Compensating the “Losers” of Globalization

Lambert here: Yoo hoo, Davos Man! Yoo hoo!

By Silvia Merler, Bruegel Affiliate Fellow. Her main research interests include international macro and financial economics, central banking and EU institutions and policy making. Originally published at Bruegel.

What’s at stake: According to some, 2016’s political turmoil shows that the so-called “losers” of globalisation are striking back. There is, however, little agreement on how government should respond to this challenge.

An important contribution to the debate came this week from Maurice Obstfeld. He argues that countries must protect and expand gains from trade through policies that redistribute them more equitably. Globalisation offers potential economic gains for all. But there is no guarantee that this potential will be realised if governments do not take decisive action to support those who suffer from the side effects.

The political consensus that drove trade policy over much of the postwar period will dissipate without a policy framework to spread the risks of economic openness. Such a framework must ensure flexible labour markets and educated, agile workforces, while supporting job matching. It should improve the functioning of financial markets. And it must directly address inequality of incomes. We face many economic challenges, and trade is unique under the illusion that governments can shut out the rest of the world when it becomes inconvenient. In the 21st century, however, interdependence is not optional.

The question that follows is how this compensation for those who do not gain, or even lose out, through globalisation can be engineered. As Gavyn Davies effectively summarises, the shape of a solution that makes economic sense while also being politically feasible remains embryonic at best.

Antràs et al. (2016) study the welfare implications of trade openness in a world where trade raises aggregate income but also increases income inequality, and in which redistribution needs to occur via a distortionary income tax-transfer system. They propose two adjustments to the standard measures of welfare gains from trade: a ‘welfarist’ correction inspired by the Atkinson (1970) index of inequality, and a ‘costly-redistribution’ correction capturing the efficiency costs associated with the behavioral responses of agents to trade-induced shifts across marginal tax rates. The quantitative results suggest that both corrections are non-negligible: trade-induced increases in inequality of disposable income erode about 20% of the gains from trade, while the gains from trade would be about 15% larger if redistribution was carried out via non-distortionary means.

Some have proposed that we might consider a form of Universal Basic Income (UBI) as a way to replace earnings from vanishing jobs. Robert Skidelski argues that the explosion of robotics has given the demand for UBI renewed currency. A standard objection to UBI is that it is unaffordable, but Skidelski argues that this is not the main point. The overwhelming evidence is that the lion’s share of productivity gains in the last 30 years has gone to the very rich. Even a partial reversal of this long regressive trend for wealth and income would fund a modest initial basic income, which can be designed to grow in line with the wealth of the economy. Automation is bound to increase profits, because machines that make human labor redundant require no wages and only minimal investment in maintenance. Thus, unless we change our system of income generation, there will be no way to check the concentration of wealth in the hands of the rich and exceptionally entrepreneurial. A UBI that grows in line with capital productivity would ensure that the benefits of automation go to the many, not just to the few.

Danny Leipziger argues that adequate income redistribution ex post depends on public policy, including effective taxation and collection from firms and individuals and efficient use of the funds. This is where globalisation has largely failed, because many highly successful corporations have avoided paying their fair share. Beyond redistribution, however, Leipziger argues that governments, at various levels, need to be in a position to create new jobs. Effective labour market programs need to be found going forward to deal with future dislocations due to disruptive technology. This can be seen as part of preparedness for the Fourth Industrial Revolution.

Harold James writes that the compensation strategy has many hazards. People who are paid to do meaningless activities will become even more disengaged and alienated. Regions that are subsidised simply because they are losing out may demand more autonomy, and then grow resentful when conditions do not improve. Thus, simple transfers are not enough and we should rethink labour mobility. Europe and the US have long attempted to support “losers” in manufacturing and services through small-scale programs. Many of the dilemmas that confronted nineteenth-century policymakers are confronting their counterparts today.

Earlier generations used emigration as a release valve, and many people today, especially in Eastern and Southern Europe, are responding to poor local economic conditions in a similar fashion. Internal migration into dynamic metropolitan hubs is still a possibility, especially for young people, but this kind of mobility requires skills and initiative. In today’s world, workers must learn to embrace adaptability and flexibility, rather than succumb to resentment and misery. The most important form of mobility is thus not physical; it is social or psychological. Unfortunately, the US and most other industrialised countries, with their rigid education systems, have failed to prepare people for this reality.

