guarantee of the prosperity of most of the people in the society.

I might reverse your rhetorical questions and ask: if the more laissez-faire US system is so successful, why does the US have a lower average life expectancy and higher infant mortality rates than Canada? Why does it have so many more people unable to afford health care? Why does it have a lower personal savings rate, higher individual debt, and a higher child poverty rate?

Obviously, it is silly to argue from a few cherry-picked statistics that any one system is unambiguously, universally better than another. The smart thing to do is to look at specific problems and see which type of specific policies are better for solving them. The nice thing about being a rational supporter of mixed economies, rather than an ideologically blinkered communist or market fundamentalist, is that you’re allowed to consider both market and government solutions and pick the one that seems best in your particular circumstances.

[Sam_Stone]

It just annoys me that when some of us explain why we think the market should be left to work, we get accused of being fanatics, quasi-religious faithful, etc. But then the other side comes up with arbitrary government plans, state them like it’s obvious that they are the solution to the problem, and never answer substantive criticisms of government. Who’s being religious here? I have on many occasions asked people to refute arguments against government such as regulatory capture, the inability of goverment to make use of information as the market can, disincentive effects of government action, etc., and I never get reasonable answers. Usually, the response is something like, “Yeah, well the market has problems too.” Which, while true, is irrelevent to the discussion of, say, comparative advantage.

It’s all attack and no defense. But before you can convince me that government should involve itself in some aspect of the market, you not only have to show that a problem exists, but ALSO that government is capable of doing better than the market. It’s this second half that many posters are weak on. They gloss over or totally ignore serious deficiences inherent to central planning.

Market action should be the default condition in a free country. For the government to become involved it should show that there is a pressing need that warrants intervention, AND give me a solid plan for making things better that takes into account ALL of the liabilities that come with government. The burden of proof is on you. So start explaining it.

[iamme99]

@Sam Stone

Why is it that the United States has one of the lowest unemployment rates in the world? Why is it that the U.S. has one of the highest per-capita incomes in the world?

Why is it that Canada, which has a larger social safety net than the U.S., which spends huge amounts programs to retrain workers, which engages in all kinds of government job creation schemes, and which has higher taxes on the rich and greater benefits for the middle class, has an unemployment rate of 7.4%? Why is is that over the past 25 years the per capita income gap between the two countries has widened so much that the U.S. per capita income is almost twice Canada’s? And this despite the fact that the U.S. spends over 4% of its GDP on the military and Canada spends 1/4 of that amount, and despite the fact that Canada has vast amounts of natural resources such as uranium, oil, natural gas, nickel, and other things?

Unemployment figures are “juiced” by every government. How much is always the open question. Figure the USA is double what the government officially reports (this has been discussed before on these forums, I don’t know why we have to keep repeating the same thing over and over for you and a few others. But take a look at this page from the USA BLS to refresh yourself Alternate measure of labor utilization. Japan advertises something like 5% unemployment but I have seen writings that say the true number using standard measures would be closer to 20%. So employed figures are open to question.

As to highest per-capita income, you also have to look at per capita costs of living. The USA is near the top of the world on this measure so obviously, income is going to be high for people to be able to live here.

The USA is about the same size as Canada in total land area but the USA has 9 times the population. We have a lot more “hands” to put to work than you do. Perhaps you don’t have enough people to take advantage of all your natural resources? Now, if Canada were say 20 degrees or so warmer, on average, more people might want to move there <lol>. Looking at this site, I was surprised to see that Alberta (where you live, I believe) has 1.7 TRILLION barrels of oil! Given how much oil is valued around the world, seems like it would be good to develop more of your oil resources. I’m sure we would rather buy oil from Canada, than from the Middle East and the transportation charges would be lower. Doing so would certainly help your employment situation and also raise your per capita income levels. Also despite what seems like a somewhat negative portrayal of your home country, the site referenced above says “The United Nations has rated Canada as the best country in the world to live in, for seven consecutive years.” That seems like a good thing to me!

