Thursday, May 01, 2008

Free Trade is Double Plus Good

Stronach says, "Up yours!" to workers.

Didn't we realize a long, long time ago that this was where free trade was taking us? Is it finally, finally becoming obvious enough?

It's really simple. In the old days we had these things called "tariffs". Tariffs existed to protect local industries from unfair foreign competition. If country A respected human rights, respected workers' rights, gave health care to all its citizens and educated all of its citizens, why should its citizens have to compete directly with country B where the standard of living was poverty, there was no health care or public education and workers had no rights?

But no, we had to have free trade. "It will bring us cheaper goods and a higher standard of living", they told us. 'They', of course, are the people who moved their manufacturing to poorer countries and increased their profits. 'They', of course, are the people who shut down local factories and told laid off workers to retrain.

Now Stronach tells us:
The average industrial wage in the United States is about $22 (U.S.) to $23 an hour, but workers at the auto makers are paid in excess of $50

That's right. Those were good-paying jobs. Now because of "growing worries about the competitiveness of the auto industry in Canada", those good-paying jobs have to be turned in to poorer paying jobs. "Competitiveness" can only refer to the damage being caused by free trade.

Look, there's only one way this can go. If Canadian workers are forced to be "competitive" with countries that allow their workers to be beaten up while offering those workers no health care and their children a lousy public education, then we are in a race to the bottom.

We should never be competing with workers in those countries. Not only are we dragging ourselves down, we are also rewarding those who treat their workers so poorly.

But that's not Stronach's problem:
"I guess I get paid to worry," he told shareholders.

Yes, he gets paid to worry. He doesn't worry about the lives he's ruining. He doesn't worry about the workers that he and his free-trading associates just condemned to half pay. He doesn't worry about human and workers' rights in other countries.

He's worried about the share price, because that's all that matters to him.

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Peter said...

Dude, we DO benefit from having other people do things more cheaply than we can. How else is it that a Walmart employee can still afford to have a wardrobe of dozens of shirts and pants, and even drive a car with thousands of precision-manufactured parts? Trade is GOOD.

Sure, we can make it better by gently trying to impose our higher working standards on other countries, especially when it comes to safety and human rights.

But a $50-an-hour autoworker is a sign of a broken part of the system, not the success of tariffs and unions.

The real bottom line is: what is the unemployment rate and what opportunities exist for people to move up in the workforce?

Yes, the minimum wage can be raised and we can spend more to help educate people for higher-paying jobs. But protectionism (tariffs) and other attempts to preserve artificially high pay for jobs others can do will just hurt everyone else except those protected by the tariffs.

Trade is an economic issue, whereas domestic education and training is more of a social issue.

Finally, an increasing percentage of world economic output is in information, not chunks of metal. This is impossible to restrict, so we're better off learning to compete rather than attempting to create walls.

Greg said...
This comment has been removed by the author.
Greg said...

Hello Peter!

If other people could do things more cheaply than we can on a level playing field, I think that we do have some benefit.

At the same time, non-protectionism taken to the logical extreme, this implies that everyone in the United States should be picking cotton and everyone in Canada should be trapping beavers. The fact that the Canadian and U.S. economies do things that they never used to do tells us that protectionism does have some value.

I also agree that moving from producing giant automobiles to pieces of software is a very good thing as far as sustainability goes.

What I don't buy is the idea that that the goal is to lower local wages as much as possible. This has every appearance of being self-defeating. Sure, the "economy" (as in the stock market) will do well because profits are high, but the part of the economy that really matters - the standard of living - doesn't necessarily go up.

The thing we're supposed to believe is that cutting the wages of these workers will work its way around the economy to make everyone else's life better. The average standard of living should go up - according to this theory - though clearly this isn't true for the individual auto worker.

(As a digression: The problem facing the auto industry isn't expensive workers. It's the fact that despite obvious signals the auto industry still seems surprised by gas becoming expensive. It's the first problem they've had that couldn't be solved by building an even larger truck.)

The auto industry is broken even from the point of view of free traders. It should have been allowed to collapse years ago according to the rules of free trade but has been propped up repeatedly.

The economy as measured by the standard of living is supported by people with stable, good-paying jobs. When people can't get good jobs they either stop spending, or spend irresponsibly in to debt, which is just staving off economic collapse for a while longer. Taking those good-paying jobs away and replacing them with Walmart-type jobs where you can't count on your healthcare and worker's comp is not the way to go.