November 28, 2005
Book Review: Myths of Free Trade
In The World is Flat, Friedman sings the glories of free trade. In this book by Representative Sherrod Brown, we get an alternate view of free trade, as serving the needs of business and very few of the needs of everbody else. Friedman raves about NAFTA; Brown abhors it. Friedman thinks our expanding business with China will being democracy there; Brown is pessimistic about this. This book is not as a good a read as Friedman’s, but its thesis is closer to what I believe.
Brown mentions the usual advantages given to us by proponents of free trade: free trade helps more people economically than it hurts, it helps in the fight against terrorism, and it can open up the society living under an authoritarian regime such as China. Then he quotes William Greider who says that the World Trade Organization (WTO) is:
"a private club for deal-making among the most powerful interests, portrayed as a public institution searching for international consensus. The WTO aspires, in effect, to create a bill of rights for capital, crafted one case at a time by the corporate lawyers filing their confidential pleadings in Geneva. It is not hyperbole when critics say the system defends property rights but dismisses human rights and common social concerns as irrelevant to trade."
In plain language, the WTO takes care of business. It does not give a figleaf about workers and their rights, and it does not pay any attention to health and safety conditions nor to environmental pollution and other hazards workers toil under.
Worse. According to the rules of WTO, any foreign business can sue our government if it feels that one of its laws impacts its business negatively. Here's one example: Methanex Corporation of Canada manufactures MTBE, a chemical placed in gas. California banned MTBE because its use leads to cancer. Methanex sued U.S. for $1 billion. The WTO, a collection of unelected businesspeople, is effectively a government overturning laws of our supposedly sovereign state!
Friedman and other free-traders throw export/import statistics at us showing that NAFTA is a huge success for both U.S. and Mexico. Brown destroys this myth by describing the maquiladoras story. Instead of manufacturing in the U.S., American multinational companies erect factories, called maquiladoras, in Mexico. Then they purchase capital equipment from American firms which send the equipment to the maquiladoras. Statistics mark these as a rise in American exports to Mexico. Then components are sent to the maquiladoras (more exports). After the components are assembled into cars or electronic goods, they are sold back to Americans (for the most part). Statistics mark these as imports from Mexico.
Under NAFTA, multinationals make out like bandits. Workers in U.S. lose jobs. Mexican wages are now 40% lower than they were 20 years ago, according to Brown.
Free traders make a case for doing more and more business with China. Free trade, they say, will open up Chinese society and eventually lead to democracy. I thought so too, but Brown has made me a little more skeptical.
Brown asks why do big corporations go to China? Because, he says, they benefit from cheaper workers and the lack of regulations about the environment or worker rights. A democratic country would establish minimum wages and environmental, health and other worker benefits - all of which would increase company expenses. This is why multinationals are NOT eager to bring democracy to China.
Brown offers many suggestions for making free trade fair trade. He thinks that the WTO must be reformed so that it is more democratic and represents other interests of society besides business: labor, health and the environment. American laws should not play second fiddle to the WTO. And trade treaties should be presented to Congress for approval BEFORE they are signed.
I agree. We need a democratic WTO that more broadly represents the societies of member countries. Balance your "flat-world" knowledge from Friedman with the "whole world" knowledge from Brown.
Posted by Paul Siegel at November 28, 2005 02:56 PMPaul,
Free trade is fair trade.
The last thing we need is more ‘democratic’ trade, which is really just code for socialist control.
Posted by: esimonson at November 28, 2005 04:31 PMFor decades, consevatives cried “there’s no such thing as a free lunch.” It’s time they recongized that there’s no such thing as a “free market” either. Somebody will pay. The only question is who?
At first glance, this book sounds a little simplistic because, as you describe it, the author makes her points not through strong evidence, but through anecdote (though I have to say that this is also very much true of Friedman’s books as well). Does she ever amass good, solid statistics to back up her points?
Having said, this, I agree with the main point - the WTO is not an organization that is out to promote free trade, per se, but to promote trade that further enhances the profits of the members of the WTO. In short, *every* system of rules or procedures will work to serve the interests of some at the expense of others. Just to say that we need to set up a system that allows goods and services to move across borders with little to no government intervention is to say that you want to help the people who are moving (and profiting from) those goods. When the WTO works to “enhance” free trade, it is automatically putting human rights second. And the argument that “free trade is fair trade” doesn’t cut it. Unless you are setting up a system that works to enhance the rights of people, you are putting their interests second. This is why we need to make sure that labor organizations and environmental organizations have a say in all trade agreements. Of course that will mean that there will be some restrictions on the trade, and it won’t be quite as “free” but it will help the people who are (supposedly) ones who are supposed to benefit from such agreements.
Posted by: Bill at November 28, 2005 05:42 PMJust make trade like everything else, government controlled.
