Thursday, March 26, 2015

George Will on Free Trade and the Price of a Starbucks Latte

Dean Baker reads George Will so we don’t have to:
Will seems to think that we could not get people to work hard to master skills or to be great innovators if they didn't have the prospect of earning billions or tens of billions of dollars. But if we look back through history we can identify an enormous number of tremendously talented and creative individuals who did not get fabulously wealthy or even have any plausible hope of getting fabulously wealthy.
Dean is more patient than I am as I could not get past Will’s first paragraph:
Every day the Chinese go to work, Americans get a raise: Chinese workers, many earning each day about what Americans spend on a Starbucks latte, produce apparel, appliances and other stuff cheaply, thereby enlarging Americans’ disposable income. Americans similarly get a raise when they shop at the stores that made Sam Walton a billionaire.
Ah yes – the canard that all Americans benefit from free trade with China. It is true that we get lower prices for apparel but has Will ever heard of the Stopler-Samuelson theorem? As prices fall for imported products, the wages of workers in the importing competing sector fall even more. And such not everyone gains from free trade. Also - is Will unaware that the wages of Chinese workers have risen considerably from the days when they made only $0.60 an hour? Table 1 of this excellent discussion of how apparel wages internationally evolved from 2001 to 2011 noted how Chinese workers were getting $114.86 per month in 2001 but their real wage rose to $324.90. Of course, these figures were in 2001$ and the consumer price index has risen by 34% since then. So either Mr. Will is unaware of the real wage growth for Chinese apparel workers over the past several years or he does not know how to shop for coffee.

8 comments:

Sandwichman said...

Oh, and about that Starbucks latte...

http://www.nytimes.com/interactive/2014/08/13/us/starbucks-workers-scheduling-hours.html

Denis Drew said...

To put it in sports terms: you will get all the "B" player CEOs you need -- just like you will get all the "B" athletes you need -- to fill out the corporate line ups. The "A" players are going to be "A" players because they are -- and they want to be great.

fresno dan said...

I'd be more impressed if instead of snark at George Will, a refutation of a FED publication took place
http://www.frbsf.org/economic-research/publications/economic-letter/2011/august/us-made-in-china/

Soccer Dad said...

(humor) you should be ashamed of your self; picking on G Will is like stealing from a blind man's cup
you are supposed to be nice to people who are "special"

JDM said...

George Will, unaware? Surely not. As for his shopping for coffee I'm sure he does know how: you tell some lackey to go get you coffee.

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Bill H aka run75441 said...

PGL:

Pretty impressive and relatively simple. Appreciate it

media said...

george will is a genius---he helped overthrow saddam and turn iraq into a democratic utopia i hear. his research output is impressive. over 10 paragraphs a week, for barely living wage. i think he also has a staff of 10-20 interns working in the laboratory and creating algorithms and analyses that go into his finished paragraphs.

stolper-samuelson is a nice theorem, really basic,like say's or walras' law, or the dynamic version on excess demand that leads to either general equilibrium by way of perron-frobenius theorem (fixed point) or to SMD and chaos.

I first read about it in Scientific American, an article by Paul Krugman, who invoked it to say 'free trade is great'. (That was Nafta era i think). Krugman also later called the anti-WTO 'battle of seattle' protestors essentially ignorant lunatics. "free trade benefits NYT's columnists and those who have tenure in the ivy league, so whats the problem?' Cream rises to the top---eg 'strange brew' (not strange fruit' (billie holiday) or Wu-tang clan c.r.e.a.m.

samuelson wrote a short paper in AER later on (after 2000 or so) (i read it in MLK public library which i think is an ivy institution, or at least i.v. league (get your needle exchange a few blocks away)) in which he sortuh retracted some of his pro-free trade views. one thing Krugman may not have noticed was that Stolper-samuelson assumes full employment, and no reserve army of the unemployed (though of course, like putting money into the arrow-hahn general equilbirium as just another commodity) one can fix this so there is always full employment (eg some people work at being unemployed---which is a full time job, related to hustling). So if you modify it to nonequilibrium situations (eg open system) free trade may not be a good idea except for NYTimes columnists, etc.