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A line of connection in experienced disconnected thought: Southern economic growth, anti-union, free trade job loss, today’s economy

by divorced one like Bush
caution, a long read

I’ve been reading: Making Government Work by Ernest F. “Fritz” Hollings. Yes, that Hollings of Gramm and Rudman legislation fame. It is kind of rambling read, but I now understand why our congress of the democratic party side has been acting like moderate republicans and not liberal or progressive. I recommend it just as a bit of a fly on the wall experience, be it a southern conservative Democratic fly. He does not like unions. He does not like free trade as currently practiced.

And, as much as he hates unions, he can not see that his fight against GATT and NAFTA in support of the textile industry as jobs moved south and over seas is and was the large version of his attracting jobs from the north east because of the cheap, non-union labor. He understands the impetus of cheap labor found in Mexico and China for business as a problem of “free trade” for our country as currently practiced, but totally fails to see it in his anti-union position. He can see the “fight” between nations for capital in flows due to labor cost advantages and how that is harmful to higher developed nations, but Hollings never indicates an understanding that he helped create the game of pitting one area of people against another by bidding down labor when he promoted the south as a union free area. That is, he sold his state, and thus sold out the northeast and the north midwest auto/rust belt social progress by bidding a lower labor cost. He fails to see his south played and still plays the roll of China to the unionized areas of America.

I mention this as an introduction to a person mentioned in the book who gave testimony in front of his senate committee hearings on GATT and NAFTA 11/15/94: Sir James Goldsmith. I present him and this bit of history as a compliment to Stormy’s postings on trade and the related postings regarding ours and the worlds current economic condition. Senator Hollings listened, but he did not hear.

Sir Goldsmith you can imagine, is no small potatoes. Nor is his background of the character one would expect as to be not so much in favor of GATT and NAFTA. Consider:

Anglo-French billionare financier
The Goldschmidts (family name changed to Goldsmith), like their neighbors and relatives the Rothschilds, had been prosperous merchant bankers in Frankfurt since the 16th century.
He was a greenmail corporate raider and asset stripper. (Including US timber companies.)
In 1990, Goldsmith also began a lower-profile, but also profitable, global “private equity style” investment operation. By 1994 executives working in his employ in Hong Kong had built a substantial position in the intermediation of global strategic raw-material flows.
Goldsmith… believed Britain had been victim of a socialist conspiracy and that communists had infiltrated the Labour party and the media.

So, what are you thinking? Money and more money, of the world market…total conservative. Certainly eccentric, if not a little paranoid regarding the communist bogyman. Except, he wrote a book in 1993: The Trap.
From the intro:

We have convinced ourselves that there exists only one valid economic and social model: our own. By attempting to impose it universally, we have exported to almost every corner of the world our diseases: crime, drugs, alcoholism, family breakdown, civil disorder in urban slums, accelerated abuse of the environment and all the other problems that we experience daily.”

But, this is the money quote:

“The economy is a tool to serve us. It is not a demi-god to be served by society.”

So, with no further ado, I present the Ross Perot of Europe in the epic battle of free trade, Sir James Goldsmith: (the audio of the transcript is at the same site)

I believe in free markets, I believe in free enterprise and I believe the purpose of the economy is not just to improve indices but to improve the state of the nation–yours, mine. So I’m not an anti-free-market man nor an anti-free-enterprise man; quite the contrary.
[regarding a prior witness] What you’ve heard today is the view from big business, of which I was part. And I believe the view from society in general is totally different.

Let’s pause right here and let that statement sink in. Society has a different view of the effects of “free trade” as practiced.

That’s nothing to do with productivity, Mr. Chairman; that’s moving to get the cheap labour forty times cheaper. And please don’t think this is unskilled jobs; these are skilled jobs; these are high-tech jobs going there. Of course there are also the unskilled jobs, but the skilled ones are going to highly skilled people and they are moving offshore; and if you think that’s productivity, then I think you would be wrong.

