Is free trade good or bad?

[Sir Og]

Sweatshops aren't good, but they may be somewhat less bad than other imminently existent alternatives.

A worldwide minimum wage and/or earned income credit (phased in) that resulted in all jobs paying decent wages would be good. Worldwide so that rather than a race to the cheapest labor, jobs could go where the workforce was most qualified and transport of materials and goods to market made the most efficient use of energy.

The problem with wages and work conditions is one that gets resolved automatically without the need for minimum wage laws. If anything these laws would hurt people in poor countries.
Look at China. They have rising wages and constantly improving working conditions as they become richer. They are not stuck at sweatshops.
Even the environment will start improving as they keep getting richer. People will stop putting up with the bad air and water quality.

[giblets]

Interpreter?

DURKA DURRR!

[Aeson]

The problem with wages and work conditions is one that gets resolved automatically without the need for minimum wage laws. If anything these laws would hurt people in poor countries.
Look at China. They have rising wages and constantly improving working conditions as they become richer. They are not stuck at sweatshops.
Even the environment will start improving as they keep getting richer. People will stop putting up with the bad air and water quality.

No, it has not ever shown itself to be resolved automatically. Perhaps at some point in the future free markets will achieve the thing they've been touted as doing, but it hasn't happened yet. In the richest countries there are more stringent worker protection laws and higher minimum wages and/or better labor unions. We know for assurity that it's possible to reach ~full employment while having minimum wage, labor unions, and wages at something approaching a decent (from a middle class standpoint) ... we have yet to have an example of such an economy bereft of them.

The only negatives associated with better worker protections is the possibility of industry fleeing to areas where there are less worker protections. But if worldwide there are no cheap labor pools to flee too, industry would stay where it was most efficient to produce in relation to supply chains and markets.

The sad truth is that worldwide we have been losing ground in absolute numbers in poverty. In 1960 there were 3 billion people in the world. Now there are over 3 billion people who live on $2.50 a day or less. Certainly there have been vast improvements in that time in technology ... yet we haven't applied it very well at all.

The absurdity of the whole thing is we have the tools to fix it, we all would be better off if we fixed it, even those billionaires who make their fortunes moving production to cheap labor pools would be better off given billions of more affluent consumers to sell to (and how that interacts with economy of scale). Yet we (as humanity) choose xenophobia and a what essentially amounts to a massive worldwide depression (compared to where we easily could be) over our own self-interest.

[Lorizael]

I guess it's better than unfree trade. But if trade is not free, you can read "free trade!" as imperative.

Well, there ain't no such thing as a free lunch. So if it's like a ham sandwich that's being traded, it's not free.

[pchang]

Free trade is great for buyers. But, It puts pressure on producers. If you want to be a winner, you need to produce stuff people want that others cannot produce as well as you can.

[Kidlicious]

Free trade is great for buyers. But, It puts pressure on producers. If you want to be a winner, you need to produce stuff people want that others cannot produce as well as you can.

Which means that all winners control prices, whether the govt protects them or not.

[Gertrude]

The problem with wages and work conditions is one that gets resolved automatically without the need for minimum wage laws. If anything these laws would hurt people in poor countries.
Look at China. They have rising wages and constantly improving working conditions as they become richer. They are not stuck at sweatshops.
Even the environment will start improving as they keep getting richer. People will stop putting up with the bad air and water quality.

I'm afraid that is merely theoretical without sufficient evidence to support the contention that wages will automatically rise. A theory espoused by libertarian economists such as Hayek and von Mises of the Austrian Neo-classical School and hardly anyone else.

The wage rises we see for the bulk of the workforce in the industrialised countries appears to have been helped along by trade unions and minimum wage laws.

And china has no shortage of sweatshops.

[Gertrude]

Free trade is good. There might be individuals who are harmed but overall the effect is positive. The fashionable Autor at al. study does not show that free trade is bad. It only show that it is possible to find individuals who are harmed by trade. It does not show in any way that free trade is bad overall.
The effect of trade is similar to the effect of technological progress. I guess people who think tech progress is bad would be against trade too.


Even sweatshops seem to be good because people seem to prefer them over the alternatives.

The individuals who are harmed can not be expected to be pleased about the consequences. if too many individuals are harmed, or think they have been harmed, you may expect political instability to eventuate.

It does not mean they were actually harmed. They may merely be, as giblets pointed out, blaming free trade.

[pchang]

Which means that all winners control prices, whether the govt protects them or not.

Non-sequitor man strikes again.

[Kidlicious]

Non-sequitor man strikes again.

Since I wasn't arguing with you that's a strawman.

[Ben Kenobi]

A worldwide minimum wage and/or earned income credit (phased in) that resulted in all jobs paying decent wages would be good. Worldwide so that rather than a race to the cheapest labor, jobs could go where the workforce was most qualified and transport of materials and goods to market made the most efficient use of energy.

What you'll see is that inflation will adjust to accommodate the raise and buying power will remain unchanged.

[Aeson]

No. Even if you take an obviously false zero sum view on the world economy, it would still clearly be redistribution ... changing relative buying power. It would eliminate some jobs for sure.

It's not zero sum of course, but that's the closest you can get to your conclusion that it wouldn't change anything.

