Democracy in China: be careful what you wish for

Eric Shierman thb Democracy in China: be careful what you wish for

by Eric Shierman

We either take it for granted or deny it outright, but a great deal of America’s economic growth is dependent on the continued expansion of the Chinese economy. This is particularly true of Oregon, a state whose reliance on its exports to China bears a more material impact on our local prosperity. Our two largest private sector employers, Intel and Nike, have led the way. Like any other capital-intensive product, Intel produces high-end semiconductors in Oregon more cheaply than the Chinese could produce themselves. That is what comparative advantage in trade is all about.

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The greatest minds in sports marketing on this planet live and work on the west side of Portland. Nike has managed to help China embrace basketball as tightly as Japan embraced baseball to the point where the day the Chinese Olympic basketball team beats our own, a financial windfall will be felt all the way from Beaverton retailers to the University of Oregon’s development office. Notice which player’s jersey sports a Nike Swoosh:

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Do the math. For every $1 billion in exports to China roughly 5,400 jobs are created. During this past recession, as exports to the rest of the world declined, Oregon’s exports to China grew substantially to their current level of over $4 billion, a 1,300% increase since 2000.

Our greatest economic advantage comes from our $2.4 billion worth of Chinese products that Oregon imports. The mercantilist mentality dies hard so I cannot help but wonder how many of my readers think exports are great but imports are bad. To show the economic gains that imports bless an economy with let’s take a product that Oregonians consume a great deal of but is not made in China: cheese. Most cheese in the US is made in Wisconsin, but Oregon has a nice dairy farm in Tillamook. The US Constitution is among other things a free trade agreement among the states. Although article I section 9 forbids it, would the Oregon state economy benefit from trade protection measures against the import of Wisconsin cheese?

The answer is not just no, but a big loud heck no! Tillamook County Creamery Association would benefit yes, but at the expense of the rest of the state resulting in a net loss. Take a look at the price difference between Tillamook Cheese and its Wisconsin competition from this picture I took from my phone while shopping at the QFC across the street from my condo this morning:

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Kroger, which owns QFC, acts as a big importer of Midwestern products into our local economy. If they did not do so, Tillamook Cheese would cost us substantially more than their already higher prices. By paying more for the cheese we consume day upon day, the lost purchasing power would eliminate demand for many other local goods and services.

Let’s bring the same principal back to Oregon’s trade with China for a silly trade dispute lingering in today’s headlines. Oregon has a steady demand for solar panels, not to save money mind you, but to display one’s green bona fides. Todd Meyers in his excellent book Eco Fads, points out how often “green homes” that face to the north will still install their solar panels on the front of the house so the neighbors can see them, forgoing the opportunity for full electric substitution from the setting sun to the west. Buying solar panels is a form of conspicuous consumption that has a healthy market in our state. Even with substantial tax subsides, they are not cheap, but home and business solar panels are substantially cheaper now than they would otherwise be without our imports from China. When Hillsboro’s Solar World lobbies for trade protection from these imports, they are trying to protect a small amount of jobs from the capital intensive production of this product at the expense of far more jobs from the labor intensive installation of them as well as the lost demand from all the other products and services Oregon’s environmentalists will not be able to afford if they pay too much for their green eye candy.

Like the Chinese people, we are stakeholders in China’s economic success. So why are so many Americans’ demands for democracy in China so at odds with the demands of the Chinese people? The most honest answer to that question is probably that complaints about China’s political system are really little more than red herring arguments against trade. That is why I went to such trouble reminding us how valuable our bilateral trade relationship is before I even began dealing with the subject for this article.  The intellectual divide on trade is so great, such red herring arguments thrive. Just as the only geocentric astronomers in the seventeenth century had yet to look down Galileo’s telescope, today the only serous trade protectionists are those who have never taken the time to see just how overwhelming the empirical research has become. Since these are mostly progressives, the greatest irony is that they are quick to quote Paul Krugman as an authority on fiscal policy matters where he has never published any meaningful peer reviewed research, but they ignore the substance of his life’s work that won him the Nobel Prize. Not only was he a trade specialist in his academic work, but in Pop Internationalism Krugman penned the most lucid advocacy of free trade policy ever written.

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Once we remove the trade issue from any political conversation about China we can begin to appreciate what they have accomplished as a society rather than rush to highlight their faults. Ever since a coup led by Li Xiannian and Ye Jianying ousted the Maoists in October 1976 the Chinese Communist Party (CCP) has successfully initiated more reforms to advance civil liberties and executed more tough free market reforms than any other political party in human history. Their greatest move was to transition power not to a democratic process, but rather to Deng Xiaoping.

Like a spoiled wealthy child that heaps scorn on his parents, our political culture likes to blame our problems on China when in reality Americans fail to fathom how worse off we would be had Deng Xiaoping not prompted China to punt out of the poverty of socialism thirty years ago initiating the greatest economic turnaround ever seen that has lifted more people out of poverty in a shorter period of time than could ever have been dreamed possible given the inefficiently planned economy he was working with and its hungry, uniform-wearing automatons for a population. China could not have made these tough reforms as a democracy. It would have drifted in the seas of rent-seeking as has India, and China’s short lived democratic experiment would have collapsed in an avalanche of corruption like Boris Yeltsin’s Russia.

To any casual observer who has actual spend time in China, it is obvious the people of China know this, and the CCP is probably the most popularly supported political party in the world today. While reliable polls on such matters are nonexistent, I have traveled extensively in China and am fairly proficient in Mandarin. I have seen firsthand that there is no more love for democracy in China than there was for it among America’s founding generation. The Anti-Federalists campaigned against the ratification of our Constitution by calling it democratic. The Federalist Papers responded to this heinous charge with a unified theme: this constitution is great! We promise you it is not a democracy.

James Madison feared the rise of demagogic politicians flattering the people’s fleeting yet passionate demands; so he authored a constitution that put as much friction between the will of the people and the implementation of policy as possible for a sparsely populated 13 colonies. Could we not cut the Chinese a little slack for sharing the same fears with a densely packed population of 1.3 billion people? The balance our constitutional convention sought was a broadly diffuse electorate of propertied white males that amounted to a fraction of the population to elect representatives that govern for a term.

The Chinese today have developed a form of government that divides power among a broadly diffuse electorate of party members who are also a fraction of the population, electing representatives to govern for a term. There are more than twice as many cadres of the CCP as there are voters in Canada. Deng Xiaoping’s primary institutional goal was to leave a system in place that could never again be dominated by one man. Every successor of his so far was handpicked by Deng himself. In their current transition, we are witnessing the first unpredictable formation of a politburo that is being determinate by the votes of the grass-roots of the party with all kinds of Electoral College like friction along the way.

Just as the United States started off with a vision of having no competing political parties only to see Hamilton and Jefferson’s factions become a two party system, multiple ideologies and interests within the CCP are forming into two distinct factions that are doing the same. The Chinese call them the Guangdong Model and the Chongqing Model. The province of Guangdong borders Hong Kong and had the first Special Economic Zone in Shenzhen and is thus associated with free market policies. The Guangdong Model is the “party” of Deng Xiaoping’s center-right vision of greater market liberalization. Its inspiration comes from Singapore and Hong Kong two undemocratic polities that have enjoyed the rule of law with freer market economies than the United States and higher per capita GDP than we have as well.

Deng Xiaoping passed this ideological baton off to what the Chinese call “the third generation” with Zhang Zemin as head of state and the Zhu Rongji as head of government having plucked these two from the obscurity of Shanghai municipal government after the purge of Zhao Ziyang in 1989 due to their firm but nonviolent treatment of prodemocracy protestors. The Deng vision continued on in “the fourth generation” with Hu Jintao as head of state and Wen Jiabao as head of government. This fourth generation has been challenged to pass its policies on to a fifth generation of politburo leadership because of the emergence of a rival vision in recent years.

With Bo Xilai we have seen the rise of a viable center-left alternative to Deng. Bo had a western style charismatic animation to him in stark contrast to the stoic form of post-Deng technocratic rule. Bo had the feel of his audience like Bill Clinton with the tactical political cunning of Richard Nixon.

Beyond his blatantly ambitious style, Bo became out of step with Beijing in five ways. First, he opposed the continued privatization of state owned enterprises.

Second, he built a Rudolph Giuliani like name for himself as a tough-on-crime clean-up-the-city guy, but with extra legal powers. Beijing has been working hard on the Deng vision to foster a rules-based criminal law system, but Bo fought crime with a Star Chamber approach.

Third, though Bo really did break the back of organized crime in his jurisdiction, he used this power to frame political enemies. He also extorted businesses into voluntarily contributing to public causes, quickly making him the Chinese Eliot Spitzer.

Fourth, he tried to rehabilitate Mao packaging him into a more social democratic direction. While seemingly acceptable, the photoshopping of Mao out of CCP party ideology has been a steady yet delicate project of the Deng era. Having a mausoleum and his picture hanging from the palace museum is about the only Mao you see today. Deng’s CCP has tried to keep Mao as a George Washington figure for his fight for a China independent of colonial domination while ignoring his atrocities the way we would prefer to forget that George Washington was a slave owner. Bo was moving in the other direction, trying to salvage the left-wing ideology of Mao too.

Fifth, Bo engaged in a massive series of public works projects financed by very un-Chinese levels of deficit spending. None of these projects are going to pay off; he has racked up so much in debt that in a matter of a few years Bo has created a Greece like fiscal crisis deep inside of China making him the Chinese Abraham Beame. Bo’s fiscal woes can be seen in the remarkable spread between the yield on Chinese sovereign debt and Chongqing’s munibonds.

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Bo XiLai was an incredibly popular figure both locally and nationally. He was out of step with the politics of his day, but personally seemed unstoppable. So if he was the Chinese Nixon, Beame, Clinton, Guliani, and Spitzer all rolled up into one man, it seems fitting that his opponents took him down with a scandal. First there were rumors that he was involved in graft, but in Politburo circles that did not seem like enough, because who out in the provinces isn’t? He was not dipping his beak any deeper than his peers. Then came rumors that his wife Gu Kailai had contracted the murder of a British national Neil Heywood who died mysteriously in a hotel room last November. This was serious enough to send agents down to Chongqing to secretly investigate, but Bo likely was aware of every move.