Well, surely the measure of competitiveness is the balance of trade. And as you, Senator, pointed out, if you have the second worst balance of trade in history, 150 billion dollars, that’s not being competitive in world markets.

In his [prior witness] testimony he talks about 500 billion dollars to be invested in China. And then what does he say? He says what America needs–and no doubt this is true about Europe as well–is an increased rate of savings. What for? To invest in China?…we can’t increase our rates of savings just to invest them elsewhere and where we bleed to death in terms of capital and we bleed to death in terms of jobs.

And this is the big point, Mr. Chairman. What we are witnessing is the divorce of the interests of the major corporations and the interests of society as a whole.

Ok, time out. I just want to make a plug for my coined bit of nomenclature: United Corporations of Global. It’s an entirely new nation that has no grounding to any boundaries of the continents and thus no patriotism to any nation. Let’s all chant: UCG, UCG, UCG, UCG…

Sir James Goldsmith goes on in his opening to present some figures showing the decline to society’s non-GDP measures since free trade has come on the scene. So we’ll skip to the closer quote:

Now I’m not here as a bleeding heart liberal; I’m a hard-headed realist and it is my view that if we try and make profits and at the same time destroy our nations, no one will benefit from it–even those who make the profits. (can you say “2008”?)

Returning to the beginning of this post regarding Senator Hollings lack of connection to his own approach to saving the south, I present this comment made during Sir Goldsmiths testimony:

…These thinkers were telling us–in fact I was at [Renaissance] with President Clinton when Michael [Porter] from Harvard was there and he was still lecturing on the comparative advantage, David [Richardo], and I just looked and said, yeah, the comparative advantage, that’s why BMW’s come to South Carolina. We have never made an automobile in our history. I mean, come on, it’s the wage advantage; 30 dollars in Munich, 15 dollars in Spartanburg;

And that, ladies and gentleman, is the display of the disconnect of our thinkers in Washington concerning all issues. The disconnect is the segmentation of thought regarding the mechanisms of relationships when forming a position on an issue. Senator Hollings just laid right out there his selfish thought process. Now, I don’t mean this in a derogatory way. Read his book, you will see he always held in desire what is best for the people. Unfortunately, the set called “the people” changes with the focus of the argument. The mechanics of the issue is never seen as being the same at a scale unrelated to the scale of the current set of “the people”. His desire to help his south (small set of “the people”) made him unable to recognize in his approach to improving the economy of the south, the same mechanical principles he was arguing to prevent in the hearings regarding GATT and NAFTA. That is the selfishness unrealized by him. He is anti-union still today.

Returning to Sir Goldsmith’s testimony, these are relative to today:

The reason why this time there’s been a recovery in indices and GNP despite very substantial pressure, downward pressure, on interest rates and facilitating credit through the banking system is because salaries, earnings, have either gone down or risen very little relative to the period of recovery. And that is the whole philosophy, is we can keep inflation down by keeping wages down; and we have forgotten the purpose of the economy, which is to enrich, to create a stable society, and to include the population, the vast number of people in active life; and instead we believe that if we can reduce salaries we can keep inflation down. That’s the wrong way around; we just forgotten what the economy is about, what its purpose is. (Can you say last 8 years? Really, though it has been the last 28 years regarding interest rate decline, wage decline, inflation moderation with rising GDP.)
The alternatives are not just closing the market, becoming protectionist; the alternatives are not saying we are now going into protection and we’re going to isolate ourselves from the world, each one of them. The alternative is to have regional trading blocs which have similar economies so we’re not trying to make our labour forces compete with people whose labour costs 2 percent of theirs and thereby destroying them–but–and reducing their salaries and eliminating their jobs–but having negotiated bilateral agreements between trading blocs so that each region, each nation, imports those products that it needs, not those products that destroy its jobs.

