Wednesday, November 23, 2016

The Free Trade Fallacy

As longtime readers of this blog know, it’s not uncommon for the essays I post here to go veering off on an assortment of tangents, and this week’s post is going to be an addition to that already well-stocked list. Late last week, as the aftermath of the recent election was still spewing all over the media,  I was mulling over one likely consequence of the way things turned out—the end of at least some of the free trade agreements that have played so large and dubious a role in recent economic history

One of the major currents underlying 2016’s political turmoil in Europe and the United States, in fact, has been a sharp disagreement about the value of free trade. The political establishment throughout the modern industrial world insists that free trade policies, backed up by an ever-increasing network of trade agreements, are both inevitable and inevitably good. The movements that have risen up against the status quo—the Brexit campaign in Britain, the populist surge that just made Donald Trump the next US president, and an assortment of similar movements elsewhere—reject both these claims, and argue that free trade is an unwise policy that has a cascade of negative consequences.

It’s important to be clear about what’s under discussion here, since conversations about free trade very often get wrapped up in warm but vague generalities about open borders and the like. Under a system of free trade, goods and capital can pass freely across national borders; there are no tariffs to pay, no quotas to satisfy, no capital restrictions to keep money in one country or out of another. The so-called global economy, in which the consumer goods sold in a nation might be manufactured anywhere on the planet, with funds flowing freely to build a factory here and funnel profits back there, depends on free trade, and the promoters of free trade theory like to insist that this is always a good thing: abolishing trade barriers of all kinds, and allowing the free movement of goods and capital across national boundaries, is supposed to create prosperity for everyone.

That’s the theory, at least. In practice?  Well, not so much. It’s not always remembered that there have been two great eras of free trade in modern history—the first from the 1860s to the beginning of the Great Depression, in which the United States never fully participated; the second from the 1980s to the present, with the United States at dead center—and neither one of them has ushered in a world of universal prosperity. Quite the contrary, both of them have yielded identical results: staggering profits for the rich, impoverishment and immiseration for the working classes, and cascading economic crises. The first such era ended in the Great Depression; the second, just at the moment, looks as though it could end the same way.

Economists—more precisely, the minority of economists who compare their theories to the evidence provided by the real world—like to insist that these unwelcome outcomes aren’t the fault of free trade. As I hope to show, they’re quite mistaken. An important factor has been left out of their analysis, and once that factor has been included, it becomes clear that free trade is bad policy that inevitably produces poverty and economic instability, not prosperity.

To see how this works, let’s imagine a continent with many independent nations, all of which trade with one another. Some of the nations are richer than others; some have valuable natural resources, while others don’t; standards of living and prevailing wages differ from country to country. Under normal conditions, trade barriers of various kinds limit the flow of goods and capital from one nation to another.  Each nation adjusts its trade policy to further its own economic interests.  One nation that’s trying to build up a domestic steel industry, say, may use tariffs, quotas, and the like to shelter that industry from foreign competition.  Another nation with an agricultural surplus may find it necessary to lower tariffs on other products to get neighboring countries to buy its grain.

Outside the two eras of free trade mentioned above, this has been the normal state of affairs, and it has had two reliable results. The first is that the movement of goods and capital between the nations tends toward a rough balance, because every nation uses its trade barriers to police hostile trade policy on the part of its neighbors. Imagine, for example, a nation that tries to monopolize steel production by “dumping”—that is, selling steel on the international market at rock-bottom prices to try to force all other nations’ steel mills into bankruptcy. The other nations respond by slapping tariffs, quotas, or outright bans on imported steel from the dumping country, bringing the project to a screeching halt. Thus trade barriers tend to produce a relative equilibrium between national economies.

Notice that this is an equilibrium, not an equality. When trade barriers exist, it’s usual for some nations to be rich and others to be poor, for a galaxy of reasons having nothing to do with international trade. At the same time, the difficulties this imposes on poor nations are balanced by a relative equilibrium, within nations, between wages and prices.

When the movement of goods and capital across national borders is restricted, the prices of consumer products in each nation will be linked via the law of supply and demand to the purchasing power of consumers in that nation, and thus to the wages paid by employers in that nation. Of course the usual cautions apply; wages and prices fluctuate for a galaxy of reasons, many of which have nothing to do with international trade. Even so, since the wages paid out by employers form the principal income stream that allows consumers to buy the employers’ products, and consumers can have recourse to the political sphere if employers’ attempts to drive down wages get out of hand, there’s a significant pressure toward balance.

Given trade barriers, as a result, people who live in countries that pay low wages generally pay low prices for goods and services, while people who live in countries with high wages face correspondingly high prices when they go shopping. The low prices make life considerably easier for working people in poor countries, just as the tendency of wages to match prices makes life easier for working people in rich countries. Does this always work? Of course not—again, wages and prices fluctuate for countless reasons, and national economies are inherently unstable things—but the factors just enumerated push the economy in the direction of a rough balance between the needs and wants of consumers, on the one hand, and their ability to pay, on the other.

Now let’s imagine that all of the nations we’ve imagined are convinced by a gaggle of neoliberal economists to enact a free trade zone, in which there are no barriers at all to the free movement of goods and capital. What happens?

When there are no trade barriers, the nation that can produce a given good or service at the lowest price will end up with the lion’s share of the market for that good or service. Since labor costs make up so large a portion of the cost of producing goods, those nations with low wages will outbid those with high wages, resulting in high unemployment and decreasing wages in the formerly high-wage countries. The result is a race to the bottom in which wages everywhere decline toward those of the worst-paid labor force in the free trade zone.

When this happens in a single country, as already noted, the labor force can often respond to the economic downdraft by turning to the political sphere. In a free trade zone, though, employers faced with a political challenge to falling wages in one country can simply move elsewhere. It’s the mismatch between economic union and political division that makes free trade unbalanced, and leads to problems we’ll discuss shortly.

Now of course free trade advocates like to insist that jobs lost by wealthier nations to poorer ones will inevitably be replaced by new jobs. History doesn’t support that claim—quite the contrary—and there are good reasons why the jobs that disappear will never be replaced. In a free trade system, it’s more economical for startups in any labor-intensive industry to go straight to one of the countries with low wages; only those industries that are capital-intensive and thus employ comparatively few people have any reason to get under way in the high-wage countries. The computer industry is a classic example—and you’ll notice, I trust, that just as soon as that industry started to become labor-intensive, it moved offshore. Still, there’s another factor at work.

Since wages are a very large fraction of the cost of producing goods, the overall decrease in wages brings about an increase in profits. Thus one result of free trade is a transfer of wealth from the laboring majority, whose income comes from wages, to the affluent minority, whose income comes directly or indirectly from profits. That’s the factor that’s been left out of the picture by the proponents of free trade—its effect on income distribution. Free trade makes the rich richer and the poor poorer, by increasing profits while driving wages down. This no doubt explains why free trade is so popular among the affluent these days, just as it was in the Victorian era. 

There’s a worm in the bud, though, because a skewed income distribution imposes costs of its own, and those costs mount up over time in painfully familiar ways. The difficulty with making the rich richer and the poor poorer, as Henry Ford pointed out a long time ago, is that the wages you pay your employees are also the income stream they use to buy your products. As wages decline, purchasing power declines, and begins to exert downward pressure on returns on investment in every industry that relies on consumer purchases for its income.

Doesn’t the increasing wealth of investors counterbalance the declining wealth of the wage-earning masses? No, because the rich spend a smaller proportion of their incomes on consumer goods than the poor, and divert the rest to investments. Divide a million dollars between a thousand working class family, and the money’s going to be spent to improve the families’ standard of living: better food, a bigger apartment, an extra toy or two around the Christmas tree, and so on. Give the same million to one rich family and it’s a safe bet that much of it’s going to be invested.

This, incidentally, is why the trickle-down economics beloved of Republican politicians of an earlier era simply doesn’t work, and why the Obama administration’s massive handouts of government money to banks in the wake of the 2008-9 financial panic did so little to improve the financial condition of most of the country. When it comes to consumption, the rich simply aren’t as efficient as the poor. If you want to kickstart an economy with consumer expenditures, as a result, you need to make sure that poor and working class people have plenty of money to spend.

There’s a broader principle here as well.  Consumer expenditures and capital for investment are to an economy what sunlight and water are to a plant: you can’t substitute one for the other. You need both. Since free trade policies funnel money away from expenditure toward investment by skewing the income distribution, it causes a shortage of the one and a surplus of the other. As the imbalance builds, it becomes harder for businesses to make a profit because consumers don’t have the cash to buy their products; meanwhile the amount of money available for investment increases steadily. The result is a steady erosion in return on investment, as more and more money chases fewer and fewer worthwhile investment vehicles.

The history of free-trade eras is thus marked by frantic attempts to prop up returns on investment by any means necessary. The offshoring fad that stripped the United States of its manufacturing economy in the 1970s had its exact equivalent in the offshoring of fabric mills from Britain to India in the late Victorian era; in both cases, the move capitalized on remaining disparities in wages and prices between rich and poor areas in a free trade zone. In both cases, offshoring worsened the problem it was meant to fix, by increasing the downward pressure on wages in the richer countries and further decreasing returns on investment across the entire spectrum of consumer industries—then as now, the largest single share of the economy.

A gambit that as far as I know wasn’t tried in the first era of free trade was the attempt to turn capital into ersatz income by convincing consumers to make purchases with borrowed money. That’s been the keystone of economic policy in the United States for most of two decades now.  The housing bubble was only the most exorbitant manifestation of a frantic attempt to get people to spend money they don’t have, and then find some way to pay it all back with interest. It hasn’t worked well, not least because all those interest payments put an additional downward pressure on consumer expenditures.

A variety of other, mostly self-defeating gimmicks have been put in play in both of the modern free trade eras to try to keep consumer expenditures high while wages decline. None of them work, because they don’t address the actual problem—the fact that under free trade, the downward pressure on wages means that consumers can’t afford to spend enough to keep the economy running at a level that will absorb the available investment capital—and so the final solution to the problem of declining returns on investment arrives on schedule: the diversion of capital from productive investment into speculation.

Any of my readers who don’t know how this story ends should get up right now, and go find a copy of John Kenneth Galbraith’s classic The Great Crash 1929. Speculative bubbles, while they last, produce abundant returns; when free trade has driven down wages, forced the consumer economy into stagnation or contraction, and decreased the returns on investment in productive industries to the point of “why bother,” a speculative bubble is very often the only profitable game in town. What’s more, since there are so few investments with decent returns in the late stages of a free trade scheme, there’s a vast amount of money ready to flow into any investment vehicle that can show a decent return, and that’s exactly the environment in which speculative bubbles breed most readily.

So the great free trade era that began tentatively with the repeal of the Corn Laws in 1846, and came into full flower with Gladstone’s abolition of tariffs in 1869, ended in the stock market debacle of 1929 and the Great Depression. The road there was littered with plenty of other crises, too. The economic history of the late nineteenth and early twentieth centuries is a cratered moonscape of speculative busts and stock market crashes, culminating in the Big One in 1929. It resembles, in fact, nothing so much as the economic history of the late twentieth and early twenty-first centuries, which have had their own sequence of busts and crashes: the stock market crash of 1987, the emerging markets crash of 1994, the tech-stock debacle of 2000, the housing bust of 2008, and the beat goes on.

Thus free trade causes the impoverishment and immiseration of the labor force, and a cascading series of economic busts driven by the mismatch between insufficent consumption and excess investment. Those problems aren’t accidental—they’re hardwired into any free trade system—and the only way to stop them in their tracks is to abandon free trade as bad policy, and replace it with sensible trade barriers that ensure that most of the products consumed in each nation are made there.

It’s probably necessary to stop here and point out a couple of things. First of all, the fact that free trade is bad policy doesn’t mean that every kind of trade barrier is good policy.  The habit of insisting that the only possible points along a spectrum are its two ends, common as it is, is an effective way to make really bad decisions; as in most things, there’s a middle ground that yields better results than either of the two extremes. Finding that middle ground isn’t necessarily easy, but the same thing’s true of most economic and political issues.

Second, free trade isn’t the only cause of economic dysfunction, nor is it the only thing that can cause skewed income distribution and the attendant problems that this brings with it. Plenty of factors can cause a national or global economy to run off the rails. What history shows with painful clarity is that free trade inevitably makes this happen. Getting rid of free trade and returning to a normal state of affairs, in which nations provide most of their own needs from within their own borders and trade with other nations to exchange surpluses or get products that aren’t available at home readily, or at all, gets rid of one reliable cause of serious economic dysfunction. That’s all, but arguably it’s enough to make a movement away from free trade a good idea.

Finally, the points I’ve just made suggest that there may be unexpected benefits, even today, to a nation that extracts itself from free trade agreements and puts a well-planned set of trade restrictions in place. There are plenty of factors putting downward pressure on prosperity just now, but the reasoning I’ve just sketched out suggests that the destitution and immiseration so common in the world right now may have been made considerably worse than they would otherwise be by the mania for free trade that’s been so pervasive in recent decades. A country that withdraws from free trade agreements and reorients its economy for the production of goods for domestic consumption might thus expect to see some improvement, not only in the prosperity of its working people, but in rates of return on investment.

That’s the theory I propose. Given the stated policies of the incoming US administration, it’s about to be put to the test—and the results should be apparent over the next few years.

****************
On a different and less theoretical note, I’m delighted to report that the third issue of Into The Ruinsthe quarterly magazine of deindustrial science fiction, is on its way to subscribers and available for sale to everyone else. The Fall 2016 issue includes stories by regular authors and newcomers alike, including a Matthew Griffiths tale set in the universe of my novel Star’s Reach, along with book reviews, essays, and a letter to the editors column that is turning into one of the liveliest forums in print. If you’re not subscribing yet, you’re missing a treat.

On a less cheery note, it’s been a while now since I proposed a contest, asking readers to write stories about futures that went outside the conventional binary of progress or decline. I think it was a worthwhile project, and some of the stories I received in response were absolutely first-rate—but, I’m sorry to say, there weren’t enough of them to make an anthology. I want to thank everyone who wrote a story in response to my challenge, and since a good many of the stories in question deserve publication, I’m forwarding them to Joel Caris, the editor of Into The Ruins, for his consideration.

278 comments:

1 – 200 of 278   Newer›   Newest»
Kevin Fathi said...

The powers that be ahould have listened to Keynes and Schumacher:

https://www.theguardian.com/commentisfree/2008/nov/18/lord-keynes-international-monetary-fund

Marcu said...

The next meeting of the Green Wizard's Association of Melbourne will be a bit different than our normal format. For our last meeting of the year we will be going on a field trip. A fellow Green Wizard has invited all interested parties to visit his off-grid homestead. If you want to learn more about the realities of off-grid living and permaculture gardening you are invited to join us.

If you want to come along, let me know via the e-mail below as soon as possible. The field trip is this Saturday the 26th of November 2016. Please make sure that you have sent me an e-mail or that you are registered on the mailing list, I will be sending out the final details from there.

Send queries and comments to limitstogrowth1972[at]gmail.com.

P.S. I have created a webpage where I will post the details of the next meeting and any further details for those who don't frequent the comments here. The webpage can be found at wormlamp.com/gwam

Ludovic Viger said...

Hey JMG, thanks for the great post. I am big on promoting local business and buying local campaigns. Discussing the 'ravages' of free trade is of deep interest to me so this post will certainly make my life easier in arguing against current conventional wisdom about free trade.

GREEN WIZARDS OTTAWA/GATINEAU meet on December 1st @ 205 Bank Street, 6PM everybody welcome!!!

Hammer said...

JMG,

It's possible that the Trump administration will not get rid of most of the free trade policies, or get much of anything changed. We could experience political gridlock, or Trump might turn back on all his campaign promises.

http://www.politico.com/magazine/story/2016/11/trump-flip-flops-president-elect-214478
Look at all of his flip-flop statements.

Who knows what he's going to get accomplished in the end, or what he will try to do? The president himself doesn't have much control over the nation's overall fate.

But at least some change is better than none, and at least the neglected flyover country people sent a message to the political establishment.

RepubAnon said...

I'd suggest that the internal trade policies of the United States provide a natural experiment in the issues related to free trade, especially the period from around 1880 to the end of what Supreme Court followers call the "Lochner Era."

The US Constitution prohibits the individual states from setting up barriers to trade from other states. During the Lochner Era, the Federal Government was prevented from passing laws setting national labor standards. The result: as the railroads made interstate transport relatively fast and inexpensive, industries moved to low-labor cost states.

Look at the child labor law cases: when states such as Massachusetts passed laws regulating child labor, firms in the timber, furniture, and textile industries moved to the Southern states where no such laws existed. Attempts to set a national standard for child labor were struck down by the Supreme Court as an unconstitutional restraint on the freedom to contract. Any effort by states with child-labor laws to ban the import of goods produced with child labor would have been struck down as unconstitutional restraints on interstate trade.

We see the same thing in global "free trade" agreements where no protections are set for labor and/or environmental laws. Companies move to the least-regulated area, starting a race to the bottom for regulations protecting the citizenry.

It's not that free trade is bad in and of itself - it's that the free traders don't set up a truly level playing field. One could argue that destroying labor and environmental regulations was the intent rather than a "who could have known" situation - but this doesn't change the outcome: labor organizers being fired, beaten, or killed in low labor cost countries, and pollution levels so terrible that even the national leaders take notice.

Ray Wharton said...

Hmmm. So it allows the wealthy classes in poor countries to approach the wealth of the wealthy in rich countries; and allows the impoverished people in wealthy countries to approach the poverty of the impoverished in poor countries. Allowing all societies to have wide and wider differences in life expectations stuck cheek to jowl.

Also it reduces pressure on all participants to base their way of life on the realities of their natural habitat.

Recently my imagination has been enthralled with a world building project. A great saga of the rise of a successor civilization in the climate changed rocky mountains. I don't know if much of it will be turned to a story, this project is very tailored to my most unique of tastes. Still though the research I have been doing is relivent to this discussion.

This morning I was reading a book on the ways of life of the Rocky Mountain natives before white settlers got here. They had a life that was clearly tailored to make the best of very rarefied resources. Though brutally exposed to many pains of poverty that even the poor in industrial society can expect some protection from; they had kinds of wealth that were fulfilling with in those contexts. Even though they were poor, their way of life made complete logical sense in the context of mountains far far from any ocean influence on climate. A wealthy way of life that doesn't make sense is satisfying in strange ways.

Next week I will be herding sheep on the Dineta (Navajo land) Black Mesa. I look forward to it strongly, even though herding and living in a crude shelter is harsh, I know from last years experience how well it counter acts the imbalances that seep into a persons spirit from living industrially in a land with especially little patience for such non-sense.

I observe something from comparing my time in sheep camp to the lore of Ute times past. Even with only a tiny amount of industrial remains available, certain tasks can be simplified from a major part of the economic life to a minor chore. The question to my mind, anchoring the imaginary world, is what things will fill that time.

subunit said...

"Since labor costs make up so large a portion of the cost of producing goods,"

The figure is <5% for cost of labour to cost of goods sold (COL:COGS) in manufacturing at large. The push to outsource labour was NOT driven primarily by obvious cost savings (logistical & quality issues often outweigh the 3-4% reduction in cost you might achieve), but rather by political and ideological considerations. At a certain time in the 2000s, it didn't matter if you could demonstrate that you could produce furniture from North American lumber more cheaply here, Wall St. wouldn't give you a loan for your furniture factory unless you sited it in China. Offshoring was a deliberate program intended to break labour, not a rationally-considered response to price pressures.

Rich_P said...

JMG, new empirical research supports your argument. Economists refer to this as the "China Shock" and observe that regions quickly exposed to foreign competition have not recovered; in other words, the costs of free trade are disproportionate and concentrated, while benefits are diffuse. http://www.ddorn.net/papers/Autor-Dorn-Hanson-ChinaShock.pdf

Voters in economically-depressed areas used the Electoral College to call B.S. on neoliberalism and free trade. In other words, the EC performed as intended by allowing the Rust Belt bloc to check the destructive economic policies favored by other regions.

My gut feeling is that free trade eventually works over sufficiently long periods of time, but it deals so much real damage so quickly that it's impossible to stay the course before the political backlash occurs. As the paper above notes:

"Labor-market adjustment to trade shocks is stunningly slow, with local labor-force participation rates remaining depressed and local unemployment rates remaining elevated for a full decade or more after a shock commences."

Theoretical economists deluded themselves by assuming labor force adjustments in response to free trade would be smooth, or that people could move for a service sector job 100s of miles away like it's no big deal.

Lastly, while I enjoyed The Great Crash, I think any treatment of bubbles is incomplete without examining the role of the Fed and its arbitrary manipulation of interest rates. Indeed, some economists have made the argument that free trade actually causes even more when paired with the Fed's expansive monetary policies. To keep my comment brief, if outsourcing is one pincer, the Fed is the other. I hope you'll tackle central banking at some point, as they're the worst villain of them all.

zach bender said...

is there some possibility the nation state is itself an anachronism?

W. B. Jorgenson said...

To all in Ottawa, the next meeting of the Ottawa Green Wizard group is December 1, King Shawarma (205 Bank St.) at 6:00 pm. A special request is being given for non-Australian native English speakers, as currently I'm the only one of us...

Island Poet said...

Good explanation of the causes of economic failure produced by 'free trade' agreements. I will be sending people to the blog instead of arguing with them! You seem to have left out the aspect of global trade being utterly dependent on cheap shipping; for some larger reason, I suspect... Perhaps another post? Thank you for your reasoned and insightful essays; in the maelstrom of memes and general thoughtlessness that the internet provides, the Archdruid Report is my weekly dose of sanity!

Unknown said...

JMG,

Great post, as usual. Couple of thoughts...

1. Wars and Empire maintenance needs probably play highly into this discussion as well. We humans are very good at saying "If a little of something is good, more must be better!" Then when we get slapped from going too far we swing the other direction. Thus the movement from too much free trade into overreaching Populism that enabled the Fascist party.

On that not, if we can step back from free trade we could then also potentially scale back our military adventurism. Of course, people will always want to take what their neighbor has, since their grass is greener. Delicate balance, indeed.

2. I wonder if encouraging localism, for want of a better word, would also reduce energy consumption overall, through downsizing of the enormous shipping industry.

-Joel

Gee said...

