Why sure, a man or woman who has worked for 35 years in a factory making widgits and who has a mortgage and a family to feed can easily start up a busines. Someone with no previous experience shouldn’t have a bit of trouble getting finaning for that. And, taking time out from earning a living at age 55 or 60 to reeducate yourself is a piece of cake.
Is that an ivory tower I see there in the distance?
This why I believe that this wonderful new world should divert some of its new-found wealth to ease the transition from the old, worn out and discarded system, into the new and dazzling vistas that have been opened up.
Al things being equal, anyone should be able to reinvent themself, change with the times and life goes on.
<<<sniff>>>
What’s that in your pipe?
As David Simmons points out, the theory ignores the reality. As one gets older, no matter how skilled, adept and/or qualified one may be, real opportunities diminish.
>> As one gets older, no matter how skilled, adept and/or qualified one may be, real opportunities diminish.
That is going to happen regardless of what happens in the rest of the world and it is your own responsibility to prepare for that. I do not buy the theory that anyone is entitled to anything much less to continue living in style at the expense of denying the opportunity to make a living to people in other countries. I find that reasoning immoral. They should have just as much opportunity to make a living and never had it. If anything equity would tell us it is their turn now. If we are going to share the wealth we should share it with them.
But nothing really stopped that person from taking classes at night, or not buying that six-pack of beer a week or second television or whatnot and taking that money and say, saving it. I realize this too is probably an “ivory tower” statement, but you’d have to be blind to have lived in the past 3 decades and not realized how much things have changed, and that the old days of basically having an employer keep you employed for life are far removed.
Is this a good thing? Not necessarily. But it’s reality.
I do believe that free trade is a good thing. But what we have now with China is NOT free trade…all of outr manufacturing (and the supporting jobs that sustain it) are leaving this country. Our trade deficit with China is enormous-around $800 billion, and growing. The Chinese assist this by doing two things:
-they use prison labor in many of their exporting factories-essentially zero labor cost
-they chinese currency (the yuan) has been pegged artificially low against the US dollar, so Chinese goods are priced at less than half of their real cost
This state of affairs will result in almost all manufacturing jobs leaving this country. Of course, for those of us who cannot be malpractice lawyers, stock analysts, or business executives, you can always work at McDonalds! Get over it!
And once all the jobs go overseas, and Americans have no money, where will the Chinese sell their products? BTW, this is not unique to the US. Europe and Japan are losing jobs to lost cost producers as well.
I don’t remember saying that these things would be easy.
Then these people will have to choose options different than the ones that they can’t do. I notice that you left out the option that I did mention that involved taking current experience and knowledge and becoming invovled in a different aspect of the same business.
Yes, retraining via night school is a possibility, assuming that there are such resources available. Maybe spending some of this “new wealth” on strengthening the retraining facilities is needed. I would guess that the resources are barely adequate now. And also on collecting data and providing advice and information to prospective trainees on the best areas for which to train. If having to continually shift job skills is a requirement to stay employed, then adequate and effective means to continually retrain need to be available to the laboring section of the population, and that is a lot of people so I believe the investment needs to be a lot bigger than it is now.
Not only do you have to retrain for the right job, but it also should be one that is accessible to you. If you have a family, a house, kids in school and all that, it is no simple matter to pick up and move from Virginia to Washington state. A business can move a factory from Cleveland to India as easily as a family can move across town.
As far as that extra TV goes, not buying it is almost unAmerican these days. Even our heroic Flight Suit Wearer in Chief says that one of the most effective responses to terrorist disruption of the economy is to shop, shop, shop and buy, buy, buy.
It seems to me that you are extrapolating from the idle fringe and trying to imply that everyone who can’t find work is drinking beer and sitting in front of a TV in a house that has a set in every room. It is simply not true that at all times and under all conditions those who really want to work can find it if they would just apply apply themselves to the search.
Well, first of all, he has to find a carreer that is in demand, and will still be in demand when he finally gets out of school.
Then he has to find a carrer, and a company, that will hire him as a 59 or 64 year old “trainee” after he graduates. He has to do research to find want ads that advertise for “no experience necessary” in the field that he chooses to be retrained in, as well as making sure that companies in that industry do not practice age discrimination.
Not all jobs will be outsourced overseas, once the market wage rate for labor in the United States equals the going wage rate in china, then the outflow of jobs will stop. It is going on now because Indians and chinese will work for a dollar an hour, and americans currently want more than a dollar an hour at the moment.
Anyways, the benefits of free trade is that we can get products made overseas, like Nike shoes and prescription drugs, much cheaper than before - that is the benefit everyone gets from free trade : lower prices.
As far as starting up a business, he should be very, very, very careful about doing that - since most small businesses fail in their first year or two, and that would eat up whatever savings/retirement moneys he has, leaving him broke, and worse than he is now.
So if the “global” impact of job losses should be considered for the individual, then said individual must apply his own situation and not just buy into the “global” impact of spending money. He can’t have it both ways.
You’re right, it was pretty much a half-ass statement by me, and I understand what you’re saying. But it doesn’t change the reality - things change, and the individual must try to change with them.
Several posters here are using “free market” arguments in favor of moving jobs overseas, but I believe they are confusing comparative advantage with absolute advantage.
Suppose American businesses can make more profit by selling computers on the world market than by selling televisions. Obviously, more money will be invested in computer manufacturing. The natural result of this is that America will export computers and import televisions, to its economic benefit. It is better off overall, even though it has lost self-sufficiency in televisions. This is the basic free market argument - America has a comparative advantage in computers over televisions.
This argument does not apply to movements of factors of production, that is, labor and capital. If labor and capital are permitted to move internationally, they will move to countries with absolute advantage; that is, where their productivity is highest.
