Charlie Rose

attilamaradi  05/12/2009 07:26 AM Report

There is a huge trade deficit for one particular reason. When global corporates are formed whose revenues and power exceed the revenue and power of a single country the result is quite obvious. The US has a huge deficit because the 'patriotic' global American corporations selling the American products back to the American people as foreign export goods. When a corporation is present in numerous countries (on the global market) the accumulated profit is monumental. It is also obvious that with that huge budget it is way to easy to buy anyone including the government of the Unites Sates of America. The situation cannot be solved without the limitation of the corporate giants! Now we arrived to the circle of irony. Since the majority of the government is influenced by global corporations there is unlikely that genuine initiative will come from politicians. Only possible way is the increased pressure from the public!!!

esantoro  05/07/2009 08:57 AM Report

These posts are a great read.

At times I have felt that Charlie has lobbed softball questions and has not pressed certain guests outside of their rhetorical comfort zone. Recently, however, he seems to be doing a little better with follow-up questions that ask for further explanation.

I agree that these discussions need a broader panel. One of the elements that I think goes untouched in economic contexts is race. We can talk about race to some degree only when the context overtly is race, when the context is artificially divorced from issues that bear on everyday realities such as health care, education, and employment, where much more subtle and deeper discussion of race, beyond the obvious, would allow for a larger understanding of the mechanisms in play and that have been in play since 1619. Krugman's on it.

Basically, it comes down to this. It is not a coincidence that we are in this economical straight jacket some 40 years after the Immigration Act of 1965 (the Hart-Cellar Act), which opened the floodgates of cheap labor for a service sector that now accounts for around 75 percent of the economy. Within these 40 years,we also saw the rise of the financial sector's influence and the decline of the middle class.

We are now at a time where this orchestrated system has come to a head. We will either put in place necessary corrections, or we will fool ourselves into maintaining business as usual. When the financial decision-makers (I will not call them and their ilk "elites", because most of them are narrow-minded idiots who parrot an ideology they don't fully understand.)look out their windows,they see what everyone sees, a United States that is growing less Waspish.

The financial mechanisms that have been in place for the last 40 years and that have now hit a wall have been designed, wittingly or otherwise, to ensure that the growing ethnic groups in this country do not band together democratically to enact real change to the system. Never before in the history of the U.S. has the establishment faced such a challenge. The same challenge from 1880 to 1929 was rather easy to dismiss. But in the age of easy access to information and the dissemination of ideas? The establishment is racking its collective brain to find ways, methods, and means to preserve its dominance. I would argue that 10 percent of the establishment see this threat directly and speak about it plainly within their closed circles. The remaining 90 percent are necessary tools that are ideologically blinkered to believe in a certain manufactured reality. Schwab, Bhagwati, and Binder are of this second group.

REMant  05/06/2009 11:25 PM Report

I'm for free trade. Who isn't? The problem is that if monetary policy is not also free, then trade CANNOT be. That means to put it bluntly, that one group of ppl backed by a few central banks dominate it and trade is only in their interest. That is why Andrew Jackson opposed the "monster" bank almost 200 yrs ago, and why we have a good-sized worldwide depression today. Prof Blinder appears blind to the fact, and I suspect Ms Schwab and Mr Bagwhati of being a couple of the interested parties.

Philosophical free-traders like Adam Smith were hard money men, and usually agriculturalists, like Jefferson. Mercantilists have always been both paper-money men - bankers - and usually manufacturers. Their primary objective has been to wrest power from the landowners, as for instance in the Civil War. The impetus for inflationary monetary policy is to undercut the power of wealth, and thus it is the program of nationalization and emerging states. Having debts, or using notes as money, is not in itself bad, but if not controlled, leads to the disparity of wealth and financial calamities such as we have seen repeatedly since the early 19th c. But after achieving control countries invariably argue for free trade. In this the US is echoing 19th c Britain. But the tide has since WWII been turning against us, our manufacturing going abroad and our middle class shrinking. The only ppl making money, at least until very recently, were connected with finance and real estate.

How can anyone argue we have free trade, when, just for starters, China holds $1 trillion of our debt, and the Saudi's have subsidized the price of oil for 30 years or more, so that a barrel would fetch $500 just due to the dollar's depreciation in that time? Other countries, for instance France, used, several decades ago, to complain mightily about our dominance when the US had the upper-hand in trade, but, now, when we are weak, everyone complains that we are not buying enough. That is not because they are particularly mercenary, but because as top predator so-to-speak our collapse has dragged the entire system down. Tho I presume, if they could, they would enact Navigation Acts, like we used to, and GB before.

This imbalance is found just as much within this country. Compare the "cost-of-living" between NYC or DC and Indianapolis, for instance. Either the difference is due to greater productivity there, (and who would argue that?) or it is due to concentration of power. Capitalism, as has been practiced since the rise of banking, and especially since the establishment of non-convertible paper currency controlled by central banks, has undeniably served to impoverish those not involved in its manufacture, and concentrate wealth denominated in it. Far from bringing the poor out of poverty, as the "emerging" entrepreneurs conceive, or floating all boats as economists allege, using a figure demonstrating the limit of their linguistic ability, it impoverishes them, and that is, in turn, fueling the wealthy's security concerns. For Blinder to suggest that ppl like Brown and me are simply ignorant of cash flows is ludicrous. And even Sir James Steuart, who put the case for moral hazard as well as anyone ever has, was not either.

Let me quote from the Century Foundation's 2007 study of the middle-class, which no doubt informed some of Obama's campaign statements:

"The oft-cited 'middle class squeeze' is real, and the economic realities are unmistakable. Families are working more hours for less money. Their costs are going up. Life is riskier. Those at the top are doing better while the majority in the middle is stuck. For many observers, economic news of recent months and years seems confusing: traditional measures of the economy show positive signs, yet Americans report dissatisfaction in the economy. Productivity is increasing, yet American wages are stagnant. Economists, media, and citizens have been left scratching their heads. These are not confusing anomalies or blips on the radar, they are trends. Without change, the economic arc will continue to bend in a distinct direction: a direction that will diminish the American middle class."

Productivity, I have to point out, goes up, as economists measure it, when the cost goes down, whether any technological improvement has been made, or even if output declines. When, of course, a huge "reserve army" such as India's and China's comes online, the price of labor is forced down. As manufacturing shifts overseas, those in this country are left with the choice to join the new financial elite, or become their servants. In addition to credit manipulation, we can add Marx's consumer surplus to the reasons for impoverishment.

And comparative advantage does not equate to divided labor, nor was Smith's idea of it, aside from natural agricultural advantages, that of a Taylorized factory, but rather that specialization created new trade through creating new products. In this he was no different from Friedrich List. He also had the idea that far from concentrating power, free trade, by optimizing efficient production, would level wealth. That neither of these things happens is due mainly to control of money. Even so economists have often recognized that trade is most beneficial among equals. J. A. Hobson argued at the turn of the last century, as Lenin did, and many socialists still do, that manufacturers needed to continually expand the market for their goods, founding colonies to that end. This influenced Keynes, who ironically decided that more money, not less, was the answer.

Blinder also neglects that the owners of foreign companies are the ones who most benefit from the manufacturing they do here, not the workers, all of whom, by the way are non-union, and which US taxpayers have heavily subsidized.

It might be considered that the destruction of feudalism by a combination of king and democracy, with the connivance of banks, was a good thing, but it is clear, as Tocqueville anticipated, that a new "court" aristocracy has arisen and that the only people benefiting from free trade on such unequal terms are those who control finance. As they increase in wealth others are made poorer, and not just relatively, because the interests of the wealthy do not coincide with the interests of the middle and lower classes. This is held not to be a zero-sum game, because equilibria ideas such as Say's are dismissed and an idea of progress put in its place, however not one that in any way involves technological innovation. Most likely tho that means that innovation suffers as the wealthy, themselves, are corrupted by their power. None of this is really different from Stalinism.

The present enthusiasts for free trade, then, are better described as mercantilists in a position of dominance, unlike Smith and List, and have social and economic ideas that are comparable to their monetary ideas: a pyramid scheme they see as analogous to a pump. A continuous injection of credit and new manpower keeps the pump operating, and if it fails, it needs to re-primed. They are thus in favor of the free flow of both population and capital.

They have used easy money to live like little princes and princesses, while the poor here and in third world countries supported them, believing in the process that they were wealthier as prices and incomes rose because they could by merely printing money command the labor of these poor, who have become poorer and poorer. Tho population increases, too, as poverty increases, this, obviously, is ultimately a no-win situation. And no one seriously thinks we need more ppl on this planet.

There's a so-called virtuous cycle of increasing productivity and decreasing price, the money supply as a result remaining steady or contracting, which everyone in economics is familiar with, but there is also a vicious cycle in which production decreases and prices rise, and this happens when efforts are made to not cut prices and trim inefficiencies, but to increase money, the result increasing income and wealth disparity. As it proceeds fewer and fewer ppl can afford what is made, and less and less is, as a consequence, made. The more goods an economy has, the less money it needs, and vice versa. More money invariably means more poverty, not more wealth.

Take for instance professional sports, where we have small and large markets, but an assumed equality except in the draft, which depends on team records, tho constituting only a small part of overall strength. The result is that for the most part most teams remain in a stagnant position in the middle, unable to advance unless they decline, and obtain higher draft picks, which they are forced to trade away in most cases anyway, while a few teams dominate. The only way around this is to build a team from unwanted elements, which fortunately works often enough to make games interesting. Industrial organization research confirms the impression that firms are never equally distributed, but rather a few dominate and the rest remain far behind. This dominance reinforces for enthusiasts the idea of a natural aristocracy, or Social Darwinism, in which they attribute their fraud to excellence, at least until asset bubbles burst, and Ponzi schemes unravel. Another instance is charter schools, and colleges like Princeton, which self-select and leave poorer students at the remaining public schools, and then claim to be better.

The most disturbing thing about recent talk of recoveries, etc, is that it reveals that not only these ppl, but many ordinary ones are unwilling to seize the present as an opportunity for reform, but only want a restoration of business as usual. And, unfortunately, despite many remarks to the contrary, that seems to include the president.

williemc1  05/06/2009 07:22 PM Report

Another small ghost at the dance was repeatedly skirted, the necessity for a truly supportive program for all U.S. labor, then exporting those standards to other countries. That is the level playing field a comprehensive national policy in: education, health care, shelter, social security unemployment benefits etc. This is where many of our trading partners have the upper hand in the moral market trade especially the more advanced or so called first world groups. To compete in advanced markets we must provide for the needs of those workers across the board this helps businesses compete in countries where the government provides things like affordable health care. This is nothing new but the talking heads appear afraid to address delicate reasons that underlie the competitiveness of other countries.

The comparative advantage theory is more of a mackerel in a red herring barrel. It’s a quaint mechanism when illustrated over a few products and between a few nations but does not hold up in the grand scheme of globalization where it becomes the sledgehammer to dominate any country trying to emerge from colonialism. It can also be demonstrated that historically protectionist policies have benefited not only the United States and 1st world countries but emerging economies as well. Some how the counter points get left out of many of these discussions.

When subsidized corn shows up in the markets of subsistence farmers they show up at Home Depot. So many economic discussions overlook unintended consequences or chose to ignore them all together.

tetratetra  05/06/2009 07:16 PM Report

What an interesting discussion on so many levels. First I would say I was fascinated by the fact that we had three in investment types in Charlie's presence versus one senator off in the distance. Oh please tell me that was not a Schwab of Schwab fame. I must say that from this side of the television screen it looked like the senator was electronically shackled and gagged. While the "money begets money crowd" was well represented. I think what is always lost in these conversations is that people exist on a continuum of skills, we were not all meant be lawyers, physicians, engineers, mathematicians and, God forbid, Investment Types. In this country, we need jobs for all of our people not just the well-educated ,or should I say, well-financed and well-connected. Jobs that provide a decent living. Jobs in manufacturing that , when our nation was threatened, produced tanks, machine guns, munitions, steel, and committed manpower. Please, let's stop dancing around with one another. This is about cheap labor, lowered environmental standards, and Increased Return on Investment. Oh and by the way, You Don't Have To Live There.

