You Down with TPP? Why not, G?

I’d be interested in hearing concrete arguments against free trade agreements in general. I am not sold either way, but it’s not material for someone to say the TPP (for example) is a “job killer” or “wage killer” or whatever, unless it is explained exactly how that will occur under the agreement in question. I get the concept – that free trade agreements mean transnationals can move production/labor to the “lowest bidder” on wages and conditions. The notion is, this drives down wages and working conditions to the “very worst” acceptable conditions that the international labor market will bear.

Definitely not desirable! But it’s not helpful to condemn free trade for these theoretical “bad” outcomes without also examining the alternative, and how “good” those outcomes will be. The alternative to free trade is protectionism. Possibly Trump’s biggest appeal, and a major appeal for Bernie, is in promising new protections for American workers in the form of tariffs on foreign goods. What do tariffs do? Well, they are the opposite of “free” trade, so what they do is restrict trade. For example, the U.S. places a “burdensome” tariff on cheap Chinese auto parts – these auto parts become too expensive to buy in America, so the idea is that Americans will now buy the American-made auto parts and support American workers rather than Chinese workers.

Well, heck, why not?

Under pressure from the flagging domestic steel industry in the 1980s, you may recall, the U.S. slapped tariffs on Japanese steel imports. The American industry had been in a steady decline, largely due to inefficiencies in process and wasteful management practices that drove up the wholesale cost of U.S. steel compared to competitors. The U.S. steel people painted it as Japan “flooding” the market with “cheap” steel. But the Japanese had innovated new, more efficient manufacturing processes, and could produce steel faster and cheaper than U.S. mills stuck in a “monopoly” frame of mind. Japanese steel was “cheap” but not in the way the industry implied. It was better, and it cost less.

We all know what happened to the U.S. steel industry. Far from being “protected”, only its outmoded production and management models were protected – for a time – until the world market dried up for (lower quality) U.S. steel. Japan could produce a better product for less money, so everyone bought Japanese steel and nobody (except Americans) bought U.S. steel. The industry collapsed in spectacular fashion.

But that’s far from the whole story. The modern world economy is not about widgets – it’s about innovation and adaptability, about supply chains and logistics, communication and coordination across continents. That’s just. The way. It is. No matter what American policy is or is not implemented, this truth will not change for the rest of the world. Bernie (and Trump if he had the wits) likes to talk about “thousands” of U.S. plants “shuttered” because of NAFTA, and “millions” of jobs lost. OK. But let’s examine that connection. Both happened – but is NAFTA the cause, or the symptom, of a worldwide global recession? When plants close, is it always the fault of some trade agreement that was struck somewhere? Of course not. Just look at the steel industry – it failed for the opposite reason, because the U.S. rejected fair trade and reaped the whirlwind.

And what about all those job losses? One would assume that if NAFTA and other trade agreements are the cause, then countries not engaged in free trade should be doing better. Except they’re not. A fact we should all memorize during this fact-free 2016 presidential campaign: the U.S. economy today is in far better shape than literally every other industrialized economy in the world.

Once again: the U.S. economy today is in far better shape than literally every other industrialized economy in the world.

So let’s look at Pittsburgh. Two decades after the final tolling of the bell for steel, Pittsburgh is resurgant, with a vibrant new economy centered on education and the service industry.

The point is there was no future for steel – but there’s a future for what Pittsburgh actually CAN do better than foreign competitors. And now they are doing it.

What’s more, all of the statistics I am seeing point to a resurgance of manufacturing in the U.S., not the decline we are used to assuming (which was due to the GLOBAL Great Recession, not particular American trade policies). Companies with offshore operations are coming back, for a variety of reasons, and one of them is the leveling effect of free trade. Because other nations’ wages and quality of living tend to rise with increased trade leverage, their attractiveness to transnationals is diminished. American companies operating abroad have to weigh not just labor costs, but labor costs coupled with logistics (for raw materials and delivery back to the U.S.) and local laws they must obey, as well as supporting multiple infrastructures and a foreign work force. If wages get too close to parity, the offshore option starts to look like a burden rather than an advantage.

And let’s not forget that foreign industries have gone “offshore” by building plants right here in America. Mercedes, Fiat, Toyota, Honda, etc. Why? Good workers at competitive wages. Had we instituted “protections” for the domestic auto industry, those factories would probaby be somehwhere else. So when tariffs are not at issue, the U.S. can also be on the receiving end of transnational offshoring.

I believe free trade is quite a separate argument from the real reason American blue-collar and service workers are feeling betrayed. They are feeling betrayed by their own corporate leaders, who for the past 15 years or more have opted to turn massive productivity and automation gains into corporate cash rather than funnel it back to the rank-and-file workers who earned it. Basically, productivy and profit curve goes up, and the wage curve stays flat or goes down – workers know this. And they don’t like it. They know they are being shafted by corporations who no longer feel a need to compensate them fairly. Part of this is a hangover effect from the Great Recession – high unemployment is a corporate warm fuzzy. They get to dictate pay, benefits and working conditions to desparate job seekers. They call the shots. But the recession is over, and wages are slowly – very slowly but steadily – on the rise.

An interesting thing can happen when labor markets get tight – here or in any country. Employers must then compete for workers and offer them a fair wage and benefits – or risk losing valuable workers to competitors. Increased, tariff-free international trade can in fact have the effect of “lifting all boats”. High employment from robust trade among international partners creates the kind of wage-competitive atmosphere that drives wages up, not down. True, American wages are the highest of all, but in some industries (such as the auto industry), highly inflated wages due to union-led wage protectionism are a kind of illusion. They can’t last, because high labor costs drive up production costs, which drive up sticker price, which gives competitors selling the same product the advantage. I believe in unions 100%, but if they “price themselves out of the market” by paying a guy $75,000 a year to drive new cars thirty feet from the end of the assembly line to the parking lot – a verified salary for a job requiring zero skills – they have only their greed to blame when their influence wanes and non-union shops thrive in their place.

Free trade must be fair trade, but negotiating “fairness” among multiple societies is no easy trick. We must do the best we can, but to opt out of the international nature of today’s markets is to opt out of viability in a global economy that gets more global – and less dependent on the success of the American economy – every day.


Virtual Being

I’ve thought a lot lately, and written about at times, the phenomenon of the virtual world. Specifically, I’ve pondered the impact of the virtual reality offered up by Second Life and, to a lesser extent, online role-playing games such as World of Warcraft. My take, and the reason I’m interested, is that the ever-widening spaces of the virtual world represent a new type of reality and existence for humans, heretofore unexplored and unknown.

If I bring this up in a public space, I invariably get a curiously defensive response from early adopter/technophile types who will argue that none of this is new, that humanity has always endeavored to escape, however temporarily, the physical world through inventions of virtual worlds – through literature, drama, psychoactive drugs and, later, video games and film.

Fair enough. But what I’m seeing develop is something of much broader impact, and it is due to the medium you are now engaging: the Internet. As prevalent as fantasy and “worlds of the mind” may have been throughout history, none of the methods for fashioning other worlds, until now, provided the prospect of a persistent, universally shared alternative physical reality and an alternative identity (or multiple identities) for the individuals inhabiting that reality. I believe this is the defining difference of online virtual worlds compared with past escapism, and the reason they are exploding in popularity – not just the easily labeled virtual worlds of Second Life and multi-player online games, but all of them – the online forums, the chat rooms, the shopping malls, the movie houses, the sex dens, even one’s e-mail correspondence can take place, due to the Internet, in an always-present, always available (with the advent of Blackberries, universal WiFi, netbooks and the like) and always populated alternate reality. And the most striking difference, I think, is that this alternate reality no longer represents an “alternate” to the “real” world – it is equal to if not more compelling to plugged-in individuals than the so-called real world. The virtual world, in fact, as demonstrated by late human behavior patterns, is presently competing with the real world for our attention. And among many individuals, it appears to be winning.

This is new. If someone in the past, for example, were to spend a disproportionate amount of their time living a Star Wars fantasy, or if you prefer, dressing like Jane Austen and pretending to be a denizen of Regency England, we would have, as a society, designated that person as at least “out of touch” and, at most, a kook. Think “Trekkie.” But today, and often by necessity, many of us spend a very large portion of our time interacting not with Nature and our fellow beings, but with an LCD screen and our fellow Avatars or screen names or e-mail addresses. We may never meet these “people” (and in the case of online forums/worlds/gaming are unlikely to ever meet them), and yet it does not seem strange to us that we now divide our contacts–our friends and associates–between “people” we know and – well, whatever we want to call the partial version of people we deign to “know” online. (We don’t necessarily know them – we know their online persona. Case in point: the FBI agent who spends all day pretending to be a 14-year-old girl.)

Evidence that the virtual world is “winning” the battle for our attention is anecdotal but compelling.  Often it seems change in human behavior is generational – that is, that novel ways of living are established in our youth (because everything is new anyway), and persist through our adulthood. If this is so, then look at the youth of today – they are totally at home in the virtual world, and many seem disengaged, bored or even restless when not connected to it. When socializing with younger people I know, it’s not uncommon for them to have their cell phones open and before their eyes the entire time, effectively dividing their attention between the “real” people they are with and the virtual information that may become available. It’s important to note, because it represents the advantage the virtual world has over flesh-and-blood humans. To wit: it is instantaneous, up-to-the-minute and universal in reach. Sitting at a table in a bar, you have a pretty good idea of what’s on offer for the next hour or two – the present people sitting, drinking and conversing. But on the table, your Blackberry is a  Siren, a portal to another – faster acting – reality, one which potentially offers you everyone you know (or in the case of Facebook, have ever known), and the latest news from around the globe as filtered for your preferences. In contrast to your drab flesh-and-blood companions, the phone offers instant access to an entire reality contained in cyberspace, filtered and channeled directly to its little screen.

This phenomenon has been lately noticed in business meetings, during which the “high-powered” folks will monitor their Blackberries for any contact or information that may override the more or less “static” presentation of the current meeting in the (predictable) physical world. Or maybe they’re just playing Solitaire. Presenters at meetings have noted they feel they are “in competition” with meeting attendees’ devices, and that they are at a natural disadvantage in such a contest – no flashing colors, no news, no tweets from Ashton Kutcher, no stock updates, no surprises.

The bizarre phenomenon of “driving while texting” probably would have been unthinkable a few years ago. But it is prevalent enough to be an issue in this society, and it signifies the pull of the virtual world – we can’t even let it go while we’re fully engaged in the physical world and at risk of seriously compromising our place in it.

This is not meant as a criticism of technological progress, and I would hope this site is evidence enough that I am not a technophobe or Luddite. I don’t actually know (nor does anyone) what the spread of virtual habitats  portends. We may become a nation–a world–of sedentary screen gazers who forget what a tree looks like, or we may eventually ramp down our obsession with the virtual world and place it in our technology tool bag alongside digital cameras, DVDs and Marconi’s wireless. But we are living, at least part of the time, and for many of us a good part of the time, in a new reality, and I would argue that it is the first “new” reality for human beings since the earliest days of our embrace of civilization – represented by the inventions of writing, agriculture and animal husbandry.