2007 December 30 Sunday
Hillary Clinton Questions Benefits Of Globalization

An article in Der Spiegel reports on declining support for globalization among Americans.

Democratic presidential candidate Hillary Clinton has distanced herself from the idea of free trade, a philosophy which has shaped America's worldview since the end of World War II. The theory holds that trade between nations automatically increases the wealth of all participants, and that any form of trade is better than no trade at all. Every American president since Harry S. Truman has spent a good deal of his time in office eliminating customs restrictions and barriers to trade.

Globalization and "free trade" have become synonymous with the United States going massively in hock to the world. Yes, most people think this is bad. No, they don't buy the arguments of some doctrinaire free market economists that the market will somehow make it all work out well in the end. Ricardo's theory of comparative advantage has been modernized into a strange form where our comparative advantage is the ability to borrow money from other countries. Somehow I don't think that is what David Ricardo had in mind.

MIT Nobelist economist Paul Samuelson says the consequences of globalization are negative for the United States.

Does he think that globalization is a zero-sum game, in which one party wins, and the other loses? No, he replied after he had finished his sushi. The world's wealth will continue to increase. But, he quickly added, unfortunately this won't apply to all groups within a society.

But won't the profits of globalization's winners offset the losses of its losers? No, he responded, not any longer. According to Samuelson, the consequences of globalization for the United States have been negative for some time now. Compared with Asia's rising economies, the country is now in a "win-lose" situation. Asia, says Samuelson, is gaining economic strength while America is losing its assets.

What are some of those consequences? Much higher prices for oil, minerals and other natural resources. Much more pollution. Greater habitat destruction. Much more intellectual property theft.

How can America compete by producing knowledge if the knowledge gets ripped off? Designs that get copied are designs that pay less in return for their development. Shrinkwrap software that gets used illegally on a massive scale by Chinese companies gives them a competitive advantage over US companies that pay to legally use software. The situation is analogous to how employers of illegal aliens can drive out of business any company that only uses higher priced legal labor. China can beat us by cheating. Shouldn't we object to this?

Morton Kondracke is displeased that Lou Dobbs is opposed to immigration. I'm displeased with ole Mort and think he ought to stop supporting policies that damage America. Mort's also unhappy that Hillary Clinton has serious doubts about whether Ricardo's theory comparative advantage describes what is happening with world trade.

And Democrats increasingly have turned anti-free trade. As a prime example, Sen. Hillary Rodham Clinton (D-N.Y.), wife of the president who pushed through the North American Free Trade Agreement, the World Trade Organization and normal trade relations with China, now questions the whole basis of free trade.

She — along with other Democratic presidential candidates — has called for a “review” of NAFTA and a “time out” on new trade agreements.

And, in a Dec. 3 interview with the Financial Times, Clinton said she would take a “hard look” at reviving the stalled Doha Round of trade talks aimed at reducing trade barriers around the world.

She went so far as to question whether the theory of “comparative advantage” — the idea that everyone benefits when countries sell their best products and services to one another, the whole basis of post-World War II U.S. international economic policy — “may not be descriptive of the 21st century economy in which we find ourselves.”

How dare she question established dogma. Well, heresy comes easily to me. So I'm with Hillary on this one.

Share |      By Randall Parker at 2007 December 30 11:29 PM  Economics Globalization


Comments
TR said at December 31, 2007 9:40 AM:

Where was she 10 or 15 years ago on this issue and when her husband was pushing NAFTA? She was co-president, right? Now she wants to put it under "review" now that the damage is done? It would be funny if it wasn't so sad. And we know she is all for mass latino migration into the US along with other 3rd world losers, criminals, low IQs and the diseased. She is a fucking weathervane and wants a 3rd world US, just like the rest of the assholes running for president.

kurt9 said at December 31, 2007 2:01 PM:

I think you guys have the wrong attitude here. Free trade is actually quite empowering. I have worked for several small companies that sell world-wide and am in the process of starting an import/export business that I work right out of my own home. I can buy and sell to suppliers and customers in Asia. I can even email drawings and have my CAD work done in India and have engineering work done (on contract basis) in China. All of this, out of my own house. I can be a one-man (in my case, a two-man) multi-national company.

In my experience, globalization is quite empowering. I think you guys need to stop thinking of it as a threat and more as an opportunity. You must think more opportunistically about these things. I find non-opporunistic thinking about anything to be about as worthless as tits on a boar hog.

To help change your attitude, I recommend the book "China, Inc." by Ted Fishman.

Bob Badour said at December 31, 2007 2:17 PM:

I favor free trade. What I oppose is the fiat money system that breaks everything. Let's stop pretending and playing with monopoly money.