The greatest scandal that sent Beijing into action was the discovery that Bo XiLai was wiretapping the standing committee of the Politburo, including Hu Jintao himself. The security apparatus that Bo’s Chongqing Model created included enlisting the help of Fan Binxing president of the Beijing University of Posts and Telecommunications and the father of China’s “great firewall” of internet censorship to help him build an advanced domestic signals intelligence capability. Bo’s use of this asset to monitor his rivals in Beijing became the Watergate moment that swung the central authorities into action. As they were preparing to pounce, Bo’s police chief Wang Lijun, for reasons yet unknown beyond rumors, feared his life was in danger and sought political asylum in the United States on February 6th, walking into the US consulate in Chengdu with documents and secrets.

This no doubt involved a 3am call to the White House, and the Obama administration made the right decision by not granting him asylum. Wang was Bo’s henchmen overseeing the planting of evidence, tortured forced confessions, and perhaps political killings. The State Department contacted high level authorities in Beijing and handed him over to national police. Wang will probably face treason charges of some kind, but he is turning over state’s evidence for the ongoing Chongqing purge.

It remains to be seen how far the Deng Xiaoping wing of the party can exploit this moment to its advantage and continue the free market reforms that have made such a positive impact on Oregon’s economy too, but it is clear we are witnessing a monumental moment in Chinese political development. Bo is under house arrest. His wife is in a jail cell awaiting her trial for the murder of Neil Heywood, Wang is in some kind of Chinese witness protection program, and the Chinese media has been given a relatively free hand to openly report it.

This whole affair carries three clear take-aways. 1) In Bo Xilai we got a glimpse of what a rush to democracy in China would have looked like. This has been the dominant narrative in the popular Chinese blogosphere. 2) The intolerance of all sides of China’s political spectrum for the arbitrary arrests, kangaroo courts, and wiretapping in Chongqing represents a deep seated desire for the rule of law by the CCP and represents a maturation of China’s political culture. The left-wing minority in the CCP may desire a return to Mao’s goal of equality, but not Mao’s means of achieving it. 3) China is evolving in its own way at its own pace, reforming its institutions to adapt to its own unique circumstances. There is little advice an American diplomat could offer that would help China find its way.

When so much of our own prosperity is dependent on Chinese economic growth, US foreign policy has wasted way too much of our scarce political capital trying to interfere in China’s internal affairs. Mass political participation is only a means to an end. The end is good governance and civil liberties. If China can become a giant Singapore, delivering growth and freedom without democracy as we know it, good for them and good for us. If China were to democratize and become a giant Argentina, it would be a human tragedy on a colossal scale, a loss to the entire world, but Oregon especially.

Eric Shierman lives in southwest Portland and is the author of A Brief History of Political Cultural Change, and also writes for The Oregonian’s My Oregon blog.

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Posted by at 05:55 | Posted in Economy, Free Trade | 108 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Ramalama

    Just a quick note. The Kroger cheese isn’t necessarily cheaper because it’s from Wisconsin, it’s cheaper because it’s a house brand. 

    If Kroger couldn’t ship Wisconsin cheese into Oregon, they would have an incentive to work out some kind of deal with an Oregon producer, perhaps even Tillamook.

    Imports can’t be made illegal between the states, but your example isn’t necessarily an accurate example.

    • http://www.facebook.com/eshierman Eric Shierman

      The reason the concept that all costs are opportunity costs is the first principle of economics that first must be mastered before all others is to prevent the commission of common analytical errors like the one you just made. In this case it is called the fallacy of vertical integration. While it is possible to sell a proprietary product at a loss, purchasing from an internal supplier has no inherent advantage over purchasing from an external one. Delta Airlines is about to relearn this lesson that corporate America learned the hard way in the 1970s as it loses its shirt from its now famously foolish purchase of an oil refinery. 

      Store brands are generally less expensive because of the economies of scale that come from purchasing from suppliers with the lowest marginal costs. Compared to production costs, transportation is not that big of a deal when amortized over an entire triple trailer load. Tillamook Cheese has many things going for it, but lower marginal costs are not one of them. 

      Costs of course only indirectly affect prices. You knew that right? Prices are determined by the price a consumer is willing to pay relative to the marginal supply from the competition. If Kroger were forced to purchase from Oregon suppliers that would be a dramatic reduction in marginal supply. Also Oregon producers like Tillamook have effective branding that commands a higher price consumers are willing to pay. Shipping costs are nothing compared to these factors, thus free trade has a very measurable positive affect on a domestic economy’s purchasing power parity while “buy local” is synonymous with “buy less” – much less.

      • deanfromoregon

         You are missing a key point Eric. Quality. All cheeses are not equal, hence they aren’t priced equally. Same is true for wines, sausage, ham, butter, and a lot else.

        Tillamook isn’t just about branding. Its about taste, which as they say, there is no accounting for (but there is a price difference). 

        • http://www.facebook.com/eshierman Eric Shierman

          Have you retired the “valley person” handle? Why not post in your full real name? 

          Differences in quality can only affect prices if the consumers are willing to pay a premium for it. Also it is the case that improvements in quality do not necessarily increase marginal costs. This fact has been most pronounced by the Toyota Production System which has surpassed sushi, as Japan’s greatest gift to human civilization (otherwise known as Lean Production which is as much about Kaizening quality as the elimination of non value added processes).

          I sort of had my taste test for Tillamook Cheese this January when QFC ran a promotion during Superbowl weekend that made it the cheapest option. I was disposed to assume the favored brand would have better flavor, but it tasted the same to me. No matter how much money I make later in life, I will always be a frugal volga german from Eagle Creek.

          • deanfromoregon

            Catalyst randomly picked a name I use elsewhere. I don’t know why or wherefore.

            I’ll tell you why I don’t post under my full real name. I did that for a while, and then comments calling me a douchebag and similar terms started showing up when I would google my name. Not great for business, so I adopted an alias.

            I think the larger cheese point is you can’t draw any conclusion on the value of free trade by comparing the price of 2 cheeses unless they are in the same market niche.  There are manufactured cheeses for the masses, and then there  artisan cheeses for the discerning taste bud. Tillamook offers both mass and artisan types depending largely on length of aging. THe one you had at QFC couldhave been the low end, bland stuff. Store brands, like the one you used for comparison, are typically for the masses.  

          • http://www.facebook.com/eshierman Eric Shierman

            Those two blocks of cheese are in exactly the same market niche. That is Tillamook’s cheap block of Cheddar for the masses. That’s why it created such a photo opportunity as they laid side by side on the lowest shelf. There must be some minor difference of some form between them, but their marginal difference in taste is materially smaller than their marginal difference in price. That picture was taken at the QFC on the top of Sylvan Hill not far from he Oregon Zoo. If the cameraman were to do a 180, directly behind him is the deli with the artisan cheese. No doubt Tillamook has some products there too, but I would not know. I save my pennies. 

            Even if they were different, the fungibility of substitable goods would provide the same effect. If low quality imports are restricted so that the cheapest option to consumers is to purchase locally produced premium products, the economic gains from the firms that produce these higher end goods are less that the loss that all the other local businesses suffer from less demand because their customers have less to spend on other things. This is so measurable and the empirical evidence is so conclusive, trade protectionist really are justifiably comparable to Medieval physicists and astronomers who have never looked through a telescope or dropped two objects of different weight from a high distance. 

            If you are patient, I will respond to your other comments below when I get a chance. I am in Newport with limited internet beyond my phone. 

  • Bob Clark

    I don’t agree about China’s continued growth being a great plus for the U.S economy at least in the intermediate future.  A drop in China’s economic expansion would cause oil and material prices to decline sharply against otherwise.  Also, China would also have to reduce its export prices from otherwise, giving the U.S economy certain offsetting factors which would boost its domestic economy in the intermediate future.  It is true westcoast states like Oregon probably would not fully recoup the export loss from a sharp slowdown in China; but other parts of the U.S domestic economy, particularly the consumer could do fairly well after a few years of adjustment.

    As for democracy:  Yes it is great the U.S is a Republic and not a flat out democracy.  It got too close to a full blown democracy in the 2009-2010 period when the GOP couldn’t always exercise the filibuster in the U.S Senate (and we got ObamaCare…less).  Maybe the third branch of the federal government will correct the results of this brief bout of U.S. democracy…when snake oil salesman Obama sold the washed out post-Bush electorate on “Hope and Change.”

    Hoping now Obama is changed out of the White House in November 2012.  Change you can believe in (Nobama 2012)!

    • http://www.facebook.com/eshierman Eric Shierman

      I have enjoyed reading your comments under my articles Bob, and have taken note that you are a bonafide inflation dove. Thus I find it a little ironic that you would be so quick to sacrifice global economic growth in the hopes it will slow demand pull inflation. 

      I cut out from my already long article a few paragraphs regarding China’s current economic challenge; they are facing a tough monetary policy choice. They have reached a fork in the road and can either take the Peron path accepting hyper inflation or the Volcker path by fighting it. Their currency peg essentially outsources the growth of their own money supply to our own FOMC. 

      We export many things to China, but right now inflation is their biggest US import. Official statistics are unreliable; they are probably in double digits right now. The only way to fight it is to let their currency float. The drop in demand for US Treasuries that change in policy would entail imposes higher interest rates on us, otherwise known as monetary contraction. Thus fighting inflation both domestically, globally, and even in China involves slowing the growth of the quantity of dollars floating around this planet. 

  • 3H

    “The most honest answer to that question is probably that complaints about China’s political system are really little more than red herring arguments against trade.”

    I do believe that, in your mind, this is true.  But that says more about your way of thinking than it does about their’s.  Economics, from what I have discerned, is the primary, and most important, factor to be considered in almost all issues.  So much so, that you have a difficult time realizing that this may not be true for a great many people.  You marginalize the real concerns of a great many people who are less concerned with economic matters than they are matters of human dignity, welfare and freedom.  Matters that are not necessarily related to economic relations.  Economic relations, mind you, are part of the picture, but frequently not, by far, the most important.  

    Take some time, and really listen to people.  You may disagree with their sentiment, but you’ll come to a much greater understanding if your realize that they don’t share your belief in the primacy of economic motivations.  And then you will be less inclined to accuse them of engaging in red herring falacies and risk having your own message ignored.

    Motivations for the way people think and react is much more varied and comlex than your writings reflect.

    • Steve Buckstein

      3H, I assume you would make the same statements to me, and I take your suggestions seriously. That said, while I agree that many people may not think of economics first, that doesn’t mean that economics won’t affect them just as strongly as if they did.

