Investor’s Business Daily has an editorial noting polls showing an opposition to free trade and an increasing desire to increase taxes on the wealthy:
A Financial Times-Harris poll of more than a thousand people found that those in the U.S., Britain and France were three times more likely to think globalization hurts their country than helps it.
And “in response to fears of globalization and rising inequality,” wrote Financial Times reporter Chris Giles, “the public in all the rich countries surveyed . . . want their governments to increase taxation on those with the highest incomes.”
That is, people want to tax the rich — an age-old urge — believing it will somehow help feed the poor. Unfortunately for those who believe this, it doesn’t work that way.
“Taxing the rich” might be satisfying on some level, given the general level of envy people have for those who are more successful. But carried out as a matter of national policy, such ideas will have disastrous consequences for the world economy, leading to less growth, less investment, fewer jobs and lower standards of living.
It’s a well-established fact that globalization — simply another word for free trade — has been, overall, a major boon, raising both incomes and standards of living worldwide. And that includes rich countries as well as poor ones.
The problem is that most people don’t base their opinions on economic evidence, but on a combination of what the media tells them and unscientific feelings. Despite the fact that globalization has been one of the most important factors towards making the late-20th to early-21st Centuries a golden age of prosperity worldwide, people still use it as a convenient boogeyman. It plays on xenophobia in a time of uncertainty, which is virtually always a sure bet. Blaming globalization for the failure of socialism in places like France has been a staple of the left for some time — but even the socialistic French are embracing a more competitive worldview.
Likewise, the drive for higher taxes has a very simple explanation: jealousy. People want to take the successful down a peg in the futile hope that it will make themselves feel better. History and common sense makes it clear that such schemes never work, but that hasn’t stopped people from justifying tax policy on envy.
Yet there’s also a darker side to all this. Ilya Somin has a fascinating post at The Volokh Conspiracy on the economics of the Third Reich and how it matters in terms of policy debates today:
Two recent books further explain the socialist elements of Nazi economic policy, and will hopefully put the final nails in the coffin of the myth that the Nazis were “capitalists” or free marketeers. In The Wages of Destruction: The Making and Breaking of the Nazi Economy, historian Adam Tooze describes the statist nature of Nazi economic policy in great detail, and concludes that the Nazis imposed greater government control over the economy than any other noncommunist regime in modern history. (pp. 658-60). Tooze notes that, even before the outbreak of World War II, government military spending accounted for some 20% of the GDP, while much of the rest of the economy came under government control as a result of the Four Year Plan and other similar measures.
In Hitler’s Beneficiaries: : Plunder, Racial War, and the Nazi Welfare State, Gotz Aly argues on the basis of extensive evidence, that German support for Nazi rule was maintained by the creation of a massive welfare state funded in large part by plunder captured in Hitler’s foreign conquests, but also partly by means of “soak the rich” taxation within Germany itself…
These two new books are useful complements to Avraham Barkai’s 1990 work Nazi Economics, which explored the ideological origins of Nazi economic policy and showed how Nazi economic theorists explicitly advocated statism, while rejecting free markets. Like some modern opponents of globalization and free trade, the Nazis viewed economics as a zero-sum game between nations, where increasing wealth for one country could, in the long run, only be achieved by impoverishing or conquering others.
The same attitude seems to be popular today — which certainly doesn’t make anti-globalization advocates the same as Nazis — but allows for the kind of atmosphere in which totalitarian governments can flourish. Somin explains why this 60-year-old history is still relevant to today’s policy discussions:
Why does any of this matter today? The fact that the Nazis pursued socialist policies does not in and of itself discredit socialism, any more than Hitler’s apparent commitment to vegetarianism discredits the case against eating meat.
Nonetheless, the socialist element of National Socialism matters for three reasons. First, as noted above, some still claim that Nazism was a form of “capitalism” and try to use this association to discredit free markets. Second, and far more important, Tooze and Aly show that far-reaching state control over the economy was an essential element in Nazi policy, without which Hitler could not have carried out his plans for conquest and mass murder. It also helped quiesce potential German opposition to Nazi policies; both by imposing state control on economic resources that any opposition movement would need to support itself, and by “buying off” potential opponents through welfare state handouts (as Aly emphasizes).
The concentration of economic power in the hands of the state does not always lead to atrocities as extreme as Hitler’s. But it does significantly increase the risk that these types of abuses will occur – not to mention numerous lesser (though still severe) atrocities. In the twentieth century, both left-wing (communist) and right-wing (Nazi) forms of state domination of the ecoomy paved the way for war, repression, and mass murder. There is little reason to expect better results from similar policies in the future. This is an important point, given the recent renewed popularity of socialist ideas in some parts of the Third World, such as parts of Latin American.
While it’s unfair and inaccurate to say that anti-globalization forces are innately totalitarian, what can one say about the way in which many on the left are embracing the dictator Hugo Chávez at the same time he moves the country closer to one-party rule?
Ideas have consequences, and the consequences of a system in which states restrict free trade and engage in punitive taxation on the rich is that the state suddenly has a great deal more economic power. Whenever the state gains in economic power at the expense of the people, a measure of republican rule is lost and it becomes easier for the state to consolidate power. The state already has a virtual monopoly on violence (except in times of revolution) — giving them both the guns and the butter only makes it that much easier to take total control.
The problem with this globalization backlash is that it’s inevitably tied with increasing the power of the state — to control imports and exports, to manage the economy, and to regulate “fairness.” None of those things are acts which the state should be doing — a group of government bureaucrats are hardly the best people to be deciding what’s “fair” and what is not. By doing so, it expands the scope of government power and diminishes the power of the people. Not only is that economically unsound — there’s a direct correlation between high tax rates and economic under-performance — but it’s the sort of thing that makes it much easier for governments to become oppressive.