[iamme99]

@Sam Stone

It’s all attack and no defense. But before you can convince me that government should involve itself in some aspect of the market, you not only have to show that a problem exists, but ALSO that government is capable of doing better than the market. It’s this second half that many posters are weak on. They gloss over or totally ignore serious deficiences inherent to central planning.

Market action should be the default condition in a free country. For the government to become involved it should show that there is a pressing need that warrants intervention, AND give me a solid plan for making things better that takes into account ALL of the liabilities that come with government. The burden of proof is on you. So start explaining it.

I think most everyone here would be happy to let a free and unencumbered markerplace do its thing, IF IT WERE WORKING. But when it isn’t, then somebody else needs to step in and only a government is big enough to do so. You, John and a few others can throw all the bogus and manipulated government statistics you want on the table about how good everything really is relative to living in Bangladesh or wherever, how happy we should therefore be, etc., etc. However, actually living in and through these “good times” is another story.

[John_Mace]

@jshore

No, it is simply identifying your point-of-view for what it is, namely a quasi-religious beliefs that markets are basically, by definition, the only legitimate and efficient way for us to make any decisions in our society.

In other words, your opinion is a fact.

No…My argument boils down to “The market is not the only mechanism by which companies and people decide what is best for them. That is why we have invented self-government to take collective action in cases when the market fails or to help facilitate the conditions under which markets work efficiently.”

“The market” is not an entity. It’s simply people interacting with other people. No religion, no mysticism. Just simple everyday exchange. Government (in this country) was not “invented to take action when the market fails”, it was invented to secure the rights of individuals from coercion by other individuals.

Apparently data is what one needs to contradict the religious orthodoxy that the market is perfect and omniscent?

Data is needed to demonstrate that people need to be saved from themselves. Yes, people should be free to interact in the market, and if you wish to curtail that activity you damn well better have some data to show that there is a reason for doing so.

I won’t point out all the obvious fallacies in your logic here but will just stick to the fact that the point isn’t so much a matter of who is in charge but whether it might be proper to provide some subsidization for the attainment of education.

Please point out the fallacies. You are promoting the expansion of government involvement in education in light of dismal results by that body in past performance in that area. I’m eager to hear about my fallacies.

The U.S. also has the best basic science research in the world…And, the basic science is funded in large part by the government (NSF, NIH, the Defense Dept’s various research agencies, DOE, NASA, …)

The US government monopolizes ~20% of the economy (and that is only the federal portion). The fact that some of those funds find their way into private sector research is not a validation that those funds have been efficiently spent.

I work for one so I know this. However, the question is not whether they invest at all but whether this investment is adequate … or at the optimal level … so that no subsidization of education by the government is needed.

Tell us how to determine the optimal level.

Well, this makes the assumption that government adds to the unpredictability. I would say that government actually smooths out business cycles, making things more predictable, by adding an influx into the economy when such stimulus is needed because there is economic slack. And, I challenge you to find many serious economists who say otherwise.

You have it entirely backwards. The market exists before governments. It’s just people interacting with each other freely. If you are proposing government intervention, the onus is on you the demonstrate the benefit, not on the market advocates to argue for the government to stay out.

No, government doesn’t have to print extra money. It can simply invest, spending money by borrowing, in times when the private enterprise is not investing very much.

You have not answered the simple question: If government is better at investing during “bad times” why is it not also better at investing in “good times”?

[Kimstu]

SS: *It just annoys me that when some of us explain why we think the market should be left to work, we get accused of being fanatics, quasi-religious faithful, etc. *

Well, the remarks from John that provoked the “market fundamentalism” accusation from jshore were as follows:

JM: By getting the gov’t involved, all you’ve done is add overhead in terms of transferring money from one entity to another. Certainly gov’t people aren’t inherently smarter than business people. The only “advantage” a governement agency has is that it doesn’t have to worry about turning a profit. But if you foster activity that doesn’t turn a profit, you are damaging the economy, not improving it.

Emphasis mine. Those sure sound like the statements of someone who thinks that markets are always better and that the effect of government interference is always negative, which as I said is a matter of faith, not fact.

SS: Market action should be the default condition in a free country.