      Economics is all about the allocation of scarce resources. The more efficiently we can allocate and use scarce resources, the more we can achieve our other goals. The Happiness Index versus Economic Growth debate is a good case in point. Allen Alley wrote a great analysis of this debate a few days ago on Catalyst here:  
      http://oregoncatalyst.com/16591-kitz-fix-economy-dont-worry-happy.html

      • 3H

        I’m sure they do, and unfortunately, I didn’t make my point clear enough.  What I’m criticizing is Eric’s apparent belief that when people are criticizing China’s lack of political openness, they are really criticizing is our economic relationship with them.  In some cases, economic considerations trump others.  Sometimes, though, economic considerations are not paramount, and considerations of human dignity and freedom can be made without, necessarily, reference or dependence upon economic considerations.  I think Eric’s assumption that concerns for human rights is based upon trade issues with China is too simplistic.  

    • http://www.facebook.com/eshierman Eric Shierman

      Probably the best way to address your point 3H is the way Steve did with Allen Alley’s hilarious comparisons about what matter most to people. Of course the 1992 Clinton campaign did the same thing by pointing out, who cares if we feel great about winning the Cold War and beating Saddam Hussein in Desert Storm? Can Thymos (the greek word for spirit) and nationalistic patriotism put food on the table? No, it’s the economy stupid! 

      Though more esoteric, I would argue this a different way. It is not a question as to how prominent economic matters should be over other matters, rather everything is economic. It is your concept of economics that is limited. Perhaps you think it only regards business. Economics is about human action under the conditions of scarcity, not just the scarcity of resources but the scarcity of information as well, the scarcity of love, the scarcity of what Hegelians like to call “recognition.” Free societies with their free markets, free minds, and free love distribute this more optimally than Platonic societies that define the good, the just and the beautiful from the top down and distribute it by force. 

      I take a distinctly utilitarian approach because that is how real people behave. The deontological circularity that many intellectuals from the medieval university to the humanities departments of the academy today likes to stew in pot of nonmaterial concerns. It is they that fail to respond to the varied and complex motivations of real people.  

      I take the time to listen to many perspectives. A great deal of political discourse gets muddled in romantic mire. I like to shine some logical sunlight on the swamp of emotional reasoning. I don’t think it is economics that you find so abrasive; I’m thinking formal reasoning itself troubles you. This is not just a divide between economist and noneconomists. It can be found in the divide between continental and analytical philosophy. 

      After taking the time to listen to them, few people that I have met living in India today value their democratic political system more than their desire to have Chinese rates of growth so they can take that opportunity and utilize it to their many subjective ends. After taking the time to listen to folks in Singapore, I have noticed a great deal of pride they take in living in probably the best governed society on earth. The idea they are missing out on the pleasures of voting strikes them as silly when they enjoy levels of human dignity, welfare and freedom that the people of India will probably never know. 

      The greatest evidence that America’s obsessions with Democracy in China is such a red herring come from two facts: 1) it correlates strongly with those who mistakenly think trade with China is harmful. 2) After learning to speak Chinese, I have traveled deep into its heartland, and I have never found an actual resident of China that shares their concern. So if the anti-trade activists who make such a fuss about China’s political system don’t even care about the real hopes and dreams of the actual Chinese people, who is it that is failing to listen?

      • 3H

        I only have what you write in front of me.   When you claim, in an absolute way, that concerns for human rights in China is a red herring, with no softening, or admission of complexity and variety of opinion in that statement, then I’m forced to accept you at your word.  

        I’m sure you’re aware of the problem of anecdotal evidence, and the problems of correlation and causation. That you wish to reduce it to such a simple dichotomy is unfortunate.

        “ A great deal of political discourse gets muddled in romantic mire. I like to shine some logical sunlight on the swamp of emotional reasoning.”

        And a great deal of “logical sunlight” is nothing more than a refusal to acknowledge that emotional responses have value as well.   I’ve also come to conclusion that “logical sunlight” is used by people who wish to validate their own emotional response by pretending that it is superior to someone else’s emotional response.

      • 3H

        I believe there to be a balance that you lack, or at least fail to exhibit, in your writings.  Logic, uninformed by emotion is just as dangerous, and as bad, as emotion uniformed by logic.  

      • 3H


        Though more esoteric, I would argue this a different way. It is not a question as to how prominent economic matters should be over other matters, rather everything is economic. It is your concept of economics that is limited.”

        Again, I believe that you think this is true.  Not because it is, but because you do not have the capacity to truly understand, and consider, that other people don’t share your view.  In your mind, they must be damaged if they cannot see what is so blindingly obvious to yourself.   I suspect you cannot accept differences in viewing the world without attaching concepts of correct and incorrect to those differences; the more a view corresponds with yours, the more correct it is. I believe this to be a blindness on our part.  LOL.. not a fatal one, nor one that is deliberately, or inherently infused with malintent, but one based upon enthusiasm and a conviction that the world can be simply ordered and divined if only people would apply principles that and ways of thought that you, yourself, have adopted. 

        I am not, of course, simply talking about differences of politics that are generally found on here on Oregon Catalyst.  

        • http://www.facebook.com/eshierman Eric Shierman

          I remain open to the possibility that someone somewhere has a genuine concern with Democracy in China with no ulterior motive. Such a person lives in the West and works for an NGO like Human Rights Watch. These people work hard to accurately asses the quality of life in countries primarily with the hopes of working with actors within the countries in question to catalyze organic change. 

          They are not about coercive diplomacy. Human rights folks almost always oppose economic sanctions or any other means of coercion by outsiders to force reforms from diplomatic pressure. They publish reports in pursuit of transparency, but they do not grandstand the way the interest groups who keep the matter of China’s political system foremost on our foreign policy agenda do.These interest groups primarily come in two forms, trade protectionists and Neocons. Trade protectionist are always looking for a reason why we should not trade with another country. Neocons are always looking for a Wilsonian cause to direct our global military power toward some cause because of their Straussian identification of the nihilism of materialism as the real enemy and see “war is a force that gives us meaning” as the solution (to use the title of a book from my favorite progressive author Chris Hedges). Since real human rights people generally oppose an aggressive American foreign policy that imposes its values on other countries with either the use of tanks or trade, the nature of China’s political system would be a non issue if we did not have these two more powerful interest groups hiding behind it. 

          We first separate association from causality with a causal explanandum. Who would make the causal assertion that Paul Wolfowitz’s interest in China’s political institutions comes out of a great concern for quality of life of China’s average Zhou? Who would assert that an AFL-CIO lobbyist  telling a congressional committee that the US should restrict our imports from China because it is undemocratic, does so out of sincere hope to raise living standards in the middle kingdom?

          In social science in general, and public policy debate in particular, any nonsequiter argument, no matter how much emotion is behind it, has no truth value. When you say I fail to “acknowledge that emotional responses have value” that is the equivalent of claiming that I fail to acknowledge the value of an argument that lacks even the pretense to being either valid or sound. I think the quality of my writing would suffer a great deal  if I tried to balance the overwhelming empirical evidence that supports free trade with some level of consideration for the emotions you feel when the facts do not support your position.

          Emotion plays a valuable role in the subjective experiences in our own lives. It informs the truth value of our personal preferences. I love Cilantro in salsa, my dad hates it with a passion. Both are rational positions to have. When discussing whether or not it is the case that trade makes us better off or China’s undemocratic regime governs its people better than India’s democratic misery the same subjective preferences no longer apply. In these matters of public policy, the state’s monopoly on the legitimate use of force, the coercive power of the state gets employed to mandate a choice that all must make. We need to limit this decision making behind this power to objective analysis. When so much of our prosperity is dependent on our bilateral trade relationship with China, prosperity that enables more opportunity to pursue our diverse subjective preferences, arguments that are nothing more than “I don’t like my fellow Americans trading with those people” or “I just hate international trade!” don’t cut it. 

          I am confident I understand progressive political thought, just as I am sure Galileo could understand where his Aristotelian Thomists were coming from. A methodology that models the behavior of utility maximizing agents under the constraints of scarcity is universal in its application. It’s not limited to the business world, as the most popular economics blog Freakonomics has demonstrated. The idea that economics cannot be applied to all aspects of our lives is consistent with the communitarian’s hope that we will pursue the ends of others for their own sake rather than our own. There is a popular longing for a human condition where we do not use each other as means towards our own ends. The movie Avatar depicts this Romanticism perfectly. Each living thing was able to “bond” with another, and all the trees communicated with each other like a neural network, but the ideological tradition of Jean Jacques Rousseau does not exist beyond the science fiction imagination of James Cameron. In the real world our minds are trapped into single bodies built with selfish genes. Our emotions cannot tell us what is good for others, but while our internal subjectivity remains diverse and random, its outwardly observable behavior can be modeled and understood enough to craft laws that maintain an optimal amount of freedom for each utility maximizing agent around us.

          • 3H

            There is a difference between applied, and granting it the predominant position in all things.  I get no sense of nuance from your writings.  

            As in the case of China, you reject all other considerations other than economic, and declare that concerns for human rights is a red herring.  Not because it is, but because your analysis, and thinking, presumably, is limited to only economic factors.  You simply cannot conceive that other people may value other factors more than economics.  Not that economics don’t play a role in their thinking, but that economics is a secondary concern.  

            I do believe economics, in all it’s variety (despite your assertion in an early post that I’m unaware), does play a role in most things.  But, again, there is a balance, and sometimes economics is of a secondary importance.  Your assumption that I don’t see that is based upon your willingness to engage in “all or nothing” thinking.  

            We can have an emotive response to human misery elsewhere that compels us to action.  That first response may be followed by economic considerations such as, “how much of my money, or time, can I give.”  Or, even, “if we trade with these people, the wealth we create goes to help continue their misery.”  That thinking may be wrong, especially in the long run, but it is also sincere.  That doesn’t mean that their aren’t many that make the human rights argument as a red-herring to mask, or pretty up, their real intent to gain economic advantage or protection.  However, your thinking allowed only for monolithic, one track, analysis: people who argue against trade with China can only be doing it for one reason; all other expressed reasons are a red herring (and it is also conceivable they are doing it for multiple reasons that are intertwined and cannot be so simplistically reduced to only one).  

          • Steve Buckstein

            3H, not to speak for Eric, but for myself I’d say you’ve made your concerns known. Continuing to argue for someone to change their approach here seems non-productive.

            If you want to criticize an author’s points, then by all means do so. But arguing that they should change how they approach an issue gets old quickly.

          • 3H

            Then, with all due respect, don’t read my comments.  I address the issues that he brings up. I think that is legitimate.  I see this as more your problem than mine.  Since I’m reasonably polite, do not engage in name calling, I will feel free to continue to engage him where I think he is wrong.  

            If there is a limit to the number of responses in a post, please make that explicit.  

