Msnowe's Blog

The Financial Page-Page (M.Snowe comments lightly on Surowieki’s Financial Page)

Posted in Uncategorized by m.snowe on May 22, 2008

Page Title: “The Free Trade Paradox”

Brief Synopsis:
Surowieki waxes on the similarity of Clinton and Obama, especially in reference to their Free Trade policy, or lack of support thereof. As he summarizes, it’s “like a contest over who hates free trade more.”
Then he explains the pitfalls of free-trade and, alternatively, those of not-so-free trade.

Free Trade might be bad because:
1. It cuts US blue collar jobs and lowers wages (many believe but it’s hard to quantify this)
2. It feeds more money into the swelled pockets of the American rich (probably true, w/ all those corporate profits)

Free Trade might be good because:
1. It lowers the prices of goods lower and middle income Americans spend their cash on
2. This in turn gives more Americans greater spending power

Surowieki’s argument, while not exhaustive by any means, does extol on the short term problem of up toughening trade restrictions with other nations–it creates a world where the goods which were previously cheap, suddenly become more expensive–and those goods are usually the ones lower income households purchase. So the American wealthy will not feel the pinch, but the lower- and middle-incomers will, almost immediately. Of course, the jobs available to lower and mid income people will begin to increase as US manufacturers decide to relocate back to America, and the wages will probably spike to higher levels than when the same jobs were harder to come by and in competition with the middling wages of foreign workers (which will still be middling, only we’ll have taxed them up to their eyeballs, making their wages go down by valuable pennies as their sales also plummet). But the benefits to US workers could take months, if not years–and would it translate into a richer America?
Surowieki ultimately comes out against tougher trade restrictions.

Assessment: Our undergraduate economics professors have always said that the freer the trade, or the better the advancements in globalization–the better for all (or at least most). Globalization, at least financially, is often seen as more of a threat than it really is–kind of like the gap between subway cars and the platform–you’re often told to “mind it,” yet even when you don’t contemplate the danger, you usually navigate onto the train just fine. Of course, nobody’s blaming the electorate for having strong opinions about foreign trade, because like it or not, it combines some of the touchiest subjects we as a species seem to perpetually have issues with: money, race, culture, nationalism, etc. The problem is, is there really anything we can do in this globalized marketplace that will in fact yield a higher quality of life for our poorer or lower middle class workers? Obviously, we’d all like to believe the answer is yes, but is the free trade, or not-so-free trade debate really the outlet? It seems that trade restrictions will only hurt lower earners, at least in the short to medium-length run.. And in a recession, any short-term losses for the lowest paid in our country, even if there’s a promise of better wages on the unpredictable horizon, is not exactly a wise decision, or in their best interests. And what about lower income americans that don’t work the kind of jobs that foreign workers do to create these goods? Their bills will go up without ever seeing a spike in their wages. We’ve become so reliant on foreign goods, we probably won’t even know where to start. Another point to make is that Surowieki’s argument forgets to mention that this issue is not one sided–we can tariff the crap out of foreign entities, but they also have the power to set prices, and if we drive taxes up, they might eat some operating costs to adjust the prices, and therefore stay competitive, while simultaneously lowering the already low quality of goods, and compromising lower American earner’s quality of life in the meantime. But it’s anybody’s guess what could happen. The problem is that plans that restrict free trade, while they are possibly made by certain politicians with the best of intentions, they can also be fed or supported by those who have less concern for the working poor and lower classes, and foreign workers as well.

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