He’s pointing out that your wanting to buy local products, and buy American products, is a result of your tribalism instinct. We all have that instinct - our family is more important that our neighbors, our neighbors are more important than people in another state, people in our country are more important to us than people in other countries. Now this is the same instinct that is responsible for racism, but with skin color used to denote who’s in your tribe instead of physical proximity. So The Ryan is pointing out that a law to keep American jobs in America is morally equivalent to a law to keep white jobs white.
Interesting thread.
Jonathan Chance (and I always enjoy reading your posts) very well summarizes how I feel…
In short:
American workers have no inherent right to have jobs provided to them from multinationals.
However, the United States is a huge market place and has every right to ‘market’ that marketplace. You want to sell here…what’s in it for us? Do you pay taxes? Do you employ American workers with good wages who are then happy and pay taxes? No? Then get the hell out…we don’t want you. Come back when you have a better proposal.
Whether the above is a good idea or bad, I don’t know. I’m ambivalent myself. However, it is going to ring strongly in the masses if the standard of living falls in the future or if the average stays the same but there are more on the lower than average side.
Those who want to tax companies who set up shop overseas will find that they will soon need to add protectionist tarrifs as a consequence of their actions. Economics is like this-- you can’t just change one rule and expect everything else to stay the same.
Let’s look at two hypothetical companies: Ma&Pa Tool Company and Giant Amalgamated Tool, Inc. Both companies specialize in making hammers from wood and steel. GAT, Inc. controlls all aspect of produtcion, including the harvesting and shaping of timber for the hammer handles. It decides it needs to move that division off shore to save money. It lays off many workers and sets up shop in Thailand. Ma&Pa, on the other hand, concentrates on assembly and buy all their wood from suppliers. They used to buy US wood products, but recently a supplier in Thailand has offered much better pricing and delivery terms. Ma&Pa switch to the Thai distributer. Their US supplier has to lay off some employees due to a reduction in business, but the Thai comapany is hiring.
GAT, Inc faces some stiff taxes if it “ships jobs overseas”, so it decides it has to keep the US timber division after all. But it’s having trouble competing with Ma&Pa. No worries. GAT has a lobbying firm in DC that gets Congress to slap a tarrif on wood imports (such as those procured by Ma&Pa). After all, it’s only “fair”, right?
So now, everyone’s costs are higher, but at least they’re the same, right? Wrong. A Japanese company starts exporting hammers to the US that they manufacture in Thailand. So Ma&Pa team up with GAT, Inc to lobby for a tarrif on finished goods to “level the playing field”.
Of course consumers have to pay higher prices for tools and construction companies have to charge higher prices for construction jobs. So the Japanese company starts exporting prefab housing materials. What’s the next step? A tarrif on pre-fab housing materials, of course.
Japan retaliates with tarrifs on US goods and the EU gets in on the action as well.
And who pays for all this protection? The average consumer. Goods don’t flow freely across boarders, so there is a built in inefficency that someone has to pay for. But there is no way for consumers to actually know that prices are higher since there really is no comparison. It’s just “inflation”.
The whole concept of taxing companies which “send jobs overseas” is impossible to implement. Let us follow the example with hammers. My company, Sailor Hammer & Sickle, Inc. makes hammers and sickles. Are you going to force me to continue making hammers and sickles no matter what? Of course you cannot do that. I may decide it makes more sense for me to buy the hammers from someone else in the USA or abroad and make money reselling rather than manufacturing. And the manufacturer I am buying from can be a subsidiary of mine. Or are you going to stop me form investing where I see fit? It is just unworkable from the get go.
The only thing you can do is erect trade barriers. Implement tariffs for imported goods. This has been shown to do more harm than good. Put a tariff on imported hammers and who pays for that? The American public. Same with shoes or anything else. The thought that a company is going to keep operating at a loss is just silly. they pass the cost of any tariffs on to the buyer of their product and, in the end, it is always the consumer who gets the shaft.
Sailor:
Yes, you got it absolutely right. The only way to stop “exporting jobs” is to erect the whole gammet of trade barriers in which case you end up isolating the US economically, and making US goods too expensive to export.
The protectionist measures stifle growth and damage the creation of future jobs in growth industries. Better to kiss those low paying jobs goodbye and focus on the future.
It’s true that the US could implement a scheme like this if we really wanted to. It would break all our major trade agreements, and cause a fundamental shift in our markets. Right now, people everywhere in the US think that they should be allowed to purchase a product from whomever they want, without the gummint getting involved. If I can buy a car that’s better for my needs from Japan, where do you, as another citizen, get off, telling me what I can and can’t do? Our whole national way of thinking is built around this freedom, and taking it away with tarriffs is sure to p*ss off consumers who would have to pay more.