            I’m going to assume that you’ll bring that same concern up to other posters who argue back and forth.  Or do you feel a need to protect Eric?  From what I can see, he is quite capable of defending himself.

          • Steve Buckstein

             3H, no, I’m not saying that there is some comment limit here, or that you aren’t following the posting rules, just stating my opinion.

            Contrary to what you might think, I do value your input, even when I often disagree with your conclusions.

            And, I’m not defending Eric, just suggesting that your points may be better made without continuing reference to what you see as his single focus.

            All that said, post away…

          • 3H

            However, since it seems to bother you greatly, much more than the name calling that goes on in this blog, this will be my last post on this topic.  I’m going to assume that you are a moderator, and since this is your blog, then I should respect your wishes.  

          • Steve Buckstein

            I’m not a moderator here and this is not my blog; I’m just a frequent poster and commenter.

            I am bothered by the name calling here, and have commented on some of that in the past; from all sides.

          • http://www.facebook.com/eshierman Eric Shierman

            So 3H, it appears we are clear on what I meant when I said everything is economic. I was talking about how the methodology of economics can be applied to noncommerical forms of human relations to add more positive analytical tools to the humanities, a trend made fun and exciting by the popular blog Freakonomics. 

            Do I disproportunatelly write about economic issues? Yes, I’m not a sports writer, nor are you likely to see me writing much about abortion and the various cultural issues. While I occasionally write about electoral politics, and next week I will be writing a tribute to an Oregonian that was KIA at Khe Sanh 45 years ago, I mostly write about economic policy. I care about other issues, but perhaps my views on civil issues might be out of step with the conservative target market of the Oregon Catalyst that the fine folks who manage this blog sell advertising for. If you want to see a broader topic choice, there is stuff I submit to the Oregonian that I know the Catalyst is not interested in.

            So when writing about economic matters what is more persuasive to people who do not agree with me? I could write passionately emotional arguments about how immoral it is to be a trade protectionist, that there is a human right to international commerce and trade protections violate this right. I could try to argue that forcing China to reform its political system the way we want them to is some kind of cultural imperialism. If I did these things, I would be less persuasive, and I suppose you would enjoy my writing more if I were less persuasive. 

            Debating moral positions, the deontological approach, does not get very far with people. It ultimately boils down to “I prefer chocolate” vs. “I prefer vanilla.” Such normative arguments are supported by premises that are not falsifiable.

            To actually persuade people of something, positive analysis provides opportunity for agreement. Consider the persuasive power of an economic argument vs. a moral argument by watching advocates of higher food stamp spending. They don’t say “let’s sacrifice to help feed the poor.” No they say “Every dollar spent on food stamps generates $1.35 in economic activity!” The latter is both more persuasive and thanks to the hard work of Ramey, Barro, and Romer it is now falsifiable. Trade policy is very falsifiable as well. When the evidence is so conclusive, where is the need for nuance? Paul Krugman displays less nuance than I do in all his writing, Pop Internationalism is no exception. This seems to be working for Krugman quite well. As much as I like writing for this site, I would not mind writing for the New York Times some day. 

            Regarding my nuance on democracy in China? Did you not read my entire article? I explained why the Chinese people themselves are genuinely afraid of democracy. Go back and read my last paragraph. I made no argument whether China should or should not adopt more democratic reforms. My argument is that our Xenophobic political culture, and the politicians that it elects neither have the Chinese people’s interests at heart, nor an informed knowledge of real conditions inside China to tell them how to arrange their political institutions. It is American political discourse on China that lacks nuance. Watching Fox news you would think there is little difference between the government in Beijing and its counterpart in Pyongyang.When I point out the people who advocate linking trade as a tool of coercion to force china to become more democratic are inauthentic as human rights advocates, I’m really having a hard time believing that you really disagree with that obvious observation. If you really disagree with me, then answer my rhetorical question about the motives of an AFL-CIO lobbyist or a NeoCon. Real human rights NGOs lobby AGAINST economic sanctions.

            I cannot help but notice that all this talk about “balance”, “nuance” and the notion that my thinking is “monolithic” seems to have emerged in the complete absence of any real argument that the substance of my article is unsound. Are any of my premises false? Do my premises not lead to my conclusion?I’m not seeing any real concrete suggestions of the other factors that you think should be in play here. You mention the justification of an emotive response to human misery. It does not then follow that we should pursue policies that make that misery worse. I just love this gem: “if we trade with these people, the wealth we create goes to help continue their misery.” You admit this is wrong, but suggest people can be both wrong and sincere. There are areas where that is possible if the evidence is inconclusive. The problem is that it is so verifiable wrong, that the failure to take the time to consider the position of the broad consensus of peer reviewed literature provides evidence for my conclusion that there are other motives at play. They cannot go out of their way to avoid the evidence all around them and be sincere at the same time.

      • deanfromoregon

         ”Free societies with their free markets, free minds, and free love
        distribute this more optimally than Platonic societies that define the
        good, the just and the beautiful from the top down and distribute it by
        force. ”

        This is the false choice that so many of your arguments rely on.  You argue the merits of fee markets against the demerits of oppression. Its a load of crap though, since no one argues for oppression.

        In the real world, there are degrees of free markets housed within degrees of societies organizing themselves around how they define the good life. In every advanced democratic industrial nation, that definition includes a degree of economic security and redistribution of income or wealth, with perhaps Denmark at one extreme and the US at the other. No society has freely chosen to put free market economics above all other considerations. though lord knows you guys keep trying to sell this particular swamp.  Free markets are a means to an end, not an end in themselves. When freer markets leave negative externalities, free people choose to regulate or moderate them.

        • http://www.facebook.com/eshierman Eric Shierman

          No one argues for oppression? Free markets, free minds, and free love are challenged everywhere we look. There is a taxi lobby that seeks to oppress the business opportunities of towncar drivers. Beyond Teachers Union rent-seeking, it’s remarkable how much their opposition to school choice involves a Deweyesque desire to hold the commanding heights of socialization. And in the state of Oregon two people of the same gender cannot wed. 

          We enjoy greater levels of freedom than the Spartans and the Athenians of the 5th century BCE, but as you pointed out, there are needless compromises to human liberty in nearly every country. Much progress remains in the historical march toward greater freedom, and progress is being made. Only the US seems to be going in the wrong direction these days. You now have to mention Denmark as the opposite extreme rather than Sweden like you used to, because after China, Sweden has dismantled its old economic model faster than anyone else and it’s no accident its growth has reflected its new found economic inefficiencies.  The trend in Western Europe more than anywhere else is toward liberalization. Their current fiscal crisis is to the European welfare state what 1989 was to the centrally planned economy. 

          If all we did was regulate negative externalities, we would be far more laissez-faire than we are today. Most government regulations intentionally impose advantages on one set of economic actors at the expense of others without any externality as its pretext. Even a social safety net for the poor is chump change compared to what our entitlement programs really are, massive intergenerational rent-seeking from working young people to affluent 60-somethings. Means testing the welfare state can bring us down to governments spending to GDP in the low teens. A more efficient deliver of transfer payments to the truly needy would bring us down even lower. 

          Free markets are indeed not an end in themselves, they are the means by which we all seek our own diverse pursuits. When public choice curtails our private choices, it is not just the means that get diminished, it is a multitude of missed opportunities. I have attached two charts to show how many more choices the Swedes have enjoyed since they embarked on their bold market liberalizing reforms compared to Denmark that looked identical to Sweden in nearly every way twenty years ago, indeed the Dane’s economic position was better having nothing like Sweden’s deep recession of the early 90s. These past two decades have found these nordic twins living in separate worlds.

          • valley person

             ”No one argues for oppression?”

            No, they don’t. They (we) argue for regulation, rules, boundaries, oversight, assigning the cost of externalities to the producer, and a leveling of the playing field when it comes to trade between countries. You and libertarians view this as “oppression.”  I and I think most Americans don’t share that view because we don’t put absolutely free markets above all other considerations.

            Market entry restriction is certainly used to prop up the rates a profession or service can charge, as in taxis and my own profession, which requires a state license (and which in my case I have opposed as not in the public interest).

            But these are case by case situations. A certain amount of “propping up” of incomes may indeed be in the greater public interest if it raises the overall position of the middle class. I know free market economics would say this is impossible, but then German prosperity must be also impossible because this is a common practice there.  

            Economic liberalism, which you appear to be a strong and articulate proponent of, has not delivered. You make claims about “free trade” with China something we are dependent on, yet we lived quite well for many decades without free trade with China, or many other nations, and we prospered.

            I think you confuse “free trade” with China’s economic development. Yes, China becoming more prosperous opens opportunities for American business. Yes, some earn great profits from this. Yes, some consumer goods are cheaper as a result. But are we as a whole better off? Not if you use median income as a measure.

            The Swedes have improved their situation by relaxing some of their regulator and welfare state. But they didn’t throw out the welfare state. They modified it. They didn’t go from socialism to free market fundamentalism. If anything they are simply proving there are optimal levels of free markets, regulation, and economic security.

            “The trend in Western Europe more than anywhere else is toward liberalization.”

            Yes, and they are in rapid decline as this occurs. It isn’t working. The welfare states were working pretty darn well until they went down the path you favor.

          • Steve Buckstein

            vp, does your opposition to market entry restrictions in your own profession mean that you oppose them in the teaching profession?  If so, I am truly impressed.

          • valley person

             I think the profession of teaching and the quality of education would benefit by opening it up to people with other degrees or experience, if that is what you mean. (I think Eric for example, would be a great teacher).

            As a teacher myself (college) with no formal education in the art of teaching I probably have a bias towards teaching from knowledge over teaching from technique. As my students tell me, its of great value to them to be taught by the person who actually wrote the book, as opposed to the person who merely assigns and interprets the book written by someone else.

            I think my own profession is damaging itself and doing the public no good by the way if engages in market restriction. Professional licensing has its place, but can be counter productive.

          • Steve Buckstein

            I’m impressed. I may want to remove licensing in more places than you do, but breaking down the barriers in education would be hugely productive and beneficial to taxpayers and students.

  • deanfromoregon

    Economic models always show net benefits to free trade, but when the “net” is concentrated at the top of the economic ladder, and the losses are concentrated everywhere else, it isn’t much good for society as a whole. Unless we think cheap plastic objects beat high wages that is.

    The highest growth period in America was well before our many free trade agreements. The era of free trade has been one of slow growth, declining median wages, and most people running harder just to stay in place.

    A big counter reaction against free trade is building on the left nad right ends of the political spectrum, and this will migrate to the middle fairly quickly, especially if Romney, the quintissesntial international capitalist with his own Cayman Islands and Swiss bank accounts, wins the next election.

