rickyp wrote:Government is meant to do what the people wish it to do.The notion that there is one defined role, that suits all people all the time is intrinsically rigid and doomed to fail.
In this case, a group of farmers wanted the government to facilitate the creation of a marketing board to help them continue as small businesses.
Without their help, artificial trees, made in China, would continue to seize market share for the category eventually putting those farmers out of business. With a limited amount of assistance, the industry has been enabled. They soon will have a marketing voice that can allow them to create a marketing campaign that might save their enterpises. Or even allow it to prosper.
But you'd side with the cheap labour in China over the family owned farm ? Its that laissez faire attitude that has sent jobs over seas. Its that rigid ideological approach to business that has failed so miserably.
I'd argue that it is sometimes the duty of govnernment to help domestic industries over those of imports ... because the long term benefit to the domestic economy is more important than the notion that freedom equals cheap imported christmas trees.

Yet they already have a trade association. They don't need enabling.

I'll spare you the next couple of quotes about enabling a trade association.

rickyp wrote:This is from the summary of the working paper you linked... I'm not certain that your conclusion that the rush to the bottom doesn't exist is strongly supported. See bolded parts.(Also note that the same people whoi complain abour regulation killing jobs don't beleive that the climate is warming...)

The point is that there is little evidence it (race to the bottom) exists, not that it's been disproven. From a theoretical perspective, it is well supported and makes sense. As for cross-border pollution, you do need bi- and multi-lateral efforts to handle them but I would argue that these negotiations do not belong in the realm of trade agreements. It opens the agreements to protectionsim and rent-seeking while suppressing the gains from trade.

I believe we are seeing China in particular move towards greater worker protections and improving conditions. However, it isn't rushing there as quickly as manufacturers moved jobs out of the US.
In the meantime, in 30 years, US working poor have seen their real income virtually stagnant, and the middle class barely move ahead. A lot of that is because a lot of high value manufacturing has been moved. Yes, a lot of jobs are lost to automation. But the jobs IBM, Dell, Cisco etc. moved...that wasn't due to automation. And they were high pay skilled manufacturing..

They've moved jobs because the products have become commodotized and/or the workforce abroad has upped their skills. The truth is, the U.S. is no longer a 'job for life' society. It takes increased amounts of education/training as well as skills flexibility to build a career, a career that may include working dozens of different jobs. The educational opportunties are here - I tell my students that if they don't take advantage of the opportunities afforded them in this country, they are not going to get a lot of my sympathy. Having said that, I realize that many will not do well in a more competitive-style labor force. I am perfectly happy with social safety nets and progressive taxes to aid those who do not succeed. But that is domestic policy - not trade policy.

I'm not sure what manufacturers are doing moving high tech jobs into areas where national govenrments don't protect their intellectual property...[/But surely, before they moved the manufacturing they could have demanded laws and enforcement that did this? Laws that cost American companies and your govnernment money to maintain, and enforce.
It would have served as a competitive buffer that would have protected some manufactruing in the US, but also protected technology companies from the loss of IP. Loss that has lead to an erosion of their market share in many cases...

And some of those companies may regret that decision. We've seen it with outsourcing jobs - it was realized that the productive US workforce is worth the higher price, and some of those jobs have come back. Foreign firms are investing in US manufacturing facilities such as in automobiles and furniture (IKEA just opened its first US facility in Virginia). We can compete in manufacturing but it will be capital intensive requiring a skilled workforce.

Article in Washington Post about "regulation Killing Jobs" today. Appropos....
http://www.washingtonpost.com/business/ ... story.html

Read it this morning. But, this is geared towards regulations on safety and the environment - regulations that I generally support (sorry Brad, I'm probably not in your camp on these). It does not justify, or even address, obvious rent-seeking protectionism from an industry lobby.

rickyp wrote:Any individual or group has a right to petition their law makers do they not?

