Summary: Something is wrong with America, rendering our society incapable of connecting effectively to reality. Who can tell what has caused this social illness, a form of cultural Alzheimer’s? The symptoms appear in many aspects of our national public policy, an inability to effectively take collective action in critical areas such as energy, geopolitics, and management of our economy. This is chapter 2; the first chapter (6 December 2007) discussed our housing bubble.
- A brief look at free trade
- Problem recognition is always the first step
- About those wages for highly trained professionals
- Ricardo probably would consider our trade policies insane
- Mockery of obsolete orthodoxy, an effective tool to encourage thought
- Other reports about free trade and globalization
- Afterword and where to go for more information
Globalization — the free flow of capital, jobs, and trade — was a pillar of the post-WWII geopolitical regime. Economists and the foreign policy establishment assure us that this globalization is an unqualified good thing — a “win-win” for all parties. That is, of course, absurd. Globalization in its current form has clearly become problematic for America. It has weakened us in important ways during the past 3 decades. Unless we start to think more clearly about trade, the ill effects will grow both during this downturn and in the following recovery.
Our inability to adjust to this change is another example of America’s broken thinking. The late USAF Colonel John Boyd described the connection of individuals or groups to reality as a process: Observe, Orient, Decide, and Act. For a description of the OODA loop see this or Wikipedia. All four phases of this process seem to work poorly in modern America, but we seem to have special difficulty with orientation. To learn more about Orientation see this article by Chet Richards.
(2) A brief look at free trade
Is free trade beneficial to the US? David Ricardo stated that both sides benefited if the key factors of production were not mobile (On the Principles of Political Economy and Taxation, chapter 7). That was true in 1817, but not so today. Three of the key factors are mobile: knowledge, capital, and labor (both as migration and outsourcing).
The expansion of our exposure to third world competition was tolerable so long as limited to traditional “tradable goods.” Now both sophisticated manufacturing can be done almost anywhere, exposing a large fraction of our workforce to global wage competition. Worse, globalization is expanding to services. Another tranche of high paying jobs — this time white collar, professional jobs — are going overseas.