The History of the World (Part Seven)

Free Trade: Part Two.

In our last episode, I discussed losing my job because of (ominous musical fanfare): The Great Recession. I pointed out that this was/is, generally speaking, a fact. However, I went on and on (you know how I get...) to demonstrate that specifically speaking, the particular reason was/is hard to pin down.

This is true because if I look at what happened via a big picture view, and strive for objectivity, I can observe any number of seemingly concrete facts. But which particular combination of concrete facts resulted in my losing the last real job I had is nothing more than a best guess. And what about facts that I may be completely unaware of? Sheesh, it would seem that economics, like everything else in life, is mostly just a best guess, based on (hopefully) known facts, and subject to our built-in biases.

Macroeconomists, like all social scientists, are much better at explaining things afterward than in making predictions. Why? variables. Just like the weatherman, they have to deal with myriad known unknowns, and, unknown unknowns. Which is a very fancy way of saying they try and make predictions about systems that are so complex in nature that an educated guess is as good as it gets.

This is why a minimally regulated market works better than a highly regulated market. This is why when you go to the supermarket most of the thousands of competitively priced products they carry are always in stock -- literally millions of specialists pursuing their own self-interest and freely trading with each other. This is why communism and strict versions of socialism don't work, it's physically impossible for politicians and bureaucrats to efficiently do what the market does effortlessly.  

If we’re truly free, we’re free to trade. Common sense suggests that both sides in a given transaction are getting something they want out of it or it wouldn’t happen. Life on Earth being what it is, in spite of what we would like it to be, there’s no guarantee the result of a given transaction is going to be completely fair and equitable for both sides. Let the buyer beware, but let the buyer buy, if they want to. Prosecute the weasels, enforce the contracts, read Consumer Reports and ask dad, mom or your dutch uncle what they think. Secure your _______ and jump.

You’ll win some, you’ll lose some, and some will have mixed results. Take comfort in the fact that when you win one the other side may hate and resent you, or at least be thoroughly depressed, often without even having ever actually met you. The entrepreneur that went bankrupt because you didn’t think their world-changing product was worth your money comes to mind. There are no unemployment checks for failed entrepreneurs. Of course, if you fail on a large enough scale The Gubmint may step in and save your bum. And that’s not fair -- unless, of course, your job or business is on the line. But that’s not how it’s supposed to work, and you can’t count on it.

Adam Smith said, “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”

In other words, the cut-throat competition of the marketplace usually ensures that the customer wins. The huge honking downside is that any given particular producer --  which includes owners, management, and labor -- is subject to being destroyed by its competition.

“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups,” Henry Hazlitt (my emphasis.)  Notice the use of the word art, not science.

“Oh yeah,?  Well that’s all well and good but NAFTA screwed everything up and now they want to do that new one and….”  Whoa cowperson, obviously anyone who lost a job because of NAFTA may understandably be reconsidering not only the wisdom of free trade agreements but capitalism in general. This will no doubt be on their minds while they’re driving to Wally World to take advantage of the low prices and all that stuff in one place in an American made car that’s chock full of parts manufactured all over the globe (as virtually everything is).

Yes, people lose jobs when a trade agreement is implemented and/or a tariff is eliminated. Other jobs are created or expanded, but unfortunately, this is virtually impossible to document with anything resembling precision, which is why both sides can plausibly argue their position. However, economists don’t agree on much but they overwhelmingly agree that free trade will, overall, generate at least as many jobs in a given country as it erases. Also, the consumer (that is, everyone) always wins. The producers (and by extension, their employees) may win or lose. We all want good, secure jobs. But we also all want lots of food, toys, and fun -- for which we wish to pay as little as possible.

Finally, the Reality Checks, Caveats & Premises department has it on good authority the global economy is a fact, not a possibility. Adapt or get run over like a cute little bunny that’s incapable of grasping the potential impact of an 18 wheeler passing through the neighborhood.

After WW 2 ended America was the beneficiary of a boom that lasted for roughly 35 years during which you could drop out of school and still get a job that would provide a good living, and maybe a pension. The rest of the world, having been more or less trashed by WW 2, watched and learned.

More than a few thought they might also enjoy eating regularly and being able to seal the couch in plastic to keep it nice. Liberty might be nice too but that proved to be a lot harder and much more complicated. Life on Earth being what it is, instead of what we would like it to be (a phrase that bears repeating), there’s always gonna’ be bullies that embrace their inner chimpanzee - bullies need victims.