It makes a huge difference if the industry asked for this, through of petitioning gov't, or if the gov't imposed It on them. It may still be stupid, but it's not sticking the gov't nose into someplace it certainly shouldn't be. I withdraw my earlier criticism.

Ah, I do love the way they do Christmas trees in NYC. We don't buy one, of course, but they sell them on the sidewalks in every neighborhood in town. Makes everything smell so great. Most of them (in my neighborhood anyway) are sold by these young, hardy, ruddy-cheeked French Canadians down for the month between Thanksgiving and X-mas. They live on the sidewalk by their trees for the month, counting on the kindness of strangers for their showers and bathroom breaks. It's kinda like a very low density Occupy Wall Street, without the signs and slogans.

slo

They've moved jobs because the products have become commodotized and/or the workforce abroad has upped their skills. The truth is, the U.S. is no longer a 'job for life' society. It takes increased amounts of education/training as well as skills flexibility to build a career, a career that may include working dozens of different jobs. The educational opportunties are here - I tell my students that if they don't take advantage of the opportunities afforded them in this country, they are not going to get a lot of my sympathy. Having said that, I realize that many will not do well in a more competitive-style labor force. I am perfectly happy with social safety nets and progressive taxes to aid those who do not succeed. But that is domestic policy - not trade policy.

I don't know how you can easily compartmentalize polices. Example. . If you don't fund education properly you end up with a less qualified work force that can't met the demands of some jobs... That ends up effecting trade... ( And yes I know education isn't just funding its the right funding. And mostly its about elevating the teaching profession, the way the Finns have done..)
I agree that there is no simple answer about why jobs moved, and simple competitiveness is part of it. However, in the 80's and 90's neo mercantilist nations heavily subsidized manufacturing in a lot of key industries in order to attract industry. In return, US administrations made up of laissezz faire free traders simply let corporations move production. Short term profits grew for the corporations, but entire business sectors moved out of the US.
This cultivated further competition. But the key is that, no policies were enacted to make domestic production more productive, nor hurdles put up that would balance the articificial subsidies of the neomercantilists... In brief, much of the manufacturing (not all but the high tech manufacturing most assuredly) that moved , moved because one nation bought the corporations with incentives.
Now, you might say that it isn't governments job to subsidize those US jobs. I think its interesting that you support a social safety net for those who lose out... Wouldn't it be better to make the investment in these people before they lose out?

To your last question (and I believe it addresses the remainder as well): I absolutely believe we should invest in our most valuable asset - people. We do it by providing and subsidizing education for as far as people wish to go. Provision for children (how to is up for debate but that's another thread), subsidization as adults. Subsidizing and protecting industries, however, is not an investment I'm often willing to make.* If China or anyone else wants to subsidize their goods, so be it - I'll gladly take up the cheap goods and put my savings into more stuff or stash it away for my kids' education. If you wish to make the US more productive - beat 'em with smarts, not rules. There's no reason to play tit-for-tat.

*There are some general incentives I would support, say tax breaks on R&D expenditures.

I can compartmentalize because I am a pragmatic economist - not an ideologue. There is nothing wrong with finding a middle path.

slo

Subsidizing and protecting industries, however, is not an investment I'm often willing to make.* If China or anyone else wants to subsidize their goods, so be it - I'll gladly take up the cheap goods and put my savings into more stuff or stash it away for my kids' education

And the difference is, that for the neo-mercantilist Asian tigers, they were willing to subsidize the industries for a couple of decades. In order to attract the industry. (Try and find American made displays or computer peripherals) They weren't subsidizing the industries against American competitors. They were subsidizing them against American workers. Workers who were told then to go find jobs in the service industries...or in knowledge based industries. Generally these workers settled for lower paying jobs.
So, although you get cheaper goods for a while, in not too many years, fewer people can afford those goods. You have to look at this economic dislocation as one of the reasons that the middle class has done so poorly in the last thirty years. Now, subsidizing and protecting an inefficient industry doesn't make a lot of sense. However, perhaps acknowledging that the playing field isn't level and adapting laws and policies to account for competition with foreign governments attracting industry with incentives makes sense. And that doesn't have to be direct but could be with tax laws that make the flexibility with which corporations moved capital for instance.
The point being, you're displaying the "grasshopper attitude". I'll take the cheap tube socks as a reward for giving away technology sectors.
There is no reason why Finland should be a power house in the communications field. No reason except that government policies decided that they wanted their labour force to have an opportunity to work in high value, knowledge based industries. And enacted nurturing policies. South Korea built their own Internet and computer industries with the same kinds of policies. Good for them. But this wasn't a win win Slo. The industries they now dominate in manufacturing, were once US dominated.
And the most telling reason is that the South Korean work force had a government willing to intercede to advance their interests, where the US governments have generally let the markets decide . And they decided that the US labor force would be long term losers. (But have access to lower priced consumer electronics. Although after awhile a smaller number of them could afford even the cheaper goods.
Look, I'm not big on intervention. But intervention in reaction is just common sense. Sitting back while your competition steals your jobs isn't sensible. That's what laissez faire capitalism, as practiced in the 80s and 90s was. Caving in, by failing to react to artificial conditions in some industries created by foreign governments. And covering that with the ideology that the market never makes mistakes...
The market never does. But the effects of the wisdom of the markets aren't pleasant. Is the american labour force a disposable group?
The attitude that it isn't the government's job is still prevalent on the right in the US. Witness Romneys cure for all those houses under water. "Let foreclosures commence."
Now, in the true sense that the markets knows that houses are over valued in the US (thank you unregulated mortgage market), But he's saying to everyone who's mortgage is under water that they are on their own. if this were a handful of irresponsible individuals that would be one thing.
But an enormous percentage of Americans are under water on tehri mortages. He'd cut them loose the same way many people saw their jobs relocate in India or China in the 80's and 90s without regard to where they are suppossed to continue their careers...
People elect goverments to act in their best interests. Corporatism has not worked out to the benefit of most people. And thats what laissez faire capitalism ends up being. Corporatism that benefits only the excutives consistently. Sometimes even they have a conscious. The President of Cisco was once quoted as saying when ask about all the jobs he was relocating.. "I do sometimes wonder what my grandchildren will do for a living..."
Know what? In the Asian tigers and a lot of countries there are govnerments working towards a goal where they know what their grands children will be doing. And that means corporate quarterly profits are not always dominate in decision making...

rickyp wrote:slo
And the difference is, that for the neo-mercantilist Asian tigers, they were willing to subsidize the industries for a couple of decades. In order to attract the industry. (Try and find American made displays or computer peripherals) They weren't subsidizing the industries against American competitors. They were subsidizing them against American workers.

Actually, they were subsidizing their export sectors so their economies could grow and develop out of the abject poverty in which the majority of their populations were living.

Workers who were told then to go find jobs in the service industries...or in knowledge based industries. Generally these workers settled for lower paying jobs.

Do you have a reference for this?

So, although you get cheaper goods for a while, in not too many years, fewer people can afford those goods. You have to look at this economic dislocation as one of the reasons that the middle class has done so poorly in the last thirty years.

Here's a discussion paper that questions your assertion: Brookings (hardly a conservative bastion)

The point being, you're displaying the "grasshopper attitude". I'll take the cheap tube socks as a reward for giving away technology sectors.

Don't know the term. I follow the comparitive advantages (whatever the source) - if IT becomes commoditized then automate & offshore(This article contends that the latter is bit overstated). Our advantages are in inventiveness & risktaking - developing new products and services, not manufacturing them once they've become standarized. Furthermore, you'll never see 100% specialization - there will always be manufacturing in the US.

There is no reason why Finland should be a power house in the communications field. No reason except that government policies decided that they wanted their labour force to have an opportunity to work in high value, knowledge based industries. And enacted nurturing policies. South Korea built their own Internet and computer industries with the same kinds of policies. Good for them. But this wasn't a win win Slo. The industries they now dominate in manufacturing, were once US dominated.

So? Economies are not static. And it is a win-win, you're looking too narrowly at job loss in specific sectors. What is not being acknowledged are the dynamic gains to the economy. In real terms, cheaper goods mean higher real incomes - incomes that support other domestic industries. Labor in the US gets recycled to more valuable uses. True, some workers will not adapt well but, again, I'm all for safety nets and education subsidies for those less fortunate.

Look, I'm not big on intervention. But intervention in reaction is just common sense. Sitting back while your competition steals your jobs isn't sensible. That's what laissez faire capitalism, as practiced in the 80s and 90s was. Caving in, by failing to react to artificial conditions in some industries created by foreign governments. And covering that with the ideology that the market never makes mistakes...

Markets are not infallible - there are many types of market failures. When it comes to financial systems, as you point out, failures can come with harsh penalties. You won't find me arguing about financial oversight - we could use a bit or maybe even a lot more. However, governments can fail spectacularly as well. Government subsidies breed complacence and stagnation - real competiveness comes from the productivity and capabilities of its labor force, something the US has in abundance.

Know what? In the Asian tigers and a lot of countries there are govnerments working towards a goal where they know what their grands children will be doing.

Planned economies don't work - the problems created by state sponsored production will come home to roost if they haven't already. I don't know what my children will do for a living but I'd put my money on them having a lot more opportunities than me in industries I can't even imagine today.

I am not blind to the inequalities in the US. I believe they are signficant and a potential problem. There will always be trade-offs between efficiency and equality - the question is, how to find the right balance. Trade improves national welfare for those who participate - the pie gets bigger, not smaller. Fighting over the same piece does not make anyone better off. Let the pie get bigger and then work on domestic policies that allow everyone to have more, not just the top echelon.

I can see why the principle of subsidising an industry is not ideal, particularly long term However there are some key ways in which this may differ:

1) It's not a 'subsidy'. The cost is coming from the industry itself, in the form of a fee (or, if you prefer, a hypothecated tax).

2) It doesn't have to be long term. A short term boost to an industry during a recession or in the period of recovery can help it to grow at a key time when it would be hard without some support.

Planned economies can work, by the way SLOterp. Look at Germany and Sweden, and how they grew over the past 50 years. What I wonder is whether there is some conflation between 'Soviet-style communist Planned Economies' and 'all planned economies' is taking place. The US and UK also had a great deal of 'planning' after WWII which is now conveniently forgotten.

How dare you pull this thread back to its original intent! I guess every good hi-jacking must eventually go awry...

1) Oh, it is a subsidy - the government is providing administrative services and the coercive force to make farmers pay. Monetarily, it is of little consequence. As for who is paying - this self-imposed fee is almost surely to be passed on to consumers. In competitive industries (of which this appears to be one), margins are small and sustained cost changes tend to pass through to consumers.

2) Right - this is sure to go away after the tree growers increase sales .

I may have been a bit hyperbolic with the planned economy remark - I was thinking of Soviet style 5-year plans and the incredibly successful North Korean experiment.

slo

Actually, they were subsidizing their export sectors so their economies could grow and develop out of the abject poverty in which the majority of their populations were living.

From their point of view. Yes.
But from the view point of a computer engineer who's job has been relocated because the corporation got not only lower wages to pay, but also free land, free infrastructure costs, and a tax break for 20 years... (I don't have a specific here Slo consider this an illustration.)
From the point of view of South Korea they invested and nurtured those industry sectors. From the point of view of the labour force used to those jobs in the US, they were sold out. Their government made vague promises about service and management jobs that never really materialized...


My reference to the comment about lowering jobs comes from "The Betrayal of Ameriocan Prosperity" page 217 and 218.
Sources for this section of book on Internet are listed as: : www.demos.org/pubs/globalist_070809.pdf

You see what happened with the export of simple high tech manufacturing is that RD jobs followed. You lose an industry culture when you move the manufacturing and the feedback loop from manufacturing to development is best when close. In 2009 the trade deficit in advanced technology products for the US was $56 billion.That used to be an area of huge surplus.
Here's a quote from Craig Barret CEO of Intel: "The biggest loser for the United States has been our productive base, not just the factories and equipment, but the skills and the ability for them to be passed on to the next generation and to evolve. We may still have universities on our campuses but we no longer have the universities that were embedded in our factories and industrial laboratories.

What he's saying is that offshoring of manufacturing was followed by off shoring of RD and industrial development. The ability not only produce current products and processes and services has been lost but also the ability to migrate to new products and processes.
By refusing to compete versus the Asian tigers subsidization, for the ideological reason that it should be a market decision, entire sectors of the labour force were left with no future in their chosen professions.,.. But in reality, it wasn't a market decision. It was the decision of the Asian Tigers to subsidize and the decision of the US govnrment to do nothing to counter those subsidies.

As for the Christmas tree farms. First. Its not a subsidy. Its a tax, that they requested, on their own products. If anything, today its an impediment to their businesses. (If 15 cents makes a difference to consumer choice)
But the aggregate amount can lead to very smart advertising and marketing. And they are smart enough to know that investing in their own businesses is a good idea. (Just like the nurturing South Korean government) really, the govenrments involvement is minor.
When I worked on the Dairy Bureau account years ago, we saw an immediate jump in cheese consumption with any kind of advertising weight. If they come up with a clever marketing scheme, perhaps they'll save their farms. And Bill OReilly will step forwward and bless them for helping keep Christmas traditions!!!

So your arguments are based on anecdotal evidence found in a trade book connected to a progressive policy advocacy group? By the way, your link seems broken.

The U.S. is dropping in the World Economic Forum's competitiveness rankings (5th this year) but not for the reasons you seem to think:

Country profiles

The United States continues the decline that began three years ago, falling one more position to 5th place. While many structural features continue to make its economy extremely productive, a number of escalating weaknesses have lowered the US ranking in recent years. US companies are highly sophisticated and innovative, supported by an excellent university system that collaborates admirably with the business sector in R&D. Combined with flexible labor markets and the scale opportunities afforded by the sheer size of its domestic economy—the largest in the world by far—these qualities continue to make the United States very competitive. On the other hand, there are some weaknesses in particular areas that have deepened since past assessments. The business community continues to be critical toward public and private institutions (39th). In particular, its trust in politicians is not strong (50th), it remains concerned about the government’s ability to maintain arms-length relationships with the private sector (50th), and it considers that the government spends its resources relatively wastefully (66th). In comparison with last year, policymaking is assessed as less transparent (50th) and regulation as more burdensome (58th).
A lack of macroeconomic stability continues to be the United States’ greatest area of weakness (90th). Over the past decade, the country has been running repeated fiscal deficits, leading to burgeoning levels of public indebtedness that are likely to weigh heavily on the country’s future growth. On a more positive note, after having declined for two years in a row, measures of financial market development are showing a hesitant recovery, improving from 31st last year to 22nd overall this year in that pillar.

I'm skeptical of their ranking system but they do some pretty good research. This does not refute your story and I'm sure there is some truth to it. However, it should lay aside any worries that we've off-shored our ability to perform R&D. We are still a nation of 'tinkerers' to contend with.

The .15 cents is indeed a self-imposed tax - the subsidy is the administrative & enforcement costs chipped in by the USDA.

It seems like the administrative cost will exceed the amount of tax.

Sloterp, I've appreciated your posts on the dangers of protectionism. At one point you mentioned that you would be in favor of unlimited government support for education at all levels. I'm a big fan of all education, but I think there are negative unintended consequences of such a policy. We are seeing this a bit in rising amount of student loans that will not be repaid. Right now we have many people who stay in school and study unproductive subjects. That's fine if it is on their dime. All knowledge is valuable. But if it is on the government's dime, it gives the individual an opportunity to delay their responsibilities.