Trade as Representing Class Interests Over Country Interests

Trade has often functioned as a way for the powerful to gain at the expense of others. Trade is something that could be incredibly good due to countries with different resources cooperating, but the record of the last several decades shows that trade is more about exploitation than improving the lives of the general population.

The economist and policy types who have been pushing the trade agenda of the last four decades often make assertions like “everyone gains from trade.” This is what is known in the economics profession as a “lie.”

No models show that everyone gains from trade. Standard models show that some groups are benefitted by trade and others are hurt. The usual story is that the winners gain more than the losers lose.

This means in principle that the winners can compensate the losers so that everyone is better off. In the real world, this compensation never takes place, so when we talk about trade we’re talking about a policy that redistributes from some groups to others.

Our trade policy over the last four decades has been quite explicitly designed to redistribute income upward. This was the point of deals like NAFTA, or admitting China to the WTO.

These deals were about putting US manufacturing workers in direct competition with much-lower-paid workers in the developing world. The expected and actual effect of these policies is to reduce employment in manufacturing. This also put downward pressure on the wages of the manufacturing workers who kept their jobs, as well as on the wages of less-educated workers more generally, since manufacturing has historically been a source of relatively high-paying employment for workers without college degrees.

This is not a story of free trade. Our trade deals did little or nothing to make it easier for highly educated professionals to work in the United States. As a result, our doctors earn on average roughly twice as much as doctors in other wealthy countries, even as our manufacturing workers earn considerably less than their counterparts in Germany and several other countries.

In the last decade, China began running huge trade surpluses with the United States in large part because it deliberately held down the value of its currency. This has the effect of making China’s exports more competitive in the world economy.

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But contrary to Trumpian rhetoric, the resulting trade deficit doesn’t mean China wins and the United States as a whole loses. Companies like GE that have manufacturing facilities in China are very happy to have China keep down its production costs.

The same is true of big retailers like Walmart that are able to undercut competition with their low-cost supply chains in China. Higher-paid professionals who are largely protected from foreign competition also benefit, since they get access to cheaper imports without having to lose anything on the wage side.

Trump could have tried to at least partially reverse the upward redistribution from the US trade deficit if he had followed through on his campaign promise to put China’s currency management (he calls it “manipulation”) front and center in his trade policy. Instead, currency management appears nowhere in his vague and ever shifting complaints against China. Perhaps the beneficiaries from the overvalued dollar put enough pressure on Trump to drop one of his main campaign issues.

Instead, we have been treated with endless stories from news outlets where commentators express concern that Trump may not be sufficiently focused on the question of China “stealing” technology from US corporations. This is again where it is essential to remember it is class, not country, that matters here.

If Chinese corporations use technology developed by Boeing, Microsoft, or other US giants, this is bad news for their stockholders, but it doesn’t directly harm the rest of us. In fact, if the Chinese corporations can then produce the same products at a lower price and then export them to the United States, this would be a gain for non-stockholders. This is the classic argument for free trade.

In fact, if China has to pay less money to companies for patents and copyrights, it will have more money to buy other goods and services from the United States. Supposedly, economists are worried about inequality in the United States. If China doesn’t honor our patents and copyrights, it will be a step toward addressing this problem.

The long and short is that when Trump or anyone else tries to argue about the US interest in a particular trade policy, we’d better look more closely. They are trying to conceal who is really winning, and losing.

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Interesting Inequality Article

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An interesting article on inequality. The journalist is probably of the class who feel some guilt for benefiting from the unjust, enormous upwards redistribution of income that’s happened in the last four decades. The income share of the top 1 percent in the U.S. has doubled from its share during most of the 1950s to 1980. This is an amount high enough to increase the income of people in the lowest 90 percent of the country’s income distribution by over 20 percent, and it’s nearly enough to double the income share of the bottom 40 percent.

I have my disagreements with the article, and it doesn’t offer many solutions relative to its lengthiness. In brief though, one of the most important ways to reduce inequality is to stop wealth from being distributed so unequally to begin with. Market structures have been rigged in all sorts of ways to benefit the wealthy, and instead of only focusing on tax and transfer policy, pre-tax distributions of income need to be focused on more.