Asatryan et al. (2014) look specifically at the EU and argue that compensation policies should target workers in branches exposed to import competition. Rather than subsidising unemployment, compensation policies should strengthen the incentives of displaced workers to seek re-employment and improve their chances of success. In the long run, sound skill and education policies are key instruments both for increasing the benefits of globalisation and for making it more inclusive. Although “one size fits all”-strategies should be avoided given the specific strengths and weaknesses of EU countries’ education systems, a particular focus ought to be set on the early phase of the life cycle. Early childhood education programmes targeted at children from disadvantaged backgrounds are a particularly promising tool for reducing inequality of educational and labour market outcomes.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Disturbed Voter

    Marx’s comments on the “army of the unemployed” fits here.

    Capitalism without socialism is a mutual assured suicide pact. But culture/politics block any alternative social arrangement now just as much as it did 150 years ago. Gradual redistribution or sudden revolution are still the alternatives now as much as they were 150 years ago.

    FDR’s comments on his opponents fits here.

    Surplus people vs surplus manufacturing capacity is its own Malthusian paradigm. Just like free trade vs domestic employment. Either some way must be provided to reduce the surplus people or utilize the surplus manufacturing capacity or both. Either some way to provide low unemployment rate and high average income for the domestic economy or for that of your trading partners.

    The enemies of populism will be eaten alive by the proponents of the free lunch. Global minimum income will ameliorate, but only if it is low, not high, in synchrony with the real and renewable economic capacity. Not by a false sugar high provide by finance. This requires global communism … which is erosive of civil liberty and economic motivation. The nature of the human being hasn’t changed, a free lunch for the women and children, mediated by working men is the past, present and future (though that is overly simplistic vs women in the workplace). Pure capitalism would put every man, woman and child to work … in order to maximize the army of the unemployed, to drive down average wages … and do this globally.

    Sometimes I supported my wife, sometime she supported me. This is the lowest common denominator of social safety net. Support families.

  2. james wordsworth

    Still missing some more useful and practical solutions.
    1. Star with a four day work week, with an aim at a three day.
    2. Ban major mergers and the ones that reduce competition. Break up ultra large corporations (Apple, Exxon, Nestle….)
    3. Fund a guaranteed annual income from a “social dividend” payable by companies as compensation for all the technology and advancement done by society in the past few hundred years from which they benefit but so far pay no thing for (the invention of electricity, the internet, roads, …)
    4. Change the nature of the “corporation” so that they become more democratic (real shareholder votes, not the shams we have now), and the ability to provide capital punishment – take away their ability to operate – for serious offenses (not just fines). If someone wants the benefits of operating a corporation (especially limited liability) there must be real costs on the other side of the equation.
    5. A reduction in free trade. It is time to rebuild locally and build local communities. If it costs $1 to grow a tomato is a greenhouse in the winter locally or 50 cents to import one from California, I’d argue it is more beneficial for the local economy to keep the dollar in the local economy than to send 50 cents to California that has to be made up by selling something else from the local economy … if there is nothing to sell . And we are that point in many local economies … money leaves in return for goods & services, but no money comes back in. Result … dying smaller local economies and a race to the bottom amongst those still trying to stay in the game.

    The old proverb say if you want to go fast, go alone, if you want to go far, go together. Let’s take that as a guide and dismiss the insane pursuit of “efficiency” at all costs. Yes we can get faster “advancement” with unlimited capitalism, but eventually the inequality stresses will break the system and the masses will flip over the monopoly board and refuse to play anymore.

    1. lyman alpha blob

      Hear hear!

      I would add that not only do we need to break up big companies, we need to put mechanisms in place (or enforce the ones we already have) to make sure they don’t simply remerge at a later date – see ExxonMobil for example.

      Efficiency isn’t all i’s cracked up to be. From what I understand good engineers build in redundancy so that if one part fails everything doesn’t collapse all at once. Mainstream economists seem to have never learned that.

      1. HopeLB

        Why don’t these same engineers seem to work on our ovens/toasters and gadgets that
        come from afar? Are these goods really cheaper when they must be shipped with fossil fuels and then you are forced to buy a new one every year or so filling our environment with trash? The French got this right. Everything must be repairable.