Senator, when I was young I was taught, as we all were, that if we managed to create extraordinary material prosperity we would solve our problems. And we were brought up in the belief that there was an inevitability of progress: progress of wealth, progress of stability, progress of civilization. Well during the last fifty years, since I’ve been more or less an adult, we’ve had the greatest period of economic prosperity, economic growth in history. We have succeeded beyond our wildest dreams…And what has happened? Have we solved our problems? Are our towns more stable? Are our families more stable? Is there less crime, less people in prisons? Less people in–are there more people in permanent and noble employment? What have we done? We have profoundly destabilized our communities. We have done everything that was wrong in social terms; we’ve deracinated, we’ve uprooted people from the countrysides, we’ve shoved them into towns, we haven’t given them jobs; we’ve created ghettoes and underclasses; we’ve increased crime and drug addiction and family break-down–all this in a period of maximum prosperity. Why? Because we were only interested in economic indices. We forgot that the purpose of the economy is not just to improve the index; it is to improve prosperity along with social stability and social contentment. And GATT is typical of the economic instrument, whose purpose is to increase corporate profits; whose purpose is to increase gross national activity; and whose result will be the destruction of the stability of our society, a continued break-down in family life, a continued increase in crime, impoverishment and all the other ills that we are now suffering.

Read that last part again: …whose purpose is to increase gross national activity; and whose result will be the destruction of the stability of our society, a continued break-down in family life, a continued increase in crime, impoverishment and all the other ills that we are now suffering.

I think Sir Goldsmith was thinking in linear terms as to the increasing negative effects of the form of free trade being set up. I don’t think he imagined the deregulation that would give a false sense of reinforcement to the “free trade” weakening of the foundation. That business was able to shore up the crumbling base via debt against the social decline, just means, as we are now experiencing, that the crumbling of the pyramid will be of a greater energy. That is assuming we can not shore up the breaking of the foundation such that it is a controlled falling of the pyramid. Though, if we are lucky (fingers crossed, salt over shoulder) we may just engineer a solid repair of the base before it all falls down.

Can we broaden the discussion now?
Thank you.

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The Winners Compensate the Losers? Thoughts on Armistice Day + 90

Ken Houghton

Not Veteran’s Day, which is a U.S. construction to make certain we don’t have to give another Federal holiday to Those Who Served. And arguably not Remembrance Day, the version here in Canada, since (as Rob[ert] Farley notes) there are “only” ten known survivors remaining of The War to End All Wars, which ended ninety (90) years ago today. (Ten is pretty good, if you think about it; the youngest two are 107.)

So let’s talk, in broad terms, about why it was not The War to End All Wars, why remembrance of mustard gas and Verdun and the Somme didn’t cause everyone to realize we never wanted to do it again, at any price.

As I said, we’re using wide brush strokes here, and this is an economics blog. SO let’s talk about the Treaty of Versailles.

The U.S. was in the War to End All Wars for just over 18 months (6 April 1917 – 11 November 1918). For the time running up to the declaration of war, they sold equipment to both sides. Not necessarily equally, and maybe at a reduced pace to the German side after 7 May 1915, but there was commerce going on. (Same story in World War II, as followers of Henry Ford’s career know all too well.)

France, by contrast, lost 1,400,000 soldiers in that war. There is a generation taken from the country, and a country to rebuild without those on whose backs such building usually occurs.

Can anyone wonder that France wanted the Germans penalized to the extent that they would not be able to support an armed force again? There would be no one to fight.*

And yet all one ever hears is the John Maynard Keyneses and Bernard Baruchs decrying the terms of the Treaty—how they were unfair to Germany.

And the subsequent talk has all been about how Keynes and Baruch and the others were correct, and it was a mean, evil thing to make poor Germany suffer after they destroyed the breeding-age male population (and then some) of another country. From that perspective, it is difficult to imagine a different Treaty being agreed, since anything less penurious would make France worse off, and therefore not be even weakly Pareto-optimal.

