Tuesday, May 24, 2016

The Free Trade Proponents’ Arguments-Get Ready, Trump

Having been a strong proponent of free trade, I have this thing now, it’s called using inarguable evidence to adapt my worldview.

I also have this other thing, rejecting the manner in which the USA has conducted free trade does not equate to bringing back Smoot-Hawley.

Free Trade’s promise, for those of you who weren’t aware in the 80′s time frame was that much cheaper consumer goods would increase the purchasing power of the everyday consumer, thus the disposable income, and we all would be happy and have more money.

In 1980 the price of a Ford Fairmont made in Michigan (mid sized vehicle)was $4,890  Today the bottom end of the Ford Fusion line $22,110. It is made in Mexico.

In 1980 the median income was $16,671. In 2014 it was $53,013.

In 1980 a Ford Fairmont made in Michigan was 29% of income.

Today a Ford Fusion from Mexico is 42% of income.

But what is median income?
And you have all seen this:
So as manufacturing of the single item that stood for US dominance has moved with labor the costs of free trade (which is PHYSICS, not politics, if you embark on free trade), the price gain of free trade is NEGATIVE ($ -17,220) in both absolute and relative terms. Worse still, while you are paying nearly HALF of a year’s income now, for your car made in a nation whose per capita income is 1/5 of the USA’s, the odds are your ability to come up with that sum have SINCE THE 1980′s become MORE UNFAVORABLE unless you are in the top 20% of earners.

Free Traders argue there is no way  to buck this, and workers should be retrained and be prepared to give up their way of life and family and move to where other jobs are (Hillary - ‘we are going to put a lot of coal mines out of business’).

Free traders however, want BOTH an economic world without borders, and a military world with invulnerable ones.

Since, unless rapacious taxes are the goal, the disposable income of the middle class is the marker of govt revenues which are then collected to be spent in part on military/defense goals, and since free trade CRUSHES this marker, the free traders are OUT OF THEIR MINDS.

Since labor costs have decreased, taxes in other nations are lower, real estate is almost always less, and costs of doing business are much lower, but prices are not, where is the margin gain going?
Boards? Dividends? Cash retained? Top management? Stock buybacks (from who?)
Am I sounding like an economic radical now?

The arguments now being made AGAINST moves away from free trade as we have practiced it are:
It will be a tax on the poorest
This is the same argument originally made IN REVERSE in favor of free trade that the consumer would benefit from lower prices of goods made overseas. We do NOT have lower prices anywhere, and it should be obvious that WELL OVER AND ABOVE automation productivity gains we have traded careers and INDUSTRIES HERE, for purportedly lower price increases in the jobs and industries moving to other much lower cost nations. Except there are no lower prices, and price increases continue as overseas workers want better lives too.
It will start a trade war just like the 1930′s
This is not the 1930′s. This is nothing like the 1930′s. And FAIR TRADE will trade back FOR INSTANCE some lousy products made more cheaply overseas for USA industries that will provide INCREASED NATIONAL DISPOSABLE INCOME (see: Japan 1950-1979). If necessary, for strategic industries, we can just embargo certain products to ensure the demand for them is filled domestically with sliding numbers over time. What will China punish us by doing that is WORSE than this?
We cannot invent financial products on Wall Street, fatten up corporate profits with locomotives produced in Brazil (GE), make greater margin by buying in quantity from AliBaba, and then think from admin stats about a great economy this equates to the disposable income of the middle class, and motherboards for the DDG-51′s defense systems made in Texas, or North Dakota instead of Shenzhen, or Tolucca, or Singapore, or Kaohshung.

We are in a cycle of more and more demands chasing fewer and fewer financial resources.

We cannot continue.

It is unsustainable EXCEPT FOR THE FEW.

It’s time to try something else.

Free trade as WE have practiced it, HAS FAILED.

So what would West Virginia and Eastern Kentucky offer DeWalt, or Crafstman, or Milwaukee tools, to open that new tool factory right where the coal mine workers live?

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