Monday, May 31, 2004

Hot time in the old town tonight

There's a lively debate (or at least, a debate) going on between Geoff and I on multiple fronts over at Geoffland. When I first read his blog, I hadn't realized we disagreed fundamentally on so many things; but he's got a really thoughtful blog, so I guess this may be my first test of my supposed motto of taking all well-thought comers (and accepting the possibility they may be right, until I can argue otherwise).

A current contention between us is basically the old "free trade: good or bad?" argument. (I'll assume for starters that he's not a big Noam Chomsky fan.)

I hope to develop my essays on this more fully in the future, but here's some initial free trade bits about how I feel:

1) The theory of comparative advantage doesn't apply.
You heard me. This is one of the arguments trotted out for free trade (tellingly though, it seems like this argument slips away under serious contention and the benefits to the US personally come to replace it). Although our neoclassical/neoliberal economists seem to have slinked away from John Maynard Keynes and David Ricardo insofar as they've taken some of their ideas and declared them brilliant, and others and declared them bunk, despite the fact that in some cases the brilliant ideas depended logically on the so-called bunk ones. Comparative advantage, specifically, made an assumption of relatively fixed capital, which is not the case for much of today's trade. In other words, Ricardo anticipated that when Country A and Country B had different production possibility horizons (I think that's the term), say, Country A is best at making wine and B is best at making, I don't know, bread, it made sense for each one to specialize. This being the case under the assumption that A has something B can't get that makes it better, and vice versa -- i.e. wine in France depends a lot on local soil conditions, and such conditions can't easily be moved or substituted in other places. Cost of labor was not a comparative advantage in the original formulation. (I know, I know, I need to source all this... no time today, it'll come.) The fact that we can pay people in other countries very little money to make stuff isn't an immovable capital; and by the same token, most capital *is* movable today, in that you can build a car factory almost anywhere. And Keynes himself made an argument for some degree of lessened trade in one of his later works: "I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel--these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national. Yet, at the same time, those who seek to disembarrass a country of its entanglements should be very slow and wary. It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction. For these strong reasons, therefore, I am inclined to the belief that, after the transition is accomplished, a greater measure of national self-sufficiency and economic isolation among countries than existed in 1914 may tend to serve the cause of peace, rather than otherwise." (This quote would also be a good jumping off point for a copyright/patent flaw discussion, but some other time.)

Of course, some just took this as proof he was looney in his old age (and he did follow this paragraph by saying "each will remain entitled to his own opinion" in these questions of "doubtful judgement"). Methinks assuming he was crazy cuz he started disagreeing with modern ideology, well... that's more than a bit condescending...

2) National borders are relatively impermeable to labor.
This strikes many people as a good thing (keeps out the 'unwashed masses' and all that). I'm not going to make a statement on immigration/emigration per se, but rather that it was my understanding that under economic assumptions, labor is mobile -- i.e. labor is able to flow to the place where there is most demand (i.e. labor can fetch the highest price), such that efficiency is achieved because those who are able to do the work at the best (lowest) price will compete down the price of labor, and efficiency results (invisible hand and all that). That may appear to be what's happening; but the fact is, if there is a global capital and goods market that flows from country to country, the labor market should follow suit. In other words, labor should move as freely between countries as money, capital, and goods. I doubt many argue that this is currently the case. Thus, the fact that most labor is anchored in other countries (i.e. not every Thai worker can immigrate here to the US) is a barrier to economic efficiency, as far as I understand (again, hopefully this will be sourced later). It would seem prima facie that a market where companies (and company headquarters) move freely from country to country, and Ford and Dow and all can build factories wherever they wish, that the laborers should have as much ability to move, in order to balance the market. I would say, for example, until the victims of The Bhopal Disaster can move to the US and enjoy the same protections and responsibilities available here, that "free market" just means "capturing those who can't do any better." A labor pool unable to compete for better labor prices seems unlike economic efficiency to me.

3) The export of environmental problems is a severe cost that is not mitigated by regulations in countries we export it to.
Environmental problems are almost always externalities. They are not sufficiently enforced here in the US; they certainly are not sufficiently enforced abroad. And the idea that wealth (i.e. higher GDP) will bring environmental improvement (the so-called Environmental Kuznets Curve) has been shown repeated to be false (links to come). In other words, exporting our industries to other countries seems to gaurantee them environmental problems now and for an indefinite amount of time into the future. See work by Daniel Faber, for a start.

4) The US has no INTEREST in free trade.
Actual free trade is composed of some kind of quid-pro-quo (unless you understand the use of force or the threat of the use of force as a valid economic tool). As has been commented many times before, competition is *good* for economic efficiency; but all companies will naturally try and minimize competition, which will tend to drive up costs and/or drive down profits (i.e. in a perfectly efficient economy, all chances for profits should be immediately exploited and rapidly diminish to a lower equilibrium). So other countries becoming economic rivals to the US should be a good thing for consumers, right?