    2. HotFlash

      Change the nature of the “corporation” so that they become more democratic (real shareholder votes, not the shams we have now), and the ability to provide capital punishment – take away their ability to operate – for serious offenses (not just fines).

      Not only shareholders, perhaps *all* stakeholders? Eg, employees, customers, vendors? Govt?

  3. Paid Minion

    The Ivory Tower types continue to believe in the existence of candy-crapping unicorns.

    “Redistribution of income”…… “Un-American”. Good luck trying to push that plan forward.

    And once again, the economists don’t understand that “skills and initiative” are not the only reason that people won’t pack up and displace a couple of hundred/thousand miles in a search for work. And they seem to be ignoring the resistance/dislike of the locals to the “migrant labor force”, especially to those with the skills and initiative to relocate, and the additional competition lowering local salaries.

    And no discussion of how these policies promoting labor mobility even function, when almost every want ad for skilled labor says they will only look at “local candidates only”.

    All of these plans depend on the “winners” giving up a big chunk of “whats theirs”. We have plenty of evidence that they ain’t gonna do it voluntarily. We also have plenty of evidence that governments have lost the ability to force rich people to pay up.

    So we have seen the plan going forward, given these realities. Pump out “fake news”, to limit the numbers of the wretched refuse willing to get out the torches and pitchforks, while giving the law enforcement industrial complex plenty of tools and incentives to crack down on the malcontents.

  4. TomDority

    ‘ Silvia Merler, Bruegel Affiliate Fellow. Her main research interests include international macro and financial economics, central banking and EU institutions and policy making.”
    I am gob-smacked that, with all of Silvia’s education and reseach, and those she references that she fails to see the difference between financial capital and human capital, between wealth creating production and wealth destroying financialization.
    Silvia needs to do some reading of Michael Hudson.
    Is it my ignorance or, does it appear that educational institutions, in so far as it teaches and researches international macro and financial economics, central banking and EU institutions and policy making…….does it appear that the entirety of it is to ensure the only acceptable outcome is the hammering of square pegs into round holes……..certainly that could be automated.
    Just sad.

    1. craazyboy

      So true. But one would have to identify some core definitions first. Like define what is “Leadership and Governance” versus what is “Predation” and which is it and whom is doing it? (including the not so trivial academic question – is that a macro or micro economic subject? Could there be such a thing as GrossDomesticPredation? ick. methinks so.)

      Then we need to introduce the concept of a fourth dimension – Time. This would have Past, Present, and Future as its components. The order they occur in should be agreed upon by all. Maybe make them physically traversable in one direction, and cognitively traversable in both. That would thankfully cut down on the number of possibilities to deal with. But I still think it’s ok if Hollywood and sci-fi novelists do it every which way. It’s entertaining in that case.

      Anyway, with this new tool firmly in hand, we are now equipped to contemplate this sentence…..

      “Globalisation offers potential economic gains for all.”

      Leading to a stumbling point – the word “potential”. Does the author mean like a brand new, fresh and fully charged battery, powering and empowering us ever upward Maslow’s Hierarchy? Or has the battery been around a long time and has run dead, explaining why Maslow’s Hierarchy is shaped like a pyramid, when stated in constant dollars, or on a per capita basis – as depicted on our dollar bill – a squat pyramid with a single eye floating far above it.

      I don’t know where I’m going with this, because sometimes critical reading takes me a while and I’ve only completed the 1st paragraph of the article. Maybe I’ll slowly slog thru the rest now. Or maybe not.

    2. Katharine

      Sad is the word all right. This seems to reflect the usual assumption that people (perhaps excepting the author and her clique) are supposed to serve “the economy,” a convenient abstraction masking the interests of the wealthy.

      I almost said, of the elite, but then said hell, no, that comes from a root meaning chosen. They certainly weren’t chosen by us

      Talk about compensating losers is just an attempt to fend off rebellion and probably doomed to failure. A social organization that creates “losers” is plainly wrong: people don’t just need rudimentary sustenance but respect.

      1. Paul Art

        I think you are edging towards what Mahatma Gandhi called ‘self-sufficiency’. My two cents is that the human race has continually been pushed off course by the negative forces of humans viz, greed and selfishness. If a human never aspired to accumulate wealth then he would have never aspired to enslave masses of other humans and machinery, pay them miserable wages and call it Capitalism. Capitalism has contributed very little to actual human progress. Humans as a species have thrown the entire globe out of balance. Unless there is some kind of a mass extinction that happens within this race, we have little chance of saving the world for humanity.

