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Monday
September 4, 2000
Labor Day: Arise,
ye starvelings of the nations, Arise ye prisoner of want, for Reason in
revolt now thunders, and thus ends the Age of Cant...
The snake has all the lines. Actually we have a few, but
we try hard to forget them. "And thus be it ever, when free men shall
stand, between their loved homes, and the war's desolation...."
But they don't even teach that at West Point any longer, I am told.
Wouldn't want people to think about triumphs and just causes, much less
the real implications of a land of the free.
Actually, the Internationale has probably had as much long
term influence as the 4th Verse of the Star Spangled Banner, to give the
proper names of the sources of those lines above. Certainly
internationalism has replaced patriotism as the prime motive of the US
elites. Whether this is as good a thing as the elites seem to think isn't
clear to me, but it's very clear that what I think on the subject isn't
entirely relevant. If there's one thing both major parties are entirely
agreed on, its that international free trade is the major goal of the US
and we will pay a lot in both money and political capital to have it; and
that nationalist restrictions on ownership of key resources like
broadcasting companies, TV stations, mines and minerals, companies with
technologies with significant military implication, etc., are
old-fashioned and must be discarded, preferably fast.
We have already discarded most. We sold the Chinese our
operations procedures for learning to control stage separations, which is
the key to MIRV technology.
Also, I mind one technology company that had capabilities
in satellite temperature control and other matters of extreme importance
to our satellite observation program. The technologies were so sensitive
that it was ruled that the secrets could not be sold to the French:
whereupon the French through a government subsidized deal bought the whole
company and took it, plant, technology, jobs, and the rest to France. And
it was all made legal. Who the French have sold this to isn't entirely
clear. It's no longer our business.
But Free Trade is important for economic reasons.
But I keep asking for some of the numerical analysis of
these big advantages of Free Trade given the political realities. I have
yet to get a real answer from an economist, so I'll do my own.
Take a skilled worker. Call him Joe. He's 50 or so, making
perhaps $20 an hour or $40,000 a year plus another $12,000 in benefits. He
considers himself middle class, a bit pinched for sending his two teen age
kids to school, but he's managing, and has saved some in their college
fund. He's a Volunteer fireman, or belongs to a service club. Bit of
charity work. The kind of person we think of as 'solid citizen".
He pays taxes on his $40,000, say $6,000 a year. His
company makes about 10% profit on the $52,000 real costs of this worker,
or about $5,200 a year, and pays taxes on that.
His job is exported to be done by three prisoners in Qwang
Dung Province. Even with transport costs and higher profits and the like
the widgets he made still cost less. The company now makes $6,000 a year
on those widgets, and sells them for 10% less: that's the benefit to Joe
and the rest of us. We get cheaper widgets.
Joe now has to find another job. At age 50. Go retrain,
he's told. But he spent 10 - 15 years getting good enough to earn $20 an
hour at his old job. He hasn't got 10 years to invest this time. With a
lot of luck he may manage $12 an hour at the new job after going through
most of the college fund and other savings. We'll assume he keeps his
house because Susan did some part time work and everyone cut way back on
spending. Fortunately the people who run the widget company spend the
extra they get so there's been no real effect on net demand for widgets
and other such stuff.
It's a bit hard on Joe to realize he's no longer middle
class and the country doesn't care. Major college is now out for the kids,
but perhaps they can work their way through the local college. Weighbelow
Normal isn't the best school in the world, but it's a college. Joe isn't
paying the kind of taxes he used to pay. Neither is his company which has
much of the profit paid through a Cayman Islands bank, but it's careful to
stay legal, so it pays some.
Joe's attachment to the Land of the Free may be just a bit
less now. He has less stake in things. He's a bit more alienated.
So are his kids.
If Joe's kids don't get alienated entirely with the system
and become criminals -- and believe me one historic source of criminals is
bourgeois tumbled into the working class, and believe me that kind of
criminal is expensive -- and we don't have to subsidize Joe's family's
medical (which used to be part of that $12,000 in benefits but he doesn't
get that any longer), then Ricardo's principle of comparative advantage
may bring about a net benefit to all of us including Qwang Dung Province:
but you know, the interesting part is that if you play with Excel
spreadsheets and plug in various assumptions about the hidden costs of
Free Trade in a highly liberalized -- that is, regulated, subsidized, and
not-free economy -- you get some interesting results. Or at least I do.
Those medical benefits are only a part of it.
But no spread sheet is going to count the real cost
of losing a solid middle class citizen, the costs of alienation, and the
rest of those hidden political costs. I know that many think we have as
much (or as little) obligation to the peasants of Qwang Dung Province as
to the mill workers in Pleasanton. I also know that if we need to call on
them to defend the country, the peasants of Qwang Dung are not terribly
likely to respond.
Cato the Elder, when asked why he was opposed to the
destruction of the small farms in Central Italy (consolidating those farms
and working them with slave labor would have been a lot more efficient,
and would have made a lot more money for Cato and the Senatorial class)
said "No more peasants, no more Legions." But of course
they could and did hire Legions from the displaced peasantry. And thus be
it ever when hirelings shall stand between our loved homes and the war's
desolation...
But the skies are blue, there is a gentle breeze, the
column is going well, and I'm for a walk in my hills. Have a good Labor
Day.
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