Protestors's motivations

[system]

First a word on JM:
Egypt was not a Soviet style socialist state, it always has had a mixed economy. My comments in re Egypt were thus illustrative of development challenges for much of the third world, including Mexico which has had a statist tradition also, witness PEMEX. Second, I fail to see where you are deriving your observation in re Keynes and this particular issues. I would also note that Kimstu’s data proves nothing of the like insofar as I do not see mention of continuing wage declines per se, nor evidence that even if there were such that this would not be driven by increasing offer versus demand.

Now, into substance, such as we can achieve it here.

One of the most frustrating parts of these kinds of discussions is the complexity of international trade issues. It is both time consuming and somewhat difficult to adequately talk about them. All the more so when basic economic concepts also have to be brought in and explained. Unfortunately I lack the intelligence, talent and the patience for both. However, I am going to attempt to respond here in a productive manner, albeit due to time constraints and lack of North American data at my finger tips, without my customary data-centered approach. As such, I’m just going to comment in a general framework including the information which Kimstu has gathered, admitting this makes my argument rather weaker, but I lack the time to make a fully convincing case. Nor does the forum or my abilities in this area really permit me to, for which I apologize.

I will note that searching the internet for data confirmed my general sense that in regards to contentious economic issues touching upon the political economy, there is little good, quality material available. Most of it is partisan attacks from either the so-called progressive camp, who I would name the neo-Protectionists, or from the extreme end of the free trade community who would not acknowledge the legitimacy of concern with transition costs. I will note that off the internet, although not easily available to me – I can not say not available, but not easily-- there is a much more balanced and sophisticated set of literature.

I believe that I can make a resume of my issue with Kimstu’s approach, which I regard as fundamentally flawed and essentially uneconomic in the following terms:
(a) flawed conception of the economy as a static entity with static opportunities. While not explicit, this appears to be implicit in the underlying analysis.
(b) flawed framework of analysis framed in terms of (i) incorrectly and insupportably adopting out-dated Capital versus Labor categories — the rhetoric is all in terms of US workers as a category and US businesses as a category. A proper analysis must, if one is to accurately characterize winners and losers, identify different interest groups as well as interests. As such, to ignore that not all US businesses are pro-free trade and not all US workers interests are against free trade, but rather each is dependent upon their relative positions in re the national and international economy is to ignore the very fundamentals of the problem. While I am sure there may be an attempt to say “generally such and such workers” suffer or not, I see no economic support for the rhetoric of setting this up as business (Capital) versus workers (Labor).
(c) Unsupported weighting of one segment of the economy over others: Kimstu rightly suggests that in the global economy unskilled workers in capital intensive nations may lose out in opportunities. Well, yes, that is a rather basic observation, however that does not mean that globalization is bad, it may or may not be bad for those unskilled workers depending on capacity to transfer to other sectors and taking advantage of new opportunities opened up by expansion predicated upon free trade. Further, the weight of those workers as part of the overall economy also should be considered. Unskilled manufacturing workers are what percent of the labor force? Is there any economic reason to favor them and impose burdens/costs — economic literature is rather clear on the costs of protection generally exceeding the aggregate wage bill of lower paid industries — on the rest of the economy. Kimstu’s comments gloss over this balance in order to imply a general loss to the United States based on ** one sector** of the economy. Classic fallacy of composition. While the issue of difficulties for some low-skilled workers in manufacturing to transfer to either higher skill sets in the same industry in order to take advantage of new opportunities — as suggested — at a higher end in the value added chain or to new jobs in another industry, is an important one I do not see this as trumping the larger gains from free trade for the entire economy.

*Originally posted by Kimstu *

Despite puddleglum’s sneers in the OP, I think it’s quite legitimate for US workers to be concerned about liberalization policies that cause them to lose their jobs

[/quote]

Fine, of course those that also ** gain ** from trade must be considered. Further, your aggregation of US workers as if they are a single class strikes me as both unfounded and unsupportable. Some classes of workers will gain from trade, either directly as exporters or indirectly from efficiencies achieved. This entirely leaves aside the gains of the consumer who at the lower end is also in fact the self-same workers.

—especially since for many semi-skilled workers in manufacturing trades whose plant moves south and/or east, finding another job as good as the one they lost may be by no means as easy as pg’s airy allusions to want ads and interviews imply.

Again, fine, however, at what point does protecting one segment of the work force hurt other segments. Aggregate gains should be considered, not solely one segment of the work force.

As for losses of sem-skilled jobs in mfg, frankly tough. Manufacturing is but one game in town, and overall gains and losses have to be considered. Buggy whip makers also lost out when cars came along, unskilled elevator operators lost out when automatic elevators came along. However, new efficiencies were introduced and overall gains were realized. In the short run this can mean uncomfortable costs on both individuals and even whole groups, in the long run everyone gains. A healthy economy means creative destruction. I see no policy reason to introduce protection — and for whatever denials Kimstu may wish to advance, this is the sole policy response which makes sense in her framework of analysis— which will inevitably increase costs for the economy at large for a non-competitive for the economy. Sure, protection dressed up in fancy language, but protection nevertheless however it may appeal to workers rights. “Fair Trade” is a fine piece of rhetoric, I don’t see it as much more than new clothes for old protection.

And yes, workers’ effective purchasing power is increased when cheaper imports made by lower-wage workers are readily available. Nonetheless, workers have a perfect right to oppose attempts by their own government to encourage employers to take away their jobs and leave them with job opportunities that are distinctly inferior to the ones they lost, especially if few or no attempts are made to retrain workers for other good jobs or to encourage local development that will provide new good jobs. (Especially, also, if the relocated plant takes advantage of more lax laws in its new country to damage workers’ rights or the environment—but that’s Part II.)

Rhetoric Kimstu, rhetoric. All this hand waving is all well and fine. What I am interested in is what creates long term economic growth, which is the ** sole ** method of creating and keeping * good * jobs in the aggregate.

Let me further continue your unfounded us of Workers as if they are but one class, as well as continue to note my objection in re your focus on one class of workers to the exclusion of others, and taking this as the privileged position. I will harp on this point as I regard it as a major problem in your analysis, one that leads you to entirely unsupportable conclusions.

• Did NAFTA cause the loss of significant numbers of U.S. jobs and leave workers with inferior job opportunities? (The second clause is as important as the first, since somebody who can easily move into a new job as good as the one he/she lost has no real cause for complaint.)

First, I reject your opening premise. Inferior jobs. What do we mean by inferior jobs and for what workers? What sectors? You’re stacking the deck in my opinion. And again, I continue to note that I do not accept one whit the rhetorical conflation of one segment of the workforce with the entire workforce.

In order to argue this inferior jobs issue, we need to see proof that (a) in fact low-skilled manufacturing workers are not reworking their skills and transferring to other sectors (i) at equal or higher wage rates in the aggregate — i.e. beyond the anecdotal MacDo stories, I want to see aggregate data indicating retooling has not lead to shifts from low-skilled manufacturing to say the expanding service industry(*) and comparable wage sets (ii) that the same set of workers have not seen advances in cost of living based on more efficient production/lower prices, in real terms and thus gains at this side (b) substantive comparison with gains in other higher wage areas of the same industries, such as higher up the value added chain, and recognition of course that higher paid workers in this area create secondary opportunities in both retail and business services (c) context of NAFTA gains across the board, not just in the competing sectors, but also in export sectors as well as other sectors/industries which have benefitted from lower prices and achieved more efficient domestic production.

(*: I note the frequent denigration of service industry jobs in the anti-free trade propaganda, but I don’t see fundamental reasons to presume mfg jobs are superior to service jobs per se, or in fact)

Knowing that it would be considered suspect and biased to start from the viewpoint of reports by progressive foundations such as the Economic Policy Institute, I took as my baseline this 1998 report from the National Council for Science and the Environment. Its summary says:

Progressive foundations? Anti-trade more like it, and bloody poor economics. I will note as I have in the past that the EPI analysis is ** seriously ** flawed. In essence, it is quite clear their conclusion was made first and the data massaged to achieve it. Examples: No attempts to break out different influences on trade deficit --no its the NAFTA deficit, never mind that in the context of the 1990s economic expansion, poor US savings rates, a trade deficit was inevitable. This is what I call dishonesty.

Debate continues over the benefits of U.S. trade with Mexico, the North American Free Trade Agreement (NAFTA), and particularly maquiladoras, or cross-border production sharing plants. Maquiladoras generate a large portion of U.S.-Mexico trade, yet the economic effects are not widely understood. Many believe there is no benefit to such trade because it leads to the loss of U.S. jobs, production, and wages. Maquiladora products, however, have a high U.S. content that in addition to fostering productivity gains in both countries, may actually minimize the loss of U.S. jobs by allowing the higher paying jobs to stay at home rather than be shipped entirely abroad, for example, to Asia. Still, adjustment to globalized production creates challenges, particularly in addressing the plight of low-skilled workers who become unemployed. Research, however, continues to point to domestic rather than trade policy for the likely solutions, particularly the emphasis on education and training programs.

That sounds sufficiently level-headed and pro-globalization to keep you folks happy, eh? So what are the facts that those claims are based on? (Statements in the following quotes are supported by the footnotes that you can find in the linked report; most of them refer to US International Trade Commission publications.)

Pro-globalization? Neutral perhaps.

That’s kind of a skip from '75 to '96, considering NAFTA was only implemented in '94; we don’t know how much production sharing grew before the major trade liberalization. However, I think it’s pretty well accepted that trade liberalization has been beneficial to US businesses (otherwise, they’d hardly be supporting it). No dispute that this is a good thing.

Again the cardinal error of the “progressive critique” as it were: assuming old style “Capital versus Labor” models of analysis. The assumption is deeply flawed to begin with and merely leads astray.

(A) Not all “business” (perhaps I should say Capital?), supports NAFTA in whole or part. Import competing sectors have notably been unenthusiastic as one might expect.
(B) Not all “workers” may be expected to be in an adverse position vis-a-vis NAFTA especially those in export industries, and insofar as their industries have experienced positive gains, one may ask on what basis one ipso facto excludes them from the gains.

Starting from this schematic basis, flawed and factually incorrect, I am led to expect a flawed analysis.

The quote from NCS&E

Much U.S.-Mexico production sharing and trade, however, is explained by traditional trade theory that emphasizes relative factor costs (capital and labor). Mexico has a comparative advantage in low-wage labor, which allows the two countries to specialize in different stages of production that have different input mixes. Generally, lower wage economies, such as Mexico, inherit certain industry segments (assembly), while more developed economies, like the United States, remain competitive producing in other segments (specialized inputs or more sophisticated downstream production) consistent with their relative abundance of capital, technology, and high skilled workers. […]

Yes, precisely what traditional theory implies. And what one would expect.
Continued

Despite the benefits for the world as a whole, it is also widely accepted that globalization presents “challenges” as well as “opportunities” because industry adjustments do not lead to gains that are distributed evenly either among countries or within them. Concerns over these challenges thrive in the United States, where many argue that production and trade from maquiladoras have resulted in lost jobs and falling wages, particularly in such industries as textiles. […]

Once more agreed, gains are not evenly distributed (nor are losses). Some industries may suffer. In fact some may be extinguished. That does not refute the wider observation that there will be aggregate gains, although one is cautioned not to make simplistic, rosy assumptions about trade gains without accounting for transition costs.

Further their comments:

The employment and wage effects implied by these trade data are not, however, straight forward. Many of the low-skilled jobs (textile mill and some finished product positions) have moved to Mexico, with U.S. employment in this sector falling by 7-14% from 1993 to 1996. However, the higher-skilled, technology-enhanced textile jobs (mostly in fabrics and finished apparel) have remained in the United States and interestingly, the average wage has increased by 9-12% from 1993 to 1996, with productivity improving some 10%. In short, production sharing with Mexico is credited with minimizing job losses that would have been more severe had the whole process relocated to Asia, which in turn has allowed for a higher average wage for industry employment. Asian investment in Mexico even further supports these U.S. jobs.

Again, precisely what one would expect. Shifting of production to the country with comparative advantage. That’s how it works.

So it is acknowledged that NAFTA has indeed resulted in job loss for many lower-skilled US textile workers. (Others have also been affected: the Bronfenbrenner report linked below notes that “according to US Department of Commerce reports, in 1999 alone a total of 341,000 manufacturing jobs were lost in the US” largely on account of NAFTA.)

Interesting reading, Kimstu. The glass is always half-empty.

Let me restate, your analysis is fundamentally wrongheaded to start with. (A) Your privileging one non-competitive sector of the economy, low-skilled workers, over others makes little sense to me. Protecting their jobs is likely to cause lower aggregate gains for the body of Americans at large, in other words making us poorer in the aggregate. (B) As noted in the quoted text, wages have increased in higher added value production.

Now while it’s a good thing that higher-skilled workers get to keep their jobs, the fact that the average industry wage has risen appears to be a bit of a red herring.

Not one whit. Rather it is a key aspect of the concept of comparative advantage. Production is shifted to areas where domestic comparative advantage is high, that is an * inevitable* effect of free trade. Comparative advantage in textile production in the USA where we have access to much human and advanced physical capital is quite clearly in high-end added value production. I see no reason to protect a segment where we do not have such advantage — such protection obviates free trade although you do not seem to realize that and further costs both consumers and high-end workers. While retraining may be required, that is not a reason in my mind to penalize the rest of the economy. Your problem is taking the entire effect out of context, focusing on one narrow industry and then declaring this bad for “US workers” — fallacy of composition and not founded on the economics.

Of course, if the lower-skilled and lower-paying jobs disappear and the higher-skilled and higher-paying ones remain, the average industry wage will rise! Simply “disappearing” the workers on the low end of the scale automatically moves the average worker higher up the scale, but it doesn’t do a thing to help the “disappeared” low-skilled workers whose jobs were moved.

