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Opening Arguments

Middletown redux

Nearly 80 years ago, a couple of sociologists wrote a book about Muncie called "Middletown," detailing one Midwestern city's struggle with change -- moving from 19th-century agriculture to 20th-century industrialization. Now, that 20th-century-style industry is disappearing, and The Associated Press visits Muncie to see how residents are coping with the transition to the 21st-century global economy.  Predictably, change is just as unsettling as always:

It is the bitterness of the times, not just the cynicism of the politicians, that is souring people on politics.

"If you want to grow and flourish in a flat world, you better learn to change and align yourself with it."

Those words glow from a projection screen on the second floor of the Ball State University library, where Tatiana A. Kolovou is clapping her hands far too joyfully for an 8:30 a.m. seminar on culture shock in the workplace. The quote is from Thomas Friedman's seminal book on globalization in the 21st century, "The World is Flat," and Kolovou's audience is entranced.

She is a Greek immigrant and newly minted U.S. citizen who consults with businesses about how to prepare employees for a "flat" world, where once-dominant America is competing against rising nations on an increasingly level playing field.

"You must know how to interact with other people around the world and other places because we're no longer isolated in our little personal cocoons _ our families, our towns, our counties, our country," Kolovou tells two dozen Ball State staff. "We are a small part of a global community, like it or not."

In other words, the world is getting smaller ... so get over it. Hers is not a lesson about how to outpace the Chinese and other global competitors, but rather how to work with them: Don't be loud, don't be rude, and don't crowd them.

Don't fight it, people. Be a good global citizen _ or else.

The world is getting smaller, so get over it. The global economy is as much an unstoppable force as the industrial revolution. We can learn to deal with it or be destroyed by it. We need to be smart about what we can and can't do and be serious about things like education and retraining. High-paying, low-skill jobs are not coming back, no matter what the pandering political class says.

Beware of candidates -- Clinton, Obama -- who say they can stem the tide by denying reality with protectionist policies that will only make matters worse. Beware of candidates -- McCain -- who confess they don't know much about the economy and seem most interested in military answers. War was the past. Trade is the future.

This comes near the end of the AP story: "Leadership that offers honesty and inspiration, that shields us from foreign threats, that fixes problems and evens the economic playing field. Is that not what we crave today?" That may be what we crave, but we shouldn't expect it to be delivered, any more than it was during the agricultural-industrial changeover. A politician who is honest won't promise to protect us from foreign threats. One who is inspirational won't pretend to be able to fix all the problems and level the playing field.


A J Bogle
Thu, 03/13/2008 - 8:00pm

And increasingly it appears that the jobs of the global 21st century are not those of innovation and industry but of resturants and retail.

Here is noted "leftist" Pat Buchanan on "free" trade

To Die for NAFTA
by Patrick J. Buchanan

"The commonest error in politics," said Lord Salisbury, "is sticking to the carcass of dead policies."

Lord Salisbury's rule comes to mind on reading of John McCain's delight at the $40 billion contract awarded the French-led parent of Airbus -- to build the next generation of U.S. Air Force tankers.

The contract could run to $100 billion and is a body blow to Boeing in its duel to the death with Airbus. Two-thirds of all air-to-air refueling tankers are used by the United States. The contract gives a 30-year lease on life to the expiring Airbus A330 and means early death for Boeing's 767, the U.S. model for the tanker.Continued

Congratulating himself for having exposed corruption in the Boeing bid, McCain purred, "I have always insisted that the Air Force buy major weapons through fair and open competition."

If McCain thinks Airbus has prospered through "fair and open competition," he is beyond recall. In its first 25 years, Airbus sold 770 planes but did not make a dime in profit. It was started as a socialist cartel, subsidized by the governments of Spain, France, Britain and Germany, to invade and capture a market owned by Americans who built the planes that won World War II.

Airbus drove Lockheed and McDonnell-Douglas out of the business of commercial aircraft and almost took down Boeing. And like indolent buffalo munching grass as they are shot one by one, we let it happen.

Lost U.S. jobs should not be our primary concern, said McCain, "I've always felt the best thing to do is to create the best weapons system we can at minimum cost to taxpayers."

