Back from a bachelor party weekend in Las Vegas, and as I try and rehydrate, I read two interesting articles in the Sunday’s L.A. Times Opinion section (annoying registration required, use ‘laexaminer’/’laexaminer’).
The first one is a blithe commentary on the need for the ICC by Robert McNamara, still atoning. I’m working on something that sets out why I think the concept of ‘international law’ means something quite different from ‘national law’, but read his article yourself and see what you think.
The second is a thoughtful, but partisan, article on white-collar job flight by David Friedman, from the New America Foundation. His column almost exactly reflects what I believe about the state of the economy and the response of the two big parties to what we’re seeing. read the whole thing, but here are three good grafs:
News that major U.S. technology companies, among them IBM, plan to export thousands of high-skill jobs overseas indicates that worrisome trends in the U.S. economy will probably strengthen. Optimists contend that such “workforce flexibility” guarantees that something new … the Internet, biotechnology … will turn up to create similar high-paying jobs and carry the economy forward. But rather than triggering real economic development, moving white-collar jobs offshore underscores how reliant the U.S. economy has become on inflating high-end wealth and paper assets to compensate for large-scale job losses. If this pattern holds, the next boom may quickly mutate into another unsustainable bubble, further limiting America’s industrial options.
…
Today, if you’re, say, a U.S. filmmaker or an executive of a high-tech company, you can freely shift skilled and managerial-level jobs to low-wage or government-subsidized nations or hire at will from a bottomless pool of compliant workers in those countries. As a result, you can accumulate personal wealth much more rapidly. In turn, you pay far more in taxes.
This arrangement also makes private-sector employment less secure. That boosts demand for government services like job retraining and education. Tenured, benefit-rich public-sector jobs become more attractive. As wealth creation at the top is fostered, so too is the apparent need for and capacity to fund the public sector.
But it’s difficult to sustain economic growth this way. For example, during the last boom, the economic link between elite wealth and the public sector was most fully forged in New York City, Seattle and the Bay Area. For a time, housing prices soared, stock options fattened executives’ incomes and the resulting tax windfall fed public-sector expansion.
When the economy slowed, these areas were especially vulnerable. Land-use, zoning and redevelopment policies had driven out the middle and working classes, leaving behind an unbalanced economic base. Even after the economy soured, growth restraints kept property values high and public spending continued unabated, frustrating hopes for a quick turnaround.
…
Democrats have largely abandoned their New Deal, pro-industrial political legacy in favor of an elite-dominated, anti-development sensibility. The powerful public-sector unions that now dominate the party have little incentive to expand the private sector, in no small measure because they disproportionately benefit from the accumulation of massive wealth in a small number of pockets.
Across the aisle, Republican economic thinking is increasingly shaped by what political commentator Michael Lind calls “Southernomics” … a primitive commodity capitalism inspired by 19th century industries like cotton and oil production. Its adherents are unlikely to be troubled by the expansion of a concentrated, aristocratic-style wealth distribution. The party’s once vocal advocacy for entrepreneurial, egalitarian development is today rarely heard.
It may be that America’s flexible labor force is enough to stimulate an unexpected creative breakthrough, reinvent the U.S. economy, replace the nation’s dwindling supply of quality jobs and pay off the nation’s huge public deficits. But it’s just as likely that the next boom will be even more volatile and short-lived than the last one. If so, the pathologies latent in the U.S. economy may become even more entrenched and increasingly difficult to treat.
I’m not sure he’s nailed the Republican condition, but he’s absolutely right on three things:
The Democratic alliance between the high-wealth sector and the public employees, as each become more and more dependant on the other (the wealthy to the public sector to deal with the externalities they create, and the public sector on the wealthy to provide the tax revenue necessary);
The Republican policy abandonment of “entrepreneurial, egalitarian development”;
And the fact that our responses to this…as we are seeing right now in California…leave us with fewer and few policy options as the burden of public debt increases along with the fragility of the regional economic and social networks, meaning that disruptive change becomes less and less possible as we slowly drift downward to Neil Stevenson’s prosperity (‘what looks like prosperity to a Pakistani brickmaker).
People have been saying stuff like that for over thirty years. Perhaps this time, with global-scale telecommuting, they’ll be the broken watch that is occasionally right. I mean, one has to figure if you keep predicting the same thing year after year, the odds are with you that eventually you’ll stumble uncontrollably into being right.
But lets actually think, not just read:
“how reliant the the U.S. economy has become on inflating high-end wealth and paper assets to compensate for large-scale job losses.”
That would have to refer to the ’90s, since the current period has not experienced “inflation [of] high-end wealth and paper assets”. The ’90s saw significant gains – not losses – in jobs and also in standards of living.
Now, the current period has seen losses; however, it started with the piercing of what was a bubble; the puncturing of “paper assets” leading to some job losses. However, the real economy has continued to grow – if slowly (“We’re enjoying sluggish times, and not enjoying them very well”), and it was a drop in business investment which created the short recession.
Point: whoever wrote the article has complete lack of knowledge of the economic situation and facts.
I’ll let someone else do a more comprehensive job of defending the Democrats in general, if anyone cares to. But there is one thing that the Clinton-Gore Administration strongly advanced, which was a pro-trade agenda on the grounds that it would, on the whole, help create jobs and foster prosperity – not undermine it. Yes, they said, there would be some identifiable industries where there would be losses, but on the whole we would gain. They were right; trade agreements in the early ’90s helped create real economic growth and the U.S. economy surged ahead, leaving rivals (Europe, Japan) with more closed economies (where the trade policies were designed to “protect jobs” in the internal market) behind. We grew on average ~1% per year more than Europe, and even faster than Japan.
The problem with the current Democrats is more that they have all abandoned the pro-trade policies of the early years of the Clinton Administration (even Clinton abandoned it in ’99 at Seattle, and Gore distanced himself even further from it in the campaign); they clearly had and have no deep comprehension of what makes for a strong economy, and most of the current crop are, as Gore did in 2000, running on an economic platform that essentially resembles what David Friedman outlines (where it doesn’t resemble Hoover’s).
The truth is, it’s difficult to sustain economic growth the way that is proposed in the article; thus Japan and Europe’s relative difficulties.
As for the tech sector that the article focuses on, it misses the elephant in the room; what set off the puncturing in the tech boom wasn’t outsourcing but a shake-out that really shouldn’t be unexpected in a relatively new economic sector where there was lot of investment in things that ended up not working out – at least not as quickly as expected (even in the tech sector, though, despite the recent difficulties, gains *were* real in many areas, not just “paper”).
As for the concept of “entrepreneurial egalitarianism“, to the extent to which this neologism and nonsense phrase has any meaning, I will presume that he is talking about support for small business and economic opportunity. Whether or not the Republicans have abandoned it, as he asserts and you concur, is contradicted by the fact that the Republicans advocated and passed cuts in tax rates, in no small part on the grounds that they are the rates paid by many small businesses, and reducing the increased fiscal burden that Democrats had placed on them would help them. They have also continued to impose mandates on business that would impact what Hillary Clinton characterized as “every undercapitalized small business out there” (which she said she couldn’t be bothered to worry about).
Large, established businesses typically don’t mind these burdens as much – they can pass on the costs, but such costs are a barrier to entry of potential competition. (This is also why the usual Democratic solution when it comes to new mandates on business, of exempting businesses with fewer than X employees but mandating it on everyone with greater than X employees, end up styfling the growth of new companies, because it discurages people from hiring X+1 employees).
Overall, these predictions are comming from people who, like the predictions issued from the anti-war crowd, have a track record of abysmal failure and whose understanding of economics is essentially Colbertism and Dirgisme at its foundation. Merchantilism is a empirical failure everywhere it’s tried.
It’s also an interesting position for a ideological movement that claims to care about world poverty but then is essentially opposed to seeing poor people improve their living standards by market means; I guess it’s supposed to be State Socialism and Import Substitution Economics for them, no matter how often that is shown to fail. Here India is now turning to a more promising path, and the sort of people one might otherwise expect to encourage people to take steps out of poverty are wringing their hands and trying to find some way to impose a barrier that will prevent them from succeeding.
It’s dispicable.
Again, I’ll recommend this as a bit of a start.
Interesting, it is when the world turned away from increasingly open trade, at Seattle in ’99, that things began to falter.
In the meantime I recommend to Liberals and to Democrats that they not emulate French economics.
(by the way, that “giant sucking sound you hear” is still of Mexicans coming to America in search of jobs, not the other way ’round).
This whole thing reminds me of the most laughable part of the Gore 2000 campaign – his position on trade, which amounted to “our trade policies over the last eight years helped spur the longest peacetime economic expansion and growth in jobs, and if elected I promise I’ll never do that again!
Real point of this comment, though, is that I also recommend the economics section of this site. Actually, I recommend the entire site (even the bits I don’t agree with), but pertaining to this, the parts dealing with economics, political economy, and economic philosophy.
Good article. If they move our tech jobs overseas, we’re screwed, pure and simple. Porphy… seems to have forgotten how much change there’s been in the last 30 or 40 years when the jobs went overseas. But the early 1980s, our cities were wasted. Philadelphia by 1990 had lost more than half its population. The working class has already been thoroughly screwed over, now they want the white collar middle class.