Your analysis is fundamentally static. Your presumption is that there is but choice X for the workers and that they do not gain from increases in productivity. Firstly, I question the ** presumption ** that lower skilled workers can not or will not be converted over in some % to high skilled jobs. Further, even if they have to change sectors, so long as there are aggregate gains for the US economy I do not see problems.

Again, the standard should be are general standards of living rising. If some sectors lose out, well aid should be extended to them, however that does not mean penalizing the larger economy is justified. You will inevitably raise the issue of increasing disparity of wealth. All well and fine, but I advance the observation that so long as most boats are rising, even if unequally, in real terms then we have gains.

As such, I do not see the question in terms of ‘disappearing’ workers but shifting sectoral emphasis. It does not appear that we have seen a rise in structural unemployment in the United States in the past decade, quite the opposite. One may argue that perhaps the least educated sector has been hurt by larger economic shifts, but given that such shifts are not truly dependent in large part on international trade but the continued evolution the American economy.

The second point is also somewhat double-edged, claiming that one aspect of economic globalization (NAFTA) is a good thing because the effects of another aspect of economic globalization (moving production to the Asian Third World) would have been worse. Besides the general dubiousness of conditional arguments, this is not such a great advertisement for economic globalization on the whole, is it?

Aside from the general dubiousness of your framework of analysis? As I read the statement, NAFTA allowed the development of a certain area of competitive advantage in American textile production. As such, for that sector there were gains within the framework of free trade, which in the context of increased competitivity for the economy at large are a good. Insofar as we can exclude trade diversion, and I believe that most things I have read have suggested NAFTA does not result in trade diversion from lowest cost producers, this is an overall positive.

In terms of avoiding relocation to Asia in its entirely, I note also that I do not see the statement saying the Asian Third World — perhaps Kimstu should question her assumptions that lead to the conclusion. Rather Asia also includes what one might reasonably call developed nations, if second tier, e.g. South Korea and Taiwan which might have — and I believe this is the contrast the authors were seeking — captured the higher end of the value added chain which would have also been served by the Third World production physically close by. So, in this NAFTA scenario we may presume that American textile producers were able to achieve some positive dynamics with nearby Mexico, and thus in a competitive atmosphere achieve the positive effect of moving up the value added chain, increasing wages and efficiency and laying a basis for future wealth.

“Adopt managed trade liberalization schemes now! They throw fewer people out of work than unrestricted global capital movements do!” Um, was there a third option in there somewhere, boss?..

Sure, the third option is understand the economics and not adopt empty rhetoric. If you would care to try that, you might see things a bit more clearly.

But let’s stop and think about this. First, this is not managed trade, rather its regionally based trade. Very different concepts. Second, the relocation of textile production to Asia may or may not have anything to do with “unrestricted global capital movements” despite your presumption. In fact, most Asian development has been largely self-funded through extremely high savings rates, not the grim specter of the evil blood-soaked foreign capitalist exploiting the alienated labor of the masses. Perhaps the local ones, but that’s another question.

Another issue that can be almost as serious as actual job loss is the use of threats of plant relocation in order to squelch collective action on the part of US workers who still have jobs. Kate Bronfenbrenner of Cornell University wrote a report (PDF) for the US Trade Deficit Review Commission on such incidents involving NAFTA, in which she points out that her 1996 study for the NAALC found that half of all employers (62% in more mobile industries like manufacturing and communications) involved in private sector certification election campaigns threatened some sort of operations shutdown if workers voted for a union. Now while relocations and relocation threats aren’t unique to the NAFTA situation, the existence of liberalized trade with such an important economic partner makes such threats much more credible and much easier to carry out, seriously intimidating labor activity (see Bronfenbrenner’s report for details). Not all of this is legal under the National Labor Relations Act, but legal repercussions for bullying employers are notoriously rare and superficial.

Well, this is more problematic, but neither is it new. I don’t see a necessary connection with NAFTA. Indeed, given most of the present US textile industry is in the South East(*), historically terribly hostile both popularly and institutionally towards unions and that all kinds of extra to quasi-legal actions on the part of such employers have long been documented, it seems a bit of scape-goating to blame NAFTA.

(*: which itself, interestingly enough “stole” these jobs from the North East in a process no different from that of jobs relocating to Mexico except it was internal to the United States. And one sees that the South in the long run benefitted from this, with wages eventually rising, new industries moving in and a slowly rising skill set for its workers. Now I would say that it is likely that greater public investment on the part of Southern states in public human capital — that is schools at all levels— would probably have sped up this process and the South would have been richer for it. However, the problems of under-investment in human capital and so forth lie outside of this message.)

As for offsetting the impacts of job loss:

But a critical policy issue remains: how to respond to the lower- skilled workers who have the most difficulty during the adjustment process.

Some call for slowing economic integration, including rethinking the U.S. commitment to NAFTA (and free trade in general) to alleviate the adjustment problem. Others believe that those low-skilled workers facing employment problems will not find lasting relief based on any type of barriers to international economic relations. Studies have found that wage stagnation and job losses in this group are, for the most part, not the result of trade, but as noted by the International Monetary Fund, represent a broader trend “driven principally by advances in technology that favor skilled labor.” From this perspective, the solution is to be found in domestic rather than trade policy. The oft-repeated policy suggestions include supporting trade adjustment, first on a short-term basis by helping marginalized members of society to weather economic transition (the social safety net issue) and second, on a more permanent basis, by helping them learn to function in an increasingly competitive global economy (the education and training issue).

This seems like a reasonable summary of the issue.

Now, in regards to this comment

Both sides seem to agree that the issue has been blurred by the strong economy and tight labor markets of the mid-90’s, in which many laid-off workers could readily obtain at least some kind of new employment; as the economy slows, we may get a clearer picture of how important or valuable retraining assistance really is.

I wish to note that you are blissfully ignoring the extent to which free trade has contributed to the very conditions which are noted here. Goal posts.

Either way, there’s no question that retraining and unemployment compensation are not as good as having a job, nor are they any guarantee that the retrainee will actually end up being able to get another job, much less one as good or better than the lost job.

So? That’s not the business we’re in. Guarantees are not to be found in life, and I don’t see that there is any reason for us to consider them. The proper question in this regard is the following: (a) to what extent did retraining programs allow workers to upgrade/change skills in an appropriate manner to respond to new opportunities (b) to what extent were there aggregate gains/losses.

More importantly (since we did take it as a given that guaranteed job protection is neither possible nor desirable), the trade liberalization “perspective” presented in the above quote dumps the problem of worker readjustment squarely in the lap of domestic policy.

Yes, and quite properly. Domestic policy is required to help re-distribute the otherwise uneven domestic gains from international trade.

Free trade advocates such as the ones who met in Quebec generally do not want trade policy saddled with domestic employment issues, and I can see the point of that.

What mechanisms would there be? It is a domestic issue. I see no logical reason for a wealthy nation like the United States to take any such steps. For nations such as Mexico, developing nations with less capacity for human capital upgrading and development, as well as physical infrastructure wants there is an entirely different question before them. They properly need assistance so as to be able to better respond and so that the overall result with be increased wealth for all parties.

One can think of the context of the EU and its integration of its poor southern tier. That integration faced very, very similar issues, although not 100% analogous. Long-term assistance, however much some French, German and British ratepayers complained has proven a long-term boon as the Iberians especially have squarely entered the developed world with free trade with the EU — it is easy to forget the real poverty of Iberia in the 1970s for example.

Nonetheless, from the point of view of the US worker, it’s a rather chilling philosophy. Trade liberalizers are largely expecting worker job loss in developed countries to be handled via “the social safety net” and “education and training”. But the social safety net, as well as public investment in education and training, are under serious attack right now in the US by an administration that favors minimizing government’s role in the economy.

Chilling? Rubbish. Potentially problematic from an internal domestic point of view, but all the more reason to defend retraining programs etc. within the highly defensible context of economic liberalization.

The above discussion and the linked sources, I think, provide ample factual evidence that

No, not really.

• NAFTA has caused significant job loss in the US, particularly among lower-skilled workers who do not find it easy to get equally good jobs outside of manufacturing;

(a) I first once more question the assertion significant job losses among lower skilled workers as caused by NAFTA contra as part of the overall evolution of the economy, even in a protectionist framework.
(b) the assertion in regard difficulties in finding “equally good jobs” — I’d like to have this defined, but let me presume in re pay rate per hour — needs to be supported.
(c) insofar as we have seen quotes in regards to a single sector, whose losses may have been inevitable under all but the most extensive protectionist programs, I fail to see support for the sweeping assertion on the national level.

• NAFTA has contributed to the power employers exert (not always legally) to frighten workers away from collective action;

Perhaps, perhaps not. As noted again, I do not see substantive reasons to conclude this.

• NAFTA has provided many new jobs and some new training to offset lost jobs, but so far not enough (especially in the hardest-hit sectors of the workforce) to counteract its contributions to job insecurity among US workers.

Your judgement not enough is based on what? Strong assertion based on what? Contributions to job insecurity among all US workers? Or among a narrow segment of mfg workers who make up what % of the overall work force. Even there, I question the extent NAFTA per se contributes to job insecurity versus larger macro-economic structural evolution in the economy. Again, this strikes me as an a priori conclusion.

IMHO (especially given the lack of commitment in the current US political climate to public investment in the social safety net and human capital development), US workers have good reason to be worried about trade liberalization. Your turn, Collounsbury: what are the facts that encourage you to think that such concerns are unjustified, or what policies do you recommend for alleviating them if they are justified?

(a) I reject your continued use of “workers” see comments above.
(b) In re human capital investments, I don’t see particular lacks. Americans spend quite a lot on higher education, and have a fairly efficient and response education and training system after high school — schools are a real problem but of course given the state and in fact locally based systems and fierce opposition to federal participation, there is not much national policy to be undertaken. Insofar as there are concerns about levels of human capital investment — above all education opportunities for lower end of the economic spectrum and for equity there, I do not believe they are in fact tied to NAFTA contra domestic issues. My own opinion, and I believe you know I am favor of strong public sector support and funding for education, is that this issue is utterly separate from trade liberalization and insofar as the latter is connected to it, is most useful as a tool to leverage otherwise retrograde interests into ponying up moola for broad-based educational opportutities.
(c) In re job creation and the economic pattern of the past few years, it strikes me that your concerns are overblown. 4-5% unemployment is more or less rock-bottom, what more do you want? Old economy steel mill jobs. Sorry, the economy has moved on, people have to retrain.
(d) It strikes me that you are willy-nilly focusing on problems to the exclusion of gains.

— Christ in a buttercup, Collounsbury, I spend all day composing this only to find out from your subsequent post that you already acknowledge that the short-term effects of liberalization are often detrimental.

Detrimental? I acknowledged there are costs. I also noted that they are differential by sector. I also noted that one has to think about this in the context of the actual choices available. While one policy choice may be difficult, if the others are unable to respond to the problems, one has to move ahead.

Arrgh! Okay, what are your reasons for thinking that the long-term effects will constitute an improvement? And how far away is the long term?

Economics, basic observations on gains from free trade. Examples of economic development in the context of European integration. Long term is as far away as it takes for the economy to achieve a competitive footing.

What choices are you presenting beside protectionism dressed up in new language?

[Kimstu]

Thanks for the detailed reply, Collounsbury. Before I get anywhere near the details, though, there’s one major misunderstanding I’ve got to clear up. You said:

• Kimstu rightly suggests that in the global economy unskilled workers in capital intensive nations may lose out in opportunities. Well, yes, that is a rather basic observation, however that does not mean that globalization is bad *

And you continue through your whole post arguing against me as though I were trying to defend the general idea “globalization is bad”. But that’s not what I’m saying. I’m not suggesting that production sharing is a bad idea, that trade liberalization can’t be beneficial, that protectionism is obviously necessary or desirable. I didn’t attempt to demonstrate any of those things—because I don’t believe they’re true—so you need not bother pointing out the inadequacies in my support for that argument, because that’s not the argument I’m making.

The point I started out trying to make was simply that current and proposed trade liberalization policies in the Americas have some serious negative side effects. I think we’re both agreed that this is obvious; my aim in stating it was not to argue that the negatives necessarily outweigh the positives, but to correct puddleglum’s simplistic antagonism towards protestors who do feel that the negatives outweigh the positives. They may be wrong, but by God, they’re not automatically fools or villains just because they are seriously concerned about possible hardships for workers* and the environment. The situation is sufficiently complex that we do not have to conclude, as the OP did, that the only possible motivation for people to protest the FTAA is that they’re lazy and selfish, looking for kicks, hoping to attract babes, and indifferent to poverty in developing nations. That’s what I was trying to get across.

Okay? Now that that’s out of the way, maybe we can go on with our discussion of the actual pros and cons, being as factual as possible (and I agree that it is a lot harder to find sources of factual data and analysis than heated polemic, especially on the web), without your thinking that my position is simply that trade liberalization shouldn’t exist.

• And yes, all I mean by “workers” is some workers! I am not using the word, nor do I ever use it, to signify a monolithic unanimous mass of Labor in opposition to a monolithic unanimous mass of Capital! Give me credit for a slightly more nuanced perspective than that, okay?!?

(And by the way:

*“Okay, what are your reasons for thinking that the long-term effects will constitute an improvement? And how far away is the long term?”

Economics, basic observations on gains from free trade. Examples of economic development in the context of European integration. Long term is as far away as it takes for the economy to achieve a competitive footing. *

Geez, Collounsbury, and you talk about my hand-waving! :))

[system]

*Originally posted by Kimstu *
And you continue through your whole post arguing against me as though I were trying to defend the general idea “globalization is bad”.

Apologies then, I read your general argument in that light, apparently misplaced. It may be AWC rubbed me the wrong way such that I went overboard today.

