Re: Free Trade and Factor Mobility

["Gary Santos" <garysantos@xxxxxxxxxxxx>]

James,

You say things that make me have a great day (wink). Thank you for the
compliment. Especially that it came from you.

I envy people like you and Henry who have the perspective of history to draw
from. Not that I don't read history, I do. But, there is so much that
occupies one's time and there is so much to read that one necessarily
becomes selective. The sad thing in education today is that history is
relegated to some dusty corner. There is much to be said of a liberal arts
education.

Which brings me to what you pointed out -- parallels between the colonial
period and 20th century imperialism with today's growing inequality. It
makes one think of cycles and whether we are locked into this by fate. If
that point comes, I wonder what J.K. Galbraith would suggest. Again, my
thanks and best regards,

Gary


----- Original Message -----
From: "James Cumes" <cresscourt@xxxxxxxxx>
Sent: Tuesday, January 20, 2004 4:34 AM
Subject: Re: Free Trade and Factor Mobility


> Gary,
>
> Yours is a most valuable contribution.

> There is so much in it with which I agree that it's not easy to pick out
one
> particular point; but I might just highlight this -
>
> "The worker and the consumer are the same person."
>
> This applies as much, for example, in Australia as it does in the United
> States. It applies to the workers in Wal-Mart as much as it does to the
> consumers in Wal-Mart.

> If the real wages of the workers are driven down, then their capacity as
> consumers to consume will be driven down too - or be held up by
> unsustainable consumer credit whose collapse can be only a matter of time.
> A healthy economy is one in which real fixed-capital investment drives
> productivity and production upwards and full employment or at least high
and
> stable levels of employment are accompanied by high levels of reward for
> labour and capital.

> There is no way that a sturdy society can be built or maintained on a base
> of low levels of demand for and low levels of rewards for labour.

> Elsewhere I have suggested that the colonialist/imperialist economies of
the
> 19th and earlier 20th centuries tended to be "extended" economies with
> external markets, investment and supply sources. The domestic economies
were
> marked by chronic instability, volatile labour markets tending to high
> levels of chronic unemployment, low wages, marked inequality between the
> higher and lower income groups, widespread poverty and poor public
> infrastructure especially in low-income areas.

> We see these characteristics re-emerging now - indeed, they have already
> emerged in such countries as the United States and my own country,
> Australia.

> At the risk of being a bore, may I just say again that the economic and
> social conditions I have just described led to the greatest and most
> widespread depression of the industrial era and to World War Two.
> As a result, the world that the battered but enlightened survivors
conceived
> after World War Two was not one in which world markets and supply sources
> would be exploited by and for an exclusive group but one in which a high
and
> stable growth economy would be maintained at home through well-balanced,
> socially just monetary and fiscal policies, at the heart of which would be
> dedicated policies of full employment and high, stable rates of real
> domestic investment.

> The decolonisation that took place between 1945 and about 1970 was a
feature
> of these policies. Those colonial powers that divested themselves of their
> colonies quickly prospered more and more quickly than those who lagged.
> Now, in an era of much more, more varied and more sophisticated
> international contact, trade and investment, we are returning or have
> already returned or regressed to a type of 19th century exploitation.
> It is difficult to see how anything but intensifying instability - in the
> world political and strategic as well as the economic and social
situation -
> can follow from these trends.

> Let me emphasise that, like Keynes in the 1930s and 1940s, I do not
advocate
> that the fundamentals of a free, plural, democratic, essentially
capitalist
> society be overturned. On the contrary, just as in the 1930s and 1940s,
the
> preservation of such a society should be seen as vitally dependent on
> policies that will safeguard the interests of all elements within the
> society and promote an affluence - social, economic and political - that
> will be shared by all.