CurtC,
I’m not sure if what I wrote is a good thing…and I mentioned that. However, consider a politician using that in a long term, depressed economy…it could work for that politician, right?
Remember, that is what the logic is…that in the LONG TERM it is good for everyone though in the shorter term many could suffer. I’m not sure if I buy that either, though I lean that way.
I look at cars. My God, look how good cars are compared to even 20-30 years ago let alone 40 years ago. It is freaking amazing. That would not have happened without fierce global competition. There are many ways in which the average Joe has benefited from globalization.
However, no matter what the logic there is for the benefit of this, I think it is proper for the ‘gummint’ to monitor the effect and decide that the U.S. market is being hurt more than helped by certain arrangements or companies. If a hypothetical company has almost all foreign workers who work for very low wages and no benefits, doesn’t pay much in U.S. taxes and can so drive U.S. tax paying companies that pay money to tax paying American workers…does not the U.S. have the moral right to close the U.S. market to them unless there is a higher benefit to the U.S.?
If the economy is doing well, I would definitely say no. Affected people need to ‘retool’ and find a different path. However, if the economy is hurting? I don’t know.
To focus on the long term without trying to ‘cushion’ the effect on the people suffering carries a considerable risk of backlash. That backlash would be a much, much larger threat to globalization than allowing a bit of a cushion.
This isn’t a race. We have time. If we don’t have time then it is all moot anyway.
As someone pointed out in a previous post - ‘In the long term we are all dead’. I laughed at that because I use that quote quite often in RL. It is very true. While most people live too much short term and don’t worry about the future, the opposite of that can even be more unwise.
Maybe I should express another reason for my not-complete acceptance of globalization.
Multi-national companies ‘scare’ me.
Here you have a group of entities driven by the desire to accumulate wealth. When they are ‘tied’ to countries, that country can establish laws that are the ground rules for all companies to follow. The company has ties to the country it is apart of and wants that country to do well.
Multi-national corporations have the potential to bypass these laws and rules and do not really care about the countries they are apart of. If labor prices rise too much in country A, they go to country B etc.
The big item worrisome to me is the bypassing of the laws and morals of the country they are selling. In the U.S. we have minimum wage laws, child labor laws etc. When Nike sells their shoes in the U.S. they are BREAKING THESE LAWS.
Now, you say, they really aren’t because the laws are different because they laws in Vietnam (for example) are different.
However, they are selling those shoes back in the U.S. where such activity is illegal and could bring jail time. How is Nike doing this not illegal by U.S. law and therefore Nike should be excluded (not a tariff) from the U.S. market?
I know Nike isn’t breaking any laws…but why should the U.S. allow such behavior from companies and let them market here?
I don’t know. This issue confuses me. I admire many people’s confidence that they are right. Me, I don’t know. This is serious stuff and it scares me a bit.
Why do they scare you? Because they are trying to sell you products at the lowest price possible?
You’re perfectly free to not buy Nike shoes and to loudly and public advocate that others follow your lead. If that is truly a value to the country as a whole, the consumers will reject Nike products along with you.
I hate to sound like a broken record, but you can’t have just a “little bit of protectionism”. It doesn’t work-- there are too many ways around it. Unless you are willing to wall off the country and close the economy, you’re going to be fighting a losing battle. Let countries like Vietnam develop at the their own pace and within their own means.
As Sailor argued above, how would you feel if European countries, for example, refused to allow the US to export goods to them unless we complied with their ideas of social welfare?
What future?
On Marketplace today I heard that all the jobs exported from the U.S. are vanishing into the ether because foreign countries too are streamlining productivity and hiring fewer worker. Soon companies everywhere will be very productive and virtually no one will have a job. Oh, frabjous day! Welcome to the Permanent Worldwide Jobless Recovery.
So we will all have tons of stuff, clothes, cars, electronics, all made by nobody! As they take no effort to make they will be dirt cheap. We can all bask in the sun with all our stuff and never have to work for it.
This, of course, is nonsense. Loss of jobs has been decried by every generation. The mechanization of agriculture, industrial machinery, computers. . . they all meant lost jobs. Does anyone really think a return to manual agricultural labor is the way to go?
Agreeing with John Mace and sailor, I also wish to say this is very funny.
How is it nonsense? It’s simply a continuation of the trend toward automation that has been in force since the Industrial Revolution began. I would be VERY surprised if at some point the production of most material goods DIDN’T require a very, very tiny percentage of the labor force to produce them.
