Flying my neoliberal freak flag for what may have been one of the last times... But — and this is a very important “but” — even here in America, you can, as you definitely can elsewhere, mobilize a great deal of populist energy by identifying foreigners as the enemy. I do not think this is an impulse that it is healthy for any part of this country. I do not think this is something any political movement that seeks to do anything other than destroy can dare to encourage. And I now find myself far beyond my competence. So I want to hear from historians, sociologists, political scientists, and cultural studies practitioners about why we have come to obsess about NAFTA, about not blocking China from joining the WTO, and about TPP. The economic case against the two agreements that passed, and the one that did not, doesn’t hold water. It’s clear, however, that candidates can make an effective political case against trade agreements — and that scares me
I agree that manufacturing jobs were going away well before NAFTA. The trend was obvious by the 1980s. The real problem isn't that manufacturing jobs were going away, but that union jobs were going away, but no one was allowed to more than allude to this in a mainstream forum. There had been a massive power shift in the 1970s, and its most obvious manifestation was in the creation of the Rust Belt in the former "trunk" region. By the 1980s, all those manufacturing centers one learned about in the 1960s were brown fields.
Trade agreements were relatively minor in their direct impact, but they were a piece of the growing power shift that one could actually criticize in a public forum. One of the big levers in the power shift of the 1970s was the ability of manufacturing to move. This was made easier by the interstate highway system, changes in the railroad system, a more centralized banking system and the rise of container shipping. Shutting the plant down and moving to the Sun Belt, now that the railroads were no longer dominant, was a realistic option and one exercised with increased frequency.
Free trade agreements just added a new wrinkle, there was now an easy step down from the Sun Belt and, with increased globalization, more easy steps down from there. There was no longer even an excuse for providing decently paying jobs. Workers and small businesses in the Sun Belt, which never allowed unions or any other form of worker push back, now found itself in the same situation as the Rust Belt. It too could be bled.
The press doesn't cover labor issues any more. It hasn't done so for decades. Pay cuts, crazy hours, invidious contracts, wretched working conditions are all simply assumed and not worth reporting. Now and then one sees a think piece, but it's usually full of the passive voice and carefully non-political, as if the wretched condition of labor were due to solar activity. Since trade agreements also affect civic leaders and business owners, we get to hear about them. When elites are involved, the fight can be visible.
(In some ways, free trade agreements are the revenge of the NE bankers who watched the interstates and post-World War II automotive life style erode their concentrated manufacturing empire. Maybe the South could rise again, but only so far. When the elites battle, everyone else has to scramble to avoid getting crushed. I don't believe in any conspiracy theory, but I do accept that there are powerful players out there and that I shouldn't take every argument on face value.)
"The people who lose jobs in import-competing manufacturing and leave the sector for the most part found jobs elsewhere — in services, in construction, and so forth."
This so reminds me in the 1980s when someone said "it doesn't matter if we are good at making computer chips or potato chips". Really? Krugman has done work on geographic clusters to explain why a cluster succeeds in its area of expertise. Now that China is building whole [Boeing knockoff?] aircraft, how will that affect the Seattle area? Will Boeing continue to lay off workers and will aerospace expertise diminish until China or Airbus become the sole vendors of commercial jets? What about all the jobs dependent on those Boeing employee wages?
Silicon Valley was once great at electronics. Now that expertise has shifted to software. Suippose we lose that expertise to another country, then doesn't Silicon Valley as a successful, high wage, cluster decline (much as did Route 128 outside Boston), and with it Silicon Valley as a whole?
The assumption that when one good paying job disappears, another, possibly better one appears may be more looking in the rear view mirror than looking at the road ahead. How many of these service jobs will be lost to software employing AI, so that all that cognitive requirement gets automated away and fewer people are needed to do the jobs?
It has been suggested that the only surviving jobs will be high-touch, but low-paying jobs in caring for people. The engineering expertise will be lost so the robots, smart machines, and software will be largely purchased from foreign clusters of expertise, and the US will join countries like Britain that have largely "allowed" manufacturing to decline. There may be a transient gain from buying cheaper foreign goods, but in the long run?
