"The Canary in the Mine?"

I have a hard time picturing Larry Summers as a canary:

Is Larry Summers the canary in the mine?, by By Devesh Kapur, Pratap Mehta and Arvind Subramanian, Commentary, Financial Times: Is a liberal international economic order losing intellectual support? Should developing economies be worried? If Larry Summers is the canary in the intellectual mine, his two columns in the Financial Times suggest that the answers to both questions are yes.

The liberal economic order of the last several decades was premised on two assumptions. First, that the proliferation of prosperity across countries was a good thing. Second, there would be winners and losers but, on balance, a majority of people in both developing and developed countries would benefit. Mr Summers now appears to be questioning both assumptions ..., his columns ... suggest that globalisation creates competition for America.

This is an obvious fact. For the first time since the 17th century the west’s economic pre-eminence is being seriously challenged. But he goes on to draw the disturbing conclusion that the process of globalisation should be attenuated, precisely because it poses potential threats to the US. In doing so he, perhaps unwittingly, presents the rise of the poorer parts of the world ... more as a threat than an opportunity to the US. In effect, globalisation is justified only when it serves American interests.

This apparently nationalist argument is couched in appealing distributional terms. The losers in the process are US workers. The structure of globalisation is such that their bargaining power is considerably weakened, while mobile capital reaps all the benefits.

Mr Summers is right to worry that US workers have not benefited as much from globalisation... He is also right to assert that globalisation requires democratic legitimation.

But the ... terms of what constitutes just globalisation cannot be determined unilaterally from the standpoint of the gains and losses within the US. It has to be determined co-operatively, involving discussions over the costs and benefits to all, especially those least able to defend their interests in both rich and poor countries. ...

That globalisation needs appropriate regulation is hardly in doubt. But blaming globalisation preponderantly for the ills of American workers runs the risk of providing an alibi for the sins of omission in domestic policy that have had a much bigger impact.

It is undeniable that the best line of defence for protecting workers has to be overwhelmingly domestic – through progressive taxation, improving education, strengthening the bargaining position of labour and improving the safety nets. Since the Ronald Reagan years, the headlong embrace of market solutions has systematically undermined each of these policy responses.

One reading is that Mr Summers’ angst about globalisation is motivated by desire to maintain the environment for the continuing spread of prosperity: a need to tweak the rules – through regulatory harmonisation – to bolster the fraying consensus among the US middle class in favour of globalisation.

But the manner in which his position is framed, the inconsistencies of the arguments across time, the inappropriate transferring of the burden of any response from domestic actions to international ones, and the susceptibility of the proposed remedies to protectionist misuse point to a more alarming prospect for developing countries. The ground is shifting under their feet. They would do well to take notice.

Comments

[david]

Wow -- the fear of protectionist misuse trumps all! Be scared, just look at how much the last years have witnessed protectionist misuse as the chief disabler of poorer people.

says...

To keep other people impoverished in order to have a privileged lifestyle for ourselves is as immoral between as within countries. It is certainly not a Christian way to behave or think. On the practical side, it is dangerous to us.

[Patricia Shannon]

that is my comment above

[Bruce Wilder]

The U.S. has been consuming more than it produces, and borrowing like crazy to consume a disproportionate share of the world's oil, and the jig is up. The U.S. will have to cut its consumption by a significant percentage.

The Bush Administration economic policy was 8 years of two policy objectives, pursued in parallel:
1.) delay the day of reckoning, when consumption would actually have to be reduced;
2.) cram down as much of the economic pain on the lower 50% as possible, while skimming as much cream as possible for the top 1% and their henchmen.

Larry Summers is being trotted out to distract Americans from doing the sensible thing: guillotining the plutocracy. Preserving the "liberal international order" is just a cover story. If the globalization and the liberal international order have to be sacrificed, so that the stateless 6000, who own everything, can keep their heads, well, . . . some sacrifices will have to be made.

[ken melvin]

Strange dichotomy betwixt the believe in markets and this call for the altruistic nation.

[CasualObserver]

Bruce,

Would you like to make a side bet that 4-8 years from now, income equality will still be an issue and will be worse, not better; that healthcare will still be an issue, and that outsourcing and globalization will be increased, not decreased; and we will still lose manufacturing jobs?