        1. Katharine

          I haven’t the slightest idea what you mean by that term in this context, and I deny on principle that I am edging toward something you have not defined or justified.

  5. David

    This reads like another thinly-described attempt to persuade us that there’s a relatively small category of “losers” from current trade practices, who are not sufficiently flexible and agile, and need to be bought off in some fashion in case they start rioting. But it’s doubtful if in net terms there has actually been any “benefit” at all from the successive waves of globalization and deregulation of the last generation or so, and you can’t share what’s not there.
    In part, that’s because the whole concept of “trade” has been turned inside out. It used to mean “I export stuff that you can’t make or produce as well or even at all, and vice versa.” That did provide net benefits. By contrast, “trade” today means unregulated movement of goods, services, finance and human beings to wherever they can provide the highest return for investors. It would be astonishing if such a system provided any net benefits, and even more astonishing if self-prcolaimed economists thought it did. The answer evidently lies in a return to managed trade as existed for most of human history, and notably in the years of economic success after 1945. The only question is whether Davos Man (and Woman) realise this in time to save themselves.

    1. MisterMr

      I totally agree, plus “higest returns for investors” here basically means “screw labor more”, so if “capital” had to compensate the workers who lose from globalisation, the whole exercise would make no sense (from the point of view of capital).

      On the other hand if the idea is twisted into “workers that don’t lose from globalisation (and hence are supposed to get the advantages of it) have to compensate workers who lose” then it makes sense from the point of view of capital, but in pratice it leaves the problem as is.

      I think that this whole way of thinking of “winners and losers” from globalisation in terms of field of work is a red herring, the real problem is (still) labor vs. capital.

      1. Alejandro

        While I agree that compensation has been disproportionately distorted beyond reason, IMHO a problem with the ” labor vs. capital” framing seems that ‘it’ has disempowered many from recognizing and consequently countering {rent extraction, usury, profiteering} as a function of {cost, price, value}…e.g., by framing ‘it’ as doing(work, labor, activity) v. stuff (“capital”-WhateverTF that means), a “corporate” person like Sam Zell can claim that “the reason he’s rich(has more stuff than most) is because he works (labors) harder than most”, without much of a backlash.

    2. Harry

      Not a small group. Just not the kind of people one should pay any heed to. You know, like deplorables, Palestinians, Arabs, Muslims, poor people, those who didnt attend expensive universities. Well the list goes on. But you know what I mean.

  6. Normal

    This is a complicated problem without obvious solutions. Kudos to NK for talking about, and stimulating ideas rather than political positions.

  7. roadrider

    How clueless are these guys?

    Labor mobility? Yeah, sure. So we can further concentrate all of the jobs in a few select overcrowded and ultra-expensive metro areas that most folks can’t afford to live in and are force to commute large distances which is soul-crushing, unhealthy and accelerates global warming.

    Re-training? Workers whose jobs have disappeared are damaged goods as far as employers are concerned. Especially if they’re older and were well compensated in their previous jobs. The most disturbing thing about this post is that its centered around blaming he workers for their jobs going away and puts the onus on them for solving the problem instead of confronting the way that workers are treated as replaceable commodities instead of human beings by the corporate and political systems.

    Adaptability and flexibility? More code words for blaming workers for a societal problem. What these words really mean is that we should all be flexible enough to adapt to a diminished life while the narrow slice of uber-capitalists, political, financial and academic elites who receive outsize benefits from globalization, robotics, etc. party on in their gated communities.

    1. Justicia

      How clueless? Totally clueless and utterly blinded by the ideology of the privileged.

      “Losers,” indeed! These are the consumers who drive the consumer economy. Who’s going to buy all those goods robots will produce? Without effective demand the economy will go into free fall.

      There is absolutely no reason why people should be paid “to do meaningless activities.” If people were given a guaranteed basic income, a good (free) education, and opportunities to use their time, talents and energies as they see fit we just might see a boom in creativity that would rival any golden age. We’d all have more time to devote to the children, our families and communities. But this isn’t what our greedy and malevolent over-lords have in mind.

  8. John Merryman

    Efficiency is to do more with less, so the ideal of efficiency is to do everything with nothing. Reality though, is circular and cyclical, not linear.
    The eventual response is to understand finance and money, as economic medium, are the very definition of a public utility. Like the evolution of government, it starts as private enterprise, aka monarchy, but eventually outgrows it.
    Yet it is not a an integral function of government, much as the circulation and nervous systems of the body are separate.
    Which is why the Bank of England model works so well.
    Money is perceived as quantified hope and politicians live and die on hope, so cannot be in control of the money supply.
    The evolution of society.

  9. washunate

    As others are pointing out, this doesn’t get at why globalization creates losers. The problem isn’t trade in concept. Rather, it is the way public policy has concentrated wealth and power.

    First, an important distinction in the US: where is discussion of some form of universal health care? This is one of the obvious policies, to complete the work started with the Social Security Act of 1935 to make access to decent medical care a universal human right. Social Security/Medicare is one of the most popular programs of the US government, across age, party identity, gender, and many other variables.

    Second, in North America, Europe, and Asia: where is discussion of financial fraud?

    Third, where is discussion of all the tax breaks the wealthy have received?

    Fourth, the complete absence of any context of imperialism and warmongering is quite notable.

    Fifth, if we are going to focus narrowly within the labor market, spreading the work around is what almost everyone wants, the opportunity to work less, take vacations, have shared communal holidays, have dignity and respect in employment rather than crap jobs, and so forth.

    The problem isn’t that we don’t have workable solutions. Rather, it is that our highly paid professional class has little interest in critiquing a system that is purposefully structured to benefit connected insiders at the expense of the general public.

    1. fresno dan

      January 20, 2017 at 9:46 am

      couldn’t be said any more perfectly

    2. OpenThePodBayDoorsHAL

      Thank you, this is standard stuff, blaming the victims. So let’s look at the “winner/loser” categories: on one side we see 8 guys who have half the world’s wealth. Half. The next quarter of the world’s wealth is squirreled away in offshore tax havens like Panama and Delaware and London, controlled by probably 20-30,000 people. So let’s do some math: 7,100,000,000 (world population) minus 30,008 = 7,099,969,992 “losers”. No wonder the elite are choking on their caviar at Davos.
      These are problems that can be solved in one hour by the stroke of a pen. The “losers” simply need to get control of that pen, but I’ll suggest they’ll never in a million years do that by voting. Rocks, pitchforks, torches, ropes, and guns however should do the trick nicely, as they have throughout history.

  10. oho

    deeming the “losers” as ‘losers’ is condescending narrative building—as a loss and losers implies a fair fight on merit.

    The ‘losers’ are the ones robbed in the rigged system.

    1. RUKidding

      We’re certainly not talking about a level playing field. There’s nothing remotely fair about the present system. Deeming people as losers implies that they deserve their fate because of the usual tropes about being too lazy to work “hard enough,” or choosing to pursue the wrong kind of degree in college, or expecting free hand outs from the nanny state, etc.

      The system is definitely rigged, and the losers have lost because they’ve been robbed and then screwed over.

  11. cnchal

    The political consensus that drove trade policy over much of the postwar period . . .

    There was no consensus from the peasants, globalization is imposed from the elite’s consensus to loot the world.

    Directly after WW 2 trade was between allied countries of the “west” where eventually labor wages became roughly equal. This led the elite to find new sources of cheap labor, which were the Asian Tigers, and their labor wages climbed to be roughly equal.

    Where globalization has been an epic disaster is trade with China, where the supply of cheap labor is so vast, and the profits off that labor has accrued to the elite, in and outside of China. There has been little sharing of those profits with Chinese labor, and their sweat has been stolen at the roll of a tank’s tread, and also resulted in the country becoming a toxic waste dump.

    Why did Walmart go to China in the 90’s? Was it because customers came into Walmart and marched up to the manager and said ” I’m not buying this expensive American made stuff, and I demand you get these products made in China”, and the managers dutifully sent the message upstairs to the CEO? That would be consensus, and that never happened. It was Wall Street’s demand for greater profits to boost Walmart’s share price which was the greatest motivator for dumping US manufacturing in favor of made in China.

    The other week we saw news and comments on NC about Apple’s profits regarding smartphones, and how Apple managed to scoop somewhere between 80 to 90% of all profits among smartphone makers. No one seemed to get the joke. Apple makes no smartphones, they are made by contractors in China. Apple is a marketing outfit now, with a small engineering rump, that has convinced customers it’s a good deal to have their own personal corporate Peeping Tom pervert to carry around. How do you compensate those losers?

    The latest globalization idiocy is Jack Ma and his meeting with Trump, and supposedly creating 1 million jawbs in America, based on selling American grown produce to Chinese customers through Alibaba. My guess is that the seeds go with the produce, and in ten years Washington apples grown in China will be competing with Washington apples grown in Washington, except the Chinese version will have toxins. Who has comparative advantage, now?

    1. David

      Yes, note the weasel wording of “much of,” by which the author presumably means the post-1980 period of slow growth, high unemployment and mass poverty, as well as all those other wonderful benefits of globalization. There was, of course, a genuine post-1945 consensus for managed trade which produced an unparalleled era of prosperity, but we don’t talk about that.

    2. Altandmain

      Pretty much this.

      Nobody ever asked them to send jobs where labor was cheapest. They are doing it to themselves.

    3. Sound of the Suburbs

      This is one example I know of, but it illustrates the problem.

      A $5 pair of sunglasses in China costs $250 in the US, this wasn’t supposed to happen, companies took the rest in profit.

      The cost of living in the West hasn’t come down as much as it should have due to profiteering.

  12. Matthew G. Saroff

    I think that these discussions of redistributive policies ignore the fact that modern “free trade” is about maximizing the rent extraction power of monopolies (copyright, patent, finance, etc.) whose work only derives value from a tax that they levy on the rest of society.

    Most of the US positions in the TPP were about having the rest of society guarantee the ability of pharma, big AG, and finance to extract profits from the rest of us.

    The problem is that when you enable this, you create a huge amount of undeserved profits (Martin Shkreli and his ilk have billions to drop on politicians to convince them to embrace and extend their monopoly rents).

    As a first step, I would suggest reversing the monopoly protections implemented over the past 50 years.

    BTW, for those who support job retraining for displaced workers, it appears that it gives no better outcomes than not doing so. (

  13. John Wright

    One could make the case that if increased globalization has always also been accompanied by increased USA inequality, then globalization has an “inequality” cost that is never reflected in the so called economic gain projections.

    A more equal USA society, even at a lower economic output, might be a worthy policy decision.

    Another speculation is the title “Clinton Global Initiative” might have been a factor in the loss of HRC.

    If the family “initiative” had been titled “Clinton Better USA Initiative” it might have not telegraphed that the Clintons, and a new President Hillary Clinton, could well be more interested in general global welfare than in the specific welfare of USA voters.

  14. Praedor

    Asatryn, et al is WRONG WRONG WRONG. The answer is NOT perpetual “job retraining”. The assholes who benefit from trade deals simply keep outsourcing and offshoring job after job after job, or automate them, so there ARE no more jobs worth doing to be retrained into. It is NOT acceptable to tell working people that they must permanently keep retraining as jobs are pulled out from under them.

    UBI. Period. Why work if robots are doing it? Work for work’s sake is Puritan bullcrap. Time to lose that nonsense. The trust fund rich (virtually all rich people are BORN that way) don’t EVER have to actually work a day in their lives. If that’s OK for them, then it’s good for everyone and anyone else. If a trustfunder gets to get paid to party and not work a day in their lives, then that’s good for displaced “losers” of globalization too…OR we FORCE the rich to actually WORK. LABOR. MAKE things and do work that hurts their backs, makes their muscles ache, etc. FORCE trustfunders to be door greeters at Walmart. FORCE them to bag groceries, stock Ace Hardware shelves. No scuttwork, no trustfund.

    What’s good for the goose is good for the gander. If it’s fine for the rich to be “paid” to be idle if they so choose, then it must be made available to ALL people to be idle yet still be paid to live.

  15. Gaylord

    Sink, or bootstrap …if there’s anything left to pull yourself up by. The world is getting colder and crueler, in spite of AGW :) — or due to it going forward, as the rising tide sinks all boats. The attitude of those who “get mine” generally has become so callous as to deny to the masses their humanity and the right to viability. The new regime in Washington pretends to champion the cause of the disenfranchised, but it’s really bent on more of the same exploitation and oppression by the masters that have no decent vision of how to use their power to benefit everyone. Their anti-government mantra is “nothing in life is free” because their unfettered profits will not be denied. The Revolution belongs to Nature and its outcome will be human extinction.

  16. Altandmain

    What people really need is a restitution for theft. This is what this really is if you think about it.

    What happened is that they redistributed the wealth of society from the middle class and the poor to the rich, using bullshit economics to try to cover it all up. They literally exploited both the poor in the Western world and in Asia to transfer all the wealth to the rich.

    That’s why according to Oxfam, 8 people now own as much wealth as 3.5 billion people.

    No, this is the theft, pure and simple.

  17. Josh Stern

    Good, long overdue discussion going here. A couple of points not mentioned above – “intellectual property” and “passive income/capital gains taxation”. Current policies in the US give extra boosts in those areas, consistent with a utilitarian premise that absent such boosts, too much marginal spending would go into consumption and not enough into long-term investment in production resources. To the extent that is not the situation in the economy, those policies are out of date. They do, on the whole, favor existing capital over labor, and wealth concentration over more even distribution. And they do it an artificial way. The first says “you can’t invent/use a method because I got their first with my abstract legal claim”. The second says “I get to keep a higher percentage of my passive income than the percentage you get to keep of your wage income – because my marginal spending is more valuable to society.”

  18. ewmayer

    Perhaps refraining from pursuing policies which create so many ‘losers’ in the first place might be a good start.

  19. RBHoughton

    Let’s get the terminology clear. The losers of globalization are nation states who don’t issue an internationally traded currency. The winners are easily predictable – USA, EU, Japan, China and even small economies like Australia, New Zealand and Canada – as long as your money is financing some part of international trade, no matter how small, you are punching above your weight.

    One of the first things we need to do if we go down this dark and dreary road is to create a new medium of exchange that favors all countries alike. If a demand along those lines was published we would likely hear no more of globalization.

  20. Dick Burkhart

    There are enormous unmet needs (social and physical) in our society, especially when we consider the needs of future generations. So there is no lack of good, productive work that needs to be done. The only question is how to pay for it. Private business has failed miserably, because these unmet needs do not yield an immediate profit, or breakeven. But if government taxes the rich, then it can shift our resources from serving those rich to meeting our unmet needs.

    1. Lambert Strether Post author

      The United States is sovereign in its own currency, and Federal taxes do not fund Federal spending. There are other good reasons to soak the rich, but funding our unmet needs is not one of them. (You say it yourself: The requirement is to shift resources, right? If the resources exist, taxation is not relevant.)

  21. David Troutman

    This post seems to be saying the following:
    1. TINA. There is, with globalisation and Clinton, no alternative.
    2. Let them eat education.
    3. Workers must be willing to accept change, and the fact that they have no control over their lives. TINA.
    4. Mobility- workers must move from their homes, cultures, and support networks to wherever the demands of globalization require them to move. (And please, accept this. TINA)

  22. Sound of the Suburbs

    The US lost itself in its own propaganda about capitalism and thought basic capitalism would yield results for all.

    The UK knows what basic capitalism looks like from our own history in the late 18th and early 19th centuries, the rich lived in luxury and the poor lived in squalor.

    Milton Freidman and the University of Chicago worked up the US fantasy about capitalism into neo-liberalism, this was then rolled out across the world. Inequality soared and, once the easy credit dried up, demand faltered.

    2017 – Richest 8 people as wealthy as half of world’s population

    Basic capitalism is the same as it always was, everything gets sucked up to the top.

    Trump has applied some pragmatism to the neo-liberal consensus and is looking for fiscal stimulus and applying tariffs. The neo-liberals thought all free and subsidised services should be removed, but the soaring costs of housing, healthcare and student loans have priced the US labour force out of global markets due to the high cost of living, requiring tariffs.

    Milton Freidman’s neo-liberalism says the idea is to maximise profit and investing in the US is not going to yield high profits as it is a high wage economy due to its cost of living.

    The fundamental contradictions within neo-liberalism meant it had to break down and as the US embraced it the hardest it was always going to be the first to crack.

    Neo-liberalism hollowed out the US due it its own flaws.