The loss of manufacturing has other consequences. When the new nuclear power station at Hinkley Point C was being contested due to the power being much more expensive than renewables, the Chinese partner not so quietly threatened that there would be sanctions levied if the UK tried to back out of the deal. This was a foretaste of what was to inevitably happen after Brexit as the UK would be less buccaneering and more "cap in hand" for trade deals.
Lastly there is the strategic issue. As more and more manufacturing in electronics is outsourced to China, what happens if a war breaks out? Chip supply shortage? Chips with self-destruct codes to cripple the hardware?
If manufacturing jobs declined solely due to automation, then fine. The expertise stays largely national. But that is not really the case anymore, is it? If it says "Made in China" on the box, then that is where the manufacturing is done, and where the expertise is migrating to. Hence China's launch of the C919 commercial jetliner. They are not just building the lower technology passenger sections for assembly at Everett. They can build high-tech wings too.
But don't those communities of engineers support an economic ecosystem that ensures those blue-collar jobs are maintained and with decent wages as the profits may be high. We see the reverse when such clusters end. The ecosystem starts to unravel, jobs are lost, the work available degrades to pink-collar work, and unemployment. If the data supports the conclusion that blue-collar manufacturing wages remain low due to exploitation, then I would agree with you, but is that the case? Where it went wrong in Silicon Valley was that the blue-collar manufacturing was outsourced from the cluster, undercutting the ecosystem. Costs were clearly a driver as it was evident by the mid-1990s that buying electronic components and fabricating circuit boards was far cheaper from foreign companies than the local companies. Large companies quickly outsourced manufacturing, often to their detriment as foreign firms were quite happy to steal designs and manufacture their own for sale at lower prices.
What does the economics profession have to say about such practices? What is the actual long-term trade-off of outsourcing manufacturing to increase profits while losing control of manufacturing processes and creating competition, versus keeping an integrated firm but accepting higher costs and lower profits? Is there a game-theoretic solution that overcomes the benefit of outsourcing, or is it all about how fast you can keep ahead of both domestic and foreign competition?
Sometimes yes, sometimes no. It depends on whether the technologies they build are labor-complementing or labor-substituting, how much bargaining power labor has, and whether there is a high-pressure economy. Remember: a skilled blue-collar job is just an unskilled blue-collar job with a strong union...
I agree that manufacturing jobs were going away well before NAFTA. The trend was obvious by the 1980s. The real problem isn't that manufacturing jobs were going away, but that union jobs were going away, but no one was allowed to more than allude to this in a mainstream forum. There had been a massive power shift in the 1970s, and its most obvious manifestation was in the creation of the Rust Belt in the former "trunk" region. By the 1980s, all those manufacturing centers one learned about in the 1960s were brown fields.
Trade agreements were relatively minor in their direct impact, but they were a piece of the growing power shift that one could actually criticize in a public forum. One of the big levers in the power shift of the 1970s was the ability of manufacturing to move. This was made easier by the interstate highway system, changes in the railroad system, a more centralized banking system and the rise of container shipping. Shutting the plant down and moving to the Sun Belt, now that the railroads were no longer dominant, was a realistic option and one exercised with increased frequency.
Free trade agreements just added a new wrinkle, there was now an easy step down from the Sun Belt and, with increased globalization, more easy steps down from there. There was no longer even an excuse for providing decently paying jobs. Workers and small businesses in the Sun Belt, which never allowed unions or any other form of worker push back, now found itself in the same situation as the Rust Belt. It too could be bled.
The press doesn't cover labor issues any more. It hasn't done so for decades. Pay cuts, crazy hours, invidious contracts, wretched working conditions are all simply assumed and not worth reporting. Now and then one sees a think piece, but it's usually full of the passive voice and carefully non-political, as if the wretched condition of labor were due to solar activity. Since trade agreements also affect civic leaders and business owners, we get to hear about them. When elites are involved, the fight can be visible.
(In some ways, free trade agreements are the revenge of the NE bankers who watched the interstates and post-World War II automotive life style erode their concentrated manufacturing empire. Maybe the South could rise again, but only so far. When the elites battle, everyone else has to scramble to avoid getting crushed. I don't believe in any conspiracy theory, but I do accept that there are powerful players out there and that I shouldn't take every argument on face value.)