The point I started out trying to make was simply that current and proposed trade liberalization policies in the Americas have some serious negative side effects.

Okay? Now that that’s out of the way, maybe we can go on with our discussion of the actual pros and cons, being as factual as possible (and I agree that it is a lot harder to find sources of factual data and analysis than heated polemic, especially on the web), without your thinking that my position is simply that trade liberalization shouldn’t exist.

Very well, I will restrain myself…

• And yes, all I mean by “workers” is some workers! I am not using the word, nor do I ever use it, to signify a monolithic unanimous mass of Labor in opposition to a monolithic unanimous mass of Capital! Give me credit for a slightly more nuanced perspective than that, okay?!?

Well, that’s how I read it, my apologies for the misreading.

*“Okay, what are your reasons for thinking that the long-term effects will constitute an improvement? And how far away is the long term?”

Economics, basic observations on gains from free trade. Examples of economic development in the context of European integration. Long term is as far away as it takes for the economy to achieve a competitive footing. *

Geez, Collounsbury, and you talk about my hand-waving! :))

I ran out of steam. Pleading guilty to shorting the argument as I also have a little analysis for my actual employer to finish. And I’ve realized I don’t know what I’m doing. Very disturbing.

[Kimstu]

Just hammering in the nails on some of the particular points:

(: I note the frequent denigration of service industry jobs in the anti-free trade propaganda, but I don’t see fundamental reasons to presume mfg jobs are superior to service jobs per se, or in fact) *

Per se, of course, they’re not; there’s no reason a service job can’t be as good as a factory job. In fact, though, low-skilled service industry jobs at present tend to be less unionized than low-skilled manufacturing jobs, more reliant on temporary workers, and scantier in employment benefits like health insurance: so the manufacturing jobs are often seen as superior. This seems to be pretty well accepted across the board, but I can dig up data if you require it.

Again, the standard should be are general standards of living rising.

I agree. So, are they? Poverty and unemployment hit lows in 1999, due largely to the strong economy, as noted in this Center for Budget and Policy Priorities report. (And yes, I do know that trade liberalization contributed to economic growth in some sectors!) But the average American household has a negative savings rate (as discussed in this Japan Economic Institute report), and bankruptcies have been rising rapidly. The very tight labor markets of recent years didn’t produce the significant growth in average real wages that most economists would expect. Where’s the evidence for an unambiguously positive trend in the general standards of living? As far as I can see, the current indications are very mixed.

Well, this [labor activism intimidation by threats of plant closings] is more problematic, but neither is it new.I don’t see a necessary connection with NAFTA.

I specifically said that such situations weren’t unique to NAFTA relocations; what I said is that liberalized trade with Mexico made it easier for employers to make and act on such threats, as Bronfenbrenner’s report shows. Sure, Northern U.S. employers have been relocating in similar ways to the South for a while now, but NAFTA vastly expands relocation possibilities.

*“NAFTA has contributed to the power employers exert (not always legally) to frighten workers away from collective action;”

Perhaps, perhaps not. As noted again, I do not see substantive reasons to conclude this.*

? Did you read the Bronfenbrenner report? The “Executive Summary” specifically concludes: “international trade and investment policies, combined with ineffective labor laws, have created a climate that has emboldened employers to threaten to close, or to actually close their plants to avoid unionization.” And she devotes much of the actual report to substantiating that claim. Which part(s) of her evidence are you disputing, or what is your reason for excluding NAFTA in particular from the “international trade and investment policies” that have so contributed?

However, the problems of under-investment in human capital and so forth lie outside of this message. […] Chilling? Rubbish. Potentially problematic from an internal domestic point of view, but all the more reason to defend retraining programs etc. within the highly defensible context of economic liberalization. […] Insofar as there are concerns about levels of human capital investment — above all education opportunities for lower end of the economic spectrum and for equity there, I do not believe they are in fact tied to NAFTA contra domestic issues. My own opinion, and I believe you know I am favor of strong public sector support and funding for education, is that this issue is utterly separate from trade liberalization and insofar as the latter is connected to it, is most useful as a tool to leverage otherwise retrograde interests into ponying up moola for broad-based educational opportutities.

Great, but who is doing that, in US policymaking today? It’s all very well to say that this isn’t a trade policy problem, and as I said, in theory I agree with you. But in the current US political climate, the dominant influences are both in favor of trade liberalization and resistant to “ponying up moola” for just about anything broad-based, whether it be educational opportunities or social safety net mechanisms to insulate individuals against the shocks of economic changes. Just shrugging your shoulders about the negative effects on some sectors and saying “well, that’s a domestic policy issue” isn’t much help.

The cold fact is, we’re not getting domestic policies at present that do much to help those left out in the cold by trade liberalization. Labor rights enforcement is extremely weak, the administration is resolutely opposed to expansion of social entitlement programs such as health care, and our biggest concern about social services seems to be how we can make them cheaper by farming them out to religious organizations. No, protectionism isn’t the answer for long-term economic success, but how can you blame people for looking at the current political situation and feeling that protectionism is the only protection they’re likely to get?

Sheeee-oot my dog, and we still haven’t gotten around to the effects of NAFTA in Mexico. Next time. Look, let’s not quarrel, okay? I really don’t think we’re as unsympathetic to each other’s concerns as it may have first appeared, and I apologize if I’ve contributed to that impression with waspish or overheated remarks.

(Note added in preview: thanks, Collounsbury. Extra apologies for anything I may have missed. :))

[Kimstu]

Sorry it’s taken me a while to get back to this, but as we noted before, it’s tough to find decent data on these issues, and it’s a big subject to cover. I’m sure the following survey is inadequate in many ways, but at least it’s a starting point.

To restate my original claim: There are enough serious problems in our existing experience of trade liberalization to justify much of the concern of people protesting the FTAA. That doesn’t mean that liberalization is inherently harmful or can’t be beneficial in the long run (and in some ways in the short run too), but it means that we need to take a hard look at the effects it’s actually producing. Contrary to the views of the OP, the protestors (though their assessments of globalization overall may be more negative than the facts warrant, and their visions for policy alternatives may be inadequate) have some sound substantive points and are doing us a favor by calling our attention to them.

More specifically, NAFTA has been in numerous ways a failure with respect to economic prosperity and environmental safety and health in Mexico. That doesn’t mean that NAFTA hasn’t also accomplished some positive things, or that Mexico didn’t have and wouldn’t have serious problems in these areas without NAFTA. But NAFTA was heavily marketed as a win-win solution to these economic and environmental problems—in the same way that the OP touts the FTAA as a “magic bullet” for poverty elsewhere in Latin America—and it has in many ways failed to justify that optimism.

This is why I think so:

• What did NAFTA supporters claim it would do for labor and the economy?

From a Cato Institute article by well-known NAFTA advocate Roberto Salinas-Leon:

A NAFTA would offer tremendous advantages for Mexico. Unrestricted commercial access to the largest market in the world would create a stable source of new jobs for the 1 million citizens who join Mexico’s workforce every year. The development of new commercial opportunities and the inevitable rise in real wage rates resulting from expanded growth and a wider output of goods would constitute a crucial force for stemming illegal immigration to the United States. […]

A NAFTA would ensure the potential for sustained growth in Mexico, enabling it to maximize its comparative advantages in such varied sectors as citrus and fish, cement and steel, leather goods and beer.

More important, the creation of a NAFTA would add a powerful impetus to the market-based reforms now under way in Mexico.

What has it actually done? As this article asserts,

NAFTA has helped Mexico economically. Over the past five years real GDP has grown at 5.5 percent per year. Even including the sharp shock of the 1995 peso crisis, Mexican real GDP has grown at 3.8 percent per year since the ratification of NAFTA. The urban unemployment rate that was 6 percent in 1992 and rose to 8.5 percent in 1995 is now less than 4 percent.

Which is fine, no question. But as this study points out, despite these advantages (plus increased exports and maquiladora employment), Mexico’s debt burden has increased by $20 billion since NAFTA began. The percentage of Mexicans in “severe” or “moderate” poverty is 51%, up from 47% in 1994. Real wages have fallen: in the manufacturing sector, by 9.5% since NAFTA was implemented. Working conditions in the maquiladoras are famously lousy. Attempts at labor organization have been quashed, and as this Century Foundation report comments, the effectiveness of the labor side agreement institution in redressing or discouraging these practices has so far been very low. Illegal immigration from Mexico, of course, has not been “stemmed” or even decreased, despite the Clinton administration’s increasingly aggressive policies on border enforcement since 1993.

• What did NAFTA supporters claim it would do for the environment?

This Cato Institute article (Salinas-Leon again) says the following:

[…] NAFTA will contribute to a healthy environment, especially in Mexico. […] One of NAFTA’s major environmental benefits will be to increase cooperation of the United States, Canada, and Mexico in solving environmental problems such as the cross-border movement of toxic waste, wastewater treatment, and ecosystem interdependence.
[…]

Opponents of NAFTA on environmental grounds offer five fundamental green herrings'' to obfuscate our understanding of what NAFTA will actually mean for the environment. The first, perhaps the most prominent in policy discussions, is that NAFTA will drive large numbers of U.S. firms south of the border to reap the advantages of lax environmental regulations and enforcement. [...] The second green herring is the claim, advocated by the Sierra Club and Public Citizen, that NAFTA's settlement mechanisms will compromise U.S. health, safety, and environmental regulations. [...] The third green herring is the suggestion that NAFTA's trade liberalization will force the United States to weaken its clean’’ environmental standards to increase its competitive advantage. […] The last two ``green herrings’’ are closely intertwined. One is the claim that free trade will bring about greater environmental degradation in Mexico. The other is the contention that the increase of economic activity along the U.S.-Mexico border will intensify the already grave problems of cross-border pollution.

Unfortunately, several of those so-called “green herrings” seem to have been validated by subsequent developments. As this 1998 UCSB study concludes, “In general, lax environmental policy tends to attract more capital inflow from the US for pollution intensive industries”. While I don’t think it’s likely that most of the US will throw out its own standards to join in an environmental “race to the bottom”, the NAFTA Chapter 11 cases pointed out above by jshore and Needs are evidence that indeed, the settlement mechanisms can cause health, safety, and environmental regulations to be compromised. And there is little doubt that the increased economic activity due to NAFTA has brought about greater environmental degradation in Mexico: as this Tufts working paper says,

Mexico’s transition from a closed economy to one of the most open economies in the world has not been without environmental consequence. […] From 1988 to 1994, the scale of Mexican industry dropped, with cleaner industries dropping less than dirty ones—resulting in a slightly cleaner composition of industry. Total pollution however, while slowingfrom 1988 to 1994, has close to doubled since.

You can find all sorts of horrific stories on the pollution attendant on Mexico’s foreign-investment manufacturers all over the Web, so I won’t bother with them: a more sober and detailed discussion is here. While there’s reason to think, as this article maintains, that liberalization improves things in the long run by encouraging converging standards via institutions like BECC and NADBANK as well as cross-border environmental activism, at present much of the increased economic activity in Mexico is actually making the environment dirtier and more dangerous.

As the Century Foundation report points out, “During the time [the side agreement watchdog institutions] have functioned, however, their achievements have been limited at best. […] It appears that some form of subsidization will be necessary to finance environmental projects that are not commercially viable and hence not eligible for NADBANK loans.” More troublingly, “Another argument in defense of the side agreements is that they never were intended to eliminate border pollution or lax labor standards. They were designed mainly to gain crucial votes for NAFTA’s passage by the U.S. Congress, and their failure to achieve significant results is, in this light, easier to understand.” So the side agreements that Salinas-Leon argued would act as serious environmental safeguards are regarded by many—even among those who supported them—as mere gestures to quiet the opposition. With this very mixed record, what confidence can we have that the people hammering out the FTAA criteria are going to be in earnest about establishing and enforcing adequate environmental safeguards?

• What is the real source of globalization’s success?

All this brings me to what I think is the core question underlying trade liberalization disputes. Liberalization supporters like Collounsbury point to all the “Smithian efficiencies” that freer markets make available by rewarding economies and sectors that have a true comparative advantage. I definitely believe that such efficiencies exist, and can be exploited to everybody’s benefit. For example, the US has more high-tech textile spinning and weaving technology while Mexico has cheaper and more experienced labor for cutting and stitching, so cross-border cooperation results in more efficient textile production. Or since India is ten time zones away from the US, IT development or data entry firms can halve their turnaround times by setting up electronically linked branch offices in Bangalore and letting the Indian half of the project team work while the American half is sleeping, and vice versa. All that sort of thing impresses me as what you might call truly “smart capitalism,” which international trade agreements definitely ought to encourage.

But I still have no idea how much of the prosperity generated by globalization is **really ** founded on “smart capitalism” of this sort and how much of it is simply due to good old-fashioned “brute-force capitalism” that consists mainly of screwing the workers and trashing the planet. Yes, “smart capitalism” is an effective way to make money, but the time-tested techniques of “brute-force capitalism”—economic compulsion, political corruption, wealth polarization, irresponsible pollution, intimidating the opposition, avoiding regulation—are proven moneymakers too, and it’s obvious that many if not most companies are still perfectly willing to take advantage of them if they can get away with it. These techniques are widely regarded as not good in the long run for the societies that permit them, and I see no call at all for trade policies to encourage them.

So I really can’t blame liberalization protestors for suspecting that the free-trade agreements that are touted as favoring “smart capitalism” may really just be Trojan horses for “brute-force capitalism”. I agree that yelling and screaming and throwing rocks are not really adequate substitutes for coming up with intelligent alternatives: after all, capital and goods are globally mobile now, and we’re not going to change that even if we really wanted to. In fact, officially embracing free trade may be our only chance of effectively regulating it. But I think that means that we have to take our oversight responsibilities pretty damn seriously, and that our trade policy agreements have to include some regulatory watchdogs with real teeth. No more of this promising “smart capitalism” that will solve everybody’s problems, delivering “brute-force capitalism” that makes many of the problems worse, and then responding to complaints with a shrug and the comment “well, your society already had problems anyway.” (Mind you, I don’t think that NAFTA is nothing more than that, but there seems little doubt that “brute-force capitalism” constitutes at least part of its success.) If you don’t think that labor and environmental regulation belong in trade policy agreements, explain your alternative plan for ensuring that environmental health and workers’ rights won’t get seriously damaged by “brute-force capitalism” when you liberalize trade. If your alternative plan consists of a shrug, get ready to duck some more rocks.

[system]

Well, I’m afraid I don’t have the time to rebut this in its entirety but some further comments are merited.

*Originally posted by Kimstu *
More specifically, NAFTA has been in numerous ways a failure with respect to economic prosperity and environmental safety and health in Mexico.

Fine claim, but below I don’t see anything you can tie to NAFTA qua NAFTA as opposed to larger trends without specific linkages to international trade as opposed to generalization industrialization issues. In short, you’re trying to make NAFTA as NAFTA carry the responsibility of issues which are not in fact resultant from or in my opinion substantially connected to free trade per se.

That doesn’t mean that NAFTA hasn’t also accomplished some positive things, or that Mexico didn’t have and wouldn’t have serious problems in these areas without NAFTA.

The last portion of the clause is the most important part. As you acknowledge that all the issues below are in fact pre-existing to NAFTA, and I believe one can reasonably assert on the evidence such that it is, would be serious issues with or without NAFTA (and more generally free trade), then it strikes me that using any or all of them as evidence for criticism of NAFTA qua NAFTA requires one to provide something approximating substantive evidence that NAFTA is in fact responsible rather than other trends.

My objection here, thus is the same one I have in regards to most globalization critics who talk about impoverishment in the Third World without looking at what the trends were regardless of globalization and without looking to how pre-existing conditions set up the poor economic circumstances of debt crises. No, globalization is the easy but fallacious scapegoat. Which is not to say that I am arguing that globalization is an unalloyed positive, but rather many negatives attributed to globalization are not in fact dependent on it.

But NAFTA was heavily marketed as a win-win solution to these economic and environmental problems—in the same way that the OP touts the FTAA as a “magic bullet” for poverty elsewhere in Latin America—and it has in many ways failed to justify that optimism.

Shrug. Marketing. I don’t believe there is much utility in judging against extreme claims by some supporters. Rather, one should judge the agreements against original policy claims made by rational analysts. In any case, if I were to pull out the extreme claims of the anti-party and judge NAFTA against those, I rather suspect I could come up with some kind of glowing NAFTA didn’t hit bottom analysis.

Very well, the question posed:

• What did NAFTA supporters claim it would do for labor and the economy?

From a Cato Institute article by well-known NAFTA advocate Roberto Salinas-Leon:

A NAFTA would offer tremendous advantages for Mexico. Unrestricted commercial access to the largest market in the world would create a stable source of new jobs for the 1 million citizens who join Mexico’s workforce every year. The development of new commercial opportunities and the inevitable rise in real wage rates resulting from expanded growth and a wider output of goods would constitute a crucial force for stemming illegal immigration to the United States. […]

A NAFTA would ensure the potential for sustained growth in Mexico, enabling it to maximize its comparative advantages in such varied sectors as citrus and fish, cement and steel, leather goods and beer.

More important, the creation of a NAFTA would add a powerful impetus to the market-based reforms now under way in Mexico.

Sounds about right to me. Nothing magical, just higher growth rates to meet increasing needs more efficiently.

Forwarding over the positives cited, i.e. increased growth rates per:
What has it actually done? As this article

To the supposed negatives, beginning with the cite to the IPS study [–I believe I have previously noted my disregard for the economics–

Mexico’s debt burden has increased by $20 billion since NAFTA began.

So? What’s the issue? Really, if one is going to be a critic one should understand the terms. I might add their criticism of financial volatility strikes me as nonesenical as connected with NAFTA. The 1994 peso crisis had no relationship to NAFTA (however one may want to argue in re the overvalued peso, it strikes me the over valued peso policy was pre-existing to NAFTA negotiations and in any case was bad policy regardless). As for short term versus long term flows, there are non-discriminatory methods of dealing with that, nothing in NAFTA to my knowledge prevents Mexico from adopting policies like Chile’s to damp short term flows.

In re the debt, I assume that here we are talking about government debt held by foreigners. Well that comes from Mexican government policy decisions in re borrowing, now doesn’t it? So, what connection with NAFTA? Irrelevant criticism hardly a good case makes.

All well and fine to talk about money that could have gone to poverty relief and so forth but the reality is one has to pay one’s debts and as I noted previously, unproductive spending based on borrowing is what got many developing nations into this pickle to begin with.

So, we can leave this red herring aside.

The percentage of Mexicans in “severe” or “moderate” poverty is 51%, up from 47% in 1994.

Yes, be that as it may, how are you connecting this per se with NAFTA? Nice sleight of hand, but causation is important. We correlation, but any number of trends --longstanding and utterly unconnected with globalization, yadda yadda yadda-- which have created trends towards further impoverishment, such as rapid population increase exceeding growth in productivity etc. Scapegoating is what this is.

Real wages have fallen: in the manufacturing sector, by 9.5% since NAFTA was implemented.

Again, correlation versus causation. We both know how the game works. Now, in order to make meaningful statements, we need to look at the degree to which wages (by the way, I believe those are nominal figures not real figures used on their site, although that’s not clear and it is clear that real wages have fallen, although due to the 1994 financial crisis) are being influenced by other factors.

As I have pointed out when arguing in re foreign aid, just because things have not gotten better doesn’t mean they could not have gotten worse. Same standard here. It may be that without increased employment due to NAFTA, the trend would have been worse. Or not. However, it is not to be either assumed or asserted.

So, let’s try for something more sophisticated? I note that the Century report contains a much better discussion of the same issue. Perhaps it would be better to rely on their work, which as I mention elsewhere strikes me as reasonably sophisticated and balanced.

Working conditions in the maquiladoras are famously lousy.

Lousy, apparently but as compared to non-maquiladoras are they worse? An issue with analysis of the maquiladoras is what standards to use, who gets the blame? In general I believe that foreign owned and operated factories in my part of the world have been shown to operate with higher standards than local ones. I would guess that this may be the case in Mexico as well. At the very least, I would like to insist on intra-Mexican comparisons.

Attempts at labor organization have been quashed, and as this [url=“http://www.tcf.org/Publications/Basics/nafta/Evaluating_Nafta.html”]Century Foundation report](http://www.ips-dc.org/downloads/NAFTA%20at%207.pdf) comments, the effectiveness of the labor side agreement institution in redressing or discouraging these practices has so far been very low.

Well, here we may have a genuine issue, although in large part trade agreements are about trade and not about another country’s internal enforcement of its own labor laws. Sovereignty, you know, sovereignty. And once more, intra-Mexican comparisons rather than international ones are the most appropriate. It makes no sense to me to pin poor Mexican labor law enforcement, a longstanding issue along with poor law enforcement generally, on NAFTA, side agreements or not. And for the record, yes I do think the side agreements were window dressing and yes I have no problem with that. Change has to internally generated and is likely to best derive from assistance to Mexican workers in organizing as well as a degree of shaming from now and again.

I might add that the entire report by the IPS is filled with dodgy analysis, piss-poor economics and faulty logic. Indeed their entire writing strikes me as fairly ideologically driven with a disappointing unholy combination of uninformed isolationism and poorly thought out enviro-leftism. I have no idea why you continue to rely on their materials.

On the other hand, the Century report strikes me as of high quality, well reasoned and making good use of sources. I am surprised you did not rely on it more, although it does preclude some more dramatic conclusions.

Illegal immigration from Mexico, of course, has not been “stemmed” or even decreased, despite the Clinton administration’s increasingly aggressive policies on border enforcement since 1993.

Really? I read rather the opposite in the NYT a few weeks back, that there are indeed signs of a reduction in the rate of growth of illegal immigration as larger numbers of southern immigrants are stopping in the maquiladora zone.

In any case, once more, the issue of causation arises. It strikes me as an empty criticism of NAFTA if in fact the influences of NAFTA have not been strong enough to overcome poverty arising from galloping population increase in the south and the inability of the traditional economy to provide sufficient wealth generation to pull people out of poverty.

I myself have no problem with Mexican immigration, illegal or not, although obviously one should try and keep it at rates which both our economy and society can reasonably handle. There will be fall-out, but I think it’s largely a good thing Mexicans are coming here.

Now Kimstu posed the following question

• What did NAFTA supporters claim it would do for the environment?

I feel moved to note that I am not sure I want to accept a Cato analyst as the spokeperson for NAFTA given how I feel about Cato, but no matter.

[…] NAFTA will contribute to a healthy environment, especially in Mexico. […] One of NAFTA’s major environmental benefits will be to increase cooperation of the United States, Canada, and Mexico in solving environmental problems such as the cross-border movement of toxic waste, wastewater treatment, and ecosystem interdependence. (removed larger portion of prior text)

So, where are we?

Unfortunately, several of those so-called “green herrings” seem to have been validated by subsequent developments. As this 1998 UCSB study concludes, “In general, lax environmental policy tends to attract more capital inflow from the US for pollution intensive industries”.

Interesting. I am going to have to look this over more closely when I get a chance. I will note only that on one had I don’t find it surprising per se that industries facing high pollution abatement costs relative to total costs — you will note this— will seek to escape those costs by investing in production in lower cost areas. On the other hand, as the paper at hand noted, virtually all empirical studies to date have failed to find a strong influence. Looks like a solid paper however, with proper caution noted as in their conclusion they note FDI flows are influenced by many variables. In any case, I do not see a problem. A short run influence in re development is likely to be the development of polluting industries, regardless of free trade or not. That’s a short run price, which is acceptable if (a) the industrialization process is such that aggregate wealth rises so that the nation can afford environmental rehabilitation as happened in Europe and North America (exc. Mexico) (b) that basic care is taken so as not to create unmanageable problems in the short-run. There will be trade offs, but I believe efficient industries in the long run will be a positive. Inefficient state industries, for example, in Eastern Europe, in Egypt, of course have not met condition (a) and have ended up being “bads” all around, being wealth destroyers in the long run and environment destroyers.

the NAFTA Chapter 11 cases pointed out above by jshore and Needs are evidence that indeed, the settlement mechanisms can cause health, safety, and environmental regulations to be compromised.

Ahem, I direct you to this thread in re certain legal misconceptions: http://boards.straightdope.com/sdmb/showthread.php?threadid=69284
, although I believe follow ups should be posted here rather than there.

And there is little doubt that the increased economic activity due to NAFTA has brought about greater environmental degradation in Mexico: as this Tuft s working paper says,

Mexico’s transition from a closed economy to one of the most open economies in the world has not been without environmental consequence.

I do note that your quoting is a bit off here, as the paper is discussing opening from before NAFTA after Mexico decided to abandon its failed protectionist economic policies circa 1985. This somewhat changes the context of his comments, yes?

[…] From 1988 to 1994, the scale of Mexican industry dropped, with cleaner industries dropping less than dirty ones—resulting in a slightly cleaner composition of industry. Total pollution however, while slowing from 1988 to 1994, has close to doubled since.

Well, firstly I once more reiterate your loose usage of “due to NAFTA” noting time-based correlation is not causation. Second, economic development is going to have costs. Third, in the long run greater degradation is going to come from poverty than development, so I view this as a transitional cost. What are the alternatives? Starvation? Absolute poverty? I no longer have much sympathy for those who want the rest of the world to be green and poor. See my comments above in re state industries.

With this very mixed record, what confidence can we have that the people hammering out the FTAA criteria are going to be in earnest about establishing and enforcing adequate environmental safeguards?

Frankly, I see the environmental issues imported into trade negotiations as trojan horses for protectionism. Same with labor standards in large part, outside of the realm of ensuring that labor is not compelled in the sense of by physical violence and constraint, i.e. slave labor or forced prison labor in the classic sense. In both cases, I view environmental and labor standards best arrived at from internally generated supports, although multi-lateral negotiations on common minimal standards enforceable through appropriate treaty mechanisms are preferable to unilateral action for issues like fisheries and the like which are multi-national resources by their nature. However, problems which are single country specific — i.e. factory standards etc. — should be left to that country in order that locally rooted standards with local support develop.
Liberalization of Trade in general:

Liberalization supporters like Collounsbury point to all the “Smithian efficiencies” that freer markets make available by rewarding economies and sectors that have a true comparative advantage.

Why the quotes? Economic efficiencies are economic efficiencies, with or without Smith.

All that sort of thing impresses me as what you might call truly “smart capitalism,” which international trade agreements definitely ought to encourage.

Smart, stupid. Shrug. I don’t see real standards here.

But I still have no idea how much of the prosperity generated by globalization is **really ** founded on “smart capitalism” of this sort and how much of it is simply due to good old-fashioned “brute-force capitalism” that consists mainly of screwing the workers and trashing the planet.

Whatever. This is mere rhetoric, smart, stupid. Screwing the workers, trashing the planet… Fine, whatever, I see no reason to argue with rhetoric.

Yes, “smart capitalism” is an effective way to make money, but the time-tested techniques of “brute-force capitalism”—economic compulsion, political corruption, wealth polarization, irresponsible pollution, intimidating the opposition, avoiding regulation—

Now here is precisely the example of pinning deep-rooted problems on a convenient scape- goat.

** Economic compulsion.** Fine term. What do we mean by that? Compulsion to work somewhere against one’s will? Exists with or without globalization. In fact even without capitalism, if you ever visited the old Soviet bloc in the good old days, like I did, one could find plenty of it. Or compulsion to work? That’s life.

** Political corruption.** Same. In fact in general I would say the ** least open ** countries are the ** most corrupt.** Largely speaking, foreign investors like to have clean, clear rules to operate with. Of course, there are exceptions, especially in Africa thinking of the old Elf corporation and its dirty games. I’m not a market fundamentalist. I am well aware that free market gains are not magically achieved through the god-like movements of an invisible hand (not that Smith was so unsophisticated, but some use the phrase with near- religious fervor and belief). I recognize that in order to achieve the positives from free markets one needs (a) full information (b) certain ground rules. Otherwise you end up with gangsterisms and the like. All these ideological libs on this board might do well to take a visit with me to a few countries without functioning governments to see how private actors can oppress. Of course a flak jacket would be nice. But leaving that aside, with efforts to shine light on corruption, pressure from abroad can be a salutary influence.

** Wealth polarization. ** Same. It strikes me as unclear as to whether globalization is forcing further inequalities or not.

** Irresponsible pollution.** Same objection. What industries here in Egypt are the worst polluters? Which ones seem to avoid the laws and spew filth into both water and air? Why the big and quasi-state firms with government connections. Like the huge lead smelter which was virtually downtown. Wonderful. Little to no controls. Answerable to the Ministry of Industry.

Etc.

Your problem is you’ve found the scapegoat and now you’re willy nilly pinning the problems on it.

So I really can’t blame liberalization protestors for suspecting that the free-trade agreements that are touted as favoring “smart capitalism” may really just be Trojan horses for “brute-force capitalism”.

Bah, I see most of the protestors as working as trojan horses for old-fashioned protectionism. Nothing more, nothing less. Informed criticism is fine — I don’t even get all that worked up by rock throwing or burning trash cans. If you’re got a good point, feel free. However, scape-goating is another matter.

But I think that means that we have to take our oversight responsibilities pretty damn seriously, and that our trade policy agreements have to include some regulatory watchdogs with real teeth.

Who’s us? Regulatory watchdogs with “real teeth”? What are real teeth? Ability to intervene in another nation? One word, sovereignty.

Now, in re a prior message I ignored before:

Per se, of course, they’re not; there’s no reason a service job can’t be as good as a factory job. In fact, though, low-skilled service industry jobs at present tend to be less unionized than low-skilled manufacturing jobs, more reliant on temporary workers, and scantier in employment benefits like health insurance: so the manufacturing jobs are often seen as superior. This seems to be pretty well accepted across the board, but I can dig up data if you require it.

And orientation towards service industries appears to be a long-standing trend in the American economy. Insofar as much of the sector is relatively new, that unionism has fallen out of favor in the United States in the past 30 years and that unions themselves have remained focused on old-fashioned steel and guts kinds of employment, I see this as an overall economic trend which unions have simply failed to address well.

Overall Standards: increased standards of living

Poverty and unemployment hit lows in 1999, due largely to the strong economy, as noted in this Center for Budget and Policy Priorities report. (And yes, I do know that trade liberalization contributed to economic growth in some sectors!)

liberalization contributed to growth overall insofar as without imports the American economy would have run into severe inflationary pressures as far back as 98.

But the average American household has a negative savings rate (as discussed in this Japan Economic Institute report), and bankruptcies have been rising rapidly.

And? Americans don’t save and tend to overconsume. I don’t see trade liberalization having much to do with this, other than in general our openness to foreign capital flows has saved North American overconsuming asses from an investment crisis.

Well, I have spent too much time on this. By the way all, I have confirmation my precious little self is being xferred out of Cairo to Europe and later some other location as yet to be determined. So, I’m likely not to be on SD much longer.

[Kimstu]

Collounsbury: *As you acknowledge that all the issues below are in fact pre-existing to NAFTA, and I believe one can reasonably assert on the evidence such that it is, would be serious issues with or without NAFTA (and more generally free trade), then it strikes me that using any or all of them as evidence for criticism of NAFTA qua NAFTA requires one to provide something approximating substantive evidence that NAFTA is in fact responsible rather than other trends. *

Fine, but then the same condition holds with respect to the benefits that have been claimed for NAFTA, too. What is the evidence that the advantages that globalization supporters claim have accrued from NAFTA could not have accrued under other circumstances, e.g., with a liberalization agreement with stronger environmental and workers’-rights protections? No fair trying to use the correlation=cause fallacy to dismiss all complaints about negative developments subsequent to NAFTA while still claiming all the credit for positive ones.

Which is not to say that I am arguing that globalization is an unalloyed positive, but rather many negatives attributed to globalization are not in fact dependent on it.

Fine. All I’ve been trying to show here is that globalization is not an unalloyed positive.

*“But NAFTA was heavily marketed as a win-win solution to these economic and environmental problems”

Shrug. Marketing. I don’t believe there is much utility in judging against extreme claims by some supporters.*

Can you tell us, then, what part of the claims now being made in order to promote the FTAA we ought to believe? I would be happy to assess the proposed agreements on the basis of “policy claims made by rational analysts”, but it seems to me that they’re hard to find; what we’re getting instead is the same combination of optimistic PR blitz and paranoid howls of opposition that we got when NAFTA was on the table. If “extreme claims” are what globalization supporters are pushing in order to win support, they haven’t got much grounds for complaint if opponents later criticize less-than-extreme success on the basis of those claims.

*[Salinas-Leon:] “A NAFTA would offer tremendous advantages for Mexico. Unrestricted commercial access to the largest market in the world would create a stable source of new jobs for the 1 million citizens who join Mexico’s workforce every year. The development of new commercial opportunities and the inevitable rise in real wage rates resulting from expanded growth and a wider output of goods would constitute a crucial force for stemming illegal immigration to the United States.”

Sounds about right to me. Nothing magical, just higher growth rates to meet increasing needs more efficiently.*

Great, but then where is the rise in real wages? If that was a realistic expectation of the trade agreement, don’t people have cause to be concerned that it hasn’t yet materialized? If it’s “inevitable”, how much longer is it going to take? Are there aspects of the trade liberalization that are in fact exerting downward pressure on real wages as well?

The 1994 peso crisis had no relationship to NAFTA (however one may want to argue in re the overvalued peso, it strikes me the over valued peso policy was pre-existing to NAFTA negotiations and in any case was bad policy regardless).

The absence of a connection between the peso crisis and NAFTA is debatable, and hotly debated. As that same Century Fund report points out, some analysts argue “that Mexico deliberately maintained an overvalued peso in the period leading up to NAFTA’s approval in order to foster a U.S. trade surplus with Mexico that would encourage congressional support for the agreement.” Just because it was a pre-existing condition doesn’t mean that NAFTA necessarily had no negative effect on it.

• [Federal debt, poverty, wage levels:] As I have pointed out when arguing in re foreign aid, just because things have not gotten better doesn’t mean they could not have gotten worse. Same standard here. It may be that without increased employment due to NAFTA, the trend would have been worse. Or not. However, it is not to be either assumed or asserted. *

Same double standard. I am really not claiming that NAFTA has caused these problems. I am simply saying that severe problems still exist—and in some cases, seem to have somewhat worsened—which the governments and supporters who were advocating NAFTA claimed that NAFTA would help fix. Maybe the trade liberalization initiated by NAFTA will indeed fix them in the future. Maybe nothing could have fixed them in the existing time frame. Maybe they would have been fixed more easily with a different kind of trade liberalization policy.

*“Working conditions in the maquiladoras are famously lousy.”

Lousy, apparently but as compared to non-maquiladoras are they worse? An issue with analysis of the maquiladoras is what standards to use, who gets the blame? *

Well, what standards ought we to use? Remember, NAFTA advocates did not push their agenda by promising that wages and working conditions in post-NAFTA plants would be no more wretched than existing wretched ones; no, they said that the resulting higher standards would improve the maquiladora workers’ lot. It’s not very impressive to say at this point “oh well, at least they’re no worse off”.

Well, here [labor law enforcement] we may have a genuine issue, although in large part trade agreements are about trade and not about another country’s internal enforcement of its own labor laws. Sovereignty, you know, sovereignty.

As I asked before, if you’re not going to put labor rights conditions into trade agreements, then what is the reason to believe that labor rights will be upheld? And if there’s no reason to believe that labor rights will be upheld, then why should the holders of those rights support the agreements? Moreover, why should we participate in agreements that will effectively allow our own companies to infringe the rights of foreign workers? Do you believe that companies should simply be trusted not to do so, without effective external regulation? Why can’t we demand, and enforce, that our companies abide by the standards that we consider appropriate, even if they are operating outside our borders? Merely because they make more money otherwise? Don’t we have better ways to make money?

*It makes no sense to me to pin poor Mexican labor law enforcement, a longstanding issue along with poor law enforcement generally, on NAFTA, side agreements or not. And for the record, yes I do think the side agreements were window dressing and yes I have no problem with that. Change has to internally generated and is likely to best derive from assistance to Mexican workers in organizing as well as a degree of shaming from now and again. *

In other words: “If U.S. companies violate Mexican labor laws, that’s Mexico’s problem, and we should not attempt to remedy the situation by anything more than ‘window dressing’. Let the unions and NGOs spend the time, money, and effort to help workers organize and expose employers’ abuses in Mexico; no doubt they will eventually succeed in creating genuinely effective labor law, which our companies will be willing to respect just as soon as they’re strong enough to make us.” Do you really not see why some people find that reasoning objectionable?

*I might add that the entire report by the IPS is filled with dodgy analysis, piss-poor economics and faulty logic. Indeed their entire writing strikes me as fairly ideologically driven with a disappointing unholy combination of uninformed isolationism and poorly thought out enviro-leftism. I have no idea why you continue to rely on their materials. *

sigh Apologies, Collounsbury. I did my best to find sources that seemed rational and reliant on actual data, and to avoid those (such as the EPI reports) that you’ve previously criticized. I’m sorry if I made a bad choice. I will attempt to avoid IPS sources in debating with you in the future.

Really? I read rather the opposite in the NYT a few weeks back, that there are indeed signs of a reduction in the rate of growth of illegal immigration as larger numbers of southern immigrants are stopping in the maquiladora zone.

If that’s true, and if it’s caused by NAFTA, then I’ll be happy to learn of its success in that regard (though I agree with you that a reasonable rate of illegal immigration is not the problem many people like to paint it).

In any case, once more, the issue of causation arises. It strikes me as an empty criticism of NAFTA if in fact the influences of NAFTA have not been strong enough to overcome poverty arising from galloping population increase in the south and the inability of the traditional economy to provide sufficient wealth generation to pull people out of poverty.

If it’s an “empty criticism” to complain that NAFTA has not done so, then it was an empty promise on the part of many NAFTA supporters to assert that NAFTA would do so. Once again, how are we supposed to sort out the realistic expectations from the pie-in-the-sky PR?

A short run influence in re development is likely to be the development of polluting industries, regardless of free trade or not. That’s a short run price, which is acceptable if (a) the industrialization process is such that aggregate wealth rises so that the nation can afford environmental rehabilitation as happened in Europe and North America (exc. Mexico) (b) that basic care is taken so as not to create unmanageable problems in the short-run.

I agree. What I’m concerned about is that NAFTA development may not be fulfilling those conditions, especially condition (b).

NAFTA Chapter 11: Thanks for the link to the Quebec thread, I read it with interest. However, I don’t see that it contradicts my claim that NAFTA’s provisions make it easier to undermine legal safeguards (whether by communities or sovereign states) on health, safety, and the environment. As I understand it, Chapter 11 provides that foreign capital investing in Canada, Mexico and the United States may demand compensation if the profit-making potential of their ventures has been injured by government decisions. As RickJay pointed out on the other thread, corporations can already sue the government anyway; but this is an unprecedented expansion of their power to challenge legally and constitutionally enacted governmental regulation solely on the grounds that it diminishes their profits.

• [Increased pollution in Mexico since 1994:] Well, firstly I once more reiterate your loose usage of “due to NAFTA” noting time-based correlation is not causation. Second, economic development is going to have costs. Third, in the long run greater degradation is going to come from poverty than development, so I view this as a transitional cost.*

You don’t seem to have quite made up your mind whether you repudiate the connection between NAFTA and increased pollution (I agree that it’s not proven that the situation would be better without NAFTA, but I reiterate that these conditional arguments are unsatisfactory) or accept it as a necessary transitional cost. If the latter, then I think it’s important to be up front about such costs in advance. Where are the FTAA advocates acknowledging that environmental degradation in the near- to mid-term is likely to substantially increase?

What are the alternatives? Starvation? Absolute poverty?

Why are those the only alternatives? Why can’t we have increased trade liberalization in a more environmentally sustainable way?

Frankly, I see the environmental issues imported into trade negotiations as trojan horses for protectionism.

! Wow, Collounsbury, doesn’t that kind of duck the issue? While I don’t deny that some negotiators may want to take advantage of environmental concerns in order to sweeten the trade deal for themselves, surely you don’t really believe that there aren’t also a large number of people who are genuinely concerned about environmental degradation?

Same with labor standards in large part, outside of the realm of ensuring that labor is not compelled in the sense of by physical violence and constraint, i.e. slave labor or forced prison labor in the classic sense.

Once again, surely you recognize that there are lots of people who are genuinely concerned about mistreatment of workers even if it isn’t quite as bad as slave or forced labor? (And I wonder why you draw the line there, anyway. Why should it be mandatory to ensure that laborers aren’t formally enslaved, but not to protect them from deadly working environments, sexual exploitation, and physical intimidation to repress organizing activity?)

*However, problems which are single country specific — i.e. factory standards etc. — should be left to that country in order that locally rooted standards with local support develop. *

From what I’ve read about efforts at labor organization in the maquiladoras, there’s plenty of “local support” for higher factory standards, i.e., among the people who actually work there. That “support” just doesn’t extend to the people who employ them, who find lower standards more remunerative. Again, this sounds very like “we’re all in favor of abiding by labor law, as soon as they’re strong enough to make us.”

*Whatever. This is mere rhetoric, smart, stupid. Screwing the workers, trashing the planet… Fine, whatever, I see no reason to argue with rhetoric. *

I’m not claiming that the terms “smart capitalism” or “brute-force capitalism” reflect some kind of specific quantitative distinction. What I’m trying to get at is that there are instances of capitalist free enterprise which are more or less moral than others, owing to how they treat workers and the environment. I do not think that this is an irrelevant concept when considering trade liberalization.

*Now here is precisely the example of pinning deep-rooted problems on a convenient scape- goat. *

No it isn’t, actually. I am not saying that economic compulsion, corruption, wealth polarization, pollution, etc., are the fault of globalization—I specifically pointed out that these are the “time-tested” moneymakers of “brute force capitalism”, i.e., they’ve been around a long while. What I am asking is, how much of the economic development that globalization supporters like to point to with pride is the result of simply exploiting these admittedly deep-rooted problems, as opposed to finding new efficiencies from which everybody benefits? Naturally, you’ll say that this is very hard to quantify, and I believe you. But I still think it’s an important question.

I recognize that in order to achieve the positives from free markets one needs (a) full information (b) certain ground rules.

Great! Why shouldn’t those ground rules include serious labor law enforcement and environmental regulation?

Bah, I see most of the protestors as working as trojan horses for old-fashioned protectionism.

I agree that old-fashioned protectionism is not adequate for economic success these days. But the advocates of globalization have not yet made a convincing case that their way is better for everybody in the long run.

*Regulatory watchdogs with “real teeth”? What are real teeth? Ability to intervene in another nation? One word, sovereignty. *

How does it destroy the sovereignty of nations to have them form combined regulatory organizations (like the side agreement institutions of NAFTA, but not as weak) that are charged with implementing the regulations that the sovereign nations have all agreed on? If any sovereign nation doesn’t approve of those rules, it can simply abstain from the trade agreement, right? Why do you think that this is more intrusive on sovereignty than, say, the provisions of NAFTA’s Chapter 11 that permit foreign corporations to challenge sovereign nations’ laws to protect their profits?

Back to the U.S. impact:

*And orientation towards service industries appears to be a long-standing trend in the American economy. Insofar as much of the sector is relatively new, that unionism has fallen out of favor in the United States in the past 30 years and that unions themselves have remained focused on old-fashioned steel and guts kinds of employment, I see this as an overall economic trend which unions have simply failed to address well. *

In other words, if wages and working conditions in a certain industry are poor relative to those in another, it’s simply because “the unions have failed to address it well.” All the more reason, IMHO, that labor rights need to be safeguarded in the development of new economic sectors.

*And? Americans don’t save and tend to overconsume. I don’t see trade liberalization having much to do with this, other than in general our openness to foreign capital flows has saved North American overconsuming asses from an investment crisis. *

Well, you said originally that the test of liberalization’s success was whether most people are economically better off. I was simply pointing out some ways (real wage levels, job quality in the burgeoning service sector as opposed to other sectors, decreasing savings rates, increased debt) in which most Americans are not better off than they were a couple of decades ago. Yes, there have been advances made as well, and yes, the mere existence of problems doesn’t prove that globalization has caused them. Again, though, you can’t employ the double standard of automatically assuming that globalization deserves credit for all the successes while demanding rigorous proof for every suggestion that it may be connected to some of the failures too.

Well, I have spent too much time on this.

Your input’s appreciated; thanks.

By the way all, I have confirmation my precious little self is being xferred out of Cairo to Europe and later some other location as yet to be determined. So, I’m likely not to be on SD much longer.

Well, we’ll miss you; bon voyage and the best of luck!

[system]

Casual Issues

*Originally posted by Kimstu *
Fine, but then the same condition holds with respect to the benefits that have been claimed for NAFTA, too.

Absolutely. I hope that I have made no sweeping claims in regards to benefits of free trade/liberalization or NAFTA specifically. Much of the benefits are diffuse, longer term. Transition costs are near term and painful, and more easily seen (and all too often rather too easy to falsely attribute to free trade per se as opposed to other, negative, trends in the economy).

What is the ** evidence ** that the advantages that globalization supporters claim have accrued from NAFTA could not have accrued under other circumstances, e.g.,

Well, I have not done recent reading on NAFTA per se, it has little professional meaning for me obviously since I’m located a bit far away and have other concerns, however economic literature largely suggests positive macro-economic gains. After that it takes a lot of number crunching.

I devoted some time to running some literature searches and pulled up a few articles which I shall try to find the time to pursue. I will try to share them with you.

with a liberalization agreement with stronger environmental and workers’-rights protections? No fair trying to use the correlation=cause fallacy to dismiss all complaints about negative developments subsequent to NAFTA while still claiming all the credit for positive ones.

I wasn’t. I’m simply swatting down fallacious complaints against NAFTA per se. Above all those complaints which are tied to pre-existing trends expected to have continued to worsen with or without NAFTA. I might add that too many of the complaints confound general liberalization with NAFTA per se. As you know, liberalization trends began in Mexico before NAFTA. As for environmental and labor rights issues as part of the free trade pact, I reject that linkage on multiple grounds below.

• Which is not to say that I am arguing that globalization is an unalloyed positive, but rather many negatives attributed to globalization are not in fact dependent on it.*

Fine. All I’ve been trying to show here is that globalization is not an unalloyed positive.

Never said it was, however you continue to attribute, ipso facto, a large number of negatives to globalization (in the meaning economic liberalization) qua globalization where I think if one looks at demographic and economic trends, one can fairly clearly see that a good part of negative trends are dependent on domestic population and efficiency issues. The implication in much of your writing is that somehow without current globalization trends these problems (unemployment, falling wages, etc) would be better off. I don’t see terribly many reasons to so conclude. Rather the opposite, the only way wealth is going to be built to pull people of out poverty is through real economic growth. As opposed to fictive, government produced economic growth through non- productive, debt financed investments — you will note I am not a Lib et al with an ideological hostility to government intervention or even participation in the economy, quite the contrary.

So, in this context if you don’t mean to imply so the same, then I would suggest you recast your discussion which to my reading continue to rather strongly suggest that your placement of blame or responsibility is largely on globalization. Perhaps that is my bias, but your sources cited and the like certainly (largely) carry that bias.

*“But NAFTA was heavily marketed as a win-win solution to these economic and environmental problems”

Shrug. Marketing. I don’t believe there is much utility in judging against extreme claims by some supporters.*

Can you tell us, then, what part of the claims now being made in order to promote the FTAA we ought to believe?

Those for macro-economic gains, probably ultimately quite marginal for the US, but possibly quite large for “Southern Nations” presuming, however that trade diversion effects do not overwhelm trade creation effects.

By the way, given my somewhat sketchy knowledge of current conditions in re the Americas, I would expect that in large part what would be most important are agricultural exports/imports with perhaps an exception in textiles and maybe some other light industries, as well as perhaps steel. Insofar as with or without trade protection at WTO permissible levels textile and steel (big steel) are not competitive, I don’t see much added hurt to those sectors. Of course the Big Sugar boys will hurt too, but I don’t see that as a reason to lock out poor Carribean producers — although in this case in re Dominican production and clear use of forced labor, there are problems.

I would be happy to assess the proposed agreements on the basis of “policy claims made by rational analysts”, but it seems to me that they’re hard to find; what we’re getting instead is the same combination of optimistic PR blitz and paranoid howls of opposition that we got when NAFTA was on the table. If “extreme claims” are what globalization supporters are pushing in order to win support, they haven’t got much grounds for complaint if opponents later criticize less-than-extreme success on the basis of those claims.

I rather disagree with the last, insofar as it strikes me that the weakest ground in terms of rational analysis is occupied by those pushing a protectionist agenda, whether or not its dressed up in new clothes called workers rights or environmental protection or what not. However, in terms of reaching a largely economically illiterate public, they have an advantage, and have rarely shied away from distortion and the other wonderful aspects of the PR game. So free trade proponents have to fight fire with fire. I frankly don’t care for the overselling, nor the free market fundamentalism of those in say Cato Inst or what not, but I dislike, presently the protectionist dressed up as “labor rights” — yes I have little respect for the Union’s positions presently — irritate me more. “Fair Trade” my fucking ass. I would be rather that the criticisms of the Cato chowderheads be based on good econ and attack their hyper-trickle downish assumptions. Forcing of proper investments as part of competitivety in education and retraining grants would be wonderful, and if argued in strong free market terms, tends to cut the liberal bashing grass from under their simplistic little feet. (A reason I so like Krugman)

NAFTA effects

Great, but then where is the rise in real wages?

The possibilities are legion. Overwhelmed by other factors? Perhaps we have seen an alleviation in what otherwise would have been a worse decline in real wages? The trade effects are not magic wands, and certainly given low productivity, rising labor market offer one needs some pretty serious growth just to stay even. Alternatively, it may be that trade diversion rather than trade creation effects predominated, although Anne Krueger cited below feels this was largely not the case.

If that was a realistic expectation of the trade agreement, don’t people have cause to be concerned that it hasn’t yet materialized? If it’s “inevitable”, how much longer is it going to take? Are there aspects of the trade liberalization that are in fact exerting ** downward ** pressure on real wages as well?

Strikes me as more likely given my superficial knowledge you should consider domestic factors in real wage decline first. Insofar as liberalization should have created more demand and helped increase productivity… On the other hand the larger liberalization effects in terms of the peso crisis — note not NAFTA but larger liberalization — are discussed below.

Peso Crisis 1994:

The absence of a connection between the peso crisis and NAFTA is debatable, and hotly debated.

Yes, I read the same paragraph you did. And I don’t see the following as particularly convincing:

As that same Century Fund report points out, some analysts argue “that Mexico deliberately maintained an overvalued peso in the period leading up to NAFTA’s approval in order to foster a U.S. trade surplus with Mexico that would encourage congressional support for the agreement.” Just because it was a pre-existing condition doesn’t mean that NAFTA necessarily had no negative effect on it.

Peso overvaluation as policy predates NAFTA and its negotiations. To argue Peso overvaluation was because of NAFTA per se is to (a) engage in unfounded speculation on the MCB thinking and (b) to engage in exaggeration. However, assuming that the Mexican government did in fact adopt an even more overvalued Peso policy during the run up to NAFTA I have two observations:
(a) we have a matter of a degree of input not causation as Peso overvaluation clearly did not depend on NAFTA qua NAFTA.
(b) so what? Its not NAFTA’s fault Mexican CB/government took bad policy steps before the agreement. If I run up debts making a fancy office to impress before signing a contract with you is it your fault or the contract’s fault if I run into subsequent problems because of the same? No, it’s my stupid fault. In short, no matter the situation, its a red herring.

Let me note the description by Ann Krueger of Stanford: “In addition to liberalizing the external trade regime, however, the Mexican government had also adopted a “nominal anchor” exchange rate regime starting in l987. Under this regime, the peso was permitted to depreciate according to a preset schedule in a proportion less than the inflation differential between the United States and Mexico.”

That means that in fact by one measure, in real terms in fact the peso was appreciating. As Kreuger notes, " Thus, the Mexican peso was appreciating in purchasing power parity terms after l987, and the cumulative real appreciation since l987 had become significant by the early l990s."

Here we have confirmation per se of the prior existence of the bad policy, although one could link it to liberalization generally and poor policy. However, NAFTA as NAFTA, no.

Krueger adds: " This was reflected in sharp changes in the percentage of Mexico’s GDP that was in the tradables sector. Mexican exports as a share of GDP fell from a high of l9.7 percent in l987 to a low of 12.7 percent of GDP in l992, while imports rose from l3.4 percent of GDP in l987 to a high of l8.8 percent of GDP in l994 (and were even higher following the l994 devaluation). Thus, the share of tradables in GDP rose markedly from the mid l980s, spurred by the liberalization of the trade regime; however, the influence of the real exchange rate offset some of that trend between l987 and l993, and undoubtedly spurred export growth and retarded import growth after l994. Some part of the increase in Mexico’s share of the U.S. market after NAFTA would have occurred if the trade regime had remained unaltered: under a constant set of tariffs, Mexican producers’ (of both exportable and import-competing goods) ability to match competitors was clearly influenced by the changes in the real exchange rate."

(Citing to Anne O. Krueger “Trade Creation And Trade Diversion Under NAFTA” NBER WORKING PAPER SERIES Working Paper 7429 NATIONAL BUREAU OF ECONOMIC RESEARCH December 1999, p. 6)

(The paper can be had through NBER but I am not sure if this is a subscription service or not, I forgot to ask.)

That is, I see little reason to attribute this to NAFTA, although one can attribute it to trade liberalization combined with bad monetary policy. It strikes me that NAFTA critics using this are playing fast and loose. Again, opponents of liberalization per se despite dressing up their critiques in other terms.

I am really not claiming that NAFTA has caused these problems. I am simply saying that severe problems still exist—and in some cases, seem to have somewhat worsened—which the governments and supporters who were advocating NAFTA claimed that NAFTA would help fix.

So there are no magic wands. I’ll reiterate, in a real world analysis, I want to look to see if I can say with reasonable precision that, say NAFTA, had a positive or negative influence. If may be that other factors overwhelmed whatever influence NAFTA might have had to date, then I don’t see that as a critique of NAFTA but an issue of larger economic structural issues. Same standard I applied to the issue of foreign aid.

Now, an issue raised by Krueger which struck me as more damning than anything else raised, although likely the opposite from opposing POV are the trade distorting clauses such as the rules of origin which might displace Mexican input sourcing to higher cost American suppliers as opposed to Asian or Latin suppliers. That would be something which could undermine trade gains for Mexico.

