Free trade costs thousands of jobs
July 19, 2003
BY THOMAS ROESER
John E. Jones, the banker and manufacturer I wrote about last week, has made an intensive study of so-called free trade, and concludes that it has not been a good policy. Why has the United States continued to pursue this policy--and why have the Democrat and Republican parties, for the most part, chosen to support it? Jones says one reason is that ''free trade economists preach that whatever produces the lowest possible cost is best. All things being equal, everyone would agree that this is true. But if you need not consider anything but cost, a slave economy is better because it is lower cost.''
Jones calculates that real wages for the middle class peaked in 1973, ''shortly after the U.S. became an unprotected economy in 1971,'' when they were 176 percent of what real wages were in 1946. During the 17 years after 1973, real wages declined to 86 percent in 1995 and recovered to only 92 percent of real wages in 2000 during the "economic boom" of the late 1990s. ''If 'free trade' had been a better policy . . . their real wages in 2000 should have been significantly more than 175 percent of 1973--not a reduction,'' says Jones. ''When I confronted one 'free trade' economist with this data, he responded by saying, 'This is the price that must be paid to raise the standard of living for the rest of the world.' ''
Jones finds that the percentage of households in poverty bottomed out at 8.8 percent in 1973, just as real wages peaked, and by 2001 had risen to 11.7 percent. ''If 'free trade' were a better policy, the downward trend of families in poverty that prevailed when they were protected should have continued,'' he says. "Since 1973, the net savings rate has fallen from the long-run average of between 9.5 percent to less than 4 percent of net national product,'' he says. ''If 'free trade' is a better policy, the savings rate should be at or above the long-term high of 12 percent, and household debt should be reduced.''
Meanwhile, none other than conservative Phyllis Schlafly has weighed in on the issue of what the global economy costs Americans. ''When U.S. corporations built hundreds of plants in Third World countries, we were told not to worry about losing blue-collar manufacturing jobs because we were keeping service jobs,'' she writes. Now, she points out, big corporations based here hire immigrant workers from India and China at half or a third of the wages. She cites passage of legislation that legalized the importation of immigrant, non-citizen labor: H-1B visas, L-1 visas and outsourcing. She calls it a ''racket.''
''H-1B visas were created in the 1990 Immigration Act to allow corporations to import up to 65,000 cheap skilled workers from foreign countries to fill alleged labor shortages,'' she says. ''The shortage claim was always a fiction and now is nonsense.'' Some observers estimate that as many as 890,000 H-1B aliens are now employed in the United States, she declares. Immigration officials say the count is less than half the number because it excludes those previously approved or those who had their stay extended. It is still very high, and when compared with unemployment here, possibly scandalous. Schlafly details a U.S. Bureau of Labor Statistics report that records joblessness among American electronic engineers at 7 percent and computer hardware engineers at 6.5 percent. Electrical and electronic engineers lost 241,000 jobs in the last two years, according to the Institute of Electrical and Electronic Engineers, as reported by Schlafly. ''Despite hundreds of thousands of unemployed American engineers and computer specialists, corporations continue to import foreigners at the same time that they lay off U.S. citizens.''
Schlafly makes plain who the culprits are: ''It is collusion between corporations that pour big money into politics and Congress that passes legislation enabling the corporations to replace American workers with substitutes, thereby keeping all wages artificially low to enhance corporate profits.''
John Jones and Phyllis Schlafly may not always be on the same page, but his indictment of ''free trade'' and her critique of free-wheeling corporations underscore real problems with the economy that the Democrat and Republican parties have ignored.
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-- Michael Pugliese