"Multilateral Free Trade: The Obama Letdown"

Jagdish Bhagwati is disappointed with Obama’s position on multilateral trade, and with his "failure to balance his protectionist appointments with powerful trade proponents that would produce a 'team of rivals'":

Multilateral free trade: The Obama letdown, by Jagdish Bhagwati, VoxEU.org: In the Financial Times, (“Obama’s Free-Trade Credentials Top Clinton’s”), I had argued that, unlike with Hillary Clinton, there were several reasons why one could be optimistic that Obama would follow a pro-trade policy despite “prudential” protectionist talk on the primaries circuit. But his eloquent silence on key trade issues, and his failure to balance his protectionist appointments with powerful trade proponents that would produce a “team of rivals” require that we abandon these illusions and sound an alarm.

Consider Obama’s support for the multilateral trading system. At the outset, it must be admitted that the Doha Round is on hold, and Obama could not move it forward even if he so desired. A principal problem is that its completion turns critically on the US making further reduction in its distorting agricultural subsidies. But the issue has become even more difficult with the collapse of commodity prices and hence increases in support payments. Besides, history shows that the freeing of trade is nearly impossible to manage in times of macroeconomic crisis.

But Obama (unlike Prime Minister Gordon Brown, whose fulsome support for trade is in strong contrast) missed the opportunity, provided by the G20 affirmation of the importance of trade, to affirm resoundingly that he attaches the highest priority to closing the Doha Round and will work on this urgent task throughout the first year of his Administration.

More important, Obama has missed the bus on the question of preventing a slide back into protectionism. His pronouncements on the auto bailout disregard the lessons of the early 1930s when the Smoot-Hawley tariff was legislated in 1930 and a competitive raising of tariff barriers ensued. We learnt then that tariffs and trade restrictions could indeed increase our national income by diverting a given amount of insufficient world demand to our markets. But then others could do the same to divert our demand to their goods, so that the end result was reduced trade and deepened depression. Far better to keep markets open and to increase aggregate world demand instead. So, the architects of the GATT (merged in 1995 into the WTO) built into it institutionalised obstacles to such a destructive outbreak of mutually harmful trade policies.

But what trade barriers did after 1930 can be done also by subsidies. So we now have strict rules on subsidies as well. Under the 1995 WTO Agreement on Subsidies and Countervailing Measures (SCM), while subsidies on exports and on “local-content” requirements are prohibited as directly damaging to trade, all other subsidies that are specific to firms or industries are declared actionable, and this applies even when they are claimed to be environment-friendly.

There is no doubt that a bailout just to autos, and then also to Detroit within it (in fact, even within Detroit, to two out of three firms on credit-financed sales of cars, as it happens), would qualify for attention and for countervailing action and Dispute Settlement challenges. It is important therefore that Obama declares unambiguously that any action on the bailout will be WTO-consistent. This is required because every other country, France surely among them, will otherwise be emboldened to follow suit. But Obama, who has properly denounced unilateralism, should also not be the President who undermines respect for the rule of law that the WTO embodies at the multilateral level in unrivaled terms.

If Obama’s silences on multilateral trade are disturbing, should we be pleased by his strictures against bilateral Free Trade Agreements (FTAs)? Ironically, on closer examination, this is not a vote for multilateralism but just the opposite. To understand this paradox, consider that labour union lobbies and their political friends have decided that the ideal defence against competition from the poor countries (whose exports they fear) is to raise their cost of production by forcing their standards up by claiming that competition with countries with lower standards is “unfair”. “Free but Fair Trade” becomes an exercise in insidious “export protectionism” which few recognize as such; it amounts to improving your competitiveness vis-à-vis rival suppliers from abroad, not by raising trade barriers (conventional import protectionism) but by forcing up your rivals’ cost of production at source. “Fair Trade” demands for such export protectionism also work well when, as is often the case, they are additionally masked in the language of altruism: “we are doing this for your workers”!

This cynical tactic can only work when the US is engaged in negotiating FTAs typically with weak countries but does not work for the multilateral system where powerful, democratic countries such as India and Brazil reject such demands. So, the “fair trade” lobbies, which Obama continues to embrace, gravitate towards FTAs rather than the WTO. The Democrats’ opposition to occasional FTAs, including the latest one with Colombia, only reflects bullying attempts at imposing ever more draconian trade-unrelated demands, driven by different lobbies that have “captured” the politicians, on these smaller countries rather than a preference for the multilateral trading system and its chief institution, the WTO.

In fact, if he is to embrace multilateralism and free trade forcefully, Obama needs a stellar crew that will see and deplore the “fair trade” demands for the protectionism they amount to, and also dispel the fear of the unions, that trade with poor countries is harming the American workers’ wages, that drives their protectionist “fair trade” agendas.

Alas, his cabinet appointments include Hillary Clinton, whose revealed trade scepticism is badly muddled, at best, and Labour Secretary Hilda Solis, who reflects the anti-trade sentiments of the union federation AFL-CIO. His “superstar” advisers include Robert Rubin, who is crippled by his Citigroup’s receipt of large bailout funds, the brilliant former Treasury Secretary Larry Summers whose recent Financial Times columns on the issue of “trade and wages” suggest prudence in the current political environment, and the remarkable Warren Buffett, who is notorious for having proposed (Fortune, 26 October 2003) an import control regime which would “solve” the trade deficit by not permitting imports that exceed export earnings. The USTR position was offered to Congressman Xavier Becerra, a trade-sceptic at best, and has now gone to Mayor Ron Kirk with credentials only as a NAFTA supporter, hardly a recommendation for a forceful presence on support for the open, multilateral trading regime. A “team of rivals” indeed.

Editors’ note: An abbreviated version of this column appeared in The Financial Times on 9 January 2009.

Comments

[kthomas]

Wishful thinking, at best.

So long as Americans keep losing there jobs, there's absolutely no "preventing a slide back into protectionism".

History has repeated itself too many times to assume otherwise.

[Beezer]

"In fact, if he is to embrace multilateralism and free trade forcefully, Obama needs a stellar crew that will see and deplore the “fair trade” demands for the protectionism they amount to, and also dispel the fear of the unions, that trade with poor countries is harming the American workers’ wages, that drives their protectionist “fair trade” agendas."

Ok got it. Let the "dispelling" begin.

I'm waiting.

[bakho]

What did Bush do with multilateral trade agreements?

Nothing. Bush pursued bilateral agreements with lots of crony clauses.

Can Obama do worse than Bush on multilateral trade? Outside of erecting tariffs, probably not.

[anne]

http://www.nytimes.com/2008/11/20/opinion/20oakes.html

November 20, 2008

What's So Special About a Team of Rivals?
By JAMES OAKES

INSPIRED by the wisdom of Abraham Lincoln, President-elect Barack Obama is considering appointing a "team of rivals" to his cabinet — if rumors about the nomination of Hillary Clinton to be secretary of state are true. But there's more mythology than history in the idea that Lincoln showed exceptional political skill in offering cabinet positions to the men he had beaten in the race for the 1860 Republican nomination.

For one thing, there was nothing new in what Lincoln did. By tradition, presidents-elect reserved a cabinet position, often secretary of state, for the leading rival in their party. John Quincy Adams inaugurated the practice by appointing one of his presidential rivals, Henry Clay, to that post. It was a controversial move in 1824; enemies of Adams denounced the appointment as a corrupt bargain.

By the 1850s, the practice had become a tradition. In that decade, Presidents Millard Fillmore, Franklin Pierce and James Buchanan installed in their cabinets men who had been major rivals for their party's nomination. Daniel Webster, who lost the Whig Party nod in 1848, became Fillmore's secretary of state. William Marcy, after failing to win the 1852 Democratic nomination, took the same position in Pierce's cabinet. Lewis Cass, the Democratic nominee in 1848 and a man whose presidential dreams never diminished, was appointed Buchanan's secretary of state in 1857. These were not notably successful administrations. Most historians agree that Pierce and Buchanan rank among the worst presidents in American history. There was nothing particularly unusual, or even impressive, when Lincoln followed this well-established practice.

Nor is it quite correct to say that Lincoln installed his "enemies" in the cabinet. Rivals for his own party's nomination are not the same thing as political "enemies." It would have been inconceivable, for example, for Lincoln to offer a cabinet appointment to his Democratic opponent, Stephen Douglas.

In the months after his election, Lincoln tried to find a Southerner as a symbol of national unity. But he drew sharp limits. He would appoint no one who did not endorse the Republican platform. What was the point, Lincoln asked, in naming someone who did not share the president's basic principles? "Does he surrender to Mr. Lincoln," the president-elect wondered, "or Mr. Lincoln to him?"

Limiting his appointments to like-minded Republican rivals was no guarantee of a harmonious administration either. The worst of Lincoln's cabinet appointments was Simon Cameron, a senator from Pennsylvania. Cameron had been one of Lincoln's major rivals for the Republican nomination. He eventually threw his support to Lincoln at the convention and fully expected to be paid back with a cabinet position.

Cameron had a reputation as corrupt, and he had made a lot of enemies over the years. Nevertheless, against his better judgment Lincoln appointed him secretary of war. Soon enough, charges of irregularity in the awarding of military contracts were flying. Within a year Lincoln had to get rid of his former rival by offering him a diplomatic post in Russia.

The rest of the "team of rivals" spent the war years scheming and squabbling among themselves. The cabinet never really functioned as a cohesive group. Lincoln replaced Cameron with Edwin M. Stanton, a former Democrat who had never been one of his political rivals. But Stanton quickly grew so suspicious of leaks by his fellow cabinet officers that he stopped bringing important questions to the table, reserving such discussions for private audiences with Lincoln.

He was not the only cabinet secretary who preferred back-channel communication to full discussion with the cabinet. Secretary of State William Seward, Lincoln's main rival for the nomination, eventually gained so much private access to Lincoln that he didn't bother attending most cabinet meetings....

[chrismealy]

What's the story about free trade, that it benefits most, hurts a few, but increases overall wealth, so the winners should be able to pay the losers, and we'll all be better off. The economy is too complex as a whole to really know who exactly is benefitting and who's not, but in the last couple of decades we've seen all the income growth go to the top. Whether or not that's because of freer trade you can't know for sure, but the people at the top seem to think it's working for them. The people in the middle and at the bottom aren't so sure (Yes, all that cheap crap from China you can buy at Walmart is a bargain, but the picture is mixed).

So if free trade really benefits the top the most, or the top at least thinks that's true, why should Democrats suffer for an unpopular but maybe worthwhile cause when they won't get any credit for it? Or why not make the rich give up something, like universal health care, in exchange for free trade? That's the winners compensating the losers. This is a pretty simple swap: give us health care and we'll give you trade. It seems like a pretty obvious inter-class negotiation to me.

[don]

Jagdish makes some valid points. His fault is mostly one of omission. The biggest trade distortions today consist of currency manipulations, but they get no mention in this piece. Buying foreign exchange to depress a currency is much more effective than tariffs at improving a country's trade balance - they work to discourage imports as well as to encourage exports. A tariff or export subsidy may or may not improve the trade balance, but a purchase of foreign exchange must improve the trade balance by the like amount, unless there are offsetting private capital flows, and these can be stopped by capital controls (such as are exercised in China).
Instead of paying any attention to this problem, Jagdish misdirects by appealing to the lesson of Smoot-Hawley during the depression. However, during the depression, the U.S. started out with an important trade surplus. Thus, it stood to lose aggregate demand from a reduction in trade. Today, the U.S. starts out with an important trade deficit, so it stands to gain aggregate demand from a reduction in trade. I don't advocate trade restrictions to balance trade, but action should be taken to discourage currency manipulations. These are distorting trade and leading to large and unsustainable imbalances. They have contributed to the current mess, and this mess will be even bigger in future if action is not taken to address the root cause.

[Not Mark T]

For those with a special interest in trade, you might be interested in the international economic law and policy blog:
http://worldtradelaw.typepad.com/ielpblog/

[Beezer]

I'm still waiting.

Cheap labor is a begger thy neighbor tactic. Stop whitewashing it.

Labor's got a point. If the labor costs were equal, with adjustments possibly for currency differences, then the imported products would have to compete on quality, not price. They wouldn't be cheaper, apples to apples.

America has tried it's best to help bootstrap up developing countries, and other than Wal Mart, what we've gotten is a huge account imbalance and so much darn debt we won't even lend to ourselves.

Pay labor first should be rule No.1. If you can't play by this rule, compete with other cheap labor markets for their anemic purchasing power.

[Markel]

He sings a familiar tune, down to the Smoot-Hawley refrain, of dubious impact on the Depression but of enormous importance as a dog whistle today. Then, as now, GDP declines and trade financing hurt trade far more.

Interesting that after his discussions with Merkel, Sarkozy today went off on the need for the US trade imbalance with China to come to an end. Lost the link despite my efforts, sorry.

[mmckinl]

This country can no longer afford to run 5-7% trade deficits , if it could in the first place. As pointed out by don, other countries are practising mercantilist trade policy along with currency manipulation.

The current world trade market is broken and needs to be rationalized, this author completely ignores that fact. As far as the WTO, I say dump it. Going back to bilateral trade will rectify many of the imbalances. The WTO also prohibits many environmental initiatives such as truly green products and energy tax policies. Now would be a great time to truly get back to basics and build a fair and equitable trading system based on sustainability.

[Mezzanine]

Let me get it straight. According to the "in crowd" at this blog the answer to our economic woes are:

* soak the rich
* vastly increase spending for public works
* create single-payer health care
* gut the military
* don't worry about trillion dollar deficits

[Mezzanine]

Oh I forgot other items:

* raise the tariffs
* unionize the American workforce

[Mezzanine]

* outlaw inheritance, 100% goes to Uncle Sam upon death
* throw Israel to the wolves
* demonize "neocons" relentlessly like Emmanuel Goldstein in 1984
* send Bush/Cheney/Rumsfeld to the Hague for "War Crimes" trials

I'm sure Anne can list a few more.

[ken melvin]

You gotta problem wid dat?

[Julio]

ken melvin,

check the handle. He's halfway there...

[don]

Mezzanine: Right...uh...except soak the rich, unless present company is excepted, of course.
(Thanks for the smile you brought me.)

[Patricia ShannonP]

Just think, if Smoot-Hawley hadn't been repealled, we might have had declining wages, allowing for inflation, for the working class, and we might have had a severe recession, even depression. Aren't we lucky we avoided that.

[roger]

I like Mazzanine's list of suggestions. Now, that is out of the box thinking! The soaking the rich and the 100 percent inheritance tax are excellent ideas. I think you need to be a little less cryptic abut them, though. As for throwing Israel to the wolves, I don't believe there are a lot of wolves left in the Eastern Meditteranean. This is something you left off your list: shut down all economies to solve global warming.