Historically, there have been barriers to the international mobility of factors of production. When the world economy was agricultural, climate and geography were the important factors of production, neither of which can migrate. Later, socialism constrained capital and technology within America. All that capital and technology gave the American worker an absolute advantage in productivity and allowed him to earn higher wages than workers in parts of the world having little capital and technology.
Now, with improved communications and the collapse of socialism, the mobility of capital and technology means foreigners can work with the same capital and technology as Americans, but at a lower wage, bcause they have lower costs of living. Due to the free flow of capital and the large supply of labor, developing countries now have an absolute advantage. There are huge incentives for American capital to go overseas, and free trade based on comparative advantage cannot bring it back until American and foreign wages are equal.
The incentive to move to foreign production is greatest for high-productivity jobs with mobile factors of production, such as computer programming. American computer programmers whose jobs move to India will move to lower productivity jobs, which decreases the GDP and forces Americans to sell their remaining assets in order to maintain an income.
The free-market argument for moving jobs and capital overseas is only valid if one does not care whether most people in America can maintain their standard of living. Some posters have admitted that they think American workers do not deserve their higher standard of living. Perhaps. But the fact is that if labor and capital continue to move offshore, the American standard of living will be destroyed. As Marx, Lenin and Mao can tell you, that has very grim political implications.
Voodochile: I have no idea whose post you were replying to up there, but it certainly wasn’t mine.
First you had me down as a socialist, then a feudal lord, and then a royalist. Whew!
Anyway, forget all that. First thing I’d like to know is, how precisely (mark that word) has the law of supply and demand changed since Smith’s time? You do know that he was illustrating how that law is applied to labor in that passage I was quoting? I’m really, really curious to know.
Because the higher productivity jobs are precisely the jobs that are the most profitable for corporations to move overseas when they are able to. High productivity jobs generate the most revenue, so using third-world labor results in the most profit.
And when the equipment goes overseas, American workers cannot keep up their productivity.
The only way the programmers who are left behind could maintain their standard of living is if they can take advantage of some new production methods or equipment that can allow them to be as productive as before but somehow cannot be moved overseas, for example if someone designed a new computer that could be used to develop software much more efficiently than existng machines, then disconnected it from the Internet and chained it to a rock in Kansas.
His quote speaks of competition by labor, but does not account for competition by employers for that labor. He rightfully states the ranks of the laborer will grow, but doesnt seem to realize that so will the ranks of the employers; unless of course, trade is limited or channeled into certain directions.
The law of supply and demand hasnt changed. But the environment within which it takes place has.
His whole quote talks of masters and laborers. And during his day, when the economic system was far more economic fuedalist rather than capitalist, that was the way things were. But today there are no such strict classes; whether one is an employer or employee is largely up to ones choices in life, at least in the vast majority of the US. Many if not most people will have been both, a few times.
Another fundamental difference is the basis of currency. Smith was talking about laws of supply and demand when during his time the value of currency had no relation to the amount/quality of labor performed. Currency was backed soley by a finite natural resource; so no matter the amount/quality of labor, new currency could not enter circulation until more reserves of that resource had been acquired.
Quite a drastic difference than with today, where currency is ultimately backed by, what else, human labor. Whereas in Smiths time, to give someone, say, $20, you were giving them something that represented a certain amount of gold, today you are giving them a coupon for $20 of your labor.
Directly related to the above, another huge difference is that we realize now
that labor is the source of all capital.
These are only two of the extremely large differences between Smiths views of economics in the environment of his day and ours. A few others are more social in nature; it is not a catastrophe for a business owner to go out of business; he is not ruined for life. We have no debtors prisons. Monopolies are not granted by the state, and are no longer seen as the most efficient way to spread technology (well, except maybe by the current admin).
But probably the greatest difference in our understanding today is that we know now we are bioligical organisms.
As such, we will only expend energy if we derive equal or greater benefit than what we expended. How much wealth is created is literally dependant on how it is dispersed.
So, Im sorry for my tone in my earlier post, but I have no patience with dire predictions base on historical models that bear fundamental differences with today.
From the time the first Pheonician cut a section of his gold arm band to pay a debt up until around 30 yeas ago, most currencies were backed by a finite natural resource. Now they are not. ~This~ fact, more than any other, renders any attempt to look to history for a likely outcome useless. Protectionism of the past was driven by the need to keep a certain amount of a finite natural resource within political bounderies. But there is no such need today. In the modern world, wealth ~is~ created, while in Smiths day, it was discovered.
Someone mentioned the Chinese and their devalued currency? Well, the Chinese are playing a dangerous game that could just as easily backfire. It makes Chinese goods cheap in the US yes, but it makes Chinese goods very expensive in China. Its like when a new store opens in town, and they have everything half off - hurry and get it while you can, because it isnt going to last forever, and sooner rather than later theyre going to have to raise prices to compensate.
After that long winded post there is one point I cant stress enough;
When a currency is based on a finite resource, a certain amount of protectionism is then necessary to maintain a certain amount of that resource within a political boundery, if only to maintain the currencies value.
Yet when a currency is based on human labor, the opposite becomes true; because there is no objective standard of value, what is valuable is determined by what other people are willing to pay/trade, and nothing more. It then becomes obvious that the larger the group of people participating in that trade, the larger potential value each individuals labor has.
If Im an underwater basket weaver in a town of a few hundred or even a few thousand, Ill probably starve to death. But if Im an underwater basketweaver in a world of billions, I might just be able to squeak by. As long as Im free to trade with them, and they are free to trade with me - and as long as the currency we use is based on the value of my labor, and theirs.