Why? A blanket statement like that is a declaration of libertarian principle, not a choice of economic common sense. Why should markets always be the default in every situation, even ones in which we’re perfectly well aware of the existence of serious market failures? Why do we have to swear some kind of allegiance to one system over the other, so that one is the automatic default while the other is required to prove its effectiveness in every separate case? Why shouldn’t we admit that the people of a free country can make use of private market activity and of public legislative activity, and that they should be able to choose one or the other depending on which is preferable in a given situation?

If people on both sides would just accept that as the central premise, I think we’d be able to have much more enlightening discussions about which type of policy would be preferable in a given situation.

JM: Government (in this country) was not “invented to take action when the market fails”, it was invented to secure the rights of individuals from coercion by other individuals.

Which is an important societal goal that markets fail to achieve, which I think is what jshore was getting at. Securing the rights of individuals from coercion is a form of collective action that cannot be left up to the market, which is unable to recognize or defend a non-economic concept like “individual rights”. The only “right” that is inevitably sustained by market forces is the ability of the economically powerful to dominate the less powerful.

Which, of course, is one of the things that (sometimes) makes markets very efficient, so I’m not knocking them for that. But it sure as hell isn’t adequate to protect individual freedom and social justice, which is one of the reasons we have government.

I will now back off and let jshore do his own arguing if you want to go on talking about what he said.

[ralph124c]

One thing that everyone fails to point out…the Canadian and US economies are so closely linked that they are essentially the same. Canada has its own currency and laws, but the small size of the Canadian population (relative to the USA) means that it must perforce, follow the USA quite closely. That being said, Canada has always had a higher unemployment rate that the USA, due to two main factors:
-the Canadian economy is mostly resource-based(eg. mining, logging, fishing)-these jobs are cyclical, and some people in them are unemployed for part ofthe year
-Canada provides higher unemployment benefits than the USA-this causes longer stays on unemployment
The Canadian government has indulged in numerous schemes to try to provide jobs…most of these have been dismal failures (like the VOLVO car plant in Nova Scotia, and the tomato farms in Newfoundland!!).
Given the track record, I’d say its best to keep the government OUT of trying to decide where factories ought to be built!

[Evil_Captor]

I would say that whenever people say “Corporations are all bad” and “The government is all good” or vice versa – they are indulging in magical thinking.

In fact, capitalism is completely dependent on government and the rule of law to work as well as it does, and the vast majority of people would say that it’s OK to enact some of the barriers to pure capitalism that we’ve enacted. Frex, there’s the matter of slavery. In a purely capitalistic society, owning people is just another kind of market. But we’ve decided that’s wrong, and over the point of quite a few gun barrels convinced our countryment who thought it wasn’t wrong to stop doing it.

We also depend heavily on laws that forbid things like insider trading on Wall Street to keep the market viable. It’s very obvious that a lot of people were turned off from the stock market when all the corruption occured at the turn of the century. Laws that prevent such corruption, when enforced, help give smaller investors that they aren’t just being used by insiders.

Adding a governmental regulator to overcome one of the greatest flaws in capitalism – its tendency toward boom or bust cycles – is just plain good sense. There are legitimate roles for government in the marketplace, and preventing the harm and shortening the duration of economic downturns is one of them. There are a lot of potential flaws in such a program, as there are in ANY program, corporate or governmental. You need to attack the idea on its merits, not from an ideological perspective.

[John_Mace]

@Kimstu

Emphasis mine. Those sure sound like the statements of someone who thinks that markets are always better and that the effect of government interference is always negative, which as I said is a matter of faith, not fact.

If it does, it’s only because you took the quote out of context. We were discussing one specific action, venture capital funding, which I said has never been shown to be more effective when done by governmnet as opposed to business. If you have studies that show that governments make better use of venture capital funds, I think we’d all like to see them. I won’t repeat the list of failures Sam brought up in his earlier post.

[Sam_Stone]

My point was that government action suffers from a number of very well-known deficiencies. Enough so that the burden of proof should be on the advocates of government interference to prove that this time, their plan will overcome them. It’s simply not enough to say, “The market isn’t working perfectly, therefore we MUST involve the government.”