Report Finds That Class is a Better Predictor of Incarceration Than Race

In America, there are two systems of justice under the law: one for the rich and politically powerful, and then one for everyone else. Under this corrupt, two-tiered system of justice, few U.S. bankers (and none of the most high-ranking ones) were sent to prison in the aftermath of the 2008 crash, despite how big U.S. banks largely caused the global crisis that happened around ’08. This is noted as millions of Americans have been arrested (and some imprisoned) for relatively innocent activities such as the nonviolent possession of marijuana.

IT’S A FACT that African-Americans are disproportionately represented in America’s prisons. In state prisons, where the majority of prisoners are held, African-Americans are incarcerated at 5.1 times the rate of white Americans.

But what remains an open question is what explains this racial incarceration gap; what needs to change to eliminate that gap? Is it a racist economic system that produces a disproportionate population of impoverished African-Americans who then are ground up by a criminal justice system that targets the poor? Or is it better explained by racial bias in policing and sentencing?

A new report from the People’s Policy Project argues that while both exist, it’s economic oppression that matters most — or, at least, matters first.

Researcher Nathaniel Lewis sought to examine the role of both race and class in male incarceration as they impact four different outcomes:

  1. Whether or not men aged 24-32 years have ever been to jail or prison
  2. Whether or not men are jailed after being arrested
  3. Whether or not men have spent more than a month in jail or prison
  4. Whether or not men have spent more than a year in jail or prison

[…]

Ultimately, Lewis concluded that his data showed that the primary reason we see overrepresentation of African-Americans in the criminal justice system are factors related to poverty.

“I think that people are used to hearing the statistics about glaring racial disparities in the justice system, and police brutalization and the police murder of black individuals, plus the long history of stark racism in America, and they add this all up and, quite reasonably, the New Jim Crow framework of explaining mass incarceration as a racist system designed to oppress black people seems inarguably correct,” he told us. “But most of these studies and statistics don’t control for socioeconomic status, and the ones that do, I would say, do so inadequately. It could be that mass incarceration is primarily a system of managing poor people, rather than black people, and the racial disparities show up mostly because black people are disproportionately represented in the lower classes. This is what my study finds.”

Lewis concluded that his research suggests that one of the best ways to reduce the total prison population would be to embrace social democratic policy that would address poverty, the education gap, and other class divides.

“One implication, at least to me, is that policies aimed at alleviating class disparities may be the most effective way of helping black people, and all people, subject to being ground up by the criminal justice system,” he said.

Noticing Upward Class Mobility Under High Inequality

Class is a suppressed concept in America, although the loathsome big business community there has lots of class consciousness. The understanding of class struggle is a surprisingly useful insight into current affairs though, as used correctly it often identifies the core conflict at the root of political disputes.

This article in The Guardian identifies individual stories of upward class mobility, noting the differences in the livelihoods of those who advanced up the socioeconomic ladder. Karl Marx’s theory of alienation can perhaps be applied differently to wealthy professionals that have advanced up, since (as the article relates) those with much higher incomes can lose — become alienated from — the friends they once had with lower socioeconomic status. Such is another consequence of the dysfunctional economic system currently operating.

Wrenching Back Power from the Corrupt Billionaire Class

A strikingly profound op-ed for the new year. Also, a basic point of economics that most economists don’t like to talk about is that reducing the rents high-income individuals receive is typically a gain for lower socioeconomic groups.

Here is where we are as a planet in 2018: after all of the wars, revolutions and international summits of the past 100 years, we live in a world where a tiny handful of incredibly wealthy individuals exercise disproportionate levels of control over the economic and political life of the global community.

Difficult as it is to comprehend, the fact is that the six richest people on Earth now own more wealth than the bottom half of the world’s population – 3.7 billion people. Further, the top 1% now have more money than the bottom 99%. Meanwhile, as the billionaires flaunt their opulence, nearly one in seven people struggle to survive on less than $1.25 (90p) a day and – horrifyingly – some 29,000 children die daily from entirely preventable causes such as diarrhoea, malaria and pneumonia.