I think that would look wonderful with the rest of your suggestions.
You should be very proud. Maybe you should rest, now.

[Markel]

* don't worry about trillion dollar deficits

That would be ten trillion dollar deficits, the Bush deficit, if you could add. It's OK, no one expects a conservative to master arithmetic.

[JV]

Hopefully the old trade models of the late 20th century are as dead as credit default swaps. Free trade as defined by them is Asia and the rest of the world makes and America buys. Jagdesh seems to be lamenting that passing. Not I.

Japan started it all in the 80's and the rest of the "Asian Tigers" followed suit. China was just the last Tiger in the zoo and the door has slammed on it's tail. India missed out completely and only looted the American piggy bank through American companies outsourcing out best jobs to avoid having to pay good wages to their tech workers.

We can only hope that free trade and protectionism both die a terrible death and America turns to itself and its people again to make things and supply its own markets. China and the rest of Asia really have no choice but to do likewise right now. Manufacturing here at home is the wave of the future.

In a decade we can talk about trade policy and the likes again when all the worlds economies are on a more stable and sustainable foundation of internal consumption and some exports.

[calmo]

Manzananne mezzeninnied ... temporarily with you "in-crowd"ers..."left"?..it could be worse: whatof Jagdish Bhagwati's fulsome here:But Obama (unlike Prime Minister Gordon Brown, whose fulsome support for trade is in strong contrast) missed the opportunity, provided by the G20 affirmation of the importance of trade, to affirm resoundingly that he attaches the highest priority to closing the Doha Round and will work on this urgent task throughout the first year of his Administration not merely "substantial" or "bloated"...or "wholehearted" or "wholesome" or "super-sized"...I know it's still English.
..that I used decades ago.
..about like this: She had a fulsome figure.
..and I just don't know whether I'd want that kind of support or something a little less waddling, you know?

Ok, so many economists helpin Obama...does Jag feel neglected?

[Rusty]

Hey, not to worry. All of the former manufacturing workers can work at Wal-Mart.....

Except, Wal-Mart is not doing so good these days.

Wow, are we in trouble.

[calmo]

Well if it isn't the former Save the Rust Belt (aka STR)...geeze I hope this doesn't mean you got oxidized, Rusty. This new you, "Rusty", sounds wowishly upbeat...anso I needs to ask: izit the ketchup new breakfast cereal? such an improvement over the claggy porridge I plunger down the toilet, I bet.
I don't know why Bhagwati puts me off...it B the self-aggrandizing that distracts me...Minds too large for their own good..ears too small to notice that...not to mention the rest.. so how can you not get out the pea-shooter?

[Patrick]

Globalization is going to unwind as the imbalances Joe Stiglitz pointed out in his recent essay start to correct themselves.

Already, judging by Brad Setset's numbers, it looks like creditor nations are less interested in financing US profligacy. I doubt that will reverse itself.

BRIC et. al. need to increase their domestic demand. Americans et. al. need to consume less and save more (supposing we can avoid GD 2.0).

I think the future of finance is a system that can deploy capital to Kenyan farmers, not securitizing credit used to by televisions into derivatives that induce risk free hallucinations.

[Young Economist]

How can American sustain Current account deficit with free trade? If you can do it but I don't think so. Prof. Bhagwati.

[Mezzanine]

Patrick - what good is it to be a creditor nation if the debtor nations won't pay up? They are just as up shit creek as the rest of us. If a great depression in in the cards, then every country always has the option to go to a bare subsistence economy while it rebuilds wealth from the ground up. That is the worst-case scenario.

[Mezzanine]

Young Economist - isolationism won't protect us if we are pegging our economic expectations to fiat currency. However if we go to a bare subsistence economy while rebuilding our infrastructure, it might be possible to rebuild a new kind of wealth over a few decades. People in 2050 will look back and wonder how we ever managed on a fiat currency based economy.

[George Kalogridis]

Mezzanine,

The first path to recovery, economic and mental, is to own your failures.

The Chicago School is now fully discredited but the clatter remains the same.

Your ideas failed, accepting this fact will allow you to live the rest of your life in peace & harmony.

[ken melvin]

"I think the future of finance is a system that can deploy capital to Kenyan farmers, not securitizing credit used to buy televisions into derivatives that induce risk free hallucinations.

Ah oui.

[AmiBlue]

Obama's missed the bus and he isn't even in office yet? Wow, since Mr. Bhagwati can see into the future, would he please tell me what the stock market will be doing in October of 2010?

[Rusty]

calmo:

Same old me, just a new computer and a Typepad account so I don't have to re-enter the name.

For me, I like Pop Tarts for breakfast, good American food.

Bhagwati always makes the same argument, regardless of circumstances. Definition of a fanatic, I believe.

[Rusty]

"...also dispel the fear of the unions, that trade with poor countries is harming the American workers’ wages, that drives their protectionist “fair trade” agendas...."