Which is where we turn this into an economics post.

Because there is a way to improve the solution: Compensating Variation. Everyone’s lot is improved by some reallocations. And while Hicks does the mathematics in 1939, it isn’t as if such a general pattern cannot be seen on the schoolyards of Flanders and Eton.

In this case, the United States was the clear winner of the War to End All Wars. THe British did not suffer so much as the French. And in both cases, prominent public officials (Baruch from the United States, Keynes from Britain) spoke out about the Treaty, forcing one to the suspicion*** that leaders in both countries suspected from the start that the terms were penurious, and would lead to resentment among the German people.

Which brings us to Compensating Variation. Why would not the U.S. and the U.K. (such as it were) not be offering aid to France, in exchange for terms in the Treaty of Versailles that would lessen the likelihood that Flanders Field would again be invoked?

The next time someone tells you that all will be well when a Treaty is executed, because all we need is that some of the winners offer compensating variation to the losers, ask them why Armistice Day now must honor not only its own dead, but also the dead of the wars that followed The War to End All Wars.

*And, indeed, the demographics corroborate this. In 1940, the total population of France is 42 million people. The population of Germany and Austria is 78 million. 1.86 to 1. More significantly, the Armed Forces of the respective countries stand at 4.6 and 17.9 million: 3.9 to 1.

The result is inevitable: the French have more civilian casualties (470K) than the U.S. does military ones (405K).**

**Canada, by the way, loses 3.57% of its military force in World War II: more by percentage than France, the U.S., Australia, or the Netherlands.

***I said I’m talking broad strokes here, but the 1919 publication of The Economic Consequences of the Peace and the necessity of publishing The Making of the Reparation and Economic Sections of the Treaty in 1920 makes it clear that the arguments over the harshness of the treaty were contemporaneous. (Baruch, in fairness, was one of the negotiators of the Treaty, and only later became discouraged as he saw both how the results were handled, and how Ford maligned and slimed him while profiteering.

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Accurate Headline: After three years of U.S. recession, Canada looks East

The WSJ wants to pretend that Barack Obama is responsible for Canada making a good decision:

Prime Minister Stephen Harper and President Nicolas Sarkozy of France signed an agreement Friday to begin negotiations for a free trade pact between Canada and the European Union. A Canada-EU study released last week outlines the joint economic benefits of such a partnership, with two-way trade estimated to increase 22.9% by 2014.

I guess the WSJ is more impressed with Barry O’s G-D-like powers than I am. Or maybe they just can’t read data:

Exports to the United States:
2002 347,051.8
2003 328,983.3
2004 350,576.3
2005 368,414.7
2006 361,440.4
2007 356,094.2

Imports from the United States:
2002 255,232.5
2003 240,356.3
2004 250,038.3
2005 259,348.2
2006 265,023.0
2007 269,752.5

Imports steadily rising, exports falling for the last three years (and basically flat to 2004), with 2008 probably not being great and 2009-2010 already looking dicey.

It’s a great move for Canada, but any delusion that it is Obama-, not data-driven should be confined to the WSJ editorial page.

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In Which I Say Something Nice about Globalization

It’s still not “free trade” in a sense anyone but the self-delusional Greg Mankiw could describe it, but there are some gains accruing to China.

As the Chinese economy moves from agriculture to producing more goods and services, two things have happened. Energy demand has gone up:

And people have been able to afford services they could not before:

It’s not much, but it’s a start, and we would be disingenuous to deny that.

(All data from the World Bank)

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Pandering to (Some) Economists: Trade in Ethanol

by Tom Bozzo

Another major energy proposal in the McCain economic plan is ending subsidies for corn ethanol and eliminating the tariff that effectively bars to importation of sugar cane ethanol. Greg Mankiw scored these on behalf of the economics profession as points for McCain over Obama in the NYT over the weekend. I agree that corn ethanol subsidies are best eliminated as soon as possible — though I note that Obama, while not going so far as McCain on subsidies, is pretty straight-talking about the limitations of corn ethanol especially considering that he represents the corn belt and not the desert.