Randall Parker said at December 31, 2007 6:29 PM:

Kurt,

I've got a few problems with what is going on:

- intellectual property protection is a joke in many countries.
- we really are running up huge and harmful trade deficits.
- exporting our manufacturing base is a bad idea.
- we are boosting worldwide pollution on a huge scale with international trade.
- there are some zero sum games going on with natural resources.

Opportunities: Go for it! I hope you get very rich.

RueHaxo said at December 31, 2007 11:40 PM:

Call me a crank, but the more I think of our trade deficit and the rise of China, the more fondly I look upon the tariff-love of pre WW2 Republicans.

Big Bill said at January 1, 2008 9:33 PM:

Kurt9, you are not a multinational corporation, you are a freelance salesman, a Willie Loman of the 21st Century. You bring nothing special to your job or to your business except a handful of special facts regarding where people will buy things more expensively and sell them cheaper. It is no different than buying and selling dollars or barrels of oil, or quilts. As an independent salesman, you sell chinese products enabling the chinese to build more factories, train more workers, pay more taxes, educate more people, build more jets and battleships, and dominate more of the world. But it is you that is the brains of the operation, the "multinational corporation".

When you make the product that you sell and employ the workers in your own land, come talk to me. From here you could be Mr. Anyseller, in Anytown, Czechoslovakia, or Estonia, Or Uzbekistan, or China, or Russia, or Canada, or any other tax haven that is convenient. Are you even American? And what do you bring my country, other than a bank balance which you could (and doubtless would) move offshore in a heartbeat?

kurt9 said at January 5, 2008 11:51 AM:

Big Bill,

We manufacture as well. Check out www.metatechnica.com.

I will tell you a bit about my background. Once you understand it, you will understand why I find your comments and attitude to be highly offensive.

I lived as an expat in Asia (mostly Japan) for 10 years. I ended up over there because I graduated from grad school in 1991 into a recession. I had planned to do MBA stuff, but found myself back in engineering. I designed and integrated control systems for process equipment and some factory automation. Later, I developed thin-films and thin-film process technology for a variety of industrial applications. I tried to start a high-vacuum industrial coating business in Malaysia in 1998 and got killed by the currency crisis. I have established sales networks in Asian marketplace using independent sales reps for several U.S. companies (technology MANUFACTURING companies - so I am helping U.S. manufacturing) in recent years.

I have see and done things in the past 15 years that most people here would not believe.

Given my life experiences, you can see why any suggestion that I owe anything to anyone that I do not relate to or do not have anything in common with is simply one of the most OFFENSIVE notions I have ever heard of.

What can you do for me that I want that I cannot do on my own?

If you are not able to answer this question in a positive manner, further discussion with you is pointless. Do not insult me with your drivel.

DO NOT EVER, EVER, EVER, TELL ME WHAT I CAN DO WITH MY LIFE AND MY LIFE DREAM AND GOALS AND WHO I CAN DO IT WITH!


Randall,

The reason why manufacturing has left the U.S. is not so much due to our "high" salaries, but due to the exponential increase of government regulation since the 1970's. Obviously places like California and Oregon have not learned the lesson, because they keep creating more and more regulation. As long as the American people believe in government regulation and government influence over the economy, they deserve whatever suffering trade deficits and manufacturing "hollowing" bring upon them. I have zero sympathy for them.

Anyways, talk of tariffs and quotas will remain bluster. The Chinese (and the Japanese) each own about USD 1 trillion of our treasury bills. The North American and East Asian economies are joined at the hip. Discussion of them as separate economies is no longer meaningful.

Also, the Chinese are allowing the Yuan to slowly appreciate (about 7% a year). The Chinese realize that Yuan appreciation is one method of encouraging Chinese companies to move up the technology ladder into more value-added manufacturing.

There are FX funds that you can invest in that offer the benefit of this appreciation. 7% annual growth relative to the USD is not a bad deal.

Randall Parker said at January 5, 2008 2:29 PM:

Kurt,

Come on, regulations as the reason manufacturing went abroad? Be serious. I've been privy to such decisions. The for electronics unit manufacturing costs are lower in China because hourly cost of labor is lower there. That's by far the top reason. Any other reasons are small in comparison.

For something like steel and chemicals China offers fewer environmental regulations and hence lower costs. A guy who has been inside of a lot of Chinese factories (he was representing US companies including one that comes across as very Green here) told me horror stories about this. In one case he came to visit one factory that had chemicals running out of the 4th floor window of a Chinese factory, down its outside wall, and into the street gutter down to a storm drain and then into the local river. Sure, doing that lowers the costs for the manufacturing company. Lower regulations means lower costs. But do you want to live in such a world?


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