And I’m a conservative. But I don’t buy that shipping high-paying American jobs overseas is a good thing. We already have a pinch in the lower end of our economy — manufacturing has taken a big hit. If they ship tech jobs overseas, that means no matter what your education, a private sector career is never safe — you may have to pay $60k for a college education that lasts you 10 years, tops, then you need more training. Forget about raising your kids, by the time they’re in Little League, you’ll need to go to night school.
If this outsourcing overseas happens, look for the type of devastating dislocations that hit the working class in the 70s to hit the middle class. It ain’t gonna be pleasant.
I’ve seen echoes of the trends A.L. is describing, and if this is combined with a long-wave economic downturn (look up “Kondratieff Winter”), the disruptions could be epic.
A major debt-driven contraction wouldn’t repeal the laws of economics by any means, but it might change a lot of political calculations. Throw in a series of pension defaults by major corporations (and yes, that’s very possible soon), and the whole political landscape could shift.
This is [1] yet another reason that a Democratic Party not driven by its blame/hate America wing is an urgent necessity; and [2] a scenario worth contemplating, whichever side of the fence one hails from.
Rome had its heart ripped out by a corrosive alliance of the upper and lower classes against the middle. Once that locked in, its fall was just a matter of time.
Rome had its heart ripped out by a corrosive alliance of the upper and lower classes against the middle. Once that locked in, its fall was just a matter of time.
I need some help here. What do you mean? I understand that the rich are running away with the apple cart, but what exactly happened? Lately, I’ve been thinking our situation is more analogous to what happened to Athens.
Also, as a non-economist person who just looked up “Kondratieff Winter”, are we heading for complete meltdown? What the hell is happening? I understand the economy is purging debt.
“Rome had its heart ripped out by a corrosive alliance of the upper and lower classes against the middle. Once that locked in, its fall was just a matter of time.”
Joe: I could point you in the direction of some good histories of Rome, if you’re interested. Here’s a bit of a start, and here for an overview.
If you’re ever interested, I could tell you exactly why the Western half of the Roman Empire fell when it did and exactly why the Eastern half of the Roman Empire fell when it did, but that “decdence1” link is a good start. Hint regarding the fall of the Western Roman Empire: it had little or nothing to do with something that happened half a millenium earlier.
But if there’s anything I’m on firmer ground than I am on economics, it’s the history of the Romans. I didn’t pick my web-name out of a hat.
IB Bill: I haven’t forgotten anything; I just don’t buy into falacious analysis. “Deindustrialization” didn’t happen; manufacturing still makes up roughly the same proportion of our GDP as it did ~20 years ago – fewer people work in it, though, because of productivity gains in this sector. Also, industrial jobs shifted out of the rust belt but not entirely because they left the country.
Again, falacious arguments aren’t very persuasive; Philly lost half its population for reasons related to Philly’s misgovernment. Jobs and businesses moved out of the urban cores and into the exurbs because of misgovernment in big cities. National Protectionism a la France wouldn’t have prevented that.
“If they move our tech jobs overseas, we’re screwed, pure and simple.”
I’m someone who was a big fan of people like Clyde Prestowitz – anyone remember him? We were going to loose all our good jobs to Japan because they were out-competing us and working for less and had a system that was going to dominate ours, they were moving with deliberation into “high value added” sectors and we needed to have our government act to “protect jobs” or over the next decade (that would be the ’90s), we’d be screwed? Only we didn’t follow Prestowitz’s prescription and who had a better ’90s?
Poor Sumi; she was “cheap labor” in India that we’re shipping our jobs to and came here – was she paid less as “cheap Indian labor” or more?
Meanwhile, if one looks at things empirically rather than from a college campus office, living standards for the poor and working-class in America have improved, not worstened; and if you don’t believe me, then you’re forgetting what things were like for many Americans ~40 years ago, not me.
“If this pattern holds. . .”
“If they move . . .”
“If they ship . . .”
“If this outsourcing . . .”
“if this is combined . . .”
If wishes were horses, then beggars would ride.
“I’ve seen echoes of the trends A.L. is describing.”
I’m sure you have; however, the problem with all of these analyses over the years is that they look only at certain parts of what is a very complex economy, and they extrapolate trends (yah, if it keeps trending hotter every day like it has been for the last several months, we’re all screwed).
“A major debt-driven contraction wouldn’t repeal the laws of economics by any means, but it might change a lot of political calculations.”
If something as cataclysmic as all that happens, it will result in global meltdown, not “shipping of jobs overseas” – no one overseas will be getting in anything but soup lines, too. If that happens here, it’ll happen cripplingly in Europe too for similar reasons.
However, the specter of this happening soon is likewise falacious; I mean, here we are with the lowest interest rates since the ’60s and people who don’t understand economics and global debt markets are talking as if . . .well, see here.
Economically, our problem will start, not cease, if we decide to ditch the Anglo-American economic philosophy in favor of Continental-French economics, which always sounds like such a reasonable response and rational system but works. . .as it does (not) in practice.
One of the real problems is that we’ve been shipping jobs into my home.
I think we need a national policy to get me to stop manufacturing albums in my home. People used to work – Americans used to have good jobs at good wages – making albums to sell to music fans. But now we’ve shipped those jobs to my computer and I’m burning CDs and not paying myself a good wage for it.
I’m doing more things like that, too, and unless stopped, I will do more manufacturing in my home in future years; I’m ripping off the American working class and costing us good union jobs.
I think a big tarrif barrier should be built around my home to keep me (an American consumer) from importing these things that I manufacture at slave-labor wages and without providing any benifits (I, as an owner of the capital/manufacturing plant, don’t even give myself, as an industrial worker, a decent pension plan for when I retire). At the wages I pay me, how will I even be able to afford the products I manufacture?
If these trends continue. . .if this outsourcing. . .if this is combined with (Joe’s post below; I do some desktop gaming publishing myself). . .it ain’t gonna be pleasant, the disruptions could be epic. A corrosive alliance between the upper classes (me as an owner of manufacturing) and lower classes (me as a guy who earned ~$14,000/year last year), against the middle, the fall is only a matter of time.
Point of the above isn’t sarcasm; we are doing “manufacturing jobs” in our homes, and in a lot of other places. People have, for decades, been looking at certain jobs going overseas as a means of ignoring the overall *successful* trends in American job growth and prosperity – yes, the rich have gotten richer, but the poor have *not* gotten poorer (if one looks at the change in family sizes, this is even more obvious than statistics that look at “family income” would have people believe; it is even *more* clear when one takes into account the Open Secret that the CPI has been overstating inflation for the last 30 years).
We’re able to do a lot of things much more efficiently than we used to, and we’ll *SEE*, as I said in my first post, if the Chicken Littles for whom the Sky of the American Economy is Always Falling have stumbled accidentally into being right this time. However, their prescription – which proposes medicines that have always proved to be more poison than cure, aren’t the solution even if they happen to have accidentally, by crying wolf every year, cried wolf in a wolf year.
I think that on the whole, A.L.’s correct on the three points.
Yes, the Democrats have abandonded their traditional pro-growth agenda for one of class politics that panders to high-wealth sector and the public employees.
Yes, the Republican party has largely abandoned the entrepreneur and local small business.
And yes, Government response to its errors to to try and compensate by increasing the public burden.
However, the degree to which it is correcable or even how dangerious remains to be seen. California had passed significant anti-business legislation that’s driving work out of the state. I wish I could find the article, but forbs had a good bit on how the anti-business agenda coming out of Sacramento is driving jobs into other states, but not necessarily overseas.
AL,
You are fogetting the 80/20 rule. 80% of the wealth is created by 20% of the population. Created Wealth. America creates wealth. By doing things never done before or by doing them better, faster, cheaper.
The best way to create more wealth is to let the wealth creators keep what they have earned. It is better for all of us.
The question you have to ask is – am I richer because Bill Gates is worth $100 billion or poorer? This here computer I am using to pixilate my TV screen says richer.
Wealth is so vast in America these days that it doesn’t pile up. Most of it is invested. Some of those investments will make us all richer by giving us more of what we want at a price we can afford.
The poor in America today have microwaves, VCRs, and computers. How did this happen when in 1943 the only people who could afford those things were governments (and they couldn’t even afford VCRs because even the million dollar studio versions hadn’t been invented). Did I mention that the only thing generally cooked by magnetrons in 1943 was radar technicians – and this was considered undesireable? Did I mention that the computers of the day were mechanical and had a clock speed in the range of 10 to 100 cycles a second? Roughly 100 million times slower than the average desktop job sold for around $600 these days. And those old clunkers (used to do the atom bomb math) took up a whole room and used many killowatts of power. Plus they needed tending to get anything done.
So how did our poor get all this stuff? Robbing from the rich? I don’t think so. The rich bought the microwaves when they cost $1,500 each. Now you can get a good one – brand new for about $60. How sdid this happen? I bought a top of the line VCR for $600 in 1985. I can now get an equivalent unit for about $75. How did that happen? I bought my first computer with no floppy. No hard drive and no operating system for about $3,000 in 1975. Why can I pick up one 10,000 times better off the street for free?