They can fix anything.
Thought provoking post on a very important topic. In general, the post-WWII liberal trade regime (Bretton Woods, GATT, WTO),while imperfect, has resulted in vast and unprecedented economic growth in every region of the world (except some parts of sub-Saharan Africa). Along with this growth have come increases in standards of living, life expenctancy,health,education,advancement of democratic values and more technological advancement in the past 50 years than in all previous history combined.
Reducing barriers to competition, innovation, collaboration, etc. is healthy. Yes, some people “lose” in this equation, much as buggywhip makers “lost” with the advent of the automobile. But society overall gained far more. A more current example: if the US and EU would reduce tariffs on agriculture, African and Latin American countries would finally have real access to our markets,would be able to make a better living and secure a better future. On our end,consumers would have to spend less on food. Yes, some American farmers might lose out, but they would be the least competitive ones.
On China: One of the big reasons US companies locate in China is that the Chinese govt essentially requires them to if they want to do business in China. They want the jobs, the technological know how and a modicum of control. Cheap labor is overblown as a rationale.
The problem with “fair” labor and environmental standards is it is easy to manipulate them for political purposes and turn them into non-tariff barriers to free trade. For instance, France has a powerful political stake in protecting its farmers from international competition. They could contrive any variety of specious claims to erect tariffs against competitors (eg,they use pesticides we don’t like, their work week is too long, their environmental regulations aren’t as strict as ours,etc.).
Labor unions use these issues largely to protect their jobs from competition, not out of concern for the well-being of workers in other nations. Such regulations are also very difficult to enforce is less developed countries. And the last thing they need is another regulatory hurdle to clear to prove to the developed world that they are worthy of participating in the system.
WTO leaders are chosen through consensus among members. This is meant to minimize political bias in the process. No one at the UN or European Commission is elected either.
Finally, I looked up Sherrod. He’s a Congressman from Ohio, not an economist. If you really want to read about free trade, globalization, NAFTA,etc., you would be much better off reading more knowledgeable sources than Sherrod or Friedman. Both offer economics-lite. There are much more learned sources out there that are quite accessible to non economists.
Cheers…
boojum:
You offer the standard business line. Somehow you are concerned that labor and environmental standards may be manipulated but that business people getting together do not do any manipulating.
It’s not fair that business people decide everything and the rest of us have no say. The results demonstrate that multinationals make out and those who work for a living do not.
Posted by: Paul Siegel at November 28, 2005 06:51 PMPaul Siegel
So you hate NAFTA but love the President that pushed it.
If we are going to participate in free trade let’s make sure IT’S FREE. If we’re going to let other countires dump their products here, then we should be able to dump ours there.
Look at all the Japanese products that you can buy here. Now go to Japan and see how many US products you can buy there.
We let Japanese products to be imported and even manufactured here. But Japan won’t let US product there. The few they do let in they put such a high terriff on that the adverage Japanese citizen cann’t afford them.
I know that there a soveign country and can do what they want. However, turn about fair play. If they’re going to tax our products out of their market we should tax theirs out of ours.
I know, yaall liberials will claim it’ll hurt their economy. WHY THE HELL SHOULD WE CARE? They aint worried about ours by dumping their junk on us.
I watched a programme on TV last night where a journalist travelled through parts of the EU looking at attitudes in what Bush likes to call “New Europe” and France and Germany. A French government minister was interviewed regarding the EU’s common agricultural policy, where many products have been subsidised. He raised the issue of France producing hundreds of different cheeses. The Government minister smiled, and asked him how many cheeses would he like to see disappear. He smiled back, and said none. Watching this program, and being a man who has travelled in France and loves its devotion to good food and wine, I have to say that I felt that with all of this globalisation, something incredibly important is being lost. And that is the joy of living and the things that make it worthwhile. And those joys are not primarily centred around having unlimited amounts of money, but of actually enjoying the simple things in life, like food. It seems to me that globalisation is creating a utilitarian world where economic growth is everything, and people are simply units of production, or else consumers who are duty bound to stoke the furnace of increased growth from year to year.
What kind of a world are we creating? It is becoming increasingly homogenised. I notice it particularly in my own country. A city in the West of Ireland, a place close to my own heart, Galway, where my father grew up and I still have family has changed so radically over relatively recent years. Galway had its own unique charm. An ancient city, with narrow streets and unique shops, has been transformed into a cityscape like too many others. Like my own city, Dublin, it has been taken over by anonymous British chain stores with anonymous shopping mall architect. All of this in the name of consumerism, where people only have value in direct proportion to their capacity to spend and consume. I consume, therefore I am. Ireland is reckoned to be one of the most globalised economies on earth, and has grown incredibly rich over the last 10 - 15 years. For all of the new wealth, no one seems happier than before. Indeed, with the majority of people scrambling to buy increasingly expensive homes increasingly distant from their places of work, commmuting for hours every day, and desperately seeking childcare for the children they see so little of, you have to ask, what is it all for? A famous Irishman, George Bernard Shaw, defined a cynic as one who knows the price of everything, and the value of nothing. Is the world we are creating, perhaps a cynical one?