Tom

Androcass  05/06/2009 06:56 PM Report

It was unfortunate that Senator Brown was so outgunned in trying to contest the quite-orthodox views expressed by the other panelists. There are arguments that can be made that "free trade" doesn't fully capture the costs, particularly to individuals (and the losers tend to be disproportionally Americans). No matter how economists and trade representatives may try to spin the subject, "positive-sum" is not the same thing as "win-win" (I've had additional thoughts on this here: http://androcass.blogspot.com/2009/05/win-win-vs-positive-sum.html).

I would also contend that the goals of a labor market are quite different from those of a market in goods, and none of the folks on the panel dealt with those differences in their enthusiasm for free trade. Alan Blinder brought up the usual retraining, unemployment extension, etc. mantra - all those programs that really aren't working now, but somehow we're going to start doing them better.

There are, as patriceweber wrote below, many questions that need to be addressed as we move to the mythical Friedman "flat world"; as it is, we have a vast experiment that may or may not prove positive for the majority of Americans. Yesterday's vacuous discussion didn't contribute anything to our understanding.

tartufe  05/06/2009 06:01 PM Report

Agree that the omission of agricultural subsidies had to be virtually intentional. No way poor African, Asian etc farmers can compete. Mexicans can't which adds to migrant workers coming north to harvest subsidized crops. Homage to the oppressor.

patriceweber  05/06/2009 05:35 PM Report

Interesting discussion, but like as been said in the previous post we need a broader panel to discuss these issues.

I was quite taken aback by Alan Blinder's comment that "we don't necessary need a "level playing fields" when it comes to trade policies. To this, I would say:

1) What do we do to address the future climate crisis due to Co2 emissions. Do we still buy manufactured products carrying a heavy carbon footprint for the like of China, Brazil etc.. will changing electric bulbs at home?

2) Following the industrial revolution, we tend to see loss of manufacturing jobs as 'blue collard' jobs that did not require a lot of education to begin with. But with the digital revolution the world has experienced the last decades (internet, videoconf etc...) What do you tell a radiologist for example, that he should compete with a Thai one, after spending 4 or 5 years of education and been several thousand dollars in debt.

Or surgeons for that matter, I am sure will see in the coming decades robotic surgery platforms remotely controlled. To bad you spent 11 years of you life studying, could you work for $20 an hour please...

That's the kind of questions in my opinion, that free trade advocates have to answer if they want to be taken seriously by the general public.

LosAlamosJoe  05/06/2009 03:45 PM Report

I was disappointed with Mr. Rose. First, he chose three “economists” to a lone Senator. Second, he did not press the economists on how to deal with the trade-deficit, the unbalanced sectors of the economy, the long-term consequences of our current trade deficits, or the effects of trade deficits and U.S. deficit spending on U.S. national security. Mr. Rose was especially lenient on Mr. Bhagwati, who was quit “flip”. On the other hand, Mr. Rose doggedly pressed Senator Brown, trying to get him to conclude that President Obama might be changing his position on trade policy. While I applaud the topic, it could have been handled much better.

williemc1  05/06/2009 03:22 PM Report

I am always interested in the globalized context presented on trade agreements and their defense. Four very astute knowledgeable people and a very astute interviewer discuss a complex topic and never touch the true elephant in the room.

Only in passing does one economist even approach that object in a reference to Riccardian theory of comparative advantage as a 200-year-old reason to support the globalization trade trend. He uses Bananas as his example in defending trade deals. Referring to the U.S. as not seeking to limit the comparative advantage of Banana producers.