    Last point. I suggest Eric do a blind taste test between that Wisconsin cheese and the Tillamook brand. Its like comparing car costs by putting a BMW against a Fiat and drawing free trade conclusions. Apples to apples dude.

    • http://www.facebook.com/eshierman Eric Shierman

      Because trade raises purchasing power parity, free trade disproportionally benefits lower income earners. Even slight variations in real wages have a larger impact on smaller budgets. High nominal wages mean nothing if it takes more hours of labor to purchase the same basket of goods. 

      It is not just models that show this; we are way beyond theory in this subject area. Assumptions have been replaced by verification. Second only to marginal utility, the data from empirical research on trade is probably the most established insight from economics. Because we are dealing with foreigners when we trade, there will always be a popular opposition to it. Just as most people on the street hold an Aristotelian belief that heavier objects fall to the earth faster than lighter ones, folk theory lingers, and it lingers longer if a little xenophobia can be added to the mix. 

      The highest growth in American history came before the Smoot Hawley Tariff Act, not after. In the latter half of the 19th century we and the rest of the world responded to Britain’s unilateral disarmament on trade when the benefits became so strikingly obvious we did the same, no treaties just free trade. Ironically, in the early 20th century, it was the Republican party that led the way in restoring trade protection. In the post war period, trade liberalization did not start with Nafta in 1993. The GATT was THE central pillar of the Bretton Woods framework. 

      So here we are today. It’s 2012 and we live in the most prosperous America in American history where the goods and services the median wage can purchase exceeds what it could when the Annecy Round of the GATT was completed in 1949. Americans at the poverty line today own a phone, TV, air conditioning, and often more than one vehicle, conspicuous consumption far beyond their predecessors’ reach six decades ago. This is not just a correlation, America’s liberal trade has been the causal drive of the many things we take for granted. When someone shows you a chart showing real wages have stagnated, ask them why they only included wages and not total compensation to things like healthcare and the like –Doh! 

      • valley person

        “When someone shows you a chart showing real wages have stagnated, ask
        them why they only included wages and not total compensation to things
        like healthcare and the like”

        Pensions, which used to be a typical part of total compensation,  have disappeared for all but public workers. (401Ks are not “benefits,” they are simply taking money out of the check and putting it into a retirement investment account). Wages have stagnated or declined. Health care “benefits” have increased, but that has not bought any more health or health care. It is simply paying more for the service. And the cost of the health care benefit is being shifted to the worker day by day and year by year.

        You are trying to take a set of free trade negatives: declining household median incomes, increased number so of people living in poverty, higher unemployment, and elimination of pensions, and saying all this is more than mitigated by having cheaper consumer products.

        Today’s typical American worker gets to work longer hours for less pay,
        fewer benefits, and bleak long term prospects so that he or she can buy
        cheap crap at Wallmart.

        Its a good deal for you and Mitt Romney perhaps. Even for me. but not for most Americans.

  • 3H

    “Mass political participation is only a means to an end. The end is good governance and civil liberties. If China can become a giant Singapore, delivering growth and freedom without democracy as we know it, good for them and good for us.

    I’m puzzled by this statement.  Would you argue that civil liberties can be provided, protected, and encouraged, without a system of mass political participation?  Do you believe that a benign dictatorship, or an enlightened elite, can provide those liberties?  I’m guessing that you think that free markets are the best guarantor of civil liberties?

    • deanfromoregon

       Among other things, Eric seems to be making an argument that capitalism and democracy are not reliant on each other (contradicting decades of conservative dogma), and that if the latter gets in the way of the former, then too bad for democracy.

      • 3H

        I wonder if he’s a follower of Charles Beard?  But only with a positive spin on those events.  He does seem to tip-toe down the road of economic determinism.

        • deanfromoregon

          I’m not familiar with Carles Beard, but I don’t think Eric is tiptoeing at all. I think he is fully into economic determinism, to the extent of viewing every aspect of life through that lens.  

    • http://www.facebook.com/eshierman Eric Shierman

      It is not hard to argue that civil liberties can be provided, protected, and encouraged without a system of mass political participation, when examples are all around us. Let’s not forget the civil rights movement here depended on the undemocratic Warren Court to override the tyranny of white majority rule not only in the south, but even Oregon had Jim Crow like laws that judicial review had to overturn. It was not congress or state legislatures, it was America’s House of Lords that brought us change – scandalous change at the time by Eisenhower appointed judges that he thought were conservatives. In retirement, when asked if he made any mistakes as president, Ike said “Yes and they are all sitting on the Supreme Court.” 

      Most developing countries have serous ethnic problems far worse than our own that leads to oppression in many ways whether that be a government supported majority that imposes its will on a minority or a government that has to fight the majority to restrain it. Upon achieving independence in 1963, Singapore had a powder keg worse than most. The greatest challenge has been the Chinese vs. Malay, but also from a substantial Tamil minority too that has descended from refugees from Sri Lanka. Singapore has had to agressively restrict hate speech in ways that compromise its freedom of expression somewhat, not unlike western Europeans banning NeoNazi speech that we would tolerate, but Singapore has avoided both ethnic conflict and been able to maintain an open immigration policy. Singapore is no more democratic than China is, but enjoys western European levels of personal freedom with much higher per capita GDP. There is of course a similar story not only in Hong Kong, but also most of Taiwan’s post 1949 history. An unstable democracy emerged in Taiwan when the DPP came to power in 2000. Things have been downhill for Taiwan ever since. These are all Chinese speaking countries that have not only provided laboratories to observe what is possible, but Hong Kong’s integration and Singapore’s public diplomacy has provided advice the Chinese actually listen closely to and respect. 

      Democracy on the other hand has just as much chance to threaten civil liberties, slow growth, and fuel ethnic tension as not. The Chinese look very closely at Russia and India and don’t admire what they see. In the middle east, democracy is not going to make Egyptians more free nor more prosperous, but the absolute monarchs in Jordan, UAE, and Qatar have been able to deliver the liberty to their people that the Arab spring won’t. And then there was Iraq where the Bush administration set in motion more rape, murder, and chaos than the most brutal Baath rule could have ever hoped to inflict on Iraqis in Saddam’s most sadistic dreams. Democracy in developing countries has a very poor track record. 

      Whether autocratic or democratic, if good governance is achieved, states needs two things to prevent the political decay of what Francis Fukuyama calls “repatrimonialization”: the rule of law and political accountability. The idea that democracy is essential for sustaining civil liberties comes from the risk that autocratic regimes face if the family or party in control of the government could eventually have a “bad emperor” that puts himself above the law and rules in his own interest at the expense of the governed. The first person to really grasp this was Aristotle. Dean I recall explaining his six regimes to you once. 3H if you are not familiar with book II of Aristotle’s The Politics google it. If democracy has a value, it is the possibility that political accountability can prevent the government from governing in its own interest. Not all democracies do that. The limits of democracy was well known two thousand years ago, and Madison was a student of Aristotle. A democracy can decay into the tyranny of the majority where half the population rent-seeks from the rest. This is why democracies are so prone to either fall into ethnic conflict, stagnate growth, and produce a Vladimir Putin.

      I first read Francis Fukuyama’s The End of History and the Last Man in 1997, and found it very persuasive. I still sense an inevitability of liberal democracy as a final state of political development, but there is no evidence to support than contention. Indeed Fukuyama has punted out of it, now saying that China could very well be replicating Singapore on a broad scale creating an alternative to liberal democracy. If it does so, its success will be emulated not reviled. Has the CCP developed a broad system of political accountability within a one party republican form of government? I don’t know, but I do know there is little evidence to suggest that a sudden Yeltsin like pivot to democracy will do them better. If their project succeeds great! If it does not work out the transition to democracy will likely be at a snail’s pace like Taiwan, and hopefully with better results. We are in no position to judge, but we are in a position to admire what they have accomplished so far. 

      • 3H


        The Chinese look very closely at Russia and India and don’t admire what they see.
         

        Perhaps if they did less judging, and more admiring, they would come to a different conclusion.

        It seems to me, though, that you are willing to trade civil and political liberties for economic freedom.  Is that a fair assessment?

        • valley person

           Russia is hardly a democracy. India is a very corrupt one. I don’t admire what I see in either of those countries either. Nor do I admire what I see in China.

          I don’t quite get Eric’s position, despite or perhaps because of the many words he employs to describe it. China doesn’t even have much true economic liberty, let alone political liberty. It is a great place if you have a lot of capital to earn more capital, and I suspect that is what Eric likes about it.

          China has centrally planned and build dozens of large new cities almost overnight. The government designates where these cities go, takes land from the peasants who farm it, installs the entire urban infrastructure, and then makes its money back by selling parcels to private builders who develop under very strict rules. These are basically factory towns with dormitory housing, like the old logging or mining camps of our own past except based on cheap labor manufacturing. Unions are forbidden. People have to get permits to move from where they are to these new towns.

          The Chinese can only do this development model because they start with complete control over the land and natural resources and people. Its pretty far from “free” markets, yet capitalists love it, which sort of exposes their real objectives.

      • valley person

         I don’t subscribe to any inevitabilities other than death and taxes.

        Democracy, broadly defined as rule of the people, is neither an end in itself nor a means to an end. When it becomes rule of the mob, as it has recently in my home town of Damascus, it can be very counter productive.

        As problematic as it is, democracy represents a pretty universal aspiration, but one that doesn’t take precedence over food shelter and security.

        Which brings me back to the point I was trying to make. Capitalism/free enterprise, as you have pointed out, can exist quite nicely in non-democratic countries. It (capitalists anyway) even seem to benefit when those countries suppress workers, as in Singapore and China.

        IN a democratic framework, “the people” will vote themselves a measure of economic security. They will choose to tax the rich, restrain markets,  and put regulatory measures in place to moderate the harshness of markets. Free market fundamentalists hate this of course. They can argue and model higher growth rates or higher prosperity if only the people would get out of the way, but when the next big recession hits the people will put the restraints back on.

        Most people, in my experience anyway, simply don’t put perfectly functioning markets ahead of other matters. They are content with modest incomes combined with a measure of long term security. If you try to trade them the potential for a higher income if they will only give up that security, you will in the long run be turned down.

        Personally, I don’t even buy the argument that freer markets necessarily result in higher growth or prosperity, for reasons previously stated. But even if you could prove that, you have to prove it is worth the tradeoffs. I don’t think you can. Therefore you turn to an argument against democracy, because in your heart you know that is the only way to impose a perfect market on the people.