At the same time, all over the world corrupt elites, oligarchs and anachronistic monarchies spend billions on the most absurd extravagances. The Sultan of Brunei owns some 500 Rolls-Royces and lives in one of the world’s largest palaces, a building with 1,788 rooms once valued at $350m. In the Middle East, which boasts five of the world’s 10 richest monarchs, young royals jet-set around the globe while the region suffers from the highest youth unemployment rate in the world, and at least 29 million children are living in poverty without access to decent housing, safe water or nutritious food. Moreover, while hundreds of millions of people live in abysmal conditions, the arms merchants of the world grow increasingly rich as governments spend trillions of dollars on weapons.

In the United States, Jeff Bezos – founder of Amazon, and currently the world’s wealthiest person – has a net worth of more than $100bn. He owns at least four mansions, together worth many tens of millions of dollars. As if that weren’t enough, he is spending $42m on the construction of a clock inside a mountain in Texas that will supposedly run for 10,000 years. But, in Amazon warehouses across the country, his employees often work long, gruelling hours and earn wages so low they rely on Medicaid, food stamps and public housing paid for by US taxpayers.

Not only that, but at a time of massive wealth and income inequality, people all over the world are losing their faith in democracy – government by the people, for the people and of the people. They increasingly recognise that the global economy has been rigged to reward those at the top at the expense of everyone else, and they are angry.

Millions of people are working longer hours for lower wages than they did 40 years ago, in both the United States and many other countries. They look on, feeling helpless in the face of a powerful few who buy elections, and a political and economic elite that grows wealthier, even as their own children’s future grows dimmer.

In the midst of all of this economic disparity, the world is witnessing an alarming rise in authoritarianism and rightwing extremism – which feeds off, exploits and amplifies the resentments of those left behind, and fans the flames of ethnic and racial hatred.

Now, more than ever, those of us who believe in democracy and progressive government must bring low-income and working people all over the world together behind an agenda that reflects their needs. Instead of hate and divisiveness, we must offer a message of hope and solidarity. We must develop an international movement that takes on the greed and ideology of the billionaire class and leads us to a world of economic, social and environmental justice. Will this be an easy struggle? Certainly not. But it is a fight that we cannot avoid. The stakes are just too high.

As Pope Francis correctly noted in a speech at the Vatican in 2013: “We have created new idols. The worship of the golden calf of old has found a new and heartless image in the cult of money and the dictatorship of an economy which is faceless and lacking any truly humane goal.” He continued: “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalised: without work, without possibilities, without any means of escape.”

A new and international progressive movement must commit itself to tackling structural inequality both between and within nations. Such a movement must overcome “the cult of money” and “survival of the fittest” mentalities that the pope warned against. It must support national and international policies aimed at raising standards of living for poor and working-class people – from full employment and a living wage to universal higher education, healthcare and fair trade agreements. In addition, we must rein in corporate power and prevent the environmental destruction of our planet as a result of climate change.

Here is just one example of what we have to do. Just a few years ago, the Tax Justice Network estimated that the wealthiest people and largest corporations throughout the world have been stashing at least $21tn-$32tn in offshore tax havens in order to avoid paying their fair share of taxes. If we work together to eliminate offshore tax abuse, the new revenue that would be generated could put an end to global hunger, create hundreds of millions of new jobs, and substantially reduce extreme income and wealth inequality. It could be used to move us aggressively toward sustainable agriculture and to accelerate the transformation of our energy system away from fossil fuels and towards renewable sources of power.

Taking on the greed of Wall Street, the power of gigantic multinational corporations and the influence of the global billionaire class is not only the moral thing to do – it is a strategic geopolitical imperative. Research by the United Nations development programme has shown that citizens’ perceptions of inequality, corruption and exclusion are among the most consistent predictors of whether communities will support rightwing extremism and violent groups. When people feel that the cards are stacked against them and see no way forward for legitimate recourse, they are more likely to turn to damaging solutions that only exacerbate the problem.

This is a pivotal moment in world history. With the explosion in advanced technology and the breakthroughs this has brought, we now have the capability to substantially increase global wealth fairly. The means are at our disposal to eliminate poverty, increase life expectancy and create an inexpensive and non-polluting global energy system.

This is what we can do if we have the courage to stand together and take on the powerful special interests who simply want more and more for themselves. This is what we must do for the sake of our children, grandchildren and the future of our planet.