A cute tactic to but why not mention Corn or the protectionist agriculture laws that are the real elephant in the room when it comes to U.S. trade deals. Never mentioned in this segment. Jinning up comparative advantage while ostentatiously protecting the pocket books of large corporate agriculture was glaringly missing form any comments in this segment.

I like to watch Charlie Rose for the thoughtful manner he approaches many topics yet I find the omission of agriculture in favor of manufacturing and service sectors to be a great almost willing fault in so many otherwise informative programs.

balder  05/06/2009 02:38 PM Report

These free trade ideologs doesnt take into account the negative political and cultural effects of free trade. Look at the islamic civilization. They expanded rapidly from year 632 to about year 900 and created a "globalised" economy within their caliphate that made their civilization prosper. However, the political instability and internal warfare sent islam into a permanent decline from about year 1200. One way to ensure some stability was to ban free philosophical and poltical thinking. They say that the " door of itjihad" was closed within islam from about year 1200. Free trade creates tension, as it did in the years 1870-1913. The consecvense of 40 years with free world trade, was 30 years with two world wars. Free trade created the rising powers of Germany and Russia.

Todays free trade creates the rising powers of China and India. If one tries to hold them back, they might start wars like Germany did in the early part of the 20th century. And if they are not hold back their appetite for expansion will create resentment around the world.

The Harvard economists didnt see the financial crisis coming because they are blind to the political side effects of free trade. Only Nouriel Roubini sees the economy as just a part of global politics. The military ideologs was wrong about the Iraq war because at the time they didnt see wars as just a POLITICAL tool. They thought military power in itself was enough.

viafCh  05/06/2009 02:12 PM Report

I thought the deck was unfairly stacked against Senator Brown--four high profile academics/government people vs. one Ohio senator. I wonder if/why Charlie could not find a more balanced set-up for the conversation...

All these being said, I thought Senator Brown did very well in defending a point on trade that the establishment continues to be oblivious to, despite all the mounting evidence. From the pro-trade camp, we heard all the shibboleths of free trade, while no-one looked at the fact that trade has been neither free nor fair.

Indeed, trade has never been free.

During the Cold War, we traded with several closed systems for the sake of fighting together bigger enemies than trade deficits at home. When we ran those deficits, we were able to mitigate the damage to our balance sheet by invoking in the specter of the common enemy, communism. At the same very time we were seeing the beginning of of economic depletion, whereby entire economic sectors would disappear. Some said that new and better economic activity would always replace the old, we only had to stay ahead of the curve. Since, we've found out that staying ahead of the economic curve requires education and intellectual capabilities ordinary workforce does not posses. So, while some stayed ahead of the game, most had to make do with the service sector jobs.

After the Cold War, deregulated banking, credit, and large scale offshoring came into the picture. The economic depletion accelerated, while our (new) trading partners have not opened their markets enough for our services and goods. The difference this time is that we are running a lot of our trade deficit with a country/system of unprecedented scale. The specter of a common enemy, to make people swallow trade deficits, is no longer there. To say the least, we cannot go on like this for long, for it's not sustainable.

Yes, we have to keep trading, there is no other way! However, we have to put our house in order (e.g. education, healthcare) and ask of our trade partners to be mindful of: labor and environmental standards, and intellectual property. Moreover, our trade partners should open their system(s) wider to our exports. One can argue that we risk a lot by asking so much. To which I say, give most of us a fair chance at free trade.

NewEnglander  05/06/2009 02:02 PM Report

It was with heavy heart I watched as Jagdish Bhagwati and Alan Blinder had to put up with the political pontificating and bluster from Senator Brown and Susan Schwab. They tried very hard to make examples so simple but hopefully not condescending so both of the others could grasp the basics of trade. Unfortunately whenever a politician is involved in any discussion it all comes down to does my hair look good and how did the polls like it!

NewEnglander

Sugarland  05/06/2009 12:13 PM Report

It was with a heavy heart that we watched a distinguished group espouse the dogma of free trade while ignoring a US Senator's plea that this isn't working for the middleclass.

Several years ago a similiar, or maybe the same, group would espouse the dogma of un-fettered capitalism. Nobody does that anymore.