        • Steve Buckstein

          But, I thought democracy is supposed to be a means to an end, even if we disagree on what that end might be.

          And, how has democracy become “rule of the mob” in Damascus? Because citizens there have legally collected signatures and voted on initiatives that you disagree with? Your city council, as I understand it, is still stacked something like six to one against what you describe as the “mob.” No?

          • valley person

             Life seems to have many ends, or goals. Living with dignity and honor without being subject to the whim of a tyrant should be among these, and democracy, in its many forms has proven to be a good if not essential way to secure this particular end.

            Before you cheer Damascus on, keep in mind that voters in my town are not endorsing an anything goes, free market approach to land use. Quite the opposite, they are simply voting to prevent unwanted change.  Ask Damascus has become the most effective land conservation organization in the Portland region by preventing ALL new development on our rural landscape.

          • Steve Buckstein

            We may disagree on the overall impact of Ask Damascus, but the way you describe it doesn’t sound like rule of the mob. More like rule of the people versus rule of the bureaucrats.

          • valley person

            Elected officials, especially unpaid volunteer ones like those serving on our city council, are not “bureaucrats” by any reasonable definition of that term.

            The impact of Ask Damascus  has been to lock down current rural land uses in what is nominally an urban area. That and nothing more. Personally I like the open fields and forests around my place, so I suppose I should thank them.

  • valley person

    Eric, I’d like to pose a question on the value of “free trade.”

    What I recall from my econ textbooks from way back is that the general model is free trade generates about $3 in GDP for $2 in restricted trade.  Is that still the ratio used in economics?

    Assuming it is, or at least that there is some net gain, the follow up question is this.

    Should we care how this increase was created, and who gets that extra $1 in benefits?

    By this i mean, if the extra $1 was created by displacing $20 an hour American workers living in a free society with strict environmental laws and the ability of laborers to organize,  with $2 an hour Chinese workers with no environmental laws, no elected leadership, and no ability to organize, do we simply dismiss this as not worth worrying about because we gained that $1 in GDP?

    And, if 90 cents out of that $1 went to the upper 1% of society, with 10 cents to the rest of the upper 50% and a loss to the lower 50%, should we care about that?

    Another question. Do you really believe that free trade lowers prices as a whole to consumers? In other words, if we are able to export more wheat in exchange for importing more cheap plastic goods made in China, doesn’t the price of wheat go up for us even as the cost of plastic stuff comes down? What model shows lower prices across the board?

    • http://www.facebook.com/eshierman Eric Shierman

      I am back from the beach.

      It might be tempting to assume that oppression is an extreme form of unnecessary state control of society that went too far long long ago in a civilization far far away, defining it so narrowly it is merely a historical footnote. There is a circularity to this reasoning because, as a matter of degree, Stalin and Mao can be seen by their contemporaries as more moderate alternatives to the oppression of Russia under the Golden Horde or Chinese oppression under the Qin Dynasty. If it is to have any meaning at all, “oppression” is any government policy that prevents human freedom of choice without a legitimate public benefit to outweigh its costs. Oppression is found not by degree, but at the margin. As you yourself acknowledge that credentialing rules that create barriers to entry into the teaching profession take away significant options from both students and would-be teachers in exchange for no positive benefit to society, any marginal education reform that fixes this problem is a marginal reduction in oppression. 

      Saying that no one argues for oppression is only true in the Nietzschean sense from Beyond Good and Evil that no one wills the Bad. Everyone pursues their own vision of the Good, the Just, and the Beautiful. If only you subscribed to the same internal logic of people we describe as evil, then you would see how well meaning they were. Neither Stalin nor Mao sought oppression; they both sought regulation, rules, boundaries, and oversight according to their own perception of externalities. 

      Germany has a more market orientated form of labor market credentialing than we do. First Germany has school choice, where graduation from elementary education involves a competitive selection to a secondary education system that is not only vocationally orientated, but regulated not by a government department of education, but by private trade unions who compete with one another to attract the best students into the most relevant job training. This seamless connection between their high schools and the needs of Germany’s employers is the envy of the world, but it is the opposite of John Dewey’s socialization focused pedagogy. Germany does not need rules demanding that employers can only hire people with a particular diploma. Deutsche Hochschulen create the graduates Germany’s economy needs without mandated quota’s and restrictions. This is very different from the kind of credentialing we see in the United States where our very expensive process of creating highly educated nonskilled labor seems to invite rent seeking to create artificial barriers to entry into various professions since their entrants know little more than anyone else, getting most of their vocational training upon entry rather than in school.

      I reminded you that American prosperity before the Smoot-Hawley Tariff Act was based on trade, and that the restoration of liberalized trade was central to the Bretton Woods agenda of the post war economy. Trade with China had been a major element of US economic growth before the passage of that self-defeating law. That the US had other trading partners like Japan and Germany during that period of time that we lost China as a source of growth from 1937-1979 does not diminish from the fact we could have had even more growth in the same time period had China not imploded in civil war, invasion, and revolution. That China has been growing at the very moment that Europe and Japan have been stagnating has been a godsend to the US economy and Oregon in particular. 

      I would not want to associate my real name to the claim that the economic liberalization of Bretton Woods and China’s reform and opening “have not delivered” either. One could only imagine what kind of name calling that could inspire. The median incomes in the United States and China have both been growing in real terms since 1978. In the United States, it has been growing less if you only choose to measure it in wages, but even that attempt at deception shows an upward trend. It is just not as steep a slope as total compensation. 

      You seem to think that defined benefit pension plans do not come out of the pockets of workers but defined contribution plans do. You frequently make reference to some old economics text book you claim to have had in college decades ago as some kind of authority, but even a book that old would have had a chapter on labor markets that showed how employers make employment decisions based on total costs of employment and employees respond to the incentives of total compensation. Marginal increases in pension benefits, even defined benefit pension plans, DECREASE marginal wages. Also since that time contributions to the defined contribution pension plans of today have become HUGE, much larger than the contributions to the defined benefit plans of the past because firms can now increase funding when times are good without worrying about the risk of increased liabilities down the road if the good times no longer roll. In the days of defined benefit pension plans few people had them. Now far more workers in the US have an employer funding a private pension. The largest civilian employer, Walmart has a defined contribution plan that vests its workers’ 100% for the first 6% of their income. The employees who previously worked at those much romanticized mom and pop retailers had no pension of any kind. This is what prosperity looks like. 

      So you acknowledge that the amount of money from the workers’ total compensation going to healthcare has been rising, but then you impeach all credibility you might have in the eyes of anyone reading our posts when you claim that this increase has not “bought any more health or healthcare.” Our health now as a population, is far better than our health was in 1979. The price of the quality of healthcare service available in 1979, if a healthcare provider could legally offer it today, would be substantially cheaper than its state-of-the-art alternative. That healthcare regulations prevent this kind of economization by quality is but one of many factors that has the price of healthcare rising substantially faster than inflation in the same period, but its quality has increased dramatically during the same time period. Employer connected healthcare is a legacy of wage and price controls that have been sustained through incentives in the tax code. If we could eliminate those intensives, I would expect to see less employers offering health plans which would probably be a good thing. This however would not DECREASE total compensation. That the only way to find fault with the bountiful prosperity that all segments of society have accumulated over the past 30 years, one has to hide total compensation from their data, speaks volumes about how prosperous we actually are today, and also speaks volumes about the lengths that people go to massage data when reality falsifies their ideological outlook. 

      If you live a data-free intellectual life, then perhaps you might find it reasonable to claim that today’s workers work longer hours for less pay. The way to test this claim is to measure the median time worked for each product over time. It has been dropping steadily for every product that data exists to measure. Of course anyone who knows what a rise in real wages MEANS, would have known this was the case, but it is fun verify the consequence of real wage growth in this way. The Economist created a fun back of the envelope exchange rate comparison in the now famous Big Mac Index. It has spawned an interesting way of measuring purchasing power parity (PPP) over time and across currencies. A particularly revealing way to measure the PPP of low income workers this way is Princeton economist Orley Ashenfelter’s famous substitution of the median wage for the hourly wage of a newly hired worker at McDonalds which is universally in the lower income quartile of every economy. I have attached a graph showing just how prosperous our lower workers are compared to the rest of the world. The only country that beats us is Canada with its lower minimum wage. If having a lower minimum wage increasing PPP for lower income workers seems strange to you, you need to stop dreaming about what some old econ textbook might or might not have said when you were in college in the 70s and take heed of the peer reviewed literature of today. Ashenfelter’s work is also revealing in showing how China’s low income workers have a far higher PPP than the rest of the developing world. Democratic India has one of the worst.  

      In the case of the Swedes, that every reform they make has been a success is no evidence that they have reached an optimization point. Not every function has a derivative with points that equal zero. The trend in Western Europe toward liberalization has not been the cause of their current crisis, it has been in response to it. Most have had reforms forced upon them by necessity, others like Germany and Sweden have made them proactively so as to sidestep the problems the PIIGS find themselves in. The European welfare state was not “working quite well.’ It has lived on borrowed time and their hour glass has run out of sand. 

      Russia was a democracy in 1996; that is the point. Democracies can collapse in ways that well governed autocracies that deliver consistent tangible improvements in civil liberties and economic growth do not. 

      The Chinese are the envy of the developing world because they have a great deal to admire. They enjoy more civil liberties, rule of law, low crime, and of course economic growth than any other developing country. They are one of the few developing countries that really has a chance of joining the rest of the wealthy nations. It might be no accident that the only countries to do this since the end of the Second World War have been autocracies. The people of Singapore, Taiwan, Hong Kong, South Korea, and Chile enjoy civil liberties and prosperity that the people of India and Russia probably never will for a long time if ever. 

      China has come to a point where it has just as free a market economy as we have. It is engaged in so much infrastructure building that this can lead to the impression of central planning, but we don’t have private roads either. China aggressively implements its imminent domain more often than we do for this very reason, but we have our own Kelo v. New London issues. There is only one area I think China can be seen as a central planner: in its banking system, but this has gotten it into so much trouble, privatizing its banking system is its number one agenda. Wen Jiabao seems to be taking advantage of the of the Chongqing purge to push through banking reform as he leaves office later this year. But lets remember that Japan and South Korea had similar problems in the Kairetsu and Chaebol that they are only now reforming. To make up for its banking system, China has more areas of its economy that are freer than ours is. 