The lessons of the 20th Century make it clear that the keys to success are not in isolationism, but in an open society and a strong entrepreneurial ethic. The story of the 21st may be of how the increasingly decadent and self-absorbed West faded as the entrepreneurial Far East became the world’s superpowers — or it could be how in the face of economic problems, the same factors that led to the two most devastating wars in world history once again turned the world apart. As the great saying by Satayana goes, those who forget history are doomed to repeat it. The question is whether people are choosing to learn from history or make the same fatal mistakes once more.
UPDATE: Mitch Berg has more on the topic of what Hitler learned from the left. The mistake most people make is thinking that Hitler despised Communism because he disagreed with their economic theories — state control of production suited Hitler just fine. He wanted to exterminate the Communists (and the German labor unions who were heavily influenced by the Communists) because they posed a threat to his power.
It’s also important to note that the welfare state was a German invention — Otto von Bismarck is the intellectual heir to the welfare state as we know it now, and for Bismarck, the welfare state was ultimately a method of social control. By paying off the various groups in German society, the central government could rule freely. The Democratic Party in many ways tries to uphold the same general model — economic redistributionism as a way of centralizing society. Even if the Democrats don’t directly support the Bismarckian model, what they propose is virtually indistinguishable from it, and the results would likely be the same. Once the state seizes mass economic power, it’s much easier for that state to succumb to the autocratic and totalitarian temptations that every government has — which is why the Founders wisely restricted the scope and power of the central government to avoid that temptation. We undo that at our own peril.
UPDATE: And here’s another example of the “progressive” left shilling for Hugo Chávez.
“Yet there’s also a darker side to all this. Ilya Somin has a fascinating post at The Volokh Conspiracy on the economics of the Third Reich and how it matters in terms of policy debates today:”
With rhetorical sleights of hand such as this, I have to assume you were among the staunchest defenders of Keith Ellison’s recent faux pas back-handedly comparing the Bushies to Hitler. The whole analogy is kind of amusing in that Hitler outlawed labor unions, which I can use to draw a parallel between the Third Reich and free market ideologues, right?
“While it’s unfair and inaccurate to say that anti-globalization forces are innately totalitarian, what can one say about the way in which many on the left are embracing the dictator Hugo Chávez at the same time he moves the country closer to one-party rule?”
For all of the right’s breathless “outrage” whenever a Bush=Hitler comparison is made by some fourth-rate leftist hack, I notice you never miss an opportunity to attempt to connect dots between history’s most brutal killers and those who disagree with your “every man, woman, and infant for themselves” economic worldview. Whatever attempts you make to distance yourself from your own incendiary comments in this thread, the glaringly obvious implication is that free trade opponents=Joseph Stalin.
“Ideas have consequences, and the consequences of a system in which states restrict free trade and engage in punitive taxation on the rich is that the state suddenly has a great deal more economic power.”
Amusing to see how you conflate those two policy actions. And I’m a little disappointed that your cries of pending financial doom over the upcoming minimum wage increase haven’t resurfaced.
“there’s a direct correlation between high tax rates and economic under-performance”
With the exception of Clinton’s “biggest tax increase in history” ushering in the longest-lasting economic expansion in history. A bit of hole in your thesis I’d say.
“The question is whether people are choosing to learn from history or make the same fatal mistakes once more.”
Voters have tried it your way for the last 27 years….and haven’t been impressed with the results. The “history” you speak of seems comparatively good to all kinds of working people facing increasing levels of economic turbulence, and seem cool with the idea of “learning from those same fatal mistakes” that existed in an era of a much more upwardly mobile working-class and middle class than exists today.
http://xkcd.com/261/
Apparently you miss the whole point. (Unsurprising as that is.) The economics of the Third Reich were based on the same zero-sum worldview as the anti-free-trade activists today. As Prof. Somin said, that doesn’t mean that anti-trade activists = Nazis, just that they are making the same basic mistake.
And exactly what makes my statement incorrect? That leftist activists aren’t embracing Chavez? That Chavez isn’t a dictator?
Your breathless overreaction to a relatively prosaic statement only displays your own lack of logical argument, not mine.
There’s nothing amusing about it — economic isolationism and higher taxes happen to be positions held by the same groups of people.
As for the minimum wage, my thesis was that it will A) have no effect or B) cause disproportionate job losses among underprivileged groups. The increase begins today, and it will be anywhere from 6 months to a year before the data comes out showing its effects, and probably a year for their to be serious economic analysis of that data.
Not necessarily. For one, Clinton’s tax hike was the biggest hike in history in dollar amounts, but was relatively mild in terms of tax rates. It was also not until much later that the economy really took off — which just happens to be after Clinton cut capital gains taxes in 1997. Not to mention that it could be just as well that Clinton’s tax increase slowed an already-happening recession, delaying what was already an inevitable economic recovery.
Except that supposed golden age of upward mobility never existed — would you really go back to the 1960s? How about the 1970s and the days of stagflation? I thought it was only the Republicans who wanted to take America back to the 1950s?
The argument that things were so much better in the past make no sense when one actually looks at what life was like then compared to what life is like now — the last 30 years of American economic history is almost uniformly a story of astonishing economic advancement at every level… and you’re sitting around thinking about what’s the best way to wring the golden goose’s neck.
The whole problem with arguing economics with a liberal is that they tend not to know anything about economics — instead of arguing about data, it’s an argument about their half-formed (and usually half-assed) feelings. Then again, if liberals actually understood the way the world really works rather than living in their own fantasies, they wouldn’t be liberals, would they?
“And exactly what makes my statement incorrect?”
Well, comparing the most evil dictator in world history, who murdered people who dared to form labor unions, with the labor-inspired anti-globalization backlash is a good place to start with where you’re incorrect.
“economic isolationism and higher taxes happen to be positions held by the same groups of people”
I would venture to guess that the majority of voters who pulled the lever for anti-globalization candidates like Heath Shuler and Sherrod Brown are not simultaneously cheering for higher taxes.
“It was also not until much later that the economy really took off — which just happens to be after Clinton cut capital gains taxes in 1997. Not to mention that it could be just as well that Clinton’s tax increase slowed an already-happening recession, delaying what was already an inevitable economic recovery.”
Wait just a minute here. Let me see if I have this straight. It’ll take at least a year before we can determine the economic fallout of the minimum wage increase, but the 1997 capital gains tax cuts directly coincided with the biggest upshot of the Clinton economy? Didn’t it take a year for those cuts to trickle through the pipes too? Or are you simply trying to construct a calendar by which all your long-ago disproven principles can avoid discreditation? And by the way, you do realize that the economy grew every quarter between 1994 and 1997, don’t you?
“would you really go back to the 1960s? How about the 1970s and the days of stagflation?”
Considering the median salary in my hometown was more than $60,000 in the 1970’s (adjusted for inflation), and is barely $20,000 today, the 70’s sound like a pretty sweet deal to me, yes.
“the last 30 years of American economic history is almost uniformly a story of astonishing economic advancement at every level”
Well….except for the people for whom it hasn’t. Climb off of your ivory tower and talk to some blue collars some day and I assure you that you’ll find plenty….who have the check stubs to prove their vaporized earning capacity during this mind-blowing renaissance you talk about.
“The whole problem with arguing economics with a liberal is that they tend not to know anything about economics — instead of arguing about data, it’s an argument about their half-formed (and usually half-assed) feelings. Then again, if liberals actually understood the way the world really works rather than living in their own fantasies, they wouldn’t be liberals, would they?”
By a 20-point margin, Americans believe the Bush economy is failing them…..and here you are, a boisterous ambassador of Bush’s political party, calling a supermajority of American people stupid. I beg you to keep up the arrogance in defense of economic values discredited during the Roosevelt administration….the TEDDY Roosevelt administration.
Do you have an issue with reading comprehension?
“The same attitude seems to be popular today — which certainly doesn’t make anti-globalization advocates the same as Nazis — but allows for the kind of atmosphere in which totalitarian governments can flourish.”
“While it’s unfair and inaccurate to say that anti-globalization forces are innately totalitarian, what can one say about the way in which many on the left are embracing the dictator Hugo Chávez at the same time he moves the country closer to one-party rule?”
Or is it that you’re just intellectually dishonest and don’t bother to understand the arguments being made?
And I’d wager that they think that they’ll raise taxes on “the rich.”
Yes, because investment cycles are forward-looking and respond to future trends, while employment is not.
See above.
No, you’re trying to do that by comparing apples to oranges — employment policy generally takes longer to judge than a change in investment policy. But then again, I’m assuming you have even a basic level of economic knowledge, which you’ve proven to be false time and time again…
At rates that would have been higher had Clinton not raised taxes.
Then your hometown is the exception, not the rule. If the median salary in your town is less than $20,000, which is less than half of the national median, either you live in a shantytown or your numbers are utter rubbish. I’d also wager that most of that decline has more to do with the failure of the same corrupt unions that you constantly shill for as well…
And I bet that the second one actually ran the numbers, I’d be right and you’d be wrong. The numbers tell the real story.
The classic argumentum ad populum, the staple of your flawed method of “thinking.”
By a large margin, Americans want creationism taught in schools — so I guess that the people who think that creationism is wrong are a bunch of arrogant stools for values discredited in the Scopes Monkey Trial, right?
A massive majority of Americans think that there was a cover-up at Roswell too — so I guess that settles it, and little green (or grey) men really did crash their in 1947, right?
Oh, and majority of Americans believe in ghosts as well.
The economic values of entrepreneurialism, free trade, low taxes, and opportunity are precisely why the US economy is still the leader of the world, and places that practice the kind of statist “liberalism” you support do poorly.
The state of Michigan enacted all the union-friendly policies you could want — they raised taxes, they made everyone pay union wages for state contracts, they did everything you think is just great for a government to do.
The results? Michigan ended up with its own economic recession, and while things in the rest of the country got better, Michigan continued to get worse.
All your blather about blue collar workers, and polls, and all of the other easily refutable arguments don’t mean anything — the facts are not on your side. The old saying goes is that a conservative is a liberal who’s been mugged by reality — looks like you’ve avoided that confrontation so far…
“Do you have an issue with reading comprehension?”
No, I have an issue with people who react with breathless indignation when Al Gore refers to right-wing bloggers as “digital brownshirts”, but then winkingly attempts a connect-the-dots between Adolf Hitler and globalization critics. I’m sure Charlie Daniels will be interested to learn you think he’s channeling Nazism when he rails against free trade policy.
“At rates that would have been higher had Clinton not raised taxes.”
Extra points for originality….and always having an angle to assure us that black is actually white.
“If the median salary in your town is less than $20,000, which is less than half of the national median, either you live in a shantytown or your numbers are utter rubbish.”
I actually misstated my hometown’s plight. The largest industry in my hometown has an average salary of barely $20,000 today (the same one that did pay $60,000), not the town itself….although that’s only slightly higher. And this may come as a shock to you in your world of golf courses and fine cigars, but hundreds of U.S. counties have per capita incomes of $20,000 per year or less. It’s these people, invisible as they may be to you, who aren’t sharing Jay Reding or George Bush’s optimism about the incredible economic boom we’re experiencing. But just keep telling them they’re idiots….and that they in fact don’t exist as you frequently have in the past.
“I’d also wager that most of that decline has more to do with the failure of the same corrupt unions that you constantly shill for as well”
Well, in your mind, any unionized industry is necessarily “corrupt” because they are responsible for reducing the corporate profit margin. If you had it your way, we could upend that horrific “union corruption” by returning to the good old days forcing masses of starving workers to board buses as “day laborers”, working 16 hours in unregulated sweatshops or plantations all to earn a greasy 10-spot at the end of the day.
“A massive majority of Americans think that there was a cover-up at Roswell too — so I guess that settles it, and little green (or grey) men really did crash their in 1947, right?”