> With that in mind, we should act urgently to achieve the reform required
> before the situation deteriorates further,  as you suggest, "out of
> control."
>
>
> James Cumes
> http://www.authorsden.com/visit/author.asp?AuthorID=3473
> http://members.chello.at/jamescumes/default.htm
> http://www.kokodatrail.com.au/forums/?showtopic=54
> http://members.chello.at/jamescumes/VOW/default.htm
>
>
> ----- Original Message -----
> From: "Gary Santos" <garysantos@xxxxxxxxxxxx>
> To: "Robert Murphy" <robert_p_murphy@xxxxxxxxx>
> Cc: <rainesco@xxxxxxxxxxxxx>; "Qasim KZ" <qasim@xxxxxxxxxxxxxxxxx>;
"William
> Engdahl" <engdahl@xxxxxxxxxxx>; "Abe Killian" <destro@xxxxxxxxxxxxxx>;
> "Peter Kirsch" <pjk1298@xxxxxxxxx>; "Henry C.K. Liu"
<hliu@xxxxxxxxxxxxxx>;
> "Peter Myers" <myers@xxxxxxxxxxxxxxx>; "Gavin Oughton"
<amband@xxxxxxxxxxx>;
> "Peter Wakefield Sault" <xxxx@xxxxxxxxxxxxxxx>; "Israel Shamir"
> <shamir@xxxxxxx>; <Philev@xxxxxxxxxx>; "Wolfram Graetz, Architect"
> <Wolfram@xxxxxxxxxxx>; <cpds@xxxxxxxxxxxxxxxxxxxxx>; "Arno Mong Daastoel"
> <arno@xxxxxxxxxxx>; "James Cumes" <cresscourt@xxxxxxxxx>; "Gunnar
Tomasson"
> <gunnar.tomasson@xxxxxxxxxxx>; "David Chiang" <chiang.d@xxxxxxxxxxxxxxxx>;
> "Stephen Zarlenga (E-mail)" <ami@xxxxxxxxxxx>; "Peter G. Spengler"
> <Peter.G.Spengler@xxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>
> Sent: Monday, January 19, 2004 11:12 PM
> Subject: Re: Free Trade and Factor Mobility
>
>
> > Mr. Murphy,
> >
> > Thank you. As I will be forwarding this email to the private list, I
> mention
> > now that your article (http://www.mises.org/fullstory.asp?control=1416)
> best
> > articulates your position on the above mentioned subject.
> >
> > I continue to keep your points in mind and I offer some things I have
been
> > mulling on. Like I wrote, I am searching for answers. Our earlier email
> are
> > still appended below.
> >
> > There are different principles at work that make ideas of free trade and
> of
> > absolute property rights counterproductive. The auto/buggy whip analogy
is
> > an not an appropriate analogy. Upgrading telephone technology much the
> same.
> > In both, I suspect, the employment created far outnumbered the
employment
> > destroyed as the market broadened and buggies were substituted with a
> > Model-T. The demise of the small town phone operator brought about
> increased
> > employment, again, as the market broadened and more people were needed
to
> > man provider service not to mention more linemen, more cable laying and
> more
> > copper smelting. Moreover, the pace of change allowed people to shift
jobs
> > more easily and family units, dislocated at first, were able to adjust
> with
> > the least pain. This is obviously not the case with the exportation of
> > employment and capital investment.
> >
> > Outsourcing and offshoring and the technology that supports such models
> are
> > not broadening anything. On the contrary, instead of increasing
aggregate
> > income, jobs are destroyed and wages are driven downward or held in
place.
> > There are gains for corporate productivity and profits. The worker
either
> > loses his job or is enjoined to work several more unpaid hours per day.
> >
> > That the consumer benefits, I feel, is a too often used slogan whose
> vacuous
> > nature becomes apparent as domestic job growth stagnates. The worker and
> the
> > consumer are the same person. If this grand plan was embarked on because
> of
> > the anticipated baby bust down the road, I'm afraid to say that the plan
> was
> > implemented a decade too soon.
> >
> > At the same time, I question the benefits the offshore and outsource
> peoples
> > are supposed to have. Financial and trade liberalization has done more
> > damage to compensate for the outsourced and offshored employment as
other
> > industries were rendered unprotected. Wages are not lifted. Wages of the
> > jobs created are at pittance levels. Cancun is a manifestation of this
> > failure. What was lifted were corporate profits. The appropriate analogy
> is
> > not the shift from carriage to autos and, perhaps, the present situation
> is
> > best characterized by a new form of sweat shop or slavery that benefits
> > Capital or the landed gentry.
> >
> > Also, I doubt whether any savings were passed on to the consumer.
Instead,
> > what I see is domestic production decreasing and increased consumption
on
> > items imported instead of spurring investment to create domestic jobs.
The
> > Washington Consensus was flawed in the totality of its concept and in