      Collective bargaining is not one of them. Unions are not forbidden, they are mandatory. Workers don’t vote to certify a union, they already have one given a monopoly position. That is why Chinese unions are notoriously happy to collect dues but slow to represent workers. If we mandated membership to an SEIU led by the likes of Andy Stern it would be no different here. If you are not aware of the problems our own labor movement has with forging sweet heart deals with management, you have not been paying attention. To make unions compete to earn their workers dues, China needs the same right to work reforms Oregon does. 

      Perhaps you have to spend some time in China to see it, but there is plenty of quality reporting out there too to convey the fact that the Chinese are the most content with the present and optimistic for the future than any other people I have ever met in my travels. They answer the right track wrong track question very differently than Americans do. I don’t mean the major cities that tourists go to. I was recently in a rural hamlet named Dawu an hour away from Wuhan in the province of Hubei. It is remarkable how anyone can start a small business with little interference with the government. It is easy to get around in China because anyone can buy a towncar and charge anything you mutually agree upon to to take you anywhere. Private buses compete with public transportation. We don’t enjoy China’s economic dynamics primarily because we don’t enjoy many of their FREEDOMS. 

      A good definition of something that does not have any value of any kind is something that is neither a means toward an end nor an end in itself. When you attribute this to democracy you are either trying to speak in John Lennon like slogans or you recognize that what matters in governance is not how many people participate in it, but rather how many people enjoy civil liberties and economic growth. Since Singapore enjoys the highest per capita GDP in the world, and its lowest income quartile workers consume the highest PPP, it seems rather silly to say they suppress their workers. If China can scale Singapore’s prosperity to a population of 1.3 billion people, Chinese workers will be among the most fortunate in the world. 

      You make an assumption that democratic polities will be more supportive of a welfare state and other attempts however quixotic to restrain market forces. I think that is a rational assumption. The very term “democracy” was rehabilitated by the Progressive Movement. The economist James Buchanan has also pointed this out from his development of Public Choice Theory which shows how democratic policy making is so prone to passing laws that result in a net loss to society at large when the benefits of the law are concentrated on a few motivated stakeholders. This is why it is better to be poor in Chile than the rest of Latin America, and it is better to be poor in Singapore than in Oregon.  

      I have absolutely no idea what you mean by “free trade generates about $3 in GDP for $2 in restricted trade.” Are you trying to say free trade only yields 50% more than restricted trade? That is a nontrivial number of course, but how restricted is the trade that yields the $2? Most trade protections yield a negative return in absolute terms not just relative. Old economic textbooks used to pull numbers like that out of a hat. That is one of many reasons why you should keep more current on contemporary research. You seem willing to devote a significant amount of time discussing public policy, but clearly you need to devote a greater portion of that time reading more rigorous source material and sharpening your saw. 

      The idea that trade means $20 dollar jobs get replaced by $2 competition is a dominant narrative that represents a phenomenon so rare it almost never happens. When it does it is the result of an exporter locating abroad to supply that region’s market share locally. When a domestic producer is replaced so that it can produce the same product for import back into the US, it is $7 an hour jobs being replaced. These are labor intensive industries like textiles that have little ability to leverage the lower priced capital goods here in the US. You are then selectively forgetting that trade creates more $20 an hour jobs than these rare scenarios of loss. 

      There is a massive force out there eliminating $20 an hour jobs: bar codes, automation, and lean production processes. Productivity gains in manufacturing over the past 30 years have been eliminating manufacturing jobs at a faster pace than our free trade agreements have been creating new ones that never would have existed without liberalized trade. Progressives would look like fools protesting against technology so they take advantage of the worst in human nature and blame this trend on foreigners. Indeed if you were to read the picket signs at the May Day rally, you would think the peak of American manufacturing was 1971, but we are living in the peak right now. More goods are made in the USA than any other time in US economic history, but fewer people are employed to make them. This is why deregulation of the service sectors’ faux-credentialing is critical to future job growth. 

      There is no evidence that 90% of trade benefits go to the upper 1% of income earners, but since I am not a politician, I am more than willing to answer a hypothetical for philosophical purposes. If the rest of the 99% of income earners only got 10% of the benefits, then restricting trade imposes upon them 10% of the losses. It is always better to incur gains rather than losses, regardless of the relative gains of other people. Thus free trade would be beneficial in that scenario making the more benevolent reality we live in today even sweeter by comparison. 

      Yes free trade really holds prices down for consumers. If you are suddenly concerned with demand pull inflation, keep in mind it has less effect on inflation than the money supply. You have consistently held out hope that greater inflation only harms rich people while creating jobs for the little guy. Preventing exporters from participating in global markets as a means of controlling inflation definitely results in lost job opportunities. But creating export controls is unlikely to lower prices when it simply lowers exporters’ incentives to produce as they match their production to the smaller market you have limited them to. I recall you enjoying the article I wrote when I called Bill O’Reilly out for his demand for export controls on refined petroleum products. The model that shows lower prices across the board is the adjusting of GDP by PPP. I think you would be well served to at least read Paul Krugman’s Pop Internationalism.

      • deanfromoregon

        ” As you yourself acknowledge that credentialing rules that create
        barriers to entry into the teaching profession take away significant
        options from both students and would-be teachers in exchange for no
        positive benefit to society”

        You misread my post. I was talking about licensing requirements for my main professional work, landscape architecture. I think this is of marginal benefit to society, and doesn’t even benefit our profession in my opinion. On teaching, I think licensing teachers is appropriate, but the rules could be loosened to allow people with non teaching degrees easier entry, and I think this would be beneficial to students and society.

        I don’t equate either circumstance with “oppression.” I think we diminish the nature of oppression when we lump in every rule or societal boundary in with gulags and concentration camps. I don’t see these as merely points on a scale, but as difference in kind.

        A free, democratic society protects civil and individual rights from the state.  It also adopts rules that constrain individual and corporate behavior to protect others. There is a constant juggling to find the right balance between rules and freedom, and this juggling takes place within an imperfect democratic structure. Rules adopted by democracies are often inconvenient, but are rarely oppressive.

        That is what I mean by no one (I should say hardly anyone) argues for oppression. You may think having to get a discharge permit for your waste products is oppressive, but that is a semantic exaggeration on your part, not simply a disagreement.

        “The median incomes in the United States and China have both been growing in real terms since 1978.”

        The growth in median incomes since 78 has not just been slow, its been barely perceptible. And this despite a huge growth GDP and productivity.  Something went off the rails. If median income growth has tracked GDP growth at the same rate as through the 50s and 60s our median would now be where our upper 20% is in purchasing power.

        This is not a minor point. It goes to the heart of the great rift between us, left and right on what has happened and ought to happen to the American and world economy. It is at the root of the occupy movement, and I think the Tea party movement as well. The lack of economic progress of the median in the US and the western world is a huge, festering problem that economists and  politicians can barely talk about let alone address in policy.

        The ownership and financial class, which you are embedded in, believes that if only you could be freer to pursue efficiency, wherever it is, the tide will lift for all. But this has not happened even as you have become freer.   

        “it is better to be poor in Singapore than in Oregon.  ”

        I’d rather be poor in Denmark or Norway myself. And in fact I’m much less likely to be poor there in the first place, thanks to their robust welfare states. More importantly, its better to be middle class in either place.

        “Progressives would look like fools protesting against technology so they
        take advantage of the worst in human nature and blame this trend on
        foreigners.”

        Wrong Eric. We don’t blame the foreigners. We blame the capitalists who lack enough patriotism to care about their own nation’s fortunes.

        “This is why deregulation of the service sectors’ faux-credentialing is critical to future job growth.”

        Or think of it another way. It is why unionizing those jobs that can’t be outsourced is critical to maintaining American purchasing power at the median. 

        “There is no evidence that 90% of trade benefits go to the upper 1% of income earners”

        Sure there is. Look at the disparity of income that has opened up between the 90% and 10%, or more true the 99% and 1%, since the opening of trade. Look at the lack of wage growth at the median. Look at the continuing pressure on remaining industrial workers competing with the possibility their jobs can be outsourced. And look at the Romneys of the world pushing more free trade.

        “If the rest of the 99% of income earners only got 10% of the benefits,
        then restricting trade imposes upon them 10% of the losses.”

        That isn’t really a sufficient answer. Prior to the free trade movement, the benefits of economic growth were broadly shared by all income classes in the US and the western world. Now they aren’t. You are making a let them eat cake argument. Politically and economically this is a dead end, and your class needs to understand this.  

        Median incomes in the Us. to the extent they have increased at all over the past 30 years, have done so by people working harder. It now takes 2 wage earners to maintain a typical household. That was not the case prior to 1978. Again…something happened. The evidence I’ve looked at says it was not one something, but an accumulation of things, from free trade to union busting to a stagnant minimum wage and so forth.

        You, the financial class, need the laboring class (not just blue collar but also white) to grant you the power to keep on this trade liberalization path. In return you tell us: work harder, accept less benefits, accept more personal debt, an uncertain retirement, and downward mobility. And maybe a few crumbs will drop at your feet.

        Thanks a lot.

        “Yes free trade really holds prices down for consumers”

        Net? An article in the Capital Press the other day stated clearly that US food prices are higher as a consequence of our farmers having better markets overseas. If we export natural gas, aren’t our prices going to go up?

        I am more a free trader than not. I like my French cheese, my Spanish wine, my German car, and my Irish wool cap. But I’m unconvinced that free trade, especially between very unequal nations like the US and China, is a net benefit  to my fellow Americans. You have your models, and we both have the real world experience of the US median income these past 3 decades.

         

    • 3H

      “…
      American workers living in a free society with strict environmental laws and the ability of laborers to organize…”

      They do not want that.  Evidenced by the constant call for deregulation and a “right to work (for less)” laws.  Perhaps they admire the ability of the Chinese to impose “order” on the unruly who might want cleaner drinking water, cleaner air, and the ability to go to the bargaining table with something approaching parity.

      • valley person

         For Eric especially, here is a good data based summary of my arguments.

        http://www.theatlantic.com/business/archive/2012/05/the-rise-and-rise-of-the-super-rich/257069/

        • Steve Buckstein

          Interesting, but here’s a more interesting analysis that includes this provocative assumption:

          “Income is not a zero-sum game. Somebody else’s
          income does not come at your expense.”

          http://reason.com/archives/2012/01/12/for-richer-and-for-poorer

          • valley person

             Sometimes it is zero sum. But in any case, the facts in evidence are that very little of the economic growth the nation experienced over the last 3 decades was shared by those near the median income. There are multiple reasons for this, including the way freer trade has played out in fact as opposed to in theory.  

            Conservatives and libertarians have been able to distract from this by pitting group against group, or by using terms like “job creators” to defend the owners of capital. But time is running out on these distractions.