Nowadays, the US buys a lot of shtuff from the rest of the world, because we're rich. The US also sells a lot of shtuff to the rest of the world, the World Bank says the US exported $2,263,253,700,000 trillion dollars worth of stuff in 2014. The 35-year-old bubble of prosperity didn’t pop, the rest of world starting blowing their own bubbles. We export more than we ever have in terms of dollar value, even allowing for inflation. The bad news is that because of productivity gains we're able to do this with a lot fewer people than we used to. A little noted/reported fact is that better than half of the shtuff we import are pieces/parts of shtuff we build here, much of which is then sold there.

And if that ain’t bad enough, now we have to deal with a communication/high tech revolution. It’s like the industrial revolution on steroids (and there still isn’t much work for saddle makers) in that the rules of the game keep changing and nobody on the rules committee has a clue what the final draft is going to be.

And if that ain’t bad enough it turns out there is no rules committee, there are just H. sapiens hoping it all works out somehow, and that the civilization ending sized meteors keep missing the mother ship. It may be the best of times, but it might be the worst of times. As noted in part six, not even the experts of Federal Reserve can be relied upon to accurately tell us what's next.  Also, they’re acutely aware that throwing the wrong lever at the wrong time, considering how complex and interconnected the global economy is, can easily set off a cascade of unexpected and unwelcome consequences.

But I've gotten ahead of myself, and I've exceeded my words quota, and I've sorta jumped from 1776 to the present, and I've gotta go. Stay tuned for part eight, the season finale.

Have an OK day.

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Dear (Eventual) Grandstickies & Great-Grandstickies (#2)

[If you're new here, and even if you're not, I must begin with a bit of explanation. My weekly column, two weeks ago (Dear (Eventual) Stickies & Great-Grandstickies, 11.05.16), was a letter to the Stickies (my grandkids) and my great-grandkids (who don't exist yet). I used the word Eventual because it's a letter more directed to the Stickies of the future than the present as they are mostly quite young yet (though in some ways not). And as I said, the great-grandstickies don't actually exist yet. Also, the Stickies official title is now grandstickies, though they aren't nearly as sticky as they used to be, and, to distinguish them from my daughter and son-in-law, who aren't sticky at all. Mostly it's because I now prefer grandstickies to the Stickies, at least for literary purposes.]

Dear (Eventual) Grandstickies & Great-Grandstickies

I didn't expect to be writing to you again so soon. The subject of my last letter, this year's hit reality show, the Donald v. the Hilliam, has been canceled. The Donald won and his  prize is a four-year gig that can't be canceled until January of 2020, regardless of his ratings.

The Hilliam and the outgoing COiC (Community Organizer-in-Chief) both gave gracious speeches acknowledging that the audience had chosen the Donald. Well, sort of (it's complicated). Those members of the infotainment industry whose job includes predicting the winners of politically based reality shows are staying busy explaining why most of them were wrong.

What a great job they have! In the real world, if your job performance rates an epic fail, there's a good chance that the person or firm that you work for will decide to replace you. In the infotainment industry, however, it's not whether you're right or wrong, it's how (or if) you attract the eyeballs. Which is why -tainment trumps info-.

Considering the intensity with which the battle had been waged, and the absurd length of it, I was feeling both proud and reassured (and happy is was finally over). The peaceful transfer of power from one administration to the next, assuming it continues, is a signature achievement of the American experiment.

[Aside: If the reference to the seemingly endless presidential campaigns we currently endure is confusing, or seems quaint, good. Perhaps you have found a better way, or at least developed a less complicated, less time and resource consuming system. Hopefully, a system that is still more or less genuinely democratic and not a farce (google Russia, or China, early 21st century).

As things stand, America takes two years to choose a president who will get a four-year contract, and this individual is permitted to compete a second time. This means that they can decide to compete on the next show, which begins two years into their first term. If they decide to compete again this will mean that they will have two full-time jobs in the third and fourth year of the guaranteed contract they just won. 

Obviously, this is good for ratings, and potentially quite infotaining. Although personally, I think that the job description of arguably the most powerful and important job on the planet Earth should preclude moonlighting.]

And we're back. But election fatigue or not, the election ain't over till the fat lady infotainment industry sings sez so. They haven't moved on, they've doubled down. The majority of 'em supported the Hilliam and they know that God, or in most cases their God substitute (the environment, income inequality, social justice for the victimized group of the moment, _______, etc.), is on their side.

Their evil enemies (and that is indeed how many on both sides view the other), though smaller in number, represent about half of our polarized population and their side (well, sorta'), has control of The Gubmint for the next two years. I say sorta' because many of them dislike the Donald almost as much as they dislike the Hilliam. Like the rest of us, they have only a vague idea, in spite of two years of fighting, of just exactly what he plans on doing. But, they know God is on their side, or at least they hope so, 'cause the Donald is a scary dude. And  he  can't  stop  tweeting!

Also, there's something going on that I've never encountered before. I'm a thousand years old in American years (39 spiritually, 63 chronologically) and have been following politics, to one degree or another, since my teens. While, of course, every presidential election I can remember has generated controversies and crazies, none were followed by several days of protests, minor rioting, and, my personal favorite, triggered Snowflakes.

First, Snowflakes. I'm hoping that Snowflake Syndrome melts away, and soon, but just now it's a thing. If my feeble scribbles were more widely disseminated I would probably be attacked for being an unrepentant triggeror. I plead gleefully guilty.

[Yes, gentlereaders, I know there is no such word as triggeror but there should be, and perhaps will be, if triggering ever becomes an official hate crime. Considering our culture's current trajectory, I wouldn't bet against it.]

It seems that the election of the Donald was so traumatic for many?/some? (I'll wager someone is looking into this, funded by -- The Gubmint -- money) of our more delicate and/or damaged college students that it's triggered Snowflake Syndrome on college campuses nationwide. Many a midterm had to be canceled, much hot chocolate is being brewed and therapists remain on high alert. Playdough, coloring books, crying rooms and comfort dogs are being deployed.

Meanwhile, off campus, there was a short-lived panic generated by strange noises being heard in cemeteries. The panic ended when it was discovered that it was just members of the Greatest Generation turning over in their graves.

Which brings us to protests and mini-riots. "Not my president! Not my president! Oh, look baby, flat screens, lets both grab one." Sound of glass breaking. These have been popping up hither and yon ever since the Donald was declared the victor. As to how extensive they are -- and who is participating and why -- well, that depends on who you believe. In my semi-humble opinion, it's mostly the usual suspects, members in good standing of the International Union of Professional Perpetually Protesting Protestors & Perpetual Victims of This, That & The Other Thing (IUPPPPPVTTT). The acronym is pronounced I up p-p-p, peevy t-t-t

The masses aren't taking to the streets, but those that have are much more infotaining than those folks who had to get up and go to work the day after the election even if they stayed up half the night waiting to see who the winner was (and actually voted). Guess which group the infotainment industry is obsessing over?

A goodly cross section of the masses didn't even bother to vote, as usual. I went a-googling and discovered that since the 1930s roughly 50 to 60% of Americans have turned out to vote for president every four years. This year's turnout looks to be about 55%. (the final numbers still aren't in).

[There's a point to this bonkercockie, yes? asks Dana the imaginary gentlereader. My muse, Marie-Louise, maintains a neutral expression, she's still on her first cup of coffee.]

My point is that I think that while many in the infotainment industry, the Snowflakes, and the members of the IUPPPPPVTTT think (or at least pretend to, to keep profits up), that this is the American Apocalypse. I don't, and for your sakes, I hope that this mini-infotainer, this semi-humble scribbler in pursuit of enlightened infotainment, ain't wrong

Keep in mind that up until the election, which happened less than two weeks ago, just about all the members of the infotainment industry, along with the Snowflakes and the members in good standing of the IUPPPPPVTTT, were certain the Republicrat party was wrecked. Fate flipped a switch and now they're all equally certain the Depublicans have been destroyed.

[Note from the Clarifications for Gentlereaders Department: Please be aware that His Crankiness, despite our repeated objections, insists on referring to the Republican party as the Republicrat party and the Democratic party as the Depublican party. He says you'll understand.]

In fact, what's happened is that the Wizard of Oz of  the new millennium became president while most of the country was mesmerized by his mastery of special effects and... Gadzooks! I've exceeded my word budget, sorry. Poppa loves you. To be continued...

Have an OK day.

P.S. If you're a Facebooker, and you enjoy my shtuff, could I trouble you to click on "Like" at the top of the page? This will (hopefully) help me to find some new readers, and retain existing ones, via your friendly neighborhood cranks Facebook page.
   

The History of the World (Part Six)

Free Trade, Part One.

Our story thus far: After evolution or God or both coughed up H. sapiens (us), we spent myriad kyr (many thousands of years -- lookit me ma, I'm a wordsmith!) primarily preoccupied with killing each other, subsisting, and once in a great while, inventing something really cool.

Hunter-gatherers got tired of wandering around in search of three squares and invented agriculture (and beer). Once there was enough food and beer to go around towns became cities became civilizations and H. sapiens rose to the top of the food chain. The killing and subsisting continued, and, as mentioned, once in a great while someone invented something really cool.

Eventually, in the late seventeen hundreds, we hit a trifecta. The Industrial Revolution picked up steam, the USA was born, Adam Smith invented modern economics. Mr. Smith said that the best way for everyone to make a buck depended on three things -- the pursuit of self-interest, the division of labor, freedom of trade.