Touché... But by focusing the critique on "bad trade deals", it mad actually dealing with the problem politically impossible...
"The people who lose jobs in import-competing manufacturing and leave the sector for the most part found jobs elsewhere — in services, in construction, and so forth."
This so reminds me in the 1980s when someone said "it doesn't matter if we are good at making computer chips or potato chips". Really? Krugman has done work on geographic clusters to explain why a cluster succeeds in its area of expertise. Now that China is building whole [Boeing knockoff?] aircraft, how will that affect the Seattle area? Will Boeing continue to lay off workers and will aerospace expertise diminish until China or Airbus become the sole vendors of commercial jets? What about all the jobs dependent on those Boeing employee wages?
Silicon Valley was once great at electronics. Now that expertise has shifted to software. Suippose we lose that expertise to another country, then doesn't Silicon Valley as a successful, high wage, cluster decline (much as did Route 128 outside Boston), and with it Silicon Valley as a whole?
The assumption that when one good paying job disappears, another, possibly better one appears may be more looking in the rear view mirror than looking at the road ahead. How many of these service jobs will be lost to software employing AI, so that all that cognitive requirement gets automated away and fewer people are needed to do the jobs?
It has been suggested that the only surviving jobs will be high-touch, but low-paying jobs in caring for people. The engineering expertise will be lost so the robots, smart machines, and software will be largely purchased from foreign clusters of expertise, and the US will join countries like Britain that have largely "allowed" manufacturing to decline. There may be a transient gain from buying cheaper foreign goods, but in the long run?
The loss of manufacturing has other consequences. When the new nuclear power station at Hinkley Point C was being contested due to the power being much more expensive than renewables, the Chinese partner not so quietly threatened that there would be sanctions levied if the UK tried to back out of the deal. This was a foretaste of what was to inevitably happen after Brexit as the UK would be less buccaneering and more "cap in hand" for trade deals.
Lastly there is the strategic issue. As more and more manufacturing in electronics is outsourced to China, what happens if a war breaks out? Chip supply shortage? Chips with self-destruct codes to cripple the hardware?
If manufacturing jobs declined solely due to automation, then fine. The expertise stays largely national. But that is not really the case anymore, is it? If it says "Made in China" on the box, then that is where the manufacturing is done, and where the expertise is migrating to. Hence China's launch of the C919 commercial jetliner. They are not just building the lower technology passenger sections for assembly at Everett. They can build high-tech wings too.
Yes: what you make matters a lot for nurturing your communities of engineering practice. But not for the real wages of blue-collar workers...
But don't those communities of engineers support an economic ecosystem that ensures those blue-collar jobs are maintained and with decent wages as the profits may be high. We see the reverse when such clusters end. The ecosystem starts to unravel, jobs are lost, the work available degrades to pink-collar work, and unemployment. If the data supports the conclusion that blue-collar manufacturing wages remain low due to exploitation, then I would agree with you, but is that the case? Where it went wrong in Silicon Valley was that the blue-collar manufacturing was outsourced from the cluster, undercutting the ecosystem. Costs were clearly a driver as it was evident by the mid-1990s that buying electronic components and fabricating circuit boards was far cheaper from foreign companies than the local companies. Large companies quickly outsourced manufacturing, often to their detriment as foreign firms were quite happy to steal designs and manufacture their own for sale at lower prices.
What does the economics profession have to say about such practices? What is the actual long-term trade-off of outsourcing manufacturing to increase profits while losing control of manufacturing processes and creating competition, versus keeping an integrated firm but accepting higher costs and lower profits? Is there a game-theoretic solution that overcomes the benefit of outsourcing, or is it all about how fast you can keep ahead of both domestic and foreign competition?
Sometimes yes, sometimes no. It depends on whether the technologies they build are labor-complementing or labor-substituting, how much bargaining power labor has, and whether there is a high-pressure economy. Remember: a skilled blue-collar job is just an unskilled blue-collar job with a strong union...