On the McCain plans for promoting trade in cane ethanol — the Shorter Version of which is that he’s proposing to substitute dependence on foreign ethanol for dependence on foreign oil (*) — there are significant issues that go to the suitability of “free” markets for provision of biofuels. Whether or not expanding trade in ethanol is a good thing depends on other institutional arrangements that are not automatic consequences of reducing tariffs and other moves to freer trade. Since critical policy decisions are outside the reach of U.S. policymakers, economists should be concerned about making policy with the institutions we have, and not the institutions we’d like to assume we have.

There’s been a broad dawning that not all biofuels, and not all methods for producing all biofuels, equally satisfy all of the policy goals that they might purport to help satisfy. Those include substituting domestic resources for imported resources, reducing fossil fuel use, and reducing the carbon intensity of liquid fuel use. Land use issues are critical both for the global warming-related goals for biofuel use and for avoiding blowback from high food prices. (Recent research out of UW-Madison shows that redirecting marginal agricultural lands to cane ethanol in fact can be beneficial, but conversions from forests and other uses are not.) The problem is that lowering tariffs on cane ethanol doesn’t guarantee, and indeed in the absence of other interventions would probably work strongly against, desirable land use patterns.

Brazil produces a lot of ethanol by the standards of the ethanol industry, but not a lot relative to U.S. petroleum-based fuel imports. The former was 327,000 barrels/day in ’07, whereas the latter is 13-14 million b/d (unadjusted for the energy densities of the fuels). Growing enough cane to replace U.S. oil imports with ethanol would require on the order of half the arable land area of Brazil; major cane ethanol substitution would necessarily occur at scales where adverse land-use consequences can’t be assumed away. Note that the current food-price spike, largely blamed on biofuel mandates, happened with only a couple percent of arable land devoted to biofuel crops.

Economists certainly can imagine market-based remedies for the problem, such as Pigovian taxes on certain land-use changes, to name one that Mankiw ought to support in principle. But removing U.S. tariffs won’t make land-use regulation in countries suitable to cane growing appear by magic.

It wouldn’t hurt to add in liquid-fuel demand destruction on hitherto unprecedented scales for the U.S. Along those lines, apart from his willingness to commit 15% of one year’s “clean coal” research funds to the cause of battery technology, McCain isn’t explicitly committed to more than the pending tightening of fuel economy regulations. McCain’s long-standing hostility to rail and apparent indifference towards non-automobile transportation modes doesn’t make the job of reducing petroleum-based fuel consumption (and doing it in less painful ways to consumers than letting the price mechanism work its magic) any easier.

(*) Economists wouldn’t tend to be bothered by this, but it’s at odds with McCain’s energy independence rhetoric.

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Renegotiating NAFTA: It’s not just for the US any more

It’s no secret that I am no fan of NAFTA, which is to free trade what George W. Bush is to entrepreneurship. So when Barack Obama and Hillary Clinton were talking about changes needing to be made, I yawned. (save the rustbelt, by contrast, looked up and said, “Now they understand?”) Then changes they want may not be my changes—Chapter 11 must go!—but the idea that a 14-year-old trade agreement should be kept sacrosanct confuses ceteris with paribus in a manner to shame Brad DeLong.

But, of course, “free trade” is sacred, and the candidates were attacked for even suggesting the possibility.

So when The Canadian Centre for Policy Alternatives pointed out that changes are needed in NAFTA to avoid harming Canada, I was inclined, again, to yawn. Expect that NAFTA apparently directly contravenes Canadian law:

The research also draws attention to the fact that even Alberta only has 8 years of established natural gas reserves remaining—in direct violation of its own legislation requiring a minimum 15 years of proven supply before any can be removed from the province. The report calls on the Alberta government to uphold its own policy.

