It seem to me that you don´t see ALL the effects of outsourcing and specially it´s tremendous impact in the LOWERING PRICE OF CAPITAL GOODS (not just consumer goods). Thus the accumulation in the means of productions increases at a tremendous spead and the cost of production of any single good declines EVEN MORE in an exponential fashion (the marginal productivity of labour booming). You can see that for example in the unitary cost of information processing, data storing, voice telecomunication or whatever. The decrease in the unitary cost of any capital good makes its intensive use, more and more interesting (see for example Google with it´s scores of thousands of PCs working together). At this point a lot of projects that otherwise wouldn´t have been started became profitable and so generate good employment oportunities for more and more people. Toiling the soil was greatly outsourced by the lowering cost of british termal units (coal replacing man power, then oil replacng coal…) and of coordinating movements (the tractor and the harvester replacing man motion). This lowering in the cost of production of BTU and mechanic movement was the fuel of the industrial revolution that created massive markets for so mny new industries where all the well paid workers became possible. So look for all the opportunities and new industries that those newly so cheap complementary high-order goods re becoming to make possible.
josecas:
Sure, free trade has been efficacious historically and will no doubt continue to be so in the future, but what I’m discussing is the effect of free trade with China on the U.S. economy in the interim.
Exactly how is the U.S. economy’s loss of wealth generation resulting from the loss of consumer-goods manufacturing offset by those other effects of free trade you cite?
You mentioned Google. Well, I use Google search, I have two gmail accounts, I have two Blogger (now owned by Google) blogs, I post my videos on Google Video & on You Tube (now owned by Google) all at no cost to yours truly. Google generates income by selling advertising space for me to see that is paid for by the advertisers of consumer products mainly made in China.
I don’t quite follow…How does cheaper goods make me less wealthy? Are you saying employment, not productivity, is what creates wealth?
Gethky, interesting quotes, but I do not see anything extreme or ignorant in any of them. The topic of free trade, and even semi-free trade is mired in misconceptions and outright nonsense, a lot of which does need to be debunked. That isn’t to say the current situation is anywhere near ideal (the current monetary system is largely responsible for it.) I do take issue with some of Robert Murphy’s writings, for instance, on trade between China and the US, because he seems to consider it largely consistent with genuine free trade. That said, free trade is simply the expansion of the division of labour on a planetary scale.
Solid_Choke:
Will you agree that wealth is created by producing goods that sell at a price voluntarily agreed to by both producers and the buyers?
Will you agree that, after moving such production facilities from the U.S.A. to China, at least part of that wealth is added to the Chinese economy and thereby subtracted from the U.S. economy?
Not really. Its merely shifted.
Inquisitor
I don’t oppose the theory of free trade. What I do oppose are those free trade scholars/economists who ignore the vast difference between theoretical free trade and the present situation where Chinese manufacturing has become an ever-growing economic behemoth in such an incredibly short time as to be approaching worldwide ascendancy.
Niccolò:
How then is wealth created?
Gethky, I agree with you on that much; that too many free market economists conflate the status quo with the ideal.
Inquisitor:
I want to discuss a pertinent issue of the day, namely, the effect of the loss of consumer manufacturing on the U.S. economy. Do you?
I don’t understand what relevancy that has.
You’re saying wealth is stolen from the American worker and given to the Chinese worker.
To be quite blunt, its an idiotic argument and one that has been addressed too many times. Those that typically make it are either not versed in economic theory or not versed very well. There is a thing out there called labour economics, perhaps you should pick up an old Ricardo book and read about it.
For one, you have to define what a worker is, but you can not differentiate between any labourer whether they be in management, capital production, or service when you simply refer to “American workers.”
Second, “overlook the fact that low priced imported manufactured consumer goods do not, in any appreciable way, increase the wealth of the ex-manufacturing-workers and would-be-manufacturing workers in the U.S.A.” is just not an intelligent argument to make.
A. What exactly would constitute an “appreciable increase in the wealth of a labourer?”
B. What is wealth?
C. What happens when prices of the general market decrease?
Third, please… Look it up on the BLS homepage, how have average hourly earnings faired in the past ten years?
