Did Free Trade Kill The Rust Belt?

[@scygnius]

How big of an impact would you say the Jones Act has played in the Rust Belt's decline and future potential?

[@UPSTATERNick397]

So I actually don’t know too much about how the Jones act specifically impacted the rust belt. Usually when I read about the Jones act, I read about it in the context of how it impacts the economy of Hawaii, Puerto Rico or Coastal States, but in the end of the day it is certainly responsible for driving up costs in the country which hurts everyone. Making ends meat in UpState NY is hard and expensive. One of the main reasons why I am pro-free trade is I understand just how much protectionist measure drive up costs for ordinary Americans

[@ArthurGencer]

Protectionism didn't rust the midwest. If we removed protectionist restrictions the rustbelt would still be the rustbelt.

[@UPSTATERNick397]

I agree that protectionism alone is not entirely responsible for the decline of the Midwest, however I certainly think it played a part in its decline and people tend to overlook just how much we have protected this region in the past and use trade ,which can have real benefits to the average American, as a scapegoat.

[@CarlGerhardt1]

Most economists are in favor of 'free trade' because de-industrialization is no skin off of THEIR teeth. (Also, they wouldn't get all the cushy, university-endowed tenured positions, or get invited to all the swanky, plutocrat funded cocktail parties if they were against it.)

[@mihaijiplea8371]

I don't agree with the conclusions at all. The US has gone too extreme on free trade. It can be good, but it depends how you use it. Instead of good manufacturing jobs dispersed across a region, you get a lot of badly paid service jobs concentrated in cities. There has to be a balance and free trade agreements have to take into account not just the net difference of jobs but where those jobs will be lost and where the new ones will be created. No matter how much you spin the productivity angle, manufacturing is getting shipped overseas because of lower costs and free trade also allows workers elsewhere to be productive because of ease of access to technology. If you're saying that you want free trade to proceed no matter what but the government has to get more involved to ensure the welfare of those who lose their jobs, then you get into left wing methods that the US will never implement.

[@UPSTATERNick397]

Thanks for commenting! Respectfully, I’ll just point out a few areas where we disagree. First, there is a massive productivity gap between developed and developing countries that make it impossible to do much of this work overseas. If that weren't the case there would be no jobs left in the U.S., this is called the Lucas Paradox after the nobel prize winning economist Robert Lucas. Gains in productivity are slow, require stability and cannot just be transferred from country to country, that is a vast oversimplification of a much larger process. For Example, China has some of the most cutting edge technology but in recent years the productivity gap between them and the U.S. has only grown. On the issue of badly paid jobs concentrated in cities, nearly every peer reviewed study finds that jobs created by free trade pay approximately 15% more than those jobs replaced by trade. Export oriented jobs pay more not less than the national average. The good manufacturing jobs only really worked in the immediate aftermath of ww2, 1945-1970, when the entire world was destroyed and as early as the 1970’s U.S. began taking protectionist measures against German and Japanese automotive and steel companies. The communities (such as my own) where people have the least options are communities with large companies or plants that have been largely subsidized or protected by both the State and federal government (GE is the perfect example of this) and thus were unable to adapt to the changing economic landscape. Sometimes creative destruction is needed in order for communities to move on, and it is a widely accepted principle in economics that competition is good and breeds innovation and change. It is also the case that trade is a scapegoat and according to many studies, the vast majority of job losses in these industries were not due to trade but to changes in technology( aka shifting economic landscapes). And more companies moved from the Rust Belt to the South then did to Mexico.I think many people greatly underestimate just how much we had done to shield many of our industries from competition and fail to see the correlation between the fact that the regions of the world that experienced the most protection are the areas struggling the most now and that are stuck in the past, suffering from a lack of options, good jobs and dying industries while the rest of the country moved on. Economies change, that's okay and trying to stop it will only do more harm than good.

[@mihaijiplea8371]

@@UPSTATERNick397 How will a small town community dependent on manufacturing move on when their whole plant is closed and jobs moved elsewhere? It might be the case that the average job salary is higher (even though the mean is a better comparison) but those are jobs for people like me: immigrants who come from abroad and get well-paid high-tech jobs. In the meantime, small towns across the rust belt have close to no economic activity. Innovation is good, but it must be controlled properly and if this means slowing it down so people can properly transition or having contingency plans ready to go so that comparable jobs go to the same people that are being laid off, so be it. Statistics are good but they really don't show the full picture. You can have high GDP growth, high average wages and incredible wealth while half the population is under the poverty line. Government needs to be more involved, careful and take care of communities impacted by free trade while fostering the benefits.

[@UPSTATERNick397]

I completely understand where you're coming from, but I would just add that economics and development is like evolution not creationism in that it is a gradual process of adaptation that takes time to work out and isn’t completed overnight. Gradually as businesses decline or face new competition they find new ways to compete or slowly being to decline with the resources, capital and labor eventually being used on more productive industries and sectors. Again, this doesn’t happen overnight, but the reason why I am against protectionism is because it completely prevents this process and leads to communities stuck with only one or two major companies or plants that are not competitive in the modern economy. You make an interesting point in saying that governments might need to intervene to make sure people and industries can transition properly, but I would argue that the issue is the other way around.The argument I am making is that the reason so many small communities are dependent on these factories or plants is because of protectionism in the first place. Protectionism created communities that are dependent on inefficient industries.There are many areas and regions in this country that were once dependent on manufacturing, steel or oil but have since gradually shifted, at least in part, to other sectors. Texas, California and Florida were once significantly more dependent on these industries but have since become leaders in better, more economically viable industries. It is very easy to see the jobs that are destroyed by trade. If one plant closes everyone blames trade for it, but people rarely recognize the jobs that are created or the more affordable goods that they have access to due to free trade. I think trade has become a scapegoat for a lot of problems we are facing as a society, but there is very little evidence that trade is the root cause of most of our problems and nearly all economic data shows it has a net positive impact on jobs, wages and help lower costs in his country. Don’t get me wrong, I completely understand what you are saying and I think we both care about the wellbeing of people in the rust belt. I just think free trade gets more blame than it should and none of the credit for the good that it does. BTW, i'm not a libertarian and I do believe in some form of a welfare state that temporarily benefits those laid off and helps them get back on their feet.

[@mihaijiplea8371]

The approach you're advocating for is too laissez-faire. The free market isn't a magic method which gets everyone on board or makes them eventually be better off. It's an imperfect system that is better than anything we had before. And as any imperfect system, you must do your best to get all of its benefits while intervening to address the drawbacks. It's unrealistic to say that if it doesn't work yet, just give it more time - at this point this is just make-belief not backed up by facts. Protectionism is one way of dealing with this, other ways would be subsidizing job loss by higher taxes in other places and there are many more. I'm not really advocating for one single measure, I'm simply saying that government should have the job of managing the drawbacks and I don't believe that having the drawbacks in the first place is a precursor to everyone being find at an unspecified time in the future (there's simply no evidence of that).

[@UPSTATERNick397]

One last response, i'm not sure if you can tell but I like talking about trade and protectionism I'm not advocating for laissez faire economics, I do believe the government can do a lot to help out those who were laid off and I agree the government may need to play a role in mitigating the negative effects of trade. I just also recognize that the government can sometimes do more harm than good, despite the best of intentions. I take issue with the wording you use that seems to imply that the benefits of free trade are``make belief” when the benefits of free trade have been measured and praised by economists for over a century, and have played a major role in widespread extreme poverty alleviation (Close to a 90% decrease globally since 1950) and in the United States becoming the most economically prosperous nation on the planet. You seem to imply that free trade or trade liberalization never worked or never played a major role in benefiting our country’s economy or the global economy as a whole, but that is simply not correct. It's not a matter of waiting for the benefits of trade liberalization to kick in. After WW2, the world agreed protectionism didn't work. In fact, one of the main causes of the great depression was increased protectionism around the globe, especially the smoot hawley tariff. The GATT was established and the subsequent trade round that followed created an international economic order that (while imperfect) genuinely changed the world. I acknowledge that there are real trade offs associated with trade liberalization and that government assistance is needed to help ordinary people from time to time, but the problem is that most people don't recognize or understand the tradeoffs associated with protectionism and how they can negatively impact communities like those the rust belt (which again have historically been the most protectionist) and instead use trade as a scapegoat. The number of companies in each state benefits from protections can usually be counted on one hand, but trade and open access to goods and overall greater productivity through an economy has ripple effects that impact nearly every industry (not just export oriented companies) in ways people don’t even think about. The benefits of protectionism are short term, limited in scope and come at the expense of both working Americans who need to pay higher prices and non protected industries.

[@pj_ytmt-123]

Blah blah blah "comparative advantage" re-packaged. "Gainful employment" ties into "dignity of man"; these are Roman Catholic concepts and true.