Posted by: Paul in Euroland at November 28, 2005 07:37 PMBoojum,
Do you know what arbitrage is? Because we are seeing labor being arbitraged, with multinationals profiting from the discrepancies, and pocketing the difference.
What happens with arbitrage? Do the discrepancies settle with their pricing at the high end? No. Not the low end either. They settle in between.
You know where this is going, don’t you? There is a pricing discrepancy in labor markets today. A computer programmer from India may have the same qualifications as one from the US, yet work at a fraction of the cost.
Market forces are neither pro- nor anti-American. However, the results of market forces may be disadvantageous to the US. ‘Free trade’ allows market forces to arbitrage differences in worldwide labor markets. The result? The decline of the US labor market, and the rise of third world labor markets. It all averages out. Elegant market solution, eh?
Hence, we see the current market configuations; corporate profit doing quite nicely, thank you, yet non-farm payroll adding only 1.2 million jobs in 5 years.
And before the objection arises, let’s answer this honestly: the arbitraging of the labor markets is essentially a zero-sum game. Yes, ideally, worldwide rates of growth will eventually raise all boats; but that tide is very, very slow in coming in. Its rise pales in comparison with the dislocations caused by the equalization of worldwide labor markets.
The ‘Free Trade’ solution is not in our national interest.
Posted by: phx8 at November 28, 2005 07:52 PM
______________________________________________________
Welcome aboard phx8!
Posted by: Paul in Euroland at November 28, 2005 08:11 PMPaul in Euroland, I agree wholeheartedly with you about the lost charm of small towns and simple lifestyles, but to be honest, it’s pretty easy to have a sentimental feeling for a version of the goold old days which presented pretty severe hardships of their own.
I sometimes visit the quaint and beautiful little town where my grandmother lives, but the fact is that until people began the hurry and worry of modern life which requires commuting to an urban center, they were working from sun up to sun down doing grubby and dangerous work logging and in the lumber mills. Life expectancies were much lower, then, and women in particular had very few of the options open to them in the modern world. I think the myth of a good old days when people were happy is pretty much just that—a myth.
Paul Sieger:
You can’t complain about workers in the US losing jobs while also advocating for some kind of multinational economic democracy based on the WTO. If you want a protectionist US economy, you should just come out and say so, but if you want to submit the world economy to the international vote, then the billions of poor in Africa, South America and China will gladly oblige and the American worker will soon be living in a grass hut.
Personally, I think the one thing that would instantly improve the American economy—the one domino that would make the other dominoes fall—would be strict and hyper-vigilant enforcement of intellectual property laws.
I’m on an economic conservative, but this idea flies directly in the face of the big mulitinational businesses you’re complaining about. The would hate this idea because it would interfere greatly with their ability to get cheap overseas labor in places where technology patents and software licensing are not enforced.
A key reason plants in India, China and South America can pay workers so little is that they simply ignore rules than American factories have to comply with. One computer work station in an American factory may cost thousands in software licensing fees, while the same work station overseas costs nothing because all of the software it uses is simply stolen. Foreign manufacturers then turn around and flood our market with cheap goods which poor Americans workers buy because our factories—where they could be working—simply cannot produce those goods so cheaply.
It’s a vicious cycle, one which greatly profits the multinational manufacturers and middlemen, but one which is totally screwing over the American worker. And the worst part of it is that it’s totally illegal but nobody has the guts to enforce the laws already on the books.
Posted by: sanger at November 28, 2005 08:34 PMphx8,
Yes, I’m well acquainted with arbitrage and with the fact that, as computer programming has become a commodity, some of it has been sent offshore. Please illustrate for me how we can “protect” those jobs while maintaining a vital, innovative economy?
Which govt agency would you like making business decisions in place of business leaders? For instance, our auto industry, which for years enjoyed tariff and labor protections from foreign competition, has cotinued to lose market share and has lagged in competitiveness. Our software and computer industries, which have enjoyed a minimum of govt protection (even in intellectual property protection) are our most vibrant, comptetitive and successful.
What is your proposed alternative to free trade?
Posted by: boojum at November 28, 2005 08:35 PMPaul
I understand your point. I lived in Norway. It doesn’t take much to overwhelm a country like that (or maybe like yours). It depends, however, what you are gaining and losing.
