[quote=EconProf][quote=CA renter]The financial crisis has its roots in the trickle-down economic policies that began in the early 80s. The notion that we could reward speculation over labor, and somehow create a thriving economy from buying and selling things at greater prices and with higher debt levels was and is absurd. The idea that we could impoverish the majority of our population (by outsourcing their jobs) so that the capitalists who produce nothing could become wealthier and wealthier is completely ignorant and totally dismisses psychology and human behavior, not to mention simple math. A healthy economy will ALWAYS require us to actually MAKE things that can be sold here and abroad. A healthy economy requires JOBS for people so they can continue to buy goods and services from one another. There is no other way.
.”[/quote]
CAR, not sure what you mean by the trickle-down policies of the 1980s, but assume it is the supply-side, incentive-based policies of the Reagan years: cutting marginal tax rates drastically, closing tax loopholes, and deregulation. The result, once the policies fully took hold in about 1984, was a rapidly expanding economy (7 & 8% YOY in some quarters, compared to 1% so far this year), a rapidly falling unemployment rate, and a steadily falling rate of inflation. American living standards and consumption increased accordingly, as we freely chose to buy more foreign-made cars, clothes, tools, and appliances made in factories where no American unions dictated work rules and pay. From your post, it appears you would like to limit American consumers to US made goods in the above categories. I wonder what prices we would pay, and what quality we would get. Do you really want to let Detroit have that kind of power over our car-buying public?
Free (or freer) trade is always disruptive. There are winners and losers. The losers are easily identified, vocal, and elicit our sympathy and that of the superficial mainstream media. The winners are the broader consuming public, who are far more numerous but not organized into a lobby with any clout.
Another winner is the US exporters, who capitalize on American advantages in certain goods with higher labor skills and costs than the rest of the world. Let the Indonesians and Indians do the drudgery of making shoes and shirts–our workers won’t go back to that job.[/quote]
We saw a rapidly expanding economy and a falling unemployment rate during the credit bubble, too. Does that mean creating a credit bubble was a good thing?
IMHO, the inflation of the 1970s was largely due to the currency problems/end of Bretton Woods brought about by ending the relationship between gold and the dollar.
In addition to this, the Baby Boomers were entering their peak earning/purchasing years. Not only that, but women were entering the workforce en masse at the same time. These two events created a rather sudden shift in demand that increased prices, but also increased unemployment because there were so many new entrants into the job market.
Once the market adjusted to these changes (new demand was created, so new jobs followed with a slight lag), unemployment decreased. This increase in demand and jobs — largely the effect of demographic changes — was largely responsible for the expanding economy that lasted through the 80s and 90s, IMO. The expansion of credit was also a factor in this expansion, but all too often, people neglect the fact that this debt must be paid back…with interest. That’s a negative for *future* growth.
As for inflation, I believe Volcker’s interest rate shock was largely responsible for slowing the inflation rate. Without the higher rates, inflation probably would have skyrocketed.
As for buying US-made goods, I think (inflation-adjusted) prices would be similar to those paid when we DID manufacture in the US, with comparable quality to what we had then — far superior to the quality we have now, IMO.
I don’t have a problem with fair trade — trading with other countries who have similar labor and environmental standards — but have no desire to continue spiraling toward the bottom with regard to wages, work environment, pollution, etc. Of course, if we are totally incapable of producing something ourselves, we should import it without any tariffs; however, we need to offset the wage disparities, environmental disparities, and subsidies provided by other nations.
Not sure “winners” of “free trade” are the consumers. Those consumers are the very same people whose jobs have been lost due to outsourcing. More often than not, the beneficiaries of cheaper wages and lower environmental standards have been the corporations who’ve seen their profit margins grow to historical highs. Oddly enough, there are many items for which we have to pay prices that are hardly lower than what we paid for domestically-produced items (when we used to make them for ourselves). Also, when we have to replace these goods on an accelerated timetable — because they are cheaply made and designed to break in a shorter period of time — we often end up paying MORE for the use of that item over time (paying 1/3 less, but having to replace it 5X as often). This also contributes to greater environmental damage on both the production side, as well as the end-of-life side.
