Re: Free Trade and Factor Mobility

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

Gary:

Just a brief comment on a huge topic, put succinctly and with minimal
supporting argument:

The race-to-the-bottom aspect of globalization is NOT a function of Free
Trade as such.

It IS a function of the vast growth during the post-Bretton Woods era of
Finance Capital generated through New Credit Creation, either directly or
indirectly in the form of Debt-financed Demand for world output of Goods and
Services.

Thus, possible solutions to the problem will require structural changes in
monetary arrangements at both national and international levels.

Academic economists, who reason AS IF Finance Capital - as distinct from New
Credit created by the stroke of a computer key - is a Factor of Production,
whose "supply" is a function of interest-dependent "savings", are not
equipped to either analyze the issues involved or evaluate possible remedial
steps.

Gunnar





----- 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 5:12 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
> > > >
> > > >
> > > > __________________________________
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> >
> >
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