Some of the more obvious effects:

- industry would locate based on efficiencies in transport and productivity of workforce, rather than in cheapness of labor. This frees up raw materials and energy resources for use elsewhere. It rewards skilled labor rather than cheap labor.
- industries which can be automated more cheaply than hiring workers at decent wages will be automated, as they should be. This frees up labor to be working elsewhere to meet the new increased consumer demand as well as creating higher paying jobs in robotics, engineering, etc.
- working class would have higher wages relative to the rest of the economy, allowing them to consume more. This increases demand for almost all goods and services. (Very high end luxury items may initially see a fall in demand as those who profit by exploiting cheap labor, and are incapable of transitioning competitively, see their profits fall.)
- increased demand for goods and services leads to more jobs in producing those goods and services increasing competition for labor, increasing wages further.
- prices of goods and services that have limited resource implications become more expensive, increasing profits of all resource extraction at some point in the supply chain ... at least until the reduced usage reaches the point they are no longer limited. (And become part of the next item)
- prices of goods and services that have lesser or no limited resource implications become more attractive to consumers, pushing consumption towards more sustainable composition.
- those who create and sell digital goods will see massive increases in sales and profitability.
- those who invest in R&D of viable products will see an increase in their profitability due to R&D costs being essentially static, while units sold will go up.

There is a reason that in a healthy economy most jobs pay > minimum wage ... and a reason we've never seen such an economy develop that didn't first have minimum wage/unions (or in rare cases, mineral wealth shared across the population) to get the majority of people to a healthy level of consumption. Once an affluent consumer class is created free markets and capitalism are very, very good at providing goods and services. Without a working class with a healthy wage you run into a problem ... You can't profit off selling things to people who have no money. So you don't need to hire people to produce things to sell to people who have no money. So you don't hire the people who have no money. So they remain having no money. Thus why we have 3 billion people in the world who essentially have no money.

Imagine how much money Apple, Microsoft, Google and the rest could make with 3 billion more affluent consumers to sell to ... and all the jobs they'd create to meet that demand for their goods and services.

[Kidlicious]

No. Even if you take an obviously false zero sum view on the world economy, it would still clearly be redistribution ... changing relative buying power. It would eliminate some jobs for sure.

It's not zero sum of course, but that's the closest you can get to your conclusion that it wouldn't change anything.

Some of the more obvious effects:

- industry would locate based on efficiencies in transport and productivity of workforce, rather than in cheapness of labor. This frees up raw materials and energy resources for use elsewhere. It rewards skilled labor rather than cheap labor.
- industries which can be automated more cheaply than hiring workers at decent wages will be automated, as they should be. This frees up labor to be working elsewhere to meet the new increased consumer demand as well as creating higher paying jobs in robotics, engineering, etc.
- working class would have higher wages relative to the rest of the economy, allowing them to consume more. This increases demand for almost all goods and services. (Very high end luxury items may initially see a fall in demand as those who profit by exploiting cheap labor, and are incapable of transitioning competitively, see their profits fall.)
- increased demand for goods and services leads to more jobs in producing those goods and services increasing competition for labor, increasing wages further.
- prices of goods and services that have limited resource implications become more expensive, increasing profits of all resource extraction at some point in the supply chain ... at least until the reduced usage reaches the point they are no longer limited. (And become part of the next item)
- prices of goods and services that have lesser or no limited resource implications become more attractive to consumers, pushing consumption towards more sustainable composition.
- those who create and sell digital goods will see massive increases in sales and profitability.
- those who invest in R&D of viable products will see an increase in their profitability due to R&D costs being essentially static, while units sold will go up.

There is a reason that in a healthy economy most jobs pay > minimum wage ... and a reason we've never seen such an economy develop that didn't first have minimum wage/unions (or in rare cases, mineral wealth shared across the population) to get the majority of people to a healthy level of consumption. Once an affluent consumer class is created free markets and capitalism are very, very good at providing goods and services. Without a working class with a healthy wage you run into a problem ... You can't profit off selling things to people who have no money. So you don't need to hire people to produce things to sell to people who have no money. So you don't hire the people who have no money. So they remain having no money. Thus why we have 3 billion people in the world who essentially have no money.

Imagine how much money Apple, Microsoft, Google and the rest could make with 3 billion more affluent consumers to sell to ... and all the jobs they'd create to meet that demand for their goods and services.

Yes, it would. The price of goods and services are primarily determined by the cost of labor required to produce them. The jobs that would be lost would be jobs in underdeveloped economies.

[Sir Og]

I'm afraid that is merely theoretical without sufficient evidence to support the contention that wages will automatically rise. A theory espoused by libertarian economists such as Hayek and von Mises of the Austrian Neo-classical School and hardly anyone else.

The wage rises we see for the bulk of the workforce in the industrialised countries appears to have been helped along by trade unions and minimum wage laws.

And china has no shortage of sweatshops.

Here is what wages in China look like.


Don't tell me this wage growth was thanks to unions and minimum wage laws. It sure looks like natural wage rise as the country becomes richer. It perfectly coincides with China's involvement in world trade too.

Note that this is a 7 fold increase in wages for over a billion people. This is a massive benefit that surely outweighs the loss from whatever nice union jobs were lost in the US. And US jobs were not exactly lost. US unemployment is bellow 5% right now.

[pchang]

People like Kid don't care about others. He thinks that that extra $4000 per Chinese worker should have been turned into an extra $12,000 for him (assuming there are 3 Chinese workers per US worker). This is all based on his zero sum view of the world.