Now, this vastly oversimplified history of the world is about to get even worse.

That is, I'm deliberately giving short shrift to the first two and emphasizing the most important, freedom of/to trade. After all, the world in general, and the USA in particular, is somewhat preoccupied with the subject.

The pursuit of self-interest simply means that every Tom, Dick, and Jane has the right to figure out how they're gonna pay the cable bill without a king, or a master of any sort, assigning them a role to play in the economy or determining how and how much they'll be rewarded for their labors. A free man or woman should be compensated based on what service/product/talent they provide their fellow H. sapiens. A reasonably free market will easily determine the value of a good doctor, a good housekeeper, and everyone else.

When regulation is kept to a necessary minimum and the playing field is level, consumers will rule, consumers will win.

As to the division of labor, this can be summed up in two words, modern civilization. Do/make something you're good at and trade it for things you aren't good at doing/making. Simplify things dramatically via a reliable system of reward certificates (money). The result? The most prosperous era in the history of H. sapiens. Consumers rule, consumers win.

Which brings us to...

...Freedom to trade. If you’ve lost a good job because your job is now being done by someone in a foreign country, like Elbonia for example (H.T. Scott Adams) -crappy weather, chock full of primitive religious sects prone to killing each other, a corrupt government and/or any number of other possible combinations of factors that would keep you from vacationing there even if you had any damn money - odds are you might be a little cranky.  

I’m a little cranky because I lost a fairly decent job, a job that I thought would be my last, due to the effects of (ominous musical fanfare): The Great Recession. When this happened I was almost a thousand years old (in American years) and had all the wrong skills. I’ve been relegated to a crappy job, several part-time crappy jobs in fact, that required me to work eight days a week. Unfortunately, it wasn't because I was a greedy workaholic who couldn't ever be rich/secure/powerful/enough, it was because they didn't pay very well.

I had to work a lot of hours to get by; I literally limped my way, with a fractured hip, to a forced early retirement because I needed the diminished dough to get by before the rest of my damaged joints (rheumatoid arthritis) got any worse.

The reason I lost my job was because of/had nothing to do with free trade. I’m certain I could make a plausible argument linking the last recession (hopefully it was just a recession for you, for me, it was, ominous musical fanfare: The Great Recession) to free trade agreements. To bolster my case, I’m certain I could quote experts and statistics; I’m certain I could find some very official and complicated looking charts.

I’m equally certain I could make a plausible argument that proves free trade agreements had absolutely nothing to do with my personal experience of (ominous musical fanfare): The Great Recession. And I’m not even an economist.

[How to embarrass an economist. If they’re not rich (of course, most aren't), ask them why, considering what they do for a living. While they’re hemming and hawing you take your verbal kill shot. “And by the way, if economics is a science, why are you guys still arguing over what caused the Great Depression, you know, the one that hit about 75 years ago?”]

My point is that economics, which I find fascinating and worthy of study by the way, is a social science. This means cold hard facts are even harder to come by than they are in the hard sciences. We’re part of a global economy. Billions of people are pursuing their self-interest regardless of whether or not their government officially approves. This is human nature. This is reality.

[Insert relevant, ironic aside here. I live near a General Motors plant where the employees risk having their car trashed if it isn’t an official GM product. It was temporarily closed relatively recently because of an earthquake in Japan that disrupted the flow of components that GM manufactures or purchases -- in Japan. Ain’t that ironical?]

I lost my good job because of (ominous musical fanfare): The Great Recession. Economists will be arguing for generations as to what caused it as fervently as they argue about what caused The Great Depression.

More specifically, it might have happened because the company I worked for, that kept a huge Kmart warehouse clean, wasn’t competitive enough. And/or Kmart wasn’t competitive enough (hold your calls, I think we have a winner).

BIG BUT.

And/or Kmart decided that outsourcing housekeeping wasn’t such a great idea after all and decided to have people on the payroll do it. Which may have been because it was a concession to the union to get a contract signed, or just make the working environment less toxic, because the rank and file never did get over the establishment of quotas. Or, maybe they decided to assign “second tier” workers to do housekeeping since they’re bitter about the fact they have to hit the same quotas the much better paid first tier rank and file, who agreed to a second tier to keep their own wages considerably higher than local labor market norms...

Or, maybe I lost my job because of a variable, or a combination of variables, known or unknown, led to life jumping out from behind a tree and kicking me in the crotch. Which is how life, and the economy, in spite of our best efforts to generate a desired outcome, often works.

To be continued...

Have an OK day.

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