Many Americans love Ireland. But the Ireland they love never existed. It is a dear old land of leprechauns and wondrous wishing wells and there is not place on Gods green earth that has such lakes and dells. I suspect we all fall victim to the myth of the good old days. In your country’s case, most of the people were forced to leave the country in the good old days and you still have not managed to recover the population levels of a century and a half ago.
Free trade has many aspects. Without free trade, it is difficult to have a free flow of ideas and certainly not a free flow of immigration. You can’t just shut the one part of with affecting the others. Dublin has become a happing place with great restaurants and a cosmopolitan atmosphere. It used to be a place where you could have anything you wanted as long as it included corned beef, cabbage and potatoes.
There is also the problem of the poor. Despite all the rhetoric, it is abundantly clear that the poor benefit disproportionately from free trade. As terrible as conditions in China are today, they were much worse. Before the free trade reforms most people in China lived at about the level of a concentration camp prisoner. As many as 50 million people starved to death. If Free trade were withdrawn tomorrow two things would happen: first the country would descend once again into poverty and then it would probably provoke a war.
Consider what amounted to a war between the U.S. and Japan in the 1980s. Fortunately, the weapons used were trade and commerce. The trade between the U.S. and Japan made us both richer. But the relative benefit went to the Japanese. To have a change of that magnitude without trade would have engendered an armed conflict. Instead of both of us becoming richer, we would have fought over territory. It would have cost us both. The U.S. would have won. We would have remained relatively better off and could have felt the perverse pride of the conquerer, but both of us would have been poorer in real money and many of us would have been dead. And American would still be driving crappy big cars.
Jack,
Well said. Paul, I used to live in France and have great respect and affection for the culture there. especially the cheeses and wines (not necessarily in that order). There were and still are noises in Paris about the encroachment of American culture—Hollywood, McDonalds,etc. At the same time, they flock to see American movies and eat at McDonalds.
I am sympathetic to your argument, but think the world would be a worse place if we tried to regulate such things. Who wants to be the one to tell a Tanzanian farmer he can’t export his wheat, bananas, whatever to France because they need 350 types of cheese to protect their culture?
Posted by: boojum at November 28, 2005 08:53 PMThis countries rush to Walmart is quickly eroding our economy by shipping more and more jobs to China. Someone please clarify this for me, when did China become our friend? All they do is steal our ideas, make knock-offs of patented products, have state-sponsered hackers breaking into our countries computer systems. I agree with Ron Brown when it comes to China;
WHY THE HELL SHOULD WE CARE?
Screw them and all the American families that keep buying this Chinese made crap from Walmart. Yes the world is flat, just like most American brains.
Eric:
blockquote>Paul,
Free trade is fair trade.
The last thing we need is more ‘democratic’ trade, which is really just code for socialist control.
I would disagree with you on this one. Capitalism does need regulation. The best example I know of to illustrate is the stock market crash of 1929 and the reforms that took place in the thirties. Those reforms help build a system of transparency and accountibility so that firms were required to disclose all kinds of information. Those standards in the long haul produced confidence in the markets.
I am a free trader in concept, but I would support well thoughtout regulation to make sure that everything is on the up and up. For instance, I do not believe we should allow free trade with countries with accounting standards so low that investors get ripped off.
I am also not a big fan of Walmart. For instance, I would support Corporations of Walmart’s size who have wages as low as Walmart’s to offer quality health coverage to it’s employees if they have none. The reason for this is that a large minority of Walmart workers are on public assistance. I think this is Corporate welfare. You and I pay through our taxes to provide for these low wage earners wages. Other companies have to follow suit or be run out of business. I am not talking about mom and pop working environments, but multi national corporations.
There is little I agree with Paul on. I am certainly a free trader in concept. I would disagree with your statement that free trade necessarily fair trade.
Craig
Posted by: Craig Holmes at November 28, 2005 10:24 PMAll,
I conversely to my own party am quite pro free trade but I believe that it has to be balanced here at home with a currency that bolsters the import in circumspect to the export. What I see as the insanity in this is the lowering of the value of the dollar such as is done by the EU and as of the last few years the US.
My interest is adherantly domestic in this but what I’m saying is that if the dollar is skewed to lean towards the export it inevitably erodes export. In that it erodes manufacturing by the purchasing power abroad being thwarted.
Now as to China I do see the plausibility of this bearing some moderate democratic change but you also see the socialistic aspects too. In a post here was the statement (Boojum) that they don’t allow business unless they relocate there although I question whether that means headquartering. We have actualy done similar with respect to automotive manufacturing with in the US albeit to a lesser extent. Some socialist policies are a boon to us so throwing out the baby with the bathwater in respects to that is erroneous.
What my beef is isn’t the humanitarian aspects but what it means to us domestically when we have our dollar below the Euro. We can’t mobilize ourselves like this effectively as that actually creates more outsourcing by having to compensate for labor as a consistent expenditure.