  • http://www.facebook.com/eshierman Eric Shierman

    Because I sign in with Facebook, I don’t get email alerts about additional comments, so my apologies for not knowing the conversation has been continued. I just now happened to notice we were up to 51 comments as I was sifting through back articles trying to find a link to one of Steve’s that I will be including in my article tomorrow. 

    First 3H, perhaps you missed my mentioning this earlier, but China has a far greater rate of unionization than we do due to laws that mandate collective bargaining. That is why their unions are so weak. I don’t know how much time you spend with actual union organizers in our own city. I became a pledger with JWJ in 2010 during the anti-Arizona SB1070 protests. I get along great with these progressives due to shared positions on civil liberties, foreign policy, and immigration. One thing I marveled at is how after a rally I would go to a bar, slug down beers with them and note how most of their anger is directed at their own union bureaucracy and back then Andrew Stern of SEIU in particular. Unions that face a guaranteed revenue stream from legally mandated workers’ dues get very cosy with management. For better representation, Chinese workers need right to work laws too.  

    If you think the CCP has no interest in environmental law, you have not been paying attention. What happened to your interest in a nuanced view? I suspect that like most Americans what you need is an informed view of China. The Chinese interest in environmental protection is of course limited to anthroprocentric notions of negative externalities. China’s political culture lacks a Westerns style concern for defending the environment for its own sake. Beyond the protection of panda bears, there will never be an endangered species act in China. And their science focused elite remains fairly unpersuaded by the evidence regarding global warming. A democratic China that is as corrupt as India’s democracy would likely be just as bad as India is today in letting polluters poison public drinking water, and simply becoming democratic will not prompt them to foster a viable Greenpeace lobby. And then there is Dean. As I am sure your friends and family have learned a long time ago, the best way for people with a day job to cogently end a conversation with you is to give you the last word. I have come to realize that the way you admit you are wrong is by restating your conclusions in a Baghdad Bob like way, without addressing the evidence presented by others that disprove the positions you so frequently cling to with religiosity. What I thought was your last post here was a perfect example. That you posted some actual data later, is a great treat. That it undermines your argument prompts me to rejoin this conversation. 

    Of course we’ve seen this movie before, citing real studies and real data is a rarity for you, but when you do you seem to tire too quickly of sifting through all the exculpatory evidence on Google Scholar that you all too quickly cling to the first study you think supports your position without taking the time to read it. You provide me the link. I point out how it says the opposite of what you are saying. You then drop the point but restate your conclusion again anyway. 

    So on the question of whether or not free trade benefits lower income people, look very closely at those two charts on that link you gave Steve and really think whether or not it provides any evidence of any kind that trade protection would do a better job of improving the lives of the lowest income earners. Those two charts merely show that during times of economic expansion, the highest incomes grow faster than the lowest. In times of economic contraction the highest incomes contract faster too. This has never been a fact in dispute, but the existence of this fact does not lead to the conclusion that times of economic contraction are good for the poor. 

    Of those two charts, one compares the growth in real wages between the top 1% and the lowest over the past 40 years. In that chart the real incomes of our bottom earners have doubled over this time period in REAL (inflation adjusted) terms – a point I have been making repeatedly to you in other ways by talking about PPP and the decline of minutes worked to consume various products. In customary fashion you put the following true statement of mine in quotes: “Median incomes in the both the United States and China have been growing in real terms since 1978″ Which you followed by a factually FALSE response that “median income growth has not just been slow, it has been barely perceptible.” Your own chart from a progressive source shows that the lowest income earners’ REAL wages have DOUBLED! Something that is very perceptible, and we are just talking about the LOWEST INCOME EARNERS. Median wage growth has been substantially HIGHER over the same time period. That is the facts in evidence my friend. 

    You depict this chart as if it is evidence of depravity perhaps because the top incomes have quadrupled in the same time period (with the median income by definition in between at a whopping three times what it was only four decades ago). This negative conclusion you try to draw from growth rates few other societies on earth have enjoyed along with us is aided by an act of deception on O’Brian’s part, the author of that link, by presenting his other chart which goes back to 1913 without making the same comparison. Rather he prefers to let his progressive readers’ imaginations run wild. O’Brian’s other chart shows how stock prices and upper income were flat during the 30s and 40s, but IT FAILS TO SHOW DATA FOR WHAT WAS HAPPENING TO THE LOWEST INCOME EARNERS’ REAL WAGES DURING THE SAME TIME PERIOD. An honest mistake of omission? Doubtful. Real wages of the lowest income earners declined considerably. To get that kind of income convergence, the wealthy’s loss was great, but I am sure the poor felt their loss far more. The real improvements in the quality of life of the poor in the past 40 years have been even substantially greater if we compare it to the decline in living standards during that period of greater relative equality.

    This ties in well to your philosophical hypothetical of the benefits of free trade if the lowest income earner only gets 10% of the benefits. First off, I pointed out that there is no evidence of this. You did not respond with evidence you simply asserted that evidence is all around us. As if all you need for evidence is the stories progressives tell one another. There is much disparity of income, but there is no evidence it is 90/10, and you just supplied us with a chart whose evidence contradicts your assertion. If a tiny percentage of the population at the top has only quadrupled its income, which is only twice the gains made by the substantially larger portion of the population at the bottom that has doubled its gains and a smaller but still numerically superior set of people in the middle who have tripped their incomes, it is mathematically impossible for the gains to be 90% concentrated in the upper 1%. This is even ignoring the fact that the upper 1% percent pays 30% of the taxes and then proceeds to give a tremendous amount of their money away to charity. If you understand marginal utility, the doubling of real income for people at the poverty rate presents a far greater gain than than the quadrupling of income at the top.   

    Yet I am always willing to entertain a hypothetical for philosophical purposes, and I pointed out that enjoying benefits is better than suffering a loss. You parried aside this obvious and highly sufficient answer by calling it a “let them eat cake argument.” If the poor enjoy real wage growth they can afford more cake; if protectionist policies are adopted to deny them real wage growth they will afford less cake. During the short period of time between the passage of the Smoot Hawley Tariff Act and its postwar repeal in favor of the Bretton Woods free trade policy of the late 40s, economic BENEFITS were not “broadly shared by all income classes” economic LOSSES were shared. It is you that reason more along the lines of that apocryphal statement attributed to Marie Antoinette. In the social isolation of your own prosperously progressive circle you’re saying “shall they not broadly share the bountiful income that trade protectionist policy would provide” displaying a remarkable lack of empathy or even awareness of how much pain America’s short experiment with such policies inflicted on actual poor people. 

    Just as Antoinette romanticized the pastoral life, you fantasize about single income prosperity in the past that was enjoyed by very few, that consumed far less that we do today, enjoyed far less leisure than we do today, and involved women working longer hours than they do today in domestic toil than they now do with a separate income that produces a greater comparative advantage. Back then these single income households grew gardens out of necessity to help put food on the table while you garden for fun or a foodie’s rejection of industrial agriculture. Everything from their tiny square footage of living space to their rotting crooked teeth are signs of extreme poverty now as households at today’s poverty rate enjoy a higher standard of living. 

    Growth rates are very important. Unlike the lowest income earner in the US and Singapore, those in Denmark have actually seen their real income stagnate over the last 30 years. What you mistakenly thought was true of the US is true in Denmark. More importantly, the lowest percentile of income earners in Singapore have nothing to fear from the future, while Danes of all income levels have much to fear as their economy cannot support their government’s promises. The Swedes and the Germans sleep with more peace of mind than the Danes. Don’t worry Dean, you won’t miss a detail, when things start to get really ugly in Europe for those countries that have failed to steer their ship of state into the storm years in advance, I will keep you informed on the pages of the Oregon Catalyst, indeed I might even rub it in. 

    When business owners are called “unpatriotic” for engaging in commerce with foreigners, you are confirming my point about the Xenophobic roots of trade protectionist arguments. It is a fact that this trade has improved the lot of the lowest income earners in America and the median income earners even more, something confirmed by your own link, and far more sophisticated empirical work that your buddy Krugman writes about in that book I suspect you will never read. Jobs are being eliminated left and right from automation, barcodes, and email, but with no evidence what so ever, indeed with decisive evidence to the contrary, you cling to a faith that it is primarily to blame on trade with those darn foreigners by unpatriotic capitalists. 

    The idea that trade is dangerous because it would drive inflation is laughable if you really think about what you are saying. What you are trying to claim is that trade can contribute to demand pull inflation. Keep in mind that the academy is now dominated by monetarists who now reject the existence of demand pull inflation. I don’t share their position, but if it does exist it is the case that it has a negligible effect on prices compared to growth of the money supply. I think there is a theoretical argument to be made that if demand pull inflation exists let us not forget it is the result of economic growth. Because trade causes economic growth, it must be the case that it contributes to demand pull inflation. How do we prevent inflation? Stop the economic growth. I don’t recall you ever being an inflation hawk willing to do so, so it seems to symbolize your utter lack of evidence against trade that you would contradict yourself so thoroughly as you grasp for something, anything at all to disparage international trade which has been one of the greatest blessings to our economy for both the past ten years and the entire postwar period. 

    I doubt you thought this very far through. You read an article in an agricultural trade publication suggesting demand from China or some overseas consumer is driving up prices. There is no difference between consumers in a foreign country increasing demand or consumers in one of our 50 states doing the same thing. The question is do we want more demand or less demand? I also have to wonder if this article you read took any time to analytically or empirically identify where the first mover of this demand was coming from. Why are so many dollars flying around the world to make US agricultural exports so affordable? Could QE2 have anything to do with that? Ya think?

    Regarding oppression, I can see why it would be rhetorically helpful for you to say that nothing in America rises to the level of oppression. If we wanted to define oppression as descriptive only on the Pol Pot level, Jim Crow was not oppression. If we must compare our internment of the Japanese to German concentration camps then I suppose our slightly more humane version was not oppressive by that relative line of reasoning. I think that gays living in North Carolina today would disagree with you. Perhaps a Towncar driver in Portland might too, but let’s not get too far off our talk about democracy in the DEVELOPING world where extreme tyrannies of the majority are a serious threat to human liberty and human dignity. This is why the Chinese enjoy greater civil liberties, less corruption, and more rule of law than their Indian neighbors. We have a very benevolent view of Indian religion, perhaps it came from the Beetles, but if you want to see the power of the religious right, North Carolina has nothing on India. Indeed many Muslim countries are more tolerant of a right to privacy than the social police of India. The plight of people living in societies that democratized before they liberalized has been tragic. 

     

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