So Obama should dispel the truth because it is inconvenient?

[Real Person from the Real World]

BEST OF ABOVE:

JV: "Free trade as defined by them is Asia and the rest of the world makes and America buys."

Beezer: "America has tried it's best to help bootstrap up developing countries, and other than Wal Mart, what we've gotten is a huge account imbalance and so much darn debt we won't even lend to ourselves. Pay labor first should be rule No.1. If you can't play by this rule, compete with other cheap labor markets for their anemic purchasing power."
-----------
Jag defends Indian IT arguably, because he is Indian. Under some circumstances, this might be construed as racist. Just once, I would like to see some Indians showing a compassionate understanding of the American Tech worker's side of things.

When it comes to it, there are a lot of problems with globalization implemented as so many have implemented it. A population of mobilized, commodity contract workers, that live out of a suitcase, from project to project, is not conducive to a decent family life for anyone, even the imported visa guy. The visa guy only sticks it out, so he can get that magic green card at the end of 5 yrs, and start collecting the big loot for himself, the golden payday at the end of it all. Understandable, just as the republican libertarian style greed came of so many American 1099 Road warriors. Problem is, the golden payday is disappearing for everyone, including the visa guys. You amass all this loot, and then suddenly someone steals it. Jag is just engaging in wishful thinking. No one likes to see their team lose.

[anne]

"India missed out completely and only looted the American piggy bank through American companies outsourcing out best jobs to avoid having to pay good wages to their tech workers."

This is a lie, of course, but not simply a lie rather a lie that is designed to foster prejudice.

"--- defends Indian IT arguably, because he is Indian. Under some circumstances, this might be construed as racist."

This is arguably especially malicious.

[Rusty]

Well, the USPS just delivered most of our year end mutual funds and retirement plan statements.

Being moderate risk investors, we still got creamed.

Time for the pitchforks?

[Zing]

Every Senator and congressman is a "free trade globalist". They
were elected by global corporations and the top 5% to deliver free trade.

Obama need not appoint any more of these traitors.

[Rusty]

"Obama advisers say plan would create 3.5m new jobs (AP)"

We seem to be improving by 500,000 jobs per week.

[Zing]

Real person from the real word has is all spot on.

Just look at IBM- contractors contractors contractors...Indian...Indian..Indian

P.S- don't blame the Indians. They're being abused too!

[Patrick]

"Jag defends Indian IT arguably, because he is Indian. Under some circumstances, this might be construed as racist"

Might? Construed? It pretty clearly is racist.

I, for one, will welcome our Indian Overlords.

Mmmmmm curries.

[anne]

"--- defends Indian IT arguably, because he is Indian. Under some circumstances, this might be construed as racist"

Only this comment might be construed as racist; to not understand that is beyond shameful. To demean Indians is beyond shameful. Imagine demeaning a country so long our friend, were India our enemy the demeaning would be shameful, imagine demeaning more than a billion people.

[Meh]

I love the smell of insanity in the morning.

It's one thing to be wary of increasing protectionism, but here we are, suffering a huge domino crisis and massive volatility all amplified by unfettered globalisation and J. Bhagwati's biggest priority is opening up more free trade?

I imagine that you could burn Jagdish Bhagwati's house down and he'd stand outside as the flames rise worrying about the protectionist element of having only one, government subsidised fire brigade in his hometown...

[mrrunangun]

During and after WWII the USA enjoyed political and economic hegemony based on its having the world's only intact industrial capital stock. This condition persisted through the 1960s, but the degree of dominance declined during the 1970s and by 1980 the Europeans and Japanese had completely reindustrialized with US assistance. Furthermore, countries began competing in industrial trade goods who had never done so previously. During the later cold war when we thought we needed to help our allies gain strength, running trade deficits helped to accomplish that. After the cold war, trade deficits carried no geopolitical advantage. At that time wise policy indicated a change in attitude toward mercantilist industrial rivals, but that did not occur. Continued trade deficiits allowed Americans to continue to enjoy an elevated standard of living even though Americans' industrial economy no longer covered the bills for it. America came to rely on inflows of foreign funds to support its living standards. Although Americans continue to enjoy the world's highest GDP per capita (outside the banking havens and oil exporters) America outspends that GDP. The period of American industrial supremacy has probably come to an end and the end of economic and political supremacy will soon follow if America's industrial competitors are not hurt worse than the USA in the coming global recession. JB does not recognize the change in America's relative position in thw world and presumes that it continues to have the duties and burdens of the hegemon.

Problem is, Americans often do not recognize the change either. Boomers took the postwar American supremacy for granted. The American political system is thus poorly positioned to handle what seems to be the necessary transition. The stimulus proposals aim to sustain a customarily rising standard of living which has not been supported by the value generated in the industrial and agricultural economies of the USA for 20 or 30 years now. Question is whether the stimulus will "prime the pump" as JFK put it in his day, or just pile on more debt in order to temporarily sustain lifestyles that are simply not economic. If not the former, then dbt repudiation by inflation and/or a protectionist autarky will likely result.