The rich are essential to market shakeout. If the VCR they bought for $1,500 didn’t work out (Betamax any one?) no great loss to them. They can replace it with a model the market supports.
We need the rich to be the early adopters. We need the middle class for volume production. The poor can live off the castoffs (as they always have) – but what castoffs. A car for $2,000, a VCR for $75, and a computer that has a higher frequency than your microwave for about $600 (the free ones are slower). Did I mention reliable electrical supplies, reliable natural gas supplies, reliable water supplies, reliable sewage, reliable garbage collection, reliable oil supplies. ETC.
The question you have to ask is this would you be willing to make the poor twice as well off if the rich got twenty times richer? My answer is yes. Which is why I gave up redistributionist politics.
The other thing to watch is that great wealth rarely lasts over three generations in a family. The ofspring lose the habit of wealth generation because tey are not so hungry.
I can only offer a first-hand, anecodotal ‘micro’ account here, but it seems to me that foreign outsourcing is likely to be good thing. I work on the tech/admin side of an accounting firm, and we’re starting to outsource a lot of our business to a support team in Bangalore. What this has done is allow us to farm out the low-skill, high labor ‘drudge’ work that everyone hates to do, allowing the higher-paid U.S. staff to focus on higher-margin services. And instead of cutting staff to reduce overhead, we’re actually planning on expanding to meet the increased demand from clients as we bid lower for business.
To summarize:
1. Local productivity has improved as we move from low-skill, low profit services to high-skill, high profit services.
2. Foreign office productivity improved because of the additional work we send them.
3. Client productivity improves as our lower prices (bids) allows them to devote less money to administrative matters and more to their core businesses.
The problem with the hand-wringing about foreign outsourcing is that it depends on a static model where there is only a fixed amount of work to be done, and increased productivity from outsourcng reduces the need for employees. In fact, what I’m seeing is the opposite – by increasing productivity, we have more freedom to expand to higher value-added services. The resulting productivity gains to our clients, in turn, stimulate additional demand, generating more economic activity.
Of course, the other point of the post – the debt-induced recession – would blow this all up by producing exactly the kind of static – even contracting – economic output I cite as unrealistic. And the more I think of the Bush budget, the more likely this seems.
I forgot to mention that for the price of my first computer I had to solder all the boards. Assemble the power supply and card cage. Find and fix any errors and write my own assembly language code (enetered into the computer with front pannel switches) to get anything done.
Ah the good old days. When you actually had to know something to use a computer.
AL,
I must say you are close to being the Democrat of the future. Strong on defence, strong on civil liberties.
You are however weak in economics.
I expect that this will be remedied over time.
The last wall of the castle for the left is envy/guilt. Basing policy on feelings feels pretty good. The problem is if the policy doesn’t actually solve the problems those feelings represent.
Hey!, I know how to hit the “on” button. And replace my modem. {*_+}
If anyone happens to remain interested in the Roman aspect of this post, feel free to go here where I have a post on it and have even taken the unusual step of opening comments.
The problem of the right is the ignorance of feelings.
The left needs a brain
The right needs a heart
And the Libertarians need some courage.
We can be together.
The KEY for future American prosperity is to keep our economy as flexible and adaptable as possible. We can’t let the shape of it be dictated by fiat or tradition. It’s gotta be like this. Why?
If you accept the premise that EVERYONE should be able to have the opportunity to offer their labor (this is part of Porphyrogenitus argument) and enjoy the fruits of that labor, then there is NO other choice for us but to compete. I affirm, since I have no moral authority to grant, these inalienable rights of the people of India, China, and every place else.
India is making great strides in building an educated, technical work force. If folks there can do a job cheaper and better, it is only right that they do so. All people have the right to offer their services. How can I ask the US government grant me an advantage over them? This is Immoral as Porphyrogenitus has pointed out.
With China’s ascension to the WTO, the competition is only going to increase. Anyone should be thinking twice and three times before building new factories. And that’s only for starters. China’s is going to be a fierce economic competitor in all areas. This is as it should be. On what grounds can we justify marginalizing a fifth of the world’s people, or a full third if we also consider India?
A side benefit of India’s increasing integration into the world economy is that the risk of a confrontation with Pakistan will be reduced to the same extent. The more India has to lose in a war, the less likely there is to be a war. Likewise, is China more or less likely to start a war, over Taiwan oil reserves or anything else, if it would mean a domestic economic disaster?
The most important thing we need to do is to limit manipulations of currency exchange rates, the way Japan continues weaken the Yen. Considering how long we’ve been running a trade deficit with Japan, the Yen should be a lot stronger against the Dollar. This is by design. Japan remains a mercantilist trader. They sit on a HUGE foreign reserve of dollars, and when all those dollars finally come home, and sooner or later, they WILL, our economy is going to take a HUGE jolt. But ultimately, our workers are going to be that much more competitive with Japan’s.
We cannot allow India and China to pursue similar mercantilist policies. Yes. They do have the right to compete with us, but, will don’t have to help them do it! We can’t let the same artificial imbalances build up with these newly formidable trading partners. Let the currencies truly float, and this problem will be greatly mitigated, thus making the competition fairer for everyone.
The American worker is the most competitive in the world, even with one hand tied. Let’s make sure we can compete in the 21st century using BOTH hands.
Lurker wrote:
“This is Immoral as Porphyrogenitus has pointed out.”
That’s a bogus mischaracterization of what I wrote.
Indeed, if you actually look at my comments, you’ll notice that I said nothing against opening up markets of other countries, and I am against merchantilism across the board – including the common proposals that we adopt it; I oppose having other countries follow Import-substitution and closed-market practices, and I did objected to Clinton dropping the ball on negotiating greater trade liberalization.
We’ll get on a lot better if you don’t constantly mischaracterize what I say in order to score cheap rhetorical points and assert that I said things I never did.
Upon further review, I think *I* misread what “Lurker” wrote and took something as a slight aimed at me when it wasn’t.
If so, then I’m the one who owes the apology and I’m sorry. My bad.
(I thought he was being sarcastic with the capitalized “Immoral”, but I’m pretty sure I just misinterpreted and saw sarcasm where none existed. Again, my bad; I’ll try and be more careful to not see insults where none exist).
I also agree with Lurker in that I do think we’re letting China get away with royal murder in their trade practices.
Porphyrogenitus:
I just looked. Actually, the capitalization of “Immoral” was a typo. I reckon this has been a case of ‘violent’ agreement.
I get that a lot. There must be something irritating with writing. If I knew what it was I’d fix it, at least when trying to be agreeable.
M. Simon wrote:
“The other thing to watch is that great wealth rarely lasts over three generations in a family. The ofspring lose the habit of wealth generation because tey are not so hungry.”
Actually, as I think you’ll probably agree, it’s worse than that; by the 3rd generation they often turn against the very things that make wealth generation possible.
Think the Kennedy clan since JFK, Jay and other Rockefellers, the Heinz-Kerrys, the Ford Foundation, Carnegie Foundation, Rockefeller Foundation (again).
Indeed, it probably won’t even be the third generation of the Gates family, but the second, that runs a Gates Foundation that is hostile to wealth generation. Meanwhile, it’s not as if Jay Rockefeller or Teresa Heinz-Kerry or the scions of the Kennedy family live lives of aesthetic self-denial; they’re just hostile to the ladder that would open the way to nouveau riche types who gained wealth through disreputable things like commerce moving in next door. I mean, grandaddy is one thing – he’s family. But mere tradesmen? In *our* community? Puh-leeze!
Lurker wrote:
“I get that a lot. There must be something irritating with writing.”
I think it is partially a pitfall of web-based communication where you don’t get or give “non-verbal ques”, but in this case it was certainly my fault not yours.
The most important thing we need to do is to limit manipulations of currency exchange rates, the way Japan continues weaken the Yen. Considering how long we’ve been running a trade deficit with Japan, the Yen should be a lot stronger against the Dollar. This is by design. Japan remains a mercantilist trader. They sit on a HUGE foreign reserve of dollars, and when all those dollars finally come home, and sooner or later, they WILL, our economy is going to take a HUGE jolt. But ultimately, our workers are going to be that much more competitive with Japan’s.
But that’s the whole point of the currency manipulation. Japan only manages to stay competitive by keeping its currency undervalued. When those dollars finally come home and the Japanese currency appreciates, one country’s economy is going to get a huge jolt – Japan’s.
Note that most large companies generate an after-tax margin of 5-10%. If Japan’s currency appreciates by 20% – large numbers of Japanese companies will go belly-up – given that their largest market is in the US of A (not to mention other large markets that have their currencies pegged to the dollar). If mercantilistic policies were the ultimate driver of economic growth, China and India, not the US, would have the biggest economies in the world.
Zhang Fe:
Your point about a stronger Yen hurting Japanese companies is valid, but the US will still have to adapt to a weaker dollar, which WILL hurt the all Americans where it hurts, in the pocketbook.
That’s why both sides conspire, in limited fashion, to keep the exchange rate within a loose band. The net effect is that the Japanese are exporting an “increased standard of living” to the US, i.e. instead of cashing-in that huge pile of dollars to improve their lives, they’re just sitting on them, basically giving the US a huge interest free loan. …all to keep their factories going. How’s that for inflexibility?
There’s a tipping-point coming given the state of the Japan’s economy. This imbalance is unsustainable indefinitely. When the scales are balanced, it’s going to happen fast! That’s one BIG reason to keep our economy as flexible and dynamic as possible. This change will be to quick and to complex to manage. We’re just going to have to ride the waves.
Both China and India are starting down the mercantilist path. They’ve watched the Japanese model. It’s been good lesson for all developing countries. And the mercantilist approach will work for them too… initially. The problem is that their economies have the potential to be so enormous, that the US will not be able sustain their exploitation to the extent that it has from Japan. We’re talking about the difference between 2 billion people vs. 125 million!
My whole point is, let the exchange rates truly float in a free market. This will allow a more orderly transition (as contrasted with the upcoming dollar/yen crisis), allow China and India to enjoy the fruits of their labors, and protect viability of the US economy. This would truly be a win-win policy.
But I must admit, I am chauvinistic. Americans’ innate flexibility will win the day! …at least when ensuring our prosperity. There’s no way that we’ll still have the world’s largest economy. I think we’re better, but 2x or 3x better?
M. Simon: “envy/guilt” is the left. Without it they’d no longer be left at all. (Neo-neocons maybe.)
Now the thought of two essentially righty parties is pleasing, but there’s too big an electoral market for envy & guilt for it to happen before we humans become angels, or uebermenchen, or such. There will always be a Howard Dean or Pat Buchanan to tap these sentiments.
Well, M. I might continue to argue my economics over yours for some time…statist capitalism has done a pretty good job of building the U.S. and western Europe (and Japan and China and India) into the major players in the world economy.
While mine certainly has defects in application, I’d love to see an example of yours…just one, perhaps.
The reality is that economics and politics are interpenetrated so far that it is virtually impossible to separate them.
I’ll cover ‘envy/guilt’ another time, and suggest that the desire to assist one’s tribe members is found in pretty much every writing about politics as long as there have been writings about politics.
It has to do with strengthening the group as a whole. Strong individuals succeed, but are usually beat – economically and militarily – by strong groups.
A.L.
I’m with A.L. on this one. Global competition is between groups, nations, corporations, trading blocks, etc.
Individuals, no matter how successful, do NOT have the power to keep markets open and fair. The small businesses and entrepreneurs of America are very, very important to our success, but it is the government that enforces open and fair markets. Without this power, large organized groups would always override fair competition. Individuals and small companies wouldn’t stand a chance. There’s no liberty if you can’t put bread on the table.
The American ‘state’ is necessary. It serves our purposes as long it maximizes individual liberties, balanced with the necessity of fair, open markets, both domestic and foreign. To do this you need power. The ‘state’ is the only way to get that power.
Libertarians would have us give up the ‘state’ to maximize the individual liberty side of the equation. Unfortunately, this imbalance, unless every global player is following the same Libertarian ‘rules’, would make us the spoils in an economic war of exploitation.
Unless, of course some collectivist organization is setup to prevent it; but then, we’d be back where we started.
Not all Libertarians are functionally anarchists – I’m not a Libertarian, myself, but only some varieties of Libertarianism go as far as M. Simon’s. Most are concerned with limited government but *also*, critically, the Rule of Law (properly understood), and that one of a few legitimate areas of State action is to enforce such (see Hayek, who, in The Constitution of Liberty, spends a lot of time on this and also on what precisely constitutues the Rule of Law, as opposed to arbitrary State action, and also Milton Friedman. Neither of them, by the way, characterize taxation as “theft”, though both are concerned with keeping taxation and other State exactions limited. See also Thomas Sowell and Walter E. Williams – both of whom are in favor of the government negotiating the reduction of trade barriers so that other countries – and they would add our own – let people benefit from the Market).
I think that one of the things that people like A.L. worry about is the choices made by consumers, though; consumers need to have fewer options, be constrained by collective decision making, because otherwise things won’t work out as A.L. envisions. In any case, this is usually what it comes down to: American consumers are buying the wrong sort of product (foreign steel instead of good, home-grown American steel, so lets put up barriers to foreign steel to save the jobs of American steel workers – no matter how many jobs that costs in other American industries that use steel and thus have their production costs increased. But enough about *Bush*.)
By the way, I want to clear up one thing: I, personally, don’t actually manufacture my own albums. Many people do, and I was invoking that as an example to illustrate a point. Even such manufacturing as doesn’t take place in homes can now be done in smaller workshops without huge industrial plants (with many industrial workers) than was possible in the past.
“Individuals, no matter how successful, do NOT have the power to keep markets open and fair.”
but they do have the power to influence the movement of markets, which in and of themselves magnify the power of any within them. the same is true of a bottom up system of government like ours is meant to be (yeah i know the reality doesnt match the blueprint – just like a homer simpson grill).
when a government is seen as a means to an end in the hands of the people, amazing things are possible. the question before us is how we contribute further to the growth of individual empowerment and influence in global markets and national governance.
Balagan:
B: “but they do have the power to influence the movement of markets, which in and of themselves magnify the power of any within them”
Are you saying that the aggregate of individual choices in a market is the same? or better? than some organization that forcefully advances a common agenda? If so, I must disagree. If the market is being manipulated, then individuals, acting only as individuals, will only be able to buy, or choose, what is offered.
B: ” the same is true of a bottom up system of government like ours is meant to be (yeah i know the reality doesn’t match the blueprint”
Actually, the American government as structured in the Constitution is far from bottom up. It IS top down, but balanced in a way, sometimes more successfully than others, to allow abuses to be corrected. This balance is an attempt to get the power of collectivization, while mitigating the dangers of autocracy and totalitarianism.
Even the Articles of Confederation really weren’t that much more “bottom up”, at least from the POV of the individual, as argued by Albert J. Nock in *<a href=”http://chansen.tzo.com/Publications/OurEnemyTheState/nockoets0.htm”>Our Enemy the State*. He’s Libertarian. He argues that the Articles and the Constitution aren’t. I disagree that this is always a bad thing, but his historical perspective is persuasive.
For me (in my quite simplistic view) with two kids about to enter college and a mortgage, the ‘moral’ or philosophically correct economic theory arguments are irrelevant. Offshoring is a direct and immediate threat not only to my livelihood but it is a threat to any and every white-collar knowledge worker in this country.
Fear has prompted me (and others) to attempt to pressure our polictical leaders for change.
Then fear has prompted you to support policies that will actually have a negative economic effect, not a positive one – which is one reason why folks who, for *other* reasons, like to see such things, whip people into a state of hysteria and then stampede them into supporting policies that hurt the economy, hurt jobs, hurt prosperity, undermine wealth creation and preservation, but empower themselves.
Porphy, I think you’re off-base on this.
The reality is that the U.S. economy is going to be averaged toward the rest of the world economy over time.
On a broad scale, that’s probably a good thing – for most of the people in the world.
It’s going to hurt the people of the U.S. – our standard of living is going to decline over the next fifty years. That will be offset by new, good things that technology and trade will bring us.
We can’t do anything about it in the long run (think King Canute). But we can think hard about how to do two things:
1) try and see how we can tip it so that the world can average more upward toward us, rather than us more downward, toward them.
2) try and manage the consequences internally so that we don’t destroy the social fabric.
In my mind this is THE public policy issue of the century for the U.S. To be blunt, I don’t yet have a clue as to accomplish those things.
But that doesn’t mean that they can’t be accomplished or that they shouldn’t.
A.L.
“Fear has prompted me (and others) to attempt to pressure our polictical leaders for change.”
– Kevin
“The only thing we have to offer is fear itself.”
– Modern “Progressive” (Newspeak term for Reactionaries) Politics.
Armed Liberal writes:
“Porphy, I think you’re off-base on this.”
I know you think I’m off-base; I think you are. I think you’re using a faulty economic model to build your reasoning on.
“The reality is that the U.S. economy is going to be averaged toward the rest of the world economy over time.”
That may be true, but not in the sense that you and others are interpreting it; to the extent to which that happens, and the gap between our economy and others are closed, it will not be as a result of immiseration of the U.S. – assuming sound economic policies are followed. It will instead be a result of economic growth elsewhere causing them to catch up.
Now, one way to insure that we suffer, economically, is to follow policies on offer by the politicians Kevin appeals to and finds appealing, that is, policies similar to that which European states follow, with “job-protecting” policies that result in consistently high levels of structural unemployment and with economic growth rates that *CONSISTENTLY* lag ~1% per annum behind America’s rate of economic growth.
You’re also misinterpreting my position, since my position isn’t “do nothing” – I’ve been (I thought) fairly clear that we should pursue trade agreements that reduce trade barriers and open markets – not just because it’s “philosophically correct” but because it benefits *everyone*, whereas barriers designed, on either end, to supposedly “protect” industries and jobs hurt both over time – as nations who have tried such policies have increasingly discovered.
