Free Trade, junk economics, dying middle class, & where we went wrong.

[Elwood P Dowd]

Very long read but worth it.

http://www.economicpopulist.org/content/junk-economics-and-middle-class-where-we-went-wrong

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So what happened? Under President Nixon the decision was made to remove protective trade barrier and go to a Free Trade model in 1973.
According to The Myth of Free Trade by Dr. Ravi Batra:

"Unlike most of its trading partners, real wages in the United States have been tumbling since 1973, the first year of the country's switch to laissez-faire...Before 1973, the U.S. economy was more or less closed and self-reliant, so that efficiency gains in industry generated only a modest price fall, and real earnings soared for all Americans....Moreover, it turns out that 1973 was the first year in its entire history when the United States became an open economy with free trade.
"Since 1973 and free trade, the link between real wages and productivity was severed, where its commitment to free trade soared faster than domestic economic activity. Real wages for 80% of the labor force have been steadily shrinking in spite of rising productivity. Free trade skews the real value of manufactured goods, through cheaper foreign labor or weaker foreign currencies in relative prices, despite increased productivity and innovation, in turn creating a shrinking consumer base."

Trade barriers had been dropped a great deal under FDR, but they still existed for important industries all through the 1950's and 1960's. Also, where tariffs were dropped, a system of subsidies were put in place, while infrastructure spending was accelerated. This hybrid version of the American System ended with President Nixon.

" if you had not had the Protective Tariff things would be a little cheaper. Well, whether a thing is cheap or dear depends upon what we can earn by our daily labor. Free trade cheapens the product by cheapening the producer. Protection cheapens the product by elevating the producer. Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man."
- President William McKinley

Besides adopting a free trade model, America has turned away from the other tenants of the American School of Economics. Specifically, it has neglected public infrastructure projects in the hope that privatization of public assets would do a more capable and efficient job. This strategy has also failed miserably.

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[SoCalDem]

1. "...tenants of the American School..." hahahahaha

I think they meant "tenets"..

but it's a true read.. remove rules and we suffer..

and Nixon's "opening" China has not been all that beneficial to us in the long run.. They would have emerged eventually, but Nixon catapulted them at warp-speed, and our rule-less corporations ran amok:(

[Lindsay]

2. "This strategy has also failed miserably."

Actually, it's succeeded amazingly, if you realize that privatization was meant to divert tax money to private hands. The "more capable and efficient" BS was just the fiction they hid behind.