Letter to a Friend about Free Trade, Unions, and the “Rise of the Rest”

A friend asked me what I thought about an email from MoveOn featuring Robert Reich. He shares his views on “the worst trade deal you’ve never heard of—the Trans-Pacific Partnership (TPP).” Here are the first two paragraphs:

Dear fellow MoveOn member,

Recently, award-winning director Jake Kornbluth and I worked with MoveOn to put together a video about the worst trade deal you’ve never heard of—the Trans-Pacific Partnership (TPP), often called “NAFTA on steroids.”

If the TPP doesn’t sound familiar, that’s no accident: This giant story has been almost totally ignored by mainstream TV networks. (Interestingly, most TV networks are owned by corporations that would rake in profits if the deal goes through.)

Here’s what I thought, and I’d like to hear your thoughts. I expect I’ll get some blowback as I’ve made some sweeping generalizations, but it should be fun to discuss these issues and defend my beliefs about these important issues:

Hi,

Interesting you should ask. I like a lot of what Robert Reich says and thinks, but I am for free trade. I’m definitely a non-professional economist, but I do believe that most of the “rise of the rest”–the rise of more than a billion of people out of poverty as well as the expansion of the middle class in BRIC (Brazil, Russia, India, China) and other countries–is because people in developing countries can participate in the global economy more easily.

NAFTA was mostly good but bad for people with high-paying industrial jobs who were out-competed by lower wage folks in the developing world. …I don’t put American jobs ahead of Mexican or Chinese jobs; I’m a utilitarian in this regard: “most good for the most people.” Nearly all forms of protectionism are bad, IMO. Even though I’m married to a highly paid union worker, I think unions are mostly bad nowadays except in low-paying industries where workers need protection. Nowadays “Old Labor” protects the already entrenched (not the neediest). The rights that unions fought for in the 20th century have mostly been granted by law.

There’s undoubtedly a squeeze on the middle and working class right now in the US. I’m all for tax increases on wealthier folks (like me, frankly, though I’d like to believe I’m middle middle class) and public health insurance, and a decrease in all the gov’t welfare the RICH get in this country. (I have no qualms with helping the poor with gov’t money, but not the rich!) That said, much of the squeeze on the middle and working classes is because the world is more fair. We in the US had huge advantages, and globalization is taking those away…which is fair! All the more reason to invest in infrastructure and education right now!

Thanks for asking and I hope you have a good week (despite much snow).

Best,

Henry

As I said, I made some sweeping statements (as did Robert Reich), but I’m happy to dig into them. Do you agree or disagree about unions, free trade, “The Rise of the Rest,” etc.?

More People, Fewer Famines

As I’ve written in earlier posts, the Malthusian Trap–known in recent decades as “The Population Bomb”–is not a trap…and if it’s a bomb, the bomb’s a dud. Max Roser’s graph shows how famine has declined in recent decades.

The-number-of-Famine-Victims-by-Decade_Max-Roser

 

http://ourworldindata.org/VisualHistoryOf/Hunger.html#/title-slide

“One of the many reasons for declining food crises is increasing food trade – shocks to local food markets (due to weather or plant diseases) are thereby absorbed.

“As these shocks to food markets will be reflected in price changes (volatility) one can study the increasing resilience by looking at the decreasing volatility over time.” 

In a recent online argument with an anti-GMer, we sparred regarding whether or not GM foods have a bigger yield than organic or permaculture foods. He argued that yield wasn’t important because we have enough food, it’s just a distribution problem. I countered that this was because food has become so abundant in most places that people can afford to let it rot. Additionally, as people become wealthier they’ll eat more meat. That’s what’s happened as affluence has spread. I’m a vegetarian so I’m not even in favor of more meat consumption. It’s an economic inevitable barring some major change in norms regarding eating meat.

Now I don’t like it if a single piece of food to rot, but this problem of abundance is a higher class of problems. Modern famines are caused more by governments not allowing its citizens access to food more than anything else. And yes, there are distribution problems, caused (again) by oppressive or incompetent governments. Freer markets and better governance are important trends that mean famines are becoming less and less common. 

2014: Bad Headlines, Good News

Ebola, ISIS, school shootings. Michael Brown and Eric Garner, Ukraine and Russia, Israel and Hamas. It’s been a bad year for many.

Nonetheless, life slowly gets better for most of us.

I’ll just make a passing remark about the US economy. Even in times of recession Americans have a quality of life that is better than that of kings 100 years ago, so the improving US economy and record highs for the Dow are just blips in the big picture.

The Ebola outbreak was tragic. Nonetheless, there were positive glimmers, especially Nigeria’s coordinated response. And overblown fears of a pandemic proved ludicrous.

People bemoan the state of Palestine-Israel relations, but few see recent times in the larger historical context. Before Camp David there were major wars in ’48, ’56, ’67 and ’73. Since then there have been missiles and terrorists, incursions and intifadas, but no all-out wars. The conflict seems intractable, but its scope continues to shrink.

Russia, such a nuisance through much of 2014, now seems a paper bear with gas prices and the Rouble tumbling.

The opening of Cuba bodes well. Communism, like mold, thrives in closed spaces. The feeble Castros can only hold on for so long.

ISIS’s luck is running out, especial as air strikes continue to weaken its infrastructure and the Iraq government shows some modicum of competence post-Maliki.

Tragedy will continue in Syria, and Venezuela looks ripe for some kind of change.

Alas, I’m starting to predict. “Mortals predict and the gods laugh.”

Obama has been criticized (often rightly) for his leadership, but his assessment of 2014 is spot on (if a bit awkwardly phrased): “We solved problems. Ebola is a real crisis. You get a mistake in the first case because it’s not something that’s been seen before. We fix it. You have some unaccompanied children who spike at a border. And it may not get fixed in the time frame of the news cycle, but it gets fixed. And…as we reflect on the new year — this should generate . . . some confidence. America knows how to solve problems.” (quoted from The Washington Post)

Despite cops and black men being unjustly shot, America and the world are actually getting safer. And richer, freer, more equal, more democratic, more literate, longer lived, better educated and healthier.

Here’s to an even better 2015.

Millions of Children’s Lives, Simple Solutions

“In the category of stunning, heartening, woefully underreported good news: In 2000, an estimated 9.9 million children around the world died before age 5. In 2013, the figure was 6.3 million. That is 3.6 million fewer deaths, even as the world’s population increased by about 1 billion.”

This stat, from Michael Gerson’s article in the Washington Post, reflects the continuing avalanche of positive health trends of the last few decades. Gerson gives a shout out to Gavi, the Vaccine Alliance, an organization that supports vaccinations for some 60% of the world’s children. Gavi does what government programs try but usually fail to deliver–a successful program with low overhead that shuts down when the job is done. Gavi tapers off its subsidization of vaccines over time as local vaccination infrastructure scales up.

We all know how deep and detailed the reporting of the Ebola crisis was. (Now that it’s getting under control we hear much less.) But this much more important story–think of the thousands of children saved from death for every Ebola death–yet stories about vaccinations saving millions never make it to the front page.

http://www.washingtonpost.com/opinions/michael-gerson-a-global-conspiracy-of-health/2014/12/18/dc79da7c-86f9-11e4-9534-f79a23c40e6c_story.html#b12g22t20w14

Inequality: What’s Goin’ On?

Income inequality, especially in the United States, has been a hot topic. It seemed to peak with the publication this year of Thomas Pinkatty’s Capital in the Twenty-First Century. The upshot? Income inequality has gotten worse.

But it’s not that simple. If you look at the big picture, inequality has decreased.

Hans Rosling, a prominent Swedish statistician and TED Talk regular, paints a different picture in this Tweet*:

Hans Rosling Inequality

In the past 4o years world income distribution has transitioned from a bimodal distribution (two humps) to a normal distribution (a “bell curve”). In the 1973 histogram the high peak to the left represents the disproportionately high rates of world poverty.  The peak to the right means that a disproportionately large amount of wealth was held by the wealthiest. Note the gap–the trough–between rich and poor. That’s a statistical representation of inequality.

In the past 40 years the distribution has migrated toward the center, which represents the meteoric “rise of the rest,” especially China and India, and the unprecedented expansion of the world middle class.

Income inequality in the United States is a problem. I’m for unpopular measures, like taxing inheritance much more because, with some exceptions such as family businesses, inheritance is a massive transition of unearned wealth from the privileged to the privileged. Let’s spend that money on education. Our government’s priorities are dominated by untouchables like Medicare and Social Security–investment in those who no longer earn money–instead of education and poverty reduction, which are real investments that pay off in years to come. I’m an optimist about most things, but I’m not optimistic that there will be a “future focus” shift where we choose invest in tomorrow’s workers and the poor instead of the retired.

*This link takes you to the study from which Rosling bases his ideas: https://ideas.repec.org/p/ucg/wpaper/0001.html

Urban Slums: Places of Hope and Opportunity?

Since the beginning of the Industrial Revolution, billions of people have moved from bucolic country to teeming metropolis? Why would someone uproot his family from a natural farm setting to a cardboard shack in the squalor of a Rio favela or Calcutta slum?

The numbers reveal much about the compelling lure of the city. Refugee crises involve millions, but this greatest of demographic trends involves billions. Many are driven to cities for refuge. A Rwandan friend fled his country for the South B slum in Nairobi. From there he eventually made his way to the U.S., where he now lives a life of wealth and opportunity unimaginable to the people he grew up with.

But most of these billions move to the slums by choice. When I visited the South B slum in Nairobi last year I was surprised how orderly things were. I expected the smell of raw sewage, but I only encountered strong whiffs of it when I walked along the slick mud slopes of the Nairobi “River” (something we’d deem a stream). In South B you could get pretty much anything you need, including cell phones, the latest electronics, TVs, Internet connections, business services, fresh produce, clothing both traditional and hip, music, hair stylings and beauty treatments.

As I walked the narrow pedestrian alleys that penetrate every corner of South B I heard children singing and reciting lessons in their classrooms. Though super-densely peopled, South B is quite domesticated. Many the dwellings had concrete foundations and sturdy walls and roofs made of corrugated steel. Heavily laden clotheslines snaked through the alleys and, just above that, power lines. No need for phone lines in this age of ubiquitous cell service.

So if you live in a developing country and want access to water, education, health services, and other mod-cons, the city’s the place to be, even if it means living in a slum. To our rich sensibilities, the slums seem squalid and claustrophobic, but to new arrivals, the slums–and the nearby modern city centers–teem with possibility and opportunity: work, education, health care, goods, entertainment, and participation in the wide world.

Remittances: Bringing It Home

“Sending money home” was something my wife’s grandfather did for his parents during the Depression. Living in rural Appalachia, Ellis Jackson got a job at the Civilian Conservation Corps (CCC) and sent whatever money he made back home. This seems like a kindhearted, if quaint, relic from the past, right?

Wrong.

The positive impact of remittances is another driver of the decline of poverty across the globe. “In 2013, international migrants sent $413 billion home to families and friends — three times more than the total of global foreign aid (about $135 billion). This money, known as remittances, makes a significant difference in the lives of those receiving it and plays a major role in the economies of many countries. Economist Dilip Ratha describes the promise of these “dollars wrapped with love” and analyzes how they are stifled by practical and regulatory obstacles.” from TED

A study of the effect of remittances by the Refugee Migration Movement Research Unit (RMMRU) found that “remittances from international migration contribute to raising the standard of living of not only the recipients but also the non-migrant households living in migration intensive localities through expanding local demand which in turn create employment and increase wages.”

https://agenda.weforum.org/2014/09/remittances-multiplier-bangladesh-migration-labour/?utm_content=bufferf7650&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer