www.JoeCobb.com

by Paul Krugman

Bad jobs at bad wages are better than no jobs at all.

For many years a huge Manila garbage dump known as Smokey Mountain was a favorite media symbol of Third World poverty. Several thousand men, women, and children lived on that dump - enduring the stench, the flies, and the toxic waste in order to make a living combing the garbage for scrap metal and other recyclables. And they lived there voluntarily, because the $10 or so a squatter family could clear in a day was better than the alternatives.

The squatters are gone now, forcibly removed by Philippine police last year as a cosmetic move in advance of a Pacific Rim summit. But I found myself thinking about Smokey Mountain recently, after reading my latest batch of hate mail.

The occasion was an op-ed piece I had written for The New York Times, in which I had pointed out that while wages and working conditions in the new export industries of the Third World are appalling, they are a big improvement over the “previous, less visible rural poverty.” I guess I should have expected that this comment would generate letters along the lines of, “Well, if you lose your comfortable position as an American professor you can always find another job - as long as you are 12 years old and willing to work for 40 cents an hour.”

Such moral outrage is common among the opponents of globalization - of the transfer of technology and capital from high-wage to low-wage countries and the resulting growth of labor-intensive Third World exports. These critics take it as a given that anyone with a good word for this process is naive or corrupt and, in either case, a de facto agent of global capital in its oppression of workers here and abroad.

But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.

After all, global poverty is not something recently invented for the benefit of multinational corporations. Let’s turn the clock back to the Third World as it was only two decades ago (and still is, in many countries). In those days, although the rapid economic growth of a handful of small Asian nations had started to attract attention, developing countries like Indonesia or Bangladesh were still mainly what they had always been: exporters of raw materials, importers of manufactures. Inefficient manufacturing sectors served their domestic markets, sheltered behind import quotas, but generated few jobs. Meanwhile, population pressure pushed desperate peasants into cultivating ever more marginal land or seeking a livelihood in any way possible - such as homesteading on a mountain of garbage.

Given this lack of other opportunities, you could hire workers in Jakarta or Manila for a pittance. But in the mid-’70s, cheap labor was not enough to allow a developing country to compete in world markets for manufactured goods. The entrenched advantages of advanced nations - their infrastructure and technical know-how, the vastly larger size of their markets and their proximity to suppliers of key components, their political stability and the subtle-but-crucial social adaptations that are necessary to operate an efficient economy - seemed to outweigh even a tenfold or twentyfold disparity in wage rates.

And then something changed. Some combination of factors that we still don’t fully understand - lower tariff barriers, improved telecommunications, cheaper air transport - reduced the disadvantages of producing in developing countries. (Other things being the same, it is still better to produce in the First World - stories of companies that moved production to Mexico or East Asia, then moved back after experiencing the disadvantages of the Third World environment, are common.) In a substantial number of industries, low wages allowed developing countries to break into world markets. And so countries that had previously made a living selling jute or coffee started producing shirts and sneakers instead.

Workers in those shirt and sneaker factories are, inevitably, paid very little and expected to endure terrible working conditions. I say “inevitably” because their employers are not in business for their (or their workers’) health; they pay as little as possible, and that minimum is determined by the other opportunities available to workers. And these are still extremely poor countries, where living on a garbage heap is attractive compared with the alternatives.

And yet, wherever the new export industries have grown, there has been measurable improvement in the lives of ordinary people. Partly this is because a growing industry must offer a somewhat higher wage than workers could get elsewhere in order to get them to move. More importantly, however, the growth of manufacturing - and of the penumbra of other jobs that the new export sector creates - has a ripple effect throughout the economy. The pressure on the land becomes less intense, so rural wages rise; the pool of unemployed urban dwellers always anxious for work shrinks, so factories start to compete with each other for workers, and urban wages also begin to rise. Where the process has gone on long enough - say, in South Korea or Taiwan - average wages start to approach what an American teen-ager can earn at McDonald’s. And eventually people are no longer eager to live on garbage dumps. (Smokey Mountain persisted because the Philippines, until recently, did not share in the export-led growth of its neighbors. Jobs that pay better than scavenging are still few and far between.)

The benefits of export-led economic growth to the mass of people in the newly industrializing economies are not a matter of conjecture. A country like Indonesia is still so poor that progress can be measured in terms of how much the average person gets to eat; since 1970, per capita intake has risen from less than 2,100 to more than 2,800 calories a day. A shocking one-third of young children are still malnourished–but in 1975, the fraction was more than half. Similar improvements can be seen throughout the Pacific Rim, and even in places like Bangladesh. These improvements have not taken place because well-meaning people in the West have done anything to help - foreign aid, never large, has lately shrunk to virtually nothing. Nor is it the result of the benign policies of national governments, which are as callous and corrupt as ever. It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better.

Why, then, the outrage of my correspondents? Why does the image of an Indonesian sewing sneakers for 60 cents an hour evoke so much more feeling than the image of another Indonesian earning the equivalent of 30 cents an hour trying to feed his family on a tiny plot of land - or of a Filipino scavenging on a garbage heap?

The main answer, I think, is a sort of fastidiousness. Unlike the starving subsistence farmer, the women and children in the sneaker factory are working at slave wages for our benefit - and this makes us feel unclean. And so there are self-righteous demands for international labor standards: We should not, the opponents of globalization insist, be willing to buy those sneakers and shirts unless the people who make them receive decent wages and work under decent conditions.

This sounds only fair - but is it? Let’s think through the consequences.

First of all, even if we could assure the workers in Third World export industries of higher wages and better working conditions, this would do nothing for the peasants, day laborers, scavengers, and so on who make up the bulk of these countries’ populations. At best, forcing developing countries to adhere to our labor standards would create a privileged labor aristocracy, leaving the poor majority no better off.

And it might not even do that. The advantages of established First World industries are still formidable. The only reason developing countries have been able to compete with those industries is their ability to offer employers cheap labor. Deny them that ability, and you might well deny them the prospect of continuing industrial growth, even reverse the growth that has been achieved. And since export-oriented growth, for all its injustice, has been a huge boon for the workers in those nations, anything that curtails that growth is very much against their interests. A policy of good jobs in principle, but no jobs in practice, might assuage our consciences, but it is no favor to its alleged beneficiaries.

You may say that the wretched of the earth should not be forced to serve as hewers of wood, drawers of water, and sewers of sneakers for the affluent. But what is the alternative? Should they be helped with foreign aid? Maybe - although the historical record of regions like southern Italy suggests that such aid has a tendency to promote perpetual dependence. Anyway, there isn’t the slightest prospect of significant aid materializing. Should their own governments provide more social justice? Of course - but they won’t, or at least not because we tell them to. And as long as you have no realistic alternative to industrialization based on low wages, to oppose it means that you are willing to deny desperately poor people the best chance they have of progress for the sake of what amounts to an aesthetic standard - that is, the fact that you don’t like the idea of workers being paid a pittance to supply rich Westerners with fashion items.

In short, my correspondents are not entitled to their self-righteousness. They have not thought the matter through. And when the hopes of hundreds of millions are at stake, thinking things through is not just good intellectual practice. It is a moral duty.

Links

To get a taste of moral outrage against globalization, turn to Corporate Watch, a site dedicated to exposing the “greed” of transnational giants. Or, for a bizarre twist, check out Sweat Gear, a satirical online catalog that attacks sweatshops in Central America. Another argument against globalization - that it threatens democracy - is made by Benjamin Barber in the Atlantic. The Clinton administration’s word on the subject can be found in a speech by Labor Secretary Robert Reich to the International Labor Organization urging better compliance with core labor standards.

Paul Krugman is a professor of economics at MIT. He was awarded the Nobel Prize in Economics. This column was published in The New York Times March 20, 2008. Copyright by The New York Times.

by Kimberly A. Strassel
The Wall Street Journal, October 12, 2008

And now, America, we introduce the Great Obama! The world’s most gifted political magician! A thing of wonder. A thing of awe. Just watch him defy politics, economics, even gravity! (And hold your applause until the end, please.)

To kick off our show tonight, Mr. Obama will give 95% of American working families a tax cut, even though 40% of Americans today don’t pay income taxes! How can our star enact such mathemagic? How can he “cut” zero? Abracadabra! It’s called a “refundable tax credit.” It involves the federal government taking money from those who do pay taxes, and writing checks to those who don’t. Yes, yes, in the real world this is known as “welfare,” but please try not to ruin the show.

For his next trick, the Great Obama will jumpstart the economy, and he’ll do it by raising taxes on the very businesses that are today adrift in a financial tsunami! That will include all those among the top 1% of taxpayers who are in fact small-business owners, and the nation’s biggest employers who currently pay some of the highest corporate tax rates in the developed world. Mr. Obama will, with a flick of his fingers, show them how to create more jobs with less money. It’s simple, really. He has a wand.

Next up, Mr. Obama will re-regulate the economy, with no ill effects whatsoever! You may have heard that for the past 40 years most politicians believed deregulation was good for the U.S. economy. You might have even heard that much of today’s financial mess tracks to loose money policy, or Fannie and Freddie excesses. Our magician will show the fault was instead with our failure to clamp down on innovation and risk-taking, and will fix this with new, all-encompassing rules. Presto!

Did someone in the audience just shout “Sarbanes Oxley?” Usher, can you remove that man? Thank you. Mr. Obama will now demonstrate how he gives Americans the “choice” of a “voluntary” government health plan, designed in such a way as to crowd out the private market and eliminate all other choice! Don’t worry people: You won’t have to join, until you do. Mr. Obama will follow this with a demonstration of how his plan will differ from our failing Medicare program. Oops, sorry, folks. The Great Obama just reminded me it is time for an intermission. Maybe we’ll get to that marvel later.

We’re back now. And just watch the Great Obama perform a feat never yet managed in all history. He will create that enormous new government health program, spend billions to transform our energy economy, provide financial assistance to former Soviet satellites, invest in infrastructure, increase education spending, provide job training assistance, and give 95% of Americans a tax (ahem) cut — all without raising the deficit a single penny! And he’ll do it in the middle of a financial crisis. And with falling tax revenues! Voila!

Moving along to a little ventriloquism. Study his mouth carefully, folks: It looks like he’s saying “I’ll stop the special interests,” when in fact the words coming out are “Welcome to Washington, friends!” Wind and solar companies, ethanol makers, tort lawyers, unions, community organizers — all are welcome to feed at the public trough and to request special favors. From now on “special interests” will only refer to universally despised, if utterly crucial, economic players. Say, oil companies. Hocus Pocus!

And for tonight’s finale, the Great Obama will uphold America’s “moral” obligation to “stop genocide” by abandoning Iraq! While teleported to the region, he will simultaneously convince Iranian leaders to peacefully abandon their nuclear pursuits (even as he does not sit down with them), fix Afghanistan with a strategy that does not resemble the Iraqi surge, and (drumroll!) pull Osama bin Laden out of his hat!

Tada!

You can clap now. (Applause. Cheers.) We’d like to thank a few people in the audience. Namely, Republican presidential nominee John McCain, who has so admirably restrained himself from running up on stage to debunk any of these illusions and spoil everyone’s fun.

We know he’s in a bit of a box, having initially blamed today’s financial crisis on corporate “greed,” and thus made it that much harder to call for a corporate tax cut, or warn against excessive regulation. Still, there were some pretty big openings up here this evening, and he let them alone! We’d also like to thank Mr. McCain for keeping all the focus on himself these past weeks. It has helped the Great Obama to just get on with the show.

As for that show, we’d love to invite you all back for next week’s performance, when the Great Obama will thrill with new, amazing exploits. He will respect your Second Amendment rights even as he regulates firearms! He will renegotiate Nafta, even as he supports free trade! He will . . .

This article is copyright 2008 by Dow-Jones & Company, Inc.
Link to original article.

by Jim Davidson

I think libertarians must come out directly, staunchly, entirely, and frequently against racism, sexism, gay bashing, immigrant bashing, and all the other tawdry aspects of the so-called conservative movement. I think we have to stand up and say that if you are a racist, you are not a libertarian, if you are a sexist, you are not a libertarian, if you are against equal freedom for gays, the transgendered, the polyamorous, you are not a libertarian, if you discriminate against people because of their choice of religion, you are not a libertarian, if you think people from other countries should be rejected because of their choices in clothing, culture, religion, or behavior, you are not a libertarian.

I don’t mind saying that I can work with conservatives on common causes. I don’t mind saying that I have met, gotten to know, and worked with some racists. I am exceedingly uncomfortable with people who are racist, sexist, religious bigots, anti-immigrant, xenophobic, or homophobic. But I can work while uncomfortable, whether it is sawing a tree branch while forty feet in the air, eating goat eyeball stew because I was in Yemen and it was “what’s for dinner,” or finishing a writing project on time with a 54-hour “all nighter.” I can be uncomfortable and get the job done. And if finding extremely bizarre people and working with them is the only way to obtain smaller government and more freedom, now, I’m willing to do it.

But I won’t ever make the mistake of considering conservatives to be libertarians. They are not. They can talk a game about freedom for white people, they can make a pretense about constitutional government for the Christians, and they can mount a patrol against swarthy-complected persons coming across the border and claim it is all about property rights for ranchers along the border, but I don’t have to choose to believe it.

Yes, sure, get their help against an income tax. Work with weird skinhead neo-Nazis against mandatory helmet laws. Make common cause against the government where it is essential, but don’t pretend it is okay that they are racist, don’t call them libertarians if they are former government prosecutors and former CIA agents, and don’t lose sight of your principles.

I like some of the things that Pat Buchanan says and writes, but he’s not a libertarian and he never will be. I don’t think he would agree to the non-aggression oath if he were asked. And I don’t mind. Pat can be Pat and still fight against corporate welfare.

There is a difference between working with people on some issue and claiming them as your own. Like Bob Barr’s eulogy for Jesse Helms, one might choose to recognise some singular legislative achievement without, as Barr chose to do, extolling the virtue of his entire segregationist, racist career. An arm’s length political deal is probably a crappy deal, and if it violates any principles it ought to be avoided. But dealing with someone in a principled way at arm’s length does not make them bosom buddies.

If someone claims to be a libertarian, as Sonny Landham did, and calls for genocide against the Arab peoples of the world, he needs to be called a racist, as Todd Barnett called him, and set aside. Landham cannot be a libertarian. You can put lipstick on a pig but that doesn’t make it attractive. (And the pig is going to eat the lipstick. Seriously.)

If someone is ready to sell the Wiccans down the river, as Bob Barr did in his pogrom against Wiccan chaplains, we have to stand up and say, “you aren’t a libertarian, Bob Barr.”

If someone sells the non-Christians, or the gays, or the immigrants, down the river and refuses to acknowledge their freedoms under the Constitution, if that’s the quality of liberty under the Constitution Party, we have to say, “You are not a libertarian, Chuck.”

For exactly the same reason we cannot compromise on the war on drugs, we cannot compromise on the wars overseas, we cannot compromise on the corrupt allocation of defense contracts, we cannot compromise on any of our principles. We have to stand for freedom for everyone, all the time.

We cannot be a part of loading people on the box cars to the death camps. Ever.

Originally published October 9, 2008, at
Boston Tea Party blog

by Joe Cobb

I wrote an article for Reason magazine back in 1974 in which I opened with the comment that “credit” is a Latin word, 3rd person singular, translated means “he believes.” (”I believe” is a credo, first person singular.)

A modern economic system, as Adam Smith pointed out, grows more productive to the extent that it is able to promote specializations and wider trade among more people. Free international trade promotes growth and prosperity because it removes barriers that constrict and make a market smaller with fewer people to divide the labor among.

Barriers to trade make a market smaller, and specialization is reduced, and people are poorer.

There is an analogy here with a collapse of trustworthiness in a financial market. It will have the same contraction effect as any restriction in a goods-and-services market: it will produce a slowdown in trade, and a slowdown in growth. If a lender cannot trust he will be paid back, the cooperation between lender and borrower cannot occur. This is just as powerful a barrier as forbidding or taxing them, as a tariff would do.

Every economist agrees the Smoot-Hawley tariff of 1930 was a major cause of the Great Depression, and Jude Wanniski pointed out in his book, The Way the World Works, that as the tariff legislation was moving through Congress in 1929-30, the stock market was responding exactly the same way as it was responding last week to the votes in the House and Senate on the bailout.

The new collapse on Monday, Oct.6, seems to have been led by European and Asian markets. They have not been able to get their act together to agree on any credit bailout process. And, sometimes these things turn into an unstable (short term) panic just because so few people can really see the big picture. They respond to short term emotionalism.

What is the Answer?

One thing that bothers me is that there is no “partial” libertarian answer. The government creation of “Fannie Mac” and the Community Reinvestment Act of 1977, which forced the lowering of credit standards in housing, and the on-going pressure from Congress to promote “affordable housing” over the past decades, intensifying since 2003, has caused this collapse. The creation of the Federal Reserve in 1913 was the first of many ways the financial markets were rigged. The Glass-Steagall Act created artificial “investment banks,” which have finally disappeared in bankruptcy and mergers. FDIC insurance in 1934 was another way the financial markets have been protected from competitive pressure. This has not been a “deregulated” market; it has been rigged.

Yet, for me or anyone to suggest a partial libertarian solution without going all the way to advocate a total elimination of government national currencies, central banks, etc. would not work. And to advocate a total libertarian solution would look like very silly and impractical suggestions. This is very similar to the situation Ayn Rand observed when she contemned David Nolan for founding the Libertarian Party. She said “nothing short of a total philosophical transformation” would work. She was correct. But for a rational person, that is like asking for a transformation of human nature itself, including everyone waking up tomorrow morning and acknowledging “there is no god.” It just won’t happen.

Here is my suggestion for a transition system, which could function like an emergency “back up” method of pricing and payments for financial assets, outside of the Federal Reserve.

Paper presented at the Center for the Study of Public Choice, George Mason University, February 15, 1984.