I’ve been, albeit sometimes in a backhanded way, praising Clinton’s trade policies prior to ’99, which were far from “do nothing, love the status quo” – they were promotion of market access and reduction of barriers to trade.
“In my mind this is THE public policy issue of the century for the U.S. To be blunt, I don’t yet have a clue as to accomplish those things.”
Yah know, I keep trying to recommend this PBS “Commanding Heights” program and website. It’s not the endpoint of knowledge on the subject but IMO it’s a fair starting point and not in the least unsympathetic to your position (I recommend the 6-part TV series, if you can watch it, or check it out from the library, or buy it).
I *know* you want to do something, but it’s more important to do the right sort of thing and especially avoid doing things that sound and seem like “help” but which are actually harmful whenever they’re tried, than just “do something”.
In the meantime, in between time, please don’t lump me in with the economic/political anarchists that I’ve been joining you, in effect, in saying that I think they’re going too far the other direction.
*MY* worry is that people who are concerned with these things are being stampeded into supporting policies that will, as they have in Europe and elsewhere, make the situation they’re concerned about *WORSE* rather than fix it, but which are popular with the political set because it puts them in charge and they don’t have to live (directly) with the consequences. *I* do. I’m not a coupon-clipping guy living off a government sinecure and what daddy left me. I work in a shipping department (domestic wholesale & retail art; unless you count Navajo as “foreign”). I don’t have a secure salary due to tenure and am not just speaking of philosophical purity – I’m speaking about what works vs. theories that have sounded plausable (and thus persuaded many people) but *haven’t* worked in practice, but which people get hussled into supporting because they sound like good ideas.
My position isn’t one of an inactive government that does nothing – as I said, I am neither M. Simon *nor* am I a Libertarian as such of another stripe. But there are effective and ineffective ways of going about things, and certainly one thing to avoid is basing decisions on a flawed economic model – which will, naturally, produce flawed policy.
In sorting out what should be done, it’s important to start from a sound foundation.
Heh, posted under my real name by mistake. Not that it’s a State Secret. {*_+}
A.L.,
You’re right. This adjustment is going to have HUGE implications. I don’t think that it’s given that our absolute standard of living will decrease, but it’s definitely true that our relative standard of living will decrease.
The thing is, we can’t hold it back. It’s going to happen, whether we want it to or not. We can’t let stopgap measures intended to reverse or delay it cause the pressure to build up until it explodes. This unfortunately is where we’re heading with Japan. But Japan is small enough to be manageable. If we get into the same situation with China and India it’s going to be a true disaster. Letting the process continue naturally and gradually is truly the best path. The other path is isolationism, closed markets, and stagnation.
We as American’s have been spoiled. Since the end of WW2, we’ve enjoyed unprecedented prosperity. Sure we’ve got a dynamic, innovative economy, but the REAL reason is that ALL of our economic competitors were sidelined. WW2 devastated EVERY advanced capitalist economy on the planet… except ours.
We’re paying for this now with unrealistic expectations of unlimited affluence forever. The next 50 years aren’t going to be an abnormal perturbation. It’s going to be a return to normal. There’s going to be a lot more competitors out there. That is normal.
And I’m sorry, but I believe in that ‘Golden Rule’ thing. Is an American, or even MY, job, worth more than someone else’s in India or China? There’s NO moral basis to justify that. Either we believe in the principles expounded in our own Declaration of Independence or we don’t. No one has ever guaranteed us prosperity, but we are allowed to continue pursuing it. All I want is a fair shake. And that’s what our government should do; make sure that we get a fair shake. No more. No less.
It’s interesting though. As long as it was the blue-collar jobs being exported it was a union, a Democrat thing. Now that it looks like professional positions are also subject to the same competition, now all of a sudden it’s a ‘me’ thing. How many of us responded to those ‘Buy American’ campaigns? How many of us cared when it was Joe Redneck’s job being exported? Where was your car made? How about your TV? Anyone remember Zenith?
I’m not saying that it was wrong to export those jobs. Look at the bogus steel tariffs that Bush imposed recently. More jobs were lost than saved. Ask anyone that runs a US based company that uses steel. Why would we want our industries that can still compete to pay more for steel? To protect a steel industry that can’t, or won’t compete? Someone please explain how this helps us.
Am I worried? Damn right. Am I scared? No way. The US is not in any danger of disappearing. This will ALWAYS be true as long as we all WILL it to be true. No nation will ever have the power to take our liberty away, by economic might or force of arms.
But maybe, we shouldn’t expect to always be the top dog. And maybe, instead of having it all, we’ll have to choose between sending our kids to college and that trip to China or India. But, remember that Golden Rule. It works both ways.
I’m no economist, but I do make one short- to medium-term prediction on this: Tech workers will start to unionize, and in a hurry. I saw it at Boeing, and I can’t imagine it not happening industry-wide over time.
Waaaaaaay off-topic: Porphy – are you a Wisconsinite by any chance? I live in Madison, and I’m just curious. Sorry if I’m prying or anything.
I used to live in Madison and I still consider it “home” – I went to Randall Elementary, Stoddard Middle School, West High, and the UW.
I miss the Union Terrace, even though they bought crappy replacement chairs for the ones that had been there since, like, forever.
(I also miss Pegasaurus – er, Pegasus Games, Memorial Library, and all the kewl book stores in Madison. I can’t get jack all out here without mail ordering it most of the time).
Porphy –
And I owe you an explanation as well; my use of the King Canute metaphor was to make the same point as he made in the Bible…no matter how powerful you may be, you can’t hold back the tide.
I’m the last guy in the world to support a Fortess America autarky…it’s a deranged fantasy, not a policy.
But…and it’s the all-important but…I think we can work to manage the change, and more important, manage the impacts.
Clearly, we will do things wrong there – we always do. But, as in field first-aid, the measure isn’t whether we do things perfectly but whether the patient is better off with the intervention or without it.
A.L.
A.L.
Sorry if I got, and continue to be, too wordy….
I’m now thinking I was “violently agreeing” with you. There are always domestic policies to smooth the transition, unemployment insurance, retraining, educational tax credits or grants, all the stuff like that.
You’re right to be worried though. Look at the Great Depression. This could lead to similar demands for even greater government intervention… or baring that, increasing unrest.
Everything will be okay as long as most Americans feel like they’re getting a fair shake. If it continues to look like the middle class is getting screwed by the pigopolists, then all bets are off. No matter what the pro mega-corporation Republicans think.
And tongue half in cheek… But maybe, alluding to that post about the Internet and Politics, Blogging will become another opiate of the people, giving us the illusion of democratic participation, without yielding any real influence. No unrest, but still unappealing.
Porphyrogenitus:
If you visit Mad City, be advised that the sole Pegasus is now on the west side, on Odana road. The downtown one moved to a new location, which promptly closed. I’ve been patronizing them all I can, though my personal preference is definitely for The Last Square down the street. My family used to live near Schenck Elementary, but moved up to Marquette, Michigan just before I started Kindergarten. It’s good to be back.
Lurker:
You’ve got something there. To quote a wonderfully eccentric instructor I had for aircraft survivability, “human beings are only rational up to a point.” Job mobility may in fact be better for the long run, but people are afraid of losing their jobs now, and the “suck it up and drive on” rhetoric I hear so often from free-traders really won’t encourage them to be more selfless. In a free society, citizens need to feel that the proponents of a policy have considered their interests before they’ll sign onto it.
Here I’m going to contradict something Lurker said.
Our post-WWII advantage has often been cited, with that gap inevitably closing.
However, would we all agree that by, say, ’80, that situation had disapeared? Europe & Japan were no longer suffering from WWII devastation and, indeed, had replaced destroyed plant in the ’50s with the most advanced then available.
By ’80 the war-effect gap had been closed, to the extent wo which it would ever be closed, and the advanced economies that we compete with were back on their feet.
They followed certain policies, “industrial policy” type policies – of the type that many were saying America needed to adopt to keep up. I remember; not only was I a big Prestowitz fan, but I was reading Robert Riech before there was a Clinton Administration to appoint him as Labour Secretary. Somewhere in my boxes of books are hardcovers of Robert “Bob” Kuttner’s “The End of Laissez-Faire (in which he promoted managed economics and industrial policy) and Lester Thurow’s “Head to Head” (in which he predicted the “House of Europe”, with its economic policies as they are and were, would dominate in the ’90s and beyond).
Boy, were they wrong! and if we had followed their suggestions, we’d have been hosed.
America’s percentage of world GDP was *larger* in 2000 than it was in ’80. Europe and Japan both faltered in comparison. Lurker is right that Japan’s policies have hurt our trade with them – but Japan’s economic policies have hurt, rather than helped, them. Same with Europe’s policies, designed to manage things.
The point isn’t that thus we shouldn’t have any policies at all and just let whatever happens happen, but that bad policies can easily make things worse, even if the intention is to make things better or more humane. On the other hand, better policies can be beneficial for all participants – Japan hasn’t really benefited over the last decade or so from their manipulations of currency valuations and other things designed to “protect” their market and boost exports.
