And progressives thought Obama was one of them? This is a real scandal they way Oak lays it out, but the Democrats don't have to be concerned about the GOP calling them out, since it's GOP SOP.
This is actually a weakness in the MMT argument that imports are a benefit in real terms. As Marshall Auerback observed, that only holds at full employment. The MMT answer is to run a large enough deficit to produce full employment. But unless the government were to become a major employer, the deficit would not peak until the rest of the world was hired up. I just don't see this working as planned.
Obamacare Outsourced
Robert Oak
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Thank you for saying that, Tom.
Besides the lack-of-full-employment issue -- the opportunity costs are zero when you have excess manufacturing capacity -- there's also the issue of knowledge products vs. scarce natural resources.
MMT treats all trade as if it were scare natural resources -- imports are assumed to be "real" benefits and exports are assumed to be "real" costs.
But in the case of knowledge products, that's not necessarily true. What is the real cost of Microsoft exporting a software license? What is the real cost of exporting a computer chip that contains 10 cents worth of silicon and the rest of the price tag is knowledge-based value added?
The more knowledge product you manufacture, the more knowledge you gain. You also gain market share and brand recognition.
It seems to me that the most advantageous trade policy is to import scarce natural resources and to export surplus knowledge products -- which basically describes Japan, Germany, Switzerland, and the other high tech countries that have the highest standards of living.
I don't think that imports are real benefits is necessarily wrong, and virtually all economists agree upon it. The devil is in the details. It presumes a fairly equal world economy and the currency reality is neoliberalism, neo-imperialism, and neocolonialism. This involves a lot of externalities in the mix in a race to the bottom. It's also dominated by unequal power relationship and transnational class interests. Failure to take these crucial factors into account results in an inaccurate picture. When policy is based on such inaccuracy, the outcomes are about as expected. Dismal other than for those in a position to gain from exercise of power and privilege in class interest.
Dan, the US improvement in trade is quite the opposite. We are exporting our cheap energy that is embedded in finished products. At the same time, GE and others are buying up the knowledge companies and sending the high tech work of building the software, tools and machinery and engineering to Asia.
http://www.census.gov/foreign-trade/statistics/highlights/congressional.html
It is difficult to gauge the real impact of technology companies like Google or Apple by looking at official trade data because most of their official revenue that shows up in Government reports was compiled using data reported with accounting gimmicks to avoid taxes and capital controls in countries like the US, China, and Europe. The result is unrecognizably distorted figures. The companies have so little money in the US they have to borrow while their fake operations in Ireland or Bahamas have tens of billions in excess. In China they understate values, under state costs to keep money out, in the US they under state revenue to avoid taxes, In Ireland and the Carribean they over state and store IP rights... but the official US, Chinese trade numbers are completely meaningless in real/financial terms.
"What is the real cost of Microsoft exporting a software license?"
Crowding out some other software company in another country - via financial manipulation of the world economy rather than the merit of the products.
It is very dangerous to view the world from a US standpoint.
It is a bad model to see it is US vs Rest of World. There are a set of interacting economies all with the same fundamental restrictions (like exports overall only grow with world income).
Exporting to excess is stealing demand from some other country. Importing is supplying demand to some other country - helping them develop. You can see it as a form of aid.
The key to dealing with an import deficit is precisely the same as an export deficit - develop your domestic economy so that it is fully employed and restrict the financial sector so that it doesn't destroy the domestic sector.
"the deficit would not peak until the rest of the world was hired up"
What does this mean?
y, a pretty standard criticism of MMT is as the deficit increases to counter demand leakage, much of the offset goes to buying imports i.e, the increase in G feeds the import market. Even if the US government were to address unemployment with government hiring, say a JG, then the added income would not directly increase domestic invest since a lot of that income would go to buying imports and many US multinationals would increase investment abroad where labor is cheap and there is little regulation, assuming the continuance of free trade and free capital flow.
I am all for using imports as aid to development but to really aid development, a developed importing country needs to set conditions that address worker exploitation in both countries, as well as negative externalities. Free trade and free capital flow rule that out under present agreements.
I am also for using exports to develop domestic production but that too has its limits. Developed countries are using their clout to cram ridiculous privileges from intellectual property rights down the throats of emerging countries, for instance.
Free markets, free trade and free capital flows are pretty much slogans of neoliberalism, neo-imperialism, and neocolonialism masquerading as expansion of "freedom." A lot of it is expansion of exploitation and environmental degradation.
"Free markets, free trade and free capital flows"
That's a lot of 'freedoms'... ;)
Basically, freedom to do what you want regardless of consequences and even to force others to accept the consequences. TPP would greatly amplify that "freedom."
a pretty standard criticism of MMT is as the deficit increases to counter demand leakage, much of the offset goes to buying imports i.e, the increase in G feeds the import market.
I've seen that critique before but I struggle to get a handle on how it turns into a problem.
When we talk about satisfying domestic private sector $USD savings desires with the NFA from deficit spending there always seems to be an implicit understanding that those desires don't grow to the sky.
Yet, when we talk about satisfying foreign sector $USD savings desires with the NFA from deficit spending there's the critique that seems to suggest these desires are A) infinite and B) accommodating them inherently problematic with no countervailing forces stopping it short of 100% "bread and circuses" and/or $USD obligations morphing (how?) into foreign currency obligations through some mechanism (what?)
The criticism is that funds put in through a JG are mostly spent and a lot of that spending will be at Walmart and dollar stores, where most goods are cheap because they are imported from the least expensive producers. So while domestic employment is provided, imports are incentivized simultaneously with no other change in policy. So for every job added imports increase and there is an expansion of both the fiscal deficit and the trade deficit. This is great as foreign aid, but as emerging countries add more competition at lower wages and benefits, more jobs are lost up the line, so that now middle class jobs are being outsourced. It's a matter of arbitraging and it doesn't end until the great leveling is complete. The assumption is that this is at the level of all economies becoming developed economies. But this only occurs with a lot of disruption to the economies involved. Development affects the people of emerging countries unevenly, and wage adjustment affects developed countries. The ones that make out well throughout the process are those in the upper echelons of society.
The US congress passed the JG. Beginning tomorrow everyone in the country is offered $20/hr if they willing and able to work.
1.) Assume you are a Euro politician that has 3% deficit limits and 20% unemployment, how could you leverage the US JG to fix your little problem?
2.) Assume you are regional politician in China that has directive to spend whatever is necessary to keep employment below 5%, growth above 8%, develop oil and gas resources in your country, raise incomes 50%, keep inflation below 8% all within ten years while employing at least 14 million new people. If you fail, you will be jailed or worse sent to live out your days on a farm in the Gobi dessert. You have (literally) unlimited lines of credit. How can you use the US JG?
3.) Assume you are a US Multinational that needs to raise profits? How can you use a JG?
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