The CCPA made it clear that renegotiation may well be a question of national secutiry:

“We looked at whether Canada could reduce exports for the sake of conservation or environmental policy, or whether we could prioritize our dwindling natural gas reserves for domestic value-added production, or even for household heating. We cannot. We cannot even guarantee eastern Canadians access to western crude,” says John Dillon, economic justice researcher at KAIROS and co-author of the report.

And, therefore, renegotiating the inappropriate aspects of NAFTA is something in the interest of the Canadians as well:

“Barack Obama and Hillary Clinton have put NAFTA back on the table with their musings about re-negotiating or ripping up the agreement,” says co-author Gordon Laxer, a political economist at the University of Alberta. “The Canadian government must realize it is the only country in the world that has jeopardized the energy needs of its people in this way, and move quickly to exit the proportionality provisions of NAFTA.”

That press release and the accompanying PDF are four weeks old, a decade in blogsphere time. While Greg Mankiw leverages George Will to advocate indentured servitude (sad h/t to Spencer), the need to revisit “free trade agreements” goes unremarked.

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How to Devalue Your Brand, Greg Mankiw Version

Greg Mankiw, clearly distracted by his former collaborator’s wife having been denied a tenured position at Harvard, quotes Fred Bergsten in the WSJ, Instapundit-style:

By effectively killing “fast track” procedures that guarantee a yes-or-no vote on trade agreements within 90 days, lawmakers in Washington, led by House Speaker Nancy Pelosi, have destroyed the credibility of the U.S. as a reliable negotiating partner.

Which leads to the obvious conclusion: Republicans “destroyed the credibility of the U.S. in 1998 when they did the same thing to President Clinton.

Strangely, Greg Mankiw (Fortune, January 12, 1998) “knew better.”

Policy and politics diverged again in the fast-track debate. Clinton was asking Congress for something all recent Presidents have had–the authority to negotiate trade deals that Congress would consider without amendment. This power is crucial if the President is to continue the multilateral process that over the past half-century has moved the world toward freer trade and greater prosperity.

Although economists are united in support of free trade, opinion polls show the American public is more skeptical. The public’s view is partly based on the false analogy that trade is like war–some countries must lose for others to win….

Because of the public’s ambivalence–and the opposition of interest groups that fear foreign competition–fast track went down to defeat. This may put an end to the multilateral approach to opening up world trade. But it need not mean an end to the free-trade movement.*

Got it? If it’s a Democratic Congress, then Pelosi is a “problem.” If it’s a Republican Congress doing the same thing, it’s Through No Fault of Their Own.

And by not pointing out that he himself used to know better, Greg Mankiw destroys not Fred Bergsten’s credibility, but his own.

Cross-posted from Marginal Utility.

(See also Dani Rodrik, who gives the lie to the whole line of “reasoning.”)

*Yes, I omitted Mankiw’s framing issue (tomatoes), but if he really wants to claim George W. “Steel Tariffs” Bush was different, the only possible response is “Bring it on.”

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You, Me and China make Three, part II

Back on April 20th I presented my introduction to a book by Will Hutton: The Writing on the Wall.

First, the book is 334 pages. The list of references 39 pages. There is a lot I could cover. But this is the Angry Bear which I view as being about US(of A). It is this part of Mr. Hutton’s writing that caught my attention. As much as I am interested in China’s life influencing ours, I am more interested in understanding what happened to us.

I presented his concept of values coming out of the Enlightenment as being the basis for what the USA (as a stand-in for referencing Western processes) had achieved and what China has to move more toward. It is not that China must model us exactly, but that it’s current structure is limited. It needs to be more democratic based on values from the Enlightenment. Mr. Hutton presents the democratic Enlightenment concepts as four: “accountability; representativenesss; respect for the rule of law; and the capacity, through free speech, for debate, exchange, and interaction.”