    Low paying service sector jobs that cannot be off-shored and highly paid executive and technical jobs are all that’s left, the rest was off-shored, it’s the way neo-liberalism works.

    1. Sound of the Suburbs

      Trump may not have to worry about NAFTA as the Mexican’s have discovered neo-liberalism.

      They are removing the subsidies off petrol and foodstuffs, raising the cost of living and minimum wage.

      Mexico’s days as a low wage economy are numbered.

      If they then have a ridiculous housing boom to inflate housing costs like the West, the cost of living and the minimum wage will soon be the same in Mexico as the West.

      The land of cheap labour will be no more.

  23. cnchal

    Sometimes, comments found elsewhere are so good and to the point that it would be wrong to not share.

    Now, reading Mish, I get the impression that he thinks the only people that deserve to have a good living are people exactly like himself. Here is what he says about “trade”.

    If Trump follows his message, we are certainly going to see a more protectionist, isolationist America.

    Isolationism, as in not meddling in the foreign affairs of other countries, would be an excellent thing. Political meddling leads to wars, and only makes more enemies.

    On the other hand, protectionism, is not a good thing. Trade is not between nations, trade is between individuals. Lower prices are undoubtedly good for consumers.

    If it’s good for consumers, it’s good for the US. Neither NAFTA nor China is responsible for the loss of manufacturing jobs. Automation and productivity improvements are to blame.
    Here is the comment, by John B Goodrich.

    As a tech industry corporate lawyer for 35 years I can promise you that in the mid ’80’s the exit of electronics manufacturing, much of our auto industry and our semiconductor industry was the direct result of the Japanese manipulation of the Yen/Dollar currency exchange rate (285 to the Dollar); it has been followed since the mid ’90’s by the general exit of most of our other manufacturing by the artificial peg of the Chinese Yuan to the Dollar at an unreasonable low rate; that had the effect of an aggregate of a US $4.3 trillion trade deficit between our two countries since it started. That is, in fact, the cause of loss of our manufacturing jobs; Not automation; Not new technologies. Those jobs still exist and are expanding in China.

    If you sat in the board rooms of modern US tech companies you would still see the massive cost differential provided by the Chinese using its Yuan/Dollar “peg,” now disguised as a (controlled) trading “range,” which has been mechanically adjusted by the Chinese at will.

    The idea that you can benefit by losing your manufacturing sector in exchange for cheap imports is mistaken. Manufacturing creates further manufacturing, increases capital, increases trade skills, increases technical innovation and has the only real economic multiplier.

    The essence of manufacturing is:

    (Material Meets Tool X sales) – expenses = profit or loss. If it’s profit, that is wealth creation and loss is hell.

    The less manufacturing, the less chance there is of making a profit that can be put towards living. The losers in this are not just the ones that lost their jawbs, but also those that live as overhead in society.

  24. TEK

    Wow, lots of comments. Some really good ones.

    My opinion, there is not fix, only dealing with it.

    It is not so bad that we need UBI yet. If we go to UBI then it should be funded by taxing wealth, like a comprehensive Property and Asset tax. We should move away from income tax anyway. Any Property or Asset not declared on you Tax Statement are subject to forfeit and confiscation by the IRS.

    Trade barriers are one way of dealing with job losses but must be careful to not make things worse.

    Education and Retraining can help some but will only work in places where there are other jobs to for which to train.

    The rich, like I said, tax their wealth and take a portion of every transfer off-shore, even offshore capital investments.

    We just need to set up the right incentives (carrots and sticks) to keep the money at home and make products here.

    The poor are not getting poorer and the rich will always get richer. The middle class getting poorer is the thing we need to stop.

    All the wealth in the country, personal and corporate is $85 Trillion and the Federal Budget is about $4 Trillion so we would need a Wealth Tax of about 5% to balance to books. This is naturally progressive since those with nothing pay nothing no matter how much they earn and the middle class only pay if they have something of value and the rich pay a lot even if they are not making a penny.

    This would also encourage investment since if you can’t make your assets return 5% you will be bleeding cash. Oh, and you will need to be generating cash flow as asset appreciation will increase your tax payments so you will need cash to pay the tax.

    This goes also to show how hard it would be to pay for UBI, just to cover the current bills we have to sock everyone for on twentieth of everything they have if the federal government is going to be putting out more money we will need to take more from everyone who has wealth.


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