However, knowing how this works out is difficult at best. Perhaps I can cite to Krueger to give an idea, who notes that given “all the other changes that were taking place as NAFTA was negotiated and phased in, it would require a very careful specification of the determinants of trade patterns and related variables for the U.S., Canada, and Mexico to disentangle the various influences at work on the pattern of trade among NAFTA partners before and after the start of NAFTA.” She also notes that little data is available, as “comprehensive data are available through l997 or l998 (…), thus allowing observation of only the first four or five years of operation of
NAFTA – a length of time not even halfway through the tariff phase-out period, and probably not
even long enough to allow for adjustment lags in any event.” Of course now we have an added two years, from time of writing, but I would note the caution which is used here.

It strikes me that one can not say that NAFTA has had either a huge negative or positive influence, despite what some sources have claimed.

Maybe the trade liberalization initiated by NAFTA will indeed fix them in the future. Maybe nothing could have fixed them in the existing time frame. Maybe they would have been fixed more easily with a different kind of trade liberalization policy.

What different kind of trade liberalization policy? You either liberalize or you don’t. Barriers are barriers are barriers. Of course this is a bit flip, but I don’t see where you want to go. Now it might be useful to cite to this analysis, also from the NBER by David Trefler

Trefler notes that int’l econ’s central tenet is that free trade is good. Certainly it’s what I learned in various modes. But he notes “we have one heck of a time communicating this to the larger public, a public gripped by Free Trade Fatigue.” “Why is the message of professional economists not more persuasive? I think that there are two reasons. First, in examining trade liberalization we treat short-run transition costs and long-run efficiency gains as entirely separate areas of inquiry.”

He as a point. As he notes a lot of heat is generated in “on-going and heated debates about freer trade. This heat was generated by the conflict between those who bore the short run adjustment costs (displaced workers and stakeholders of closed plants)and those who garnered the long run efficiency gains (consumers and stakeholders of efficient plants).” (Daniel Trefler “The Long and Short of the Canada-US Free Trade Agreement” Working Paper 8293, National Bureau of Economic Research, May 2001.) I would add workers in efficient plants.

Working conditions in the maquiladoras

Well, what standards ought we to use?

Comparisons with prevalent conditions in Mexico generally, yardstick should be against local working conditions, not against something which may neither be realistic or achievable.

Remember, NAFTA advocates did not push their agenda by promising that wages and working conditions in post-NAFTA plants would be no more wretched than existing wretched ones;

I frankly could care less about the propaganda one way or the other. If you want to keep bringing up agitprop by one or the other, feel free, but I don’t see a place for it and won’t waste my time responding.

no, they said that the resulting higher standards would improve the maquiladora workers’ lot. It’s not very impressive to say at this point “oh well, at least they’re no worse off”.

Sure it is. If they could have been starving or killed crossing the US border because there was not work for them, that is a good thing. If the jobs created helped provide otherwise not-available productive, wealth building labor, then we have something better than the non-trade condition, although it ain’t up to spiffy ideal standards. Your implicit yardstick are conditions the USA achieved only after a good century of development. I am sure Mexico and other countries can get their faster now, but it ain’t gonna happen overnight. Too many costs.

Labor Laws

As I asked before, if you’re not going to put labor rights conditions into trade agreements, then what is the reason to believe that labor rights will be upheld?

Labor laws are a domestic enterprise, to be enforced domestically. The domestic system has to evolve to be strong enough to enforce laws suitable to the on-the-ground reality.

And if there’s no reason to believe that labor rights will be upheld, then why should the holders of those rights support the agreements?

Upheld where? In your own country? Well, that’s a matter of domestic enforcement. In another country? Join Amnesty International and work constructively within that other country’s political framework to effect change. Otherwise I see this as something protectionists will abuse and exploit while doing little for the on the ground reality.

As for why US workers should support free trade, because we have largely gained from the same.

Moreover, why should we participate in agreements that will effectively allow our own companies to infringe the rights of foreign workers?

Because the proper framework for the rights of those workers is their own sovereign nation.

Do you believe that companies should simply be trusted not to do so, without effective external regulation?

Simply trusted? No. Regulated through extra-territorial means? No.

Why can’t we demand, and enforce, that our companies abide by the standards that we consider appropriate, even if they are operating outside our borders?
[/qutoe]

Who’s we? But otherwise, I see the issue of standards, provided a basic level of human rights and consent is implied — i.e. excluding slave labor proper or otherwise compulsory labor/unpaid labor (in the meaning of direct compulsion, not generalized ‘economic compulsion’ ) — as less-than- helpful. Firstly, it’s an issue of sovereignty, secondly it’s an issue of what local conditions can support. Standards may be more expensive than local productivity can support. Ergo, I see imposing American standards as inappropriate in terms of legal framework — if one wishes to do so through consumer means, I’m all for it .

Merely because they make more money otherwise? Don’t we have better ways to make money?

Because the poor motherfuckers won’t necessarily have jobs otherwise, if meeting our fancy- schmancy standards is the name of the game.

Frankly, after living in the third world and trying to see a business through, I no longer am terribly concerned about “better ways” or “cleaner money” or what not. Luxuries. I’m concerned with raw growth and given folks a least some way to make a living. I’ll be brutally honest, I think most protestors lack the slightest fucking clue about what real living conditions are, they lack the slightest fucking clue as to how much work has to be done to create wealth for people to rise up out of such abject poverty that it turns my stomach. Better ways to make money? I could give a fuck now, just giving folks productive labor which in the long run, perhaps two generations, can make things better would be nice.

Let me take an example, the people called the Zebaleen in Cairo. They’re a largely Xtian garbage collectors — private — in Cairo. They recycle in rather primitive circumstances. They quite literally live among the garbage that they collect. Foodish garbage goes to either them or more generally their pigs; metals, papers, glass and plastics are sorted and sold to wholesalers who resell to factories. Or sometimes some of the wealthier run small factories themselves. None of this really occurs with much in the way of standards.

Let’s suppose that they had a factory producing plastic sandals for export to USA (in this little hypothetical, we’re close to the USA) with some foreign capital to help out. But they have to meet foreign standards. Well they can’t fucking afford that. And how will they be able to without getting some higher value business?

Labor Law Enforcement

In other words: "If U.S. companies violate Mexican labor laws, that’s Mexico’s problem,

Yes, US companies resident in Mexico are Mexican responsibility and should be both responsible and subject to Mexican laws and standards on an equal basis with local companies. Nothing more, nothing less.

If I violate Egyptian law, it’s neither Swiss nor American responsibility/duty to whack me up side the head, its Egyptian.

If a Canadian company violates American law, as a resident of America, its American standards it meets, not Canadian
.

Let the unions and NGOs spend the time, money, and effort to help workers organize and expose employers’ abuses in Mexico; no doubt they will eventually succeed in creating genuinely effective labor law, which our companies will be willing to respect just as soon as they’re strong enough to make us." Do you really not see why some people find that reasoning objectionable?

Laying aside the inflammatory language and the presumption that American owned countries – contra the evidence I have seen in aggregate-- are law flouters in general, I see why some people might object, but they’re either innocents or fools. The problem lies with Mexican institutions, they have to strengthen from within.

Effects
In any case, once more, the issue of causation arises. It strikes me as an empty criticism of NAFTA if in fact the influences of NAFTA have not been strong enough to overcome poverty arising from galloping population increase in the south and the inability of the traditional economy to provide sufficient wealth generation to pull people out of poverty.

If it’s an “empty criticism” to complain that NAFTA has not done so, then it was an empty promise on the part of many NAFTA supporters to assert that NAFTA would do so. Once again, how are we supposed to sort out the realistic expectations from the pie-in-the-sky PR?

Political promises are political promises. Further, as many analyses note, it’s far too early to really know what NAFTA is doing in truth.

Legal Issues

NAFTA Chapter 11: … this is an unprecedented expansion of their power to challenge legally and constitutionally enacted governmental regulation solely on the grounds that it diminishes their profits.

Since I am not a lawyer I shall not attempt to argue the legal provisions. I will only note that according to what I have read your final characterization is not at all correct. However, we should have to seek legal advice/opinion to really understand this, no?

Environmental Issues
You don’t seem to have quite made up your mind whether you repudiate the connection between NAFTA and increased pollution (I agree that it’s not proven that the situation would be better without NAFTA, but I reiterate that these conditional arguments are unsatisfactory) or accept it as a necessary transitional cost.

[/quote]

Well, no. Since there is not data, I neither repudiate or not. However accepting the hypothetical that there is an increase tied to NAFTA, I do accept it (industrial pollution) as a transitional cost. Insofar as initial stages of industrial development are going to characterized inevitably by such, there’s not much of a way around this, unless you wish to condemn folks to poverty.

If the latter, then I think it’s important to be up front about such costs in advance. Where are the FTAA advocates acknowledging that environmental degradation in the near- to mid-term is likely to substantially increase?

Well, why? It’s not as if enviro degradation is not going to increase substantially in the near to mid term anyway. You see, your argument manages to imply in a rather strong way that FTAA or NAFTA or any other free trade agreement is going to be a motor for an otherwise non- important trend, or perhaps will be a significant source of harm.

As I see it, with X level of population growth rate, and Y amount of land, you get far more damage over far more area through impoverished traditional farmers trying to eke a living out of some cleared scrub or virgin forest than you do through a maqi factory across from Texas.

What are the alternatives? Starvation? Absolute poverty?

Why are those the only alternatives? Why can’t we have increased trade liberalization in a more environmentally sustainable way?

Costs, costs, costs. Population growth, population growth, population growth. I’d love it if we didn’t have a population explosion but we do. Since I’m not allowed to be a world dictator and impose a draconian one child policy come hell or high water on the world, one has to look elsewhere. Development seems to produce lower birthrates. Adding less people in the longer run will be good. In the meantime, the marginally comfortable worry more about their environment than the desperate, ergo, I see this as a good choice. Raise the cost of development too much with too many poorly conceived front-loaded requirements and people stay mired in misery and don’t give a fuck about anything but getting tomorrow’s bread.

While I don’t deny that some negotiators may want to take advantage of environmental concerns in order to sweeten the trade deal for themselves, surely you don’t really believe that there aren’t also a large number of people who are genuinely concerned about environmental degradation?

I also believe there are large number of those people whose idea of the world outside of their borders is highly unrealistic, and verging on the patronizing. They want their touristic paradises preserved to visit the picturesque natives (or better the wildlife without the annoying poor natives around).

Further Labor Standards:

Once again, surely you recognize that there are lots of people who are genuinely concerned about mistreatment of workers even if it isn’t quite as bad as slave or forced labor? (And I wonder why you draw the line there, anyway. Why should it be mandatory to ensure that laborers aren’t formally enslaved, but not to protect them from deadly working environments, sexual exploitation, and physical intimidation to repress organizing activity?)

I also recognize that (a) standards appropriate in the developed world may not hold well in the developing world. Standards are expensive. Example. Motorcycles and helmets. All for ‘em in the States. No question. Around lovely Cairo, where the traffic is mad and swerving across multiple lanes of traffic to make a turn is the norm, you don’t see that many of the Vespa riders with them. Expensive, and the folks who ride those babies don’t do so out of choice. Would I impose such a standard here? No, I would not. The apparently trivial minor added expense would in fact loom large in the budget of a family of six where perhaps only papa works, or in any case family income per year is $200. I gave my doorman a ramadan bonus of some 100 guinea, say 30 dollars. That was more than two months pay for him. (b) standards should depend on local mores, desires and ability to enforce. I’ve mentioned more than once my contempt for those movements which get rules on the book which are never enforced. Donor laws, to make the Europeans/Americans happy. No reality on the ground ‘cause they don’t have much consciousness at large. I rather see treaty imposed provisions as creating more of this sort of bullshit. I’ve seen way too much of it already.

Now, in re sexual exploitation — well if we’re talking equivalent to slavery/compulsion on a large scale, then fine. If we’re talking the incidental problems of a macho culture, that’s their business to be regulated by the internal evolution of their culture.

Finally, in re suppression of otherwise granted rights, I think that human rights frameworks are better than trade treaties for working on this.

From what I’ve read about efforts at labor organization in the maquiladoras, there’s plenty of “local support” for higher factory standards, i.e., among the people who actually work there. That “support” just doesn’t extend to the people who employ them, who find lower standards more remunerative. Again, this sounds very like “we’re all in favor of abiding by labor law, as soon as they’re strong enough to make us.”

First, I would like to note that based on my limited readings that I have a sense you are confounding Mexican owned and American owned export factories into one category.

Second, well, if there is local support, then one should work through that as well as work through human rights organizations to shame the government into enforcing the laws. I expect corruption is also an issues. This has to change, and from within.

I’m not claiming that the terms “smart capitalism” or “brute-force capitalism” reflect some kind of specific quantitative distinction. What I’m trying to get at is that there are instances of capitalist free enterprise which are more or less moral than others, owing to how they treat workers and the environment. I do not think that this is an irrelevant concept when considering trade liberalization.

I do not see practical ways to address this.

Scapegoating

No it isn’t, actually. I am not saying that economic compulsion, corruption, wealth polarization, pollution, etc., are the fault of globalization—I specifically pointed out that these are the “time-tested” moneymakers of “brute force capitalism”, i.e., they’ve been around a long while. What I am asking is, how much of the economic development that globalization supporters like to point to with pride is the result of simply exploiting these admittedly deep-rooted problems, as opposed to finding new efficiencies from which everybody benefits? Naturally, you’ll say that this is very hard to quantify, and I believe you. But I still think it’s an important question.

I don’t even think that it is possible to quantify. Indeed corruption, compulsion etc. are subjective. Further, even if they are exploited to an extent, I do not see that this necessarily undoes the benefits in the long run.

I recognize that in order to achieve the positives from free markets one needs (a) full information (b) certain ground rules.

