From: sitomlin@undergrad.math.waterloo.edu (Stephen I. Tomlinson)
Subject: The New Economy (was Re: NAFTA)
Organization: University of Waterloo
Date: Mon, 17 Aug 1992 22:44:51 GMT

<51907@dime.cs.umass.edu> yodaiken@chelm.cs.umass.edu (victor yodaiken) writes:
>sitomlin@undergrad.math.waterloo.edu (Stephen I. Tomlinson) writes:
>>The prospect of losing 400,000 jobs should not greatly concern people (aside
>>from those directly inconvenienced, of course).  Employment in the 
>>U.S. rose from 99.3 million in 1980 to 117.9 million in 1990.  That's 
>>more than 5000 new jobs per day or more than 150,000 new jobs per month.  
>>And that's with the recession of the early 1980's averaged in.
>
>Right, but what kind of jobs? Everything I've read on this topic suggests
>that the 80's saw a process in which high-wage skilled labor was replaced
>by low-wage unskilled labor: replacing 400K industrial skilled labor
>jobs with 500K burger flipping jobs is a massive net loss to the economy.
>
>. . . it is not unskilled workers who are most directly endangered by
>the "free-trade" agreement. No-one is going to move a Burger-King
>from Houston to Juarez, but they might well move a machine shop or
>auto plant. 

Well, 'everything I've read' suggests that the service jobs replacing
industrial jobs are something more than 'burger-flipping' ones.  The 
following excerpt [from Patrick Bloomfield's article in the 1992 
Financial Post Magazine] addresses your 'auto plant' and 'machine shop'
concerns directly.  (The 'new economy' consists of the parts of the economy 
expected to continue expanding instead of declining in the future):

"Toronto economist Nuala Beck argues that the new economy now accounts
"for at least 60% of U.S. gross domestic product.  She never ceases to
"stress that there is nothing magical about the nature of the change.
"Any alert executive can see it happening by looking out of the office
"window, or walking around a customer's plant, or keeping a diary of 
"how the family at home goes about its daily routine.  . . .
"
"Beck talks of four new engines of economic growth: the *computer and
"semiconductor* industries have taken over from Detroit's automakers;
"the baby-boom generation now needs *health and medical care* the way
"it once demanded housing; instead of moving people and things around,
"the new economy uses *telecommunications and communications* to shift
"information and ideas; and, finally, *instrumentation* has taken over
"the lead role in industrial modernization from the old-fashioned lathe,
"or 'machine tool' as the more modern versions were officially known.
"
"As Beck reminds her listeners, the U.S. health and medical industry is
"now larger than the petroleum-refining, aircraft, auto parts, textiles,
"steel and mining industries *combined*.  Health care accounts for 13% of
"U.S. gross domestic product, while retail merchandising speaks for little
"more than 4%.  Yet, supposedly informed people still think of the service
"sector as if it were confined to shops and offices.
". . .
". . . Many industries in Beck's new economy produce mundane products
"such as lawn or garden equipment, or even sausages.  In this world of
"grabbing a bite when you can, and cutting back on household and garden
"chores, consumers pay for convenience.  As one food industry executive
"says, 'these days people don't dine, they graze.' 
". . .
"More than ever, the secret of successful investing in the 1990s will be
"the ability to look and see what your neighbours are buying and how their
"lifestyles are changing.  . . .

>>. . . today's unemployment rate is not out-of-line
>>with unemployment rates of decades past, despite major advances in
>>technology.  
>
>Considering that the 3% unemployment rate was a hot political issue
>in the early/mid 1960's, you are incorrect.

My almanac only lists unemployment rates for even-numbered years before 1980,
but reports an unemployment rate of 5.5% in 1960, 5.5% in 1962, 5.2% in 1964,
3.8% in 1966, and 3.6% in 1968.  Considering that the 1960s had one of the
lowest overall unemployment rates of any decade since the 1920s, and taking 
into account that we are at the trough of a recession right now, today's 
unemployment rate still does not look out-of-line with those of decades past 
to me. 

>>. . . A tax collected from employers who don't
>>provide x hours of training per employee per year has been suggested by 
>>some, and sounds promising.  
>
>Of course, the free trade agreements make this kind of scheme impossible.
>If we tax employers to retrain workers, the employers will have no 
>alternative but to move to a lower tax local. The "free-trade" agreement
>essentially mandates that social services including education be equalized
>at the lowest common level, and similarly for environmental and labor
>protection. Note that this is not an intrinsic requirement of lowering
>trade barriers, but it is an intrinsic part of the multinational corporation
>welfare system which is implemented in NAFTA and GATT.

Isn't the United States of America a counterexample to your argument?
Different states have different tax rules, but employers don't appear
to be acting as if they have 'no alternative but to move to a lower tax
local' and education services don't appear to be 'equalized at the lowest
common level', even though there are no tariff barriers between states.

I don't understand your 'multinational corporation welfare system' comment.

>It's not the idea of "free trade" which offends me, it is rather the
>corporatist type of "free-trade" which our masters are imposing on us.
>For example: there is no reason why a free trade agreement should not
>provide for penalties which prohibit any trading partner from gaining an
>unfair advantage via environmental or labor exploitation.  One could set
>up a mechanism by which company X could bar imports of products from
>company Y if they could show that company Y was spilling toxic waste or
>had used terror tactics to break a strike. 

I agree with your example.  But my understanding is that if one country
feels another country has lowered its environmental standards, the country
can appeal to a binding dispute settlement mechanism (much like the mechanism 
that appears to have worked well in the Canada-U.S. Free Trade Agreement).

>. . . the US is
>attempting to squash Ontario's environmental fees on aluminum cans 
>(favored by US beer companies). 

In this case it is not the right to tax for environmental reasons that
is being questioned, but whether or not the tax is really for environmental
reasons at all.  The Ontario government may just be being protectionist
in environmental clothing, and if that's the case the U.S. efforts to
'squash' the tax are justified.

-Stephen
Newsgroups: sci.econ,talk.politics.misc