Where economists agree

... about a level playing field.  One of the less subtle form of cheats is the currency pegging scheme.  This produces low cost exports while making imports more expensive.

China has been engaging in this sort of scheme for over a decade (1:8.28).

If you will remember, this was one of the issues when Clinton was considering permanent most favored nation trading status for China.  The argument then was that, sure they are currency pegging, but without giving them preferential treatment, we would have no leverage to correct the matter.  The other big argument was that Congress will need to grant temporary MFN status later if they did not grant it permanently; that is, that the parliamentary process is much too strenuous for Congress to engage in.

Meanwhile, China has gathered quite a number of T-bills, due to deficit funding.  That is to say, China purchased our manufacturing sector, and we gave it to them at a discount.

If you care to hear it from an economist, here are links:

Special Analysis: A Walk-Down Primer on the U.S. Trade Deficit with China

Pulp Economics: Exchange Rate Regimes

Pulp Economics: Foreign Trade and Debt

China and the "Free Market" Myth

On the plus side, at least you didn't go into some foaming at the mouth, kitchen sink, catch-all rant about Bush this time around.

I think you're making progress. 

Because people are uncomfortable with the particular negative effects, and ignorant of the positive effects.

I can understand "free trade" and not having protectionism. However, what we have seen over the years is nothing but crap and it is destroying the middle class. Now, can any of these economists come up with an answer? So far, the economists and politicians seem to be clueless.

No, neither of those classes is clueless. 

The economists know there are winners and losers with free trade, but a supermajority of them believe the positive effects outweigh the negative.  They're quite explicit about this. 

The politicians understand that the negative effects are felt sharply by a vocal minority, and many also understand that the positive effects are spread out over a group that mostly doesn't understand how they're benefiting on a daily basis.  Politicians understand perfectly that they're balancing between the minority of business interests and principled free-traders who are conscious of the benefits, and the minority of people working in industries that can't take the heat of foreign competition.

This is where you have to manage certain areas. I don't think we should accept something as an ideology.

Two wonderful euphemisms.  We shouldn't accept economics as an ideology (i.e., we shouldn't accept the obvious implications of a science).  We should instead "manage" the inconvenient parts (i.e., ignore them).

(A) Outsourcing has destroyed the middle class. (B) It has closed factories. (D) It has made cities and states struggle to find revenue. (C) It makes the middle class accept wages at a lower rate. (D) It means less tax revenue to support all government from city, state, federal, and social programs.

(A) The middle class is huge.  Given a choice between upper, upper-middle, middle, lower-middle and lower classes, a Pew poll less than a year ago found that:

• 19 percent of Americans identify themselves as lower middle class,
• another 19 percent identify themselves as upper middle class,
• and fully 53 percent self-identify as plain old middle class.
• That leaves only 6 percent as lower class, and 2 percent as upper class.

If the middle class has been destroyed by outsourcing, I'd like to see some data proving that.

(B) Has outsourcing closed factories?  Yes, and it has opened more factories elsewhere.  And those factories produce goods very cheaply so that Americans -- especially the poorer among us -- can enjoy an unprecedented variety of affordable goods and services that we couldn't afford back when everyone with a high school education could work in a factory for life.

You have to destroy jobs to make better jobs.  A lot of people used to work in back-breaking agricultural jobs that were replaced by industrial machinery, which greatly increased the efficiency with which agricultural products were created and sold.  Food became cheaper relative to the wages of the populace, so people could better afford to eat--and eat well.  And we outsourced tons of agricultural jobs to foreign countries, which provide us with a wider variety of food year-round.

Now back-breaking industrial jobs are being replaced by service and information-based jobs, which are greatly increasing the efficiency with which industrial products are created and sold.  Manufactured goods have become cheaper relative to the wages of the populace, so people can better afford to buy them--and buy better and better versions.  And those jobs, too, will be replaced in time.

So outsourcing closed factories (and farms) and opened air-conditioned office parks and outlet malls.  Why does hardly anyone talk about the second part?

(C) Is the middle class accepting wages at a lower rate?  A lower rate than what?  Than if somebody else was forced to subsidize their factory jobs?  Because if you want to stop outsourcing, somebody's going to have to pay -- or did you think that could be done for free?  If you want to prop up the costs of what they're selling, you have to hurt the consumer, and you probably have to tax him, too, to buy up excess produce and keep supply down relative to demand.

What I see in recent history is individuals mostly making higher wages over the course of their lifetimes, but the bottom of the wage ladder being filled in by young adults and immigrants -- to a greater extent than you see in either Japan or Europe.  I also see that official inflation figures overestimate the effects on WalMart-type products, so that people with tight budgets are actually seeing their real wages rise.

And I notice you focused on wages, when wages are only one part of compensation.  Total compensation includes things like health insurance, which is very often provided by the employer thanks to the government's tax treatment.

And how about other benefits?  Safer, more comfortable workplaces?  More flexible employment and career paths, so that you don't have to spend your entire life clawing your way up through one company (or even in one industry)?  These things come with costs, and they redound to the benefit of the workers, but nobody bothers to quantify the benefits.  A lot of us won't work in a factory if we're given the option of working somewhere else.

(D) And have governments been struggling to pick up revenue because of outsourcing?  No -- their revenues have been pretty darn good, although they do sink in recessions.  The problem is that they spend even more than they take in.

For example, every time California's revenues rise, they project that they're going to be growing at that rate for the forseeable future.  They spend accordingly, and when revenues do contract, they hold the children hostage and say that there will be wailing and grinding of teeth if the Republicans don't approve a budget that lets them keep spending like they did in the fat times.

Over the long term, all governments' revenues depend on the productivity and prosperity of the people they govern.  Don't just focus on workers in a few categories when revenues also depend on homeowners and consumers and industries that benefit from free trade (like retail, or anyone who buys components from foreign suppliers).

If a company gets the same tax rate for outsourcing as one that stays on our shores then I would call that immoral.

According to what moral code?  Please, spell it out.

 In October of 2007 my job at a major newspaper was eliminated -  relocated to be more accurate, to another point on the planet -I was told I could keep my job if I wanted to move to Idaho. Fat chance. (most likely it was India I never found out for sure ) My wife had (and still does for the time being) a great paying job and we love our house. Kids in school with friends they'd like to keep - the typical anchors that keep you in one place for a while.

Since then I had one job for 9 months until layoff time once again. It paid a little more than half my former income. We've had to scale back. Now I've been out of work since just before Christmas of '08. Every night there are thousands more laid off at what few major companies still exist in the U.S. 

I only tell you this, not for pity, but to indicate to you that I know first hand of what I speak.  I'm in the downward spiral like what you see at the drain after your shower. Forces beyond my control, like thousands more unemployed looking for the same low paying, few in number jobs, willing to take anything to stall the foreclosure sign from your front door. It's getting more and more a way of life. My wife just got word that the company she is with hopes to remain in business until May of 2010 and offered incentives for her to stay until then.

America is fast becoming a two class society. The elite Polit Bureau Congress with vast amounts of money at their disposal and the working poor.  People who with each job that is lost has to settle for less at the next one and be glad for it. Welcome to the Socialist Dream.

There are some that see that growth is not an end in itself.

More will come around to that line of thinking in time.

Hamilton, founder of the Australia Institute, is widely loathed by economic rationalists, libertarians and many others. They'd dearly like to dismiss him as an ignorant ratbag - were it not for his PhD in economics, which makes him better qualified than most of his critics.

Last week Hamilton renewed his attack on the unthinking pursuit of economic growth in a speech to senior federal public servants. He began with a quote from a leading federal politician.

"If Australia continues to grow at 4 per cent per annum for the next 20 years, my kids are going to be nominally twice as wealthy as they are now, but I know they are not going to be twice as happy," the pollie said. "One of the questions that is not put in the political process by either side of politics, let alone answered, is: Towards what are we striving to grow?" 

Source

 en.wikipedia.org/wiki/Growth_Fetish