Perhaps. But we won't allow that to happen. Intervention in Nicaragua, Colombia, Argentina, Mexico, and pre-revolution Cuba, as well as many other places, has tried to put a stop to people too ambitious for economic independence (i.e. possible generators of competition). In Guatemala, Jacobo Arbenz (the democratically elected president in 1951) was overthrown by the US when he tried to expropriate unused United Fruit Company land, while offering the price that *their tax filings said it was worth*. This expropriation was for the purpose of land/agrarian reform (widespread land distribution is said by some economists to be necessary before an economy can be "developed"; i.e. the squatters of early US history); UFC insisted the land was worth some 20 or 30 times what they had reported for tax purposes (the strong implication being "of course we valued it downward to assess it for tax, but as for it's actual worth, of course that's much higher" -- in otherwords -- "what do you mean we can't screw you twice?"). A CIA operation, under the approval of Pres. Eisenhower (and under the guise of fighting the Communist threat) helped topple Arbenz and replace him with a brutal dictator. (So I'm going to have to disagree with Geoff when he says the US is "the nation most willing to consistently apply [our ideals]", though he admits our failure to sometimes "realize" them.) This is not asimilar to the US' toppling of the Iranian president and installation of the Shah. (A detailed search of FOIA about our extra-national activities is a long-term goal of the J Continuum. Stay tuned.)

The US has shown a willingness to crush any other country that poses a serious challenge to our economic interests.

This does not create a healthy international market, imho.

More on the flaws with capitalist dogma at a later date.



Geoff said...

Coming over here to respond to your last point (but will check out what's new on your site later today...)

At some point, we stopped discussing the same issue. The original NYTimes article argued that individuals should be coerced (legally prohibited from smoking in various places) on the grounds that it was good for them. This is an illiberal argument. Though I share the conclusion (smoking should be banned in most public places), I disagree vehemently on the justification. Somewhere in the disagreement, this issue seems to have morphed into the largely unrelated question of whether the government should aggressively publicize the health-risks of cigarette smoking - which obviously it should.

I do not find argumentation "coercive" in any way. I do reject Chomsky-ian logic which implies that certain arguments are so powerful they will override free will (repeat a canard long enough and people will believe it). Lies are one thing - but in the absence of lies (and the argument that smoking will make you more glamorous cannot be considered a "lie", properly defined), argumentation is not coercive.

When it comes to government expression there are two categories of speech implicated. Affirmative speech (the government informing consumers of health risks) and negative speech (the government prohibiting the tobacco companies from arguing for the benefits of smoking). The tobacco companies frequently lied for years about the health risks of smoking, and that is something for which they should be punished, and an ignorace which should be rectified. But I reject your premise wholeheartedly that the prevalence of advertising or its repetition in any way imperils the exercise of free-will. The fortune of New Coke should be enough to indicate that consumer loyalty is somehow connected to product quality - whatever the role of advertising in formulating the initial choice.

You advance the Chomskyian fallacy in your reply:
"Our President coerces us every time he gives a speech about anything, simply by his position"

If this is the case, then what relevance has persuasion? If the merits of an argument are secondary to the position from which it is advanced, then we MUST despair of the possibility that arguments compel through persuasion, not coercion. Only an argument advanced from a position of absoltue powerlessness could be extended credit as persuasion.

I simply cannot conflate those two categories as you have done.

J said...

Response to Geoff--

Well, now we certainly are talking about different things. Let me try and rejoin the broken threads.

A) My implication of "coercion" from authority is not how you take it. People speaking from positions of authority almost always have their positions given greater weight; this is not always a good thing. So a position of authority automatically compels someone, on average, to give more credence to that person's argument. I labeled this coercion, because it's based on a rational mental schema, but must be rechecked every time against the facts, which is a skill that must be trained and honed, like any other, for most people. Rational, argumentative persuasion is of course the antidote, as you suggest.

And to deny that advertising has a deep effect upon the psyche is to deny very fundamental psychology research (the psychology upon which advertising is based, no less), and assume that companies are completely wasting their money and disregard a large amount of research simply out of, it appears, distaste or disbelief. New Coke's failure does not disprove the deep influence the saturation of McDonald's, Coke, etc. advertisements and their effects on the psyche; it is a circumstantial case, but in France, alcohol advertisements have been banned in sports stadiums and on tv, and drinking has dramatically decreased.

I think it comes down to a difference of definition. I used coercion as a term to mean that we are surrounded by stimuli that compel us to do different things. It is quite clearly not the government's duty to forcibly compel us (beyond enforcement of inter-person physical safety, etc) to do anything. The government should, however, try and persuade us, through reason, that the best science research on how avoid unnecessary smoking death, for example, is valid and the commercials are quite possibly not.