EARJOY,
that actually is a fascinating topic. The creation of outsourcing by Walmart contracts. Being that to be able to sell wholesale that low they by and large have to move atleast a majoritive portion of their corporate manufacturing overseas somewhere whether Mexico, China or somewhere to lower thyeir operating costs.
the point of us eroding american agribusiness to me should have more protectionist policies in place as that is essentially the very vital economy of the midwest and to sel it out or say cattle ranching abroad depletes those economies in which case more corporate welfare is extended to compensate for those losses.
Now as to the quest for the good old days, small towns and idealisms based on that premise. I think so too there is an erosion of small businesses there as markets get edged but I don’t think it’s the problem entirely of free trade at all or even Walmart. It has to do with not creating the systems by which small business locations can be built and having no means by which to be more protective of our city economies. THe main problem is that small businesses can’t compete but I would argue against socialist policy as the answer. My answer would be too lengthy to get into but essentially authorizing government loans on a six year basis with interest rates fixed that at the time of default could be consolidated by mortgage companies and hence money returned to the US government. What these loans would be used for is esentially in an SBA capacity as well as creating small business downtown construction on which bonds are sold and mortgage companies consume at time of default. WE don’t syphen money out and we get a monetary return and the borrower can actually either borrow from the mortgage handler or go back to theuS government for another loan with interest if approved. Yeah kind of involved but essentially it creates a protectionist zone for the flourishment of small businesses via capitalist means on which the government gets a return on. we could extend such practices the world over and not just syphen monies out of our pockets with little or no return.
So as to the problems of Walmart it is our own damn faults we didn’t create the means by which to compete.
Posted by: Novenge at November 28, 2005 10:29 PMphx8:
Do you know what arbitrage is? Because we are seeing labor being arbitraged, with multinationals profiting from the discrepancies, and pocketing the difference.
What happens with arbitrage? Do the discrepancies settle with their pricing at the high end? No. Not the low end either. They settle in between.
The ‘Free Trade’ solution is not in our national interest.
America benifits in the following ways:
1. Longer periods of time between recessions. Recessions are caused by bottlenecks due to rapid growth. Many times these are caused by inflation. Labor cost increases are the biggest cause of inflation. With basically an infinite cheap labor market out their, inflation is going to be low for a very long time. This makes recessions not as likely.
2. There is a big win for the consumer. Consumers are able to receive goods they choose to by at much reduced cost.
3. Higher productivity of workers. When workers are displaced they are displaced my more productive workers when measured by Unit labor costs. Jobs that increase in this country require higher productity. Productivity is growing at a wonderful rate here in the US.
Craig
Posted by: Craig Holmes at November 28, 2005 10:35 PMBashing Walmart is beside the point. Walmart isn’t a manufacturer but a retailer, and all they’ve done is perfect the model of the retail store. Manufacturing and the import of goods is a another issue. They’re just better at doing what Woolworth’s or K-Mart had been doing for generations.
People complain about them putting mom and pop stores out of business, but mom and pop stores themselves once did the very same thing by cutting into the business of little specialty shops like the local butcher, baker and grocer.
You shouldn’t blame Walmart as much as you should blame the collusion of politicians with the large multinationals who turn a profit by turning a blind eye to abuses of the law.
I have no problem with multinational corporations or big business. You can be 100% for free trade without thinking that some nations and businesses should be allowed to ignore the law while those who follow it are hamstrung and put at an insurmountable competitive disadvantage.
Posted by: sanger at November 28, 2005 10:59 PMNovenge
What I see as the insanity in this is the lowering of the value of the dollar such as is done by the EU and as of the last few years the US.
This isn’t quite accurate. The Euro is a new currency. If you look at a basket of securities the dollar is near the bottom of a trading range that has been going on for some time. It only looks like a big fall because of the short time the Euro has been around.
Second, it was that lowered by the EU. It was investors who bought or sold currency to make the dollor less valuable.
Third, the dollar fluctuation is caused in great part by the fed’s lowering and raising on interest rates. The dollar has rebounded as of late due to the Fed’s raising. Basically US treasuries look more attractive because they pay better which attracts more foreign capital.
craig
Posted by: Craig Holmes at November 28, 2005 11:04 PMNovenge,
You’re absolutely right. I wanted to add that to my post but feared I was already being long-winded. We, the EU and others frequently have what are called “local content” laws, which means a certain percentage of a finished good (eg, a car) must be manufactured or assembled in the country in which it’s sold. This is inherently protectionist. It is also the main reason Japanese car companies have factories in the US and Europe, so they can sell in our markets without excessive regulation.
My compliments to all on a good discussion so far!
Cheers,
Boojum
Craig,
You are correct sir! The value of the dollar is affected by, among other things, US interest rates (higher rates equal higher demand for treasury notes due to higher return), confidence in the US economy, lack of confidence in foreign economies. Domestic deficits often influence interest rates higher to attract foreign capital to finance deficits.
yadda, yadda, yadda
Posted by: boojum at November 28, 2005 11:20 PMCraig,
I agree with your free market stance entirely but:
Labor cost increases are a factor in wholesale/retail cost to the consumer certainly but not entirely the cause of inflation. Too many dollars floating in the market exceeding the needs of import are what shoots prices up (as it takes from operating costs as a natural factor under such economies), as the value is less due to it’s over-circulation in the market without (or with slowed) federal reserve recall and that is at times the source of fiat debt largely (although it does lower interest rates as you know—it’s obviously a bit more complex than this too). monetary value is in some ways a ventillation system (you might know a good portion of this). Our economy has monetary needs when the dollar values don’t fit with that framework or go beyond it for the sake of export and there is too much money floating about with a thwarted recall to the fed this will innevitably lead to increased prices on goods/services due to what it means to operational overhead. The value of money is actually a borrowed entity, strange huh?
Posted by: Novenge at November 28, 2005 11:31 PMNovenge
Labor cost increases are a factor in wholesale/retail cost to the consumer certainly but not entirely the cause of inflation
Agreed but labor costs are the major cause of inflation since they are the largest portion of the costs of producing goods and services.
Craig
Posted by: Craig Holmes at November 28, 2005 11:39 PMCraig,
I agree with the exception I can’t say ‘major’ when coupled with other factors. Yes we have always had to a good degree some outsourcing of labor so with the larger corporate entities, let’s say Nike, there has always been the option to do just that and reduce labor costs/increasing profits. Outsourcing in mistakenly viewed as something new.
America has just turned it’s eye to it as of late and as far as I know gave it the name outsourcing. It used to be just foreign manufacturing or some other term there-abouts.
Posted by: Novenge at November 28, 2005 11:47 PMsanger
Bashing Walmart is beside the point. Walmart isn’t a manufacturer but a retailer, and all they’ve done is perfect the model of the retail store. Manufacturing and the import of goods is a another issue. They’re just better at doing what Woolworth’s or K-Mart had been doing for generations.
I agree in part. What I disagree with is having to back door subsidize by paying for medical benefits of full time employees. This forces other retailers to cut costs along the same lines. I think corporations of the size of Walmart should be required to provide reasonable medical care, or we should go to national health care.
By having such a low standard of medical benefits, this could force other retailers to follow suit.
By Amy Joyce Washington Post Staff Writer Thursday, June 23, 2005; Page D02Several congressional Democrats introduced a bill yesterday that would force states to report the names of companies that have 50 or more employees who receive government-funded health care, an effort to pressure Wal-Mart Stores Inc. in particular to improve employee health coverage.
In introducing the Health Care Accountability Act, Sen. Edward M. Kennedy (D-Mass.), Rep. Anthony D. Weiner (D-N.Y.), and Sen. Jon S. Corzine (D-N.J.) said they are concerned that large employers such as Wal-Mart are transferring responsibility for health care to government-funded programs such as Medicaid.
Sen. Edward M. Kennedy (D-Mass.) was backed by union activists yesterday at a news conference.
Sen. Edward M. Kennedy (D-Mass.) was backed by union activists yesterday at a news conference. (By Yuri Gripas — Reuters)
Of Wal-Mart’s 1.3 million full- and part-time employers, the lawmakers estimate that more than 600,000 do not have company insurance. Company critics say Wal-Mart wages are so low and the health premiums charged to employees so high, even some full-time employees qualify for go
I do not know if I agree with Senator Kennedy’s exact proposal. However I stand with them (As a Republican) that this is unjust and should be remedied.
Craig
Posted by: Craig Holmes at November 28, 2005 11:49 PMCraig as to the second post.
The EU actually has a consolidated treasury (this conversation is really getting technical) but there may be something to what you are saying as far the Euro being a fairly new currency and it being hedged and traded in a flurry.
Now as for interest rates being the cause of fluctuations by the fed. The fed adjusts to the growth of the money in circulation in terms of amounts and it’s prospective value. So meaning it is a response to growth in many respects. (This is getting really technical as a conversation). I’m gonna’ bow out of this one, for a more head-soothing jaunt through boons and pitfalls of freetrade. As I think we are essentially on the same page anyway in terms of it’s largely economic benefits.
Posted by: Novenge at November 29, 2005 12:09 AMCraig,
Instead of “interest rates” in the first sentence of the second paragraph I meant “dollar fluctuations”, my apologies.
And Wow you might be a democrat afterall, hmm seeing need to be filled as it compensates for overall national and local costs. I’m impressed. Even the assertion for a national social health care system of some kind.
Posted by: Novenge at November 29, 2005 12:23 AMAll,
Free trade reduces our costs. Outsourcing reduces our wages. If the experiment could be carried to its logical conclusion, worldwide labor costs would eventually equalize. Cultural differences would be rewarded or punished, until cultures & countries became identical from an economic, multinational corporate point of view.
The process of dislocation & ‘creative destruction’ can be both painful & useful, no doubt. I think we can all see that. The problem occurs when the process happens so fast, when the rate of change overwhelms the ability of cultures & countries to adapt.
This Free Trade arbitrage jeopardizes the position of the US in a number of ways:
First, do we really think it’s a good idea for our wages & benefits to drop enough for us to compete with Indian, Chinese and other poor laborers? That might be great for multinational corporate interests, and that might be great for keeping costs to consumers low, but it makes no sense for the national interest, because low wages for most of the population is an undesirable outcome.
Second, some industries have to be protected as a matter of national security; steel, food production, and so on.
I don’t buy the idea that free trade creates longer periods between recessions; just the opposite! With the increasing speed and liquidity of investments & even the ability to move production itself, booms and busts are almost inevitably going to be accelerated, with higher highs and deeper lows.
The answer? Wish I knew! I’m still puzzling through it. I was always a free trader. I thought NAFTA was a sensible idea.
This last recession changed my thinking. I sat in the front row for a view of the recession & its effects upon hiring & training in offices and in IT. My view only encompasses Oregon, but there’s no doubt in my mind the current situation is untenable.
Technology enables us to outsource the actual foundation of our technological superiority & ability to innovate. We must not allow that to happen.
Not only are we selling the rope to hang us with- we’re also selling the blueprint for mass-producing the gallows.
Pardon the gallows humor.
The alternative to Free Trade? Fair trade. It’s obvious. Of course, there’s a little more to it than just saying ‘Fair Trade.’
But enough for now. Pardon the lengthy post…
Novenge,
Agreed, there are many influences on the Fed’s decision making process, from housing starts to consumer price index to whether there’s a full moon or not. It does get arcane. Perhaps another time ;-)
We should focus on the main issue, which is the mammoth advantages of free trade…….
Posted by: boojum at November 29, 2005 12:25 AMPaul,
Is the world we are creating, perhaps a cynical one?
Yes. i fear the next class war will be as global as the market. Imo, societies desiring to survive need to improve the self sufficiency of their towns and villages and re-learn the true value of an honest day’s work. Those who NEED outside trade the most will be the most vulnerable. Today we are dependant on foreign oil. Tomarrow it will be food. Not to worry, urban sprawl and suburbia swallowing up agricultural land is no big deal— we are not as they say, an agrarian based society anymore. ‘Would you care for a little coal in your iced petrol tonight, sir?’ Posted by: jo at November 29, 2005 12:31 AM
phx8,
Good post, but I have to say that “fair trade” is more a slogan than a trade policy. I have no problem admitting inequities in free trade, or capitalism in general, but the “managed” alternatives are worse.
Craig, I think that health care has to be looked at as a separate issue, one to which other solutions have to be found than mandating employers to provide it for their employees. For all the flak Walmart takes, they’re far from the only or even the worst offender when it comes to finding ways to cut costs on employees benefits.
And nationalizing healthcare, in my opinion, would just be another recipe for a different kind of disaster.
I find it interesting that Democratic lawmakers in particular attack Walmart, considering how one of their most solid consituencies is by far the worst abuser on this score—namely, higher education. Around two thirds of university instructors these days are kept permanently on a part time basis in in order to avoid giving them benefits, and the whole archaic tenure system reinforces the problem.
I have a friend with undergraduate and graduate Ivy league degrees who makes literally a tenth as much for teaching the same classes as others in her department, some of whom who have worse professional and educational credits than she does and consistently get bad performance reviews, but happened to get tenure status twenty or thirty years ago. The number of people this situation effects dwarfs the number of Walmart employees, but lawmakers aren’t about to touch it with a ten-foot pole because doing so would mean challenging some very powerful cultural insitutions.
My point is that yes, healthcare is a problem, and one which requires some both and innovative solutions. But I don’t see either party offering anything at all right in the way of a comprehensive solution.
Though I support Bush on most other issues, including the need to drastically curtail malpractice lawsuits, I must admit that his proposed health saving accounts would be meaningless to those who would actually need them.
People with so much income that storing away a percentage would actually make a difference in the event of major medical costs would (1) be better off buying their own insurance to protect their assets, and (2) most likely have a good job with benefits anyway—hence their wealth. These saving accounts, as I understand them, would probably just end up being tax shelters for the already well off and have little effect on the national healthcare situation.