[Icarus]

Real Person,

While there may be instances of exploitation of H1 indian workers, it is not the norm. They generally get paid well (over $50,000 US to start), and have a clear path towards wealth accumulation if they work for 5-10 years. That's why coming to the US is such a lottery ticket for so many Indian college graduates.

As for living out of suitcases...well, perhaps that's what one has to do at an initial stage of one's career. I've known many indians who share apartments, share food preparation, share expenses. They don't spend money at happy hour every night, or eat 6000 calories a day. They work, gain skills, build a resume, save money...and one day, they get married and start a family.

Don't you get the sense that Americans can learn something from this model? The Indians are succeeding (right now, they are the highest earning minority in the US), and the US middle class is not.

Don't you think that instead of demeaning their choices, you may have something to learn? Just a thought.

[Crimson Tide]

"Don't you get the sense that Americans can learn something from this model? The Indians are succeeding (right now, they are the highest earning minority in the US), and the US middle class is not"

Actually US citizens are the hardest working people in the world. Corporate greed in hiring dependent workers is the issue. There is widespread discrimination against US workers in the tech fields. By both executives and Indians.

But America has never gotten over what a great thing slavery was. Screw up as an H1b and you're deported. This is not the America people fought and died for. Of course the h1b knows nothing of our culture or history (nor do many care).

Please go home h1b! You're not wanted here!

[anne]

"They don't spend money at happy hour every night, or eat 6000 calories a day. They work, gain skills, build a resume, save money...and one day, they get married and start a family."

Always creepy tripe, even on 2000 calories a day.

[anne]

"Actually US citizens are the hardest working people in the world."

How could anyone possibly know any such thing?

[CBBB]

I don't understand why the majority of Americans should just kind of be resigned to being peasants living in cramped apartments with other peasants.

If there's real benefits that overshadow the costs for most people from "free" trade and lots of low-cost immigration then it might make sense to continue the policy of H1B and cheap Chinese imports.
On the other hand why would the typical American person want to accept DRAMATIC drops in their standard of living to but their lives inline with Icarus' dream world?
Why not just have a huge backlash against the immigrants and the trade policies?

[Mezzanine]

I am supporter of free market capitalism, but not necessarily monetarism. I believe that capitalism can work without government fiat currency. It just will require a readjustment on all our parts.

[Julio]

http://news.yahoo.com/s/ap/20090109/ap_on_re_us/jail_food_bonus

Alabama sheriff to give up profits from jail food
By JAY REEVES
Associated Press Writer

An Alabama sheriff imprisoned after admitting he legally pocketed about $210,000 from his jail kitchen while providing skimpy meals to inmates agreed to give up future profits from the operation, a judge said Friday.

[So, another activist judge destroys one of the few remaining growing industries in the US. What next, 6000 calories per inmate?]

[Mezzanine]

Anne - objective studies find that the American worker is the most productive in relation to GDP. Whether that means "hard working" is up to you. In the end results are all that matter, not how much sweat you generated.

[Real Person from the Real World]

Are H1b Contractors abused? Yes, and I don't condone it. Who knows waht some are paid, while the vendors make money off them. Are they paragons of virtue, sitting at home alone in their rented dorms reading poetry and sipping water? No, I have had contractors that put off interviews because they planned on going out and binging on alcohol the night before.

People on both sides have a right to point out the problems with outsourcing and the H1b visa program. Why is it, we never hear anything but praise for the H1b programs from the companies that benefit from the cheap labor, or from economists from one of the same countries that benefit the most from it? There are whole ranges of views on everything else under the sun. Why is outsourcing so gloriously wonderful that no country that benefits from it will ever find someone with an opposite point of view?

Why is it, you cannot say there are problems or say that you see bias in an argument without some ultra liberal ideological elite trying drown out what is said by claiming the other sincere argument is racists? That there can be no opposite points of view for civil discussion of saying there are problems? Isn't that what freedom of speech is about?

The sword cuts two ways. This inability to allow someone else to say anything, no matter how civil they try to be, is exactly why there was so much bitterness in the last election. Some academic Ivory tower ultra right liberal elites defend everything, with blinders on their eyes, and if someone dares complain, just drown them out.

[anne]

http://www.nytimes.com/2005/07/29/opinion/29krugman.html?ex=1280289600&en=3c22823bd42da3b6&ei=5090&partner=rssuserland&emc=rss

July 29, 2005

French Family Values
By PAUL KRUGMAN

First things first: given all the bad-mouthing the French receive, you may be surprised that I describe their society as "productive." Yet according to the Organization for Economic Cooperation and Development, productivity in France - G.D.P. per hour worked - is actually a bit higher than in the United States....

[OMG!]

[Lee A. Arnold]

Link to the objective studies, instead of stating it to be so.

[Patrick]

Mezzanine: The likelihood of the US or any of the other advanced economies (Canada, UK, Australia, France, NZ, etc...) defaulting on their debt is zero.

