Blinder on Free Trade

 

OccupationsVulnerableGraph.gif    Source of graphic:  online version of the WSJ article cited below.

 

For awhile, during the Clinton administration, many Democratic economists, such as Alan Blinder, seemed to solidly support free trade as an engine for economic growth.  But now several Democratic economists, such as Blinder as described in the excerpt below, seem to be returning to the usual Democratic protectionist policies.

If the goal is economic progress and growth, such policies remain ill-advised, no matter how effective they are at helping Democrats to win elections.  To whit:  Ed Leamer provides the arguments and evidence against worries about outsourcing in his long, but excellent, review of Thomas Friedman’s hand-wringing in The World is Flat.  (See way below for the reference.)

 

(p. A14)  Mr. Blinder’s job-loss estimates in particular are electrifying Democratic candidates searching for ways to address angst about trade. "Alan, because of his stature, provided a degree of legitimacy to what many of us had come to feel anecdotally — that the anxiety over outsourcing and offshoring was a far larger phenomenon than traditional economic analysis was showing," says Gene Sperling, an adviser to President Clinton and, now, to Hillary Clinton. Her rival, Barack Obama, spent an hour with Mr. Blinder earlier in this year.

Mr. Blinder’s answer is not protectionism, a word he utters with the contempt that Cold Warriors reserved for communism. Rather, Mr. Blinder still believes the principle British economist David Ricardo introduced 200 years ago: Nations prosper by focusing on things they do best — their "comparative advantage" — and trading with other nations with different strengths. He accepts the economic logic that U.S. trade with large low-wage countries like India and China will make all of them richer — eventually. He acknowledges that trade can create jobs in the U.S. and bolster productivity growth.

But he says the harm done when some lose jobs and others get them will be far more painful and disruptive than trade advocates acknowledge. He wants government to do far more for displaced workers than the few months of retraining it offers today. He thinks the U.S. education system must be revamped so it prepares workers for jobs that can’t easily go overseas, and is contemplating changes to the tax code that would reward companies that produce jobs that stay in the U.S.

His critique puts Mr. Blinder in a minority among economists, most of whom emphasize the enormous gains from trade. "He’s dead wrong," says Columbia University economist Jagdish Bhagwati, who will debate Mr. Blinder at Harvard in May over his assertions about the magnitude of job losses from trade. Mr. Bhagwati says that in highly skilled fields such as medicine, law and accounting, "If we do a real balance sheet, I have no doubt we’re creating far more jobs than we’re losing."

. . .

He was silent when his former Princeton student, N. Gregory Mankiw, then chairman of President Bush’s Council of Economic Advisers, unleashed a political firestorm by reciting standard theory but appearing indifferent to pain caused to those whose jobs go overseas. "Does it matter from an economic standpoint whether items produced abroad come on planes and ships or over fiber optic cables?" Mr. Mankiw said at a February 2004 briefing. "Well, no, the economics is basically the same….More things are tradable than…in the past, and that’s a good thing."

Mr. Blinder says he agreed with Mr. Mankiw’s point that the economics of trade are the same however imports are delivered. But he’d begun to wonder if the technology that allowed English-speaking workers in India to do the jobs of American workers at lower wages was "a good thing" for many Americans. At a Princeton dinner, a Wall Street executive told Mr. Blinder how pleased her company was with the securities analysts it had hired in India. From New York Times’ columnist Thomas Friedman’s 2005 book, "The World is Flat," he found anecdotes about competition to U.S. workers "in walks of life I didn’t know about."

Mr. Blinder began to muse about this in public. At a Council on Foreign Relations forum in January 2005 he called "offshoring," or the exporting of U.S. jobs, "the big issue for the next generation of Americans." Eight months later on Capitol Hill, he warned that "tens of millions of additional American workers will start to experience an element of job insecurity that has heretofore been reserved for manufacturing workers."

At the urging of former Clinton Treasury Secretary Robert Rubin, Mr. Blinder wrote an essay, "Offshoring: The Next Industrial Revolution?" published last year in Foreign Affairs. "The old assumption that if you cannot put it in a box, you cannot trade it is hopelessly obsolete," he wrote. "The cheap and easy flow of information around the globe…will require vast and unsettling adjustments in the way Americans and residents of other developed countries work, live and educate their children." (Read that full article.)

. . .

Diana Farrell, head of the McKinsey Global Institute, a pro-globalization think-tank arm of the consulting firm that has done its own analysis of vulnerable jobs, calls Mr. Blinder "an alarmist" and frets about the impact he is having on politicians, particularly the Democrats who see resistance to free trade as a political winner. She insists many jobs that could go overseas won’t actually go.

Ms. Farrell says Mr. Blinder’s work doesn’t take into account the realities of business which make exporting of some jobs impractical or which create offsetting gains elsewhere in the U.S. economy. He counters he is looking further into the future than McKinsey — 10 or 20 years instead of five — and expects more technological change than the consultants do "even without the Buck Rogers stuff."

 

For the full story, see:

DAVID WESSEL and BOB DAVIS.  "JOB PROSPECTS; Pain From Free Trade Spurs Second Thoughts; Mr. Blinder’s Shift Spotlights Warnings Of Deeper Downside."  The Wall Street Journal  (Weds., March 28, 2007):  A1 & A14. 

(Note:  ellipses added.)

 

For Leamer’s wonderful riff on why we need not worry about outsourcing, see:

Leamer, Edward E.  "A Flat World, a Level Playing Field, a Small World after All, or None of the Above? A Review of Thomas L. Friedman’s the World Is Flat."  Journal of Economic Literature  45, no. 1 (March 2007):  83-126.

 

BlinderAlanS.jpg  Alan S. Blinder.  Source of photo:  online version of the WSJ article cited above.

 

Entrepreneur Bets on Nuclear Power Revival

 

Entrepreneur Kyle Kimmerle at one of his 600 uranium claims.  Source of photo:  online version of the NYT article quoted and cited below.

 

Kyle Kimmerle is an entrepreneur, risking his own money.  If he guesses right, he will make himself rich, by helping provide the fuel needed for generating electricity for us. 

 

(p. C1)  . . .   Prices for processed uranium ore, also called U308, or yellowcake, are rising rapidly. Yellowcake is trading at $90 a pound, nearing the record high, adjusted for inflation, of about $120 in the mid-1970s. The price (p. C4) has more than doubled in the last six months alone. As recently as late 2002, it was below $10.

A string of natural disasters, notably flooding of large mines in Canada and Australia, has set off the most recent spike. Hedge funds and other institutional investors, who began buying up uranium in late 2004 to exploit the volatility in this relatively small market, have accelerated the price rally.

But the more fundamental causes of the uninterrupted ascendance of prices since 2003 can be traced to inventory constraints among power companies and a drying up of the excess supply of uranium from old Soviet-era nuclear weapons that was converted to use in power plants. Add in to those factors the expected surge in demand from China, India, Russia and a few other countries for new nuclear power plants to fuel their growing economies.

“I’d call it lucky timing,” said David Miller, a Wyoming legislator and president of the Strathmore Mineral Corporation, a uranium development firm. “Three relatively independent factors — dwindling supplies of inventory, low overall production from the handful of uranium miners that survived the 25-year drought and rising concerns about global warming — all have coincided to drive the current uranium price higher by more than 1,000 percent since 2001.”

. . .  

. . .   “We won’t build a new plant knowing there’s nowhere to put the used fuel,” Mr. Malone of Exelon said. “We won’t build one without community support, and we won’t build until market conditions are in place where it makes sense.”

But that is not holding back Kyle Kimmerle, owner of the Kimmerle Funeral Home in Moab. Mr. Kimmerle, 30, spent summers during his childhood camping and working at several of his father’s mines in the area. In his spare time he has amassed more than 600 uranium claims throughout the once-productive Colorado Plateau.

“My guess is that next year my name won’t be on the sign of this funeral home anymore and I’ll be out at the mines,” he said.

He recently struck a deal with a company to lease 111 of his claims for development. The company, new to uranium mining, has pledged $500,000 a year for five years to improve the properties. Mr. Kimmerle will receive annual payments plus royalties for any uranium mined from the area.

 

For the full story, see: 

SUSAN MORAN and ANNE RAUP.  "A Rush for Uranium; Mines in the West Reopen as Ore Prices Reach Highs of the 1970s."  The New York Times  (Weds., March 28, 2007):   C1 & C4.

(Note:  ellipses added.)

 

UraniumPriceGraph.gif   Yellowcake, which is processed uranium, is in the third jar from the left of the top photo.  The photo below it is of old equipment at a dormant uranium mine.  Source of the photos and the graphic:  online version of the NYT article quoted and cited above.

 

The Safety Net in Europe and the United States

 

SafetyNetGraph.jpg   Source of graphic:  online version of the NYT article cited below.

 

FROM issues of crime and punishment to the proper domain of the spiritual and temporal powers, Americans and Europeans have long cast a skeptical eye at one another across the Atlantic.

Perhaps nowhere has the gaze been more jaundiced than in the area of work. From the perspective of Western Europe, American employers have a relatively free hand to hire and fire, coupled with meager and short-lived unemployment benefits. America’s deregulated labor markets seem to provide hardly any safety net when it comes to economic dislocations of workers.

Americans, by contrast, have found it hard to resist a touch of schadenfreude at the joblessness stoked by European governments’ intervention in labor markets, with rules on everything from wages to layoffs, on top of generous unemployment benefits.

 

For the full commentary, see: 

EDUARDO PORTER.  "Economic View; A Bridge Over the Atlantic, in Labor Policy."  The New York Times, Section 3  (Sun., April 1, 2007):  5.

 

Communist Dictator Chavez Destroys Freedom of the Press in Venezuela

 

   Supporters of freedom in Venezuela protesting communist dictator Chavez’s shutting down the television network that dared to criticize him.  Source of photo:  online version of the NYT article that is quoted and cited below. 

 

My Wabash College economics professor, Ben Rogge, used to say that political freedom ultimately depended on economic freedom:  how could you depend on a socialist government to provide a printing press to those who seek to undermine socialism?

(In his article "The Case for Economic Freedom" published in his Can Capitalism Survive? Rogge gives credit for the argument to his friend Milton Friedman in his Capitalism and Freedom, which was based on lectures given at Wabash.)

Well, if there is a heaven, I can imagine Rogge there, reading the following passages, and reacting with his sad, knowing, half-smile.

 

(p. A3)  CARACAS, Venezuela, May 27 — With little more than an hour to go late Sunday until this country’s oldest television network was to be taken off the air after 53 years of broadcasting, the police dispersed thousands of protesters by firing tear gas into demonstrations against the measure.

. . .

The president has defended the RCTV decision, saying that the network supported a coup that briefly removed him from office in 2002.

RCTV’s news programs regularly deride Mr. Chávez’s Socialist-inspired transformation of Venezuelan society. “RCTV lacks respect for the Venezuelan people,” said Onán Mauricio Aristigueta, 46, a messenger at the National Assembly who showed up to support the president.

Mr. Chávez has left untouched the operations of other private broadcasters who were also critical of him at the time of the 2002 coup but who have changed editorial policies to stop criticizing his government. That has led Mr. Chávez’s critics to claim that the move to allow RCTV’s license to expire amounts to a stifling of dissent in the news media.

“The other channels don’t say anything,” said Elisa Parejo, 69, an actress who was one of RCTV’s first soap opera stars. “What we’re living in Venezuela is a monstrosity,” she said at RCTV’s headquarters on Sunday, as employees gathered for an on-air remembrance of the network’s history. “It is a dictatorship.”

 

For the full story, see: 

SIMON ROMERO.  "Dueling Protests Over Shutdown of Venezuela TV Station."  The New York Times  (Mon., May 28, 2007):  A3.

(Note: the excerpts above are from the updated online version of the article that appeared online under the title: "Venezuela Police Repel Protests Over TV Network’s Closing.")

(Note:  ellipsis added.)

 

On 5/28/07 CNN broadcast a Harris Whitbeck report on students protesting the Chavez censorship under the title "Hear No Evil, See No Evil."

 

   Monica Herrero protests Chavez closing down the television network that dared to criticize his government.  Source of photo:  screen capture from the CNN report at http://www.cnn.com/video/partners/clickability/index.html?url=/video/world/2007/05/28/whitbeck.chavez.tv.affl

 

Passport Fiasco Would Bankrupt a Private Company, But Government Lumbers On

 

Here is an email that I sent to Congressman Lee Terry’s office on Sat., March 24, 2007: 

 

I applied for a passport renewal on January 20, 2007.  The web form said that it would take about six weeks.  Later, on the web site they increased that to eight weeks.  Then 10 weeks.  The trip was scheduled for April 3rd, and as the weeks passed, my stress increased enormously.  I would have been willing (not happy, but willing) to pay the extra $60 for "expedited" service, if I had known they were going to lengthen the time for routine handling by a month.  But they only passed out that information after it was too late to do anything about it.  Insult was added to injury when the State Department passport office was unwilling to answer their phone after many tries at times ranging from early in the morning until a few minutes before midnight (eastern time).  Each time, a recorded voice would say:  visit the web site, or try to call later.  (But the web site did not have the answers to my questions, and calling "later" never worked.)

There is no excuse for the State Department not anticipating that there would be a huge increase in demand for passports when they put into effect the new mandate that passports be used to re-enter the U.S. from Mexico.  If a private business operated with the inefficiency of the passport office, they would justly go bankrupt. 

The only ray of sunlight in this dark vista was "Susie" of Lee Terry’s office.  When I called the Omaha office they put her on the line, and she asked me relevant questions, and proceeded to get back to me the same day with what I needed to know.  She got through to an actual human being at the State Department, and learned that I would receive my passport in a few days.  (I received it yesterday.)  "Thank you" to Susie, and thank you to Lee Terry, for having an office staffed with competent people, who care.

Sincerely,

Art Diamond

 

Chambers of Commerce Dump Commerce and Embrace Big Government

 

The Chamber of Commerce, long a supporter of limited government and low taxes, was part of the coalition backing the Reagan revolution in the 1980s. On the national level, the organization still follows a pro-growth agenda — but thanks to an astonishing political transformation, many chambers of commerce on the state and local level have been abandoning these goals. They’re becoming, in effect, lobbyists for big government.

. . .

In as many as half the states, state taxpayer organizations, free market think tanks and small business leaders now complain bitterly that, on a wide range of issues, chambers of commerce deploy their financial resources and lobbying clout to expand the taxing, spending and regulatory authorities of government. This behavior, they note, erodes the very pro-growth climate necessary for businesses — at least those not connected at the hip with government — to prosper. Journalist Tim Carney agrees: All too often, he notes in his recent book, "Rip-Off," "state and local chambers have become corrupted by the lure of big dollar corporate welfare schemes."

. . .

The U.S. Chamber of Commerce boasts that the organization’s "core mission is to fight for business and free enterprise before Congress, the White House, regulatory agencies . . . and governments around the world." The national chamber has done just that, pushing tort reform and free trade — but in the states, chambers have come to believe their primary function is to secure tax financing for sports stadiums, convention centers, high-tech research institutes and transit boondoggles. Some local chambers have reportedly asked local utilities, school administrators and even politicians to join; others have opened membership to arts councils, museums, civic associations and other "tax eater" entities.

. . .

"I used to think that public employee unions like the NEA were the main enemy in the struggle for limited government, competition and private sector solutions," says Mr. Caldera of the Independence Institute. "I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations." 

 

For the full commentary, see: 

STEPHEN MOORE.  "Tax Chambers."  The Wall Street Journal  (Sat., February 10, 2007):  A8.

(Note:  ellipses added, except the one in the quote following the word "agencies.")

 

Private Money Can Top Government Money in Space, as in IT

 

Lots of people are building new IT companies. You can start a company and sell it to Yahoo! or Google in a couple of years. But so can anyone else. Aerospace is different. To paraphrase John F. Kennedy in 1962: We choose to go to the moon not because it’s easy, but because it’s hard.

That’s why, as a long-time investor in IT and Internet start-ups, I’m now spending more and more time on private aviation and commercial space start-ups. I’m trailing an illustrius crew of IT pioneers: Elon Musk (Space-X, rockets, formerly with PayPal), Vern Raburn (Eclipse Aviation, very light jets, formerly at Microsoft, Symantec and Lotus), Jeff Bezos (Blue Origin, rockets, and still at Amazon, too!), Jeff Greason (XCOR, rockets and formerly with Intel) and Ed Iacobucci (DayJet, air taxi operator, and founder of Citrix).

. . .

On the space side, there’s a . . . strong parallel with the world of IT. The establishment in "space" is the government and especially the military, just as it once was (along with academia) for the Internet. I remember the days when commerce on the Internet was considered sleazy—but look at the innovations and productivity it unleashed.

In the same way, the current priests of space are dismayed by the privately funded space start-ups—unsafe, sleazy, frivolous. Imagine: Ads on the side of a rocket ship! Well, why not, if it helps pay for the fuel… and the R&D that designed the thing?

 

For the full commentary, see: 

ESTHER DYSON  "New Horizons for the Intrepid VC."  The Wall Street Journal  (Tues., March 20, 2007):  A19.

(Note:  ellipses added, except for the ellipsis following the word "fuel" which was in the original.)

 

“Free Agent Nation” Still Rings True

 

   Source of book image:  http://g-ec2.images-amazon.com/images/G/01/ciu/10/ae/8ca3d250fca0f5b077de4010.L.jpg

 

Daniel Pink’s 2001 Free Agent Nation has been on my to-read list since it first came out.  It finally made it to the top—at least in the author-abridged two-cassette incarnation.

I always found the basic idea appealing:  the appeal of the freedom of working for yourself—Harry Browne’s How I Found Freedom in an Unfree World, but for real. 

But I also was a little anxious; fearful that the book would place too much emphasis on seeming flash-in-the-pan dot.com labor market phenomena and rhetoric.

To my relief, I can report that little in the book depends on the dot.com over-exuberance.  The internet appears, as an infrastructure enabler, but the free agents are mainly doing more standard stuff, but doing it from a home office, and doing it project-by-project.

Pink is not an academic, which has pros and cons.  One of the pros is that his prose is pleasant.  Another is that he has an ear for a good story and a telling example.  Perhaps a con is that he often hasn’t had the time, or the interest, (or maybe the data just don’t exist) to often follow-up with how widespread his examples are.

Still there’s some good stuff here.  Like suggesting that free agency is what you would expect more of us to pursue, as we work our way up Abraham Maslow’s hierarchy of human needs.  (In college I was enthused enough about Maslow that I was thinking of minoring in psychology, until they told me how many hours I would have to run rats through mazes before I’d be allowed to open a Maslow book.)

And there’s plausible discussion about how in some ways free agency is more secure than a regular job (multiple clients means diversification).  And there is more freedom to control your own time, and be your authentic self.

There’s also some good discussion of how the government makes free agency harder through health care and taxation policies.

All-in-all, this book helps make the case that labor can thrive in a Schumpeterian world of creative destruction.

 

Reference to the book:

Pink, Daniel H. Free Agent Nation: How America’s New Independent Workers Are Transforming the Way We Live. New York: Warner Business Books, 2001.

 

The Best Case for Supporting a Tariff

 

I doubt the veracity of George Pendle’s humorous, but unkind, comment about Millard Fillmore’s views:

 

“His firm support for tariffs, . . . , seems to have been based on a misapprehension that a tariff was a long-legged marsh bird.”

 

Pendle is quoted in: 

THOMAS VINCIGUERRA.  "Why He Gets the Laughs."  The New York Times, Section 4  (Sun., March 18, 2007):  5.

(Note:  ellipsis added.)

 

Pendle’s forthcoming book, is:

Pendle, George.  The Remarkable Millard Fillmore: The Unbelievable Life of a Forgotten President.  Three Rivers Press, 2007.

 

Commodity Trading Philistines Were Actually Not Very “Philistine”

  Inscriptions on Philistine pottery are being interpreted as evidence of a Philistine written language.  Source of photo:  online version of the NYT article cited below. 

 

Archaeologists have applied more polish to the long-tarnished reputation of the Philistines.

In recent years, excavations in Israel established that the Philistines had fine pottery, handsome architecture and cosmopolitan tastes. If anything, they were more refined than the shepherds and farmers in the nearby hills, the Israelites, who slandered them in biblical chapter and verse and rendered their name a synonym for boorish, uncultured people.

Archaeologists have now found that not only were Philistines cultured, they were also literate when they arrived, presumably from the region of the Aegean Sea, and settled the coast of ancient Palestine around 1200 B. C.

At the ruins of a Philistine seaport at Ashkelon in Israel, excavators examined 19 ceramic pieces and determined that their painted inscriptions represent a form of writing.  . . .

. . .

“We had no direct evidence of their early writing,” Dr. Stager said. “We knew they had weights and measures for trading commodities, even precursors of coinage. So we assumed they had some notation or writing system.”

 

For the full story, see: 

JOHN NOBLE WILFORD.  "Philistines, but Less and Less Philistine."  The New York Times  (Tues., March 13, 2007):  D3.

(Note:  ellipses added.)

 

  Philistine excavation.  Source of photo:  online version of the NYT article cited above 

 

GE Stands Up for Innovation and Free Choice

MoorheadRandallLightBulbs.jpg   Randall Moorehead’s Phillips Electronics wants the government to force us to switch from the incandescent bulb on the left, to bulbs like the Phillips bulb on the right.  Source of photo:  online version of the NYT article cited below.

 

WASHINGTON, March 13 — A coalition of industrialists, environmentalists and energy specialists is banding together to try to eliminate the incandescent light bulb in about 10 years.

In an agreement to be announced Wednesday, the coalition members, including Philips Lighting, the largest manufacturer; the Natural Resources Defense Council; and two efficiency organizations, are pledging to press for efficiency standards at the local, state and federal levels.  . . .

. . .

The Australian government said on Feb. 20 that it would seek to ban incandescent bulbs and replace them with compact fluorescents. Shortly thereafter, the environment minister of Ontario, Laurel Broten, said her province was considering a similar step, and a California assemblyman, Lloyd Levine, introduced a bill to do the same.

“Incandescent light bulbs were first developed almost 125 years ago,” Mr. Levine said, “and since that time they have undergone no major modifications.”

Kathleen Rogers, president of the Earth Day Network, one of the groups in the alliance seeking to end the use of incandescent bulbs, predicted, “I think you’re going to see these disparate efforts adding up to this great tidal wave.” The problem, she said, was that “the incandescent spends most of its life making heat, not light.”

But General Electric, which traces its origins to Edison, said that could change.

“It’s shortsighted to freeze technology in favor of today’s high-efficiency compact fluorescent lamps,” the company said in a statement. ”We’d rather keep innovating and offering traditional, commercial and industrial consumers more energy-efficient choices — not fewer choices.”

 

For the full story, see: 

MATTHEW L. WALD.  "A U.S. Alliance to Update the Light Bulb."  The New York Times   (Weds., March 14, 2007):  C3.

(Note:  ellipses addd.)