Politicians are pretending to propose control over long term trends that are unmanageable by the politicians. These issues have been going on for several decades and will continue. They are a natural evolution of a world-wide economy.

[lark]

What I notice in the above is that the remedy for unleashed unfettered global capitalism is leashed, fettered national capitalism. That is the essence of

It is undeniable that the best line of defense for protecting workers has to be overwhelmingly domestic – through progressive taxation, improving education, strengthening the bargaining position of labour and improving the safety nets. Since the Ronald Reagan years, the headlong embrace of market solutions has systematically undermined each of these policy responses.

This is intellectually incoherent.

There is no reason for global capitalism to be unfettered if the national variety is disciplined through taxation and labor rights, etc. Capitalism is capitalism.

Furthermore, any limits to capitalism within a nation will simply make that country less attractive to capital. And so we have Chinese manufacturers moving to Vietnam because of the new Chinese labor laws.

In any case, developing economies have become such intensive polluters and users of resources that they have to follow the same environmental standards as the developed world. It's absurd that China is now the greatest emitter of green house gases yet is held to weaker developing world standards.

[lark]

To keep other people impoverished in order to have a privileged lifestyle for ourselves is as immoral between as within countries. It is certainly not a Christian way to behave or think. On the practical side, it is dangerous to us.

This is slippery rhetoric that runs aground where such sentiments usually do: at the assumption that we Americans control who is impoverished in other countries and who is not.

We could all be Christian saints and the poor of Africa, India, China, would still have the boot on their necks - because that is the boot of local elites, the local Boss.

If we want to change this, we need to use the trade system, via trade sanctions (bilateral) or move towards world government with the mandate of protecting human, labor, and environmental rights.

Since the latter is likely to be met with stout resistance, the only political lever through which these agendas can be expressed is trade. I think trade will become more and more politicized, as we meet more, and more difficult, international problems.

[save_the_rustbelt]

It is always the blood and money of the US that must save the world. Maybe not this time.

Lark hit in on the head.

[Bruce Wilder]

CasualObserver: "They are a natural evolution of a world-wide economy."

"natural" being a synonym for the free choice of an overweening plutocracy.

My only bets against the plutocracy consist of donations to Democratic campaigns, and I make them fully expecting that the odds are that my side will lose, in the end. But, I won't have it said that I didn't try, or that the destruction of my country and the planet was in any respect "natural".

[Francois]

"blaming globalisation preponderantly for the ills of American workers runs the risk of providing an alibi for the sins of omission in domestic policy that have had a much bigger impact."

Bingo!

How about taking a long, hard look at the damage done to the American worker by all the domestic policy choices of the last 27 years?

[Francois]

CasualObserver: "They are a natural evolution of a world-wide economy."

Natural? As in predetermined by who knows what force of Nature?

Yeah right! It is perceived as "natural" only if one conveniently forget the systematic effort of destruction of labor share of economic prosperity, the removal of legal and social protections our grandparents fought so hard to gain, and the shameless showering of money on politicians who decided to insulate themselves from their voters and grab the wealth afforded by big money.

[zinc]

It is apparent from the results that the current trade system is another sweet idea gone bad. The good of the domestic society has to trump the unbridled capitalist greed hiding behind a cloak of failed academic, economic, fad theory.

The idea that America should destroy itself in the name of altruism is corrupt on it's face. There is no credible evidence or economic theory to support such a foolish opinion.

The rather small group of academics who have directed our trade policy for the past few decades can cling to their misguided ideas on their own.

America has been incredibly tolerant during what has been a trojan horse of one-sided trade deals. The damage is reaching a critical juncture. The dollar has declined precipitously to the point that American produced goods are competitive with any country in the world yet the near record trade deficits continue.

Let's call a slow down to the experiment and begin to phase out open access for the mercantilist predators who view trade as a war. Cuz guess what... their winning and the US is losing. Larry Summers is stating the obvious.

[puravidavid]

The imbalances of the past century (or so) are reverting. The ability of the US to amass a previously unprecedented amount of productive infrastructure from abundant and relatively inexpensive resources that were unscathed - as were Europe and the far east - during the early and mid 20th century, along with the pool of reserves harvested from those same decimated nations who required our goods and services while their populations, cities and factories recovered ever-so-slowly from the annihilation of 150 million people and bombardment to ruin of countless trillions of dollars worth of the collective construction of several millennia, has waned... like sand from a beach flushed out with the falling tide.