But if McCain thinks cost trumps all in building weapons of war, why not outsource the building of U.S. carriers, cruisers, destroyers, frigates and submarines to the foreign shipyards that constuct America's merchant ships? Why not hire and train foreign sailors as crews?

Why not outsource the scores of thousands of U.S. government jobs handling Social Security checks and tax returns to Bangladesh and India? After all, the neocons want to hire foreign mercenaries to fight America's wars and reward them with U.S. citizenship, as the Romans did in the last days of the empire.

What does it mean to be an American anymore?

It took 20 years to wake up blockheaded Republicans to the social insanity of open borders. Only the collapse of his candidacy last summer jolted McCain into realizing that the 80 percent of Americans who reject amnesty and want a border fence are not all "bigots," as his Tonto, Lindsay Graham, said they were.

Is it going to take 20 more years for Republicans to awaken to the economic disaster they have created and the political ruin they are inviting with this fanatic faith in "free trade," while the rest of the world loots our country through mercantilism?

When Europe imposes a 15 percent value-added tax on U.S. imports and rebates the VAT on exports to the United States, that is not free trade. When China devalues its currency 45 percent, as it did in 1994, and bolts it down to suck jobs and factories out of the United States, that is not free trade. When Japan manipulates its currency, preaches economic nationalism to its people, and shelters its market for TVs, autos and steel, while dumping into and capturing ours, that is not free trade.

McCain admits to knowing almost nothing about economics and is now being advised by my old friend Jack Kemp. In a Wall Street Journal essay bemoaning my views, Kemp concedes, "I'm on the advisory board of Toyota North America and now drive a hybrid Lexus."

Nor is Jack the only pol who has found happiness in a foreign employ. Ex-secretaries of state and Cabinet officers, ex-senators and congressmen, and ex-White House aides are getting rich working for foreigners who are carting off American jobs, American technology, American markets, American factories -- and America's future.

Yet retribution may be at hand for our multinational GOP. In Ohio, NAFTA is a five-letter word with a four-letter meaning, as Ohio lost a huge slice of the 3.5 million manufacturing jobs that vanished under the McCain-Kemp-Bush policy of unilateral disarmament in the trade wars being waged against America.

Look at the Bush-McCain record: $4 trillion in trade deficits, $2.5 trillion in manufactures alone. One in every six manufacturing jobs, 3 million, gone. With America borrowing $2 billion a day to pay for foreign goods, we have seen a collapse of the dollar, the price of gold quadruple to $1,000 an ounce, oil soar to $107 a barrel and gas heading toward $4 a gallon.

Where Bush has created an average of 46,000 new private-sector jobs a month, Bill Clinton did five times as well, creating 220,000 a month.

Hillary won Ohio denouncing the NAFTA deal Bill Clinton cut. The lady gets it. McCain remains a loyal NAFTA man. Good luck in Ohio and Michigan. As the Great Peer said, "The commonest error in politics is sticking to the carcass of dead policies"

PS = Friedmans book is bunk - widely discreditted by liberals and conservatives.

tim zank
Fri, 03/14/2008 - 7:35am

AJ, setting aside the senile, oxygen deprived rants of Buchanans' paranoid ramblings, let's examine your statement.

"And increasingly it appears that the jobs of the global 21st century are not those of innovation and industry but of resturants and retail."

That couldn't be farther from the facts, innovation and industry are alive and well. What is no longer in practice here or globally is the practice of paying somebody $100,000 a year to put 5 lug nuts on wheels all day long.

Worldwide consumerism drove non competitive manufacturers out of business and out of the USA. You can blame any bogeyman you want but the simple fact is, if two identical products are sitting side by side and one costs considerably less, which one are YOU going to buy?

The days of standing around with your thumb in your ass on the factory floor with a union protected $100k a year income are long gone, and you can thank the unions for that plain and simple.

Bob G.
Fri, 03/14/2008 - 11:03am

Speaking as a former "union" member (sheetmetal/welding, AND Federal gov't), I can agree with Tim 100% on that. The unions did themselves in.

And while I agree we still have innovation, the first thing we ususally DO with that innovation is ship it overseas somewhere to make it cheaper than hell, so we can pay import taxes when it comes INTO our country, driving the trade defecit higher.

Not lookin' all that good, especially when people lose their jobs & no longer have enough $$$ to BUY those items.

A very vicious circle indeed.


A J Bogle
Sat, 03/15/2008 - 10:32am

by Ha-Joon Chang
Reviewed by Thom Hartmann

The fundamental myth of the Milton/Thomas Friedman neoliberal cons is that in a "flat world" everybody is not only able to compete with everybody else freely, but should be required to. It sounds nice. America trades with - and competes with trade with and for - the European Union. France against Germany. England against Australia.

But wait a minute. In such a "free" trade competition, who will win when the match-up is Canada versus the Solomon Islands? Germany versus Bulgaria? Zimbabwe versus Italy?

There are two glaringly obvious flaws in the so-called "free trade" theories expounded by neoliberal philosophers like Friedrich Von Hayek and Milton Friedman, and promoted relentlessly in the popular press by (very wealthy) hucksters like Thomas Friedman.

First, "infant" economies - countries that are only beginning to get on their feet - cannot "compete" with "mature" economies. They really only have two choices - lose to their more mature competitors and stand on the hungry and cold outside of the world of trade (as we see with much of Africa), or be colonized and exploited by the dominant corporate forces within the mature economies (as we see with Shell Oil and Nigeria, or historically with the "banana republics" of Central and South America and Asia and, literally, the banana corporations).

Second, the way "infant" economies become "mature" economies is not via free trade. It never has been and never will be. Whether it be the mature economies of Britain (which began to seriously grow in the early 1600s), America (late 1700s), Japan (1800s), or Brazil (1900s), in every single case, worldwide, without exception, the economic strength and maturity of a nation came about as a result not of governments "standing aside" or "getting out of the way" but instead of direct government participation in and protection of the "infant" industries and economy.

The modern history of protectionist trade policies goes back to ancient Rome, stretches through the reigns of a series of King Henry's in the UK, through Alexander Hamilton's tenure as Secretary of the Treasury under George Washington, through the trade policies of Dwight D. Eisenhower and JFK, and continues today with China, Korea, the Middle East, and the rapidly-growing Brazilian economy.

The way economies go from being underdeveloped, anemic, and uncompetitive to becoming developed, strong, and aggressively competitive is simple and straightforward: government steps in.

Government first determines which industries are worth growing and which are not. Having a strong machine-tool industry in the United States both creates good jobs and is in our strategic interest - machine tools are necessary for virtually every other form of heavy manufacturing (and even light/sophisticated/electronics fabrication), and being dependent on Italy or China or Japan for them is crazy. On the other hand, do we really need to spend the resources of We The People to encourage and grow a sandalwood-carving industry (actually a substantial industry in Thailand) when we neither grow sandalwood nor have a long and historic tradition of carving it into both artistic and utilitarian forms?

Once "strategic" and "important" industries are identified, government both encourages and protects their domestic growth in a variety of ways. These include subsidies, legal protections (like patent laws), import tariffs to protect against foreign competition, strong industry regulation to ensure quality, and development of infrastructure to ease manufacture, distribution, sales, and use of the product.

As Ha-Joon Chang points out in his brilliant book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism," in 1933 a clothing manufacturing company decided to branch out into the manufacture of automobiles. They had everything going against them - their nation had no really serious domestic auto industry, the company had no experience with the product, and other nations (particularly the US and Great Britain) were already making world-class vehicles that had captured most of the world's markets.

But the company caught the imagination of its country's leadership, and a ministry of trade decided to help it along. Government subsidies helped the company develop their first car. Decades of high import tariffs protected it from foreign competition as it grew into a serious contender. Domestic content laws both made sure the company used parts made within the country, and also guaranteed that domestic competitors would have to, thus building a strong base of domestic companies supportive of an auto industry, from tires to plastic components to precision machine tools and electronics.

In 1939 the country even kicked out both GM and Ford from sales within the country, and the nation's single wholly-owned bank bailed out the struggling textile manufacturer as it moved relentlessly forward in the development of an automobile.

That company, originally known as The Toyoda Automatic Loom Company, is today known as Toyota, and manufactures the infamous Lexus that Tom Friedman mistakenly thought was successful because the world is "flat" and trade is "free." In fact, the success of the Lexus (and the Prius and every other Toyota) is entirely traceable to massive government intervention in the markets by Japan over a fifty-year period that continues to this very day.

To illustrate how infant industries must be nurtured by government until they're ready to compete in global marketplaces, Chang points to the example of his own son, Jin-Gyu. At the age of six, the young boy is legally able to work and produce an income in many countries of the world. He's an "asset" that could be "producing income" right now. But Chang, being a good parent, intends to deny his son the short-term "opportunity" to learn a skill like street-sweeping or picking pockets or shining shoes (typical "trades" for six year olds in many countries) so he may grow up instead to become an engineer or physician - or fully reach whatever other potential his temperament, abilities, and inclination dictate.

Somehow this is lost on Thomas Friedman and the whole "free trade" bunch. As Chang writes, "[E]ven from a purely materialistic viewpoint, I would be wiser to invest in my son's education than gloat over the money I save by not sending him to school. After all, if I were right [in sending him out to work at age six], Oliver Twist would have been better off pick-pocketing for Fagin, rather than being rescued by the misguided Good Samaritan Mr. Brownlow, who deprived the boy of his chance to remain competitive in the labor market.

"Yet this absurd line of argument is in essence how free-trade economists justify rapid, large-scale trade liberalization in developing countries. They claim that developing country producers need to be exposed to as much competition as possible right now, so that they have the incentive to raise their productivity in order to survive. Protection, by contrast, only creates complacency and sloth. The earlier the exposure, the argument goes, the better it is for economic development."

But history proves the free-traders wrong. Every time, without exception, a developing nation is forced (usually by the IMF, WTO, and/or World Bank) to unilaterally throw open all their doors to "free trade," the result is a disaster. Local industries, still in their developmental stages, are either wiped out or bought out and shut down by foreign behemoths. Wages collapse. The "Middle Class" becomes the working poor. And in the process the largest corporations and wealthiest individuals in the world become larger, stronger, and more wealthy. It's "Monopoly" (the game) on steroids.

Even worse, opening a country up to "free trade" weakens its democratic institutions. Because the role of government is diminished - and in a democratic republic "government" is another word for "the will of the people" - the voice of citizens in the nation's present and future economy is gagged, replaced by the bullhorn of transnational corporations and think-tanks funded by grants from mind-bogglingly wealthy families. One-man-one-vote is replaced with one-dollar-one-vote. Governments are corrupted, often beyond immediate recovery, and democracy is replaced by a form of oligarchy that is most rightly described as a corporate plutocratic kleptocracy.

When this corporate oligarchy reaches out to take over and merge itself with the powers and institutions of government, it becomes the very definition of Mussolini's "fascism": the merger of corporate and state interests. As China has proven, capitalism can do very well, thank you, in the absence of democracy. (You'd think we would have figured that out after having watch Germany in the 1930s.) And as so many of the Northern European countries show so clearly, capitalism can flourish and generate great wealth and a high standard of living within the constraints of intense regulation by a democratic republic answerable entirely to its citizens.

Consider the United States of America.

In the earliest days of our nation, George Washington's Secretary of the Treasury Alexander Hamilton, with some writing and editing help from Tench Coxe, outlined what came to be the foundation of American industrial policy. At its core was the protection of what Hamilton referred to as "infant" industries.

Although the invention of the term "infant industry" is usually credited to Friedrich List (in 1841 to support the idea of protecting new industries in Germany by government actions), the man who originated the phrase (and most aggressively promoted the idea in the USA) was Alexander Hamilton. In his "Report on the Subject of Manufactures," written together (but not credited to) Hamilton's friend and sometimes-assistant Tench Coxe, Hamilton wrote:

Bounties [subsidies] are sometimes not only the best, but the only proper expedient, for uniting the encouragement of a new object of agriculture, with that of a new object of manufacture. It is the interest of the farmer to have the production of the raw material promoted, by counteracting the interference of the foreign material of the same kind. It is the interest of the manufacturer to have the material abundant and cheap ... By either destroying the requisite supply, or raising the price of the article, beyond what can be afforded to be given for it, by the conductor of an infant manufacture, it is abandoned or fails;