Home > Economic policy, World Events > Trade after Trump (crosspost from Crooked Timber)

Trade after Trump (crosspost from Crooked Timber)

November 20th, 2016

The one policy issue that was an unambiguous loser for Clinton was trade[^1]. Her grudging move to oppose the Trans-Pacific Partnership, choice of Tim Kaine as running mate and some unhelpful remarks from Bill Clinton meant that Trump had all the running. How should we think about trade policy after Trump? My starting point will be the assumption that, in a world where Trump can be President of the US, there’s no point in being overly constrained by calculations of political realism.

A few points and some suggestions

* So-called “trade” deals like the TPP were actually devices to enhance corporate power (and, in the case of the TPP, to isolate China), and deserved to be defeated regardless of views on trade

* No matter what policy is adopted, manufacturing jobs aren’t coming back, any more than farm policy can restore an agrarian society. The manufacturing share of total employment has peaked nearly everywhere in the world, notably including Mexico. As is often the case, Chinese data is too opaque to get a clear picture, but there’s plenty of evidence of contraction about

* The idea of manufacturing jobs as “good” jobs is historically specific particularly to the US, and reflects the fact that the dominance of manufacturing coincided with the New Deal and the unionisation of the labour force. It’s unions, not manufacturing that we need to bring back.

* The big problem facing workers, in the US and elsewhere, isn’t competition from immigrants, or from imported goods. It’s the fact that capital is freely mobile and unfettered by any social obligation. So, a profitable plant can be closed down if its owners get a better off elsewhere. Alternatively, the threat of a move can be used to bargain down wages.

So, instead of thinking about tariffs and trade agreements, the big question is: what can be done to change trade and capital flows in ways that yield more good jobs?

Some suggestions over the page

The first and most important step is to reverse the global decline of unionism. The obvious starting point, for the US, would be to repeal the Taft-Hartley Act. More generally, the left needs to go beyond the (justified) demand for a higher minimum wage and seek to restore the wage share of national income to the level that prevailed during the postwar era. That can only be done with strong unions.

That leaves the question of how to handle the ability of corporations to undercut unions by outsourcing, corporate inversions and so on. The only positive element of the TPP was the attempt to impose some recognition of union rights on participating countries. But the better option would be to impose the relevant obligations on corporations themselves. That is, any corporation doing substantial business in the US should be required to respect labor rights, including the right to unionisation, and to impose the same requirement on its suppliers.

This would, of course, be totally unacceptable under the Investor State Dispute Settlement procedures of most existing trade agreements. So, it would be necessary to repudiate those clauses of the agreement and offer the counterparties the option of scrapping the agreements altogether or dropping ISDS.

The power of corporations to relocate capital is greatly enhanced by the massive flows of short-term capital currently amounting to $5 trillion per day, or around 30 times global gross product. The flow required to manage international trade and capital transactions is about 1 per cent of that. The fact that observed flows are so much larger mainly reflects tax evasion/avoidance and regulatory arbitrage. A Tobin tax at a rate of, say 0.1 per cent applied to all financial transactions would wipe out short term flows, so that international capital movements actually reflected shifts in physical capital investment. This would make it much easier to regulate such flows.

None of this could be done easily and much of it might never be achieved. But it’s the kind of program that’s necessary to counter Trumpism and that, thanks to the collapse of neoliberalism exemplified by Trump’s success, is now thinkable.

[^1]: This introductory background is not meant as an invitation to rehash the election result. Any comment that does so will be deleted.

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  1. Tom the first and best
    November 20th, 2016 at 12:04 | #1

    The biggest relatively easy step that European trade Unions could take to even the playing field is to start fighting for EU wide contracts and related labour market regulation. This would dramatically reduce the ability of companies to jurisdiction shop in the EU. THey should have done this decades ago.

  2. Curious Harry
    November 20th, 2016 at 13:17 | #2

    “The flow required to manage international trade and capital transactions is about 1 per cent of that. The fact that observed flows are so much larger mainly reflects tax evasion/avoidance and regulatory arbitrage.” – Prof. Quiggin, would you happen to a source/link for more in-depth reading on this point? I’m a current econ undergrad looking to potentially write a paper on this.

  3. Salient Green
    November 20th, 2016 at 18:01 | #3

    * The big problem facing workers in the US and elsewhere is competition from imported goods produced with lower environmental, OH&S, Labor, engineering and food safety standards.
    A major contributor to that competition it the fact that capital is freely mobile and unfettered by any social obligation.
    So, a profitable plant or small business or producer can be closed down by unfair competition with imports.
    This will end local production, local jobs and local wealth whether its owners are forced into bankruptcy or are better off moving overseas. Alternatively, the threat of a move can be used to bargain down wages.

  4. November 20th, 2016 at 19:27 | #4

    The current environment is enough to make you yearn for the highly regulated, protectionist/stagflation/wage price inflation spiral of the 70’s.

  5. hc
    November 20th, 2016 at 20:12 | #5

    I’d prefer to allow free capital flows to take advantage of cheaper labour in China and elsewhere but to tax the capital gains that investors in the US get as a result of such liberalizations and to redistribute such gains to those displaced workers who face adjustment issues in labour markets. Generally there should be much higher taxes on the wealthy who get the bulk of the gains from globalisation. Income distribution issues should be addressed via the “directness principle” – by taxes and transfers which reduce inequality not by making the economy less efficient.

    Of course, too, the emphasis should also be on retraining workers that lose jobs.

    The high rates of labour migration into the US and Australia are redundant from the viewpoint of enhancing US welfare if there is capital mobility and free trade. Such movements only reduce the incentives of governments in developing countries to manage their population sizes with a view to the environment and to reducing surplus labour conditions.

    Increasing union power will advantage those who retain jobs and make it harder for those who are displaced by globalization to get employed. Unions are selfish and optimise the earnings of their paid contributors.

    The world has changed and suggesting restrictions on trade to slow down the advance of the developing world is really immoral for poor countries and counterproductive from the viewpoint of developed countries. Moreover, it won’t work irrespective of any moral considerations because market forces will win.

  6. Salient Green
    November 20th, 2016 at 20:41 | #6

    @hc
    “Of course, too, the emphasis should also be on retraining workers that lose jobs.”
    The problem being that “retraining” does not create jobs.

  7. Michael
    November 20th, 2016 at 20:45 | #7

    hc :
    Increasing union power will advantage those who retain jobs and make it harder for those who are displaced by globalization to get employed. Unions are selfish and optimise the earnings of their paid contributors.

    This, I’m afraid is a valid point – Union’s are fundamentally flawed in that they have ended up protecting only a small subset of workers and those are ones that are secure and well-protected. Thanks to 30-years of successful anti-union propaganda they have sadly become a by-word for corruption and thuggery. I doubt it will be easy or even possible to come back from that – although a radical change in approach may work.

  8. John Quiggin
    November 20th, 2016 at 21:56 | #8
  9. Ivor
    November 20th, 2016 at 22:39 | #9

    @Salient Green

    This was a pretty good summary of the key issues.

    Free trade is not necessarily fair trade and promises that losers will be compensated have been proven to have been false. Also claims that offshore wage differences merely reflect productivity differences are also false.

  10. Salient Green
    November 21st, 2016 at 07:45 | #10

    @Ivor
    Thanks Ivor but I just re-arranged JQ’s dot point to suit my own particular views.
    hc claims “…suggesting restrictions on trade to slow down the advance of the developing world is really immoral for poor countries and counterproductive from the viewpoint of developed countries”
    Slowing down the advance of the developing world is not the aim, relieving unemployment is and producing goods under good quality standards should be.
    I have no objection to the relative wage advantages enjoyed in the developing world but tariffs need to be applied to account for pollution, workplace dangers, food safety dangers and poorly engineered products.
    Unemployment in wealthy nations has huge social and economic costs over and above the safety net which I am sure I don’t need to detail for posters on this site. For this reason, I favour a shorter working week over a universal basic income.

  11. Ivor
    November 21st, 2016 at 09:01 | #11

    @Salient Green

    Unfortunately John Quiggin always seems to mangle his points. For example he says:

    It’s unions, not manufacturing that we need to bring back.

    But we need both.

    A Tobin tax at a rate of, say 0.1 per cent applied to all financial transactions would wipe out short term flows,

    THis would have no impact because it is below the normal daily volatility in exchange rates, and if it applied to all FX, would simply be incorporated into their costs of finance so there would be no competitive pressure to change behaviour.

    The benefit of Tobin Tax is that it provides revenues for social democracy.

  12. November 21st, 2016 at 10:40 | #12

    I agree on the dim future for manufacturing jobs, which automation will accelerate.

    Will it be possible to revive unions outside their historic base in mines and factories, which brought together critical masses of exploited workers and allowed a class consciousness based on solidarity to emerge? There are examples : French cheminots and teachers, and – very surprisingly – hotel and casino staff in Nevada, which bucked the national trend to elect another Democratic senator.

    An anecdote on good manufacturing jobs. Among all the Communist leaders of the last century, the only one SFIK who had held a skilled job in a modern factory was Deng Xiaoping. He worked as a fitter for Schneider in France, a patriarchal firm that formed the backbone of French heavy metal-bashing industry. Doubtless the work in Schneider plants was hard and quite dangerous, and management just as hard: but they made real stuff like cannon with giant machines, a demonstration of the transformative power of capitalism and technology. I speculate that this experience contributed to Deng’s pragmatism and his reforms after Mao died.

  13. November 21st, 2016 at 13:01 | #13

    Its funny, isn’t it. Automation will cut jobs and its all doom and gloom. Yet automation will save people from monotonous and back breaking work, which is fantastic.

    All we need is a way to share the wealth around without heading into Soviet era disfunction. If only people weren’t so damned contrary.

  14. Other James
    November 21st, 2016 at 17:05 | #14

    Trade, capital flows, and the subsequent enrichment of the 1% due to business friendly neo-liberal policies for the last thirty years require a national efficiency dividend that rewards the nation for increasing national wealth over that period. The public sector likes a number between 1.0% and 2.5% on an annual basis, so applying this to the private sector, with appropriate discounting, may look something like 4% every five years, taxed on nominal wealth greater than say, $5million (ok, I just pulled that figure out of a hat, after the bunny), to be used to pay appropriate losers, generally defined as those on government benefits. I do have a real problem with the propensity to consume, which could be ameliorated by directing the tax into the social wage improving housing, health and education services, and a move to making Australia sustainable in the face of impending threats, such as climate change. Don’t want to blow out the current account deficit. There are many clever ways to run a country, none of which I see being implemented, or even discussed, by… well, I’ll just leave it there.

  15. D
    November 21st, 2016 at 20:41 | #15

    We need to “bring back” the unions suggests they have gone.

    Obviously unions haven’t gone. Therefore the problem must lie with unions themselves.

    Years ago they decided to stop representing “workers” and instead take on the role of managing them on behalf of capital and, to some extent, the political parties that used to stand for them.

    Wikileaks is a wealth of information about the distortion/hijacking of unions over the last few decades.

  16. Peter Russell
    November 21st, 2016 at 20:46 | #16

    @James Wimberley Nikita Khrushchev was a skilled metalworker in his younger days, though he worked primarily on machinery in mines rather than in factories. Even after he became a political commissar, he retained his direct interest in the nuts and bolts of the mines, and took a very hands-on approach to getting things restarted after the devastation of the Russian Civil War. I can’t think of any other Soviet leaders with a similar background off the top of my head. Brezhnev was trained as a metallurgist, but I don’t think he spent any real time doing that as a job. It’s an interesting parallel to Deng, given that Khrushchev was arguably the most pragmatic and reform-minded of the 20th century Soviet leaders (which isn’t to deny that he had his ideological blind spots as well, of course).

  17. rog
    November 21st, 2016 at 22:39 | #17

    @James Wimberley Deng was also a victim of the Cultural Revolution which may have influenced his rejection of the hard communist doctrine.

  18. rog
    November 21st, 2016 at 22:41 | #18

    Unions as they have traditionally existed have become redundant. The German policy of cooperation between management and unions seems to have been successful.

  19. Collin Street
    November 21st, 2016 at 23:25 | #19

    Obviously unions haven’t gone. Therefore the problem must lie with unions themselves.

    Err… this doesn’t follow.

  20. D
    November 22nd, 2016 at 00:01 | #20

    If the “problem” is absence of unions, then the problem doesn’t exist.

    So therefore there is no need to “bring back” unions. They are already here.

    The answer to the question: “…what can be done to change trade and capital flows in ways that yield more good jobs?” is not “bring back unions”.

    If “unions” are the solution, then there must be something wrong with the unions. And absence of unions isn’t what’s wrong with them.

  21. D
    November 22nd, 2016 at 00:21 | #21

    As an aside,

    The other day I heard something from an American writer that went along the lines:

    “When people say they are ‘middle class’ I ask them: ‘If you lost your job tomorrow would you have to get another one immediately?’, and if they say ‘yes’ then I tell them: ‘you are not middle class, you are working class. Middle class people can take a year or so off to decide what they will do next'”.

    This rings true to me. “We” are mostly working class whether we realise it or not.

  22. James Wimberley
    November 22nd, 2016 at 02:01 | #22

    @rog
    I believe Deng went back to working as a skilled fitter when disgraced in the Cultural Revolution. Of course many other things went into his politics.

  23. rog
    November 22nd, 2016 at 05:06 | #23

    It is in the best interests of capital, or managers of capital, to accept that unions are essential to their business and that a “happy” workforce is a productive, cost effective workforce. For many businesses employees are also customers and, in the long run, reducing their pay can’t be good for business. When one side gains the upper hand destabilising imbalances occur – and business plans do not need disruption.

  24. Troy Prideaux
    November 22nd, 2016 at 07:46 | #24

    @rog
    Well, unions are good when they’re run on good intentions and are purely there to support the interests and welfare of their members. Fortunately today, most (certainly not all though) unions probably operate this way, but that wasn’t always the case especially in certain manufacturing sectors. I can ramble off dozens of stories of complete union bastardry within both the construction and food processing industries especially from the 70s – 90s.

  25. Ikonoclast
    November 22nd, 2016 at 09:00 | #25

    I agree with most, maybe all of J.Q.’s points. The problem is what he leaves out of the analysis. The main issue glossed over is the question of the ownership of the means of production. This question sorts the serious left from the faux left. The faux left won’t talk about it.

    While a few people own a whole lot and a lot of people own very little, redistribution after the fact (taxes and welfare) does not get to the root cause of capitalism’s problems and contradictions. The problem is the vast disparity in ownership levels. Under our institutional settings, ownership gives command and control of the political economy to the few owners of most of our capital. Capitalists control and run our society. Voting democratically once every three or four years comes a poor second to command and control (capitalist autocracy) exercised every day in every private and corporate workplace. Under this system our governments are also bought and suborned by capital. Trump’s neo-f a s c i s m (for that is what it is) is the natural next step of neoliberal capitalism. Capitalism naturally trends to corporate f a s c i s m. That is in its structural or systemic DNA.

  26. Jim Birch
    November 22nd, 2016 at 09:44 | #26

    I’m in favour of a Tobin tax. However, what would the impact of declaring a unilateral Tobin tax?

    It seems to me that there would be at the least a spectre of taking your country out of the international finance circuit. Then there’s the political flak, presumably backed by some serious lobby money, from people in the international money shuffling businesses.

    OTOH it seems a no-brainer for a chunk of countries with “normal” economies, like us, most of Europe and the US for starters.

  27. J-D
    November 22nd, 2016 at 10:58 | #27

    @Ikonoclast
    Delenda Carthago, eh?

  28. BilB
    November 22nd, 2016 at 11:23 | #28

    Ikonoclast,

    The cost of ownership of the means of production has been resolved in most Western Corporations simply by having non, and buying finished goods from elsewhere at minimal cost. Now you will say that the money to acquire the goods is the Capital, but considering that this for most consumer goods is as little as 10% of the usual market price it could be argued to be marginal and irrelevant.

    The real capital in today’s world is knowledge.

  29. may
    November 22nd, 2016 at 12:51 | #29

    knowing is not quite the same as doing.

    knowledge plus ability plus application equals skill

    maybe the manipulation of people with skill is what is called knowledge capital?

    i mean for example, microsoft.

    the capitalist enterprise is based on the ownership of countless individual patents.
    bill gates did not develop them all.
    of the ones he didn’t develop/invent how many were bought for a metaphorical song,
    and how many contribute to the money/power wielded due to the ownership of those knowledge units?

    am i being too obscure?

  30. J-D
    November 22nd, 2016 at 13:29 | #30

    D :
    We need to “bring back” the unions suggests they have gone.
    Obviously unions haven’t gone. Therefore the problem must lie with unions themselves.
    Years ago they decided to stop representing “workers” and instead take on the role of managing them on behalf of capital and, to some extent, the political parties that used to stand for them.
    Wikileaks is a wealth of information about the distortion/hijacking of unions over the last few decades.

    ‘It’s unions, not manufacturing that we need to bring back’ is only part of what John Quiggin wrote. He went on to write, ‘The first and most important step is to reverse the global decline of unionism.’ He didn’t mean ‘We need to have unions but there are no unions’. He meant ‘Beneficial consequences would flow from an increase in the rate of unionisation.’

    So the fact that unions still/already exist is not evidence against his conclusion. In recent decades the rate of unionisation has decreased; therefore, we know that it’s possible for the rate to be higher than it is now.

    Also, the undeniable facts that unions are sometimes corrupted, that unions sometimes behave selfishly, and that union actions sometimes have negative consequences, mentioned by more than one commenter, are not enough to establish that John Quiggin’s conclusion is definitely wrong.

    If somebody wants to suggest that John Quiggin has not made a conclusive case in favour of the beneficial consequences of stronger unions, that’s probably fair, but none of the comments have made a conclusive case against it.

  31. Ivor
    November 22nd, 2016 at 15:53 | #31

    @Jim Birch

    A small Tobin Tax would not have serious adverse second effects.

  32. November 22nd, 2016 at 17:32 | #32

    Donald Trump vows to withdraw from Trans-Pacific Partnership trade deal (22/11/16) | ABC News

    US President-elect Donald Trump has vowed to pull out of the world’s largest trade deal on his first day in office.

    The incoming leader has released a video on his Facebook page, outlining his key policy platforms ahead of his inauguration on January 20.

    “I’ve asked my transition team to develop a list of executive actions we can take on day one to restore our laws and bring back our jobs,” he said.

    “I am going to issue a notification of intent to withdraw from the Trans-Pacific Partnership – a potential disaster for our country.

    “Instead we will negotiate fair, bilateral trade deals.”

  33. totaram
    November 22nd, 2016 at 19:33 | #33

    @BilB

    “The real capital in today’s world is knowledge.”

    Ha,Ha! Tell that to my son who is working on a “knowledge based” start up using a purpose-built software platform etc. etc. His biggest problem is that he needs to “raise capital” (not more knowledge). Obviously you live in some rarefied academic/Utopian vacuum.

    The fact is that the people with the capital can buy the “knowledge” for a pittance.

  34. Ivor
    November 22nd, 2016 at 19:45 | #34

    @James

    But worse – develop shale-gas and clean coal.

    Trade is small bikkies in comparison.

  35. BilB
    November 22nd, 2016 at 20:42 | #35

    Totaram,

    It sounds to me like your son needs the….knowledge…..of leveraged development.

  36. November 22nd, 2016 at 22:10 | #36

    @Ivor on November 22nd, 2016 at 19:45 | #34,

    The meaning of your comment escapes me.

    Possibly you are being critical of Donald Trump’s somewhat flawed attitude towards the environment.

    Whilst I am also concerned about that, the wars that Hillary Clinton would have started had she won the election would cause far more environmental destruction than a less restrained fossil fuel industry under President Trump possibly could.

    If you had followed the link from my last post to the Dog that didn’t bark discussion back to the article on my web-site Congresswoman Gabbard statement on meeting with President-Elect Trump (22/11/16) you would have found links on that page to sites of and about Democrats congresswoman Tulsi Gabbard. You would have found that she is a committed environmentalist. She is actively supporting the grass-roots campaign against the Dakota oil pipeline and would almost certainly also oppose shale gas.

    Given that the American mainstream media has been totally discredited for its attempt to demonise Donald Trump and peddle rigged public opinion polls against him, whilst not reporting his massive campaign rallies, and concealing the miniscule size of campaign rallies for crooked Hillary, it will be much, much harder, from now on, for that same mainstream media to undermine such grassroots environmental campaigns as it has been able to in the past.

  37. November 22nd, 2016 at 22:34 | #37

    @Ikonoclast

    I don’t care who owns the capital. We just need to distribute the wealth properly. And the idea that the private sector will create jobs that do this is so wrong.

  38. D
    November 23rd, 2016 at 00:29 | #38

    Unions haven’t gone, so they don’t need to be brought back.

    Membership has been on a long and steady decline.

    Unions can generally be characterized in recent times as corrupted, behaving in their own self interest, and acting against members’ interests (…sometimes).

    But the solution is “stronger” unions, and more membership (?).

    I still hold that – if unions are a solution to anything – there is a problem with the unions we currently have that needs to be fixed before advocating more people must join them, or making them stronger.

    The problem is with the existing unions. If they themselves fixed those problems then they would automatically attract greater membership and that would automatically make them stronger.

  39. J-D
    November 23rd, 2016 at 04:38 | #39

    @D

    Unions can generally be characterized …

    People can say anything, but producing evidence to justify their conclusions is another matter. Reiteration of an accusation does not increase its merit.

  40. Collin Street
    November 23rd, 2016 at 05:53 | #40

    If the “problem” is absence of unions, then the problem doesn’t exist.

    Are you, in fact, actually mentally incapable of categorising problems and responses in other than black-and-white absolutist terms? Are all levels of presence and activity equivalent to you?

  41. Greg McKenzie
    November 23rd, 2016 at 06:17 | #41

    The Prices and incomes policy of the ALP government, between 1983 and 1994, allowed for a social contract with the ACTU! The Wage-Price spiral had led to stagflation,
    with unemployment and inflation both over 10 percent in Australia by 1984. Wage rigidity downwards had been caused by the legalistic nature of Australia’s industrial relations system. This meant that monetary policy action could only deliver either, a recession,
    or, stagflation. From 1984, external policy was centered around a floating exchange rate and the gradual reduction of tariff barriers. Australia’s first free trade deal was signed with New Zealand!
    Stagflation made the use of fiscal policy problematical.
    The social contract with the ACTU caused the social wage – defined as expenditure by governments which directly affected living standards – to rise. This convinced the union movement to continue with the Accord over six renegotiations and ten years. Accord Mark
    VI came in after the ALP and the ACTU had reduced the number of unions in Australia by amalgamations of like craft unions. The centerpiece of Accord Mark VI was a three percent compulsory superannuation addition to award wages. Tax cuts were used to offset the impact of lower wage rises. Enterprise bargaining was introduced to keep wage rises below a certain level.
    All this had the desired effect of breaking Australia’s economy out of stagflation, and bring unemployment and inflation back in line with the then OECD average. For example, wage inflation fell from over 10 percent in 1983 to below 5 percent in 1993. Unemployment had fallen, but was on its way back as strict monetary policy action was curing the “banana republic” of its imported inflation. This gave the “bucking bronco” a good dose of the recession we had to have.
    Unemployment eventually rose to over 11 percent and Australia had its longest contraction since the 1960s. Union power was broken by the Liberal-National Party government after 1996.

  42. Ivor
    November 23rd, 2016 at 08:25 | #42

    @James

    Gabbard is not the President of the UNited States and no doubt many oppose shale gas.

    Nonetheless Trump has recently advocated shale gas and more coal.

    All good people see the demon in Trump.

  43. totaram
    November 23rd, 2016 at 09:52 | #43

    @BilB

    With the public convinced that innovation is only helping the rich get richer, humans will spiral downwards into relying on dogma and half-truths

    https://www.newscientist.com/article/mg23231001-800-the-world-in-2076-the-antiscience-backlash-has-begun/

  44. jrkrideau
    November 23rd, 2016 at 23:23 | #44

    @D
    There seems to be a move in Canada and I think for the USA for anyone not super-rich to call themselves Middle Class. Essentially the concept of Working Class seems to be disappearing.

  45. jessica stroehle
    November 24th, 2016 at 01:03 | #45

    – and as our host suggested to take the discussion from CT to the (newly opened) Sandpit – I gladly use the chance to pest everybody here about the tremendous upside of ‘manufacturing’.

    Like – ‘manufacturing jobs aren’t coming back’ – because they never have left in tremendously successful ‘Producing Countries’ -(like Germany)
    And the fact that ‘manufacturing share of total employment has peaked nearly everywhere in the world’ – is even a bigger chance for countries who still put a lot of effort in manufacturing -(like China, Japan or Germany) – to still export countries like the US right into the ground.

    And it is true that the idea of manufacturing jobs as “good” jobs has taken some hits in the last years -(attention joke: not only by many Americans – who wanted to become Investment Bankers – but also with ‘Cheap Chinese products’ which made manufacturing look awfully… cheap) –

    As I should inform ‘y’all – it’s still a very ‘good’ or actually even a ‘great’ job to manufacture something like a Porsche -(while getting paid the highest possible wages and salaries and enjoying long vacations and all kind of other perks – including as a Porsche worker to buy the car for a yuuuge discount and sell it later – without having lost a cent)

    And so – to make a long story short – thats how Trade after Trump could look like – if US workers would get again the same type of purpose a lot of German -(or even Italian) workers still have.
    Building something like a… Tesla… perhaps – and the funny idea that success in manufacturing only is possible after doing some capital or money engineering – or through the advantages of some (UN)’Free Market’ – just drive once a ‘ultimate driving machine’ -(or learn how to take it apart – and rebuilt it again) – and agree: ‘Good’ manufacturing NEVER will die!

  46. Ikonoclast
    November 24th, 2016 at 05:29 | #46

    @John Brookes

    Are you making a joke to take an amusing dig at me? 😉 If so, where is your irony alert?

    “I don’t care who owns the capital. We just need to distribute the wealth properly.”

    You do realise the contradiction in these two statements don’t you? Because you are joking I am sure. If a few people (the 1%) own most of the capital (wealth) then the wealth is not distributed properly, if by properly we mean reasonably equitably.

    Perhaps the confusion (mine or yours?) turns on the meanings of “wealth”, “capital” and “income”.

    Capital – “Capital refers to financial assets or the financial value of assets, such as cash and funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities. Additionally, capital includes facilities, such as the buildings used for the production and storage of the manufactured goods.” – Investopedia.

    Wealth – “Wealth measures the value of all the assets of worth owned by a person, community, company or country. Wealth is determined by taking the total market value of all physical and intangible assets owned, then subtracting all debts.” – Investopedia. So wealth is total assets (capital) minus debt.

    Income – “Income is money that an individual or business receives in exchange for providing a good or service or from a pension, annuity, gratuity or other source or through investing capital.” – Investopedia.

    In summary, distributing the wealth more evenly means precisely spreading the ownership of most capital from the 1% to the 100%. In a word, it means socialism.

  47. Ivor
    November 24th, 2016 at 08:40 | #47

    @Ikonoclast

    There is a basic misunderstanding of Capital (a social relationship) and finance, tools and equipment.

    This is too complex for this blog, but in essense you can have means of production, fiance and wealth without having Capital.

  48. Ernestine Gross
    November 24th, 2016 at 12:50 | #48

    @Ikonoclast
    I agree with you post #45.

  49. Ikonoclast
    November 24th, 2016 at 12:56 | #49

    @Ivor

    Perhaps we should take it to the sandpit, but is not narrow “capital” defined as per the definition I gave? Whereas “capitalism” is defined as the social, institutional and ideological arrangements which underpin the private ownership of the means of production, especially capital, and thus ownership and control of the profits. I would tend to use these terms in this so I could talk to non-Marxists.

    It depends I suppose on the narrow and broad meanings of “capital”.

    I do concede that the Encyclopedia of Marxism says:

    “Capital is a Social Relation

    Capital is not just wealth, but wealth in a specific historically developed form: wealth that grows through the process of circulation. As an aside, it should be noted that wealth itself is a social relation, not just an accumulation of things. For example, if you owe someone a favour, then that is something personal between the two of you; if your debt is determined by a third party or by some social ritual such as a birthday, then that is a social relation. Wealth is a social relation in the same sense, and its various historically developed forms are social relations. The issue is to understand exactly what kind of social relation is capital and where it leads.”

  50. Ivor
    November 24th, 2016 at 14:13 | #50

    @Ikonoclast

    There is a huge academic industry pretending that capitalism is just mundane saving, debt and credit, investment, financing, production, employment and supply and demand underpinned by the holy “competitive” “free” market.

    They blame their so-called “magneto” or “thermostat” when things go wrong.

    Capital is different. If this was not the case, there would be no structural crisis.

  51. Ikonoclast
    November 24th, 2016 at 16:21 | #51

    @Ivor

    For sure, I agree.

    At the same time, I think one can hold a narrow and a broad definition of “capital” in one’s head at the same time. The narrow definition, which matches that of orthodox economics or OM for short, is useful for communication purposes. People from two schools (OM and Marxian) can talk about the same thing with the same terminology. Rather than insist on the broader meaning and implications of “capital” as a full phenomenon when talking with non-Marxians I explicitly use the term “capitalism” for the full system. That is where I insist that “capitalism is not just mundane saving, debt and credit, investment, financing, production, employment and supply and demand underpinned by the… “free” market.”

    Technically and more deeply you are right but people have to be guided to that understanding in stages. Heck, even I need to be guided further there as you have seen in this exchange.

  52. November 24th, 2016 at 17:53 | #52

    @Ikonoclast

    I suppose you must be right Ikon, but I just reckon tax the bejeesus out of them.

  53. Donald Oats
    November 24th, 2016 at 19:01 | #53

    Friedmanian pursuit of “pure” capitalism, an uninhibited free market, always struck me as missing the entire point of human existence, to the extent that there is a point, I suppose. Some of us have been fooled into believing that wealth accumulation is the be all and end all of human existence; that shouldn’t mean that the rest of us have to play along with their delusional belief.

    People don’t want to work in jobs that strip them of their humanity, but most people are happy to work hard at some thing or other, given the choice. That one person who is content to sweep the floor of a building should be paid a reasonable fraction of the CEO’s package, say a quarter to 50%. Alternatively, tax the bejeesus out of any salary/package that is more than two times the floor sweeper’s pay. If someone has talent as a CEO, well good for them; if floor sweeping is their thing, well good for them too. This grandiosity in thinking a CEO is somehow so much better than a floor sweeper is the central stupidity of our current capitalist (or is it corporatist?) society; I mean, apart from the CEO, who cares a jot for what he/she/it does? Sweeping a broom for several hours and making the place look spick and span is a pretty good ambition, as far as I can see.

    As for Trump, if he tears up the TPP, I for one won’t be crying.

  54. November 24th, 2016 at 21:50 | #54

    Take pro-Trump postings to the sandpit, please.

  55. Ivor
    November 24th, 2016 at 21:52 | #55

    @John Brookes

    In theory, taxing profits, with appropriate enforcement, would work.

  56. rog
    November 25th, 2016 at 05:55 | #56

    @Troy Prideaux As I said before, unions as they have been traditionally run are redundant.

    As I see it the problem is that the loss of unions is not a win for capital; without proper representation labour will feel as if they have been discarded giving rise to anti establishment feelings. Thatcher may have broken the unions and turned the UK around and now we have Brexit. Reagan broke the unions in the US and now they have Trump.

    It’s in business’ interests to maintain a proper dialogue with labour and ensure that participation and benefits are satisfactory. Dumbing down the workers can only lead to a loss of social cohesion.

  57. J-D
    November 25th, 2016 at 06:08 | #57

    rog :
    @Troy Prideaux As I said before, unions as they have been traditionally run are redundant.

    A statement doesn’t become true just because you say it’s true; and if it wasn’t true the first time, repeating it doesn’t change that.

  58. Collin Street
    November 25th, 2016 at 06:35 | #58

    As I see it the problem is that the loss of unions is not a win for capital; without proper representation labour will feel as if they have been discarded giving rise to anti establishment feelings.

    Yeah, look. People shape their strategy by how they think the world is, not how it actually is: a person who doesn’t think about second-order effects won’t plan with an eye to second-order effects and will with complete confidence act so as to wrap themselves in utter failure.

    An awful lot of people, and thus an awful lot of small/medium business owners, are prone to externalising their failures and poor choices, blaming whatever other they can find that’s disagreed with them for the poor outcomes. “If only everybody had done what I wanted [==”if only everything had fallen out as I’d planned”, only without the self-awareness.

    So, yeah. Unions exist explicitly to tell business owners they’ve got it wrong. Of course people are going to hate them.

  59. Ikonoclast
    November 25th, 2016 at 07:09 | #59

    @James

    It is entirely naive to think that a billionaire capitalist is going to care about workers and the little people. We only have to look at Trump’s own history to see how he has abused workers and workers’ rights. In fact, he abuses and mocks almost everybody from women to blacks to latinos to disabled people.

    Obama and Clinton were the smooth, liberal, hypocritical face of neoliberal capitalism. At a basic level they had some humane and civilized values directed toward their own US constituency but none for other peoples like Iraqis, Afghanis, Libyans, Syrians or Yemenis.

    Trump is “politically incorrect” which is actually code for free license to be vicious and nasty to domestic minorities. Trumps policies are a mishmash of populism and protectionism. (I actually agree with a degree of protectionism if it is implemented wisely on a case by case as needs basis. We can be pretty sure Trump won’t be so discriminating in his judgement.)

    Trump is also a blatant, unrepentant liar as are all modern politicians. The sole difference is that in his case is he disdains to lie about lying. His explicit attitude is “Yeah I lied about everything in the campaign. So what? I am in power now.” Trump has a completely narcissistic and solipsistic personality formation. Only Donald exists and only Donald matters. All of this is all about Donald Trump and about absolutely nothing else. Donald Trump cares only about Donald Trump. To imagine he cares about anything else is the height of naivety.

    From the point of view of hoping for the collapse of US imperialism and capitalism and hoping for a sea change of some kind (hopefully reasonably peaceful) towards at least a bit more democratic socialism, the election of Trump could be a catalyst. The bull is in the capitalist china shop now. When he makes a total mess as he will, people will want permanent institutional change for the better so that this kind of thing (ultra-right populism) cannot happen again.

  60. Troy Prideaux
    November 25th, 2016 at 08:09 | #60

    @Collin Street
    I once asked one of the government’s independent arbiters (whose job it was to hear & rule on employee vs employer disputes/claims) about what the ratio was for who (employees or employers) are generally at fault or in the right in general for such disputes.
    His answer was quite clearly – “it’s pretty much 50:50”.

  61. Troy Prideaux
    November 25th, 2016 at 08:10 | #61

    @rog
    Yeah, agreed

  62. November 25th, 2016 at 08:43 | #62

    People who vote for rightwing populists are just like people who vote for the left or the conservatives; if their candidate craters, they don’t switch to the other camp, they look around for different, better, more effective left/conservative/populist candidates. You haven’t been listening closely enough to our host’s analysis of our progression into pure tribalism, where all that counts is that our champions hate the same people we do.

  63. J-D
    November 25th, 2016 at 17:48 | #63

    @James

    But, as I said, even if our worst fears about Donald Trump are realised, the carbon footprint would only be a small fraction of the carbon footprint that would be caused by the conventional wars that Hillary Clinton was planning to launch, let alone the thermo-nuclear war that might ensue.

    Well, it depends who you include in the first person plural when you write about ‘our’ worst fears. Some people’s worst fears about Donald Trump are precisely the same as your worst fears about Hillary Clinton; that is, the possibility that he might trigger a thermonuclear war.

    What the consequences of a Trump Presidency will be is something we are about (for good or ill) to find out (well, sort of — when bad things happen, anti-Trump people will blame Trump and pro-Trump people will blame other causes; when good things happen, pro-Trump people will credit Trump and anti-Trump people will credit other causes). But what the consequence of a (Hillary) Clinton Presidency would have been is something we will never find out. Nobody can stop you from believing whatever you like, but there’ll be no confirmation.

    I think it’s time that the unjust demonisation of Donald Trump ended.

    Do you? What about the just demonisation of Donald Trump? Is it okay with you if that continues? And what about the unjust demonisation of Hillary Clinton, and of Barack Obama? do you think those should end?

  64. rog
    November 25th, 2016 at 18:18 | #64

    @J-D So you say 🙂

  65. D
    November 25th, 2016 at 23:02 | #65

    No allowing that unions as they currently are could have problems (e.g. with their existing structure/role/actions/political allegiances)?

    Instead, “bring back unions” can only be a reference to needing more of them/more membership/more “strength” (whatever that really means) and more influence for them….in something.

  66. nastywoman
    November 25th, 2016 at 23:56 | #66

    ‘I can’t quite figure out who or what nastywoman is arguing with’

    I was arguing mainly with two points.
    The idea ‘no matter what policy is adopted, manufacturing jobs aren’t coming back’ –
    AND the idea ‘that manufacturing jobs as “good” jobs is historically specific particularly to the US’ – or implying that manufacturing are not (that) ‘good’ jobs.

    And so referring to your first point:
    Yes – there might be countries – which by a combination of factors at play — policy, culture, education, and simple historical advantages – have advantages in certain ‘industries’ –
    but that shouldn’t be the case anymore in the so called advanced countries – where there is the possibility in every field -(even in the software industry) to be competitive.

    And as our issue is ‘manufacturing’ and ‘manufacturing’ is (was) generally ‘working’ in every country -(just with different dimensions of success)- it seems to make a lot of sense to try to figure out what makes very successful manufacturing so successful.

    And I used the example of Germany mainly to counter the misconception of some commenters who seem to think that successful manufacturing only can be done by paying workers the lowest wages and salaries and having NO strong Unions.

    And to focus on manufacturing as “good jobs.” I gladly also make the argument – that there are reasons why manufacturing jobs are likely to be “good jobs.” if you work at Italian companies like Ferrari or Gucci or if you produce the best Espresso or Coffee Machines in the world.

    And for sure we can’t generalize that – as much as we couldn’t generalize that manufacturing are ‘bad’ jobs – and forgive me if I was under the impression that some commenters really think that
    manufacturing jobs are ‘bad’ jobs – or not desirable (anymore)

    And as this whole discussion is (was) based on the erection of Trump and that he promised American workers to bring their jobs back – and ‘realism’ – and ‘policies’.
    Yes! –
    there are realistic chances to bring back manufacturing jobs to American workers -(without the bad tariffs or building walls ideas of a F…face von Clownstick) and we don’t have to sing some praises of some German corporate culture at all.

    Just think ‘Tesla’ – and if you like let’s sing his praise to the utmost degree!

  67. J-D
    November 26th, 2016 at 05:09 | #67

    @D

    No allowing that unions as they currently are could have problems (e.g. with their existing structure/role/actions/political allegiances)?

    On the contrary; yes, allowing that unions as they currently are could have problems.

    Instead, “bring back unions” can only be a reference to needing more of them/more membership/more “strength” (whatever that really means) and more influence for them….in something.

    Yes, that’s right, ‘bring back unions’ means more members and more influence for unions.

  68. Ernestine Gross
    November 26th, 2016 at 18:18 | #68

    What can be done?

    “A Tobin tax at a rate of, say 0.1 per cent applied to all financial transactions would wipe out short term flows, so that international capital movements actually reflected shifts in physical capital investment. This would make it much easier to regulate such flows.”

    I am not convinced that a 0.1 per cent Tobin tax would wipe out all short term international financial capital flows and I don’t believe wiping out all short term financial capital flows would be a useful objective (a lot of international trade of physical goods involves short term financial capital flows; international tourism also involves short term financial capital flows; insurance companies and pension funds).

    However, I have been in favour of a Tobin-type tax for a very long time, not because Tobin was a general equilibrium theorist, although I won’t miss an opportunity to point out that useful ideas do emerge from this type of work. I am in favour of a Tobin-type tax – also known as financial transactions tax for several reasons. Firstly, due to the so-called financial innovation, the international financial system is fragile – to put it mildly. There is too much junk in the system, which all amounts to an almost impenetrable fog of debt. Debt bubbles burst and the costs are shifted to the public. This should be avoided. A Tobin-type tax can act like an insurance premium on the speculative debt generation and debt trading industry. Second, such a tax slows down the speed of financial transactions, hence it works toward increasing synchronisation between physical and financial transactions technologies. Third, it is a source of tax revenue that could be used to reduce government debt incurred during a financial crisis. Obviously, which of the reasons given is dominant depends on the state of affairs.

    The EU (some member countries more than others) has been considering a Tobin-type tax for quite a while and with increased enthusiasm since the GFC. There is some progress.

    On 5 December 2016, 10 EU countries (Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain) are going to decide on the introduction of the Financial Transactions Tax. 9 out of the 10 have to agree to pass it. The proposed tax rate is 0.05%.

    There is still some uncertainty in the public press as to the specifics of the proposal that is to be voted on. For example, which types of securities are to be subject to the tax? (Derivatives and shares are in the basket; government securities not – I understand at present.) Is there a transition period and if so, for how long? How is shifting security transactions into non- member countries to be avoided? My latest information regarding the latter is: There are two principles which are aimed at mitigating tax avoidance by means of choice of a juristiction. These are:
    a) The principle of residency of the financial institution (eg if the Deutsche Bank trades the relevant financial securities in say Australia, the tax is still applicable because the Deutsche Bank’s residency is in Germany.)
    b) The principle of issuance of the securities. (eg Mercedes issues shares then, irrespective of where the shares are traded, financial transactions tax applies.)

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