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Thursday, November 17, 2005

More Smooting From Conservatives

Taking a page from embarassing moments from Charles Krauthammer, Matt Towery, a pollster with solid conservative values and usually keen insights, bemoans the impending bankruptcy of GM and sees the culprit being high wages. He should have taken a deep breath before publishing this essay.

While recognizing the myriad costs that hamstring manufacturers in America, Towery proposes to force our competitors like China to pay their workers higher wages-actually wages commensurate with those paid in the US! He opines that if the Chinese had to pay anything close to our wages, manufacturers would open mills in the US instead of China. Maybe so, but that sounds like coercion and not so free market to me.

His proposal, he claims, is not protectionism but a means of "ending the trade advantages of China and other emerging countries".

He proposes:

How about this: Let's reinvigorate the movement to close foreign "sweat shops," but with this crucial difference from efforts to date: Instead of arguing the morality of these establishments, let's apply an economic "eye-for-an-eye" standard.

If a nation like China refuses to pay its workers more, the United States could tax China's exports to the U.S. on a scale based on the difference between what China pays its workers and what America pays its workers for making the same product.

Oh, no! That's protectionism, some will say. It's against the principles of global, free-market economics.

Somewhat, yes, but with a difference. This eye-for-an-eye approach would encourage competitive behavior from the Chinese or whomever. They would pay no set surcharge on their goods; only a tax indexed to their wage scale relative to the country that imports their products -- us. Legitimate Chinese businesses with a solid future would pay higher wages; sweat shops wouldn't, and they'd suffer accordingly.

This idea is ridiculous. He expects that Chinese businesses will voluntarily pay workers multiples of the market wages in order to increase the price at our shores? Why wouldn't they just raise the prices and pocket the additional money rather than pay it to the US Treasury? And why should US consumers pay such high prices when cheaper are available. Wouldn't the Chinese manufacturer set up straw companies in other countries to get around the wage mandate?

With all due respect, the only way to compete is to lower costs. If unions provided salaries for workers beyond their fair market values, then the salaries need to be scaled down in order for companies to continue doing business.

Towery concludes:

It would send the message that the opening of markets worldwide has to mean a parallel closing of worldwide business loopholes. Only on this level playing field can true globalism take permanent root.

Matt, the playing field will never be level as there is comparative advantage among competing interests in life. Someone can do things better and cheaper than other people. Those that can do things better and cheaper can sell to those who cannot. The latter group can find other things they do either better or just do because the first group won't do it. In the end, your proposal merely penalizes local consumers for the sake of businesses that should make changes.

And to use GM as an example is ludicrous. The reason GMs cars do not sell is because people do not wish to buy them. Maybe GM needs some new ideas.

7 Comments:

At 8:06 PM, Blogger Aaron said...

Your posts are good! I find it hard to believe that many so-called conservatives today are either ignorant or hostile to free market education or reality.

Free Trade is a good thing. David Ricardo proved that many years ago. But demagogues continue to miss his point.

I liked your post about German taxation too.

 
At 7:50 AM, Blogger neal phenes said...

Thanks, aaron. One reason I am so shocked at conservatives is they are supposed to understand the destructive nature of big government and champions of free enterprise.

It is almost as if the conservatives against free trade suffera brain lock and allow their emotions take over what a clear analysis would provide.

 
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