I couldn’t care less what other people think about alien life on America. I’m certainly willing to let them believe whatever they wish to believe about little green men so long as they have the sense to recognize the arithmatic of your pro-globalization bloviations isn’t adding up to anyone’s favor except for those of you rich enough to smoke cigars.
“The results? Michigan ended up with its own economic recession, and while things in the rest of the country got better, Michigan continued to get worse.”
As a result of being undercut by lawless robber baronism currently allowed in other states and nations in the global race to the bottom. Take away the freebies the Japanese automakers have been showered with in right-to-work states over the last two decades and they’d still be lagging behind Detroit. Only in your world does an average of $400 million worth of corporate welfare doled out to EVERY Japanese auto plant operating in America constitute “free markets”.
“The old saying goes is that a conservative is a liberal who’s been mugged by reality — looks like you’ve avoided that confrontation so far…”
With the huge resurgence in old-fashioned liberalism sweeping across the country, it would seem as though incidence of “muggings” must be way down. I would suggest you must be the one living in a shantytown is you’re subjected to that many muggings. You really should find a nicer neighborhood….among us liberals. All the cool kids are moving there!
Except I specifically said the opposite — which apparently you’re too lazy and dishonest to bother to read.
Except for the fact that I linked to an economic analysis backing up my points — which you are pathologically unable to do.
Ah, yes, my lavish lifestyle of public golf courses and weekly cheap cigars… why I’m just like a Rockefeller…
The median income in the US is over $40,000. Even in economically depressed areas, the median income is over $30,000 — if there are counties in the US with median incomes of $20,000, it’s probably because they’re victims of the same failed policies you embrace.
And you enjoy drowning puppies. Of course, I have absolutely no proof of that, but you have absolutely no proof of your stupid little smear, so I figure turnabout is fair play.
Given that the workers in places like Toyota’s Kentucky factories have jobs, have steady incomes, and have working conditions better than those in union-dominated Detroit, whose policies are better for American workers again? Given that Michigan is economically depressed despite doing everything you think is great (a point you can’t be bothered to refute), reality supports me — which is apparently why your preferred argument is more of the same blather with nothing to back it up.
I’m not sure what you’re smoking, but it can’t be helping…
The reality is that globalization is responsible for the majority of economic growth in this country, a force which has benefited millions of American workers, and the anti-trade policies of the increasingly isolationist left were enacted, those millions of people would be out of jobs.
It’s the same old protectionism and xenophobia — apparently Mark can’t be bothered to read a history book and see that it’s all been done before with disastrous consequences.
Except the argument that EVERY Japanese auto plant gets $400 million is completely wrong. And if you want to compare corporate welfare, there’s no bigger corporate welfare mama than the auto industry: GM got $3.6 billion in corporate welfare from 1997-2002 alone — and paid a corporate tax rate of negative 1.3%. Chrysler got a nearly $1 billion bailout in 1979 — adjusted for inflation, it’s still one of the biggest bailouts in US history. The list could go on and on.
Your corrupt unions in Detroit keep running Michigan’s economy into the ground, demanding more and more taxpayer subsidies, and not doing nearly as good a job as their Southern counterparts. And here’s Mark, sitting on the deck of the Titanic bitterly decrying anyone who says that the ship’s sinking.
Do you really buy your own bullshit anymore?
“All the cool kids” can piss off — I’d rather be right. The fact that you’re proud to live in a fantasy world doesn’t exactly do much for your utter lack of credibility or argumentation skills.
“Except I specifically said the opposite — which apparently you’re too lazy and dishonest to bother to read.”
No….first you made the comparison….then you winkingly said such a comparison is not fitting. It’d be like me saying that Republicans kill Jews just like the Nazis did….but that doesn’t mean Republicans are as bad as the Nazis.
“The median income in the US is over $40,000.”
You’re talking median household income. I’m talking about per capita income. The county where I last worked had a median HOUSEHOLD income of $34,000 back in 2003….and there were dozens of Minnesota counties with lower median household incomes than that. Looks like you’re out of touch again.
“And you enjoy drowning puppies. Of course, I have absolutely no proof of that, but you have absolutely no proof of your stupid little smear, so I figure turnabout is fair play.”
Since you dismiss any organized labor presence as an assurance of corruption, your default position is that the pre-labor era robber barons had it right. And since their worldview generally conforms with yours, what other conclusion could I possibly come up with?
“Given that the workers in places like Toyota’s Kentucky factories have jobs, have steady incomes, and have working conditions better than those in union-dominated Detroit, whose policies are better for American workers again?”
We’ve gone round and round over this before. Kentucky is a means to an end for Toyota to operate a taxpayer-funded plant just long enough to kill the American competition with its self-imposed legacy costs. After the Big Three are bankrupted and the burgeoning Chinese automakers instigates a new race-to-the-bottom in the auto market, Toyota will no longer have any need for Kentucky.
“Chrysler got a nearly $1 billion bailout in 1979 — adjusted for inflation, it’s still one of the biggest bailouts in US history. The list could go on and on.”
That was 28 years ago. Now all the freebies are going to the Japanese automakers building new plants.
““All the cool kids†can piss off — I’d rather be right.”
Then you’re 0-for-2. Every successful economy in the world embraces an economic platform closer to mine than yours.
Except that’s your interpretation, which has nothing to do with the actual discussion.
The median household income in the US in 2005 was $46,326. Minnesota has the fifth highest median income with $55,914.
And per-capita income isn’t even a sensible measurement — it only measures what the average income would be if all the GDP of a region were equally distributed.
I’m out of touch?… you just failed Statistics 101.
Except for the part where I made no such categorical statement.
Which is an idiotic conspiracy theory — as if Toyota is going to shutter a profitable plant just out of spite. And the Chinese? For one, Chinese automobiles are rubbish. Secondly, the Chinese can barely fill their own demand, no less bother with exports. Finally, if there’s a race to the bottom, it’s being held in Detroit where the unions are taking in millions in mandatory contributions from workers while more and more workers keep getting laid off.
