Politics: Onward from New Hampshire

[sgtclub]

Originally posted by Skeks in the city
Originally posted by sgtclub



Unskilled workers on average suffer long term wage loss from free trade and immigration. And given that globalization is moving up the food chain, skilled workers will as well. I doubt you can prove that gains in purchasing power will make up for that wage loss. If 50.1% of the U.S. population will have a worse standard of living due to free trade and immigration, they should vote against free trade and immigration. They should do that unless there are going to receive full compensation from the 49.9% of the U.S. population that benefits from free trade.

Retraining is no solution. Free trade and immigration are simply lowering the standard of living for U.S. workers that are substitutes for foreign workers in countries with lower standards of living. Retrain for any job you like, free trade and immigration are depressing wages at all skill levels. The clear beneficiaries of free trade and immigration are foreign workers in undeveloped countries and owners of capital. There is no good reason for U.S. workers to hurt themselves in order to benefit foreign workers and owners of capital.

I'm also in favor of eliminating double taxation of corporate earnings, as long as we hike taxes on high income individuals enough to recoup the losses in revenue.

You are focusing on the short term at the expense of the long term. I urge you to go back and re-read the two articles I posted. But here are the cliff notes:

The only drawback to increased productivity occurs in the very short run, when it slows job growth. In the long run, rising productivity is the only thing that makes it possible to improve our standard of living. As Berkley economist Brad DeLong has pointed out, it takes about 60 years for the income of the average American to double when the productivity of our labor force grows by 1.2 percent per year. It only takes 25 years for incomes to double when productivity grows by 3 percent per year. More income implies more economic growth and, therefore, more jobs. Which is to say, trying to put the kibosh on productivity growth in order to generate a few token jobs today would be utterly self-defeating.*

Comparative advantage, though frequently confused with absolute advantage, is actually a concept about relative relationships, not absolute ones. What the principle of comparative advantage actually implies is that each nation should specialize in what it does best relative to all the other things it could be doing and then trade with others for other needs. At its most basic level, comparative advantage is about opportunity cost: The country with the lowest opportunity cost of producing a good (i.e., the cost of producing that good in terms of other goods) should specialize in production of that good.
Let's take the example of software, since it seems to be on everyone's mind. Suppose that the only two goods in the world are T-shirts and computer software. For the sake of simplicity, let's say it costs us $10 to produce a single T-shirt, and $100 to produce a computer program. And let's also say it costs the Indians $5 to produce a single T-shirt, and $95 to produce a single computer program. In other words, the Indians can produce both T-shirts and computer programs more efficiently than we can.

Does that mean that the Indians will produce everything and that we'll produce nothing--and that, before long, the Indians will own us and the only kind of rice you'll ever be able to get in the United States is basmati...? (Sorry, we get a little carried away with this stuff sometimes.) The answer is, emphatically, NO. The reason is that it's still in both countries' interest to specialize in the good they have a lower opportunity cost of producing. In this case, we can produce 10 T-shirts for every computer program. The Indians can produce 19 T-shirts for every computer program. Since it only costs us 10 T-shirts to produce a computer program versus the Indians' 19, we should specialize in production of computer programs and trade them to the Indians for T-shirts (which will be cheaper for us when acquired through trade than when produced locally). They, on the other hand, should specialize in production of T-shirts and trade them to us for computer programs (ditto on the logic).