[ron]

JV says...
Hopefully the old trade models of the late 20th century are as dead as credit default swaps. Free trade as defined by them is Asia and the rest of the world makes and America buys. Jagdesh seems to be lamenting that passing. Not I.

Thanks JV, well said and defines much of the babble about free trade.

[Icarus]

Real Person,

Becuase, you didn't actually make a point. You simply just continue to complain that H1b's are taking what you call "US Jobs". This is a myopic, and kind of ass-backward view. Jobs are not the property of a nation. Firms that are multinational have a right to source labor as they see strategically fit.

As well, the movement of labor is a strategic concern for both firms and nations. H1b application numbers and regulations are top concerns of the Microsoft and HP's. They need labor from other nations to stay competitive. The host nation needs these labor migrants to keep their firms competitive. The consumer and investor are happy as well, as the product cost comes down, which usually has a positive effect on the bottom line.

Who loses? Well, a small group of laborers, who were extracting rents, if you ask me. And, that doesn't even explain much of it. Why are so many Phd students in math/engineering foreign born? The percentages are staggering. Why aren't those seats being taken by US born applicants? The answers are obvious...US students just can't provide the necessary supply of brain power and labor for these areas. Computer sciences, engineering sciences, pure sciences...they all depend on foreign labor.

Firms are not all that biased...they simply want the best laborer at any price point. Indian immigrants have a competitive advantage here...they are produced at a much lower cost, and provide better results.

Firms, the nation-state, consumers, and investors are all better off here. Who loses is the ex-laborer who has been replaced by a better candidate. All in all, it seems like a no-brainer. The ex-laborer better have saved and planned her own transition, and the rest of society is better off.

[CBBB]

Icarus,
You are the one who has very much the ass-backwards view of things.

This is a common idea that I see; that globalization and multinational firms are almost a force of nature. That is, nations and workers just have to live with the labour arbitrage because it's some kind of law of the universe or something.
Firms that can source labour throughout the world are just a construct of current policy - slap some tariffs around and change immigration laws and that whole system comes collapsing down. Just a construct of very changeable policy.

And I don't get the idea that jobs should be thought of as up-for-grabs to just about anyone. Why are the immigrants flocking to the USA for jobs and educations? Why not to Bangladesh or Iran? Jobs are not the property of a nation? I think you could argue that they are: the US has developed all these companies and industries and jobs because of the investments made by US citizens and governments over the history of the United States.

You're right that the cheaper labour has benefits but the US consumers are also the US producers so if a tipping point is reached where the US consumers just don't have money to consume because the low-wage workers have displaced their income then perhaps the winds will change and the those mutable polices that give life to the Multinational Corporation will twist to cause the end of the Multinational Corporation.

[Icarus]

CBBB,

On a couple of points, I do agree with you. The results of labor migration and globalization will have serious effects on some US labor, and they may not be the uber-consumer that multinationals rely on. So what? This is a tough world, and they will adapt. If the US white/black consumers loses their purchaser of the last resort status, firms will adjust. The pain of transition is simply a cost of doing business.

The Multinational will transition, however. There will be other global customers to rely on. They are already generating a significant percentage of their profits from global sources. Perhaps that percentage just increases. Not such a big deal, if you ask me. (and maybe a good thing)

As for whether these jobs are "US jobs" because (you argue) US citizens invested in these jobs...Hogwash. Global citizens invested as well. They have been the objects of US colonial/imperial policy for decades. The effects of Cold War politics, Monroe Doctrine piracy, CIA terrorism, US-Zionist imperialism, and simple illegal military strikes. Hardly anyone on the globe has been insulated from the dominance of US Empire...and now, the tides will turn.

Every dominant system capsizes, often due to its own internal logic. In this case, the cult of capitalist productivity is the end of the America we all despise. We should all applaud.

And CBBB,
Keep in mind that there is no "US Citizen" which we need to really protect. They are all immigrants, mostly arriving after the 1880s. They are european immigrants, nothing more. If those immigrants can't provide high value labor at a good price point, they are effectively obsolete.

I pray for their continued obsolescence. I suggest that in the name of progressive politics, we do the same.

[anne]

"I pray for their continued obsolescence."

The essence of hatred, the essence of what it means to be evil.

[CBBB]

It would be better thing if these companies and countries sold their goods to a market that was more diverse then simply the US Consumer. However I think Icarus, you're naive to think that there can be adjustments within the current framework if the US Consumer is lost. I don't believe the system is even remotely so flexible and robust.
China and India have essentially piggy-backed their entire economies off the US consumer and a significant loss of US purchasing power would, I think, lead sooner to a change in the policy framework largely ending the existence of multi-national firms and globalization then some sort of adjustment within the current system.

You can't have a global economy that on the one hand is largely focused on selling consumer goods but on the production side is based on the idea of ensuring consumers have very small incomes.