All your silly rhetoric can’t disguise your facts being wrong…
GM’s massive corporate welfare wasn’t. Interesting how you pick one statistic and ignore the other. There’s another sign of an intellectually dishonest person.
Except for the fact that they don’t — the US is the world’s strongest economy because it has followed an economic platform that works — although people like you would love to strangle the goose that laid the golden eggs, thankfully unthinking ideologues like yourself tend not to pass the rigors of a formal economic education and end up bitching about policy rather than writing it.
“The median household income in the US in 2005 was $46,326. Minnesota has the fifth highest median income with $55,914.”
Most households have two incomes, which equates to the average individual salary per household in the $23,000 per year range. My town’s largest employers pays slightly over $20K per year, and you suggested such an average wage means I have must have grown up in a shantytown. Looks like the majority of Americans must live in shantytown by your blinded-by-privilege perspective.
“as if Toyota is going to shutter a profitable plant just out of spite”
Not out of spite….out of the knowledge that they’ll get a sweeter deal in the Third World, using increased competitive forces of the bourgeoning Chinese auto market as the justification for their departure. I’d be surprised if it was more than 10 years away.
“For one, Chinese automobiles are rubbish”
The same was said about the very Japanese cars you now celebrate as recently as 25 years ago.
“Except for the fact that they don’t”
We all know how the conversation goes from here so I might as well just speak for both of us.
Mark: Name the successful economies on the world that embrace the kind of unbridled free markets you endorse.
Jay: Singapore and Ireland!!!!!
Mark: Weigh those against every other successful economy of the world and the numbers are on my side.
Jay: Yes, but their doomsday is coming….
Well, you get the picture.
“the US is the world’s strongest economy because it has followed an economic platform that works”
And the U.S. is closer to the economic model of Western Europe than modern-day China, which practices the purest form of lawless free marketism on the globe today.
“And the U.S. is closer to the economic model of Western Europe than modern-day China, which practices the purest form of lawless free marketism on the globe today.”
Incorrect. It’s hard to say if there is anything particularly “free” about most of the Chinese economy; pretty much every major company has a Communist Party secretary on their corporate board and is at least a quarter owned by the government, if not 50%-100%. Lawless, perhaps, but it’s hard to call their system in any way free. It’s more or less the technocracy that Deng Xiaopeng had been trying to bring about since the late 50’s (after he wrested some measure of control from Mao after the failure of the Great Leap Forward) finally seeing fruition.
That said, it’s very good at one thing (production on a massive scale)- and lousy at everything else. And, in case you hadn’t noticed, Mark, manufacturing is the LEAST lucrative portion of the entire product cycle. The real money is in design, engineering, marketing, distribution and sales- all of which are done here. China is simply the “factory floor”. Thus they have millions of people working at $200 a month jobs… and, at the moment, not much else. They have an army of engineers who aren’t terribly innovative, state-of-the-art science laboratories that produce nothing in the way of groundbreaking research, no overseas marketing talent to speak of, and- most importantly- no consumer credit. It’s still nearly impossible for most Chinese to get a credit card, home loan, or car loan (most homes are subsidized by the government and corporations; cars are generally owned either by upper middle class families pooling their resources, the ultra-rich, or, once again, the same government and corporations that own the housing). Without us, their entire system would collapse- China needs America more than America needs China.
So, your China paranoia aside, we still hold all the cards; and it will be decades yet before China will even be as competitive as Japan in the more important sectors of the economy, outside of a handful of fields where Taiwan is leading the way (computers and semiconductors). In the meantime, all the high-wage portions of the cycle are handled in America, and will be handled here for the forseeable future.
Apparently you can’t read a graph either — the average individual salary is $32,140 for persons 25 or older ($39,403 for men, $26,507 for women).
For one, you never bother to mention what town your talking about. Secondly, if the town’s largest employer is paying slightly over $20K per year, the people living in that town would be better off leaving. Even in a place like Sioux Falls, which has a median household income that’s significantly less than the national average (~ $36,000) someone with a high school degree and a decent work ethic could easily swing more in a few years.
Except economics doesn’t work that way. Why the hell would Toyota move to China? For one, labor costs are only one relatively small part of owning a factory. Secondly, it isn’t cheap to move a car on a container ship across the ocean in volume, and there’s the lack of skilled workers in China, not to mention the bribes, unreliable electrical supplies, etc.
If your little fantasy were true, why the hell wouldn’t Toyota already be building in China? There’s nothing to stop them, and if the economics were that compelling, they would. The reason they don’t is because it’s not a smart thing to do. The decreased cost of Chinese labor isn’t worth the additional hassles. As Nick points out, the bugaboo that all these jobs will end up in China just isn’t the case — and the more skilled the job, the less likely that someone’s going to source it out to unskilled workers.
The real migration of workers isn’t overseas, its from states that are less competitive (Michigan) to those that are more (Kentucky, North Carolina, etc.)
Which was A) never true and B) quickly went away when American auto manufacturers didn’t make efficient cars during the gas crises of the 1970s.
The threat of Chinese cars is about like predicting that Yugoslavian cars will take over the US market. If price were all that mattered we’d all be driving Trabants…
I’d speak for you, but I hear lobotomies are exceptionally painful…
Let’s take a look at the numbers shall we? More specifically, the Index of Economic Freedom. The top five are Hong Kong, Singapore, Australia, the US, and New Zealand. None of those are particularly socialist countries, and all of them have extremely high qualities of living. Even if you knock off city-states like Hong Kong and Singapore, you’re left with three Anglosphere countries with histories of limited government.
Odd how countries that embrace the statism you prefer tend to do poorly, while countries that embrace free-market reforms end up doing better. Ireland being one, yes. Israel went from the hyper-inflation of the 1980s to being the top-performing economy in the region thanks to Binyamin Netanyahu’s economic reform package. The UK in the 1970s was in the midst of the same stagflation as the US, but thanks to a certain Lady Thatcher, within a few years the British economy was one of the strongest in Europe, and not even the left-leaning Blair administration dared go back to the way things were.
Again, all your blather doesn’t change the facts. Economic freedom correlates directly with overall prosperity — and we can see that right here in the US when states like Michigan embrace your brand of statism and fail, while states like Colorado and Virginia who have low-tax policies do better. If statism worked, why does New York (home to some of the richest people in the country) still rank below the national average? Why do incomes in Michigan continue to fall?
And odd isn’t it, that New Hampshire, the state with the highest median income also just so happens to have some of the lowest tax rates? Gee, I guess they should raise taxes so that they’re more like New York, shouldn’t they?
I’d poke holes in that, but Nick’s already done it well…
Here’s your problem: you have a bunch of opinions that you’ve never tested. You don’t look at data. You don’t follow the argument. You don’t think for yourself. It’s just your opinions, and the facts be damned, and the more frustrated you get, the more silly little codewords you throw out. It’s like a tell in poker — the second you start foaming at the mouth about “lawless capitalism” and “plutocrats” and “Dey tuk er jerbs!” you might as well stop there, because it’s over.
A word of advice: try reading this bookor this one and learn something about basic economics before trying to make arguments that are so easily refuted. (Actually, everyone should read those books as most Americans are shockingly ignorant when it comes to basic economics — mainly because it’s not taught except as a speciality these days.)
Nick:
“The real money is in design, engineering, marketing, distribution and sales- all of which are done here. China is simply the “factory floorâ€. ”
Which is great news for a certain sector of the American economy (provided they’re not undercut by India), but assures an endless state of decline for the have-nots getting frog-marched to the low-skill service sector gallows. An economy that can’t find a way to pacify a peasantry (particularly a peasantry whose past experience has instilled certain expectations) will ultimately find itself in the midst of a growing populist revolt….as America is experiencing now.
“Without us, their entire system would collapse- China needs America more than America needs China.”
Perhaps for today. But if we’re dependent on Third World imports for nearly all of our material goods, how much of a superpower can continue to be? An organized global trade sanction against America tomorrow would both spiral our paper-shuffling and burger-flipping economy into meltdown and leave us imminently vulnerable to attack.
Jay:
“For one, you never bother to mention what town your talking about.”
For what it’s worth, the town I’m talking about is Albert Lea, Minnesota. And for the record, I haven’t lived there since 2001.
“Even in a place like Sioux Falls, which has a median household income that’s significantly less than the national average (~ $36,000) someone with a high school degree and a decent work ethic could easily swing more in a few years.”
Ah yes…the old “go to where the jobs are” mantra which pretends that nobody has pending commitments where they currently live (dependent family members, joint custody with children, homes they can’t sell in the piss-poor local economy). It’s always alot easier in that conservative ivory tower.
“Why the hell would Toyota move to China?”
I didn’t say they’d certainly move to China. There’s plenty of Third World countries to choose from closer to home. Expect Toyota to shift much of its production to Latin America in the decades to come.
“If your little fantasy were true, why the hell wouldn’t Toyota already be building in China?”
Because it was in their interest two decades ago to endear their image among American consumers by building plants here, simultaneously assisting in their endgame of crushing the Big Three from within with reduced labor and legacy costs. I’ll grant you it’s a brilliant business move….unless of course you’re an auto worker.
“The real migration of workers isn’t overseas, its from states that are less competitive (Michigan) to those that are more (Kentucky, North Carolina, etc.)”
Ah yes, that hotbed of economic growth and upward mobility Kentucky! As for North Carolina, they lost more jobs during the first term of the Bush administration than any other state per capita. Seems to me that working non-union for peon wages and vanishing benefits isn’t quite the insurance policy to saving American jobs that you claim it is.
“The threat of Chinese cars is about like predicting that Yugoslavian cars will take over the US market”
All they need to do is live up to fuel economy standards and their microscopic sticker price will be very appealing to American consumers. I’m sure most people said the same thing about Chinese-made TV’s a generation ago.
“Odd how countries that embrace the statism you prefer tend to do poorly”
Well, at least until you look at larger growth rates for France and Germany than the U.S. in recent quarters. And how about the Scandinavian countries? And Switzerland? How badly would you like us to believe they’re suffering?
“If statism worked, why does New York (home to some of the richest people in the country) still rank below the national average?”
Below the national average in what? Per capita income? I dispute your claim on this, but the fact that some of the poorest people in the country live there might have something do with it if it in fact is true.
“Why do incomes in Michigan continue to fall?”
Gee, I wonder. So anyplace that falls upon tough times due to an economy changing for the worse has to be suffering from failed policies? How do you explain Mississippi, which is both the poorest state in the nation and one of the most cartoonishly pro-business?
“A word of advice: try reading this bookor this one and learn something about basic economics before trying to make arguments that are so easily refuted.”
I’ve read Milton Friedman. And I’ll call your economist Milton Friedman and raise you an economist Paul Krugman.
What a crock. If you’d ever read anything by Milton Friedman, Mark, you wouldn’t embarrass yourself here by characterizing Paul Krugman as an economist. He’s a Keynesian hack, if anything, was a paid consultant to Enron, and by his own admission has never done any actual empirical work in economics in his life. He didn’t last 6 months on the White House Council of Economic Advisors because he wasn’t even conversant on the issues being discussed — or perhaps just more socialism, government regulation, and higher taxes was not the answer Reagan was looking for.
All of which explains why the sum total of Krugman’s academic profession has amounted to no more than becoming an opinion journalist for The New York Times, whose purpose it is to decry the success of supply-side economics and promote Marxist-Leninist economic theory for all the red diaper doper babies still living on the east coast and reading The New York Times.
Meanwhile, ol’ Paulie’s laughing all the way to the bank because he himself does not live by the policy recommendations he pretends to represent. He’s a carpetbagger, who, with his wife, has churned the academic community from MIT to Stanford for two of the highest salaries ever paid an academic professional. Meanwhile, his policy position is to decry the rising costs of college tuitions and to demand still more government funding. Get it?? More money for Paul Krugman, more debt for the student consumer. So much for the little guy, eh?