No coincidence that as purchasing power of the lower socioeconomic rungs was depleted, there was a concomitant massive increase in debt to make up for it. Of course, you can only play that game for so long; the result being the recent financial crisis, the inevitable culmination of the free trade and deregulation era. Just basically a looting mechanism to extract money from the system and channel it upward, both on the way up, and then again when the system reset is needed. Then they loot the assets. (See foreclosure crisis, fixed by sending all the owned homes into the rental market, via cash rich investors picking them up on the cheap.)

In the same way, the new administration looks to be a shining example of the type that puts corrupt right wing billionaires in positions of power simply for their own enrichment (see Ms DeVos for education secretary, for example. Knows nothing about education, simply wants it privatized, ya know, because markets.)

While I fully agree with your analysis of what was wrong with this country and what brought Trump to power, he is not the solution. He is a different sort of problem, but not completely different from the mess the neoliberals made. I could never vote for Clinton as I could not vote to reinforce the disgraceful status quo. But we'll have a serious mess on our hands soon with the bunch that is coming to power. For now, the looting will continue until morale improves. :) But I suspect this will end badly.

Mike said...

I seem to recall a previous post where you noted that venture capitalists with money to burn were pointedly *not* throwing their capital into new energy gimmicks, since they have all proven to be pipe dreams. (pipeline dreams? :) although you have also noted the fracking bubble currently in the cauldron.

In any event, I hope you are right, and that one possible good outcome of a Trump presidency will be that investors will find something to invest in here that will give them some reasonable return (>0) and also provide a way for some of the wage class to earn a few dollars more and spend it here.

David, by the lake said...

John--

I'd also suggest that there are contextual dependencies involved as well (as there are with most things -- I am learning!) in that given the resource-constrained future we are looking at, with its inherent resource conflicts, a (more) self-sufficient economy is less likely to be disrupted by external events. Not a guarantee, of course.

As I read this week's essay, I also considered your model with respect to internal US dynamics. By constitutional fiat, states cannot regulate interstate commerce -- though what exactly this means is open to debate -- which restricts their ability to control for the kinds of effects you mention. We have, of course, seen the very things you've described occur -- companies register in DE b/c of favorable laws, banks have operations in ND b/c they can "export" usurious interest rates, production shifts to right-to-work states w/o unions, etc. I wonder if this is not another element of internal conflict that continues to slowly build within the structure of our federal system. Of course, the analogy is not exact, as there is that overarching federal representation for the disaffected which is not present in the international case you described. That said, the straws keep piling up on the camel's back.

As a side note, I need not ask you anymore about the spittle-flecked comments you've mentioned. I had my own run-in with one of those recently. By the end of the (digital) conversation, I was fully vested in hood and robe with a shrine to Hitler in my closet, because apparently anyone who refused to vote for Hillary when Trump was the alternative *must* be an unrepentant racist. My economic issues were dismissed as fantasy and make-believe. Eh bien.

If this is where the Democrats are going then they will be out of power for a while, even if Donald ends up with the next recession (which I fully expect he will). It will be interesting to see how he handles that crisis when it arrives.

. said...

This would be such heresy in Ireland. People are absolutely convinced that we tried protectionism in the 1930's and ended up in a trade war with the UK which led to massive impoverishment and that we should therefore never, ever engage in anything resembling protectionism again. Plus we've benefited from jobs that US companies have offshored here as a tax haven.

Is it possible for such a tiny country to have normal trade barriers? Or could we be too small to function independently? I suppose we did have trade barriers and a nascent domestic industry prior to being forced into the Act of Union with the UK in 1801. How to sell people on the lost possibilities of 1799 though?! It will sound to them like a return to potatoes three times a day every day.

Mallow

. said...

The Left always argues against protectionism on the basis that it impoverishes the low paid and causes nationalism and therefore wars. Leaving aside the idea that nationalism causes war, it occurs to me that they've confused correlation and causation.

It wasn't the raising of trade barriers in the 1930's that led to war. The trade barriers and the war were both in part the fruits of the preceding decades of free trade-related social, economic and political stresses.

Mallow.

Mark Luterra said...

JMG,

I've been wanting to understand the effects of free trade more coherently, so I thank you for providing your insight and explanation.

It occurred to me last week that the sudden political movement away from free trade over the last few years - culminating in Hillary's disavowal of the TPP and Trump's anti-free trade platform - may well not be a populist-driven movement.

In the previous era of free trade, wealthy empires maintained political control over low-wage nations, ensuring that policies there supported continuation of the status quo, i.e. a majority of the population employed in export-based labor for overseas corporations. In the current era, the US has maintained an effective empire in Latin America but less so in Asia, and the balance of power continues to shift.

In the absence of empire, the low-wage countries that dominate production will eventually leverage this for economic advantage. China is the best example currently, as more and more Chinese manufacturers are selling directly to the global market rather than producing goods for US corporations. Furthermore, control of manufacturing in a free trade market allows for the sort of "dumping" you describe - market manipulation to drive foreign competitors out of business.

The resulting trend of wealth creation ultimately advantages corporations that directly control production (i.e. those in manufacturing nations) over corporations in wealthy nations that subcontract production elsewhere and siphon off the majority of the profits. Thus the exponential trend of Chinese buyouts of US corporations, e.g. http://www.cnbc.com/2016/05/09/chinese-firms-go-on-a-buying-spree-for-american-companies.html

Mark Luterra said...

My hypothesis could be stated as follows: Free trade, by outsourcing production to low-wage countries, generates a net flow of real wealth from low-wage nations to high-wage nations, while simultaneously driving down wages and increasing profits in high-wage nations. In the absence of political control over low-wage nations, however, free trade also allows these nations to gain control over production and sell directly to consumers worldwide, undercutting corporations in high-wage nations that are dependent on outsourcing and generating sufficient capital to ultimately bankrupt and/or buy out the competition.

The endgame of this would appear to be a shift of global economic power from the US and Europe to China and southeast Asia, which is well underway. Once that happens, free trade policies will enable a now-high-wage China to extract wealth from a now-low-wage America. This is already beginning, as we are exporting raw natural resources like timber and grain - at rock bottom prices - to China and Japan for processing into goods that are sold worldwide.

I think our current movement away from free trade - though couched as a populist movement to garner political support from the frustrated and disenfranchised - is actually being driven by a growing cadre of the corporate elite who are seeing where this is going. Two questions then arise:

1. If it is now in our interest to abolish free trade and in China's interest to continue it, does China have enough political/economic/military clout to enforce its interest over ours? and

2. If a movement away from free trade in the US is driven not by populism but by a corporate elite, will that movement ultimately succeed in improving the lot of the working class?

As for the first question, I don't know the answer. For the second, I would postulate that yes, rejection of free trade will of necessity ultimately restore an equilibrium that allows workers to afford the products of corporations. I don't see that happening, however, without a massive collapse of speculative investment wealth followed by an extended depression/recession. Such a recession may of course provide overseas corporations with an opportunity to exploit American labor, in which case we effectively become a third-world country. Perhaps a careful crafting of trade barriers can prevent that...

JacGolf said...

Free trade works if you accept the free movement of 'resources' Unfortunately, humans are considered a resource and though the capability is there to move to where the jobs are, leaving one's family, friends and in some cases culture, in search of a paying job is not something most will consider. If people could and would want to do that, there would be less of an effect because the talent would move to the areas where wages are lower but so are costs, thereby leveling the immediate impact. Of course, businesses would look to move again to another, lower cost area, thereby creating another move.

Let's hope Trump was truthful in his decree to render these detrimentally awful trade deals null and void. If not, he may be facing riots from both the crazy snowflakes AND the working class...shudder to think f how awful it would be to be a police officer or national guardsman then...

bicosse said...

I'm not sure how well Brexit fits into your argument. The Tory Brexiteers, such as the five Conservative MPs who wrote the manifesto 'Britannia Unchained' (two of them, Elizabeth Truss and Priti Patel, are now cabinet ministers), tend to be ardent free-marketeers who think the European Union is too protectionist and interventionist and holds Britain back. Protectionism is also a much less attractive option for a small, densely-populated country heavily dependent on international trade than it is for a continent-wide nation like the USA that is still rich in natural resources and has a huge internal market. But you are right, the EU's internal free market in labour was becoming deeply unpopular in the UK and this drove the success of the Leave campaign.

Vanholio ! said...

I've always thought that another problem with free trade is that it allows goods and capital to move, but not labor. Most people only have their labor to trade, but if their nation's real wages are depressed, they either have to suffer or move. If they move, including illegally, it brings suffering to their families and sometimes the cultures they move into. It causes social tension. Few cultures, if any, are so cosmopolitan that they can accept large numbers of immigrants without tension or even violence.

These forces don't just apply to "rich" countries. Under NAFTA, US corn undercut Mexican corn. Yes, labor was and is cheaper per man-hour in Mexico, but highly mechanized and subsidized US farmed corn cost much less labor per bushel. It drove rural Mexican farmers and farm laborers out of work, and they migrated to the USA for jobs. They undercut lower-skilled US laborers and began changing the culture of smalltown America, even as better jobs in manufacturing went to Mexico first, and then to even cheaper labor markets in China and the rest.

Lessons?
1. Laborers have much less flexibility than capital to adapt, and so the potential for wage depression, migration, and suffering is greater under free trade.
2. As migrants and jobs shift around faster than labor can adapt, potential for inter-labor and cross-cultural conflict is heightened.

Bill Pulliam said...

It's funny, I remember well in the 1970s-1990s that opposition to free trade and its fraternal twin globalization was a LEFT issue by and large. Somehow the "left" in its institutional Washington version flipped this. I remember all too well how president Clinton, supposedly of the "left
Iiberal" party spent most of his political capital getting NAFTA passed, which was a plan inherited from his supposed "right wing" opponent George HW Bush. On top of this he gave us DOMA, Don't Ask Don't Tell, and enhanced limits on the travel of HIV+ people into the US.

I especially recall thinking it was odd that goods services and money could freely cross borders while the movement of actual human beings remained much more restricted. Pretty well clarified the priorities of our government and both major parties.

This is a major reason why I have rarely voted for the major party candidates for president in many decades.

inohuri said...

Is it true that these agreements trump national
laws?

A quick search re NAFTA found this:
Barry Appleton, Canadian lawyer for Ethyl Corp,
said at the time, “It wouldn’t matter if a
substance was liquid plutonium destined for a
child’s breakfast cereal. If the government bans
a product and a U.S.-based company loses profits,
the company can claim damages under NAFTA.”

http://elizabethmaymp.ca/investor-state-
treaties/what-happened-under-chapter-11-nafta





Shane W said...

JMG--what do you make of the obsession of certain individuals that Trump will not accomplish anything? What is this an indication of?

Tom Bannister said...

YES!!!

Free trade wisdom is like gospel these days. The logic (or illogic rather) that people acting in their own rational self interest will inevitably work out best for everyone via the invisible hand of the free market! If nothing else its such a catchy, beautiful sounding idea that no wonder its got so much traction over the last few decades (as long of course, as your not on the negative end of the free trade policy).

A real problem (for example here in NZ) is the insistence that because of the economic stagflation at the end of the last Keynesian era (Under Robert Muldoon here in NZ) free trade, or anything except protectionism must be a good thing. Then of course, once you take resource limitations into account, the picture becomes much clearer. We simply can't keep growing like we used to (another heresy! AAHHHH!).

That's right. No more growth (blank stares....) uhhhh...???

Anyway, just my little rant.

Shane W said...

(fingers crossed) I'm hoping that this upcoming downturn in the much-needed depression. I was so disappointed that '08-'09 was jerry rigged out of being the next depression. We really need a good old fashioned depression right now. It's the only way we'll learn our lessons.

Tom Bannister said...

Just another point. I remember trying to argue with an economics student a while ago about the wisdom of raising the minimum wage, to encourage economic stimulus (working people, having more money to spend, will spend more in the goods and services economy) his response was something like, well the economy you see is already in a more or less perfect state and any intervention will result in less employment etc etc. It all comes back to how economics as a subject (or orthodox economic theory) lives in a kind of la la land...

Helix said...

Rich_P said... "My gut feeling is that free trade eventually works over sufficiently long periods of time..."

I'm not so sure. Low labor cost is certainly one of the driving forces behind outsourcing, but by no means the only one. Or even the most important one. IMO, an even more important reason is to put corporations beyond the regulatory apparatus of any country. In particular, workplace health and safety standards and environmental standards can be totally ignored if capital can outsource to places with lax regulations but business can sell the products so manufactured freely in the countries whose regulations they are sidestepping.

Sadly, it appears that governments really are the best hope for curbing the abuses of capitalism. Not that governments are always interested in curbing such abuses.

John Michael Greer said...

Kevin, indeed they should have. If they had, we wouldn't be facing anything like as serious of a mess just now.

Ludovic, glad to hear it. By all means spread it around!

Hammer, lots of things are possible. Myself, I don't see a lot of point in fixating on any one set of arbitrarily chosen possibilities.

RepubAnon, thank you! I didn't happen to be aware of that bit of economic history, and you're right, it serves as a confirmation of my thesis.

Ray, basically, yes. Best wishes for your sheepherding adventure -- and also your worldbuilding project. I hope you turn the latter into a novel!

Subunit, you're making the common mistake of focusing on averages rather than the margins. Many industries have relatively low labor costs, but not all -- and offshoring those industries that have high labor costs, because they employ many people, has a disproportionate effect on wages throughout the economy. That said, it actually doesn't matter why jobs get offshored; the effect on income distribution is the same.

Rich, many thanks for the reference! I've just downloaded Autour et al. and will be reading it as time permits. As for the role of central banks, how would you explain the fact that stock market crashes came more frequently before the Fed was created than they have since that time? The stock market crashes of 1873, 1893, 1896, 1901, and 1907 took place when interest rates were completely unregulated, and that of 1873 ushered in a depression comparable to the one in the 1930s, the Long Depression. I'm entirely willing to believe that the Fed can mess things up, and has done so, but the absence of a central bank doesn't seem to correlate with better outcomes...

Zach, care to offer me some evidence for that curious claim?

Island Poet, the dependence of free trade schemes on cheap fuel is something that would need some research; I don't happen to know, for example, how transport costs in the Victorian era compared to those today. Still, it's a plausible claim.

Unknown Joel, the two free trade eras both happened during periods of unipolar global hegemony, with Britain in the top spot the first time around and the US in a corresponding position this time around, so your first supposition is quite plausible. As for the second, it would depend on details, but yes, that also makes sense as a general rule.

Gee, we're far enough along the process of decline in the US today that pretty much every choice is going to end badly. That said, if Trump actually does back the US out of some of the worst trade agreements, a lot of Americans may benefit.

Mike, exactly. It's going to take some time for the damage done by free trade policies to heal, but once jobs start returning to flyover country and people have money to spend, a lot of businesses that are struggling will find things getting easier again.

Cortes said...

Resistance to free trade depends on the size of the resisting economy, I believe.

The efforts of Dr Francia in newly independent Paraguay are instructive: he sought to resist pressure from the rising British power and its local comprador allies in Argentina, Uruguay and southern Brazil and was subjected to the same sort of treatment as the Venezuelan, Bolivian and Russian governments experience today. The Russian Federation, having turned western sanctions against the west, is probably too large to undergo the fate of XIX century Paraguay or of XXI Century Venezuela and Bolivia (and, regrettably Cuba).

A terrific novelistic approach to the regime of Dr Francia in Paraguay is Augusto Roa Bastos's "Yo, el Supremo "/ "I the Supreme One".

John Michael Greer said...

David, that makes a good deal of sense.

.Mallow, again, there can be bad trade barriers as well as good ones, and the economic theories of the 1930s encouraged a lot of really bad economic policy. I wonder, though, whether the people who insist that trade barriers failed in Ireland in the 1930s have really thought through the other factors at work. When your nation has just pried itself loose from an empire that spent most of a thousand years stripping it to the bare walls, and then piles the costs of a bitter civil war on top of the revolution that won it its independence, at a time when the global economy has gone gurgling down the drain -- why, yes, you're in for hard times no matter what!

As for the left's insistence that protectionism causes war, here again, they've missed the point that free trade also drives down wages...

Mark, as I see it, it's not an either-or thing. Most political issues are supported by a lot of people for a lot of different reasons. So, yes, there are likely to be affluent interests supporting an end to free trade, but there are also populist groups with the same agenda, just as the proponents of free trade come from various points on the income spectrum and have different reasons for supporting it.

JacGolf, look at the way the free movement of laborers across national boundaries has pushed down wages in Britain. Whether you move the jobs to the low-wage workers or the low-wage workers to the jobs, the result is a decrease in wages.

Bicosse, whatever the pro-Brexit Tory politicians thought, there's good reason to think that a lot of the voters who chose "Leave" were acting on a clear sense of the way membership in the EU drove down their wages and increased the disparity in income distribution -- though they'd have phrased it differently!

Vanholio, there's one set of problems with free trade when the laborers can move, and another when they can't. Your own example shows that letting people move from one country to another en masse has its own cascading problems.

Bill, why, yes, I remember that too. It's funny how many policies that people want used to be Democratic policies, until the Democrats turned their back on their old constituencies...

Inohuri, yes, it's true. The trade agreements are intended to give corporations the power to overrule national governments. That's another reason they need a good stout wooden stake driven through their hearts.

Shane, I think it comes from the same place as the frantic insistence that voters couldn't possibly have voted for him.

Tom, exactly.

John Michael Greer said...

Shane, I hope you don't end up recalling those words as you stand shivering in line at a soup kitchen...

Tom, exactly. I'll listen to economists again when they're able to make accurate predictions about the real world. They haven't done that for years.

Cortes, and of course your example points out another far from minor detail about free trade agreements -- they function as part of the imperial wealth pump that concentrates wealth and power in the imperial center at the expense of the periphery.

pygmycory said...

I've had a fair number of conversations on the subject of free trade agreements with people I know. Most of them agree that they aren't good for ordinary workers in rich countries. Some of them then say that these agreements help workers in poor countries, who are poorer than those in rich, and therefore we should support the free trade agreements anyway.

I assumed that the story of benefits for poor countries was basically true for a long time, but recently I took a look at the impacts of NAFTA on mexico, and found it wasn't necessarily so. The changes related to fishing licensing, and the sale of industrially produced US corn in mexico seems to have put a lot of small farmers and fisherpeople out of work. Some of them emigrated illegally to the USA, which meant that the US working class would have gotten hit coming and going.

As far as I can see, the big beneficiaries of NAFTA were the wealthy in all three nations, plus technically-skilled people who could go work in one of the other countries if they chose. Full disclosure: I 'volunteered' in the USA for a couple of summers due to not finding work in my field in Canada.

The biggest losers were workers in all three nations. I think the downsides of these agreements vastly outweighs their benefits, and I want to see them die.

Graeme Bushell said...

Sir!

Ecologist, I name thee! And systems thinker.

Ien in the Kootenays said...

Well said, but we are left with the question of which scale is best for which job? Lest we start worshipping the small too much, let us remember that Machiavelli's work was a reaction to an unbearable state of constant warfare among tiny states. In the supposedly blessed time of ultra localization, Fernand Braudel mentions famines in one district in Northern France unalleviated by rich harvests in another district nearby. We share an atmosphere with China. Some things, like the global commons, ought to be regulated world wide. Others, locally. Sorting out the options will take time, and in the meantime we may run out of cheap fuel for all that transport and be back to camel caravans through the wilds of lesser Jihadistan. Let's hope we don't do too much damage before that happens. Meanwhile, I am planting gardens, gathering seeds, collecting a library of how-to (Green wizardry included) and learning more healing arts.

Shane W said...

I work in one of the few industries where economic nationalism is still at work. The US, Canada, Great Britain, Mexico, and others have placed into trade agreements definitions defining the origins and labeling requirements of Bourbon, Tennessee whiskey, Canadian whisky, Scotch, Tequila, etc. Basically, they reciprocate, eg. "whatever the Mexican law states is Tequila is what our law says it is, too." I look for trade in spirits to remain robust even if free trade goes by the wayside, even if the locals prefer their own stuff to the imported stuff.

drhooves said...

An excellent summary of the problems with economic theory versus reality - theories promoted by those with the most to gain, ignoring the aspects which don't hold water. What I find really irritating is the crass presentation of the theories from tools like Bernanke or Krugman, and their insistence that their views are on the same level of knowledge as scientific laws. We, "the little people", can surely not comprehend it all.

For the first time since the beginning of the industrial age, this era of "free trade" will end without the option of economic expansion to fall back on. In other words, the wealth has been transferred, the music has stopped, and now there's far fewer chairs available. Many economic and emotional bubbles will burst.

inohuri said...


The Chinese are opening factories in Africa. This could be to get a yet lower wage.

A neighbor recently returned from Addis Abeba and I asked him if he had seen Chinese. In his weak English he said yes and he didn't seem to like it much. I have read about the Chinese shoe factories in Addis.

The Ethiopian government seems to be giving away the store. People are being removed from the land they have farmed for ages and it is being leased to foreign corporations cheap.

Old Professor said...

Free trade policy is also tied to currency manipulation. Currency exchange rates have been allowed to float so countries can devalue their currency against the dollar at will which makes their imports cheaper and our exports more expensive. This wouldn't be so easy if tariffs were in place versus the big offenders (i. e., China).

BobJones said...

It occurs to me that the same dynamics that you observe within a neoliberal free trade bloc can take place within individual nations as well, especially big ones. I think we see it in the US with right-to-work states beating their more union friendly neighbors in a race to the bottom, and I would be very surprised if China and Russia don't face the same issues in spades.
Reminds me of Kohr's 'Breakdown of Nations', I think he proposed ~10 million people as the historically optimal size of a group to self-organize for their own economic, political and cultural good.

Grebulocities said...

How does automation fit into the picture? Manufacturing that is easy to automate is in the process of being returned to the US, but without the labor that goes with it. I'm aware that technology has been replacing workers since the beginning of the industrial age, but in the past, technology had also led to enough new jobs appearing that the surplus labor could find somewhere else to work. Today, however, this does not appear to be happening: Google has a greater market capitalization than GM did in its heyday, but less than 10% of its workforce, and other tech companies are even worse. Furthermore, they don't spin off anything like the number of programming or tech support jobs that auto manufacturing created in its satellite industries such as auto repair. All the while, they are actually succeeding at eliminating jobs, and now that self-driving vehicles and machine vision are becoming cost-effective, there is a substantial chance that truck drivers and many clerical jobs will be eliminated as well.

I'm not disputing that we will eventually end up in an age of scarcity industrialism and a new demand for human labor, but we don't seem to be headed there quite yet, at least for the owners of capital. Are we simply headed toward an era of steadily increasing long-term unemployment no matter what is done with respect to trade policy? I do recall the idea you presented in Retrotopia to switch the tax incentives so that capital used for automation is taxed while human labor is incentivized, but even this seems that it would only slow automation a little bit.

doomerdoc said...

Yes but the train has left the station a long time ago. None of this will make a difference in the long emergency.

The very development of our systems allows speculative financial capital (nothing more than vaporware digits) to control the fate of nations, businesses, and people. During the decline, they will simply mop up more for themselves, as people here have noted.

As a billionaire real estate man, Trump's success is dependent on financial capital, even if he himself is not a part of it. If you restrain financial capital, labor might get a somewhat larger share, but then there are no more Trumps.

It's the Hobson's choice for labor, either:
1) your labor is protected and you get a little better wage which allows you to afford a little better product, or
2) your labor isn't protected, but you have a 1 in 100 chance of becoming rich

People always choose 2, and capital knows this. The victory of capital is complete, we are just discussing the endgame.

Berserker said...

Hi JMG,
Longtime lurker and infrequent poster here.

You Wrote:
“A gambit that as far as I know wasn’t tried in the first era of free trade was the attempt to turn capital into ersatz income by convincing consumers to make purchases with borrowed money.”

Yes, in the 1920s demand was “pulled forward” by the extension of consumer credit, Sears Roebuck & Co. was a leading force in this new method of marketing. They would ship anything in their vast catalogue anywhere in the U.S., and consumers paid after getting the goods. Surprisingly, this “trusting” model worked, although it appears that the U.S. postal service was, in effect, subsidizing their business model, particularly when it came to rural delivery. While the amount of credit issued would be dwarfed by today’s over-extension, at the time it was a sharp increase from a low base rate. The same decade also saw rapid penetration of the American market by radio (ownership was a census question in 1930), and explosive sales of automobiles and every sort of household convenience.

I’m not sure how this played out in other industrialized nations, but this aspect of the 1920s bubble is now covered in college history intro textbooks.

However, this has clearly been covered elsewhere in the blogosphere;
The top Google hit for “consumer debt in the 1920s chart” was:


http://www.dailykos.com/story/2008/1/14/436037/-

So, yes the song remains the same old song….

zach bender said...

evidence. the nation state in roughly its present form did not exist prior to the treaty of westphalia in 1648. it can be argued its emergence as the dominant form is an artifact of the industrial revolution. like any tool, it came to hand when it was needed or appropriate, but it has persisted beyond that moment.

the dominant economic force for at least the past seventy or eighty years has been the multinational corporation. these actors do not operate with any meaningful reference to national boundaries, and they certainly do not contribute to the tax base of their "residence" states in anything like the proportion of economic activity they generate.

the political interests of human beings tend to be local on the one hand -- schools, court systems, transportation -- and regional on the other -- trade, environmental concerns --, in each case disregarding national boundaries.

the realities are already here. it may be time for us to develop the appropriate tools.

patriciaormsby said...

Announcing the 4th (I promise to stop counting sooner or later) meeting of the Kanto Green Wizards. It will be held on Sunday, December 4, from 12:00 noon at the Asakawa Kompira Shrine near Takao Station on the Chuo Line. For more detailed directions, see the Green Wizards site, Meet Ups, http://teresamcguffey.com/greenwizards.org/?q=node/34926#comment-8745

Note that this is potluck, so bring something to share. Even in the worst of weather, some of the community is gathering there anyway, but in a snowstorm I might not make it. Still, you'll have fun with these nice people.

Jay Moses said...

jmg- you have identified one major problem that accompanies free trade: it is inherently deflationary. it drives down prices and wages with the results you note. however, there are issues with free trade that are potentially even more destructive. the "race to the bottom" that drives wages down also sends businesses in search of other social and political bottoms. businesses prefer to locate, for example, where environmental regulations and labor standards are the most lax. they prefer low tax locations to higher tax locations. while they evade the taxes, regulations and labor standards of their nations of origin, they are quick to demand the assistance of the nations they left and no longer support when they run into trouble.
here in the u.s. we have patted ourselves on the back for reducing air and water pollution. in fact, all we really did was to send that pollution (and a whole lot more of it) to countries like china that were willing to accept it in exchange for the jobs that would result. we no longer have triangle shirtwaist fires here... we sent them to bangla desh instead.
free trade makes economic sense only because we refuse to put a price on the lives of bengal textile workers, on the poisonous air of beijing, the garbage gyre in the pacific or on the rainforests leveled for lumber and palm oil.

Dennis D said...

A comment related to the end of blog topic, Into the ruins. Myself and my wife have developed the tradition where we "hint" about possible presents to each other for the upcoming season, to ease the problems of what to get each other. I sent the link over for the first three editions as a worthwhile gift.

gwizard43 said...

Illuminating explication, JMG, as is so often the case - thank you.

So the first era of free trade unfolded in the context of an explosion in net energy, as 'rock oil' refineries came online in the early 1860s, at that era's start - whereas this current one bids fair to collapse in the context of a slide down the far side of Hubbert's curve. Interesting that these eras should bookend the age of oil so neatly.

Incidentally, I've only had time to read Jason H's story from my copy of Into the Ruins that arrived yesterday - terrifically evocative, I just loved it. I can attest to the fact that those not in receipt are indeed missing a treat...

melo said...

The seductive power of free trade arguments relies on the $2 screwdriver (that lasts the job on a good day) and the lack of bureaucratic stasis imposed by tariff deciders/enforcers.
Example: i live in Italy and ordered a product from the USA. It got stuck in customs for 6 months while they grappled with the quandary of the product being a food or a medicine and then slapped an import duty three times the value of the product.

Customs officials can make scans pf funny money turning a blind eye to chunks of the inevitably profitable black markets and smuggling that will complementarily spring up to throw sand in the soup, leading to greater need for law enforcement.
Yet I still think you're right in the main, especially about (given intelligent government) a middle way -in probably perennial, seasonally cyclic flux- will evolve.
If free trade were shut down overnight it would still take a generation of energetic, curious, otherwise unemployed tinkers to create a Veblenesque reality of pride in durability, artisanal competence and true functional aesthetics to get up to (slow but sure) speed, due to 4 generations of de-skilling.

Thanks again John for being the clearest, most polymath worldview on the Web.

canon fodder said...

Free trade, in and of itself, as you describe it is not a bad thing. Unhindered trade within the US has not caused excessive impoverishment, though it does exist. Before objecting that the polity of the US does not constitute a “free trade agreement” across states, consider that the US GDP is nearly that of the EU with 28 nations, and we have several states that on their own would constitute global economic powers. With a third of the global output, the free trade within the US is massive and effectual.

The real question is why can’t we produce the same result at the international level? As you alluded to, it is in large part a dissonance between the economic reach of corporations versus the political reach of nations. This dissonance allows international companies to arbitrage such things as labor, workforce regulations, and environmental regulations. The outsourcing of manufacturing jobs had as much to do with regulations as it did with labor costs. In some ways, you can say we exported our pollution to China.

I disagree that is it simply a race to the bottom for corporate economic inputs. If that were the case, then countries like China would have a stagnant wage level while the developed world sinks down to that level. Instead, average yearly wages in China have increased 100-fold in the last 50 years. Granted, that’s still only about a quarter of US average annual wages, but the point sometime in the future where wage levels equalize will be vastly above where the Chinese were when the US normalized relations in the 1970s. From the wealthy nation’s perspective, it’s a depressing erosion of a standard of living. From the developing nation’s perspective, it’s an overall rise in a standard of living. The continual rise in global product per capita until 2008 reinforces the general improvement in global living conditions.

Your essay looks at the two top dogs of their eras, both empires, both with the global reserve currencies. In the beginning of both periods, companies in each country aggressively expanded international market share, creating a relatively short period of high growth and profitability, allowing generous wage packages. This period was also marked by increase national trade surpluses. The second half of both were marked by increased competition abroad, declining wage packages and national trade deficits enabled by having the global reserve currency. Could this have been changed by a more nationalistic trade policy? Doubtful. Much of British and US foreign policy has been about expanding the economic reach of domestic companies. Markets that weren’t open peaceably were forcibly opened (e.g. The Opium Wars) since corporations and governments were aligned in their quest for progress and power. And the foreign markets, once opened, allowed corporations to start arbitraging labor, regulations, and resources, thus leading to the hollowing out and decline of the imperial power.

I seriously doubt that the Trump administration’s trade policy will make much difference in the erosion of US wages. Yes, Ford did decide not to move a major assembly plant to Mexico, a worthy victory in and of itself. However, we will not return to the halcyon days of the 1950s when the US was practically the sole industrial economy in the world, despite any campaign slogans.

Trade policies can’t fix the systemic problems facing the US. If anything, free trade allowed the illusion of progress to hang around a couple more decades. Now the bills are coming due, and no trade policy will prevent the coming depression (or erosion of our standard of living, if you like). At this point, I think the best trade policies will be ones that reduce the length of supply lines as much as possible, both internationally and domestically. Consider it a variation on your "collapse now" theme put into trade terms.

Ondra said...

Dear JMG,

thank you for this essay. You could try to submit it for publication in The Economist, just for fun.
I only want to ask - could you (and other commenters) recommend some reading on the history of free trade from Victorian era to Great Depression beside Galbraith? And on the topic in general as well. Thank you very much.

Regards
Ondra

Bruno B. L. said...

@Cortes and JMG, please don't use Venezuela as an example of free trade failure. That country is a textbook example of bad governance, nothing else.

Joe McInerney said...

There is significant environmental impact to global capitalist free trade as well. It's no accident that the current movement took off just after the US federal government enacted the modern suite of environmental laws in the early 70's; NEPA, Clean Air and Water Acts. Free trade allows an end run around them. And trade barriers could instantly level the playing field globally. A US carbon tariff would act as a global agreement overnight. The Chinese and Indians would rather collect it domestically and so would implement it at home.
Global Exchange has been a great source of info on this for decades...
http://www.globalexchange.org/resources/econ101

I highly doubt that the new administration will actually act against the interests of high finance. Smoke and mirrors is what the Republicans will deliver.

aNanyMouse said...

JMG, your thesis here (e.g. about bubbles) brings to mind that of the int’l finance blogger FOFOA, whose theory about the emergence of excess investment capital differs somewhat from yours, but in interesting ways not inconsistent with yours. His post at

http://fofoa.blogspot.com/2014/12/global-stagnation.html?commentPage=1
attributes the US’s serial bubbles to a decrepit int’l system, whereby the Dollar’s status as the world’s Reserve Currency HINDERS FOREIGN capital markets’ efforts to raise funds to build their economies! (You might Wiki “exorbitant privilege”, “Triffin’s dilemma”, and “Managed float”, otherwise known as “dirty float”.)

(Like you, he predicted a Trump victory.) He charges that he US investing public gets Over, since foreigners hoard their extra $$ (coming from the US’ trade deficit) into bubble-ish US Assets (Treasuries, stocks etc.), instead of chasing up prices of real goods/ services here, or being steered into local enterprises better understood by these foreigners. These foreigners are steered into US gov’t and Wall St. etc. instruments which they don’t much understand, thereby encouraging diversion of capital from productive investment into speculation, which leads to bubbles and waste of resources:

“… investing requires active specialization, and should therefore not be a passive activity. That naturally-passive, risk-averse savers are a large and distinct group, separate from investors, traders and speculators, and that only in the present dollar-based international monetary and financial system… are they forced to swim with the sharks.”

FOFOA argues that world Central Banks have been propping up US markets when investors (temporarily) fled busted bubbles, but are tiring of this. Will the US Deep State be able to (further) pull strings, to delay the flight of foreign capital (from these instruments) into real goods /services inflation comeuppance here? [Note that US consumers are already mostly tapped out (broken by bursted bubbles?), with Uncle Sam taking up the slack.]

Warning to gold-bug haters: FOFOA is a vehemently ANTI- Gold Standard “gold bug”, who expects gold to thrive as a store of value, when it’s free from such shackles as its being officially pegged to currencies. (Its official, tho fake, US gov't price is $42/ oz.!) The shortest good summary of his Freegold doctrine is at

https://www.bullionstar.com/blogs/bullionstar/introducing-freegold/ .

aNanyMouse said...

BTW, the sort of official support of US markets, to which FOFOA refers, is often called the Yellen Put, tho he refers more to foreign CBs than to the Fed.

Talon Talonicus said...

Thank you John. That's a very important point - capitalism is a race to the bottom (for the majority). What it will reliably produce is the lowest possible income and living standards for labor.

A distinct but important point, though, is that capital is much more mobile than labor - it can move around the world in nanoseconds - and therefore, labor can never compete or reach equilibrium with capital. Essentially, capital can extort labor by threat of its sudden removal, to which labor cannot effectively respond. Even the most "efficient" (lowest paid) labor force is vulnerable.

Capitalism essentially means: you need money to make money. Which is similar to: the rich get richer. Which necessarily means: the poor get poorer. Rent - e.g. on housing or borrowed money ("interest") - is precisely this mechanism at work.

When everything is rendered in terms of $$ (human resources, natural resources, financial resources etc), you don't have an ecosystem - you have a monoculture where the few "strongest" entities live by preying on (cannibalizing) those weaker (almost everything else - animate, inanimate, etc). This doesn't end well, even though trade barriers etc might offer some palliation.

Max Osman said...

I think that Trump is unlikely to solve the economic problems of the white working class, but if he does so, it will naturally have to be via public spending and protectionism, something that he seems inclined to do. The problem is, especially on the spending file, his own party has a large congressional delegation that has made much of their careers on the ideological rejection of public spending. If he can get around that, he has a chance at a second term. If not, not. If he breaks the current system without having an economic replacement, he will simply make the economic insecurity of his voters worse.


That, of course, is a Hitler condition — that he is forced to throw escalating “red meat” at a base whose economic demand he cannot satisfy.

HalFiore said...

From the Civil War up until WWII, agricultural labor in the South was in short supply, at least at wages that plantation owners were willing or able to pay due to depressed commodity prices at the time. The labo4r fo4rce also had a habit of becoming uppity and expecting living wages, or sneaking off to the manufacturing centers of the Midwest, especially during the latter years of that time period. Of course, you could terrorize them and hold them on the farm at literal gunpoint, but enough were successful at escaping that it created real shortages. Less draconian attempts at meeting the need were tried, including bringing in Italian, Chinese, and, of course Mexican labor. None of these tended to last more than a generation at best on the farm before discovering that they could do much better by opening restaurants, groceries, speakeasies, or body and fender shops. That's why my region to this day has a national award-winning Chinese restaurant, many fantastic Italian restaurants, and the best hot tamales in the world.

How was this dilemma finally solved? Why the planters recognized the value of a prosperous working class and started paying them livable wages. HAW, HAW, made you laugh, I'll bet. No, seriously, at about the time demand and prices began to rise as a result of WWII and the post-war boom, along came gas and then diesel tractors, cotton pickers and pesticides.

Which finally brings me to my point: Yes, I certainly agree that free trade has been disastrous to our manufacturing sector, and there is no doubt that getting back to policies that favor repatriating industry to the US could help to somewhat mitigate some of the effects of the contraction we are going to eventually be going through. If Trump or anyone else can begin that process, they will have served some purpose, anyway. But no one is talking about the effects of automation, which effects I see all around, from obvious places like the factory, to construction, where air compressors, cordless tools, and pre-fabrication have turned crews to handfuls of workers on even fairly large projects. Offices long ago began shedding secretarial and clerical positions fo4r compute4rization, and that p4rocess is well advenced. Self-driving autos are being tested, and GPS-guided automatic tractors are almost ready for adoption.

I just don't see how that process is reversed, even in an energy decline, and arguably especially in such a situation. We'4re already seeing the self-driving auto being touted as an environmental boon, and from people who ought to know better. So how does this not swamp the factors you're talking about?

Nancy Sutton said...

Soooooo glad you're shining your clarifying spotlight on this issue. There is so much propaganda around it. (And I look forward to your tackling other economic hedgehogs :)

For more comprehensible economic writing, I'd suggest anything by Ha-Joon Chang...maybe starting with 'Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism' (he teaches at the London School of Economics).

. josé . said...

OK... This is an off-topic comment ...

But totally salient to the overall Decline and Fall: Destroyer USS Zumwalt, another hyper-expensive M.I.C. subsidy trap, breaks down in the Panama Canal.

https://www.theguardian.com/us-news/2016/nov/23/us-navys-most-expensive-destroyer-breaks-down-in-panama-canal

Unfortunately, not long enough to affect the flow of "free trade".

lordberia3@gmail.com said...

Great post John.

I have to admit, I have always gone along with the free trade consensus until recently and the main reason I have turned to a calibrated trade protectionist view is your writings on the subject.

For those who claim that Trump won't make any changes, it appears that you are wrong, as he has already killed of the Trans Pacific Partnership, to the horror of the foreign policy elite. Its true that Hilary Clinton claimed that she was opposed (after supporting it before Bernie came along) but as her vice-president pick himself admitted, Clinton would have pushed it through if she had been elected president (with a bit of cosmetic change) - http://www.washingtontimes.com/news/2016/oct/23/tpp-by-another-name-tim-kaine-hillary-clinton-open/

Many of the Left also don't like to admit that open door policy on immigration also has an negative impact of real workers wages. Corbyn does make some good points but on the issue of migration, he is very much part of the neo-liberal elite on this matter.

I have written on my blog on why Corbyn's knee jerk internationalism will probably lead to a Conservative (who are now the Brexit party) landslide at the next general election.

https://forecastingintelligence.org/2016/09/11/the-strange-death-of-labour-england/

On a final note, the continued loud insistence by those who say that Trump won't make any changes once elected makes me wonder if secretly, these folks rather rather that the status quo continues? It appears the the death of progressive identity politics liberalism is such an emotional trauma to some individuals on and outside this forum that change, however, positive, from the populist right is therefore unacceptable.

Jo said...

I have been annoying people at parties for years by complaining about free trade, so loved this essay, as it provides some excellent new data points to add to my dinner-time tirades. Quite apart from its disastrous economic outcomes for our own countries, there is free trade's social justice and environmental impact as jobs and industries are exported to the countries with the least regulated labour and environmental laws. We have effectively trashed China, and it appears China is now trying the same trick in Africa.

I cannot wait for my government to do anything about this, so in the spirit of being the change I wish to see I am attempting to feel my way into living a life which is not dependent on free trade but on living locally and paying a fair price for the few things I buy that aren't second hand. It is incredibly difficult to buy locally-made for most things other than food, so often I have to settle for buying imported goods from independent businesses instead, but I feel like I am heading in the right direction at least, and if we all did this, the demand for local at a fair price would transform our local economies.

In my mind the golden age of protectionism was the guild of the medieval city which set prices and working hours so that no-one had a business edge on anything other than the quality of their products. Imagine such a concept! Excellent workmanship rewarded and weekends and work-free evenings enforced!

neil said...

I believe Ireland's population and resource base is too small to thrive without large scale trade with the neighbours. Tobacco farming in Cavan was mad, of course, but some of the import controls may have had benefits. I'm more alarmed to read today that most new jobs are going to foreigners. Then we find infrastructure can't cope - because it was designed for a smaller population, but that's never pointed out.

flute said...

Mallow: As JMG also says, not all free trade is bad and not all trade barriers are good. Free trade might be a good in certain contexts, e.g. between small neighbouring nations. The Nordic countries (Finland, Sweden, Norway, Denmark, Iceland) would probably be a good example of a zone where free trade would be mutually beneficial. this zone could maybe also be expanded to include the baltic states (Estonia, Latvia, Lithuania) or Britain and Ireland and maybe the whole of northern Europe. The important factor I think is that countries in a free trade zone cannot be too diverse when it comes to labour laws, environmental laws etc, because then you would get the detrimental effects that JMG describes.

Aldabra said...

The standard defence of free trade is comparative advantage theory, developed by David Ricardo in The Principles of Political Economy and Taxation (1817). He is entirely explicit that his analysis depends on an absence of free movement of capital between countries (chapter 6). The argument no longer holds, post-1980s (and this is why the less developed countries got poorer rather than richer under Washington consensus trade liberalisation).

https://books.google.bg/books?id=cUBKAAAAYAAJ&dq=editions:y8vXR4oK9R8C&pg=PR1&hl=bg#v=onepage&q&f=true

kristofv said...

Dear John Michael Greer,

your gift for independent and interesting analysis never stops to surprise me. This week it seems as if I have been reading from an Modern Money Theory Blog. Probably the time is ripe for it, as one of its proponents just finished his own 4 part series on free trade "The case against free trade": http://bilbo.economicoutlook.net/blog/?p=34677.

Your analysis also highlights what is going wrong with especially the Eurozone in the EU as having your own currency and exchange rate offers some kind of balancing mechanism, even with free trade. Having abolished that, it is clear to see that the strong industrial power horse (Germany) destroyed the weaker economies, especially since it followed a policy of wage suppression. They don't want to see that their success depends on pushing especially the souther European states into poverty and cannot persist in the long run. Even worse they add insult to injury by blaming the laziness of the Greeks, Spanish and Italians.

My newspaper just offered the view from the British historian Harold James, who also talks about this first wave of globalization with the abolishment of the Corn Laws in 1846 until the crash in 1929. He admits that prosperity and inequality grow with globalization, both decline with protectionism. However, he laments the fact when nations abandon free trade, open borders and the growing prosperity out of psychological grounds and take the wrongheaded decision to become nationalistic and protectionist in the past and now. He admits the economic crisis but somehow cannot bring himself to question if free trade might be partially to blame.

On another note. I recently watched an interview with Putin and was surprised how much he talks, at least in translation, about interests in world politics and how little about values.

Robert Honeybourne said...

The question I would pose is how does this work when you look inside countries rather than the whole world

In the UK and possibly to a larger extent in the US as you do everything bigger, the wealth focusses in the big cities

The very same free trade questions apply! People who live outside the big cities have low earning power, and people from the cities buy up houses in the countryside forcing prices up. Prices are national but wages are local

So where does it end?

I would assume that within a country, the equivalent to tariffs would be redistribution of wealth by the taxation system and public spending

Free trade could therefore work if profits were redistributed - by global standard of living agreements for example

It is just two choices to achieve the same end I think... you can tariff, or redistribute

The interesting aspect would be whether, for example, letting businesses locate in suitable surroundings and redistirbuting thr profits would be better overall than choosing to protect your own businesses and jobs by applying tariffs

What is needed by whichever means is a way to enable people to live their lives and not be exploited

Mark In Mayenne said...

Hi John, you talk of a continent of several countries trading with each other. One thing that has always puzzled me is that the boundaries between the different countries are potbelly the result of accidents of history. What changes of we erase one or two boundaries to create new, bigger nations? What happens if the whole continent is a single country? How is a single continent made up of might - have - been several nations different from one giant free trade area?

Barrabas said...

Yeah the TPP we were thinking of signing with you Yanks included sovereign risk provisions where if we as a nation state passed laws to prevent said Yank corporation from poisoning land/ water , they could sue us for the loss of profits incurred thereby . Curiously, all the pollies in Oz were still keen to sign up. It was Julian Assange that originally blew the lid on these odious mind boggling provisions .... why would ya !

baba free said...

I live in Ecuador. Our president Rafael Correa, a ph.d economist no less, has enacted a version of what you are proposing. A return to tariffs and a turning away from free trade agreements. Mind you, he's widely vilified by mainstream press as a socialist commie etc. etc. but one thing that he has done is instilled an environment where investment brings fair returns. An average bank cd brings anywhere from 6 - 11% return. Scary huh?? Too good to be true? Maybe, we will see but it has been holding up for years even in a downturn in oil prices (Ecuador exports oil and gets a good chunk of change from that)

Herbert Pagg said...

I am a bit astonished some would think that 'non-free' trade policies couldn't work for smaller countries such as Ireland. The Scandinavian countries (with pop. of 3-6 million each in the interwar years) did out of it create very successful welfare states. Even when Sweden and Norway was in a union 1814-1905 Norway pursued its own trade policies (the only thing that brought the union together was that both countries shared head of state and foreign policy and there were no border controls for passenger travel. Else they were separate entities, with different parliaments, currencies, military and so on). All Scandinavian countries were heavily indebted (though many of these debts were resolved when Germany went into hyperinflation in the 1920's as much capital had been borrowed from Germany. Alas the UK was a big lender there too), debt which they used to build up their industries, railways and so on. None of them had to declare any state bankruptcy though they at the turn of the last century were some of the most indebted countries in Europe.


If interested I recommend to read Erik Reinert ('How rich countries got rich and why poor countries stay poor' is an excellent introduction to both European and American experiences in how they became wealthy countries. Every method from industrial espionage to trade barriers to governmental policies and investment was used, just as China and India do today). Korean Ha-Joon Chang ('23 Things they don't tell you about capitalism') is another excellent writer on this subject.



Another way to look at it is: As long as you only specialize in your "best" industry, you might as well remain in the Stone Age if your "strength" consists of making stone axes (or bananas for that matter). Or to put it in another way, no expert dish washer has ever become a millionare out of it even though he might be one of the best dish washers there is. Not all kinds of specialization create wealth.

patriciaormsby said...

Great essay this week! This really needs to be translated into Japanese and presented to Prime Minister Abe and bunch of other Japanese elites who keep going on and on and on about the TPP and are trying to pressure Trump into supporting it, meanwhile a significant number of their own citizens oppose it, aware of how it will impact them. Wider knowledge of the fact that it ultimately impacts the rich as well might bring a few key people back to their senses.

I am reading your and one or two other blogs I consider valuable, but otherwise staying off the Net. I should do this more often.

Tower 440 said...

The monthly joint meeting of the Green Wizards’ Benevolent and Protective Association, Tower Number 440, and Ruinmen’s Guild, Local 440 will be held at 11:30 AM on Wednesday, December 21 2016. Our location is Ruko’s Family Restaurant, 9385 Mentor Avenue, Mentor, Ohio 44060, (440) 974-1914. Shining the Green Light! Public Welcome! Tables for Failed Scholars. Look for the table topper with the Green Wizard Hat. Contact us at GWTower440@gmail.com.
Many thanks to John for the posting space on his blog.

donalfagan said...

Trump was just taking credit for withdrawing from the TPP, which the US hadn't actually adopted, but has been noticeably silent on his campaign issue of withdrawing from NAFTA.

For those who found the post-election video of Mark Blyth & Wendy Schiller interesting, youtube has The Watson Institute's video from a few months beforehand, where Blyth (alone) more thoroughly explains the trade concepts he alluded to in the later video:

https://www.youtube.com/watch?v=Bkm2Vfj42FY

JimBobRazrBk said...

If you think that borrowing money for a house or car you can't afford then paying back the interest on it is a bad idea, just think of the student debt crisis. Charging 40-50,000 dollars a year just for tuition has become common practice now for universities, and every year more of what you pay for there leaves Terra Firma for truly ridiculous courses like "Politicizing Beyonce" (the course taught by that clown at Rutgers who was taken the hospital after using class time to threaten to randomly shoot white people after Trump's election.) I am an avid follower of the Student Loan Justice movement, where the organization receives countless personal testimonies by people whose lives have been utterly destroyed by the student loan scam. For example, there are many letters written by family members of a loved one who committed suicide over unpayable loans plus constant harassment from Sallie Mae bill collectors. There are many more who've attempted or at least contemplated it. Other problem is that all too often a person who thought they only borrowed 30,000 dollars to attend college somehow finds later that they owe over 100,000 due to the outright fraudulent and criminal practices the student loan industry has gotten access to through buying off politicians. This economic burden on especially the millenial generation will take some more years to play out fully (so many of them are still deferring them by going back to get second and third graduate degrees in equally useless areas) but when the bill finally all comes due, the economic burden and the reaction will make the housing bubble's aftermath look like a picnic

NZ said...

JMG- The clarity of your argument leaves me thinking, what will it take to implement change benefitting the people and not the wealthy elite? This is a question of political power and the people have little organized power serving their interests at the moment. Individual effort at building self-sufficiency is a beginning, but at some point an organized effort must take shape to counterbalance the excesses of the elite. I haven't been exposed to the thoughts of Mao, but I remember hearing his political slogan, "All political power grows out of the barrel of a gun". This maxim seems appropriate, and points to the dilemma of those willing to use force to obtain political ends and those opposed to the use of force and violence as a means to an end. Which worldview is more successful? Which is stronger- which is able to survive over time?

In one of your previous posts you talked about the importance of interests to determine political affiliation. I am beginning to realize that this is the important foundation on which to build that countervailing force. Clearly defined principles which hold groups of people together in common interest. Truthful, and proven out by physical results- not promises of future benefits.
That common interest is based on living together in peace. Why is peace so difficult to achieve when it seems only a small minority of the population revels in violence and strife?

Globalism and free trade as practiced are just sublimated expressions of the desire for violence against our fellows. All this death and destruction justified by the fact that more people can have toasters and the like. The notion of a global community only makes sense if the quality of life is improved for all. Quantity in and of itself means nothing. Such an complex world.

Nastarana said...

Free trade isn't free. Someone pays, somewhere, safely out of sight.

So far, the TPP seems to be DOA in congress. In other news, Clinton, Inc., is doing everything it can to undermine the incoming administration. Clinton, Inc.'s backers really, really want their war and their deals, no matter what voters think about the matter. The Green Party, whom many of us considered a model of rectitude, has now joined up with the dark side, filing suit for vote recounts in three large states. They even have the nerve to request donations for the purpose. Why can't they just get the money from whomever it was who put them up to this caper? Where were they when the primary was stolen from Sanders last spring?

Foreign govts. might want to consider that tariffs, however unwelcome, are preferable to bombs, not to mention drones, and signal their willingness to work with the incoming Trump administration.

Melo, the energetic and curious tinkers already exist in the USA, and likely in Italy as well. For the time being, here in the USA, they pursue their passions in the face of great opposition from many quarters, not excluding members of many newly arrived communities and their SJW spokespersons, who like to regard the rest of us as walking ATM machines.

Bill Blondeau said...

My 2016 has been filled with a lot of dismay and loss, ranging from the personal to the planetary. It's been really bad. In context of such an annus horribilis, the news that After Oil 5 will not be forthcoming might seem to be lost in the noise floor.

It is not.

The series has been a gift since the beginning. Worth reading in its own right as entertaining fiction; a community project, with all of the sense of common wellbeing that such efforts generate; but more than anything, a narrative voice for the complex concepts -- and the rejections of current mythology -- that readers of this blog must continually wrap our heads around.

That the contest was in essence scrapped due to a lack of submissions is particularly sad. (And for me personally, the occasion of a certain guilt -- not that one more story would likely have tipped the balance, nor that any contribution of mine would necessarily have cleared the bar in the first place; but still. Not unlike the feeling of neglecting to vote, and being confronted with a startlingly unhappy result, I suppose.)

There is more than a little comfort in the excellent work Joel Caris is doing with Into the Ruins. Kudos to him, and I hope the magazine becomes an enduring clubhouse of the imagination during the Long Descent, much the way Analog and Galaxy and their peers were for the Space Age. But we still need diversity here. We need to support all of the channels for deindustrial fiction that we can.

Times are already dark. They will get darker. I hope that Space Bat wings will once again flutter in that darkness.

Mario Incandenza said...

I basically agree with this analysis of the effect of free trade policies on economic inequality, and it is very cogently stated. The suggestion that the Trump administration's trade policies will actually test the theory and lead to greater economic equality, however, rather conspicuously elides the other two main components of his economic program: massive tax cuts for the wealthy and wholesale deregulation of the financial industry. Add to that the Republican congress's plans to throttle the attenuated remnant of organized labor in the United States, and the sum effect is sure to be an increase in economic inequality, even if the trade policies by themselves would have a salutary effect.

All in all, it looks to me like we are in for an acceleration of the trends that have predominated for the last 40 years: an increasingly rapacious and entitled capitalist class appropriating wealth from both workers in the present and from future generations, abetted by a Randian ideology that celebrates self-interest and scoffs at any sense of commitment to the common good.

Donald Hargraves said...

I've read recently about Apple looking into moving iPhone production to the United States, and I can't help but wonder if the move has anything to do with the recent spate of "bad luck" Apple has had in Chinese Courts. As an example:

Apple Sued In China For Allegedly Copying iPhone 6 Design

I've thought for a while that Globalism has been on the decline; the Apple rumors (I won't call it news until I get hard news of actual construction and/or plans) adds information from the corporate side of the equation. And if nothing else, it shows that it's more than certain off-the-beaten-track blogs (IF you can call this blog that anymore) pointing to the future as it's becoming.

Owen said...

>It's no accident that the current movement took off just after the US federal government enacted the modern suite of environmental laws in the early 70's; NEPA, Clean Air and Water Acts

BINGO. Regulatory arbitrage. Whatever it is you want to do, it's legal somewhere.

Also labor arbitrage too. Hard for labor to move, so many bureaucrats in the way as all the Hillbullies found out when they looked into Canadian residency. Capital somehow finds an easier trip.

I dunno. I think if the trend towards robotics holds up, the whole idea of massive global trade may go completely away. Along with jobs too, and that if you don't have the robots to make it, you just do without. Wealth will be redefined as how many robots you can control and access to raw materials. Landed gentry might make a return.

Call it technofeudalism. Let's hope the robots don't revolt and put themselves in charge.

Peter Trabant said...

Nice account of the issues JMG.
It is said that the ideal corporate employee is someone who works for nothing and receives no benefits, i.e. slaves.

M Smith said...

Grebulocities, regarding automation vs. labor, one of the complaints I hear from employers is the lack of qualified, reliable employees. Machines don't call in sick. Machines' "fiances" don't loiter in the parking lot. Machines can make required calculations correctly. Machines have nothing to prove to the customer in front of them and don't cop attitudes, ignore them pointedly, or run them off. Machines don't talk to their kids or their kids' teachers all day on the phone. Machines don't get pregnant on the company's health plan, requiring that "their" job be there when and if they return to work after 6-8 weeks leave mandated by the govt. Machines don't yammer about their "rights", like "free" health care.

If human labor is ever to be in demand again, we've got to loosen the govt constraints on employers. I imagine I'll get some flak for saying this, but if I were an employer I'd hire white males only. I'm not willing to lose all I worked for because of someone with immutable characteristics and an unpleasant acquired one who decides unilaterally to engage in some impromptu social justice warfare. Heck, I'm not willing to lose a moment's sleep over such a one. Been there, done that, have already been called every name in the book for it.

Malcolm M said...

As Dean Baker has been pointing out for well over a decade, the problem starts with calling these "free" trade agreements. They are not necessarily free. They are simply trade agreements, sometimes quite focused in fact on limiting, not freeing trade.

For example:
- Barriers to movement of labor through immigration of blue collar labor are not addressed, so capital and goods are free, while labor is not.
- Barriers to movement of labor in professions are not freed, professional licensing requirements such as with doctors and lawyers are not opened up to foreign reciprocity, creating artificial protections for professionals.
- The agreements inevitably result in patent/copyright protections being expanded, extended, and widened.

One would note, in fact, if they looked back at our IP system, for a nation allegedly interested in free trade, we devote a lot of energy into after-the-fact widening of patent protections. After-the-fact extensions, of course, utterly betray the alleged purpose of granting IP in the first place.

Study these trade agreements enough, and you start getting very frustrated every time another journalist or politicians reflexively refers to them as "free."

Kieran O'Neill said...

What will be interesting will be seeing how committed Trump is to following through on this. His proposed cabinet contains a disturbing number of millionaires and billionaires, with a [urk=http://www.politico.com/story/2016/11/donald-trump-cabinet-billionaires-millionaires-231831]cumulative net worth estimated at somewhere around $35 billion.[/url] It seems fairly unlikely that they're going to go against their own interests.

Dennis Frank said...

National self-sufficiency always seemed more sensible to me than free trade, but I suppose the lack of any political advocacy for it as ideology means the expectation of trickle-down from trading is too widespread (perhaps even the reality).

The collapse peak-oil theory predicted (made more likely by the gfc) got postponed by fracking so trade remains viable & the capitalist system has kept operating with even more imaginary money than before. Great copiers, the Chinese will be learning a few lessons.

Sceptics (of which I'm one) will say yes but quantitative easing only seems to be a powerful spell cast on all, and eventually that spell will wear off. I'm inclined to refer the other sceptics to the proven resilience of the system, which keeps regenerating in the aftermath of all its crashes. Alternative wizards are only likely to prevail over establishment wizards in two scenarios: (a) a system crash that does terminate the system, and (b) creation of a positive alternative sufficiently contagious & persuasive that it gets a decisive body of support & triggers a tipping point in mass consciousness. The latter would indeed be a powerful spell...

MawKernewek said...

As far as the self-driving car being good for the environment, I am not sure.
It could mean that journeys that are not currently made by private car, could be in future, e.g. people who are not able to drive, who today would be getting a bus or train, or staggering back from the pub on foot. It could mean, for someone who works a couple of kilometres away from home but doesn't have available parking at their workplace, the car will make the round trip twice each day, driving home in between or finding somewhere in a residential street where it can park.
It is a non-sequitur that some people assume that a self-driving car would not be privately owned, saving resources since fewer would be needed. In truth people are quite attached to their cars, since it enables carving out a pseudo-private bubble from a public space.

As for the return of economic nationalism, I see it is quite difficult in an age where there are few large national companies as such, they are multinational, and often part of a large conglomerate. See for example this graphic, in the Behind the Brands report produced by Oxfam. If there were to be national industries again, they would have to be reinvented over the dead bodies of the multinationals.

Shane W said...

People need to check their technofantasies. Newsflash: we're already well past "peak-automation" and "peak-digitalization" Things are as buggy as Windows 10 and getting buggier by the day. The one thing I regret about Hillary not getting elected is that it didn't set off a full-on cyberwar that made a smoking, cratering ruin of the internet. That, I guess, will have to wait for another day. Here in the real, non-technofantasy world, the buggiest machines that work the least and break down the most often are the most automated and most digitized. In the distillery I work in, the machines that break down the most often and are the least reliable are our state-of-the-art, computerized, digitized labeler and palletizer. The most reliable machine? The 1950s era filler. Coincidence? I think not. Retrotopia is here, now. I often remark to my coworkers that our plant would work much better if we used all vintage '50s equipment, even if it requires more people, and most everyone agrees, especially the 20-somethings.

Shane W said...

I'd say that our most-automated, most advanced equipment breaks down and is out of service 1/3 to 1/2 the time, and that is actually on the generous side.

deedl said...

There is besides private households (employees) and companies (employers) a third important economic actor who is highly affected by the free trade policies - government. The goverment produces public goods as education, security, public health and gets paid for these good by the other two economic actors.

Today, governemnts face the same trends that you outlined for private hausholds. Diminishing income, which is a result from an international taxes/wages race to the bottom reduces the gouvernments ability to spend money. In the same way as consumers shall pay for products from money they dont get paid, government shall provide services from taxes it is not allowed to raise.

And in the same way that private income is replaced by investment, government income is replaced by investment. So not only is skyrocketing private debt a result of globalization, but public debt is too.

Looking back in history it is easy to see how tariffs can not only secure fair wages but but also a secure a tax base for public services. Before the civil war, almost the entire federal us budget was paid for by tariffs. This way, economic activity for domestic purposes was relieved from both international competitors and from government taxation.

Mark said...

Nastarana ~ I don't know for certain, but I would think Stein wants all the Green Party votes counted, so that people like me, the erstwhile president of the Springfield Vermont Green Party, don't have to solicit for signatures on a petition to get the Green Party on the Vermont ballot next time around. Boy, did I ever need an alcoholic beverage after going out with my clipboard this past spring. I was reading a book about Japan, a country I really love, "The Yamato Dynasty", and about the group-think in the ruling oligarchy/military that was Japan 1920 - 1941 and beyond. The Democratic group-think got even worse *after* the primary!

This is what has become of America?

If you believe the New Yorker, Marine LePen is a dangerous nut. Turns out no, LePen makes sense, just doesn't maintain the status quo. And it's the same with Franke Petry.

I just want some one to tell me why peace is not as profitable as war. Is it because there are so many people on the planet now that life is so cheap? Or, the is so much money, nothing is sacred? Sorry, that's a bit rhetorical. So please tell me why?

gwizard43 said...

@ M Smith

"Machines don't call in sick. Machines' "fiances" don't loiter in the parking lot. Machines can make required calculations correctly. Machines have nothing to prove to the customer in front of them and don't cop attitudes, ignore them pointedly, or run them off. Machines don't talk to their kids or their kids' teachers all day on the phone. Machines don't get pregnant on the company's health plan, requiring that "their" job be there when and if they return to work after 6-8 weeks leave mandated by the govt. Machines don't yammer about their "rights", like "free" health care....we've got to loosen the govt constraints on employers."

Yammering about their rights?? Wow. Are rights not worth yammering about? I kinda think they are.

I suppose if the be all and end all goal is business profits and corporate success, to which all else is deemed subservient, you're position is entirely supportable. But why loosen constraints in that case? You just made a great argument for replacing these flawed humans with machines, wherever possible. The picture of employees you've painted makes me wonder why any business would want to deal with that kinda chaos!

I gotta wonder - are you in favor of loosening environmental constraints on corporations as well? How about debtor's prisons?

That seems to me to be an awfully one-sided view you've got there, M. I'm curious: you've shared with us the complaints you've heard from employers - what are the complaints you've heard from from employees??? What happens if you choose that lens through which to look? Or do you honestly think there is only one side to this story?

Iuval Clejan said...

I don't understand why the race to the bottom happens only among nations, not within a nation. Is it because somehow the political process can be called upon to raise wages and redistribute wealth? But that process is not stable and politicians can be bought.

John Michael Greer said...

Pygmycory, agreed. The point I tried to make, and I think most readers missed it, is that trade agreements only benefit the rich in the short run. In the long run, they drive down return on investment and destabilize the economic system that makes money mean anything at all.

Graeme, I tend to think of it as a matter of simple common sense. Thank you!

Ien, as I noted in the post, it's a common modern delusion to think that the only possible points on a spectrum are the two ends. I'd also point out that the best size for a nation depends vastly on issues of environment, resources, culture, etc.

Shane, luxury goods -- and imported booze is a luxury good -- always manage to find their way from place to place, so yes, you're in a good stable industry.

Drhooves, oh, granted. I'll tolerate Krugman's pretensions to omniscience when he shows that he can make an accurate prediction about future economic trends. Honestly, if he said the sun was going to rise tomorrow, I'd wonder if he was right.

Inohuri, yep. The Chinese are following historical precedent -- their previous overseas empire, in the 14th and 15th centuries, was in the Indian Ocean and the east coast of Africa. That's one of the reasons I set the key events of my novel Twilight's Last Gleaming there.

Old Professor, exactly. That's another of the things a sensible tariff would do.

BobJones, if you've got major cultural and economic differences within a nation, yes, you can get the same effect unless political forces restrain it.

Grebulocities, much of what drives the push toward automation in the US is the raft of Federal tax policies that reward automation and penalize hiring workers. If you hire somebody, the government requires you to pay a raft of additional costs in addition to salary and benefits; if you automate, you don't have to pay those, and you can write off the cost of the machine as a capital expense. Get rid of the perverse incentives that subsidize automation, and we'd already be well past peak automation in the US.

John Michael Greer said...

Doomerdoc, to my mind that's a very simplistic analysis. No victory is complete, because the victor always goes to extremes and collapses in turn -- look at the aftermath of US victory in the Cold War as a prime example. In the same way, the temporary ascendancy of capital has created economic imbalances that are crushing return on investment and driving ever more violent turbulence in markets, with a side order of violent popular unrest. This will not end well.

Berserker, many thanks for this! Okay, that's another very useful parallel.

Zach, the Treaty of Westphalia was more than a century before the dawn of the industrial revolution, and the particular mode of nation-state more or less established at that time has been replaced twice -- in the nineteenth century, by the ethnic-linguistic nation, and in the twentieth, by the constitutional multiethnic nation. As for multinational corporations, those were a big deal in the Victorian period, too, and then went into eclipse as governments took back the powers that had been briefly lent to the business sphere. Watch what happens when US hegemony goes down; a lot of supposedly "multinational" corporations will go down, too, because they were never more than creatures of US global power.

Jay, that's also a good point, and relates to my discussion of the externality trap in a post last year. The mere fact that we've offshored our pollution, of course, doesn't keep it from circling around to bite us in the buttocks anyway.

Dennis, delighted to hear it. You're in for a treat...

Gwizard43, that's an interesting point. I wonder if there's something in the rate of change in available net energy that encourages free-trade schemes.

Melo, you're welcome and thank you. Of course trade restrictions also have their problems -- it's characteristic of every political issue that every possible choice has downsides.

Canon Fodder, obviously I disagree, and I'd point out that your example actually disproves your claim. Wages in China have risen so fast precisely because China uses massive trade barriers and currency manipulation to protect its industries from foreign competition. Back when it had free trade policies forced on it by Western powers, it hemorrhaged wealth to London and New York, and now that money stays home and boosts the Chinese economy. That's another piece of evidence that free trade is bad policy and should be discarded.

Ondra, it's been a very long time since I did that reading, and I no longer have the book list. Can anyone else help?

Bruno, I see Venezuela as an example of what happens when you build a welfare state on the assumption that the price of oil is going to stay above $100/barrel, and it drops to a fifth of that. Good government or bad government, once you make that mistake, you're in for a world of hurt.

John Michael Greer said...

Joe, the point I tried to make, which you and almost everyone else seem to have missed, is that free trade only benecits the rich in the short term. In the long term it drives down return on investment and destabilizes the entire economic system. I suspect a certain number of rich people have recognized this, which is why opposition to free trade schemes is coming up for public discussion again.

Mouse, interesting. I'll have to find time to read his site one of these days.

Talon, I notice that you've done the usual Marxist switcheroo and tried to divert a discussion of the problems with free trade to the subject of the supposed evils of capitalism. Nice try.

Max, notice that he's proposing public-private partnerships rather than straighforward public works spending for his infrastructure program. That's something a lot of anti-public spending types have historically been willing to get behind. Still, we'll see.

HalFiore, I think we're actually pretty close to peak automation, precisely because the whole system costs of increasingly baroque technology are becoming so big a burden on the economy as a whole. As I've noted repeatedly, automation makes economic sense in large part because perverse incentives in the tax code subsidize automation and penalize hiring of workers; that's starting to see some discussion -- and I expect it to become a major issue in the politics of the next couple of decades.

Nancy, I avoid tackling hedgehogs -- they get upset when you do that, and it distracts them from their proper purpose of eating slugs! ;-) That said, we'll see about some of the other economic issues.

Jose, heh. It's nice to know that the Navy has something just as breathtakingly advanced, and exactly as capable of doing its job, as the Air Force's F-35.

Lordberia3, of course they want the status quo to continue. That's why nobody protested when Obama broke his 2008 promises, kept fighting wars in the Middle East he'd promised to get us out of, and accelerated the campaign of drone strikes the Bush administration had started. It's also why nobody, but nobody, on the establishment Left got upset when Hillary Clinton demanded that the US try to impose a no-fly zone over Syria when the Russians had already announced that they'd respond with live ammo. The mainstream Left wants to protest the status quo, not to change it.

Jo, the medieval guild system evolved out of the wreckage of the Roman economy, and embodied a lot of common sense about how to stop people from gaming the system and keep goods and services available at stable prices. In the longer run, we could do worse.

Neil, again, you're missing the point that trade barriers don't mean a complete halt to trade -- they mean that any good or service that can be produced within a country's borders has preferential access to that country's markets, and each country trades its surplus product to other countries in exchange for things that can't be produced locally. Imagine free trade at one end of a spectrum, and no trade at all on the other end. Sensible trade policy is somewhere in between.

John Michael Greer said...

Aldabra, thank you! It's been a while since I read Ricardo, and I'd forgotten that detail.

Kristofv, exactly. The EU is a classic example of a badly designed free trade system; the systematic impoverishment of southern Europe for the benefit of Germany and a few other northern European nations will eventually cause enough political turmoil to bring down governments and force the withdrawal of the south from the system. As for Putin, exactly; he's speaking the language of politics, while our politicians are stuck in feel-good abstractions.

Robert, yes, but the interesting thing is that within a single country a variety of balancing factors come into play. For example, outside the big cities the cost of living tends to be a lot lower -- and yes, there are also various ways of redistributing wealth through the political process.

Mark, it depends on whether you've got significant cultural and economic differences between the regions. If so, you're going to have some of the same problems -- as indeed the US has had with its southern states, which are very different in cultural and economic terms than the rest of the country.

Barrabas, exactly. If the only useful thing Trump ever does is sink the TPP, he'll have done a lot.

Baba Free, fascinating. I'll have to look into Correa's policies; they might well be a useful template for other nations, such as mine.

Herbert, a very good point. Many thanks for the references!

Patricia, have you considered doing a spot of translation? I'd be delighted to see this piece in Japanese, or in any other language, for that matter.

Donalfagan, we'll just have to see, now won't we?

JimBob, another good example.

NZ, the point I tried to make, which you and almost everyone else seem to have missed, is that free trade only benecits the rich in the short term. In the long term it drives down return on investment and destabilizes the entire economic system. I suspect a certain number of rich people have recognized this, which is why opposition to free trade schemes is coming up for public discussion again.

Nastarana, if the Clintonista attempt to undermine the Trump administration is as efficient, well-planned, and responsive to actual data as Hillary Clinton's campaign was, Trump has nothing to fear.

Bill, remember that the most recent challenge was really out there on a limb -- asking people to come up with futures that involved neither progress nor decline is a reach, and I was impressed with the number of people who managed to tell good stories anyway. We'll see what happens with the Space Bat challenges; in the meantime, I'd encourage everyone to suppore Into the Ruins with their storuy submissions, subscriptions, and (especially) publicity online and off, so it can become the widely read magazine it deserves to be. I'm sorry to hear, btw, that this year has continued to be difficult for you; I hope things take a turn for the better soon.

John Michael Greer said...

Mario, well, we'll see, won't we?

Donald, yep -- my guess is that as soon as Apple moves production back to the US, some Chinese company will launch a new brand of tech accessories that just happen to look and work like Apple products, and cost half as much. We'll see then whether the Apple people find trade barriers to their taste...

Owen, as I've noted above, my take is that we're rapidly approaching peak automation, and would be past that already if the tax codes didn't subsidize it.

Peter, nah, you have to feed and house slaves.

Malcolm, that's why I specified in my post that I was talking about agreements that allow free movement of goods and capital.

Kieran, the point I tried to make, which you and almost everyone else seem to have missed, is that free trade only benefits the rich in the short term. In the long term it drives down return on investment and destabilizes the entire economic system. I suspect a certain number of rich people have recognized this, which is why opposition to free trade schemes is coming up for public discussion again.

Dennis, and it's exactly that sort of powerful spell that I've been working toward. So far the results are better than expected, but it's a long process.

MawKernewek, of course it will happen over the dead bodies of the multinationals. It already has in Russia, Iran, and a handful of other countries. It's not often remembered that a combat in which one participant has weapons and the other only has wealth generally resembles a mugging...

Shane, I'm not at all surprised, but do you happen to know if there's any quotable source I can use for this? I'd like to put those details in the book I'm currently writing, The Retro Future, but I'll need a footnote. Many thanks!

Deedl, that's an excellent point, and one that I hadn't thought of. You're quite correct, of course.

Iuval, of course the process is unstable and politicians can be bought, but sooner or later the race to the bottom drives serious unrest and even revolution unless it's stopped, so the rich and the politicians have an interest in stopping it.

Kevin Warner said...

With free trade agreements, there is always a geopolitical component to consider which will try to force a treaty being accepted no matter how little actual benefits the treaty provides or the huge problems that it will cause individual countries. The Trans-Pacific Partnership, comes to mind which is also know is the everyone-but-China treaty. Obama came straight out and said that its purpose was that the US would write the rules of the trade rules in this region. I suspect that the Transatlantic Trade and Investment Partnership too is simply a way to destroy any chance of a Vladivostok to Lisbon trade route being formed. That "imagined continent", by the way, sounded like an awful lot like Europe.
JMG's suggestion that "that there may be unexpected benefits, even today, to a nation that extracts itself from free trade agreements and puts a well-planned set of trade restrictions in place" is already underway. Ever since the west launched an economic war against Russia two years ago this appears to be happening. Yes, there is a lot of pain but the Russians are substituting local goods and services in lieu of cheap imports fueled by cheap loans. They appear to be investing too in those goods that that they have not manufactured for a very long time as well as an financial infrastructure to back it up. The sanctions will of course continue until Russia hands back Crimea to the Ukraine but as this region has been a part of Russia since 1783 when America become an independent country, America is more likely to hand back Texas to Mexico.
Perhaps the worst of it is that those neoliberal economists that push for things such as free trade and the like still command an audience is spite of massive amounts of empirical evidence that their theories do not work in the real world. An example is Greece which has been turned into the world's largest outdoor debtor's prison simply to accommodate the theory of authority. And yet none of these people have lost their careers, their chairs or been publicly renounced. But it was only at their word that free trade came into its own.I guess that there is too much profit to be had following these theories to certain interests.
Personally, after the catastrophic damage that neoliberalim has caused through mechanisms such as free trade, austerity and the like (and on a sarcastic note), I say that we call an international conference of neoliberal economists at the Chicago School of Economics, take off, and nuke the entire site from orbit - it's the only way to be sure!

team10tim said...

Hey hey JMG & Island Poet,

RE: Free trade and shipping costs: I happen to have done the research on this, but I don't have it handy. Sort of, not on free trade per say but on the export of manufactured goods.

Prior to the steam engine shipping was expensive and dangerous. Over land was very time consuming and over sea was risky. Trade was primarily in items that could not be obtained locally, ivory, silk, spices, metals, etc. because the shipping costs far exceeded the production costs for most items. It made little sense to buy a piece of furniture or clothing from far away even if the far away place could produce it more cheaply if the freight cost was twice the value of the product.

Industrialized transport changed that. As shipping costs fell the competitive advantage of a country became more and more important. Just as a thought experiment consider the steal market in the USA. China and the USA compete in the steal industry. US steal is made from US ore and US coal and Chinese steal is made from Brazilian ore and Chinese/Australian coal. In the present shipping environment they are roughly competitive in the American market. Now imagine those commodities, coal and ore, and the finished product, steal where shipped on tiny wooden vessels that took much longer to travel with large crews and small cargo spaces that often got lost at sea.

Thanks,
Tim

Esn said...

This is a good overview, but I feel like you may have missed the opportunity to take a broader perspective.

What do you need money for, really?

Money's purpose (I think it all boils down to this) is to get people to do things for you that they would not do of their own accord.

In other words, the price of things is a value system. Prices determine what human activities are worth - especially in highly monetized societies such as the West. It is a way of punishing or rewarding individuals into doing what others in the economy would like them to be doing.

If a nation (or even a tribe) can control its own prices, it can control its own values. If it cannot, its values will be forced upon it from outside.

And now we understand why they call it "economic warfare". (of course, prices are not the ONLY way to impose values on a country from outside -- when this is not an option, invading armies have done the job)

With large, multinational free trade deals, a country's control over its values is ceded, partly to the tastes of the citizens of other countries (the values of human activities will become closer to the "average" of the values systems of the different countries), and partly to the multi-national organizations that control and oversee the terms and implementation of the free trade deals.

Once such deals are implemented, citizens are no longer able to put pressure on their own governments to control the values of daily life, because the people who are in control are unelected and hard to reach. And, perhaps, that is the real reason why these large free trade deals tend to lead to rising income inequality - it is only one of many other values that citizens become no longer able to control.

It's an idea I had, anyway.

jcummings said...

@ Bill Blondeau - I too am bummed by the inability of us readers to pull together for the latest challenge. I am not guilty of not submitting a piece for this challenge. BUT. I am guilty of not being able to imagine it. The story that appeared at the end of my fingers didn't fit the bill in the slightest. I found it EXTREMELY hard to imagine a future that exists outside continued prosperity or decline. My story ended up as a rehash of the many stories that predict how the breakup of the Union might go. I would love to see a story that accomplished the task.

@ JMG - speaking of, what do you make of all the articles suddenly appearing that would lend legitimacy to the idea of breaking up the Union in some way - I've seen three ideas that suddenly people are talking about with a kind of seriousness that here-to-fore would have seemed ridiculous: The Calexit discussion, Cascadia, and interestingly from the right side of the spectrum the State of Jefferson (not technically a breakup of the Union, more like a breakup of California which seems to me to be more about gerrymandering than anything...)

team10tim said...

Hey hey JMG,

I haven't finished reading the comments but thought that you would like this about the EU from 1992:
http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that

It's been a while since I read it, but if memory serves it is about the likely consequences of of a trade/monetary union without political/fiscal integration. It didn't specifically predict that Greece would borrow lots of money from Germany to buy German goods, racking up a trade deficit and a debt to Germany that it wouldn't be able to pay that would cause political fallout. But, looking back from our present vantage at what Wynne Godley wrote 24 years ago I think it's safe to say that he called it.

Thanks,
Tim

Crow Hill said...

Free-trade, protectionism : Where does mercy for the fate of Nature/Earth (WWF Living Planet Report 2016) beyond humans fit into the picture?

Larz (near San Jose, California, USA) said...

from Island Poet 11/23/16 "…left out the aspect of global trade being utterly dependent on cheap shipping…"

Right you are, Island Poet. It is "cheaper" for me to order toilet paper (an example of a commonly-bought and generic item) from Amazon — where it is delivered to my door at virtually no-charge for shipping/handling — than to drive cross-town to buy the same item at my drugstore, grocery store, or Walmart store. The UPS, FedEx and USPS trucks make regular deliveries every day to several houses on my block — I hear and watch the trucks from my home-office windows. The main difference is that my drugstore, grocery store, and Walmart store do not have couriers that deliver to my door, much less deliver at no-charge. (For argument's sake, I am leaving out Walmart.com.) At Amazon, returns are no-charge to me. I often wonder at what point UPS, FedEx and USPS shipments to/from Amazon will no longer be dirt-cheap. When I had to make a return to JCPenney, it cost me $15 (expensive); because of the relatively high-cost of returning something to JCP, I only buy from them once in awhile — if and when I really need an item that I can't find elsewhere.

I am located in the San Francisco Bay Area bubble. I learn so much from commenters on this blog. This blog is one of my most accurate sources of info. To me, John Michael Greer is sort-of a Studs Terkel. Terkel's book "Working" changed my life, much as this blog of John Michael's has. I wonder what Terkel would have thought about Trump as President.

On a different note, my generation of Baby Boomers was a crock. The Boomer generation, including myself, made no impact whatsoever. I compare photos of the multitudes at the 1969 Woodstock Music and Art Fair to Boomers' current lack of retirement savings, and really, all I can say is "What goes around, comes around." We expected our parents would take care of us forever, and were foolish not to see that our parents would all be dead by year 2000, and after that, we were on our own. What can we rely on now? God,—a concept we Boomers ditched 45 years ago.

latefall said...

@Bill P re left-right issues annti-globalization (L?) anti-globabalist (R?):
I had a very similar experience from even the 2007 G8 Heiligendamm run-up. People were nailing boards over the windows so the reception center (weeks before and hours (by train) away from the protest) would not get stormed by police. Made it difficult to prepare banners, leave alone do any form of substantial discussion. There was one strange week I will not forget when most MSM switched to using the word "gobalization critical". I think this another instance that tells me there is not a lot of merit in using the left/right labels to get anything done beyond political theater. Isn't it more about which of ones proclaimed values will win out over the other when it is crunsh time (ie context dependent). https://en.wikipedia.org/wiki/Anti-globalization_movement#Appropriateness_of_the_term

Look at Clinton criticizing immigrants ("they take our jobs" etc.): https://www.youtube.com/watch?v=4384XQR44yM
From the same channel an interesting speech by Bannon: https://www.youtube.com/watch?v=7nTd2ZAX_tc (the first I've heard him talk directly, no idea how representative).
I still agree very much with a comment you made last week. There can be certain consequences to the bedfellows you choose so I am certainly apprehensive. Especially in the light of what Kelly Vlahos of The American Conservative reports:
https://www.patreon.com/posts/radio-war-nerd-7283779

@JMG: Here are a few numbers in support the discussion (the elephant graph of income growth) Western "middle class" (whatever that is) sits at the low point of the trunk. US middle class probably clings to the lower portion of that.
https://www.weforum.org/agenda/2016/07/the-surprising-thing-about-the-backlash-against-globalization
Here is the detailed version: http://documents.worldbank.org/curated/en/959251468176687085/pdf/wps6259.pdf

Shane W said...

JMG, most of the data is anecdotal from people I work with. Most of the problems with these machines are the byzantine complexity of them and the sheer overload of tasks they're expected to accomplish. They're chock full of "seeing eye" lasers that track everything. Here are the steps of the palletizer: an arm pushes a pallet out onto a platform (actually, this is a two-step process), boxes enter via conveyor onto a platform where they're oriented in a row based on a pattern to fit on the pallet. An arm shoves the boxes onto another shelf where the layer is arranged for the pallet. Another arm shoves the layer onto the pallet being created. Then, a retractable floor retracts, putting the layer on the pallet. The pallet is on a spinning platform that spins the pallet around shrink wrap as the pallet is being created. Finally, once the requisite layers are put on the pallet and shrink-wrapped, the completed pallet is shoved out for removal by forklift. All of this is accomplished by an army of seeing-eye lasers and Windows-based computing. A frequent problem is boxes going in at odd angles, throwing off the whole pattern. Recently, one of the lasers on the arm that pushes the empty pallet into place got out of joint, so the machine didn't "know" where it was and it broke the chain controlling it.
The labeler puts front, back, side, and top labels on bottles, and puts a laser code on the bottle as well. Again, this is accomplished by an army of seeing-eye lasers. The machine is supposed to "know" the orientation of the bottle and flip it if it's not in the right position (this is a frequent source of problems). It frequently breaks bottles.
Needless to say, the byzantine complexity of all this computerized, laser guided robotics is it's achilles heel, and I'm just a "little person", so who am I to suggest that this expensive piece of metal is a fracking piece of shale? Meanwhile, the mechanical, non-digital, non laser-guided, 1950s filler is the workhorse, happily squirting whisky into bottles. Everyone talks about how we don't have qualified operators to run the complex machines, and how they would only work well if only we had a dedicated operator, but that just defeats the purpose of having an automated machine, right?
The palletizer is made by TopTier of Portland, Ore. and the labeler is made by an Italian firm, Kosme. I'm sure they're in use by a lot of manufacturers.

gwizard43 said...

@ Mark

"I just want some one to tell me why peace is not as profitable as war."

One word: munitions. You get the gummint to take money from citizens and give it to munitions manufacturers (in true Carlinesque fashion, now called 'defense contractors'), who make products (bombs, planes, ships) that get destroyed, so the gummint needs to take more money to give to the munitions folks, rinse and repeat. Further, the infrastructure that gets destroyed by those munitions also can be rebuilt, generating profit for those who rebuild it.

In peacetime, you don't have this destruction, and so you don't have the opportunity to funnel money at this scale to munitions makers.

That said, Frédéric Bastiat used the parable of the broken window (check out the wikipedia page) to argue that destruction is not actually a net benefit societally. In other words, he argued that destruction only redirected profits - one sector benefits, while (often hidden) costs are imposed on other sectors. In other words, war is just another redistributionist scheme.

According to this argument, war is not in fact more profitable than peace - it is just made to appear that way.

Phil Harris said...

Building anything big, including a harvest, requires 1OUs and a full larder and fuel shed. Building or expanding new versions of large industry requires a lot of IOUs (capital) and a great deal of credibility (including at the start a network of currently profitable industries and traders) and needs coherent organisational behaviours.

Essentially this latter ‘coherence’ needs political settlements based on looking to the future and on a reliable ‘collective’ covering of risk. The example I have in mind is Japan’s post-war recovery and break-out (globalisation) and later stagnation, very much conditioned by US geo-political goals.

I think I am perhaps just a little like JMG in that to be able to begin to understand just about anything I need some history. I have found a useful book in this regard Globalization and the Race for Resources, Bunker and Ciccontell , 2005, with examples from European world expansion and a relevant example in the form of the later Japanese expansion quoted above. An essay by Bunker Natural Values and the Physical Inevitability of Uneven Development under Capitalism sets the scene for much of the current reality of a partially industrialised world, including for example the USA and other ‘advanced’ economies current ability every day to import large resources of necessary raw materials including much from undeveloped extractive economies: Bunker in Rethinking Environmental History, Eds. Alf Hornberg et al, 2007. Bunker makes the obvious point that “… industrial modes of production depend on [this] self-depleting form of extractive activity … [these modes] have evolved the ability to change … [and] find substitutes for essential resources as these are depleted. This process is necessarily finite …”

Recent substitution has enabled the import by the ‘advanced economies’ of finished goods from industrialising ‘export-led’ economies. These like the extractive economies cannot consume all they produce. Considering the underlying industrial modes of production, and the resources on which these modes depend, globalisation seems to be a self-depleting and necessarily finite process, which brings forward the problems of financing not just expansion, but increasingly maintenance of our modern daily life.

best
Phil H

inohuri said...

I posted this at the end of the last cycle so probably few saw it. It was off topic then. Now financial keeps coming up so here it is again.

The AutomaticEarth broke away from peak oil to address peak finance. Without finance it is not currently possible to discover, drill, transport or refine oil.

I believe the ships that drill in deep water rent for roughly $100,000 per day and I don't know what that includes. Pipe, cutters, crew, fuel etc. could be additional. Currently those deep water ships are parked. The deep water oil might never be extracted.

You might want to do this in 4 parts, there is a lot there.


Negative Interest Rates and the War on Cash

https://www.theautomaticearth.com/2016/09/negative-interest-rates-and-the-war-on-cash-full-article/

Nastarana said...

Mark, I would like to believe you. I want to believe you. But, why just Wisconsin, Pennsylvania and Michigan, all states with large electoral vote caches and slim margins for the presidential winner? I voted Green last election and I was happy to do so. Now, I will consider carefully before doing so again. BTW, the Greens badly dropped the ball with respect to the Senate campaign in NY; Sen Schemer is not well liked outside of his Wall Street and Zionist preserves, and a strong campaign against him in the upstate might have seriously compromised his ability to make mischief in DC.

