OPINION & EDITORIAL
Free trade our best chance
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Also by Corey Sheahan:
- Prognosis poor on hospital tax (November 5, 2007)
- Giuliani's impact on NYC overrated (October 23, 2007)
- Senators step perilously toward war (October 8, 2007)
- Religious group funding not 'according to the gospel' (September 24, 2007)
- UW socialist noble but wrong (September 10, 2007)
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- UW deserves answers from gubernatorial candidates (October 1, 2002)
- Public TV rejects Greens (October 13, 2006)
- Eshraghi or King (February 15, 2005)
by Corey Sheahan
Monday, December 3, 2007
As the race to the White House continues, the leading candidates of both parties struggle to court the remaining undecided voters. In doing so, they've stressed the deficiencies of the current administration and of their rival candidates. In general, I'm not too interested in what the candidates have had to say about each other.
However, when they discuss the economy — and how they would change current policy — I start to pay attention. If you had no access to information on the economy other than listening to the presidential candidates — especially the leading Democrats — you'd probably think that America was on the verge of another Great Depression. Now, I understand that this is probably the result of the political process (it would be awfully hard for a Democrat to get elected by saying how good things are, wouldn't it?), but whatever the candidates would have you believe, in 2007, we have things pretty darn good.
Now, I'm sure everyone reading this has heard the doomsday statistics. Americans are losing jobs to overseas competitors. The housing crisis has left the economy on the edge of recession. The monstrous fiscal debt is eventually going to bring down the economy. Searching for a scapegoat, an overwhelming number of Americans believe free trade is to blame.
While our economy is not perfect, the reality is this: We don't have much to worry about. Furthermore, free trade is not the problem; it's the solution.
Let's take a look at outsourcing, using the U.S. auto industry as an example. Has the shift in auto manufacturing overseas been bad for U.S. workers?
In the 1960s, the U.S. auto industry was the worldwide leader, and the average autoworker was paid very well. Beginning in the 1970s and continuing into the present day, competition from foreign countries — especially Japan — revealed the inefficiencies of Detroit. Politicians and union leaders decried the trend and imposed tariffs on the foreign car manufacturers. It was argued that without the tariffs, U.S. autoworkers would be left jobless and destitute and the loss of jobs would be harmful to the American economy.
This is the general argument made against globalization and free trade, and it has been made for decades. Whenever you hear Barack Obama or Hillary Clinton talk about the dangers of free trade (and believe me, they will in Iowa over the next five weeks), remember that the unemployment rate in the U.S. is at historically low levels.
Despite the loss of the auto manufacturing jobs, and many other factory jobs, the U.S.is as competitive as ever. According to a recent World Economic Forum survey, the U.S. remains the most competitive economy in the world.
Along with low unemployment rates, jobs in the U.S. are far more
productive and pay better overall than they did 40 years ago. This is the
direct result of our comparative
advantage in education. While the manufacturing jobs of the past are mostly
gone, information and technology jobs provide better wages and higher standards
of living than ever before. Yet you wouldn't know this if you listened to the
men and women fighting to be the next president.
One of the things that bothers me most is the glorification of the past that we
hear so often. We look back on history (especially the '50s and '60s) and act
as if we’ve lost the Golden Age of American history. When I hear statements
like this, I'd love to challenge the speaker: Do you think living in an earlier
time would result in a better standard of living? In nearly every measurable
aspect of life, we’re better off today than we were yesterday.
I can already hear rebuttals from the left. They’ll claim that I’m ignoring the harmful consequences of free trade and that globalization and free trade create an environment in which the major powers (for example, the U.S. and EU) exploit the developing world for their own benefit. Yet, this could not be further from the truth. America has little to gain from keeping our trading partners down. By facilitating the growth and prosperity of our neighbors, America benefits from a more stable economic partner.
Every day, we hear about poverty and genocide in Africa. We read about
the poor in our own country, who go to bed hungry and without a place to sleep.
We hear this awful stuff, and it’s nearly impossible to accept that this is the
best we’ve ever done. We’ll continue to improve as the decades roll on, as we
learn more about the economy and as wealth continues to accumulate and spread
to new sections of the population.
I don’t want to simply say “everything’s
rosy” and leave it at that. There’s work to be done. But we need to be
intelligent and realistic before coming to pessimistic conclusions about the
economy, society and America as a whole.