its
> > implementation. The spoils of liberalized markets benefit only shared a
> few
> > instead of most. I fear that much the same can be said specifically of
the
> > concepts of offshoring and outsourcing as it relates to the economy and
to
> > the entire population because the plan, if there is indeed a
comprehensive
> > plan, does not consider the millieu in which it is being implemented. We
> are
> > in a cyclical bottom or, if unlucky, headed into deeper into one.
> >
> > The cracks in the super structure are already apparent. Interest rates
can
> > not be raised. Instead of gaining confidence, the speeches of Greenspan
> and
> > Bernanke only served to show that Fed is now on the defensive. Bernanke
> > threatens to flood the market with new dollar credits on an
unprecendented
> > scale. Greenspan claims a victory even while the battle is still being
> > fought. Inflation now depends on the domestic policy of foreign
> governments
> > and on the corporate interests of Chinese and Japanese families. Even
now
> > these interests are changing.
> >
> > In the meatime, even as we continue to experiment with the idea of
> > unfettered free trade, tax rebates and increased spending bloat fiscal
> > deficits in a magnitude that would make von Mises turn in his grave.
What
> > makes it worse is that the experiment continues with the nation's debt,
> > personal and aggregate, at so high a level that the thought of raising
> > interest rates brings up the specter of not just a mild recession. I
don't
> > see any mainstream economist giving any caution. Or, maybe they are
> keeping
> > quiet on purpose? It seems to me that the experiment that began with
> > Thatcher has now gone out of control.
> >
> > Gary Santos
> >
> > PS. The email below from "Jas Jain", The New Forum, is interesting. No
one
> > seems to know why money supply is falling even as the Fed is making
> credits
> > available. Are people paying off debt?
> >
> > Money Supply Article: from The New Forum, Jas Jain.
> > -------------------------------------------------------
> >
> > Deflation Watch - Shrinking Money Supply, Pushing On the String?
> >
> > There is some very good news for those of you who have been worried
about
> > all the money that the Federal Reserve has been printing and that it
would
> > lead to inflation - the money supply has been falling for the past six
> > months! So, rather than printing all that money, the Fed must be now
> > destroying some of the old printed money. No? Or, is the Fed now pushing
> on
> > the proverbial string?
> >
> > Here are some excerpts from Merrill Lynch:
> >
> > Money Supply Update
> > M2 shrank another $5.5 billion now down about $170 Billion off its
summer
> > highs. This aggregate has now fallen in six out of the past seven weeks.
> M2
> > is
> > now sinking at a 5.5% 13-week a.r. and the y/y trend, now at 3.9%, is at
> the
> > slowest pace since Dec 95.
> >
> > The most important, or widely followed, measures of money supply - M2,
M3
> > and MZM - have been falling for the past six months at annual rates
> between
> > 2.3-3.6% (growth being negative) and even M1 has been falling for the
past
> > three months.
> >
> > For the money supply to fall under the current conditions, including the
> > easiest monetary policy in decades and all the other stimuli, is quite
> > extraordinary. I don't know what exactly it means for the economy, or
> > inflation, but monetarists tell us that falling money supply leads to
> > deflation down the road with some lag. I personally think that powerful
> > long-term deflationary forces are at work and the falling money supply
> might
> > just prove to be symptom rather than the cause.
> >
> > Jas
> >
> >
> > ----- Original Message -----
> > From: "Robert Murphy" <robert_p_murphy@xxxxxxxxx>
> > To: "Gary Santos" <garysantos@xxxxxxxxxxxx>
> > Sent: Sunday, January 18, 2004 8:51 PM
> > Subject: Re: Free Trade and Factor Mobility
> >
> >
> > > Mr. Santos,
> > >
> > > First, you can certainly send my emails to a private
> > > group, but PLEASE say that I wanted a disclaimer that
> > > my emails are written quickly and thus may not be very
> > > persuasive.  I would also ask that you provide links
> > > to my online articles which are better expositions of
> > > my views.
> > >
> > > As far as "drawing the line," again I would say that
> > > it only makes the average American poorer when the
> > > gov't interferes either with voluntary purchasing
> > > behavior (tariffs) or with the use of someone's
> > > private property (e.g. shipping a plant to Mexico).
> > >
> > > It's unfortunate that people may be laid off and have
> > > to switch industries, but people were saying this back
> > > when the automobile put horse-and-buggy manufacturers
> > > out of business, or when automation put workers in the
> > > phone industry out of work.  Should the gov't back
> > > then have "drawn the line" at serious readjustments in
> > > jobs?
> > >
> > > Again, the general argument is that whenever a
> > > particular company outsources its production to a
> > > different country, because of competition it must pass
> > > the cost savings (eventually) on to the consumers.  So
> > > yes, it might cause pain to the laid off workers, but
> > > overall consumers benefit from lower prices.  So long
> > > as we allow this to happen for ALL goods and services,
> > > then even the people who are hurt by a layoff can
> > > benefit from the price reductions in most of the
> > > products and services he or she buys.
> > >
> > > RPM
> > >
> > > --- Gary Santos <garysantos@xxxxxxxxxxxx> wrote:
> > > > Mr. Murphy,
> > > >
> > > > Thank you for your reply. However, given that you
> > > > have seen fit to do so,
> > > > may I repeat the point of my email -- What of
> > > > domestic employment? Where do
> > > > you draw the line? I personally see that the result
> > > > of such unfettered free
> > > > trade and liberalization a stratification of society
> > > > between rich and poor.
> > > > I suspect that if there is any real structural
> > > > imbalance at play today it is
> > > > this growing, both domestic and internationally, gap
> > > > between the rich and
> > > > the poor. Beyond the economics of it all, lives are
> > > > shaken to their roots.
> > > > Probably, 10% of families are dislocated and a much
> > > > greater number suffer
> > > > uncounted hours to increase productivity. Is this
> > > > the vision that von Mises
> > > > had for society?
> > > >
> > > > There must be a balance struck and, if at all, the
> > > > shock treatment the
> > > > economy is being given is akin to the sad
> > > > implementation of the Washington
> > > > Consensus. Even Williamson wrote an apologia.
> > > >
> > > > I also ask your permission to copy furnish our email
> > > > conversation to a
> > > > private email list of concerned people. Most, I
> > > > would think, oppose your
> > > > views, I warn you but others, such as I, seek to
> > > > point out what I would
> > > > characterize as an idea gone wild. The list includes
> > > > authors, a former
> > > > ambassador and economists. All are regular guys.
> > > > Perhaps, you would enjoy
> > > > exchanging views?
> > > >
> > > > Gary Santos
> > > >
> > > >
> > > > ----- Original Message -----
> > > > From: "Robert Murphy" <robert_p_murphy@xxxxxxxxx>
> > > > To: "Gary Santos" <garysantos@xxxxxxxxxxxx>
> > > > Sent: Sunday, January 18, 2004 12:24 AM
> > > > Subject: Re: Free Trade and Factor Mobility
> > > >
> > > >
> > > > > Mr. Santos,
> > > > >
> > > > > Thanks for the email.  For what it's worth, I have
> > > > > another article on this coming out soon.  But to
> > > > > answer your question, I "draw the line" when it
> > > > comes
> > > > > to the government interfering with the decisions
> > > > of
> > > > > American citizens regarding their private
> > > > property.
> > > > > If you or anybody else wants to move your capital
> > > > > equipment overseas, I'm not going to use men with
> > > > guns
> > > > > (i.e. the gov't) to try and stop you.
> > > > >
> > > > > RPM
> > > > >
> > > > > --- Gary Santos <garysantos@xxxxxxxxxxxx> wrote:
> > > > > > Mr. Murphy,
> > > > > >
> > > > > > I recently read your article. Fine arguments.
> > > > But,
> > > > > > the question still remains in my mind, Where
> > > > does
> > > > > > one draw the line between goods and services
> > > > done
> > > > > > abroad? America's competences are not that
> > > > legion
> > > > > > that will allow an unfettered exportation of
> > > > > > employment. 20% unemployment with the rest
> > > > enjoying
> > > > > > the benefits of cheap consumption? Are we to
> > > > become
> > > > > > mere consumers? Where does one draw the line?
> > > > Should
> > > > > > free trade force the economy into a prolonged
> > > > > > recession as wages are driven downward and
> > > > > > employment stagnant, it will hardly be any
> > > > metric
> > > > > > for raising any standard of living.
> > > > > >
> > > > > > Gary Santos
>
>
>