And ag labor … that’s one of the places where manual labor has suffered its worst losses.
I see a very unhappy future ahead unless we think about what we are going to do to keep people happy and productive as automation continues to shrink the labor market. And I see you Free Marketeers as part of the problem, not the solution, since you see any attempt to face problems squarely as defiance of your ideology.
Likewise, Evil Captor, I find your every suggestion of a ‘solution’ as worsening the ‘problem’, both short and long term. You cannot save inefficient jobs, simply because someone is trained there, or because that is what his father did, and his father’s father and so on. In your nightmare scenario (which fortunately could never occur outside of dreams), it wouldn’t matter how much productivity is improved - the mass joblessness would mean no one could buy anything.
Agricultural soceity morphed into industrial soceity, and I’m sure people becried the change because all they knew was agriculture. Industrial soceity is morphing into a service soceity and people are becrying the change, because all they know is industrial soceity. Eventually, the service soceity will morph into something new, and people will becry the change because all they know is service soceity. The constant here - despite the moaning and groaning, soceity did and continues to evolve.
Don’t you see that you are contradicting yourself? Yes, there was a time when 95% of people were employed in agriculture and now it is like 5%. according to you, we would have 90% of people jobless. But that is not what happened. What happened is that those 90% of people are doing things which were not done before. They are making cars and VCRs and movies and a lot of things which did not exist before because people were too busy farming. If we could do with 5% of the workforce what we do today with 100% that would mena we would have a lot of people doing more things which we cannot afford today. We could dedicate all those people to medical research or to science or they could go on vacation longer. After all, everything would be so cheap they could live on close to nothing. They could be students all their lives.
Your theories are proved wrong by history.
ResIpsaLoquitor, I still think you’re making too much of the requirement that a tax must “raise revenue.”
I don’t think it’s the case that (1) the government enacts a new tax, (2) a taxpayer sues (well, he’d have to wait a bit for standing, but ignore that), and (3) the government then has to prove that the primary and sole purpose of enacting the tax was to raise revenue and not to encourage or discourage certain activity.
Rather, I think that the government has fulfilled its requirement that a tax be for the purpose of raising revenue if the government shows that it is likely the government will receive more revenue after the tax is enacted than it would have received before it was enacted. This is obviously a very easy standard for the government to meet.
Like I said, I’m getting this from readings I did for tax classes in law school and not a full study or anything, so I’d like to hear evidence to the contrary if you have anything.
No, my theories aren’t proved wrong by history, they’re fully in line with history. It’s just that you tend to gloss over the pain and suffering of human beings as they’re displaced from one industry to the next, whereas I don’t.
In the Industrial Revolution ag workers shifted over to manufacturing, but it was a very, very painful process involving much human suffering and even death as some employers paid wages that were sub-starvation level. Granted, conditions in the ag sector weren’t much better for workers at the time, but at least being on farms they could often find food even if they couldn’t earn money to pay for it.
Now we are seeing massive displacement of workers by automation. Do you actually believe that the shift from what they’re doing now to whatever they’re doing in the future will be painless, or in fact anything other than tremendously wasteful of human life?
Now, THAT would be ignoring history!
I think we’re capable of doing better for our displaced workers – hell, for ALL displaced workers – than ignoring their suffering and just telling them it’s for the greater good of the Invisible Hand. The marketplace changes under capitalism, but that’s no excuse for treating people like shit.
Evil Captor, I will agree with you that displaced workers, especially those incapable of or unwilling to adapt to the changes around them, suffer. And I do not mean this as a slight to the workers - I think it fairly basic human nature to resist change.
The question then becomes, can we promote the change process while protecting displaced workers? To this, I will answer a unequivocable maybe. What I will assert is that the ideas promulgated here - tariffs and coercive taxes - are the equivalent of putting sugar water in the gas tank of a poorly running car. Just because you don’t know how to properly fix it* does not mean you can’t discard theories which will not work for more than the very short term good of the few.
*My faith in the political process is such that even if we knew exactly how to fix it, too many SI groups would find some reason to delay, hinder or prevent implementation.
Evil Captor, stop waving your hands so much, you are going to hurt yourself. And please try to be consistent.
You said : "Soon companies everywhere will be very productive and virtually no one will have a job. " Which implies lost jobs are not replaced by other jobs.
To which I responded: “Loss of jobs has been decried by every generation. The mechanization of agriculture, industrial machinery, computers. . . they all meant lost jobs” and I pointed out that jobs lost in agriculture were replaced by other types of jobs.
And you respond: “No, my theories aren’t proved wrong by history, they’re fully in line with history”.
To which I say: “Whatever”.