Socializing medicine is a non-starter as far I’m concerned—sometimes the cure (literally in the case) is worse than the disease. Instead, I think we need a patchwork of market-driven approaches which are going to offend both liberal and conservative interest groups. Medical malpractice reform tops the list. After that we need to confront a whole host of regulatory roadblocks—including, yes, many of those favored by the drug and health insurance industries.
Drug and medical techonology patents need a closer look. At all costs, we should avoid stifling the profit-incentive for innovative research and development, but there should be a better system in place for freeing up those technologies and treatments which were funded with public money in the first place. And then we shouldn’t allow so many renewals of patents after the reasonable time-periods in place which allow companies to recoup and make profits.
Let’s allow the market forces to work here and let doctors and hospitals employ some of the same techniques for delivering services that Walmart—yes, Walmart—has used for delivering goods.
Let doctors and hospitals go shopping internationally, if need be, for the technologies and drugs that people want and need, and let’s get the government, the lawyers and the entrenched corporate middle-men who enjoy special non-competetive regulatory protection out of the way.
Posted by: sanger at November 29, 2005 12:59 AMCraig,
Capitalism requires regulation by its very nature. But let’s define regulation. By regulation I mean it requires rule of law, enforcement of contracts, protection of private property, and punishment for fraud, intimidation, force, and malfeasance.
Capitalism requires a stabile political environment where you can anticipate that congress will not vote to take over part of your business or start micromanaging any part of it at their whim. In short, it requires the foundations of liberty and freedom that we all expect.
When someone has an ideology that defines business activity as a crime, then you can expect that their version of democratic control of business is going to be rather harsh and illogical.
Posted by: esimonson at November 29, 2005 01:24 AMBoojum,
Agreed, simply demanding ‘fair trade’ isn’t enough. Let’s get utopian for a moment-
First, the idea that ‘the government’ is some sort of adversarial enemy which hurts more than it helps is just wrong. Ideally, ‘the government’ is ‘We the People.’ We and the government are one and the same.
Second, only one organizational entity is large enough and powerful enough to address the problems of trade, and that entity is the federal government. ‘We the People’ are the only entity capable of making conscious choices for the most desirable outcome, rather than the most efficient one.
Third, the problem is not the idea of trade itself, and not necessarily other governments. The problem is with multinational corporations, which arbitrages labor markets for the most efficient, profitable solution. These corporations operate beyond the reach of much regulatory control, yet exert too much influence upon regulatory policy.
In fact, these corporation seem to determine much of our policy. Anyone following the situation with PSA’s in Iraq? Hopefully everyone understands Iraq is about oil, very very large amounts of oil; more specifically, it is about ensuring an opportunity for immensely profitable deals for large corporations? Blood for oil, indeed. We need these upcoming elections to establish a sovereign government which can sign long-term, binding, legal contracts. But I digress…
The utopian situation follows:
1) Multinational corporations must be barred from participating in the political process; corporations do not enjoy the same rights as a person, and do not possess a right to influence public policies. A corporation does not enjoy the same rights as ‘We the People.’ The solution? Public financing of political campaigns, with donations by individuals limited in amount to a nominal sum.
2) Multinational corporations must be regulated by an alliance of countries with common capitalist & regulatory interests. The multinationals must be presented with an ultimatum: pay to play. No more offshore tax havens. No government contracts to companies which headquarter offshore. The idea that Halliburton would receive billions upon billions of US taxpayer dollars in the form of no-bid contracts, yet avoids US taxes by going offshore, is staggering.
Sadly, we couldn’t be in a worse position for having politicians who can act in the public’s interest. Maybe the Third Parties can convince everyone to vote out incumbents… with the exception of the 23 Senators who voted against Iraq Resolution. Mostly liberals. Only people worth a damn in the Senate… Jeffords, Feingold, a few others…
Corruption is more tempting and more damaging to society the larger the business. Ma Bell broke up because of the monopoly effect but it did not curtail all the issues. Businesses, rather than working together, leverage and buy each other out… reducing oversight and simultaneously increasing the likliehood of corrution. The larger the company, the greater the risk to the community. the WTO is a GROUP working together for their combined interests.
Increasingly prorating the burden on businesses might provide necessary incentive to diversify if you will and co-operatively work together with other businesses keeping one another both more honest and agile enough to adapt quickly to market forces.
Posted by: jo at November 29, 2005 01:46 AMTalk about Freedoms and Liberties.
There’s a fallacy that all Americans are free.
WRONG!!!
You are only as free as you can afford to be. For example: If you don’t want your kids to go to public schools, because you don’t want them influenced by the “ghetto” culture, pull them out and put them in Private School. BUT…You have to pay for that. If you can’t afford to pay for Private School, you run the risk of your kids growing up a “wigger”. Is this fair?? No, but it’s life. Your rights are directly proportional to your wallet’s thickness.
Posted by: Silent Majority at November 29, 2005 12:42 PM
