From: yodaiken@chelm.cs.umass.edu (victor yodaiken)
Newsgroups: sci.econ
Subject: Re: The New Economy (was Re: NAFTA)
Date: 18 Aug 92 12:36:48 GMT
Organization: University of Massachusetts, Amherst

In article <Bt5GIs.Iv@undergrad.math.waterloo.edu> sitomlin@undergrad.math.waterloo.edu (Stephen I. Tomlinson) writes:
>>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;

Sigh. It is well known that the absolute number of computer/semiconductor
jobs in the US is dropping. The decision by Intel to build semiconductor
plants in Korea because the of the costs and quality of Korea materials
engineering says something about how far US manufacturing has collapsed.
Despite the dreams of economists, computer/semiconductor manufacturing
is deeply tied to such mundane things as machine tools and materials
engineering. Anyone who believes that the US economy can prosper with an
isolated high-tech island as its only manufacturing base is dreaming.

>"the baby-boom generation now needs *health and medical care* the way
>"it once demanded housing; instead of moving people and things around,

Thus, $8-$20 skilled carpenters are out of work, while there are openings
for minimum wage LPNs at nursing homes and mimimum wage orderlies at
hospitals.

>"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.

This sounds like complete economist-talk to me. For your information,
one cannot use "instrumentation" to transform bar steel into screws
or wood into table legs -- old-fashioned lathes and "machine tools" are
still required, even thought they may now be computer controlled and
of new designs. The advanced machine tools and robotics which are necessary
for industry are not, however, being made in the US.

>"
>"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.

The health sector is a massive source of bad jobs: from LPNs to orderlies,
from insurance file clerks to medicare forms processors, millions of 
people are emplyed in low pay, low-skill, low-interest, no future work.

>>>. . . 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.

Where have you been? States and towns have been competing on tax-giveaways
and other breaks for industry for 2 decades and industry has been 
fleeing high social service states for low ones at a rapid rate. 
A classic example is the flght of high tech industry from Mass just
over the border to New Hampshire, where the benefits of Massachusetts
public sector investment can be reaped while its taxes can be avoded.
Fortunately, national regulations, e.g. EPA and OSHA regs, make it 
less profitable to simply shop around, but there are no counterparts
to EPA and OSHA covering the NAFTA or GATT countries.

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

NAFTA and GAAT are designed to make the movement of capital and production
over national boundaries as cheap as possible, at the expense of local
self-government, local-services, and the survival of small business. 

>>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 decision by GAAT arbiters on the dolphin-tuna case shows how poorly
this mechanism can work. GAAT arbiters found that the US had no right
to bar imports of dolphin-unsafe tuna because the barrier interfered with
free-trade.  Binding arbitration by whom? Under what laws? Will the
decisions process remain secret (as in GAAT ) or will it be open to 
public scrutiny? Who choses the arbiters? Can they be recalled? What
happens if the scientific evidence is in dispute -- e.g. whether or 
not BCH is safe or what levels of pesticide on fruits are acceptable?

>
>>. . . 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.

But this is exactly the problem. Certainly US steel producers will
benefit from a law which limits imports of steel made under unsafe
conditions or using processes which damage the environment in ways not
permitted by US regs. If our government passes such legislation will
unelected trade bureaucrats, working in secret, be able to invalidate
them on the basis of the perceived motive of the legislators? 
And what happens if we decide to bar imports from companies which
sell arms to Serbia? Or if we decide to subsidize apprenticeship programs in 
industry X, or to prevent exports of raw timber in order to 
conserve our forests, or forbid exports of endangered animals, or 
ban import of Chinese prison labor goods or ...  ?



-- 


yodaiken@chelm.cs.umass.edu