Sunday, March 7, 2010

May The Force Be With You

"The force of globalization can't be stopped," declares John Torinus in his latest Journal Sentinel rant. This type of thinking is typical of the business class. They believe in the magic of the market - an unstoppable force which always gravitates toward optimal outcomes. The problem with this paradigm is that it leads to a global race to the bottom, which ends up decreasing labor standards, while rewarding mobile capital.

He points to Mexico, and our trade relationship with them, and concludes it's a "major plus, a job creator." But, as I wrote in an earlier post, with the U.S. continually subsidizing farmers, we artificially lower the price of American agricultural exports and hurt developing countries. Such as Mexico, in one area where they can actually produce at a lower cost. Instead, our subsidized agri-business drives Mexican farmers off their land because of our low priced agricultural products. And, because of this, Mexican wages have actually fallen since NAFTA.

Torinus also claims, "Companies must go where the business is, not where you want it to be." So why are subsidies and tax breaks given out to lure companies? Just as the two Spanish companies (which Torinus mentions) whom are moving some operations to Milwaukee based on subsidies, not simply business nor competitive advantage (which Torinus doesn't mention).

I guess when one believes so blindly in a theory, which one also benefits and profits handsomely from, it's hard to let historical and empirical evidence get into the picture.

1 comment:

krshorewood said...

This is what is known as the invisible hand job.