Four, you’re arguing from an inherently normative stand point as though the Chinese - and no the Chinese are NOT less regulated than America, if I have to explain that, then this doesn’t matter, it won’t get through to you anyways. I would just suggest that you apply for the director of SFDA instead - don’t “deserve” as much as the American worker deserves.
On that, you’re wrong, Americans deserve what they get and also if China is such the desirable location for manufacturing labourers, I believe boats run across the pacific in California, I’ll donate ten dollars for your way!
Niccolò:
Will you agree that wealth is created by producing goods that sell at a price voluntarily agreed to by both producers and the buyers?
Will you agree that, after moving such wealth producing production facilities from the U.S.A. to China, at least part of that wealth is added to the Chinese economy and thereby subtracted from the U.S. economy?
Purchasing goods from China will stimulate further investments there. Not purchasing goods from a country will discourage it. So I’m getting the point you are trying to make Gethky. It is however that purchasing goods at cheaper prices (from another country) will lead to lower living and operational cost in that country for the time this kind of business is running. So actually both countries can benefit from this. There was a similar argument concerning the clothing industry in South Africa. Clothing made in RSA was much more expensive then clothing imported from China. The grade of clothing was however also lower. This lead to job losses in the industry, but on the other hand clothing became also affordable for the growing number of poor people in South Africa. Personally I don’t think “free trade” (I’d reject this term) as such is the problem. One should rather ask, why the cost in Dollars for production are higher in some countries then in others. This could i.e. have to do with taxation, monetary policies, business culture, work ethics and many more. Also the fact that some political systems are more repressive then others can have an influence on the wages.
Gethky, where do you think Chinese firms will turn when they want highly skilled labour? Where do many firms already go?
Even current levels of trade have fomented an increase in jobs in the US, not the reverse (something Murphy illustrates in his The PIG to Capitalism.)
Torsten:
Yes, free trade usually works well, but China, being so very different than any other country, is the case in point. Unlike Japan, China didn’t industrialize during WW2 because it was partly occupied by Japan (as was Korea).
After WW2 Japan began exporting manufactured consumer goods, but China, then in the grips of a communist dictator, remained agrarian. Japan became a leading manufacturer of consumer goods, but was limited by its physical size and population. South Korea then stepped into the exporting limelight, after the Korean War, with TVs, cell phones and cars, but it also soon maxed out. By this time the Chinese communist government had mellowed enough to allow the first Westerners to bring in their factories, train the Chinese personnel and export their products. Before long Chinese entrepreneurs were starting up their own factories and vying for contracts with U.S. companies. China’s manufacturing capacity won’t soon max out because it is a huge country with a huge population. Prices for Chinese exports will remain low because of the huge backlog of potential factory personnel still in the countrysides of China (and attending Chinese engineering schools).
So, with this behemoth as a trading partner, the U.S. manufacturers of consumer products could not compete and either gave up, or moved their factories to China, or contracted with Chinese manufacturers. Isn’t it something for the free trade scholars at Cato and Mises.com to mull over when the predominate consumer goods manufacturing nation in the world loses its consumer goods manufacturing to trading partners?
Inquisitor:
I understand that the Chinese are training quantities of engineers by orders of magniture over the enrollment of U.S. engineering schools.
How much of that job growth in the U.S.A. is due to the wartime economy?
No. I will not agree. Wealth is a state of mind, its not a physical quantity. Wealth is relative.
In response to the second question, no, no wealth is being subtracted from the economy and stop speaking in nationalist terms of “US Economy” or the “China economy” all economies are connected, there is essentially only one or over 6 billion.
Just because production of certain goods has been transfered to the geological region of China does not mean that production of other goods have not been transfered to the geological region of North America or created by they process of increasing market efficiency.
Niccolò:
Will you agree that profit is created by producing goods that sell at a price voluntarily agreed to by both producers and the buyers?
Sure.
Profit is also created by dancing on one’s head for one’s own pleasure. What profit has to do with anything… I’m not sure.
Whatever the case may be, so far globalization has meant increased jobs on the whole for the US. Certainly workers and businesses in some sectors have been displaced by competition, but then even those losses have been outweighed by the gains. Removing certain impediments (e.g. the minimum wage) would further improve the situation.
On a lighter note: