Do Right-To-Work Laws Hurt State Economies

We all know the conventional wisdom on right-to-work laws:

"Proponents argue that it creates jobs, on the theory that there are a bunch of anti-union employers who will flock to whatever state passes the law ... Opponents dispute that claim, and argue that all it does it allow employers in those states to pay workers less and give them fewer health and pension benefits. They claim it is part of the race to the bottom that corporations encourage and that Republican politicians are more than happy to implement in exchange for the huge political contributions to their campaigns."

Under either philosophy, the idea is that jobs shift from union to non-union states, and for decades that pattern was beyond dispute. But in this post-NAFTA, internationalized era, might the story have changed?

Only one state has passed right to work since NAFTA: Oklahoma in 2001. (Before that, the most recent was Idaho in 1985.) About a year ago, Lafer and economist Sylvia Allegretto published a report for the Economic Policy Institute* exploring just what had happened in the decade since Oklahomans got their "right to work." The results weren't pretty.

Rather than increasing job opportunities, the state saw companies relocate out of Oklahoma. In high-tech industries and those service industries "dependent on consumer spending in the local economy" the laws appear to have actually damaged growth. At the end of the decade, 50,000 fewer Oklahoma residents had jobs in manufacturing. Perhaps most damning, Lafer and Allegretto could find no evidence that the legislation had a positive impact on employment rates.

Given that the U.S. can no longer win a "race to the bottom" in terms of wages, perhaps we've moved into an era in which it's more important to offer communities sufficiently attractive to professionals and skilled labor than to offer the cheapest domestic wage for factory line workers. A company that has so little loyalty to state and community that it will relocate half-way around the country to save money on labor will have no more regard for the new community when the total cost of production is cheaper outside of the United States. Whether or not you believe there is a moral factor involved, that's the story of modern manufacturing and a company that doesn't shave production costs is apt to be undersold by cheaper imported goods.

For a state like Michigan, my approach might be to try to create an environment in which certain hub communities, offering a good lifestyle to workers, a highly educated and highly skilled workforce, and other factors that could attract workers at the top of the market, are at the center of a manufacturing hub, such that manufacturers can have a reasonable expectation of being able to find local (or near-local) suppliers, labor, and support. I don't know if it will work, but it seems to beat trying to drive down labor costs to compete with other states, starving communities of the tax base they need to fund schools, recreation, roads (already bad enough in Michigan), and other factors that make for an appealing community. If the effort fails, it all falls apart anyway, so why not try?

Jeb Bush Flatlines in the WSJ

Jeb Bush seems to be trying to set himself up as the candidate people wish had run for the Republican nomination. It's a "Don't pay any attention to what I did as governor (or what my brother and father did as Presidents, or what my grandfather did as a Senator) - I've discovered Ron Paul and libertarianism, and regret "succumbing" to the temptation to "do something" about economic problems.

The short version is that Jeb has supposedly been moved by Ron Paul's allusion to "The right to rise" as a "core concept of economic freedom", and as a result wants to free businesses of regulation and to free individuals from any form of government assistance.

We have to make it easier for people to do the things that allow them to rise. We have to let them compete. We need to let people fight for business. We need to let people take risks. We need to let people fail. We need to let people suffer the consequences of bad decisions. And we need to let people enjoy the fruits of good decisions, even good luck.

You know, like being born to a family that has been fabulously wealthy and politically connected for more than a century. The sort of fortunate birth that many people confuse with qualification for public office, but that's apparently something we are now supposed to celebrate rather than regret in the wake of a duopoly of increasingly disastrous Bush presidencies. (Anybody wanna go for a trifecta?)

The primary target of Jeb's editorial is regulation, which he tells us "abridge our own economic freedoms". He paints with an incredibly broad brush, but fails to identify any actual regulation that he sees as harmful, or to identify any actual harm. I don't think that's because he could not identify a regulation in which the costs and benefits were out of balance. I suspect that it's because to do so would reveal that this is penny ante stuff - that he could not identify any significant impediments to big business arising from regulation and that people would very easily identify the need for the regulations he specifically described even if agreeing that they should be modified.

It is fair to say that regulation of business impairs the ability of small businesses to enter highly regulated markets, and to compete with larger businesses that have legal departments that allow them to navigate or bypass regulation. But it's also fair to observe that as much as businesses rail against regulation, they recognize that complexity can be their friend - a clear regulation must be obeyed, while labyrinthine regulations are inevitably full of loopholes. Simple regulation also doesn't serve as a barrier to entry, while complexity may deter competitors from entering their markets. A similar phenomenon can be seen with newer high tech companies complaining about patents as a barrier to their success, and then not seeming so bothered by them after they build their own catalog of patents to use to threaten or negotiate with competitors.

But Jeb is speaking about personal freedom, and he provides no link between the regulation of businesses and the freedom of individuals. Having supposedly been inspired by Ron Paul, perhaps he has been listening to some of Paul's inanities on libertarian markets. As much as a certain faction of right-winger would like to pretend otherwise, history's lesson is clear: In the absence of regulation, business and wealth run roughshod over individual rights and freedoms.

Jeb offers some stump speech-style rhetorical questions,

Have we lost faith in the free-market system of entrepreneurial capitalism? Are we no longer willing to place our trust in the creative chaos unleashed by millions of people pursuing their own best economic interests?

If you succumb to the temptation to answer the questions, they're easily revealed as simplistic and inane. But that's not the point. Jeb is suggesting that there's a horrible "other" at work in our government that is out to undermine "entrepreneurial capitalism" and individual economic freedom and, implicitly, that it's men like him who are the answer... that is, now that they're out of power and no longer "succumb" to the temptation to pass the regulations that they would not dream of passing if they are returned to power.

When Jeb says, "We see an industry dying and we demand it be saved," I expect that he's speaking of the domestic auto industry, more specifically of GM and Chrysler, that both his brother and President Obama thought necessary to save within the context of a massive economic meltdown. Except the auto industry was not going to fail - just two of the three domestic manufacturers. Do you believe for a second that, had Jeb been President, he would have stepped back and allowed GM to collapse rather than providing funding to keep it afloat while pushing it through a structured bankruptcy? I suppose he could be referring to the financial industry, as that industry might have collapsed pretty much in its entirety had it not been bailed out by the government, but the chance of President Jeb not stepping in with a bailout package would have been zero percent. Let's be real. The "right to fail" is an individual right, and provides a context in which Jeb would have no difficulty distinguishing large corporations from real people.

I liked this line:

The right to rise does not require a libertarian utopia to exist.

Have you ever paused to wonder what a libertarian utopia would look like? Were you to smoke opium you might dream up something along the lines of Ron Paul's fantasy:

The regulations are much tougher in a free market, because you cannot commit fraud, you cannot steal, you cannot hurt people, and the failure has come that government wouldn't enforce this. In the Industrial Revolution there was a collusion and you could pollute and they got away with it. But in a true free market in a libertarian society you can't do that. You have to be responsible. So the regulations would be tougher.

I once heard a sarcastic, but much more likely vision of a libertarian utopia: anarchy with lawyers. You only have rights to the extent that you can privately enforce them, meaning that you need lawyers and money (or guns) on your side to prevail. Once you start allowing the government to regulate such things as what you do with the toxic sludge you dump on your own land, such that it doesn't leach into the groundwater or create toxic runoff onto neighboring parcels, you're creating the "collusion" that Ron Paul assures us will only serve to ensure that the polluter will get away with it, or the "loss of personal freedom" that Jeb implies will inevitably arise from the regulation of industry.

Jeb, as a politician, saw his party cater to the legal drug dealers of his state - pain clinics that rake in millions of dollars legally selling pain medications to addicts from around the country - and failed to pass legislation that would have created a state system for tracking the prescription of scheduled medications. Such a database is an imperfect tool, but is one that can help the state track both doctor shopping by patients and the doctors who are most obviously selling prescriptions as opposed to practicing medicine. Perhaps, having seen the "folly" of such regulation, Jeb has come to believe that people should have the freedom to get intoxicated on the substance of their choice. More realistically, he came to understand that it's sometimes the most immoral, most repugnant businesses who have the deepest pockets for lobbyists and to find ways to buy off government officials who might otherwise limit their harmful practices.

Within that context, I have a difficult time not being cynical about Jeb's call for "Rules that sunset so they can be eliminated or adjusted as conditions change". The non-cynical interpretation is that he's proposing that we test how regulations work in practice and only renew them if they work as planned, and return benefits that exceed their cost. The cynical interpretation is that if you set a sunset period of, let's say, four years, every four years you get to return to the trough to be fed by the industry's lobbyists.

Meanwhile we are to pretend that regulations are never revisited, that nobody ever looks at costs and benefits, and that nobody can figure out how they work. Great hyperbole, and like any good lie containing a kernel of truth, but a lie nonetheless. Sure, there's always an element of uncertainty in the creation and passage of new regulations, and there are always regulations that continue long after their original goals are fulfilled. But it's absurd to pretend that industry doesn't figure out how to operate in a regulated environment, that its lobbyists are not consistently working to amend or revoke unwanted regulations, and that some of the zombie regulations live on because they benefit an industry, directly or indirectly subsidizing certain activities and operations. We can also easily look back on episodes of deregulation and see direct, negative consequences on industries, public welfare and the economy. For example, although Jeb would probably prefer that we not recall his brother Neil, whose reputation was shattered by his role in the Savings & Loan debacle, or how the more recent financial industry collapse was a repeat of the S&L collapse, on steroids, but it would take a fool to not see how deregulation played a significant role in both financial disasters.

With no apology for his hyperbole, Jeb tells us the horrors that will inevitably come from regulation:

We either can go down the road we are on, a road where the individual is allowed to succeed only so much before being punished with ruinous taxation, where commerce ignores government action at its own peril, and where the state decides how a massive share of the economy's resources should be spent.

You might believe from Jeb's first statement that, since his father was in the West Wing and Oval Office, taxes have been on the rise. But then there are those nasty facts - taxes went down significantly under big brother G.W., and have again been reduced under President Obama. If Jeb wants us to believe that we're on an inescapable downward spiral of regulation that can lead to nothing but higher taxes, the facts have a cruel way of raining on his parade. Now it is fair to say that our course is unsustainable - that the damage the G.W. Bush years, with their unfunded wars, entitlements and tax cuts, bloated budgets, stagnant wages and out-of-control spending did to the economy leaves us with no choice but to raise taxes. But none of that has a whit to do with regulation. And, as a good Republican, Jeb prefers to pretend that we can magic away all of that harm by eliminating regulations and cutting entitlements.

I'm not sure when we were last in a world in which commerce could avoid paying attention to government action. It appears that Jeb is unfamiliar with the U.S. Constitution and how it empowers the federal government to regulate interstate commerce, or how that regulation has facilitated commerce between the states. Or how he can be unaware that treaties and negotiations have facilitated commerce between nations. Even so-called "free trade" agreements are a form of regulation, not deregulation - rules and policies that both sides must follow in order to avoid tariffs. You don't believe me? Read NAFTA and... in a few hours, or perhaps tomorrow, when you're done, come back and explain to me how little it regulates.

As for Jeb's concern that the state "decides how a massive share of the economy's resources should be spent", well, let's take a look at the budget. The biggest expenditures are for Social Security and the military. Social Security is an insurance program, perhaps a redistribution of wealth but not the government deciding how the money is to be spent - the government may write the check but, as a beneficiary, you're free to spend your check as you please. (The same is true for income security programs such as unemployment). So is Jeb railing against military spending? Unquestionably, the government controls how every penny of the military budget is spent. But we know what would happen if we were to directly ask Jeb about military spending as the state deciding how a massive amount of money should be spent - we would get a word salad that boils down to "That's different."

But I'm (cough) beating around the bush. Jeb is talking about medical spending, and is implying that the Affordable Care Act's shifting around of the deck chairs on the Titanic amounts to deciding how the nation's healthcare dollars are spent. Never mind that for most people there will be no discernible difference between their health care or health insurance expenditures before and after 2014, or that the plan pushes money into the hands of private health insurance companies. Never mind that if "free markets" inevitably brought the efficiencies that people like Jeb promise, we would already have the cheapest, most accessible health care system in the world, while instead we have the highest costs in the world without a corresponding level of access or performance. Never mind that the ACA at least attempts to reign in medical inflation, and that without corrective action the present system will collapse.

The alternative to Jeb's imaginary parade of horribles is the "return" to a world that exists only in his imagination:

Or we can return to the road we once knew and which has served us well: a road where individuals acting freely and with little restraint are able to pursue fortune and prosperity as they see fit, a road where the government's role is not to shape the marketplace but to help prepare its citizens to prosper from it.

Would that be a road through which the son of a millionaire can become a millionaire Senator, and have a millionaire son who becomes President, and have a millionaire grandson who despite a track record of non-achievement can also become President while his more accomplished (but still not all that impressive) brother can become a governor who obviously hopes to also become President? Because the road is a lot tougher for the rest of us, and the Horatio Alger myth remains a myth. Jeb speaks of choice between "the straight line promised by the statists" (an allusion, perhaps, to equality?) that turns out to be "a flat line" and "the jagged line of economic freedom" (where you and I have our ups and downs, while brothers like Tripper and Tumbler - the Secret Service code names Jeb and George respectively earned as they staggered through their drunken young adulthood - emerge from their wastrel youth float into adulthood, buoyed by an inherited name, family fortune and political connections... but in fairness, Jeb did let us know, up front, that we need to let people enjoy "the fruits of... good luck".

So let's pretend that a return to the era of the robber barons, the age in which the Bush family fortune was first accumulated, will be an era of equal opportunity, of a rising middle class. Let's ignore that the greatest innovations in the world's history occurred in no small part through public-private partnerships of the modern era - NASA, ARPAnet, the Manhattan Project, military technology, etc. - and pretend that we would be better off in the era of child labor, violent union-busting, rampant inequality, and corrupt government. Because it would appear that to Jeb Bush, those are the good old days. Make the pie lower.

For the diminishing number of people who still believe that a new candidate can enter the Republican primaries and save the party from Mitt, sorry, it won't be Jeb. It's far too late for that. So why emerge from the woodwork now? To attempt to position himself as relevant and, should the economy stagnate for another four years, to point back on his essay with an "I told you so". Why offer an essay that is so lightweight, weakly reasoned, devoid of examples? For the same reason - in the event that the economy turns around, by leaving the meat off of the bones he's not making any statements that his future opponents might use against him.

Random Memories

When I was about ten, we had a "guest" of some sort come to our class with a project for us to complete. We were divided into groups, and each group received an envelope of pieces for a simple puzzle - but no one had all of the required pieces. Our task was to trade with other groups so that we could complete the puzzle.

When my group opened our envelope we found a large number of identical pieces, and two other unique pieces - well short of the number we needed to complete the puzzle. You're probably guessing at this point that the pieces were distributed randomly, so we could simply go around the room trading our large set of pieces for the others we needed. Wrong. Everybody already had that puzzle piece. And we couldn't trade our other pieces without ending up exactly where we started - no, there was no artificial scarcity of those pieces such that we might have been able to do a two-for-one trade. It was one-for-one at best, so a trade would leave us exactly where we started. So, basically, we sat out the exercise while we watched the other groups complete their puzzles.

We did have options, I'll grant, but none that would have worked in a controlled classroom setting. We could have "declared war" on another group to take the pieces we needed. We could have attempted to trick other groups out of their pieces ("I'll trade you the pieces you need, hidden in this envelope, for the following..."). We could have tried stealing. Or begging. In retrospect, a war might have been fun, but by now you've figured out that we were in an impossible situation.

As no explanation was provided to the class, once we were done I asked our visitor why we were given no chance of succeeding. I was told that the exercise was to demonstrate international trade, and that we were in the position of a "have not" nation. Perhaps that was realistic, as none of the "haves" even noticed that our group existed, but there was a bit of a problem: they also didn't notice that they were supposed to be learning something beyond the immediate exercise of trading puzzle pieces. Even within my group the lesson was far from obvious. I think, by virtue of my asking, I was the only person who was let in on the little secret of what we were supposed to have learned.

Many years later, I went to see a documentary with a group of friends. One asked, "What's the movie about?" The response, "A journalist in Haiti."

"Oh, then it has an unhappy ending."

"How do you know?"

"Because it happened in Haiti."

Going back to my elementary school exercise for a moment, I don't think you have to have any great amount of insight to recognize why a nation that has virtually nothing in the way of resources has a difficult time emerging from poverty. You can argue that some form of paternalism could help Haiti improve itself, and you would probably be right, but perhaps you shouldn't do so after glorifying the rise of the resource-rich, uber-authoritarian People's Republican of China. (Is it something in the water at the Times building?)

You can also argue that there's "no consistently proven way to reduce corruption" or increase growth; but that doesn't mean we can't figure out, in retrospect, why a particular nation has high levels of corruption or why it hasn't grown. You can talk about how Haiti and the Dominican Republic share a desperately poor island, but that the Dominican Republic is much less desperate in its poverty and "has trees", but to then switch topics to China, the Barbados and Harlem suggests an overt effort to avoid drawing any lessons from Haiti's history. It's not as if Haiti's trees one day decided things were better in the Dominican Republic and snuck across the border - there's a history there.

Perhaps you should also start by recognizing that people who are mostly concerned with getting enough food to eat aren't going to be listening to your moral disapprobations over their own stomachs, no matter how benign your paternalism or how misguided you believe their religion to be. China has the puzzle pieces. Harlem has the puzzle pieces. Even controlling for massive earthquakes, Haiti still has to beg.

It’s time to find self-confident local leaders who will create No Excuses countercultures in places like Haiti, surrounding people - maybe just in a neighborhood or a school - with middle-class assumptions, an achievement ethos and tough, measurable demands.

That shouldn't be too hard. I suspect Haiti actually does have enough middle class people to fill up, um, one neighborhood¹....

It's the darndest thing - sometimes a people's belief "that is life is capricious and planning futile" is borne of the fact that their world is miserable. Sure, you have Nick Kristof to occasionally tell you of the glories of child sweatshop labor as a means to rise... if not out of poverty, at least away from the need to sell your children or prostitute yourself. But when companies decide to move their factories out of Haiti to the relative stability of China, where does that leave you?
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1. I exaggerate, but:

Haiti is the poorest country in the Western Hemisphere with 80% of the population living under the poverty line and 54% in abject poverty.
* * *
Household income or consumption by percentage share:
* lowest 10%: 0.7%
* highest 10%: 47.7% (2001)

Free Trade

McCain backer Dan Schnur has an editorial in the Times in which he ridicules Clinton and Obama for pandering on free trade.

Barely a footnote in the Democratic debate throughout most of 2007, trade has emerged more recently as perhaps the key defining policy distinction in Tuesday’s Ohio primary. One of the most important Democratic gains in recent years has been among financially secure and highly educated voters, most of whom understand the benefits of a global economy. A prolonged argument on trade policy between Senators Clinton and Obama could put those voters in play again in the fall.

Well, probably not. Because well-educated, financially secure people understand the difference between campaign trail hyperbole and what will actually happen when either candidate, if elected President, assumes office. I don't much care for the pandering, but it probably resonates with targeted voters better than is McCain's admission, "globalization will not automatically benefit every American". (They already know that.)

The danger for a protracted struggle between Senators Clinton and Obama is not that the party will fail to unify. Rather, the real threat is that the two candidates will continue to move leftward to try to win over voters in the remaining primary states, not just on trade policy but on other issues as well.

It's always good for a Democrat to follow the advice of a Sicil... er, McCain backer.

Had John McCain lost the Texas primary to Mike Huckabee on Tuesday night, he would still eventually have become the Republican nominee for president. But after another month or two of competing with a fundamentalist minister for primary votes, Senator McCain probably would have had to put James Dobson on the ticket with him and give his convention speech in tongues to turn out conservatives in the fall.

Actually.... Dobson has already declared that he would rather sit out the election than support McCain and, with nothing to fear from Huckabee, McCain has chosen to embrace Hagee. I doubt McCain will speak in tongues at the convention, but if he thinks it will make the difference he needs....

I don't argue with Schnur's (professed) hope that Clinton and Obama avoid escalating their "anti-trade sentiments", but I have to wonder¹ if his real fear is for them, or is it concern that their continued emphasis will highlight McCain's competing stance of, "Many workers will suffer and good jobs will continue to disappear, but free trade is good for everyone else."
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1. This is a rhetorical flourish. I think we can reasonably infer Schnur's intent. Paul Krugman highlights the real risk to the Democrats, and perhaps especially Obama - that anti-NAFTA talk will be viewed as disingenuous.

Trade Deficits and Health Care

In an unsigned editorial the New York Times opines,

The Democrats need to take a more pragmatic view of the lopsided trade situation. The surest way to make American businesses more competitive — and workers more secure — is to resolve the nation’s health care mess. And the government needs to update and strengthen the safety net for workers who are hurt by global competition.

One of the joys of the unsigned editorial is that the author can express half-baked ideas with absolute certainty. But what do those suggestions mean? How do you "strengthen the safety net for workers who are hurt by global competition"? Train experienced workers to gain entry level jobs at a fraction of their former salary? Extend unemployment benefits?

As for national health care, the last time the Democratic Party made that a priority it was, to put it mildly, unsuccessful. The problems of establishing universal health care have been discussed and debated countless times. It may well be that "resolving the nation's health care mess" will help keep U.S. plants open, help keep existing jobs in the U.S., and help attract new jobs which might otherwise have been created in foreign nations. But what solution do you choose? And how do you implement it?

I suspect that if the author had any solid ideas, they would have been shared - perhaps under a byline. As it stands, as is quite typical of unsigned editorials, it attempts to define the way the world should be then leave it to others to figure out how to make it happen.

Flabby Body, Flabby Brain?

Today, Thomas Friedman laments that America is on the decline.

I have been thinking about [the virtues evidenced by Lance Armstrong and his Tour de France team] lately because their abilities to meld strength and strategy - to thoughtfully plan ahead and to sacrifice today for a big gain tomorrow - seem to be such fading virtues in American life.

Sadly, those are the virtues we now associate with China, Chinese athletes and Chinese leaders.

Okay... so the virtues which caused American athlete Lance Armstrong to win the Tour de France are the virtues Mr. Friedman associates with China's Tour de France team? Um... I can't seem to find it. Or perhaps he means their programs to identify potential athletes at a tender age, remove them to boarding schools where their skills can be nurtured, and have many of them participate at the highest levels in international competition. Granted, that's not the way we do things here, but that's also not likely to change.

But what in the world does he mean with his apparent hero worship of "Chinese leaders"? Is Mr. Friedman aware that China is a totalitarian, communist nation? Please, even if you are enamored with what can be done with that type of power and control, don't wish that leadership upon me.

Talk to U.S. business executives and they'll often comment on how many of China's leaders are engineers, people who can talk to you about numbers, long-term problem-solving and the national interest - not a bunch of lawyers looking for a sound bite to get through the evening news.

Isn't this the same thing we heard about Japan's industrial leaders back in the 1980's? My, how things change.

We are now playing defense. A top C.E.O. wants to be paid not based on his performance, but based on the average of his four main rivals! That is like Lance Armstrong's saying he will race only if he is guaranteed to come in first or second, no matter what his cycling times are on each leg.

Mr. Friedman seems to believe that it is news that American CEO's obtain contracts which require them to be paid more than the industry average. But benchmarking is old news and, while it certainly has played a major role in the exhorbitant compensation packages paid to many CEO's, should be recognized as such. I am not arguing that bloated executive salaries help companies - it often seems more like legalized looting of stockholders' investment. I will certainly concede that such compensation packages are much less likely under a communist government. But it is far from a new phenomenon.

I recently spent time in Ireland, which has quietly become the second-richest country in the E.U. ...

How are we defining "richest" - because by GDP, Ireland is about 16th on the list, behind such nations as Denmark, Portugal, and Greece - and way behind Germany, France, Italy, Spain and the U.K. Of course, Friedman is speaking of "per capita GDP", where Ireland recently became second only to Luxembourg among EU states. I'll give Ireland credit for its accomplishments - we could do much of the same here, for faltering and impoverished regions of the country, if we chose. It took a great deal of investment and effort, and a great deal of E.U. grant money, to pull Ireland up by its bootstraps. But we have different spending priorities.

Wouldn't you think that if you were president, after you had read the umpteenth story about premier U.S. companies, such as Intel and Apple, building their newest factories, and even research facilities, in China, India or Ireland, that you would summon the country's top business leaders to Washington ask them just one question: "What do we have to do so you will keep your best jobs here? Make me a list and I will not rest until I get it enacted."

We have a trade policy which favors large, multinational corporations. It would take a rather dramatic transformation of that policy before the Bush Administration asked corporations to look beyond their bottom line, and advanced policies to keep jobs and factories here.

Instead [of forming policy to significantly reduce our dependence on oil] we are about to pass an energy bill that, while it does contain some good provisions, will make no real dent in our gasoline consumption, largely because no one wants to demand that Detroit build cars that get much better mileage. We are just feeding Detroit the rope to hang itself.

Ah yes - the allegorical "Detroit", where cars are made, as opposed to the real one where they used to be made. Ford, GM, Daimler-Chrysler... aren't they all now Delaware corporations? But I thought the comparison was to China, which itself is increasingly dependent upon oil. Or perhaps to Ireland, which as of 2002 was the 7th most oil-dependent economy in the world, and third-most-dependent in the E.U. Perhaps we should segregate economic issues from the largely theoretical notion that if we were less dependent upon oil, terrorists would be less of a threat.

And if you were president, would you really say to the nation, in the face of the chaos in Iraq, "If our commanders on the ground say we need more troops, I will send them," but they have not asked.

No, I wouldn't. But if I were a columnist for the New York Times, even when addressing such a duplicitous comment, I wouldn't pretend that the President could wave a magic wand and conjure troops from thin air.

Oh, well, maybe we have the leaders we deserve. Maybe we just want to admire Lance Armstrong, but not be Lance Armstrong. Too much work. Maybe that's the wristband we should be wearing: Live wrong. Party on. Pay later.

I realize that Mr. Friedman is speaking metaphorically - I don't expect that he will be donning spandex and mounting a racing bike any time soon. But what does he expect? Apparently, he only just woke up to the problem of runaway executive pay, and hasn't even noticed that "Detroit" has become a mere metaphor for the auto industry. It would be great if the rest of the nation were two steps ahead of him, and energized to press our leadership to revitalize depressed areas of this nation. Sure, we should reconsider tax policies which result in the starvation of our public universities, and deterioration of our nation's infrastructure. But how do we get there from here? It's much easier to identify a problem than it is to solve one.

If There's Something Worse, Anything's Better?

In a continuation of yesterday's comments, another thing occurred to me while I was reading Kristof's column on Cambodia and sweatshops. Southeast Asia is notorious for its sex industry. As Thailand has tried to legitimize itself and to seem "safer" for tourists, it has worked to diminish some of the less savory aspects of its sex industry. These elements are setting up shop in Cambodia.

If we were to tweak Kristof's column a bit:

I'd like to invite George Bush and the other Republican puritans to come here to Cambodia and discuss "morality" with scavengers like Nhep Chanda, who spends her days rooting through filth in the city dump. One of the most unfortunate trends in the Republican party has been the way nearly all of the major voices, including the President, have been flirting with anti-prostitution positions by putting the emphasis on human rights standards in international agreements.

My guess is that they sincerely believe that such policies would help poor people abroad — and that's why they should all traipse through a Cambodian garbage dump to see how economically naïve shutting down Cambodia's brothels would be. Nhep Chanda, age 17, averages 75 cents a day for her efforts. For her, the idea of being exploited in a brothel — working only six days a week, inside instead of in the broiling sun, for more than $2 a day — is a dream.

All the complaints about third world brothels are true and then some: they use child prostitutes, foster drug addiction, and spread disease. But they have raised the standard of living in the Philippines and Thailand, and they offer a leg up for people in countries like Cambodia. In Asia, moreover, the brothels tend to hire mostly girls and young women with few other job opportunities. The result has been to begin to give girls and women some status and power, some hint of social equality, some alternative to picking garbage or working in sweatshops. The fundamental problem in the poor countries of Africa and Asia is not that brothels exploit too many workers; it's that they don't exploit enough.

I'm not intending this to be a fair criticism of Kristof - he specifically recites the sex industry as a source of employment that the sweatshops permit women to avoid. But once you get past issues of "morality", his arguments seem to apply equally in both contexts - and he seems quite willing to set aside issues of morality in the context of the conduct and operation of sweatshops.

Comments

Globalization and Sweatshops

A couple of years ago, I had the privilege of visiting the ancient Khmer temples in Cambodia, the most famous of which is Angkor Wat, but also lesser known temples such as the amazing Angkor Thom City and Bayon, and the amazing Banteay Srei. Huge numbers of tourists flock to Siem Reap to see these ancient temples, and there is an incredible amount of hotel construction in that small city. The most expensive hotels are costly even by western standards, and the cost of a night's stay in a standard room at the five star Sofitel Royal Angkor is scarcely less than a typical Cambodian earns in a year.

It is impossible to visit the temples without observing Cambodia's poverty, as people live in an astonishing density along the roads into the temple region. The typical home is a single room, elevated from the ground to accommodate the high water levels of the rainy season, which may house a sizeable family. Anywhere there is standing water, somebody is growing rice. Many of these houses are along a small river, but although the water has many domestic purposes it is not by any standard safe or potable. A more affluent family, not likely to live in this area, may have a motorcycle, and it is not unusual to see an entire family riding a single motorcycle - mom, dad, and three or four kids. Even among the healthier and more successful adults, you can often see the effects of the mass starvation which occurred under the Khmer Rouge, or the chronic malnutrition that exists among the poor - you see relatively short adults with small frames and heads which seem disproportionately large for their bodies, a permanent reminder of their malnourished childhoods. When you learn the age of children, it is frequently surprising to realize how much smaller the typical Cambodian child is than is a typical child of a similar age in Thailand or Vietnam (let alone the U.S.)

As you close in on Angkor Wat, you have to pass many vendors with small booths, selling a variety of trinkets. At most temple sites, you are likely to be mobbed by children trying to sell you post cards and Wrigley's gum. (Many of these children have amazing contextual language skills for selling their wares - sufficient fluency in English, German, French, and Japanese, and probably one or two other languages, to make their sales pitches, attempt some emotional manipulation, and negotiate price.)

Within some of the temple areas, you will see Cambodian victims of land mines, often playing music to try to earn donations from visitors. An amputee in a nation like Cambodia has virtually no job prospects, and the government is apparently teaching many how to play traditional instruments so that they can raise money from tourists in a more internationally palatable manner than through begging. If you choose to go a bit off the beaten path, you can visit the war museum, or the landmine museum, where the extent of mining and the impact on the population is made plain. While at the temple sites you are most likely only going to see adult victims of landmines, at the landmine museum you will meet children with missing limbs. Many limbs were lost not only during periods of warfare, but in subsequent periods where the hope of scavenging items to sell or of harvesting tropical woods led the locals to enter areas which they knew to be heavily mined, in the hope of earning some money. You won't see any of the tropical rain forests that once dominated the region, save for a few trees of astonishing size which have grown around some of the walls in Angkor Thom City - the giant trees have been harvested and sold.

Cambodia's climate can be difficult for westerners, as it is hot and extraordinarily humid. A rain can seem cooling, but after the rain stops the precipitation evaporates from the ground and the humidity increases significantly. Flying into Cambodia, as your plane lowers to land many of the structures on the ground appear water worn from the heavy rains and flooding of rainy season. If you do a bit of reading on the country, you will learn that the climate is also very difficult on the nation's poor - which, sadly to say, is pretty much everybody. Impoverished children and adults suffer from frequent lung infections, which can have a significant cumulative effect on lifespan. Due to the close proximity of housing, it would be difficult to contain even a mildly infectious disease before it rippled through a community.

There's a certain naivete to the population, which appears to emerge in no small part from the loss of so many educated adults during Pol Pot's purges - in essence, a nation of children and teenagers was left to fend for itself. When we stopped at a small holocaust memorial, around which a group of very small children were playing "hide and seek", our tour guide commented in an almost off-hand manner, "We had a killing field here. A small one." There was no apparent concern about the conduct of the Hun Sen government, and I saw no sign of resentment that the best road in Siem Reap was sealed from local traffic - it was reserved exclusively for the King's use should he visit the city.

There is a lot of ambition among Cambodians - they see the opportunity for a better life - and there are many schools which offer to teach English to the locals, an artisan's school which teaches the creation of traditional crafts and stonework which may be sold to tourists, and there are certification programs for tour guides. (A certified tour guide will be competent in the language of his or her clients, will know the history of the temples, and will know the best locations for photographs.) Cambodians proved to be a very welcoming people, and remarkably upbeat. Their resilience is amazing, even if you don't know the nation's history of war, occupation, and genocide.

When I read Nicholas Kristof's column, "Inviting All Democrats", in which he described his visit to the Cambodian capital, Phnom Penh, and his observation of the poor trying to survive by scavenging in a garbage dump, I can't say I was surprised by the economic conditions he described. I did not visit Phnom Penh, but I understand that its poverty goes well beyond that of Siem Reap, and that it has developed an enormous slum region where the poor have congregated in an effort to find a better life in the city. In addition to disease, poverty, and malnutrition, these urban poor also face risk of fire and at times violent confrontation with the police. (Some might note that this type of circumstance is not unique to Cambodia - that description could as easily have been of a slum area in Guatemala City.)

There seem to be two major arguments about global trade policy. One is that worker rights and wages should be dictated by "market forces" (or even suppressed through global trade organizations), such that the people of the developing world can have access to jobs in what we would deem "sweatshops". The counter-argument is that the industrialized world should impose some form of minimum wage, working condition, and environmental conditions on the developing world - whether premised on protecting domestic jobs, or out of concern that multinational corporations are exploiting the world's poor in a manner not likely to help them or their nations pull out of poverty. With self-serving special interest groups backing both sides of the argument, it can be difficult to discern which approach is ultimately best for the people.

Kristof suggests that it is more altruistic to allow expansive sweatshop labor than to regulate the developing world in a manner which might dissuade multinationals from manufacturing goods in nations like Cambodia:

The Democratic Party has been pro-trade since Franklin Roosevelt, and President Bill Clinton in particular tugged the party to embrace the realities of trade. Now the party may be retreating toward protectionism under the guise of labor standards.

That would hurt American consumers. But it would be particularly devastating for laborers in the poorest parts of the world. For the fundamental problem in the poor countries of Africa and Asia is not that sweatshops exploit too many workers; it's that they don't exploit enough.

A politically partisan response is that the impact of the regulation proposed by politicians such as Gephart are not likely to have any greater impact on the developing world than the apparent "weak dollar" policy and legal and illegal tariffs imposed by the Bush Administration. But that partisan tit-for-tat really doesn't interest me.

In a nation like Cambodia, where the economic conditions are dire, it is a bit simplistic to say that "given the choice of two evils, who are we to take away the lesser". There are echoes in Kristof's voice, I'm sure, of the sentiments of the factory owners from the British industrial revolution, rationalizing why it was okay to open the world's first sweatshops to improve the lot for England's poor - and yes, how obvious it was that if the alternatives were better, people would seek them. It was minimum wage and maximum hour laws, as well as laws granting a right to collective bargaining, which elevated the industrial world's workers out of similar conditions. While there is a fundamental truth to the argument that if sweatshops were worse than the alternative, people wouldn't work in them, I am not as quick as some to begrudge the workers of the developing of legal rights and benefits similar to those which helped create a prosperous middle class in the developed world, particularly in the name of "helping the poor" of those nations.

There's a certain obscenity in Nike's willingness, at the drop of a dime, to move production to the nation with the lowest labor cost, while simultaneously entering into $100,000,000 endorsment contracts with domestic celebrities. While Kristof notes that there is a loss to a nation which loses a sweatshop to a cheaper labor market, that already happens. The goods produced in the sweatshops he applauds in Cambodia were likely formerly produced in sweatshops in Thailand and Vietnam, before Cambodia became sufficiently stable that its population could be put to work. Next stop, Laos - or perhaps Burma, where the government will certainly be helpful in squelching any worker unrest.

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"Conservative" Protectionism

It is interesting to observe what passes for the far left and the far right in this country, when it comes to "free trade". On the wacky left, we have the "anti-globalization" activists who stand for... well, I'm not sure what they stand for, but they're against "globalization." Another more moderate faction of the left believes that free trade can help impoverished nations develop and provide better lives for their people. The wacky "right" preaches "free trade" for U.S. exports and trade barriers for foreign imports. A more moderate faction of the right preaces self-interest - that we should use trade barriers to protect domestic industries, and to force developing nations to sell us raw materials for us to turn into manufactured goods as opposed to allowing them to develop their own manufacturing industries - moderated, of course, by third world sweatshops where labor-intensive goods can be made at a low cost. (Please don't get me wrong here - a majority of Democrats seeming falls into the category of the "selfish right" when it comes to trade issues.)

These self-interested efforts by the right can at time seem cartoonish, such as legislating that Vietnamese catfish can't be sold as "catfish" in American stores and restaurants, but simultanously (and fraudulently) claiming that Vietnamese catfish farmers were "dumping" their products at below-market prices to the detriment of domestic catfish. Whether or not Vietnamese catfish are or are not "catfish", it seems, depends upon which classification furthers the government's immediate protectionist goal.

These days, President Bush seems to waver between the wacky right and the self-interested right. Although I guess it could be argued that his wackiness is motivated by a different form of self-interest - the goal of buying votes in swing states through the imposition of illegal trade barriers. (William F. Buckley reminds those who hate the World Trade Organization that the U.S. was a leader in its creation, and, of course, "If the idea is free trade, then somebody has to have the authority to rule that you're cheating.") If you have recently heard Tom Usher complaining about the repeal of steel tariffs, consider whether his fund raising efforts and participation in a Bush Administration transition team played more of a role in the imposition of those tariffs than did actual need.

As a result of this renewed focus on trade barriers, there have been some interesting articles and editorials on the issue of U.S. agricultural subsidies. The New York Times editorialized about cotton subsidies, noting that some of the rules which permit first world agricultural subsidies are due to expire next year. It also notes that, despite those rules, the Bush Administration has nonetheless granted improper subsidies for U.S. cotton:

American cotton costs a great deal to produce by international standards. Yet even though global cotton prices were crashing from 1999 to 2002, our share of global exports grew to 40 percent, from 25 percent. That was because Washington propped up King Cotton with $12.9 billion in subsidies. We were, in effect, paying the rest of the world to buy American product rather than the cheaper cotton grown in Africa and South America. In recent arguments in its W.T.O. case, Brazil offered credible expert testimony that absent Washington's subsidies, America would have exported some 40 percent less cotton. That actually seems like a conservative estimate. Still, it illustrates the magnitude of the injustice being perpetrated against poor nations for which cotton might be the only competitive export.

Similar attention is being directed at sugar subsidies which, though legal, massively raise the price of sugar for U.S. consumers. (We don't really notice, because sugar remains cheap even at "twice the price".)

One of the problems with subsidies is that, once they take root, it is very hard to eliminate them. At the start of World War II, concerns over the supply of beeswax, used to seal munitions for overseas shipment, led to subsidies for bee farmers. Those subsidies remain in place. Jimmy Carter's family became wealthy as "gentleman farmers" growing heavily subsidized peanuts. While states collect billions of dollars from the tobacco industry's settlement of their suits over health care costs caused by smoking, we continue to subsidize tobacco farmers. It has been suggested that, had Congress taken its present approach to failing industries during the 19th Century, we would still have blacksmith shops - and that argument is compelling.

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Steel and Orange Juice

Unsurprisingly, the Bush Administration's duties on steel imports have been declared illegal by the WTO, setting up a possible U.S.-European trade war in the event that they are not revoked by December 15.

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