Corey Sheahan (csheahan@wisc.edu) is a senior majoring in history and economics.
Anonymous (December 3, 2007 @ 3:17am):
Bring back the sweatshops! Let's make America great again!
Anonymous (December 3, 2007 @ 8:06am):
Nations don't trade unless society benefits as a whole, it's a simple economic fact. The government can choose how those benefits get distributed. That should be the argument (providing assistance to workers in fields such as the auto industry) instead of whether free trade is beneficial.
And 3:17, nobody is bringing back sweatshops here. Sweatshops in foreign countries are usually better than the previous working conditions there.
Anonymous (December 3, 2007 @ 8:14am):
Before I comment, I would like Mike Hahn's opinion of this essay.
Anonymous (December 3, 2007 @ 9:19am):
FairTax!
Ron Paul in '08!
Anonymous (December 3, 2007 @ 9:32am):
I say go isolationist big-time!
Eliminate all income taxes (repeal the 16th Amendment) and fund the government with import duties. Bulk up the Coast Guard and border patrol (bring ALL the troops home and set up garrisons on the borders) to prevent smuggling and it would also prevent illegal immigration. Put all the money spent on foreign adventures into nuclear power and run everything on electricity.
The USA could get along better without the rest of the world.
Everybody complains about the USA actions in the world, see how they do without us.
Anonymous (December 3, 2007 @ 9:45am):
It's not the fair trade that hurts us, it's the unfair trade that hurts us. How can a US company compete when they have to factor in the cost of following environmental & and Health regulations , paying their works a living wages and maybe paying for part of the employee's health care when companies in China can force someone to work 18 hours a day with no health care and they have zero enforcement of menial health and environmental regulations?
You claim to know what the left will say, how very physic of you.
And yet every argument you use in your editorial piece has been repeated over and over for the last 5 years by the right.
Facts:
1) Our trade deficit is growing
2) Our national debit is a disaster
3) The value of the dollar is in a free fall
4) If OPEC decide to use the Euro to value it's oil, it would be a HUGE problem for our economy
5) If China decides they aren't going to lend us any more money - we're screwed
6) If china wants us to pay back all the money we've already borrowed - we're screwed.
7) Most of the "New" Jobs that you say is lowering the unemployment rate, are low paying service jobs. Yes they are making more money historically, but people like you that say the economy is great tend to leave out that it cost more to live today then it did 5, 10, or 20 years ago.
Revolutions are born when the many have to little and the very few have to much.
We're still a young country it would be arrogant and foolish to think it couldn't happen here.
Anonymous (December 3, 2007 @ 10:24am):
We are "solving" the problem of foreign debt the only way we can - by making the dollar worth less compared to other currencies.
Domestic inflation will be the inevitable result. That the dollar is worth so much less is a part of the reason that oil prices are up (in dollars), if purchased with gold or Euros - not so much.
Anonymous (December 3, 2007 @ 10:26am):
"Most of the "New" Jobs that you say is lowering the unemployment rate, are low paying service jobs."
Right! We won't get rich cutting each others hair or handing out fries to each other.
Anonymous (December 3, 2007 @ 10:40am):
"They'll claim that I'm ignoring the harmful consequences of free trade and that globalization and free trade create an environment in which the major powers (for example, the U.S. and EU) exploit the developing world for their own benefit. Yet, this could not be further from the truth. America has little to gain from keeping our trading partners down. By facilitating the growth and prosperity of our neighbors, America benefits from a more stable economic partner."
Dead wrong. American corporations enter these countries and rob them blind of all of their resources that they could use for their own development. And what do we do when we finish taking all of their resources? We leave behind a torn apart nation that has no hope for success in the future because all of their economic possibility was taken as a raw resource cheaply by the US and sold as an expensive product. If they were allowed to develop their own resources, they would stand to gain much much more, but we don't allow that.
Anonymous (December 3, 2007 @ 11:31am):
"We don't have much to worry about."
Kid, who has gotten into your head?
Anonymous (December 3, 2007 @ 12:43pm):
This piece is so badly off-target that Corey's pretty much shot himself in his behind.
Free Trade is neither the cause of nor the solution to America's economic problems. The foremost problem is that the largest component of the American economy is the finance sector, and right now the system in place to control it is working about as effectively as the BCS.
But I don't want to be construed as a pessimist, so I'll just agree that as long as "we're doing the best we've ever done", everything will work out OK in the end and everyone should stop worrying.