[Arthur James]

For those of us who think that Keynes provides key insights we need for responding to the present crisis, it is worth remembering that the Keynes of "The General Theory" and later was, as in his earlier (pre-Depression) years, a believer in "the wisdom of Adam Smith" - that is, free trade - when there were commitments to policies in the major economies to promote high employment. All this is evident in Markwell's account of Keynes and the development of his thinking on international economic relations. This is a moment for Keynesian free traders to come to the fore!

[Real Person from the Real World]

Anne: It's always easier to drown out someone else's opinion by screaming the "R" word, rather than putting some thought observations together. In our PC society, that is the biggest insult. It also show your lack of reasonableness.
Why isn't possible for someone to take a point of view against giving big biz more H1b visa slots without being racist? A mobile work force may look good in a model, and the dreams of amassing as much loot free from taxes appeals to libertarians like Icky but the reality is that contract work is a miserable life, from feast to famine to feast for many. The visa serfs stick it out, to get that brass ring: the magic green card that will let them amass the same loot as the US 1099 libertarian bunch. We are losing our technology grads, and transferring our technology to other countries. When the glboalization tables are turned finally, will they be as welcoming to us?

[Real Person from the Real World]

In previous immigrations, people came over, started at the bottom at worked up. Now they are established, and yet a new wave of immigrant is brought in, and is slotted into the best paying jobs and replaces the now established group which becomes impoverished as a result. I have no home country with relatives and socialized health care to flee to. These 3rd world immigrants do. I have to pay the rates required to live in this economy. I cannot pay my bills on a 3rd world salary.

[Patricia ShannonP]

I have had IT co-workers who are U.S. citizens and were originally from India, and also co-workers from India who were here on Visas, volunteer their opinion that it is wrong that we have massive outsourcing of IT jobs to India, when there are many experience IT workers in the U.S. who can't get jobs because they are "over-qualified".

[Icarus]

Crimson Tide,

Ah, it's great to hear from a unabashed xenophobe. Welcome.

Actually, most of your American-ilk know nothing of their own culture. I think you'd find that the H1b's actually know quite a bit more than your US citizens. See, they actually read and study...perhaps an activity we should introduce to the red/white/blue.

And, there isn't widespread discrimination against US workers in Tech...it's simply that the US isn't really providing the market with good workers. H1b's get good paying jobs...they are not serfs/slaves. Calling them that is simply a defense mechanism by those who are systematically losing in this industry (the old white guy, usually).

I'd pull my proverbial head out of my metaphoric ass if I were you, and read the tea leaves a bit better. Those students who study harder tend to be rewarded with better jobs...and those who save tend to survive the transitions/disruptions of capitalsim better. Americans should learn these basic lessons quickly...or, perhaps they should 'go home' from where they came from.

[Icarus]

Patricia/Real Person,

Any purported "over-qualified" IT worker in the US can get a job...they may have to train up in a hot area, but, if they do, jobs usually come.

As well, in IT, there are hiring/firing cycles. Right now, the times are slow, and most IT workers should have saved enough to survive this (and, as they make great wages, that's not too much to ask).

This downturn will end, and capital spending will increase. This will lead to many new hires, and if you have a skill set the market wants, job offers come pretty easily. Of course, you may have to travel, adapt, do project work (1099)...but, jobs are usually there.

Now, if you cling to a skill which was valuble in 1988, and haven't retrained, and saved nothing...and now blame the govt that you can't work...well, you're really not an IT worker are you? You're just a whiner pretending to be one.

[Icarus]

Real Person,

IT contract workers often make over $80/hour (I know, I hire many)...People with Microsoft Sharepoint, Reporting services, any SAP or Oracle...and a myriad of small applications, generate such hourly wages.

Who is suffering? This is a great life. Many work 7 months per year, and earn plenty, even after costs.

Who exactly is the serf?

You should probably focus more on getting more US workers these skills, some of which are easy to acquire (like Sharepoint).

[Real Person from the Real World]

Visa serfs come to the US, but are they always truly as qualified and credentialed as they claim? Some are, probably quite a few aren't. The smart ones bone up and cramm on what to say to pass interviews, then live cheap and fairly quiet until they get that magic green card. Then they can start amassing the loot their recent US experience now provides. Are US workers less qualified? Sometimes, but perhaps it is just easier to check their credentials and work experience, AND worse sin of all, they are less willing to compromise on salary. The visa serf is vended by his owners. They are the ones that decide how much, and the lion's share of the money goes to them, until the serf gets his free agent status, and when he does sometimes he is just as greedy as his American Libertarian counterpart.

The point is that there is no "market" for labor rates, if outside inputs can be arbitrarily brought in by 3rd parties. If there is no market, how can labor rates be fair?

If H1b were meant as a stop gap, until the US got it's IT going, then it failed. We keep flooding the market with cheap imports.

If H1b was meant to harvest the brains of the 3rd world, how does it help those countries? AND, given the bell curve for any population, I doubt that 3rd world visa serfs have a special gene for IT. Their gov'ts just saw an opportunity and grabbed it. We get a few of the smart ones, but a vast majority of the IT serfs are the same as US commodities, but with fewer Vendors working to vend them to 3rd parties.