Sometimes (MANY times), government action just makes things worse. So just showing that there is a problem isn’t enough. You have to prove your case for government. This is rarely done. Usually people just say something like, “The unemployment rate is too high. Therefore, we need government to step in and fix it!”

[Kimstu]

JM: *We were discussing one specific action, venture capital funding, which I said has never been shown to be more effective when done by governmnet as opposed to business. *

Glad to get that cleared up, thanks. Looks like the statement that originally pushed the “market fundamentalist” button was the sweeping-sounding “But if you foster activity that doesn’t turn a profit, you are damaging the economy, not improving it.” Good to know you’re not in fact a market fundamentalist, and I hereby retract anything I may have said that applied my general criticisms of that group to you in particular.

[Kimstu]

Now then, how about those proposed Chinese trade sanctions? Is there a role for them in constructive responses to lost US jobs? I am not a protectionist and don’t think it’s either fair or smart for a country to hit another country’s goods with tariffs just because the second country manages to make stuff cheaper.

But if the second country is lowering its prices by violating the conditions of trade agreements that forbid extreme exploitation and oppression of workers—well, if we have these provisions in our international trade agreements why shouldn’t we enforce them?

[John_Mace]

@Kimstu

**Glad to get that cleared up, thanks. Looks like the statement that originally pushed the “market fundamentalist” button was the sweeping-sounding “But if you foster activity that doesn’t turn a profit, you are damaging the economy, not improving it.” Good to know you’re not in fact a market fundamentalist, and I hereby retract anything I may have said that applied my general criticisms of that group to you in particular.

As much as we’re geting way off topic, I’ll try one more time. In a thread whose purpose is to define solutions to the “jobless economy”, are you saying that you would like the government (or any agency for that matter) to foster money losing activities? Please tell me what I’m missing. If we’ve gotten to the point where someone is branded a “market fundamentalist” for advocating that ventures should turn a profit, then I guess I am one.

[Voyager]

@John Mace

As much as we’re geting way off topic, I’ll try one more time. In a thread whose purpose is to define solutions to the “jobless economy”, are you saying that you would like the government (or any agency for that matter) to foster money losing activities? Please tell me what I’m missing. If we’ve gotten to the point where someone is branded a “market fundamentalist” for advocating that ventures should turn a profit, then I guess I am one.

As I’m sure you are aware, private VCs fund lots of money losing activities. But the important thing is that this activity gets triggered only when the market hasn’t succeeded in providing something important like jobs. I’d be dead set against government VC funding in an economy without a problem.

The second thing is that I see most of the money for this activity coming from money that government is already spending on this issue. Instead of paying someone unemployment, pay him to do a job. Yes, some incremental funding will be required. (And with this seed money maybe they can go and get private VC funding.) Some “ventures” might be socially useful, and not profit driven. (Heresy, I know). Is it really the best use of the market to pay someone to look for jobs that are not there, or to pay him to quite possibly create some new jobs?

[Evil_Captor]

@Sam Stone

Sometimes (MANY times), government action just makes things worse. So just showing that there is a problem isn’t enough. You have to prove your case for government. This is rarely done. Usually people just say something like, “The unemployment rate is too high. Therefore, we need government to step in and fix it!”

My position is that we are still feeling out the proper relationship between government and the private sector vis a vis the economy and we haven’t found the proper balance yet. C’mon, Sam, you have posted on several occasions proposals that would further damage the social safety net, and you don’t want to have the government do ANYTHING to the market. I notice there haven’t been any responses to the instances I cited where government interference in the markets either works to the advantage of the markets or fulfills social imperatives that amost evreyone would say are more important than keeping things profitable.

I assume that means yuou accept my points. Now, if we can have one kind of beneficent governmental effect on the markets, why not another?

I have read posts here which claim that VCs operate in downturns as well as upturns, which directly conflicts with my experience of reading a lot of accounts of venture capital almost completely drying up after the dotcom bubble burst.

As has been pointed out already, a government program that employs people instead of paying them to sit on their butts and/or look for nonexistent jobs has at least the POSSIBILITY of spawning successful new businesses and getting socially useful work done. I haven’t seen anything posted by anyone which argues successfully against that point.