Anonymous (December 3, 2007 @ 12:51pm):
FNTP
Fox News Talking Points
Anonymous (December 3, 2007 @ 1:15pm):
"it's the unfair trade that hurts us."
Yeah, poor us. We continue to suffer at the hands of institutions like the World Bank, IMF and WTO, whose leaders are hand-picked by third-world countries, and either ignore or hyper-inforce the rules depending on how it benefits the world's poor. Then, they dump cheap grains into our economy under the threat of their militaries, driving our poor farmers out of business and into the slums and sweatshops, spiking unemployment and a downward spiral of wages, and forcing many of our men to emigrate to Mexico as migrant farmers. Oh woe is us.
Anonymous (December 3, 2007 @ 3:12pm):
The third world suffers at the hands of the tyrants that rule them, rob them and transfer the money to Swiss bank accounts.
Corey Sheahan (December 3, 2007 @ 7:19pm):
Ok, I'll address these comments one at a time:
8:06am- You get it. I agree that the government has a responsibility to help those who lose their jobs to overseas competitors (like the auto workers). Thank you.
9:32am- "Going isolationist" would be bad for the U.S. as well as for the rest of the world. Immigration and trade are crucial for the health of a dynamic economy like we have.
9:45am-
"people like you that say the economy is great tend to leave out that it cost more to live today then it did 5, 10, or 20 years ago."
-This is blatantly false. What evidence do you have to support this? First of all, a 5-10 period is too small of a sample to notice the long-term trends of our economy. Ask yourself this- Would you rather be born in the 1980s (I'm assuming that you were) or the 1950s? How about around 1900? 1850? I suspect that you'd choose the 1980s. The standard of living in this country consistently improved throughout the 20th century, and will continue to do so.
"Most of the "New" Jobs that you say is lowering the unemployment rate, are low paying service jobs."
-Another unsupported claim. If the new jobs were all in the service sector, there's no way that we could remain a competitive economy, let alone the most competitive.
10:40am- could you give me an example? A good example? Because I can give you many that refute your claim. I don't want to hear about 18th century mercantilism, either. U.S. direct foreign investment (which is what you're talking about) almost always improves the lives of the citizens where we invest.
11:31am - "Kid, who has gotten into your head?" The point of this column was to refute the conventional wisdom that our economy isn't stable and healthy, and is threatened by unfair trading practices of other nations. If you look at some of the comments posted here, you'll see that many people believe this.
Since WWII, our country has experienced growth and prosperity, with few interruptions by recession. You think I'm delusional? Bring me some evidence, because I have plenty to support my claims. We're the most competitive economy in the world. We accept more immigrants than any other nation on this planet, yet we still maintain an incredibly high standard of living (including for those immigrants). From a long-term economic view, we really don't have much to worry about.
12:43- This piece is not off-target: free trade agreements like CAFTA and the one with South Korea get shot down because there's a fear in this country that free trade is bad for us. This fear isn't limited to the left, either. Republicans agreed with that statement at a 2:1 clip in a recent poll.
Also, I can tell you didn't read the last paragraph of my column, because I made sure to mention that I don't think everything is perfect; I think it's the best we've ever done, which is entirely accurate. We need to recognize what has gotten us here, and continue to enact intelligent economic policy, rather than let unsubstantiated fear govern our future. Oh, and good BCS joke. Very original.
12:51pm- I consider myself a moderate Democrat. I do not watch Fox News. Just because I disagree with some Democrats on this issue does not mean I'm a pawn of Rupert Murdoch. Free trade isn't necessarily a Democrat vs. Republican issue. But with the primaries in Iowa and NH right around the corner, you're going to hear unsubstantiated assertions about free trade, especially from the leading Democrats.
3:12pm- That's part of the problem for some countries. As much as I dislike Paul Wolfowitz, his campaign against corruption in the third world was a worthy cause.
If you still disagree with me, I have a couple books to recommend-
The Undercover Economist, By Tim Harford (especially the chapters "Why Poor Countries Are Poor" and "How China Got Rich")
The Progress Paradox, by Gregg Easterbrook.
Anonymous (December 3, 2007 @ 11:21pm):
"Immigration and trade are crucial for the health of a dynamic economy like we have."
Why? The USA would eat well - the rest of the world might starve tho.
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