To anyone with real-life business experience or at least an academic background in finance and economics, this is not the least bit surprising. Paul Krugman is nothing but a Leftist political shill and always has been. He’s sort of the “Ward Churchill” of the op-ed pages for people who don’t read anything but newspapers. He’s an “economist” in the same way Jack Benny was a violinist, and no educated person would ever make the mistake of comparing him to Milton Friedman. Those who do only demonstrate their complete ignorance, which you continue to display here with mind-numbing conviction, and always without the slightest hint of the self-awareness God gave a gnat.
But do keep up the good work, Mark. You do a fine job of representing the illiterate point-of-view here, of illustrating the failure of public education, and of perfecting the argument for limited government, less regulation, and lower taxes.
Jay:
Give the Chinese auto industry another decade to bring their quality up to at least Korean levels; if there aren’t at least two Chinese automakers selling cars in the US by 2017, I’ll eat my shorts. And cotton boxers aren’t the tastiest pants around.
But I don’t think that’s what Mark is talking about- he’s talking about Toyota (or another major automaker) moving their manufacturing to China to sell cars to the US market. To be perfectly honest- I don’t see it happening. Mercedes is setting up factories in China, that much is true, but they don’t manufacture cars in the US anyway, and it sounds like they’re focusing on producing for the domestic Chinese market through those facilities, not export to America.
Mark:
“Which is great news for a certain sector of the American economy (provided they’re not undercut by India), but assures an endless state of decline for the have-nots getting frog-marched to the low-skill service sector gallows. An economy that can’t find a way to pacify a peasantry (particularly a peasantry whose past experience has instilled certain expectations) will ultimately find itself in the midst of a growing populist revolt….as America is experiencing now.”
Thus the problem is twofold, from where I see it-
1. The service sector isn’t sufficiently unionized. Unlike Jay, I support unionization; Detroit’s problem was having idiotic management that had no idea how to properly work with a union and reach effective compromises and agreements, combined with extreme technological short-sightedness and executive boards staffed with too many bean-counters and not enough technocrats. This lead to the disaster today; blaming it solely on the unions (which, really, only have the power that they’re given by management) is truly unfair. Toyota, by contrast, has emphasized a corporate democracy model that has lead to their American facilities having no need for unionization- if they wanted to unionize, they would (and the auto workers in Japan ARE union- and make out very well, producing the highest quality autos in the world in the most efficient auto industry in the world). If people in the service sector are as terribly off as you say, it’s time for collective bargaining; unionization is the only effective way to deal with companies as massive as Wal-Mart or Target. That, and the pursuit of different models within the service sector, such as employee ownership and co-ops.
2. Why do we want low-skill, low-margin manufacturing anyway? We still have massive natural resource, machine tool, and high-tech production (while China has taken a lot of the cheap electronics and end-of-the-line computer manufacturing, we’ve still got the most advanced silicon chip plants in the world, not to mention world leadership in sectors such as aerospace and defense). The best way for unskilled labor to get ahead in today’s economy is to gain skill- specifically either skills which can’t be exported, like plumbing, electrical, or other skilled construction work (leave the unskilled construction work to the immigrants), or work in a premium industry; as Neal Stephenson pointed out in The Diamond Age, when everything is mass produced, people will play a premium for hand-crafted objects- everything from furniture to foodstuffs. BA’s aren’t the way to stability (unless you can get into a good graduate field)- skilled trades are.
So much for your peasant revolution. When the peasants are driven out of one way of life, they adapt and enter another. The enclosure movements of Europe drove peasants off their land, and into the factories. Now, globalization will drive these “peasants” into different work- a new economy based on nonlocal information and localized trade and craft work. Adaptation, adaptation, adaptation. Yes, people will get screwed. That’s history, deal with it. But the hundreds of millions of Chinese and Indians who are entering the middle class don’t think so. Every change looks like a crisis- but it is also an opportunity.
He’s a Keynesian hack, if anything, was a paid consultant to Enron, and by his own admission has never done any actual empirical work in economics in his life.
There is no empirical work in economics. Every single economist will tell you that an actual functioning economy is way too complex to apply any known economic model. (That’s a convenient fudge to obviate the need in a real science to compare one’s model to reality.)
He’s an “economist†in the same way Jack Benny was a violinist, and no educated person would ever make the mistake of comparing him to Milton Friedman.
I think its informative in regards to the intellectual rigor in economics, Eracus, that you immediately rush to debate the issue in terms of personalities – “Friedman is great, Krugman is Teh Sux” – instead of in terms of ideas. I’d say that it’s an indication that you don’t understand any of the ideas of economics – which I’m sure is true – but frankly I’m not sure there’s any ideas there worth understanding. There’s a reason that Alfred Nobel never created a Nobel Prize in Economics – that prize is given out by a Swedish bank with no connection to his estate.
I mean, if economists can’t detect what just about every American understands – that we’re in an economy that basically sucks for everyone but the wealthy – what the hell good are they?
Krugman did do some interesting research back before he became a partisan shill. (Yes, I’ve read him.) It’s quite interesting to read The Great Unraveling today and see how each and every one of his short-term predictions have been completely wrong. The thesis of his book is that the budget deficit will grow to crush the economy — which four years later seems quite quaint while at the same time trying to argue that the entitlements problem isn’t really all that bad — which is utterly ass-backwards.
Krugman was a credible economist (as credible as neo-Keynesians get anyway) before becoming an utter shill. It doesn’t mean he’s right, but that he does have some credentials.
And as for your points about the “race to the bottom,” I’ll hand it to Nick, his analysis is pretty damned good. I’m not anti-union per se — I just don’t think that the traditional union structure works anymore. The new face of collective bargaining is a more democratic conversation between workers and owners. (And in fact, thanks to employee ownership becoming more and more common, there’s not a big divide between the two any more.) The days of mega-unions like the UAW are over, and there’s a good reason why workers in Southern auto plants don’t want to unionize — why bother when they have wages as good as Detroit and better job security? The relationship between workers and managers at those plants isn’t the sort of antagonism that used to go on in Detroit.
OK, so if biologists can’t detect what just about every American understands – that God created humans in their present form less than 10,000 years ago – what the hell good are they?
Oh, wait, the popularity of an idea has no bearing on whether it’s scientifically correct or not — so why are you applying the same silly standard to economics?
Sorry, you fail, Mentoc, except in revealing the limits of your erudition. Your first sentence indicates there is no need to read your next as, like Mark, you obviously have no idea what you are talking about.
Wow, I just realized how stupid that passage was:
So, an economy is too complex to apply any known model to, but scientists can predict exactly how much the temperature will rise based on nothing but climate modeling… apparently since the science of economics doesn’t agree with your political viewpoints, the science must be wrong.
Sounds like the sort of argument a creationist would make to me…
Nicq:
I’m not suggesting that Toyota will necessarily move to China in the coming generation, but that they will move somewhere in the Third World (likely Latin America) to reduce labor costs versus the insurgent Chinese auto market.
I largely agree with your assessment of how Detroit screwed themselves, but am not buying into the “Toyota worker’s democracy” bit. Toyota would not be paying non-union manufacturing workers in the South and border states as high of salaries as they do if the entire industry’s wage standard were not propped up by UAW wages. Toyota is paying high wages as a disincentive for its workers to join the UAW, but as soon as that institution falls apart, so does the $60,000 per year gravy train for Southern autoworkers playing the cowboy. Their wages will be systematically undercut after their UAW support beam collapses.
And we want a low-skill, manufacturing economy for two reasons: to serve the skill needs of a population with a diverse skill set with jobs that will invariably pay higher than what they would earn flipping burgers or stocking Wal-Mart shelves…..and to have a domestic manufacturing capacity that helps us avoid being one trade sanction away from defenselessness against those who do control production of the world’s manufactured goods. As far as I’m concerned, there’s nothing this country is doing that is as perilous to our national security interests than exporting our manufacturing capacity to the lowest bidder on a globe full of people who hate us.
“Toyota is paying high wages as a disincentive for its workers to join the UAW, but as soon as that institution falls apart, so does the $60,000 per year gravy train for Southern autoworkers playing the cowboy. Their wages will be systematically undercut after their UAW support beam collapses.”
Not likely. Maintaining Toyota’s super-high quality standards requires a well-trained and well-compensated workforce. It would make about as much sense as Apple or Microsoft undercutting their employees wages- they’d lose the best workers in the industry. In other words- it makes no sense. Toyota generally keeps their plants in places with high-skill and expensive labor because they have quality levels that they need to maintain- they wouldn’t benefit from offshoring to the third world.
“And we want a low-skill, manufacturing economy for two reasons: to serve the skill needs of a population with a diverse skill set with jobs that will invariably pay higher than what they would earn flipping burgers or stocking Wal-Mart shelves”
Not necessarily. Chinese laborers often make less than their counterparts in China’s service industries. Low-wage domestic manufacturing would simply end up being staffed by immigrants making $8 an hour.
“As far as I’m concerned, there’s nothing this country is doing that is as perilous to our national security interests than exporting our manufacturing capacity to the lowest bidder on a globe full of people who hate us.”
Well,
1) There’s a reason most of our defense industry manufacturing is still domestic.
2) Again, those economies that we’re offshoring to would collapse without us. They need us more than we need them, and they always will.
3) Our trade partners in Asia and their citizenry generally have a very favorable attitude towards us- I heard recently that America’s favorability rating with the Chinese people is over 70%. I’d imagine India, which could become one of our closest allies in the 21st century, is in a similiar position. We’re not offshoring to Iran and Myanmar.
In other words, I’m not buying it.
“In other words, I’m not buying it.”
WHAT?? You don’t believe in Marxist-Leninist economic theory, the inherent evil of multi-national corporations, or the torrents of rage 70% of the American people feel living in abject poverty with the worst economy the world has ever seen?? Don’t you read Paul Krugman?? Just don’t you nevermind that record unemployment rate or those record Federal tax revenues……and anyway it wouldn’t have happened if it weren’t for the UAW!! And everyone hates us!! That’s why we have such a helacious immigration problem…..oh, wait…
Sorry, you fail, Mentoc, except in revealing the limits of your erudition.
And you’ve revealed the limits of your argumentation – ad hominem is the only trick you seem to know.
So, an economy is too complex to apply any known model to, but scientists can predict exactly how much the temperature will rise based on nothing but climate modeling… apparently since the science of economics doesn’t agree with your political viewpoints, the science must be wrong.
Economists can’t even agree on whether or not economies are driven by supply or demand – the most basic factual question possible.
That would be like scientists not being able to agree on whether or not electrons moved towards or away from the anode.
It has nothing to do with my political viewpoints – since the “science” of economics doesn’t agree with reality, it’s basically nonsense. I’ve certainly never met a real scientist who takes it at all seriously. It’s just made-up, like philosophy and theology. It’s as relevant to understanding the world as the stats on the front of a Pokemon card. It’s not any kind of science – it’s just a social club for people who couldn’t master rigorous data collection methods to pretend like they’re studying something.
No surprise, then, that people like Eracus and Jay consider it gospel. The ideas of economics are infinitely malleable, having no relationship to concrete reality; thus, they can be easily bent to support any political ideology whatsoever.
So apparently since most economists don’t agree with your political viewpoint, then the whole science of economics is obviously wrong.
Anyone who believes something so patently ridiculous on its surface isn’t worth bothering with. Congratulations, you’ve just descended to the level of the average Creationist.
“The ideas of economics are infinitely malleable, having no relationship to concrete reality.”
Right. Economics is all about random pricing and pure speculation. Supply and demand have no relationship at all to the concrete reality of price. Gotcha. Thanks for the tip!!
Hey, do you think you’d be interested in some Arizona ocean front property?