The big disapointment over the last five years has been the loss of momentum in reaching trade agreements (yes, Bush has recently negotiated a few, but mostly with nations that are, to put it bluntly if rudely, economically trivial; it’s not bad to do such agreements, but it isn’t going to affect things one way or the other for us, though it might help them some). There has, instead, been regression – steel tarrifs, farm bills, the EU “transmogrifying” their CAP from agricultural policy to “ecological” grounds, which essentially meant keeping everything in place but comming up with a new rationale that will be harder to negotiate away.
(Btw, lest someone jump in and say “what, you’re against preserving the American family farm? These Farm Bills are always promoted on such grounds, but 80% of the cash goes to agribusinesses and to such well-known sharecroppers as Ted Turner and Sam Donaldson and others who aren’t farmers but bought land somewhere and get paid for not growing the crops they weren’t gonna grow in the first place. Me, I’m wondering where my check is. I haven’t grown any corn in years!)
India I think shows some promise and has trended in the right direction, compared to past policies they have opened their economy; more needs to be done but I think it could be done if we got back on the right track in trade negotiations.
China is another case. China cannot really be called an open, market economy (for all that there have been changes) – too many of the “businesses” are really owned by the Chinese Army or other Party front groups, and trade decisions (like who to buy what from, and who not to buy anything from – they have policies aimed, conciously, at undermining America, which they see as their rival; in a lot of ways, China now is what many people *thought* Japan was in the ’80s), and as for the rest – well, there’s a piece on the WSJ editorial page, but the online version is available only to subscribers.
As for A.L.’s first aid metaphor: most of the prescriptions politicians offer are akin to those Cure-All Tonics offered by snake-oil salesmen – when they aren’t the economic equivalent of bleeding the patient with leeches. They *CAN* and frequently *do* make the patient sicker. A maxim of “First, do no harm” would be as good for the political economy as it is in medicine. We should certainly avoid things that have a dubious track-record and pursue policies that have been successful for us.
And probably the best thing government could do that would help us is something that doesn’t involve tinkering under the hood, but fixing American education – which isn’t the same thing as more $$$$ (we spend, in inflation-adjusted dollars, roughly twice as much as we did 30 years ago, and clearly things are worse. We might find it wise to spend more, but only *after* we’ve fixed what is broken, which has little or nothing to do with cash and lots to do with how it’s spent and what the education establishment does with their sinecures. Recently a commenter, I forget who, mentioned that they read TNR and pretty much agreed with everything in it. Well, I read TNR too, and one of the most memorable articles that they ever published was one some years ago – probably ~8 years ago, on how the New York City school system functions, and the fact that it had enough certified teachers that the class size could have been 15, but many senior teachers finagled their way into administrative jobs, and inexperienced teachers – like the person writing the article, who was writing from personal experience – got thrown into large classrooms as a result with little support. That’s not something that will be solved with more money, nor will the fact that the curiculum has been turned into garbage and emphasis of feel-goodism self-esteme projects and screeds against America). Americans would probably support more funding if it didn’t simply go down a rathole; Washington, DC has one of the highest per-pupil rates of education spending, but can hardly be called a shining pillar infusing students with the knowledge they’ll need to succeed in life – and not just economic life (though that’s very important), but life in general; as a citizen as well as as someone trying to get a good job and feed a family.
Indeed, a lot of what passes for debate on economic matters and “market failure” is just a distraction from *government* failure in education. Fixing that would help so much – people who are unemployed because of poor education and poor skills, bad habits (like showing up on time and the like) which were once something inculcated in school (and at home), as well as people who can’t get better jobs for similar reasons. A well-educated work force is a more productive work force, *especially* in a technological economy and a white-collar economy. The fact is, some of these places are out-competing us not because they are low-wage areas (Sumi, remember, took a pay *cut* to come here from India), but for the same reason American companies want to get “skill” immigrants – they’re better educated and as a side-affect of their better education they also have better work habits.
Is this “blame the American worker” as some often try to claim whenever this stuff is brought up? No – people who never had a shot because schools in cities that have been run by Democrats for the last thirty years, who for the last thirty years have promised to help people, have been left to STINK because those same politicians are more beholden to the teachers unions ($$$) than to the people those teachers unions are supposed to serve, well – someone mentioned how Philly got rotted out in a early comment in this thread. . .look no further. Similar with other cities that have suffered over the last thirty years. Should I go on? I could. The post is already long enough.
The State St. location closed??? Noooooooo!!!
The Odana location had opened before I moved; but I remember when Laurie had the shop in the first floor of a house just off State (on Langdon, IIRC); then they moved onto State, and later to a bigger place about a block up on State. It sux if that’s gone. 🙁 Like losing a link to your childhood.
Next you’ll tell me Mickey’s Dairy Bar closed (DON’T DO IT!).
Also: yah, that’s how politicians get people to vote for counter-productive policies, but it never really helps them. It’s like the frog that gets boiled slowly and won’t jump out of the pot. A frog that gets singed will jump out, but live. The frog that sits there and gets slowly boiled? He dies. (But enough about Europe).
P:
“By ’80 the war-effect gap had been closed, to the extent wo which it would ever be closed, and the advanced economies that we compete with were back on their feet.”
Yes I’ll agree that the econonic gap was closing, but not the perception gap. How many people still think it’s normal to get a raise every year for doing the SAME job? How many people think their job should be guaranteed for life? How many feel gyped that medical costs are going up and not 100% covered?
All of these attitudes, and many others, developed or were strongly reenforced after WW2. So, now everyone feels cheated when thay can’t get all goodies. This is true even if our economy is still competing well overall. People still feel gyped. That’s just how it is.
Well, I for one like enough of a raise every year to keep up with inflation. A little more never hurts, either. Regular raises also reflect the fact that, in many jobs, the worker grows in value the longer he’s been with the company and the better he knows the ropes.
I was wondering how long it would take for the “Americans are too lazy to compete” saw to come out. I’ll have to calm down a little bit and think before posting a reply, but planting in people’s minds the concept that they can only expect a fixed number of years’ employment in certain fields before they’re axed in favor of a low-cost overseas replacement is a really, really good way to ensure that no thinking person goes to work in those fields.
Personally, I feel pretty safe, since I work for a small company and do systems administration, which would be awfully hard to outsource without moving the servers to India or other points as well. But if anything that can be outsourced will be outsourced, what does that say about the people willing to get jobs in outsourcable fields?
SparcVark:
I never used the word lazy. The desire to work has nothing to do with anything I’ve said.
A cost of living increase is nice, but is it really a raise? Utilimately, wages and salaries are going to be set by market conditions. Sooner or later. Unions can, at best, engage in holding actions.
Actually, I wouldn’t count on remaining insulated from the outsourcing trend. Your company could decide to outsource to a local company, who may agregate demand and farm it out to India in some cases. And no matter what you think, you’re still competing with those guys in India. This is demonstrated be the increase of your local IT talent on the streets looking for work… which does impact your job security.
You bring up an intersting point… I read an article a few months ago. I can’t remember where. The guys thesis was that the folks that are really protected from outsourcing are the hands-on craftsmen, like plumbers, electricians, carpenters, etc. How’s someone going to outsource your broken toliet repair to India? The author said this really hadn’t dawned on him until he saw his electrician’s house.
Lurker:
It was Porphyrogenitus who made the comment about “better quality” labor in India et al, not you.
But here’s the trick. Price-wise, I cannot compete with an IT guy in India because I don’t live there, and things are much more expensive in the USA. If I have to compete dollar-for-dollar, I’ll lose every time.
Skilled trades do have to stay in the US, you’re right. If I get out of work again, I’m going to become an electrician. But here’s the rub – should kids today bother with IT training and education if they’ll have the jobs shipped to India, or should they all become plumbers? Plumbing is important, but do we really want to have no IT capacity in this country?
You can compete with a guy in India. You’re right. You can’t compete with him IN India, AT your salary; but you CAN compete when are where the work is. Geography is still a big advantage that can never be completely erased. Its significance can be reduced, at least for those jobs that don’t need face-to-face contact.
For these same reasons, there’s ALWAYS going to be a need for local IT talent in the US. The skill sets maybe different… more systems architecture, business process design, and network management and less programming for example. Who can say precisely what skills will be in demand? But, there will be demand of some sort.
These things ALWAYS go in cycles. Businesses are vulnerable to fads just like human endeavor. Look at the Internet/telecom bubble for a prime example. So, expect that folks will over commit to outsourcing. And certain kinds of outsourcing will not work out very well. So we can probably expect the IT pendulum to swing back our way in a few years. It will never reach the peak that it did in the dot-com boom, but we now know that was craziness right?
If you take the specialization route, then you can make more money, at least for the short term. But it’s like putting all your bets on one horse. It’s great if he comes in, but not so good if he breaks a leg in the backstretch. Some specialists make the right bet and cash in, many more make the wrong bet and lose, picked the wrong technology, or industry, or whatever. It’s a question of how much risk you can tolerate.
If you value job security, over maximizing current income, then do NOT specialize. Be the jack-of-all-trades that has the ability to contribute broadly. Guys like this can always find a job. They might not make a killing, but there will be work. Flexibility is the key, and that’s where Americans can still outpace the competition.