As much as the book looks at China and how it does not meet these concepts sufficiently to allow it to grow such that it will meet the needs of it’s people, I want to focus on his view of us. In this case, the USA specifically. I believe he points to the USA because it was the leader in the world, as he presents the case, for manifesting the democratic Enlightenment concepts. I believe, his view of the Enlightenment is in agreement with Wiki’s presentation:
The Enlightenment is held to be the source of critical ideas, such as the centrality of freedom, democracy and reason as primary values of society. This view argues that the establishment of a contractual basis of rights would lead to the market mechanism and capitalism, the scientific method, religious tolerance, and the organization of states into self-governing republics through democratic means. In this view, the tendency of the philosophes in particular to apply rationality to every problem is considered the essential change.

The discussion of Enlightenment begins with free trade and that the USA is “not a natural candidate to support an open world trading and financial system…” We benefit, but we are “ambivalent”. “An open trading system tempts every country to pursue strategic trade policies that are much more mercantilist in their rationale…All genuflect to the rules-based openness of the trading system as regulated by the World Trade Organization. But they believe in it more because it is the means to secure their strategic, mercantilist aims than because of any desire to create gains in which everyone would share.”

Mr Hutton is pro free trade. He makes a case that America’s growth was less do to protectionist positions taken early on and more the result of a growing population with access to free land. Space and ambition were the key. As the coasts were joined, we moved to substitute foreign trade for the loss of our frontier. “The aim was not to create an overseas empire but to export the American idea…” unlike the European expansionism. And as expected, he flatly states that free-trade is not the cause of the condition we find ourself in currently. Though he thinks both sides, one portrayed by Lou Dobbs and the other by Friedman need to be “cooled down”. They are both “vastly exaggerated”.

The source of our mis-thinking is found in how we view liberty. “Liberty, in the American narrative, is the sun under which everything flourishes. Liberty permits individuals’ hard work, courage, and application to produce wealth and happiness. Government should not get in the way…Liberty and the American dream are linked…The great conservative counterrevolution …has been grounded in its brilliant capacity to exploit these cultural icons to support its own cause.”

But this is an error of our self perception. It is more correct to view liberty as a goal within “…a highly sophisticated Enlightenment political infrastructure.” Look at the United States…and you will see an economy and society characterized by pluralism, diversity, and investment in individual capabilities.”

He bolsters this view by presenting Alexis de Tocqueville’s work about America. “Public engagement and never-ending argument leavened what otherwise might have been a culture of egoism…and transmuted it into a culture in which egalitarianism and individualism enriched each other. Self-interest was not only a matter of bettering oneself; it was also a mattter of ensureing that there would be a vigorous public life and opportunity for others…The same impulse–wanting the best for oneself and for others— prompts much of American civic activism.” Our liberty “always included conceptual egalitarianism, which provided the tension between the ambition and appetites of the propertied rich and their accountability to society.” “This is not the egalitarianism of income or opportunity; rather, it is the equality of self-esteem, self worth and possibility…there is no obstacle of title, birth, accent or social rank…”

It make you feel proud, does it not? Unfortunately he notes we are losing it through “neglect and willful disparagement of their importance, in particular by American conservatives.” We are losing the “fecund interaction” of markets and the price mechanism with the Enlightenment infrastructure and resultant culture. Mr Hutton states it was our genius.

This is where I will go next. What has changed. I believe it was my very first post via an invite from Cactus (he posted it for me) that I made the statement that we had changed. We no longer were making money as we had. We no longer were focused on what we use to. It was more than just tax rates that changed in the Reagan years.

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Free trade, Republican’s no like (along with others)

From a poll by the WSJ/NBC reported in October, 2007 comes:

While 60% of respondents said they want the next president and Congress to continue cutting taxes, 32% said it’s time for some tax increases on the wealthiest Americans to reduce the budget deficit and pay for health care.

Can you imagine? They have started to figure out that their pocketbooks matter.

In a December 1999 Wall Street Journal-NBC poll, 37% of Republicans said trade deals had helped the U.S. and 31% said they had hurt, while 26% said they made no difference.
The new poll asked a broader but similar question. It posed two statements to voters. The first was, “Foreign trade has been good for the U.S. economy, because demand for U.S. products abroad has resulted in economic growth and jobs for Americans here at home and provided more choices for consumers.”
The second was, “Foreign trade has been bad for the U.S. economy, because imports from abroad have reduced demand for American-made goods, cost jobs here at home, and produced potentially unsafe products.”
Asked which statement came closer to their own view, 59% of Republicans named the second statement, while 32% pointed to the first.

I don’t think these questions are the best framed. They seem kind of load in that it states “foreign trade” instead of Free Trade, or NAFTA. But, the qualifications I’m sure are what the people responded to.

From Fortune Magazine, January, 2008:
This is a poll of the general public.

With much of the country worried about the state of the economy, many (67%) Americans say they now closely follow news about US trade policy with foreign countries. Americans see the current trade policy as a reason for the economic woes the US is currently facing.
Almost 7 in 10 (68%) Americans believe international trade benefits other countries more than it benefits the United States.
International trade is seen as having a largely negative impact on American workers (78% negative) and the Untied States as a whole (63%).
Eight in ten Americans (79%) feel the US Government has not done enough to help workers who have lost their jobs to increased foreign competition. A majority of Americans would support the following proposed policies aimed at helping workers who have lost their jobs to foreign competition and outsourcing:

Policies with the greatest amount of support include: providing special training programs (90% support), providing tax incentives for companies to relocate to areas where workers have lost their jobs because of foreign imports (84%), allowing imports only from countries that ban child labor (82% support), and allowing imports from countries that meet certain clean air and water standards (78% support).
About two-thirds (64%) of Americans are willing to pay more to keep down foreign competition.

There is a disconnect in the above responses. 90% want training, but in another question about boosting the economy, 41% opposed extending unemployment benefits. Though 67% support public works projects. This shows me that the public has not made the connections between our current trade environment and the economy. But, how about that 64% would pay more to keep down foreign competition. Can you get a more patriotic response? I don’t think the Republican’s had this kind of patriotism in mind.

When it comes to China:
Where a product is manufactured does not impact Americans’ purchasing decisions except when that product is made in China.
Nearly three-in-five (57%) Americans are less likely to buy a product if it is made in China.
When products are manufactured in other areas, such as Eastern Europe (57%), Western Europe (55%), Canada (53%), India (52%), Africa (51%), Mexico (48%), Japan (47%), and South Korea (46%) nearly a majority say it doesn’t matter.

I can ‘t imagine that people are specifically boycotting Chinese made goods. Walmart et al would be in trouble. I think this is more of a gut response.

Over all, the public is waking up and seems more sophisticated in their understanding than I believe the Beltway crowd is willing to accept. But, I believe some work needs to be done so that they connect the dots of the US economy as a function of trade policy. I would like to see a de-emphasis of the fear and a disconnecting of foreign trade equals free trade policy. I really don’t believe anyone is against trading, they just have a major problem with the current rules and the referees.

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A Completely Free Market

Edward Charles Ponzi Jr. sends along a link to an article by Doug Noland. I don’t know who that is, and I don’t agree with some of what’s in his article, but I do agree with this:

It is also as ironic as it was predictable that Alan Greenspan – Ayn Rand “disciple” and free-market ideologue – championed monetary policies and a financial apparatus that will ensure the greatest government intrusion into our Nation’s financial and economic affairs since the New Deal. Articles berating contemporary Capitalism are becoming commonplace. I fear that the most important lesson from this experience may fail to resonate: that to promote sustainable free-market Capitalism for the real economy demands considerable general resolve to protect the soundness and stability of the underlying Credit system.

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