Greetings baba free, and I hope your esteemed President Correa--who is admired and respected here in the USA, if not by American elites--has good security and that Ecuadorian citizens are alert and aware during the President's public appearances.

A harbinger of things to come?:

http://theantimedia.org/veterans-defend-dapl-protesters/

I have read veterans on other sites referring to weaponized police as "mercenaries", accompanied by statements to the effect that soldiers despise mercenaries.

Renaissance Man said...

Ah, the history of trade & wealth of nations & mercantilism. How much of this post came almost verbatim from "The Great Transformation" by Kari Polanyi? It was published in 1944, and suffers from his then-still-plausible conviction that Communism was viable, but is nevertheless a solid examination of market realities versus theories. The reality is that in the short term, everyone participates in the market, exchanging goods and services and prospers, but over time, through bad luck or bad choices, some participants are forced to drop out.

I made the obvious (at least to me) conclusion that the fundamental flaw in all these complex trade agreements (any agreement 400+ pages long is NOT free trade!) has been the deliberate exclusion of any consideration of work conditions, human beings (i.e. worker rights), and environmental effects. I believe that were these aspects accounted for, then increased trade does increase wealth, because the only thing that could be traded would be either excellent products or scarce materials. As Buckminster Fuller commented a skilled machinist in Tijuana should be paid the same as an equally skilled machinist in Kamchatka in a truly global economy. The work of Georgist economic theorists cover the economic use of raw materials & simple means to guarantee ongoing opportunity for participation in the economy by everyone.

What has puzzled me for long is why, if a managed system works, do we repeatedly keep abandoning it, every few generations or so?
I've concluded it is the tension between freedom to indulge immediate whims craved by the individual ego and the patient self-restraint required of adults by society to function. Restraint on individual behaviour is imposed externally in tribal cultures, inculcated internally by highly-complex civilized cultures.
So-called Free Trade deals are sold to people by appealing to the purr-word "freedom" that hooks directly into the cravings of the ego with the promise -- demonstrably true in the very short term -- of plentiful, cheap goods. At least until players, i.e. small local businesses, start getting knocked out of the market, leaving unemployed human beings & their families to suffer and society in general to bear the consequences.

Bill Pulliam said...

Shane -- I can posit though that one of the other sides of "technofantasies" is "catastrofantasies," the idea that we need civil war or a total devastating technological or economic crash to clean things out and give us a fresh start. I'm reminded of the early days of this blog when it was frequented by Jensenite anarchoprimitivists, who were cheering for sudden devastating collapse so the survivors (among whose number they were all sure they would be counted) could get back to the true pristine state of grace of living as hunter gatherers. One of them commented that he was eager for this day so that he and others of his generation could finally get a chance to "truly live."

So I wondered to him and all the rest, if this is the true life you desire, what is stopping you from living it RIGHT NOW? There are still vast tracts of the planet into which he (almost always he) and his tribe could vanish and live in their anarchoprimitivist Eden TOMORROW. Why did they think that somehow the death of most of humanity was necessary before they could "truly live?"

I recall getting no meaningful answer.

In a similar vein, if civil war or other sudden breakdown of civilization would bring about the life you desire, why not just skip the catastrophe and construct that world now, on a scale you can personally manage?

This is not intended as ridicule, this is a serious question. The only person you can really control is yourself, and the only life you can direct is your own. What the rest of society does will never conform to your wishes, even (especially) in the event of civil war or techno collapse.

Doctor Westchester said...

John,

One thing that I've been wondering about is how much of what we are seeing economically in this country is due to the destructive effects of the free trade/tribute system and how much is due to the tightening jaws of falling energy yield. I recognized that the pushing of free trade was a partially a response to going post peak in oil production in this country.

In particular, I wonder about interest rates since both effects mentioned above do tend to push them toward the zero bound, if not insanely below it. I see any on-shoring and ending of free trade to cause interest rates to rise since this will create actual investment opportunities, while the net energy decline will continue to suppress yields. These same effects will be mirrored in the general economy.

I also see the trend toward automatic in a similar way that I see free trade. It has the lockup and draining effect on the general economy that free trade has and it is being undermined by the decline in net energy.

Of course thinking about how these effects might work out is really a job for that think tank that you would love to start. Right now my head spins.

inohuri said...

As for rich people figuring out what is happening:

" I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code. What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now?

I see pitchforks. "

http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014

Malcolm M said...

Follow-up. Yes, I suppose that I needed to get my pet rant out of my system first.

Your main point, that in the long term, even the elite suffer under so-called free trade, due to... wait, I just said "long-term." ;)

Our economic system has become little more than a roving (marauding) band of pirates looking for anything of value to strip off and carry away. The fact that eventually there will be nothing left to pilfer is of little concern to them, since piracy is inherently a short-term proposition; a response to a ready supply of defenseless wealth to plunder. Globalized trade, viewed through this lens, is simply the "cover story" spun for this particular act of piracy. And globalized trade is simply the inter-continental version of the same scam playing out under a variety of names here at home: i.e. securitization, deregulation, privatization...

In every case, the big money goes to the first guy to have the guts to kick open the doors and "unlock" the wealth built up. Be that the M&A pirates of the 1980's who destroyed countless companies, the S&L buccaneers who turned banking into gambling, the mortgage pirates of the 2000's, the privatization pirates, the offshoring craze, etc. Each of these examples is of relatively stable stores of wealth being raided in various fashion. With privatization, wealth is taken via appropriation of public assets and seizing captive markets at bargain prices. With M&A, by breaking norms and changing laws to pilfer pensions, monetize brand goodwill, and sell off accumulated knowledge and expertise, while sucking off interest and consulting fees. With mortgages, by liquidating equity and converting the act of home investment into leveraged home arbitrage. Globalization, really, is just an extension of the M&A craze (hello Gordon Gecko) played out globally. It is the economic equivalent of strip-mining. Of over-grazing. Indeed. They take too much out of the system without putting anything back in.

My point here is mainly that the arguments in favor of globalization are really just put there by the elite for convenience. And as evidence mounts that those justifications don't hold water, the elite will glibly change the rationalization, without so much as a backwards glance.

One argument that I do find interesting to contemplate more, is that nations that trade together tend to fight each other less frequently.

Varun Bhaskar said...

Archdruid,

I don't know if Druids celebrate Turkey day, but I hope you had an enjoyable one anyway. I got into a conversation with an economist cousin of mine about the beginning of the neo-nationalist era. He just migrated from India and wholly agrees that the world is headed for an era of tighter trade restrictions. He pointed out that the Indian government is already focusing it's full effort on getting international companies to produce locally. There have been several cases brought before the Dispute Settlement Body of the WTO over the last several years.

I'd be okay with an end to free trade, but one wonders how long we'd be able to maintain anything resembling our current standard of living with just local resources. We'd probably strip bare our forests in a matter of a couple of years. However, that being said I think it's the best option of really bad choices. Why, a new political faction could even pursue trade embargoes by encouraging boycotts.

Regards,

Varun

gwizard43 said...

I'm in agreement about the importance of supporting Joel's Into the Ruins project, and for those who don't know about it, wanted to make note of another project that those interested in stories of a deindustrial future may find of interest - the Dark Mountain Project is less focused on fiction, also including essays, poetry, art and other expressions of creativity in service to developing these new stories. Their 'About' page puts it this way:

"The Dark Mountain Project is a network of writers, artists and thinkers who have stopped believing the stories our civilisation tells itself. We see that the world is entering an age of ecological collapse, material contraction and social and political unravelling, and we want our cultural responses to reflect this reality rather than denying it.

The Project grew out of a feeling that contemporary literature and art were failing to respond honestly or adequately to the scale of our entwined ecological, economic and social crises. We believe that writing and art have a crucial role to play in coming to terms with this reality, and in questioning the foundations of the world in which we find ourselves."

You can find them at 'dark(dash)mountain(dot)net'...

Mister Roboto said...

It's my understanding that the mismatch between national sovereignty and economic internationalism has a thing or to do with why the Eurozone countries are having such a huge problem with their respective national debts. Because the euro belongs to all the countries in the eurozone, it also, in a manner of speaking, belongs to none of them. The upshot of this is that all of those governments have to borrow money in what is effectively another country's currency. Normal countries that have their own currencies such as the United States, Switzerland, and Japan can just finance the debts they run up by printing more of their currency. Of course, doing so carries risks of its own if done to great excess (as the United States and Japan will learn to their chagrin once interest rates drift back to something more normal from being almost zero percent), but being completely unable to do this will inevitably hamstring national economies whose governments are so bound.

Olivier said...

Thanks for the concise summary. There is a similar longer version from one of my favorite economist here too: http://bilbo.economicoutlook.net/blog/?p=34860

Jay Moses said...

jmg;
in response to a couple of comments you have debunked the claim that free trade always benefits the rich. this is an excellent point which deserves a bit of explication.

interest rates on government debt are at historic lows, even going negative in some countries. these debt instruments are essential to the operation of banks and the low rates are contributing to the instability of many of the systemically important financial institutions such as deutche bank, citi, paschi di monte, chase etc.

cash in the hands of large corporations is going substantially to buy back their own stock rather than into new, productive assets. the obvious implication is that these entities can find no productive use for their money and use it to pump their stock values.

throughout the world, returns on investment are being squeezed. those $300 big screen tv's are the result not only of wage suppression but also of profit margin suppression. a few more ticks up in interest rates (the u.s. 10 year bond rate has risen from 1.8% to 2.4% just this month) and trillions of dollars in debt, both private and public, will become totally unsustainable--the ultimate deflationary event.

sara drew said...

Hi JMG
This is not directly free trade related but hopefully ok as my last response was one of those eaten two weeks ago. What I said then was how struck I was by the comments about health care in the States and how shocking I found it to read about the cost of insurance as well as trips to the doctor for a basic screening or minor treatment, which for me in the UK is free –though of course I now know to use that word advisedly –in that while I’m not the one directly forking out the cash, of course it is not actually free. But reading those stories it really struck me that these are in fact collapse stories and US decline is actually happening for those able to see it.

In other news:

Oswald Spengler has had a mention in the Guardian: https://www.theguardian.com/business/2016/nov/15/trumpism-solution-crisis-neoliberalism-robert-skidelsky and I am noticing a few commentators to Guardian articles starting to reflect on the cyclical nature of history.

Also in the Guardian https://www.theguardian.com/commentisfree/2016/nov/25/13-crises-we-face-trump-soil-loss-global-collapse it looks like George Monbiot has reached despair on the cycle of grief with a doom laden report on his (13) horsemen of the apocalypse –many of which are ascribed to Trump. He does get quite a lot, especially on soil depletion where he quotes a UN report saying we are 60 harvests away from soil collapse, but has yet to join all the dots (I love that thanks to your blog I am now critiquing all these high falutin commentators), especially regarding failing to see any equivalence in the war making propensity of Trump advisers (Michael Flynn) versus Democrat advisors (Victoria Nuland), and most especially his failure to address energy depletion and the steady decline in EROI, certainly for oil. I felt he was having his red pill moment (the Matrix) but he still has some way to go as he top lined the wrong question at the end of his article, going with ‘Can we stop this?’ rather than ‘What do we need to do to get through it’. And one comment signposted to you which is good, –and a noticeably civil signposting it was too, Guardian comments can get polarized and spittle flecked very quickly indeed!

So thank you for your work, time to put some money in you hat. I’m off now to brush up my oil depletion questions (how long before it costs a barrel to get a barrel?) for another time…

. said...

Thanks JMG.

Neil, you should come along to our next Green Wizard meetup in the New Year if you're in Ireland? There are 3 of us so far.

Thomas Daulton said...

Of course I'm sure it's not far from your thoughts that another disadvantage of "free trade" is that it proceeds at a snail's pace -- far too slowly to appease the investment class -- unless it is powered by burning irreplaceable fossil fuels. That's another way it contributes to economic decline, as the effects of resource peaking come into play.

I started noticing around 15 years ago how the bars of soap that one receives in hotels began to get smaller and smaller. Useta be you'd get a mini-bar of soap and a couple of shampoo bottles in your bathroom free with any hotel stay, which were substantial enough that the soap would last you another week if you took it home (and you'd often get a second, spare bar). Useta be a little free perq you received as a gift for staying at that hotel. Around that time I noticed the bars of soap were getting smaller and thinner. These days the bar of soap is about the size of a half-dollar, and roughly as thin. There is no possible way to unwrap these tiny slivers of soap from the paper packaging without fracturing the soap. After umpteen times doing this, cracking the soap in half while unwrapping it, I noticed on the label: "Made In China".

So this fleck of soap has travelled many thousands of miles, at untold cost in petroleum, cushioned carefully so it doesn't break during 30-foot swells on container ships, all so that it can snap in my hands in California at the slightest breath? Are there no soap-makers in California who could be producing this stuff, must even our most basic toilet needs be manufactured in some distant Empire so that the local hotel can shave one-sixteenth of a penny off of its soap costs??

Political gadfly Ted Rall put it well in a column many years ago: "The purpose of trade remains the same as it was in the days of Marco Polo -- to exchange something you make for something you don't already have. Trade for its own sake is wasteful and inefficient." Sure bring me tea leaves from Zanzibar and beer from Czechoslovakia, but there's no damn reason we can't make soap and tennis shoes here at home. Jobs, dammit!!

pygmycory said...

JMG, ah, okay, now I see what you were getting at.

pygmycory said...

JMG, but I also wanted to talk about the short-mid term effect on poorer people in poorer/less powerful nations, since you didn't really address that and it is pretty important to a thorough consideration of the pros and cons of free trade agreements.

rapier said...

OMG JMG, you awful Liberal. That's sarcasm mind you. I am probably one of the few who see this as a liberal argument. Of course very few liberals in the public sphere have a single clue about these matters. Then again Liberals in the public sphere were responding to the 'market' to make a buck and since the 'market' demands neoliberalism of various flavors or neo classical economics which has relentlessly been morphing into neoliberalism a sort of vicious circle emerged. Espousing free trade elicited jobs providing readers, listeners and even elections and this 'market' reward encouraged ever stronger support for free trade. Thus with economics taken care of the tattered remains of Liberalism devoted itself to gender issues and that's about it.

One odd aspect of the marriage of liberalism and neoliberalism is that liberals insist that liberals refuse to believe that there is such a thing as neoliberalism. Go figure.

Conservatives have their own sins in this regard. Free trade isn't conservative but at least championing it provided a 'conservative' result. That being the wealthy and powerful got more wealth and power and at least conservatives were not shy about getting that, as opposed to liberals who pretended against 30 plus years of evidence that free trade benefited everyone. Then too free trade delivered another conservative result, of the none Burke variety anyway. That being a stagnating lower middle class and an expanding lower class. I know JMG doesn't buy that conservatives want a large lower class. A position easy to defend since no conservative can admit so publicly or often even to themselves this is what they want.

inohuri said...

Deedl said
"Before the civil war, almost the entire federal us budget was paid for by tariffs. This way, economic activity for domestic purposes was relieved from both international competitors and from government taxation. "

I have read those tariffs were the cause of the US Civil War. The South wanted to do business with Britain, the North wanted the cotton etc. for their factories.

This sounds too familiar.
<<<<<>>>>>>>

Back to the Future: The Legacy of Abraham Lincoln

If there was no mass movement insisting on the immediate liberation of the slaves, if Lincoln himself was indifferent on the matter, if nullification and secession were part of the national dialogue, what was the non-negotiable, incendiary issue that truly separated North from South.

In simplest terms the North was industrial and the South was agrarian. Northern manufacturers wanted to institute protective tariffs against cheap British imports. The South was opposed.

http://dissidentvoice.org/2015/09/back-to-the-future-the-legacy-of-abraham-lincoln/#more-59968

http://www.counterpunch.org/2013/02/08/abe-lincoln-racist-fascist/

LewisLucanBooks said...

Dear Mr. Greer - Someone mentioned that industries can sue for compensation, due to offshoring. Not so easy.

About a year ago, I read a book about this process called "Factory Man: How One Furniture Maker Battled Offshoring, Stayed Local - And Helped Save An American Town." (Beth Macy, 2014). As I remember, this is a book about the Bassett Furniture Company (Virginia.) First you need a certain percentage of companies in your industry to bring a suit, along with you. Not so easy when most of the other American furniture companies were closing factories, laying off workers and importing cheap Chinese furniture. Many lawyers are involved. It's an expensive and protracted process. You're dealing with sluggish and disinterested government agencies.

Me, if I need a piece of furniture, I head for the local auction house. The bottom has dropped out of the antique furniture market. A run of the mill, circa 1900 oak china cupboard went for $850 to $1,200 ten years ago. In the last couple of years I've seen several go for $200.

When I was in the old tat biz, I first noticed the impact in the niche market of quilts. When the Chinese quilts started coming in, the bottom dropped out of the vintage American quilt department. Unless it was something really old, rare and unusual. And don't get me started on the flood of reproduction glass, pottery and china. Lew

Wild Zontargs said...

Shane and JMG, here is a nice little rant from a programmer on how our IT systems are held together by duct tape and over-caffeinated workers:

http://www.stilldrinking.org/programming-sucks

I can personally attest that the emergency generator systems that keep the life support operating at your hospital, the pumps running at your sewage treatment plant, and the credit and debit processing servers at your bank's head office during a power failure are using control systems that are probably in just as bad shape, if not worse. After all, they don't get full-up live testing every day, only during carefully scripted exercises or when there's an actual emergency.

A main circuit breaker is racked out for maintenance? The computer doesn't know how to re-route power, because nobody told the programmer to consider that possibility, and the generator sits there burning diesel but doing nothing. A ventilation grate is jammed shut? The generator overheats and shuts down. If you're lucky, it didn't catch fire or spray boiling coolant everywhere, and you can re-start it after you clear the jam and wait for it to cool down.

Heck, some tiny relay in a control panel comes loose, and the system can't automatically open the circuit breaker protecting the generator when the power comes back on. The generator's alternator turns into a great big electric motor trying to spin the diesel engine backwards. Hopefully some other emergency relay cuts in, or you have a big mess. This could have been prevented if the system was wired up fail-safe (the breaker automatically opens if the relay comes loose), but that's harder to set up and debug, you need to run more wires around, and you need to inspect things more often. Too expensive. We didn't budget for that, and it wasn't specified in the contract. Someone else's problem. Take the money and run.

Those are all examples of messes someone else made and I had to go clean up. Outside of special cases with extremely close oversight, nobody does a whole-system analysis. The programming is just "do A, then do B, then do C". If B fails, the computer throws its hands in the air and walks away. Most of the time, there's no usable manual controls, just a basic system for the monthly "does the engine start" test, an emergency shutdown button, and "call the idiots who installed this thing". That doesn't do much good when the sewage containment system is already full and dumping into the river.

Oh, and some MBA decided this thing had to be connected to the internet, so the facilities manager could log in from home instead of having a night shift at the plant. An eighth-grader could knock the thing offline with point-and-click tools if he wanted to, but nobody would see how cool he is, so he's hacking his friends' Facebook accounts instead. I sure hope China's cyberwarfare department is busy trying to hack the Pentagon instead of all these little systems....

zach bender said...

@JMG,

you and i may be seeing the same thing from different perspectives. in your formulation, i would question who lent power to whom, and who is a creature of whom.

i could probably accede to your shorthand history of nation states, and in fact it might buttress my larger point, which is these mechanisms have been structured with reference to criteria that are becoming less relevant -- ethnicity, language, etc.

we either do or do not want to somehow feed and shelter eight or ten billion people, and/or find ways to bring that number down without too much violence. the nation state in its various configurations may become an obstacle to those efforts.

Donald Hargraves said...

Nestsrana, et al:

I heard a few months ago that The Oath Keepers were watching the goings on in North Dakota and were waiting for an invitation to join the protests.

Looks like they've been invited. News will get interesting, if it's allowed to be reported.

Efe said...

People's misery increases with their State's aggression to their actions. Voluntary Trade is no different. I'll quote Henry Hazlit's book "Economics in one lesson"

"But the tragedy is that, on the contrary, we are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economist yesterday urged us to ignore. The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.

From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate hut at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."

I recommend these books to take a look at things with liberty (ie non aggression principle) in mind.

Henry Hazzlit "Economics in One Lesson"
Friedrich von Hayek "The Road to Serfdom"
Frédéric Bastiat "The Law"
Murray Rothbard "America's Great Depression" (spoiler alert!!culprit is not free market economy).

All-Mi-T [Thought Crime] Rawdawgbuffalo said...

Well said. I even quoted you here: http://wsenmw.blogspot.com/2016/11/trump-is-correct-tpp-isnt-fair-or-free.html

Shane W said...

@Bill,
I think we're going to have to agree to disagree about perceived objectivity and lack of bias regarding either cheerleading for collapse or the status quo. I was simply relaying real world experiences, and somehow you diverted that into an ad hominem attack. It's not a dream about the future, it's the here and now. Every country engages in cyberwarfare, and large parts of the internet and everything connected to it go down regularly due to hacking. I'm not a neoprimitivist. Honestly, I just think there's an unbridgeable class gap here. Whenever I read JMG, I feel he truly gets the wage class, but you just seem patronizing. If I really wanted a civil war, I would have voted for Hillary, and I wouldn't have breathed a sigh of relief that we avoided one when Trump won.

M Smith said...

And the flak begins!

gwizward43: "Yammering about their rights?? Wow. Are rights not worth yammering about? I kinda think they are."

"Wow", not when the "rights" are "kinda" imaginary. In the USA, there is no right to "free" health care. But the SJWs, like the NAACP, tell their followers that "free health care is a RIGHT!" and no one contradicts them because that would be "racist". There is also no "right" to employer-paid insurance (this may vary by state) but no matter, those who can't read well enough to answer the question themselves believe what their leaders tell them to believe. There is no "right" to a "living wage", not that there is such a thing. But see if you can guess what their leaders tell them! To them, if they want it, it's a RIGHT!

"I suppose if the be all and end all goal is business profits and corporate success, to which all else is deemed subservient, you're (sic) position is entirely supportable."

Yes, when I risk my life savings that I earned, my goal is business profits. Not "giving back" to a community from which I have taken nothing, not a jobs program for "struggling single moms", PROFITS. Why do you consider that a bad thing?

"But why loosen constraints in that case?" Because sufficient automation doesn't exist right now. I should be able to hire people who will make my life easier, not harder. But once I employ more than 49 people, I encounter EEOC quotas. That means I have to hire based on something other than qualifications.

"I gotta wonder - " yes, you do, because I brought no such subject up in my post, and I'm not going down that path with you.

"That seems to me to be an awfully one-sided view you've got there, M." Seems to me you're golly-gosh talking down to me, g.

"I'm curious:" No, you're critical. And transparent. But I'll answer anyway:

Complaints I've heard from employees? You're not "gonna" like this: "This is a bad place to work if you're white. The blacks get to watch DVDs in their cubicles in plain sight of the entire department. The pregnant ones don't have to show up, let alone work. Watch out if you're white and no kids, you'll be here every night and weekend, and it'll go against you if you say anything. Then you'll get the same percent raise they do."

nuku said...

@Shane W,
Re working in the booze, actually drug, industry:
Back in the day we used to say the surest ways to make $ are selling sex and drugs. Methinks that will always be the case. Good luck.

nuku said...

@Shane W,
Re working in the booze, actually drug, industry:
Back in the day we used to say the surest ways to make $ are selling sex and drugs. Methinks that will always be the case. Good luck.

Shane W said...

BTW, I just want to wish everyone a Happy Buy Nothing Day!

ganv said...

That is an interesting theory. An introductory economics course usually includes the explanation of the benefits of free trade from comparative advantage which you may want to include in your discussion. But you are right to put this in a broader societal and political framework. An individual country can't only make high-tech products because it will have a low skill part of its population that can't participate in that industry. But I am not sure the trade barriers solve the problem cleanly. In advanced economies, trade barriers will increase prices of many products. That will make incentives to manufacture locally, but those incentives will often be met with solutions that rely on automation, and we still end up without employment for low skills workers. And free trade does have benefits in making countries interdependent decreasing incentives for war and in offering markets that poor nations can tap to raise their economies. So I agree that we really need to evaluate the benefits/drawback of free trade. I am open to being convinced that trade barriers are a good solution. I think I already support them in some cases like restricting rapid capital flows and stabilizing industries so that employment patterns change over human lifetimes and not over a few years. But the broad claim that products should be produced locally to maintain wage/price balance is going to require more empirical evidence rather than rhetorical evidence to convince me.

Shane W said...

I think people are more and more open to Retrotopian thinking. Now, you see people profess belief in progress in the abstract, yet when it comes to concrete examples (like machinery in my workplace), they don't believe. If it weren't for sunk costs and attendant psychology of previous investment, I think they'd be open to junking new equipment in favor of older, more resilient equipment. I just don't see how new equipment can function w/out open supply lines, as our newer equipment is always needing replacement parts. Most electronics would not last long w/out open supply lines.

NZ said...

JMG- I understand your point about excessive free trade delivering benefits to the wealthy on a short term basis only. However, It is not the rich who are offering resistance to the trade deals, it is the disenfranchised who have finally reached a breaking point and are making their voices heard, one way or another. This disenfranchisement is beginning to reach into the upper reaches of the professional class and they might have a stronger voice, and more financial resources to make a difference in protecting their interests, but it will mean nothing if vast swaths of the poor are left behind in the process. What I was trying to express was the need to break the cycle of short term thinking and at the same time the need to protect oneself from the predations of the rich. I interpret the break we see in the wealthy as some see the coming class conflict storm and wish to avoid direct conflict by making concessions and those that would relish open conflict. The open conflict side is winning.
There is no acknowledgement in the failure of corporatism, just the fantasies that a technological/bureaucratic solution will be found to soften the inherent inhumanity. All the while, slowly, behind the scenes, people struggle to improve their lives with varying degrees of success. The difficulty is that all this effort is still disjointed and still encumbered by a belief in the capitalist system. Profit must be taken out of the social equation.

A tariff laden, protectionist economic policy only makes sense if it is designed to protect the well being of the citizenry of the nation. But this prescription is not capitalism so will not happen or thwarted by all costs. The golden age of protectionism in America was designed to protect industry, not its people. At that time, it worked because what was good for industry was also good for the citizenry- luddites excepted- in raising the living standards of citizens and had a believable promise of future prosperity. This process has run its course and no longer delivers prosperity broadly. The failure of rhetoric alone to continue convincing people to support the globalist corporate movement seems to be a turning point. If Trump fails to deliver prosperity or some sort of stability to the working class, or only delivers crony capitalism, anything is possible. Now, unless the owners of industry somehow change their view from the purpose of industry is to deliver profits alone into their pockets, to purposeful utility for the community, what we will have is a multitude of exploitive fiefdoms, supported and protected by the government- the rest be damned. That is a recipe for violent overthrow or mass destruction at the very least. It is not a free society or a democracy.

Economic stability is the foundation on which all is built. Right now, free and open markets are failing the test of stability. My hope is that enough people of means can be convinced of the importance of a broader social vision based on stability broadly interpreted- not just for the few. You have a great mastery of history, while my understanding is very limited, but is seems to me the rich always remain on top one way or another. At the very worst, they will rebrand or rename themselves to begin a new cycle after a fall or crash. This rise is based on aggressiveness and the willingness to use violence in all its forms to achieve goals. These traits do not serve a resource starved world at all. Crony capitalists still feed off the population, whether national or international. It just kicks the can further down the road.

Jared Diamond spoke to this in his book Collapse. A leadership class that fails to find the proper accommodation with the environment and their neighbors only gains the privilege of dying last. This is the perversion of public/ private partnerships stressed today by those in power. It is the latest form of exploitation designed primarily to maintain the position of the wealthy to the detriment of the majority of the population. Kick the can down the road.

Jo said...

@ Varun,

Instead of stripping our own countries bare of trees (or insert any other natural resource here) free trade allows us to strip the resources and pollute the environments of far away countries. If we could see the deforestation and pollution happening in our own backyards we would be far more likely to develop more efficient, less polluting widgets - or do without.

latheChuck said...

It is possible to purchase locally grown and locally made goods, and the Internet makes it easy to find them. About a year ago, I ordered a custom-fitted pair of fleece-lined slippers for my older son (from shepherdsflock.com, in Vermont). One pair of size-15 slippers was the only gift he got from us last year. Today, I ordered a pair for his wife. I am persuaded by the web site (which I encourage you to visit) that the labor and materials are of USA origin. I'm paying 2-3x the MainStream Vendor (MSV) price, but I think of it as "living the tariffs I'd like to see". It's one small step, but it's in the right direction.

Do you suppose we can attach the same sense of consumer skepticism to "the MSV" as we have for the MSM (MainStream Media)? They've each earned their place of scorn.

My shoes are by RedWing, made in Wisconsin. (Not everything they sell is domestic, but these are.) They cost more, but so far they're promising long service life.

There's home-grown squash stacked up in the cellar.

I hope that the workers in the US businesses I buy from are thoughtful enough to avoid sending their earnings overseas.

I find it ironic that the URL www.madeinamericafest.com points to a music festival sponsored by Budweiser (headquarters in Leuven, Belgium). Budweiser, according to Wikipedia, may contain up to 30% rice, which I kind of doubt is grown in the US. (I know SOME rice is grown in the US, but probably not the kind of commodity rice the Budweiser-Inbev uses.)

John Michael Greer said...

Kevin, of course there's always a geopolitical dimension. Free trade was the banner under which the British Empire extracted wealth from the rest of the planet, and then it became the banner under which the United States did exactly the same thing. I've talked about that at length in previous posts and my book Decline and Fall; this time, I simply wanted to focus on a different dimension -- the fact that even aside from the geopolitical dimension, free trade schemes don't do what they claim to do. As for the proper disposition of neoliberal economists, I'd simply like to require them to abandon their careers of intellectual prostitution and get honest work. There are a lot of highways that need repairing, for a start... ;-)

Tim, that's more or less my understanding, though there was also some transport of bulk products such as grain -- the last sailing routes that remained profitable for tall ships, for example, brought grain from Australia to Europe.

Esn, I discussed that point back a while ago on this blog -- the posts in question went into my book The Wealth of Nature. This time, I wanted to concentrate on something a little different.

Jcummings, I've been expecting the uptick in pro-secession sentiment for a while now. It's not uncommon to see that after a presidential election. If it happened peacefully, by constitutional amendment, it might not be a bad thing.

Tim, yep. I remember reading other predictions of the same sort around that time, and watched the pundits and politicians dismiss them as nonsense. Funny how that worked...

Crow Hill, I've discussed that at vast length in previous posts, and chose to devote this post to a different subject.

Latefall, thanks for the links!

Shane, it makes perfect sense to me, I was just hoping for something I could cite. I should probably ask my readers generally: can anyone find some good colorful stories in online or print media that show older technologies working steadily while the latest, hottest, newest ubergimmick breaks down all the time or otherwise doesn't do the job? Many thanks in advance!

Phil, many thanks for this, especially for the links.

Inohuri, the thing to keep in mind is that finance is a game with abstract tokens. If the token game breaks down, it can be restarted or replaced. I'd also point out that The Automatic Earth has been predicting an imminent fast crash for financial reasons for a good many years now, and don't seem to have learned anything from the failure of past predictions -- not that that's an uncommon vice these days.

John Michael Greer said...

Renaissance, both of the eras of free trade came about because an imperial power -- first Britain, then the US -- found it convenient for looting the rest of the world. One era ended, and the other is coming to an end, when the imperial power in question started losing more from its empire than it gained -- the common fate of empires, by the way: like everything else, they suffer from the law of diminishing returns.

Doctor W., yes, that's a huge issue. I really don't know how that's going to fall out. Certainly declining net energy is one major downdraft on economic activity; free trade is another; it makes sense to get rid of the one we can get rid of, since the other's not subject to human action.

Inohuri, I remember that. Not a bad bit of prophecy, all things considered.

Malcolm, I won't dispute the piratical nature of much of modern economic activity. That's very common in history once limits to growth make it impossible to make a fortune through productive economic activity, and it plays a large role in driving the decline and fall of the civilization that permits it. Under some circumstances, the political sphere can slap restrictions on it -- consider the way that Russia under Putin shut out the multinationals with extreme prejudice -- and at this point, to my mind, that's the one chance we've got of slowing down the decline.

Varun, you seem to be falling into the trap of believing that the only alternative to free trade is no trade at all. Not so; trade restrictions limit trade, they don't abolish it. (And the US needs to curb its appetites one way or another...)

Gwizard, that's also an excellent point. The Dark Mountain people have published two of my essays, so I have an extra reason to be nice to them. ;-)

Mister R., exactly. The Eurozone is a classic example of a badly designed free trade system, and it's reaping the usual consequences.

Olivier, you're welcome. Thanks for the link!

Jay, exactly. To my mind, that's likely to be one of the reasons why Trump et al. have turned against the free trade system.

Sara, yep -- we're in fairly rapid decline here in the US just now. Many thanks for the links; it's sad, really, to see Monbiot going through all these gyrations. He's had all the pieces of the puzzle for a good long time, but he refused to put them together...

Thomas, you'll get no argument here. My wife makes our soap, using vegetable shortening and household lye, and the quality's much better than anything you can get from a factory.

Pygmycory, fair enough.

Rapier, depends on the conservative. It's convenient rhetorically to insist that all conservatives want this, that, or the other, just as it was convenient for the Clinton campaign to insist that "women won't vote for Trump" -- you'll notice how that turned out, though.

olivier64 said...

This is a bit off-topic for this week's thread but entirely too good to pass. The Washington Post and an outfit called PropOrNot have compiled a list of subversive, russian-funded "fake news" sites that they recommend to the attention of the FBI. I kid you not. And to think some people deem Trump to be the danger. Sadly, the ADR did not make the cut; I apologize for being the bearer of such ill tidings. You must try harder!

John Michael Greer said...

Lewis, exactly. Those are both textbook examples of the way that dumping, permitted by free trade schemes, destroys domestic industries.

Zontargs, thank you! That's a great post, and will be footnoted in the book.

Zach, who is this "we" you're talking about, who does or does not want to attempt an impossibility?

Efe, I'm familiar with that approach to economics, and find it unconvincing. Markets quite readily run off the rails and cause immense human suffering all by themselves, and blaming it all on governments is convenient but not convincing.

All-Mi-T, thank you!

Shane, and likewise! My wife and I have celebrated Buy Nothing Day for years, and never regretted it.

Ganv, fair enough. I've proposed a hypothesis; now let's see how it stacks up to the evidence from history.

Shane, that's good, because Retrotopia is going to be ready for sale any day now. :-)

NZ, are you somehow under the illusion that Donald Trump is disenfranchised? He's a very rich man, and he's opposed to free trade. He's not the only person among the rich who's taken the same stance. It's a common bit of contemporary rhetoric to insist that the rich are profiting from everything that's wrong with the world and the poor and disenfranchised are carrying all the costs, but if you allow that to blind you to the possibility that the rich may have their own reasons to scuttle a policy that is hurting them as well as the disenfranchised, you lose an opportunity to change the situation rather than just protesting it.

LatheChuck, an excellent point.

Shane W said...

@M Smith,
have you ever considered how you will respond when you see the business end of a pitchfork, and the rank-and-file of the "authorities", eg the police, are right there with them? Maybe then you might be less self-righteous about what you've "earned". You've only "earned" it because society has collectively "allowed" you to keep it, destroy the underclass enough, and they will forcibly take it from you.

Candace said...

@ M. Smith- Yes, when I risk my life savings that I earned, my goal is business profits. Not "giving back" to a community from which I have taken nothing, not a jobs program for "struggling single moms", PROFITS. Why do you consider that a bad thing?"

You've received nothing from your community? So you paid for all of your employees educations, the roads, the sewers, the legal enforcement of contracts, the public safety that allows you to do business?

Has it ever occurred to you that a jobs program for single moms could help your local economy by making it possible for people to contribute mor to the economy and the community and reducing the likely hood tut their children grow up in poverty needing even more services from your community?

You seem to have a rather short sighted vision of what creates prosperity in a community and therefore members of it like you. As for the complaints about workers. Some are good employees and some are bad employees, maybe you you are suffering from some sort of confirmation bias when you say that the problem employees are black or female. My mother never called in sick, in case she had to stay home with me when I was sick. Which was not often. In other words she accrued a lot of unused sick leave and that is also a common trend among single moms. No one ever pointed that out to you?

Varun Bhaskar said...

Archdruid,

Sorry that was not my logical train. I intended to point out that curbing trade wouldn't necessarily curb the appetite for goods here, rather we would turn to stripping our local environment to make up the difference. However, Jo does have a semi-valid point that seeing the destruction in our own backyards may curb our appetites. However, if India and China are any example I wouldn't count on people curbing their appetites. You would be surprised at the amount of misery people will put up with to get at their baubles.

Regards,

Varun

Malcolm M said...

re: the call for technology failure stories.

The 911 service in our ex-urban community has had at least two outages. These were apparently caused because someone at ATT did something, and forgot to tell someone else, or something like that. And so the 911 system crashed.

Funny part: the emergency services folks sent out urgent message to be read on local radio that if you had an emergency, to transport yourself to the nearest police or fire station. That's it, we were back to circa 1910 emergency response just like that.

These sort of outages did not occur to my knowledge back when 911 was on POTS, but of course 911 is now fully digital.

These events were capped off when a routine construction backhoe cut the only internet fiber into the region serving 30,000 or so people. And so EVERYTHING went down: cell service, internet access, and 911. As well as the POTS system. Communications went black just like that.

The funny part was, folks who kept their landline phone just in case the cell system failed, got a rude awakening to learn that the POTS local exchanges had of course been "upgraded" to digital switching, and were every bit as vulnerable as the rest.

Shane W said...

@nuku,
I'm going to have to get all Burkean in defense of my industry. For me, traditional social norms approving of beverage alcohol as a "social lubricant", used in moderation, are sufficient justification for the industry. The fact that this practice has ancient roots dating back to antiquity further justifies it, as well as the fact that brewing, winemaking, and distilling are widespread amongst diverse cultures. So there are sociological as well as historical justification for the industry. Secondly, social engineering schemes to eliminate "demon rum", most notably Prohibition, have been disasters.
I'm also well aware of alcoholism's role in assisting the Four Horsemen, and am okay with it. People unable to cope with the stark future bearing down on us have a death wish that needs expressing, and if not through alcoholism, then the death wish will find another expression. In the bigger picture, human population is in overshoot, and MUST come down from its 7 billion peak, so I'm ambivalent or philosophical at best about alcohol's role in helping Mam Gaia rid herself of excess humans. There are more gruesome ways to die, as we will find out as time goes on.

Shane W said...

So, JMG, had we heeded Jimmy Carter, Limits to Growth, Overshoot, and all the other popular warning signs in the 70s, embraced "malaise" and coped with it through conservation and appropriate technology, instead of neoliberal free trade and "inappropriate technology" (digital automation), we wouldn't be in the economic mess we find ourselves in right now?

latheChuck said...

Another take on a domestic product: buy warm slippers, and maybe you can turn the thermostat down a few more degrees this winter. It's not a natural-gas (or whatever you heat your home with) boycott, but consuming less energy is good.

http://www.sickafus.com/sheepskin/SNUGWMN.html

Stepping into a nice pair of fleece-lined slippers is as relaxing to me as a few minutes of Mozart. Since our future is to be less energy-intense, less stimulation-rich, and less stuff-stuffed, I'm on the lookout for things which have a high joy-to-expense ratio. A windowsill of blooming geraniums is one thing; fleece slippers are another.

(I have no relationship with this company.)

Shane W said...

Honestly, I have no illusions about surviving the mess I think is around the corner. I just hope that I can fall on my own sword gracefully if it comes to that. Somehow, I don't think meeting a violent end is out of the question, given my personality. If only some good could come of it.

Shane W said...

Regarding California secession, the sooner we can build a national border and control immigration, the better. Global warming has written their death warrant. I can think of no other more unsustainable place in the Union with a bleaker future than California.

Adrynian said...

Dear JMG,

I strongly urge you to review some of Professor Steve Keen's work. He shows how a higher debt-to-GDP ratio leads to lower wages, higher inequality, slower growth, and a bloated financial sector... using only three macroeconomic definitions and some calculus.

"Inequality, Debt and Credit Stagnation" is available on YouTube. As is "The Alternative to Neoliberalism."

Marx and Ricardo both said that in the absence of unions, wages are driven down to subsistence levels. Free trade bypasses unions by subsuming the political sphere to economic imperatives. It forces countries to compete with each other to sacrifice impediments to profit (e.g. people, the environment, etc). Meanwhile, politicians can say, "It's not me. There is no alternative."

Debt is offered instead of higher wages, which expands debt-to-GDP. But since banks mostly lend for assets, this also creates asset bubbles. People feel wealthier while going ever deeper into debt, until they can't anymore and the music stops. That was 2008.

The last time the world went through this was the Great Depression. Except this time central banks prevented a deflationary depression by following Japan into stagnation. However, this only protected asset holders at the expense of everyone too young or poor to own anything.

And then the backlash: first Occupy & Greece, now Brexit & Trump, with more to come, probably in Europe next given that 2017 is a bumper year for elections there. But don't count out China either, as their private debt bubble is currently bursting.

Your complaints about the salaried class notwithstanding, the real problem is with the 0.1% who own banks and buy lobbyists. And really not even them, but an economic structure that is so unstable that every couple of generations it self-destructs. A little greed is all it takes. That and an unsustainably high private debt-to-GDP ratio.

I urge you to review Keen and continue educating your readers about the underlying economic contradictions. It's too important for people to remain in ignorance, as Capitalism can break in ways that destroy populations. And an educated citizenry is necessary for democracy to function as it must.

Sincerely,

Adrynian

Wendy Crim said...

I agree. This is an extremely important issue. I am almost 40, still paying off student loans for an utterly useless "education". I encourage my children not to attend college. This bubble can not burst fast enough.

Bill Pulliam said...

Shane -- where do you get the idea that I am some upper class person? My last full time job was as an over the road truck driver. You seem to feel the need to pigeonhole me in your class conflict model to dismiss me. Sorry buddy, you make more than I do. Large numbers of my friends and neighbors live on $12,000 a year or less. I believe it is you who are projecting fantasies onto me.

As fads as wishing for disaster, I was responding to your actual words:

"I'm hoping that this upcoming downturn in the much-needed depression. I was so disappointed that '08-'09 was jerry rigged out of being the next depression. We really need a good old fashioned depression right now."

"The one thing I regret about Hillary not getting elected is that it didn't set off a full-on cyberwar that made a smoking, cratering ruin of the internet."

If that does not read as wishing for catastrophe, what does it mean?



Kevin Warner said...

John Michael Greer said...
"free trade schemes don't do what they claim to do"
It may be that free trade deals are simply wealth pumps as that is the way that they work in practice but with the wealth being pumped up instead of across economies. Here in Australia the media is still moaning about the loss of the TPP even though they never report on what it was nor any of the provisions such as Investor-state arbitration courts. Our country was once sued by a tobacco mob in one of those courts due to our anti-smoking measures working too well. They lost by the way. Perhaps the Summers memo (https://en.wikipedia.org/wiki/Summers_memo) is a good view into the mindset of the people that come up with treaties like this.
I just finished cross-checking a list of the history of the leaders of the countries that signed up for the TPP against their simple Wikipedia entries and nearly half state terms like merchant banker and a venture capitalist, Chairman of 1Malaysia Development Berhad, positions at both the World Bank and the International Monetary Fund, Merrill Lynch's global head of foreign exchange and General Manager with Overseas-Chinese Banking Corporation. It's not like that they had other reasons for wanting to have their countries signed up to this Bataan death march of a treaty.
On a personal note, I too must confess, like Bill Blondeau & jcummings, being unable to complete my entry for the last Space Bats competition. I could foresee the elimination of power, water, communications & sewerage grids so that each household would become self-reliant, I could foresee the development of a static economy, I even had extended Clans that had their origins in past climate-refugee camps but could never pull it together into a composite picture that I could hang my story from that rang true. Call it an epic fail of imagination. Sigh.

Cherokee Organics said...

Hi JMG,

Thank you for writing this timely reminder of what could be. And of course, there is the dark fact that history has shown what happens when wealth inequality gets out of control. I mean honestly, I ask you this question: how would the average CEO know when wealth inequality has become out of control if their average earnings in the US is apparently the equivalent of 384 average workers incomes? It is just bizarre...

You know, down here we have another engaging scam whereby franchise operators are simply ignoring the labour laws for minimum wages and just paying people whatever. This is a serious problem for overseas students who can get deported if they complain - and one of those scams is apparently for a brand that is controlled by the second richest guy in the country. I mean, what is with that? Surely they could afford a few more bucks to pay to the workers? Apparently not.

And then you read that apparently 10% of employees in the country are on working visas and you can smell a rat and it smells of decomposition to me.

As you quite correctly point out, it is a race to the bottom, and nobody wins out of speculative bubbles because they eat the productive economy. Literally.

My main hope for the future is that it doesn't take another Great Depression to get the concept that “consumer economies need consumers” into the policy makers thick heads. There, I've said it and I feel much better now. :-)!

We had the Green Wizards meet up here today and everyone had a great time! Lively conversation and good food – what more can you ask for. Plus most of the daredevils poked their heads into the worm farm sewage system! Top work everyone!

Speaking of consumers... My computer broke earlier in the week because I was producing my Magnum Opus :-)! video showing 1,100 days growth in the orchard here. The video was just too much for the tired old beast of a machine and it fell over and died - without warning. Even Poopy the Pomeranian vomited up his dinner during the production of the video. It was very strange because everything that could go wrong, went wrong and I was beginning to feel that I should not be putting the video together at all... Anyway, it must be good as I've already been trolled! Well done them too! And too bad so sad for them that I impose strict controls on comments. Do you find that you get trolled more during a particularly choice bit of writing or is it more or less a background noise? Anyway, the video comprises 700 photos over about 11 minutes. There is a lot to see and it can be seen at the link here: 1100 days in a Food Forest .

Just for your info, I've read Galabes too and enjoyed it, but of course you did make my head spin yet again (I suspect that you rather enjoy that!), but have been off the air for most of the week now and only get a few minutes here and there so will reply shortly.

Cheers

Chris

daelach said...

I've been seeing a number of offshoring projects in the IT industry, mostly to India. Management argued that Indian workforce costs around 30% of European, and even when factoring in half the efficiency, that still should amount to cost savings of 40%, and that means *gasp* €€€!!!111

Now what happened was that the whole thing took much longer than expected, and the results were substandard. You won't get cheap first class people in India because the highly qualified will not work in India for Indian income, but instead move out.

Plus that the low costs of Indian companies are also attained by immediately laying off people once a project is over without a new one starting right afterwards. So you have the steep learning curve in every project. On top of all that, you also have the cultural gap.

All in all, it's a neverending stream of "unexpected" failures and the idea to get that right in the next project - which of course never happens. Structurally, it looks very much like what JMG has pointed e.g. with the IMF - failed policies are not recognised as such, but instead pursued even more.


@ JMG: a somewhat unrelated question, just out of curiosity - do you follow up the ongoing world chess championship?

SMJ said...

Hello JMG

In richer nations free trade reduces wages, but it also reduces prices. I would have thought that the wages and prices would self-equilibrate such that the reduction in prices is enough to compensate for the reduction in wages. But evidently this doesn't happen, otherwise Brexit and Trump wouldn't have occurred.

So why is it that there isn't this self-equilibration under free trade?

Many thanks,
SMJ

Renaissance Man said...

I'm thinking of the age of trade in medieval Europe that made Bruges, Ghent, & Antwerp so prosperous; of the Hanseatic League across the North & Baltic seas; of the Renaissance City-states of Italy, like Florence, Pisa, & Venice. Each of their mercantile networks brought such spectacular prosperity but which evolved into such disparate levels of wealth & poverty. Like empires, they had proximate causes of their dissolution, but the general patterns follow exactly the same as the economic patterns of the two recent eras of free trade you allude to.
I'm saying that, even if it was not called "free trade" these eras were, broadly speaking, similar and followed similar fates. And yet, they happened over and over again.
I've been looking hard at the Ottoman Empire lately, and realized that their empire lasted far longer than most, its decline was far slower, and was stable far longer than most. An outlier. They didn't have free trade within their empire, they did have managed trade and were reasonably prosperous until the 19th Century. That's over 500 years. Maybe a case for managed trade?
Or maybe it is as simple as the saying I've seen lately:
Hard times make strong men
Strong men bring good times
Good times make weak men
Weak men bring hard times...

Shane W said...
This comment has been removed by the author.
Iuval Clejan said...

JMG, yes, but that is the same with international trade: the rich and politicians have an interest in stopping the race to the bottom and preventing revolution. Are you saying this is easier to do on a national level? Otherwise your argument for localizing trade within national borders falls apart. I think there is an argument to be made for localizing it even further, but not because of the political process within a nation, but because of the personal ties within small villages that can counteract the self-destructive forces you mentioned within capitalism and industrialism.

onething said...

"On another note. I recently watched an interview with Putin and was surprised how much he talks, at least in translation, about interests in world politics and how little about values."

And yet, the values are implied in the way he speaks about interests. He seems to always discuss conflicts in terms of how to get a win-win, and always speaks with a very civilized amount of respect for all parties and how to accomplish things legally.

Avery said...

Hey JMG, interesting news: mainstream media are duplicating your work now. (See the paragraph on complexity.)

Shane W said...

Honestly, if alcohol's only role was as a drug, then we'd just distill Everclear and Golden Grain, and dispense with all the effort that goes into making fine beer, wine, and spirits.

lordberia3@gmail.com said...

Hi John

Agreed about the mainstream Left.

In respect to the eurozone/EU, I am curious to know your thoughts.

As you are aware, the EU is a form of free trade zone with protectionist tariffs for the rest of the world. The eurozone is a currency area which is in profound trouble.

How long do you give the eurozone in surviving in the coming years? Also, do you think Le Pen has a realistic chance of winning the French elections next year.

I am watching closely the French conservative primaries and Fillon is looking like the challenger who will likely contest Le Pen next year. He is an interesting figure, pro Putin, neo-liberal but hawkish on security and identity matters.

Le Pen's politics is very protectionist, statist and anti-eurozone. Hard to decide who will win! What are your initial thoughts?

Thanks
LB3

Bill said...

canon fodder

True, the US is a free trade zone in itself. One of the things that makes that work is that the Federal government sends money to poor states, such as Alabama and Mississippi. Being red states, they disapprove, OC. ;)

Steve Morgan said...

"(C)an anyone find some good colorful stories in online or print media that show older technologies working steadily while the latest, hottest, newest ubergimmick breaks down all the time or otherwise doesn't do the job?"

It's not a manufacturing story, so much as another story about the boondoggle that is the military equipment design and procurement process, but this story from the NYT fits the bill to a degree:

http://www.nytimes.com/2015/12/06/us/b-52s-us-air-force-bombers.html?_r=0

An appropriate quote:

"The unexpectedly long career is due in part to a rugged design that has allowed the B-52 to go nearly anywhere and drop nearly anything the Pentagon desires, including both atomic bombs and leaflets. But it is also due to the decidedly underwhelming jets put forth to take its place. The $283 million B-1B Lancer first rolled off the assembly line in 1988 with a state-of-the-art radar-jamming system that jammed its own radar. The $2 billion B-2 Spirit, introduced a decade later, had stealth technology so delicate that it could not go into the rain."

And another:

"Even as the bombers were being assembled, defense officials were planning their replacement, but each plan was undone by its own complexity. First was a nuclear-powered bomber able to stay aloft for weeks (too radioactive), then the supersonic B-58 with dartlike wings (kept crashing), and then the even faster B-70 (spewed highly toxic exhaust)."

Kevin Fathi said...

JMG,

Have you read about Jill Stein's campaign to force recounts in Wisconsin, Michigan, and Pennsylvania? Imagine if the recounts give Clinton the victory. All hell could break loose.
http://www.cnn.com/2016/11/26/politics/clinton-campaign-recount/index.html

onething said...

M Smith,

"Machines don't yammer about their "rights", like "free" health care."

The more I look into it the more I think that either single payer or insurance is the main problem. It simply doesn't work when prices are not transparent, when the consumer of health care has no skin in the price game and pays nothing at the time of service. Once no one knows or cares what the actual charges are, they rise. To be sure, many countries' governments have done a better job of reigning in costs than the US has done, but they are also having difficulties containing the costs and the pharma companies are calling the shots in Europe/Aust/NZ as well as here. Not sure about other countries. There are monopolies of interests that get hold of doctors, academia and medical publishing, who do not disclose their conflicts of interest, who are now pushing "evidence based medicine" which translates largely as big pockets doing studies whose results will benefit them and then forcing all providers to comply. This drives many unnecessary treatments and drugs, which of course increases the price we all pay and is just the same in all first world countries. It's a big club.

So if you're going to say people do not have a right to free health care you also need to have an actual capitalist system in place, not the corrupt and arguably illegal one in place now. The above accounts for most of the absurd increases in costs.

I believe that medical things are now so overpriced that if we returned to a system without insurance (or one with true insurance, i.e., against a catastrophic medical event, with no expectation that it pays for the little stuff, any more than you expect your car insurance to pay for a change of oil or tires), that prices would come down so much that a medical event would equal or be less than what your current copay or deductible is.

And back when it was like that, at least in the 70's, there were quite often free clinics and such for the very poor, anyway.

Enki mentioned last week that Obama didn't campaign on reducing prices, but that isn't true. He said that if something weren't done to reign in costs, it would bankrupt the nation. I think we need to take that true statement seriously. It may be the biggest financial boondoggle facing us. 20% of the GDP going to medical extortion and still rising. It's time to start enforcing some laws.

onething said...

Mark,

"I just want some one to tell me why peace is not as profitable as war."

Generally, war is profitable for the few. When you consider the heartbreaking amount of destruction that war often causes - burned villages, eviscerated trained horses, bombing buildings, etc., it must be a short term advantage at that.
I have a similar type of question that I've been pondering all my life. What kind of standard of living could be had if the priority was the common good and no one took unfair advantage so as to exploit others unfairly?

Shane W said...

If the US does back away from free trade, it may have an outsized effect, since it is the leading nation in pushing the neoliberal free trade agenda. When the leading nation backs away from a policy, it tends to have an outsized effect.
@M Smith,
I'm sorry, but your racist observations just don't wash w/me. I simply don't see a racial difference in work ethics amongst the underclass...

zach bender said...

m.smith says

"when I risk my life savings that I earned, my goal is business profits. Not 'giving back' to a community from which I have taken nothing, not a jobs program for 'struggling single moms[,'] PROFITS. Why do you consider that a bad thing?"

several assumptions lurking here you might profitably examine.

1. when you say you "earned" your savings, you are assuming the wage or return you were paid was fair, and took account of appropriate externalities.

2. it is flatly not true that you have "taken nothing" from the "community." the tax supported infrastructure brought you your inputs and delivered your outputs. the court system provided a mechanism to assure your agreements with suppliers and customers were enforceable. the military protected the whole operation. and on and on.

3. "profits" by definition require that someone has taken advantage of someone somewhere, and/or that some costs have been externalized.

here is a thought experiment re free health care for employees. if the machine falls ill -- as shane w. assures us happens at least sometimes -- who pays for the repair? the machine? or does the machine in effect have free health care. who paid for health care for slaves?

onething said...

Nastarana,

"I have read veterans on other sites referring to weaponized police as "mercenaries", accompanied by statements to the effect that soldiers despise mercenaries. "

Funny. I consider our soldiers to be mercenaries.

Troy Jones said...

"the most recent challenge was really out there on a limb -- asking people to come up with futures that involved neither progress nor decline..."

That was a pretty tall order, I admit. I literally could not think of any realistic story ideas set in the future that did not involve decline, or at best a mix of decline and "progress". A failure of imagination on my part, perhaps.

But that's why I didn't submit anything for this year's Space Bats.

On the other hand, Merigan Tales will be coming out at some point soon-ish, right? So, it's not all bad news in that department. The stories that made it into MT are really fantastic.

Chris Larkin said...

When it comes to the effects of the current effects of globalization and free trade, I’m reminded of Keynes’s quote, “In the long run, we are all dead.” It’s directly about how the loss of jobs will eventually be replaced, but that doesn’t tell you how long it’s take or the effects in the “meanwhile.” It’s often assumed that the time is on the orders of years especially with retraining, but in many cases, it can be a generation or two. You can’t except people to just wait that out.

The current era of globalization and free trade has done a lot of good as well. Most of the world besides the very rich have greatly benefited. I don’t think this is entirely just increased resource consumption. The problem is that it’s been at the expense of the middle and poor of developed nations. This chart does a pretty good job of showing the winners and losers:

https://www.creditwritedowns.com/wp-content/uploads/2014/05/Income-inequality.png

As JMG rightfully points out, naive protectionism isn’t the answer either. The Corn Laws mentioned here were infamous for benefiting land owners over the urban poor. 1930s protectionism was a disaster. This looks more like a matter of competing interests, and failure to yield something to those negatively affected will keep on make itself felt.

Kieran O'Neill said...

John Michael, I'm open to entertaining the possibility that the super-rich have realised that immiserating society for their own short-term profit won't benefit them in the long run. Warren Buffett would be a good example of that. But I'm sceptical that this applies to Trump or his cabinet, and I'll try to articulate why:

I'll start with Donald Trump. The man is clearly a master salesman, and linguists have made some incisive analyses of how this carries through in his speech (which hearken back to some of your posts on black magic). So, it's possible (even likely) that his concern for the average American was pure sales patter, and his business practices tend to back that up.

But has he realised that as a billionaire, his long-term prosperity depends on fostering a happy, healthy and equitable society, rather than temporarily profiting from dismantling it? This requires that Trump's competence extends beyond sales and into finance, government and big corporations. Trump has a history of bankruptcies, bullying, refusal to pay contractors and even outright scamming. These suggest competence as a salesman (or conman), but not as a businessman or politician. The fact that he doesn't read, and asserts that he makes his decisions based on "very little knowledge other than the knowledge [he already] had" also suggest he does not have this level of awareness. It's possible and even likely that his decisions will be heavily influenced by the people he surrounds himself with, that Donald Trump will be an "empty suit".

(/continued in next post. Despite my best editing efforts and cutting this well below the 4,096 character limit, the form still won't accept it, so I've regretfully split it across two posts.)

Kieran O'Neill said...

(... continued.)

So what about those influential people he's surrounding himself with? They will be a mix of Republican party insiders on the one hand, and his billionaire "political outsider" buddies on the other. The Republicans have a history of poor-baiting, and are poised to enact policies which will immiserate the poor and benefit the rich, including massive corporate tax cuts and dismantling medicare and medicaid.

That leaves the ultra-rich "outsiders" who, you've argued, might have come to the realisation that short term profit at the expense of society is a bad idea. Steven Mnuchin will likely be treasury secretary, and apart from being an ex-partner at Goldman Sachs, made $200 million through predatory lending before and after the 2008 crash. Betsy DeVos will likely be education secretary, and has a (recent) history of privatising education in Detroit, to the profit of her husband's hedge funds and the severe detriment of both K12 students and their teachers. Harold Hamm, the likely energy secretary, made much of his fortune from the Bakken Shale, and advocates drilling in nature reserves. None of these show any sign of ceasing enriching themselves at the expense of those in economic distress.

It still seems likely that Trump may deliver on his promises to enact protectionism and dismantle international free-trade agreements. But I find it hard to reconcile the idea that this is from any realisation by Trump and his billionaire buddies that free trade, deregulation and general immiseration of the poor doesn't benefit them in the long term. They seem to be full steam ahead on those in nearly every other sector besides international trade. I think it's much more likely that it was political opportunism, playing on jingoistic nationalism.

As always, I'm happy to agree to disagree, and always welcome your perspectives!

Shane W said...

JMG, off topic, but what do you make of Jill Stein's recount push? Sanders, now Stein, what's up with progressive selling out to the establishment?

inohuri said...

Older tech that worked fine.

Gears of war: When mechanical analog computers ruled the waves
http://arstechnica.com/information-technology/2014/03/gears-of-war-when-mechanical-analog-computers-ruled-the-waves/

In what I have recently read about analog computers optics and hydraulics have been absent.
Analog is more like slide rule. Digital is more like abacus. ( the extra beads on an abacus are for base 16 calculations etc. Until I read that I thought the soroban (base 10 only) was better.
http://everything2.com/title/Abacus
)
There is also fluidics.
https://en.wikipedia.org/wiki/Fluidics

Blogger ate the first version with a 403 error. Shame on me for trusting.
And then I held down the shift key for too long in Wordpad and Win 7 Pro 64 bit filter keys came back AGAIN. Clicking started and typing quit. My old mechanical typewriters never did that.

zach bender said...

who is this "we."

i am imagining the species as a whole might eventually recognize some set of common interests. some significant share of people have been persuaded, for example, that there is some benefit to be obtained from sharing a common understanding of physical realities, and from making some basic accommodations to your neighbors, etc.

maybe "we" could take this a few steps further and persuade some significant share of people that much of what you think of as your individual identity is conditioned, that the politics of scarcity create harm, etc.

as a purely technical matter, i disagree that feeding and shetering a population of x billion is "impossible," if that is what you are saying.

Jeanne Labonte said...

From JMG -"can anyone find some good colorful stories in online or print media that show older technologies working steadily while the latest, hottest, newest ubergimmick breaks down all the time or otherwise doesn't do the job? "

I came across this YouTube video of the Trefriw Woolen Mill. The machinery dates from the 1950's and 60's and still seem to be chugging away in great style.

https://www.youtube.com/watch?v=2z2kjD-z_T0

They have what looks like a lovely gift shop though regrettably they are closed Christmas Day, Boxing Day and New Years.

patriciaormsby said...

JMG, I've just been assigned the lion's share of translating a book from a Japanese Catholic organization opposing nuclear power, but what I will do is print out this article and take it with me so when I have a few moments I can work on it, and I'll do two things with it, or maybe three: go through and translate all the harder terms into Japanese, highlight important points and translate those at the bottom of each paragraph, and maybe bust up a few complex sentences to make it easier for people finding value in it to put forward a translation with professional quality.

patriciaormsby said...

@Avery, I enjoyed the link you shared, but felt like telling the author "Don't look now, but someone is already doing as you suggest and making a huge effort to put the blame for problems affecting her constituency on a foreign power." I suspect, though, that he is sincere in thinking the surrounded and harassed foreign country in this case is an execrable, calculating, vicious dictatorship, hell bent on world conquest, which we the decent have a sacred duty to stop!

Donald Hargraves said...

One way of profiting from war is straight pillaging of property. Gold, grain, women (apologies if that last word offended, but it's been historically true) – one way of growing rich is to steal wealth from your weaker, distracted neighbors.

latheChuck said...

SMJ - I'll take a stab at your question regarding "why don't falling prices match falling wages to a new equilibrium?" Consider that capital investment leads to specialization, so a given worker only produces a tiny fraction of the variety of goods that he/she consumes. If the work of that worker is moved to a new location (e.g., a low-wage country on a different continent), the product of that worker may cost... let's say... half of what it used to. (If the retail price can be cut 25%, that's an extra 25% profit margin for the management.) But that worker's income is not 1/2 or 3/4 of what it was. It's zero. So, it doesn't matter how much cheaper anything is, it's all unaffordable.

Unaffordable, that is, until that worker finds a new job. But if you now have only N/2 jobs for N workers, half of your labor force can underbid the other half, depressing everyone's wages. Where's the equilibrium? Maybe it's when employers can get by with a part-time work-force, where no one qualifies for "full-time benefits", and the hourly rate is as cheap as the (foreign labor + transportation) costs. If the foreign location has lax environmental controls, wages have to go even lower to break even. On the other hand, a country may have natural advantages (raw materials, energy, financial market transparency, well-established rule of law) which convey to its workers. (Not that I can think of such a country at the moment, but it's perhaps a historical consideration.)

Shane W said...

If the election was stolen for Trump, what explains that, considering that the establishment for the two parties was solidly arrayed against him?

latheChuck said...

Inohuri- You might like to read "Computing Mechanisms and Linkages", by Antonin Svoboda, which is easy to find in PDF form. It's a professional-level textbook on HOW to make those old mechanical analog computers. Much more than slide-rules, these machines are physically connected to their sensors and effectors (e.g., guns). However, I have not been able to imagine a use for them "on the post-industrial farm".

inohuri said...

More old tech, the woolen mill mention reminded me.

Jacquard loom
This was the predecessor of CNC machine control. Pre-computer machine shop and similar equipment used punched paper tape.

https://en.wikipedia.org/wiki/Jacquard_loom

https://www.youtube.com/watch?v=OlJns3fPItE

Many pictures on Google images.

Nancy Sutton said...

Two points: That Smoot Hawley tariffs in the 30's contributed significantly to the Great Depression has been largely disproven... although long ballyhooed by the 'free' traders.

And, I believe that the claim that neoliberalism and globalization lifted the 'third world' out of poverty is based on the (big) numbers from China... which ignored the tenets of neoliberalism and globalization.

Nancy Sutton said...

Also, re: our soldiers being mercenaries, no less than Major General Smedley Butler agreed with that assessment. His 'War Is a Racket' should be read regularly, I think.

Unknown said...

@Avery,

I suspect this will be a growing phenomenon, where "journalists" will find a blog that is cutting edge and start regurgitating it (paraphrasing so it will pass muster for copyright) without crediting their original source.

-Joel

DavidinCminor said...

JMG, re: “….can anyone find some good colorful stories in online or print media that show older technologies working steadily while the latest, hottest, newest ubergimmick breaks down all the time or otherwise doesn't do the job? "

I remember reading that diplomats are turning to typewriters to create documents that will absolutely, positively, under no circumstances end up online. (I guess as long as no one scans them into a computer, there’s trade-offs in anything, like you say.)

I don’t know if Business Insider meets your idea of a “good colorful story.” But for what it’s worth, source: http://www.businessinsider.com/russia-turns-to-typewriters-for-secrets-2013-7

trippticket said...

@Zach Bender:

Re: sick time for machines

At first I loved your point, but just playing devil's advocate here, machines and slaves are ALWAYS at work. More or less, definitely for the machine. Modern mobile employees visit a galaxy of other places in between "work," like bars, day care centers, hospitals...hookers? They could contract any number of diseases/injuries outside the auspices of work that might prove debilitating to their official responsibilities. Is that the employer's problem?

I suppose the answer to that question depends on how valuable the employee is!

Nice thought experiment though.
Tripp

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