SparcVark misrepresented:
“I was wondering how long it would take for the ‘Americans are too lazy to compete’ saw to come out. I’ll have to calm down a little bit and think before posting a reply.”
And:
“It was Porphyrogenitus who made the comment about “better quality” labor in India et al, not you.”
While you’re calming down, you might want to learn how to read better and take a few extra breaths before you massively twist and distort what I said and try to set up a straw man, claiming I made an argument that I did not make.
You need to look at what I wrote, which was in the context of our education establishment – and specifically included a statement to the effect that I was not blaming the American worker.
However, I knew that people who go for the low road, who cannot take an argument on its face and thus twist it into something its not in order to mischaracterize it, would do just what you did with it – that’s the sort of response that is given when people try to honestly confront problems we face in the country.
Thanks for being an example of such crudely dishonest methods of dialogue.
When I see someone clearly and intentionally distorting and misrepresenting what I wrote, as SparkVark did, there’s nothing but to call it what it is: a dishonest, dishonorable act of someone who can’t or won’t discuss things on the merits. Very low class.
And I never let people get away with doing that to me.
P:
Wouldn’t have been better to assume that he misunderstood your argument? At least to start with. Misinterpretation is differnt than misinformation.
BTW, when are yose guys goin’ to fill us in on how SV knew that Wisconsin is your home.
It seems to me that Porphy may not be (explicitly) optimistic enough, and that the US is quite likely to maintain a long-term advantage because it has social and political cultures that are less likely to buy into “snake oil” solutions or Euro-style “security” measures — growth-cripplers.
On the smaller-picture point: as George’s comment alluded to above, without the export of lower-margin work there’d be neither opportunity nor incentive to develop the next, higher-margin more productivity-enhancing thing. And there’s always a next thing.
Lurker wrote:
“Wouldn’t have been better to assume that he misunderstood your argument? At least to start with. Misinterpretation is differnt than misinformation.”
Normally I would, but since I explicitly pointed out that I wasn’t arguing what SparkVark then claimed I was, when I wrote:
“Is this “blame the American worker” as some often try to claim whenever this stuff is brought up? No”
It’s hard to take it as anything other than deliberate, especially since – like you – I never wrote the quote he attributed to me.
IMO, it’s hard to misinterpret that except either by sloppy reading or deliberate misrepresentation, and in either case he put words in my mouth; I mean, here is a huge section concentrating on how our failed education system is a hinderance and the need to reform it, and his reply makes *no* mention of that aspect of what I wrote – it completely disapears and is replaced with the straw-man assertion that I simply said American workers are lazy. That is beyond misinterpretation. . .
As for how he figured I was from Wisconsin, it might be because of the Congrats to James Lofton post I have up on my site, or if he read the bio-screed I have on my site, or from some other reference I made at one time.
Anyhow, for how I react when I’m pretty sure someone just misinterpreted what I wrote rather than misrepresented it, here’s my response to “someone”, who wrote:
“It seems to me that Porphy may not be (explicitly) optimistic enough, and that the US is quite likely to maintain a long-term advantage because it has social and political cultures that are less likely to buy into “snake oil” solutions or Euro-style “security” measures — growth-cripplers.”
I thought I had been optimistic on those grounds – I’ve been pointing out how we’ve outdone those nations economically; to the extent to which I thought the gap would close, I argued that it would not be because we were brought back to the pack but from other countries catching up – in the context of all my remarks, I pretty much made the point (I thought) that they would do that to the extent to which they continued reforms (as in India) and didn’t follow bad policies (ones which are causing certain countries to lag further behind us, not catch up with us).
I do think that will happen *eventually*, so long as good policies are pursued. The only way I think certain fears will come to pass is if we fall off the path you allude to and buy into the “snake oil” prescriptions that have hampered other countries. Then we’ll end up with a global averaging-out based not on growth but on sluggishness and regression – and IMO only then.
Perhaps you’re right that I wasn’t explicit enough on that – especially since IMO we *do* have a problem in education that *is* a hinderance economically and needs to be fixed but is resistant to improvement (see here for just a “small” example).
Maybe I’m naive, but I always try to not to assume a dishonest motive, when error or simple disinterst can explain someones actions. The dishonest are likely irredemable. The others can still be persauded. Aim your thoughts at them.
You’re right. Public education can seem a cruel joke. Superintendents that can’t pass writing exams, jeeze!
But alas, I’m a product of public education, ALL the way through. Maybe you’ll agree that the damage isn’t permanent, at least in all cases.
1) I do aim my remarks at them.
but
2) I don’t see error here and I don’t believe in letting the dishonest distort and manipulate things and then misrepresent it to those who are persuadable – letting people get away with that hurts efforts to persuade. Letting someone get away with going around saying “Porphy says American workers are lazy” is the sort of method used to confuse things – sort of like the Democrat Ad that Dowdifies Bush’s State of the Union remarks. I don’t assume that can be explained by simple error – and SparkVark’s mischaraceterization and misrepresentation of what I wrote, likewise.
I’m a product of public education all the way through, myself. Bad education isn’t all-pervasive, but it is getting worse rather than better (there is a noticable different between the education I have and that of my sister who is six years younger than I am – and a noticable difference in what she received and that of people younger than her).
Look, I’m not the child of a Democratic Politician – I didn’t go to Sidwell Friends and St. Albans and other private schools, like the Gores and Jacksons and Chelsea Clinton. Like I mentioned, I went to Randall Elementary, Stoddard Middle School, and West High in Madison – all public schools. The University I went to was the UW, as mentioned – a State University, and by and large I got a good education (with only a few PCish classes – typically the requirements).
There are certainly places one can get a good public school education – though English and “Social Studies” (History, Civics, &tc) education are getting pretty aweful regardless. . .but there are huge areas where this isn’t the case and where the education establishment is a positive obstical to improvement and are also working like beavers to destroy the educational merit of those places where a good public education has remained possible (Ed Departments in Universities are for all practical purposes a deliberate, designed catastrophy inflicting failed theory on would-be teachers).
In all though, people who get a good education nowdays often do it *despite* the efforts and educational theories and practices of the education establishment, not *because* of it, which is for all practical purposes antipathetic to achievement in many cases, unwilling to learn from mistakes (thus things like bilingual education remain a matter of faith in spite of the fact that immersion has been shown to work better). 90% of the Ritalin prescribed in the world is prescribed in the U.S. (with almost all the rest in Canada), because when a kid gets bored and/or doesn’t pay attention in class, the tendency is just to assign them the diagnosis of ADD, taking the easy way out, druging the kid rather than putting them in a class more up to their abilities (oooh, “tracking”, can’t have that!) or instilling the qualities of discipline and attention. But then the popular modern education theories (“whole language” theories, applied and mis-applied, “culturally responsive” theories that treat some children as not learning the same way others do, for racial reasons – and thus failing to teach them, and things like that) are positively opposed to those things anyhow.
(Here’s a good piece by Pournelle from awhile back).
Pournelle hit’s it on the head wrt boys. The teachers are quick to call them ADD. It used be that everyone knew that boys aren’t the same as girls. Now if boys don’t act like girls, everyone wants to drug them. Wonder why less, and less men are entering college?
I think the whole middle school concept is EVIL. Whatever happend to jr. high?
Well, I was going to comment now that I’m cooler-headed, but if you’ve made up your mind about me, there’s little point in it.
The issue of outsourcing hinges on lower price of labor, and an overfocus on that, rather than quality, customer satisfaction, and the like. I’m actually sympathetic to P’s argument about the decaying state of American public education, but it is a red herring at this stage in the debate, with plenty of qualified, out-of-work IT people mulling around. Even if most are poorly trained, it doesn’t account for the rush.
I agree, but will add that they’re more than happy to put girls on Soma – er, Ritalin – too; I have a cousin, female, that got put on Soma [cut a section getting into family dynamics that upon further review I decided wasn’t appropriate to post. Suffice to say, whatever problem there may be 1) isn’t solved by soma, just pushed under the carpet and 2) IMO didn’t and doesn’t originate with her.]
Yah; I agree that Middle School is evil. It ranks just behind my preschool – a experimental/lab at the UW in the early ’70s staffed by grad students – in its Lord of the Flies qualities. (The preschool had that “Open Classroom” and “it takes two to fight, what did you do to provoke the bully to nail you? You should understand the bully, whereas you’re guilty – sit in the corner” nature that is so enlightened and progressive).
The good thing, I suppose, about that preschool is that it immunized me for life against platitudinous B.S.
All this also made me go find this post by Michele at A Small Victory, which was harder than it seems since she apparently doesn’t have a search engine and the archive seems to have been corrupted since the links that others (like this excellent post by Vegard) had to it directed to an entirely different post. So I had to paw through the archives by hand, but it was worth it because Michele’s post, underlined by frustration and concern for her child, is excellent and hits the received wisdom of the education establishment spot on.
SparkVark wrote:
“Well, I was going to comment now that I’m cooler-headed, but if you’ve made up your mind about me, there’s little point in it.”
Well, if you’re willing to make an apology then I’m willing to accept one, and if you want to comment on what I *said* rather than comment with a cooler-head on the straw man of your invention, then there is no problem.
Actually, you can comment on the straw man too as long as it’s clear you’re not trying to attribute it to me – I don’t care what you write, I care what is characterized about me, though, and when it’s something I very clearly did NOT say, then I’m going to knock it down.
Putting words in my mouth and then acting like the wounded victim when I object is intellectual bullying and passive-agressive behavior that does not go over well with me.
That said, if you were to apologize for putting words in my mouth and misrepresenting my point completely, I’m more than happy to put the entire matter behind us.
In the meantime, here’s another good post on the subject of education, this one by Connie do Toit.
SparkVark, P., you’re both valued commenters here. I take it we can treat this flare-up as settled between you, and leave it at that? Reply if no.
Well.
I apologize for not making my point sufficiently clear, to the extent that I recognize that a fair reading of my comments might find them insulting. I had no intention of putting words into your mouth – I saw the tail end of a meme that is a personal pet peeve for reasons I won’t bore you with, and got hot under the collar. In reflection, I shouldn’t have posted at all until I calmed down.
A more complete explanation would be:
You said:
“The fact is, some of these places are out-competing us not because they are low-wage areas (Sumi, remember, took a pay *cut* to come here from India), but for the same reason American companies want to get “skill” immigrants – they’re better educated and as a side-affect of their better education they also have better work habits.”
Now you go on clearly to place the blame for this on the American educational system. I understand. For reasons described above, I don’t think quality of work is a major driving factor in outsourcing at this point. I would welcome evidence to the contrary – all I’ve seen are some unqualified statements by managers, not any kind of scientific examination. I believe that the chief, and the only, concern is for *cost*.
Now, changing “they [workers from “some of these places”, e.g. India] also have better work habits.” into “American workers are lazy” isn’t fair. That’s my mistake. But my position is that superior foreign work habits are a chimera, and I don’t feel they’re a strong argument in favor of outsourcing.
The above represents my thoughts on the matter, and what I *should* have written. I’ll retract everything I’ve said earlier on this same point – I plead poor phrasing, not malicious intent.
Again, you completely ignored the entire thrust of my comments there, and I note that in the quotes you take (out of context) to support your misrepresentation – whether of ill-intent or not – you (again) completely ignore where I explicitly make the point directly counter to what you asserted I was making in your “quote” of me (putting in quotation marks something I never wrote and then attributing it to me – “American workers are lazy” ); also, in this post where you write “I don’t feel they’re a strong argument in favor of outsourcing.” in the sense of interpreting what I wrote – which was a call-to-arms for us to improve our education system – as something “in favor of outsourcing” rather than what it was – which was a call that we initiate policies that will actually help, that is help give kids from Philly or Washington, D.C., or any number of other places the tools they need, that will help them – then you’re (again) misinterpreting what I wrote.
If you’re saying the American educational system is well functioning and you haven’t seen the reports, conducted both on the national level and international reports as well, that compare the educational systems of a variety of countries and rank them – with the U.S. generally comming in near the bottom of the pack in all such studies over more than twenty years – then that’s a gap in your knowledge. That also impacts work habits (more on that below).
If that’s your position, also, then you’re in a very tiny minority of people who think that our educational system is serving us well – even those on the other side of the spectrum from me, the vast majority of them agree that American education needs to be improved and that to the degree it isn’t, it has economic consequences for the individuals who come out of it and for the country as a whole – they just don’t agree on the solution (which is why I spent some time in that post on arguments that are often made as to what to do, and why, IMO, they are flawed solutions that fail to adress the real problem).
As for work habits, I’ve seen it in practice: people showing up whenever, leaving whenever, not showing up but not calling in (one of the people where I work didn’t make it in till noon today); my mother has supervized people from time to time in the jobs she’s been in and noticed the same trend. It’s not that people are lazy, it’s that they’re called work *habits* for a reason, and they’re part of a skill-set that folks aquire as they grow up – or don’t.
One of the things is, given the sort of group we have here, which (IMO) are disproportionately well-educated, literate types who have had good educations and are self-motivated to be interested in things, and in learning (so we go around reading blogs and pondering policy) – well, we’re a self-selected group. This is a big country and ya, I can easily understand that you work among groups of go-getters with solid educational backgrounds who have superb work habits. The whole country hasn’t gone to hell – that wasn’t my point. “There’s a lot of ruin in a country”, as they say. But *if* you think there aren’t big sections of the country where people in the sort of economic circumstances that are to be concerned about grow up, go to school, and reach adulthood live, that haven’t been affected by these gaps, then I think you’re just wrong.
And, again, if you re-read my post with a clear and calm eye, you’ll see that it’s not a call for us to let jobs get shipped overseas, but a call for us to deal with our education system that isn’t serving our kids, who then become adults, well at all. It’s certainly not a call for sticking our head in the sand.
I agree with Lurker: *you* can compete.
I’m the Right-Winger and I’m the one worried about the “*bottom*” end, people from urban (and increasingly other) school systems who haven’t been getting what they need. I didn’t blame them at all – I want to insure they get the help the country can and should give them – the *effective* help, but not boil-the-frog help or snake oil that helps no one but lets us think we have policies that are adressing job flight.
What I would say is this, and speaking some from personal experience: something being “a personal pet peeve” of yours, I think the tendency is for you to see that argument even when it’s not there, in something that you take at first glance to be the “pet peeve”. You’re still trying to shoehorn what I’ve been saying into that.
As far as companies and “cheaper” – “cheaper” isn’t really “cheaper” unless it produces the same (or more) at a lower cost. I argue that even at higher pay, we can be (and in many cases, especially high-end cases where yes, folks like you are skilled and have the tools they need, are) more productive and thus the better value for companies. That has been economic reality throughout history; otherwise, companies would be relocating to Sub-Saharan Africa, not India – the wages are even lower there, but they wouldn’t be able to find people able to do the job at the same value. Companies aren’t just making decisions based on where labour costs are the cheapest.
The Sumi mention is, by the way, an allusion to that: it isn’t as if everyone in India is paid less, “cheap labor”. They certainly aren’t paid less than people in, say, Egypt. But companies aren’t “outsourcing” to Egypt because it isn’t *all* about “cheap labour” – skills are important, productivity is worth paying more. Indeed, this is why – if you’ll remember all the comments I’ve posted here – I did *not* join in saying that “yah, we’re gonna lose out and everyone will have to settle for a lower standard of living” – even over the education factor; the American economy is more productive, and for that reason worth the cost of setting up shops here.
But we do have things to address in order to keep it that way – something that, as I have been saying we *can* do, if we follow the right policies and avoid counterproductive and destructive ones. One of those things is finally turning our attention to fixing malfunctioning institutions, like our education system.
Let me add this if it wasn’t clear or got lost in the concentration on work habits: how well are people going to do in an increasingly tech and information based economy who are graduated from school with inadiquate reading skills? With inadiquate math skills?
Like I said, the biggest policy-related thing we could do to help insure Americans are able to get and keep good jobs is to fix the malfunctioning education system that is denying them – too many of them (not all, but too many) what they need to do just that.
P-
These people that you are talking about, coming in late etc. It doesn’t sound like they give work as high a priority as you. I don’t agree with the attitude at all. “Don’t take a job you don’t mean to do…” etc. It sounds like they’re working for beer money to me. IS it due to the educational system? Or some other kind of disillusionment? Don’t know.
I’m still optimistic about most of these folks I’ve run across. Many of them are very bright. And America IS the country of second chances…
someone-
Don’t under estimate our ability to buy snake oil. This blog is the exception. The rule is 15 second TV sound bites, and partisan posturing.
The idea that competition makes us better is so true. Can you possible imagine how BAD American cars were, and would still be, if the Japanese hadn’t entered our market?
Lurker: Yah, probably. That’s one reason why I made a point similar to your response to “someone” in my reply to “SparcVarc”.
As for whether it’s education or not – and the priority I put on work;
Lets start with the latter first; I like free time as much as anyone, but my solution is to do what I need to as efficiently and quickly as possible (used to be a full time person, often with help, did the job I do now; there’s frequently more to ship now than there was then, I work part-time, I get what I need to get shipped shipped, and I blog). I really value time to do other stuff, relaxation and the like.
As to the other folks; well, people have been liking beer for quite a bit of time, usually they would go out after work but still show up and put in a full day’s work – often more grueling than is typical now.
I’m also optimistic about the majority of the people I come across – which is why I think that giving people the proper tools so they can better take advantage of opportunities, and be successful – they will.
(Btw, something that hits on something related to this but also related to some of the other things I’ve been talking about: atm, waiting for South Park to come on, I’ve got the TV on UCTV – University of California Television, and they’re broadcasting the opening of a conference on “Critical Globalization Studies” at the UCSB; the opening speaker quoted Gramsci – favorably – and then babbled about the secrets “they” don’t want us to talk about and U.S. Imperialism, Nationalism, and Racism, and the current guy is giving more of the same PoMo-Marxist analysis).
(Btw, you all know that Carter was a tribune of Imperialism and that the difference between Clinton and Bush is that Clinton followed the Ottoman model of Imperialism while Bush is trying to emulate Napoleon’s, right? Anyhow, that’s what this professor dude sez).