As cheap oil, cheap credit, cheap waste disposal, cheap weapons and cheap water have their value repriced to fairly reflect long-term costs, the 5% of the population that has recently consumed 30% of the energy has indebted itself to a sizable group of the 95% who need not settle for the remaining 70% of the energy supply any longer. The pendulum is swinging faster as it moves away from the unsustainable extreme that helped define American exceptionalism.

We have boxed ourselves in. While many unknowable outcomes will surely accompany this unraveling, it is more than a false choice to ponder the USA’s bankruptcy as approximately one-half of the Fed’s reserves have been committed thus far to ‘shore-up’ the insolvency of approximately half a trillion dollars of irrationally created pseudo-credit. We await our creditor's decision: are we too big to fail? Or have we, in fact, already failed... and the work-out is in a long, drawn-out, painful process?

I am not as doubtful of this, however... the superior standard of living once enjoyed by many in the US has been eroding for many people since the late 1960s. Only now however, the difficulties and hardships are hurting many more who recall better times; people who had every expectation that the opposite was nearly certain.

The backlash of those disappointed, angered or deceived may be the greater threat.

[SanFranciscoJim]

The dollar has declined precipitously to the point that American produced goods are competitive with any country in the world yet the near record trade deficits continue.

The trade deficit dropped over 5% last month, but the dollar has to fall much more before it goes away. The United States does not have any God given right to 1/3 of the world's oil. What has been happening recently is simply that the rest of the world has been claiming its share. We will have to adjust to the new reality.

There are plenty of things that we can do domestically to improve our standard of living: rationalize our terribly inefficient healthcare system, improve our rapid transit system so that people are not forced to drive as much, and improve education so that we can compete better globally. But trying to pin all the blame for income distribution issues on trade is wrongheaded and even perhaps dangerous, if it leads to Smoot-Halley style backlash.

If you really want to help working class Americans, restrict illegal immigration. This has a much bigger downward impact on the wages of the lower two quntiles than trade does.

[Brenda Rosser]

But what really happened? Here's my guess:

The US and other major multinational corporations (and their sponsored governments) engaged in yet another round of global imperialism. (Akin to that of the late 19th and early 20th Centuries).

Summers' promises, along with those of other corporate servants, were to the effect that everyone would be better off. In reality it was a program to play one nation's workers off against another. It was an attempt to defraud economies around the globe through the selling of worthless financial securities/collateralised debt obligations. It was the embarkation of war after war, assassination or bribery of political leaders, economic blackmail, dictatorship of the terms of trade as well as that of general exchange.

Nation after nation suffered the apalling consequences. They now refuse to borrow funds from Wall Street and have begun to organise their own regional sources of capital. They formed new trading networks that promised more equal exchange. US dollar hegemony can no longer be enforced because there exists now simply too many geographical fronts to fight expensive military battles and the new leaders are not as amenable to bribery and threats as they once were.

America and other western nations can no longer purchase on such easy terms the produce of other continents. The equilibrium of global force is lost.

[german_reader]

Iark

"In any case, developing economies have become such intensive polluters and users of resources that they have to follow the same environmental standards as the developed world. It's absurd that China is now the greatest emitter of green house gases yet is held to weaker developing world standards."

That's not the relevant measure. Per capita China, India and most other developing countries emit less than a fourth of green house gases compared to North America and less than half as much as Europe. The real big polluters are people in rich nations and it's only fair that they make the largest contribution to the reduction of green house gases or resource usage in general. There is no reason to believe that any country has a natural privilege to over-consumption.

( Some ) Americans tend to believe that they own the planet, that they can consume and pollute without limits, even if this threatens the future of ALL people on the planet. And they obviously expect that even people in very poor countries cut back in their consumption habits to allow the continuous over-consumption in the U.S.. That's a pretty primitive attitude.

America has never proved over the last century that it has any special sense of responsibility toward the environment or the living standards in other, especially poor nations. It consumes more than any other nation, pollutes more than any other nation, gives less in foreign aid than most rich nations, blocks regularly international attempts to improve environmental standards, uses often military force to push through its economic interests and is often at the front line when it comes to boycott the very moderate attempts to improve labor or social standards in China and other developing nations.

Against this background the whining about the declining American living standards and the evil Chinese or Indians that take away a part of the American wealth or American jobs looks pretty ridiculous. America has never shown any kind of special consciousness for the price many people in the third world pay for the excess consumption in the U.S.. Why should Chinese or Indians bother now about the fate of the "American worker" or the "poor" American citizen from suburbia with his over dimensioned SUV?

And by the way the people that will be hit the hardest by a steep increase in energy prices or a dramatic climate change would be citizens in poor countries ( as we currently can see in Myanmar ). The adjustment costs in rich nations will be moderate in comparison. And different from most poor nations rich countries have the economic means to rebuild their societies for a more sustainable future. It's not the fault of the Chinese or Indians that America has missed for decades to make its economy more energy efficient or reduce the enormous waste of natural resources in the U.S..

Most problems that plague America today are home made. No one has forced Americans to consume more than they earn. No one ( at least no foreigner ) has seduced them to start a stupid war in the Middle East. To lower the social protection of U.S. workers and undermine the labor standards in the U.S. was the result of domestic political decisions in the U.S., not a consequence of globalisation ( but globalisation the way its currently organized is a typical result of the neoliberal domestic policy of the last decades).

The creeping impoverishment of millions in the U.S and rising inequality are a typical outcome of neoliberal supply-side politics. The short breathed style of capitalism which treats workers like removable things is a classical American invention. No Chinese or Indian is responsible for the messed up health care system in the United States which leaves many millions without appropriate protection. Exploding college fees are not the guilt of poor people in foreign countries. And so on and on and on.

If Americans feel uncomfortable with their situation they should start at the home front and begin to change their own country, not expect people in much poorer countries to renounce for the well-being of the American consumer.

Besides: The people which profit the most from globalisation are not workers in the third or second world. It's the capitalist "elite" of the Western world which makes the highest gains - on the back of workers in developing countries AND in rich nations. And they should be those, who pay the price.

[hari]

Larry was arguing, I thought, against protectionism by US Congress/WH decision-makers. May be I read him wrongly....

This article is hard-hitting like the Chinese/Indian macro economic jaggernaut which will sooner than later re-establish a relatively new international division of labour specially in manufactures. Add to it an Asian FTA and Monetary Area (in the making) the argument may be more like a cyclical change in global redistribution of wealth. Recall both India and China were, at one time, advanced societies until Imperialism/Colonalism blunted their edges and whatnot.

In 1991, I anticipated this type of paradigm shift, when Indian *import raj* was finally brought to an end by the current PM (then Finance Min) of India. The Sec of Commerce was a close friend of mine and I used to start my workday in Delhi breakfast(ing) with him and his wife. I'd est. a technology /investment transfer office for sectoral JV development in mostly southern India....

A lot has happened since then, and Indians are finally getting their monetary and fiscal policy in order. Although the fixed income market is still underdeveloped...and will take some time to become globally competitive, I think.

China is a more challenging global market since their controls were relaxed in 1970s. My guess is that Overseas Chinese, and specially (then) Singapore's Lee/PM, was influential in *opening* up mainland China. Singapore's rapid GDP expansion has a lot to do with its (SWF) FDI and industrial developments along the mainland coastal regions. A lot of the infrastructure development was done by Overseas Chinese bringing capital back to the mainland. Canton was their first target...and from it a lot was learned by the Communists on how best to *remove poverty* and whatnot. They're still at it and it will take another generation or more to bring about redistribution on the mainland, I think.

Finally, just imagine if Africa could start emulating emerging Asian developments and establish policies to *remove poverty*...we might start a *brave new world*.

[Joe]

We can only control the part of the world where we have a say in how things go. In that part of the world, our nation, we can vote on how we want things arranged. As a matter of fact we can arrange it ANYWAY WE WANT.

Capital controls are a tough sell. Tariffs are feasible.

The real bottom line is the supply of labor. Globalization has been a relief valve to upward pressure on labor cost and have allowed wages to stagnate. The added income from the non-inflationary growth we have experienced over the last few decades has been apportioned to capital. I wonder about the form of the Phillips Curve (US dollar denominated version) over the last few decades. Is the slope as stark as it was back in the seventies?

The United States' experience with globalization has shown it to be a net detriment to 85% of the population (a subjective estimate) and a great benefit to 1% of the population. Those cheap foreign products did not compensate us for the loss of income from the loss of bargaining power.

In a democracy surely 85% is enough to sway are economic policies in a different direction.

We have to be careful not to overplay our hand as in the near future we do have an inelastic need of strategic imports (oil!). But with well thought out, long term oriented policies, the United States can produce a more civilized society.

We can be concerned about the poor of other countries but we have no say in how those countries arrange their economic systems. On the other hand, WE CAN ARRANGE OUR ECONOMIC SYSTEM ANYWAY WE CHOSE.

[athreya]

Second what german_reader says about per capita emissions. I think W.Europeans have come to terms with this but American politicians are still not keen to spell it out in stark terms. More generally I think this readjustment of consumption patterns has to proceed within countries as well. In India, people like me drive to work every day in our (admittedly small and fuel efficient cars) while the rising cost of food/fuel prices makes it difficult for many families to get through three meals a day. Correct pricing of auto fuels, development of mass transit, improvement in agricultural productivity are the solutions and some cities/regions will get there first before others do. In the US, as PK points out in his blog, entire infrastructure of US is built around the assumption of cheap oil. It will be a painful transition.

On the topic of globalisation itself, the phenomenon is nothing new. It has been around for centuries. Globalisation got an impetus after the industrial revolution and Britain and other European countries impoverished half the world to satiate their need for raw materials and captive markets. Compared to those days we have a much more civilised system in place today. So I am generally more optimistic that the globalisation process won't get reversed.

Hari, I am charmed by your confidence in Indian policymakers. I am much more pessimistic. Think that the powers that be will drop the ball every now and then and we will take longer to climb up the ladder.

[Farrar]

There's a lot of noise in blogs these days about the necessity of developing public transport, particularly following Krugman's blog of May 10 "Sick transit and all that".
http://krugman.blogs.nytimes.com/2008/05/10/

But apparently people didn't look closely at the pie chart in that blog which shows clearly that 77% of the sample drive alone to work.

Obviously, the quickest and most effective way to reduce transportation carbon, as well as traffic congestion and expense is to promote car-pooling. Richard Green pointed this out in his blog a few weeks before Krugman, but no one paid much attention

Get with it America - and the rest of the world - give up a tiny fraction of your personal "independence'[ and meet some interesting people at the same time.

[save_the_rustbelt]

Not to worry, it will all work out in the long run.

[reason]

STR...
The long run? Yep, Keynes told us all about that.

[athreya]

Farrar,

My comment on mass transit pertained to India. Given our population and poor urban planning even car pooling is a scary thought if everyone who is part of the mythical 'Indian middle class' aspire to ride automobiles to work.

[wjd123]

Mr Summers is right to worry that US workers have not benefited as much from globalisation as US capital; stagnant median wages and rising inequality are proof enough. He is also right to assert that globalisation requires democratic legitimation.

But the argument would be more persuasive if he did not privilege the demands for political legitimation within the US. The terms of what constitutes just globalisation cannot be determined unilaterally from the standpoint of the gains and losses within the US. It has to be determined co-operatively, involving discussions over the costs and benefits to all, especially those least able to defend their interests in both rich and poor countries.

Just how is this compromise to be found when the rules and regulations we have in our political economy are used against us when competing globally. This attack on our political economy is intensified when our every effort to insist on standards in trade agreements is seen as an attack on poorer countries comparative advantage: cheap labor. And even if standards were part of trade agreements it's doubtful that poorer countries would have the wherewithal to enforce them if they wanted to. It's also doubtful that many governments would have the will to enforce standards in the first place.

The interests of the poor in developed countries and the interests of the poor in developing countries might be similar but an ethical gulf separates them. The simple fact that "ought implies can" makes combining their interests untenable. Poorer countries don't have the ability to enforce our standards, and many don't have governments that allow them to change policies with a vote.

I don't understand the authors call for shared legitimacy. I could understand it if they were speaking of the EU, but not countries where the gulf between values, wealth, and political economies is vast. Yes, we should take into account other countries interests, but we don't have to suspend credulity to do so.

Perhaps the authors believe that since India has the "democratic legitimacy required for globalisation" a "just globalisation" would require that India be given greater latitude in trade matters than non-democratic countries such as China. I don't know if this is what they meant, but if it is, I would agree.

The compatibility of different political economies is a problem. I for one hope that American voters won't keep allowing politicians to ignore it.

What these professors are asking us to do is to engage in discussions until global corporations in the name of competition hollow out the rules and regulations of our political economy. In time the actual protections of our political economy won't be much different from those of the poorest and most undemocratic countries we trade with. I vote no.

[anne]

http://www.nytimes.com/2008/05/14/business/worldbusiness/14food.html

May 14, 2008

Indians Find U.S. at Fault in Food Cost
By HEATHER TIMMONS

NEW DELHI — Instead of blaming India and other developing nations for the rise in food prices, Americans should rethink their energy policy — and go on a diet.

That has been the response, basically, of a growing number of politicians, economists and academics in this country, who are angry at statements by top United States officials that India's rising prosperity is to blame for food inflation.

The debate has sometimes devolved into what sounded like petty playground taunts over who are the real gluttons devouring the world's resources.

For instance, Pradeep S. Mehta, secretary general of the center for international trade, economics and the environment of CUTS International, an independent research institute based here, said that if Americans slimmed down to the weight of middle-class Indians, "many hungry people in sub-Saharan Africa would find food on their plates."

He added, archly, that the money spent in the United States on liposuction to get rid of fat from excess consumption could be funneled to feed famine victims.

Mr. Mehta's comments may sound like the macroeconomic equivalent of "so's your old man," but they reflect genuine outrage — and ballooning criticism — toward the United States in particular, over recent remarks by President Bush.

After a news conference in Missouri on May 2, he was quoted as saying of India's burgeoning middle class, "When you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that causes the price to go up."

The comments, widely reported in the developing world, followed a statement on the subject by Secretary of State Condoleezza Rice that had upset many Indians.

In response to the president's remarks, a ranking official in the commerce ministry, Jairam Ramesh, told the Press Trust of India, "George Bush has never been known for his knowledge of economics," and the remarks proved again how "comprehensively wrong" he is.

The Asian Age, a newspaper based here, argued in an editorial last week that Mr. Bush's "ignorance on most matters is widely known and openly acknowledged by his own countrymen," and that he must not be allowed to "get away" with an effort to "divert global attention from the truth by passing the buck on to India."

The developing nations, and in particular China and India, are being blamed for global problems, including the rising cost of commodities and the increase in greenhouse gas emissions, because they are consuming more goods and fuel than ever before. But Indians from the prime minister's office on down frequently point out that per capita, India uses far lower quantities of commodities and pollutes far less than nations in the West, particularly the United States.

Explaining the food price increases, Indian politicians and academics cite consumption in the United States; the West's diversion of arable land into the production of ethanol and other biofuels; agricultural subsidies and trade barriers from Washington and the European Union; and finally the decline in the exchange rate of the dollar.

There may be some foundation to Indians' accusations of hypocrisy by the West. The United States uses — or throws away — 3,770 calories a person each day, according to data from the United Nations Food and Agriculture Organization collected in 2001-3, compared with 2,440 calories per person in India. Americans are also the largest per capita consumers in any major economy of the most energy-intensive common food source, beef, the Agriculture Department says....

[save_the_rustbelt]

According to the federal government, unemployment is lower in Michigan.

No connection to reality.

[lark]

Per capita China, India and most other developing countries emit less than a fourth of green house gases compared to North America and less than half as much as Europe. The real big polluters are people in rich nations and it's only fair that they make the largest contribution to the reduction of green house gases or resource usage in general.

This is moralistic posturing. What undercuts your logic here is that the problem is not fundamentally a moralistic one: bad Americans, punish the over-consumers for their greed, etc., does not address the problem.

No, the problem is an environmental one. We have a limited atmosphere.

China has become the manufacturer to the world. Now China's green house gas emissions are greater than anyone else's. Because of this FACT, they must be subject to the same environmental controls as developed nations. Otherwise - guess what - the environmental controls are ineffective! Imagine that. And we all share the consequences. In fact, Asia, according to most studies I've seen, will face more severe consequences.

Of course another approach would be to quit importing manufactured goods at all. That would punish China a lot more than what I am suggesting.

[Bupa]

german_reader and athreya your comments are a refreshing read:

"America has never proved over the last century that it has any special sense of responsibility toward the environment or the living standards in other, especially poor nations. It consumes more than any other nation, pollutes more than any other nation, gives less in foreign aid than most rich nations, blocks regularly international attempts to improve environmental standards, uses often military force to push through its economic interests and is often at the front line when it comes to boycott the very moderate attempts to improve labor or social standards in China and other developing nations.

Against this background the whining about the declining American living standards and the evil Chinese or Indians that take away a part of the American wealth or American jobs looks pretty ridiculous. America has never shown any kind of special consciousness for the price many people in the third world pay for the excess consumption in the U.S.."

please continue to give the likes of our friend lark an international perspective.

[don]

SanFranciscoJim says...
'The dollar has declined precipitously to the point that American produced goods are competitive with any country in the world yet the near record trade deficits continue.'

But the yen and the yuan are undervalued vis-a-vis the dollar. Trade with China, in particular, is based as much on artificially maintained absolute advantage (through currency market interventions) as it is based on comparative advantage. If global demand is deficient, such artificial currency policies will take jobs from U.S. workers. So far, the only U.S. response to the slowing of demand has been to try to spur domestic domestic spending and borrowing. But the U.S. already spends more than it earns (as Bruce Wilder points out above), so the room for domestic policy to fix the problem is limited.
There is nothing inconsistent with arguing that market forces should be allowed to prevail, yet also saying that artificial currency policies should be stopped.
I agree with SanFranciscoJim, though, that immigration (especially illegal immigration) is probably a greater problem for U.S. workers than international trade.

[don]

As for pollution, U.S. car manufacturers could compete only in the market for pickup trucks and SUV's, so they lobbied hard to have them exempted from mileage standards. The result was to push Americans into an arms race on the highways. As a NY Times article pointed out, when car met SUV, four out of five deaths were in the car. (Concerned parents contributed to the trend by buying the monsters for their newly-licensed children.) As Larry Summers' wife showed, the net result of the SUV craze has been more auto-related deaths, including pedestrians.
Instead of taxing gasoline to reduce the externalities, U.S. politicians (including those at the state and local levels) propose gas tax holidays.

[robertdfeinman]

To all those who know exactly how to fix the problems (drive less or whatever) how do you propose to get these changes enacted?

Exactly which things are you willing to give up so that the US GDP can be brought to a sustainable level?

Can you get to your job more efficiently? Does mass transit even service the job site? Can you buy food locally? How about in the middle of winter? Can you buy the latest electronic gadget from a maker in the US? Can you buy a high mileage car in the US, even if you are willing to pay for it?

As Pogo said: "We have met the enemy and he is us."

[Bupa]

robertdfeinman said
"Exactly which things are you willing to give up so that the US GDP can be brought to a sustainable level?"

Give up our oversized inefficient cars, our oversized underinsulated houses, our oversized overused electronic gadgets, our oversized military expenditure, our whining gas tax holiday proposals, our agricultural subsidies, ....while we are at it we can give up our myopic scientifically illiterate political leadership as well.

[anne]

http://krugman.blogs.nytimes.com/2008/05/14/larry-bird/

May 14, 2008

Larry Bird?
By Paul Krugman

Funniest line I read today: Mark Thoma, linking to an op-ed titled “Is Larry Summers the Canary in the Mine?”, writes:

I have a hard time picturing Larry Summers as a canary.

Besides, the nickname Tweety is already taken.

[Patrick]

I think the data supports free trade (in the few cases where it actually exists) as being, on balance, beneficial. However, truly free trade is a rare thing. The only thing that moves freely in the world economy is money. Globalization is code for an agenda to create a self-reinforcing race to the bottom in wages, regulation, and human rights to benefit trans-national corporate interests. To be fair, I don't think it's a grand conspiracy; it's just the powerful, short-sighted and greedy acting in what they see as their own self interest. I think truly free trade *and* free movement of people is the cure for the 'globalization' cancer.

[Don]

Bupa encourages German Reader
"please continue to give the likes of our friend lark an international perspective. "

Of course lark has the better side of the argument, creating an environmental regulation arbitrage is counterproductive if you want to reduce greenhouse gasses or excess energy consumption or whatever. What the hell's green about using a more inefficient production process and then hauling the item halfway around the world? Granted it might make the German reader feel better that some evil Americans are out of work but that seems to be rather beside the point.

And I must have slept in on the day we covered why voters in a democracy are obligated to vote against their own best interests. I agree whining about Chinese or Indians is silly, we should be adjusting our trade policies for our own best interests rather than letting corporations and their hired gun economists setting the rules.