Great! Why shouldn’t those ground rules include serious labor law enforcement and environmental regulation?

Expense and on the ground reality, see above. It should be a local affair meeting real local capacities.

Bah, I see most of the protestors as working as trojan horses for old-fashioned protectionism.

I agree that old-fashioned protectionism is not adequate for economic success these days. But the advocates of globalization have not yet made a convincing case that their way is better for everybody in the long run.

Protectionism has always been a net loser. Liberalization has been successful in the past. I believe I referred to this above in re a relevant cite, and one may add the larger body of economic literature is fairly clear on this.

*Regulatory watchdogs with “real teeth”? What are real teeth? Ability to intervene in another nation? One word, sovereignty. *

How does it destroy the sovereignty of nations to have them form combined regulatory organizations (like the side agreement institutions of NAFTA, but not as weak) that are charged with implementing the regulations that the sovereign nations have all agreed on? If any sovereign nation doesn’t approve of those rules, it can simply abstain from the trade agreement, right? Why do you think that this is more intrusive on sovereignty than, say, the provisions of NAFTA’s Chapter 11 that permit foreign corporations to challenge sovereign nations’ laws to protect their profits?

Ahh, see my comment above in re ch 11. But you will note the difference, in your example, however flawed I think it is, a private entity constituted under the laws of the host nation brings a suit under the host nation’s laws, which is decided in the context of the same. At worst one goes to non-binding arbitration by an appropriately constituted committee. That is far different from a trans-national agency “with teeth” as you say. Far different. Fuck, we can’t even get this country to pay its fucking UN dues because of the dumb fuck black helicopter crowd, a trans-national agency would really flip those idiots out.

Back to the U.S. impact:

Lack of Savings:

Well, you said originally that the test of liberalization’s success was whether most people are economically better off.

When balanced against other effects from the same. It ain’t a magic wand.

I was simply pointing out some ways (real wage levels, job quality in the burgeoning service sector as opposed to other sectors, decreasing savings rates, increased debt) in which most Americans are not better off than they were a couple of decades ago.

Connections. Savings rate is not connected with trade. Of that we can be sure. Expansion of service industry is not connected with trade, but exogenous, that’s also fairly clear. Real wage levels in the US — they have risen to my knowledge, although unevenly. That’s an issue of productivity gains. There are certainly distributional issues, but where are we?

You assert most Americans are not better off than they were a couple of decades ago, let us say arbitrarily 1960. I question that. The lowest third probably are not, but otherwise I would hazard the opinion your statement is incorrect.

Yes, there have been advances made as well, and yes, the mere existence of problems doesn’t prove that globalization has caused them. Again, though, you can’t employ the double standard of automatically assuming that globalization deserves credit for all the successes while demanding rigorous proof for every suggestion that it may be connected to some of the failures too.

I require proof both ways. As it so happens there is more work on gains in the long run than transition costs.

[Kimstu]

C’bury: *I hope that I have made no sweeping claims in regards to benefits of free trade/liberalization or NAFTA specifically. Much of the benefits are diffuse, longer term. Transition costs are near term and painful, and more easily seen (and all too often rather too easy to falsely attribute to free trade per se as opposed to other, negative, trends in the economy). *

Well then, I really don’t think, as I’ve said before, that we’re all that far apart in most of our beliefs. I will try to restrict myself to just a few core points, so we know where the places are that we just have to agree to disagree (and maybe be able to conclude this debate, instructive and enjoyable though it’s been, within the next decade! :)).

The implication in much of your writing is that somehow without current globalization trends these problems (unemployment, falling wages, etc) would be better off. I don’t see terribly many reasons to so conclude.

No indeed, some form of international trade liberalization seems to be a necessary feature of long-term growth, whatever scenario you come up with. And nobody’s arguing that the situation in most Latin American countries would be improved by staying in the same sort of cut-rate feudalism that mostly
prevailed prior to liberalization.

However, we have to ask whether the “current globalization trends” are putting pressure on poor countries to avoid different approaches (which could be in parallel with, not instead of, trade liberalization) that would help their people be better off. For instance, what about land ownership reform, which is a big issue in much of Latin America? Many economists seem to think that serious land redistribution policies would do a lot to pull people out of poverty and encourage economic growth (they certainly provided a major spur to US growth in the nineteenth century, when land was distributed and debt forgiven to an almost socialistic extent for many years during the spread westwards). But many of the current owners of that “redistributable” land have a lot of clout on globalization issues, so land reform is shelved in deference to them.

What about attempts to maintain strong currencies in order to attract foreign capital? That usually involves economic austerity measures, including reduced investment in antipoverty programs and other infrastructure and human-capital investments, which are also important for growth.

Rather the opposite, the only way wealth is going to be built to pull people of out poverty is through real economic growth.

We don’t disagree that real economic growth has to be the major component of the long-term solution. However, we may disagree on the importance or the feasibility of serious antipoverty measures in the meantime. As you point out, much of Latin America has already experienced some trade liberalization, and some economic growth in consequence; but levels of poverty and wealth inequality have generally not improved. By contrast, countries like Cuba and Jamaica have had very modest economic growth but have substantially reduced such problems of poverty as poor health care and poor education.

The difficulty is that capitalist growth enriches, but it also impoverishes; improves, but also immiserates. That’s not an indictment, that’s just a recognition of the morally neutral way in which capitalism works. So I have real big problems with the attitude that we in the developed world can and should use our great influence in the developing countries only to stimulate growth, and not also to resist impoverishment. Why do you consider the latter so much more an infringement of sovereignty than the former?

Forcing of proper investments as part of competitivety in education and retraining grants would be wonderful, and if argued in strong free market terms, tends to cut the liberal bashing grass from under their simplistic little feet.

Sounds like just the sort of thing I was hoping for! But can you be more specific? Who will be doing the “forcing” to whom, and how?

*Labor laws are a domestic enterprise, to be enforced domestically. The domestic system has to evolve to be strong enough to enforce laws suitable to the on-the-ground reality. *

Again, it seems weird to talk as though we are not already strongly influencing our developing trade partners’ domestic choices, e.g. about international financial obligations, budgetary restraints, protection of the rights of foreign investors (as NAFTA explicitly mandates), or more radical policies like the land reform I mentioned above. We already exert tons of pressure on them in many different ways. Why should we all of a sudden be strictly “hands off” when it comes to labor and the environment? Why can we be aggressively pro-growth but not aggressively anti-immiseration?

*“Why can’t we demand, and enforce, that our companies abide by the standards that we consider appropriate, even if they are operating outside our borders?”

Who’s we? But otherwise, I see the issue of standards, provided a basic level of human rights and consent is implied — i.e. excluding slave labor proper or otherwise compulsory labor/unpaid labor (in the meaning of direct compulsion, not generalized ‘economic compulsion’ ) — as less-than- helpful. Firstly, it’s an issue of sovereignty, secondly it’s an issue of what local conditions can support. Standards may be more expensive than local productivity can support. Ergo, I see imposing American standards as inappropriate in terms of legal framework — if one wishes to do so through consumer means, I’m all for it. *

By “we”, I meant the government—of the US, or of other developed countries pushing for trade liberalization with the third world. No, I’m not suggesting that we should demand that standards for employees of US firms in developing countries be exactly the same as those for US workers—that would be silly. Obviously we have to take the capacity of local productivity into account. But we could demand that wages and working conditions at least be enough to raise the workers above the local poverty level. Otherwise, where is that “rising up” out of poverty and “making things better in perhaps two generations” to come from? What’s the real difference between starving to death at 30 on a rubbish heap, with no money saved, and starving to death (or dying from poisoning due to chemical exposure) at 30 in a foreign-owned factory, with no money saved? Isn’t it reasonable to require that “giving folks a way to make a living” should actually accomplish that? Even the World Bank is talking now about the importance of fostering not just growth, but “pro-poor” growth.

(I also continue to be puzzled as to why you keep making an exception for slave labor and other forms of direct compulsion. Aren’t those part of the “domestic enterprise” of labor issues too, which you feel our “fancy-schmancy” foreign standards have no right to interfere with? Why make foreign companies sacrifice economic competitiveness in the local conditions simply in order to conform to our Western prejudices against slave labor? Or if we are going to insist that “a basic level of human rights and consent is implied”, why shouldn’t we raise that level somewhat if we want to?)

I’ll be brutally honest, I think most protestors lack the slightest fucking clue about what real living conditions are, they lack the slightest fucking clue […]

There there, calm down, I’ve lived in urban northern India, I’ve seen the scavengers living in garbage heaps too, I know what the alternatives to modern development really look like, I’m not just babbling along under the impression that all non-globalized workers are happy little peasants living in harmony with nature. (And I’m not a protestor, btw.)

Let’s suppose that they had a factory producing plastic sandals for export to USA (in this little hypothetical, we’re close to the USA) with some foreign capital to help out. But they have to meet foreign standards. Well they can’t fucking afford that.

Nobody said they had to afford it. Let’s suppose it’s the foreign capital that has to afford it; that is, its profits will be capped at some specified percentage until the foreign standards are met (and remember, they’re not likely to be terribly burdensome standards, even if the baseline is set slightly higher than the Zebaleen living on rubbish heaps). Perhaps some version of a “Tobin tax” on global capital transactions would help finance this too, making the actual burden on investors even less onerous; there are a number of ways you could fiddle with the actual imposition of the standards. And that’s a foreign rule affecting the foreign investors who provide the foreign capital, so it’s not an intrusion on local sovereignty.

Protectionist? Sure, you can label any provision that provides any protection of any sort “protectionist”. But at the most, it’s an awfully mild form of protectionism. It seems very unlikely to me that such a provision would actually drive US capital away from third world investment, and I’ll need more evidence than mere vague denunciations of “protectionism” to prove that it actually would.

I’d love it if we didn’t have a population explosion but we do. Since I’m not allowed to be a world dictator and impose a draconian one child policy come hell or high water on the world, one has to look elsewhere. Development seems to produce lower birthrates.

Yup, nobody’s arguing against development, only in favor of some “front-loading” to ease the transition costs of development. Remember too that the more we damage our environment during our climb to peak population, the more severe that population crisis will become.

*First, I would like to note that based on my limited readings that I have a sense you are confounding Mexican owned and American owned export factories into one category. *

? I was speaking specifically of maquiladoras, which AFAIK refers to a particular type of Mexican enterprise that is overwhelmingly foreign-owned.

Liberalization has been successful in the past.

Once again, though, we can’t assign too much credit exclusively to what is only one aspect of very complex economic development. Liberalization never happened in a vacuum or in a controlled experiment; it took place in parallel with many other developments, such as the land redistribution I mentioned earlier, which also influenced economic growth.

*Fuck, we can’t even get this country to pay its fucking UN dues because of the dumb fuck black helicopter crowd, a trans-national agency would really flip those idiots out. *

? Remember that polls show that most Americans are in favor of paying our UN dues and are positive about the UN in general. The chief resistance is coming from “American hegemonists” in the government who are trying to use this as leverage for dictating changes to the UN, not the “black helicopter crowd”, IMHO.

You assert most Americans are not better off than they were a couple of decades ago, let us say arbitrarily 1960.

No no, I was pointing out specific ways in which it appears that most Americans are not better off now, not attempting to estimate the overall net effect of everything on everybody in the past four decades.

[David_Weman_cdw]

bump

[jshore]

CDW,

You are “bumping” this thread back to life why?

Anyways, given that you did, I’ll add that there was an excellent special issue on “Globalism and The World’s Poor” a few months ago in the American Prospect: http://www.prospect.org/issue_pages/globalization/

See, in particular the short introduction to the subject by Robert Kuttner and the two articles by Nobel-prize-winning economists Amartya Sen and Joseph Stiglitz.

[scm1001]

Going right back to puddlegums orifinal post “Students- The problem with being is student is lots of time and little money. So consequently you get bored, and you drink and you drink and you drink some more. After a while this gets boring too. So a hip thing to do is to protest.”

As an ex student protester, the reason students protest is that (i) they have little financial stake in society at the moment and so have little to lose by change (ii) they are still idealistic to believe that protest can change things (iii) they see things in much more black and white, having less experience with lifes complexity.

Now I am fat, comfortable, lazy slob with a house, mortgage, and lots of stuff. Hey I don’t want things to change in case I lose my selfish possessions. let other people look after themselves.

[jshore]

From what I linked to above, here is a quote by Kuttner that I think very well summarizes my own point-of-view:

Global exchange of knowledge, culture, and commerce is broadly beneficial. But given the absence of a global government, there are many possible ways of structuring the system. The current system is run mainly for the benefit of investors. It is startling that this distinction escapes leading commentators. The debate is prosecuted as if there were only one possible version of global commerce, as if the inherently political question of who governs were beside the point. The usual suspects in the press tend to lump all critics of globalization together–Nobel laureates with anarchists.

…

No sensible person is “against” globalization. But a surprisingly large number of otherwise well-informed commentators are mindless of the fact that there are political choices to be made, often pitting the many against the few.

[David_Weman_cdw]

jhore: Why?

Of all the Great debates I’ve read, this is probably the one I value the most. It was unfortunately cut short by Collounsbury’s leaving the boards.
It would be cool if Col and Kimstu would resume their argument, but more generally continued debate on globalization is needed. Resurrecting this thread seemed likely to lead to a more intelligent debate than starting a new one (especially since I have nothing to add to the discussioon myself).
And if nothing else alot more people got to read this great thread.

[David_Weman_cdw]

Oh, and I wouldn’t’ve got to read that great Amartya Sen article otherwise, would I? Thanks!

[jshore]

CDW, fair enough. Unfortunately, kimstu is spending a lot less time on the Boards these days and I guess Collounsbury hasn’t seen this revival yet or has chosen not to respond.

But, hey, I am glad it gave me the chance to commend those American Prospect articles to you and anybody else who may be reading. No complaints here.