Nation of Beancounters

Chuckles from the Occupy Wall Street Movement

Posted in Uncategorized by Navin Kumar on October 4, 2011

So this guy listed some proposed demands for the movement. I assume he was trying for “demand triple, settle for double” and his demands are outrageous (from an economic perspective) throughout but these two caught my eye:

Demand one: Restoration of the living wage. This demand can only be met by ending “Free trade” by re-imposing trade tariffs on all imported goods entering the American market to level the playing field for domestic family farming and domestic manufacturing as most nations that are dumping cheap products onto the American market have radical wage and environmental regulation advantages. Another policy that must be instituted is raise the minimum wage to twenty dollars an hr.

Demand nine: Open borders migration. anyone can travel anywhere to work and live.

The incredible thing is that he completely fails to realize is that immigration and free trade have the same effect. No, seriously. Wages for Mexicans rise and wages for Americans fall. Under free trade this happens because labour-intensive production moves to Mexico, increasing demand for Mexican labour and reducing demand for American labour. Under immigration, Mexicans come to America, earning a higher wage themselves and reducing wages (via competition) for American workers. To phrase it differently, factor movements and the movement of goods and services are equivalent. Nonetheless, gains outweigh losses, although they accrue to different people.

This raw fact, by the way, is one that has a broad consensus among economists.

Of course, I support both free trade and open borders and it’s an eternal puzzle to me how 90% of the politically active part of the planet can have such inconsistent beliefs. Right wingers oppose immigration on the economic grounds that it hurts American workers and yet support free trade. Lefties oppose free trade on the ground that it hurts American workers but support open borders.

Of course, there are different social effects. Under free trade but closed borders, Mexican workers don’t get access to American schools or hospitals or institutions. They don’t vote. There are also some economic differences: productivity is lower. But few people actually focus on that.

I suspect that this is one of those cases where real motives are different from stated motives and economics is used as (thin) veil.

But do read the article. Damn funny. Especially the part where he demands that all debt on the planet be wiped out.

UPDATE: somewhat more sensible list here.

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22 Responses

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  1. David Goodfellow said, on October 5, 2011 at 8:26 am

    Think again about the debt cancellation demand. Remember that the Golden Age in Athens was triggered by a massive cancellation of all debt (equivalent to mortgages at that time) and bingo- western civilization.
    Much debt is circular in one pocket out the other,so the impact would be smaller than you imagine. Do you have a better suggestion for reducing the insane gulf that has grown in the last 40 years between ordinary people and the filthy rich? That gap is really at the root of our current economic problems.Interest payments on debt are the major source of unearned wealth that is allowing so many to live in luxury without producing a god-damned thing.
    Argentina, after all the mess,is a better country for defaulting, and Greece will be too. The collapse of the housing market is really debt forgiveness anyway, forgive or default, the effect is the same. if everyone just stopped making their payments, individuals and countries, we don’t need to wait for forgiveness!

    • Navin Kumar said, on October 6, 2011 at 12:53 pm

      I’m sure there are situations where default is better. But “all debt on the planet” is hardly a homogeneous product like carbon dioxide or CFCs. There are good debts and bad debts, loans to productive enterprises and unproductive enterprises, loans secured by good property and by bad property. Loans issued by competitive firms in an urban market, loans issued by moneylenders with information-based monopolies. The notion that this debt is all bad or that the global economy can survive the simultaneous liquidation of every financial institution in existence is absurd.

      I agree that the collapse of the housing market was a form of debt relief in the form of default. And look what happened there.

  2. Hillary said, on October 5, 2011 at 11:55 am

    Thanks for this article. It really only takes a basic study of economics to realize how ridiculous and counterproductive these demands are. Raise minimum wage to $20/hr? As a recent college grad looking for work I would really appreciate that, but really, how many employees could a company afford to hire at that rate? And tariffs on imported goods? How does he think our trade partners would react to that? We would essentially be barring ourselves from exporting any goods as well. Just look at the international reaction to Smoot -Hawley. And spend one trillion on infrastructure but decommission all power plants? What? I think the icing on the cake is the forgiveness of all debt. Again, I would love to not pay back student loans but how does that help the economy? While we’re at it, let’s just print more money and distribute it to the masses. Ask the Weimar Republic how well that worked out for them.

    • david said, on January 4, 2012 at 10:20 pm

      Sorry to shock you, Hillary, but we already have massive (direct and indirect) tariffs on imported goods. And, wonder of wonders, our trade partners don’t give a damn… or they can’t give a damn, thanks to undemocratic and secretive trade agreements made with many foreign countries that place them (not to mention workers here in the states) at a severe disadvantage. Do you really think US agribusiness would be such an international powerhouse, considering all the vast swaths of land and abundance of practically free labor in other parts of the world, under these “free” trade agreements without massive government subsidies.

      You mention that you’re a college graduate: I hope it wasn’t in economics. With regard to debt forgiveness, you (and the original poster) are hopelessly misinformed. As at least one poster has mentioned, debt forgiveness is not new. Some civilizations even institutionalized it, having “Jubilee’s” at least every generation, which were the establishment’s solution to people beginning to revolt and question the very notion of debt (and interest-bearing loans) itself. True, this was back in the day before we had all these genius economists running around (ruining our economy with their vacuum-sealed theories), and was almost exclusively applied to consumer debt. However, I do believe that a moral an economic case can be made for bringing it back and applying it to private consumer debt, sovereign debt, and some (or maybe even all) commercial debt. as for your comment on debt forgiveness not helping the economy, you ask: how does that help the economy? how about by removing the chains that are slowly strangling the economic and mental livelihoods of over 70 percent of US citizens as well as countless billions throughout the world? oh, i guess that’s not included in “the economy” (i’m starting to think that maybe you are an economics major). or how about the fact that much of the financiers (the ones who didn’t fuck up so royally that they were beyond being saved by their buddies in the government) who ruined this economy were well rewarded for their behavior which a) probably doesn’t help the economy (moral hazards and all) and b) at least provided a nice financial injection to stabilize some of the global financial industry. so with that said, why not make some changes, and help some ACTUAL PEOPLE, and NOT LARGE CORPORATIONS, weather the storm.

  3. D said, on October 6, 2011 at 10:11 am

    All fine and dandy but where are your solutions?

    • Navin Kumar said, on October 6, 2011 at 12:35 pm

      To what?

      I don’t know enough about the American economy to fix it. Few people do. The history of this crisis won’t be written untill another 10 years.

      I’m merely commenting on the ignorance of those who *do* claim to know how to fix it – but whose “solutions” predate the crisis and seem like a shopping list of stuff they want – rather than something that will solve the problem at hand. This is true for people on both sides of the spectrum.

  4. RD said, on October 6, 2011 at 10:27 pm

    So if you don’t know enough, what does it say about the validity of *your* comment? How can you say they are ignorant, when you don’t know what they are ignorant about? Do you know what it feels like to be an average American?

    And don’t say *Free* Speech.

    • Navin Kumar said, on October 7, 2011 at 12:10 pm

      I said I didn’t know about the American economy. I know enough about International Economics to mock people who don’t realise that factor movements and the movement of goods and services are equivalent.

      I can say they’re ignorant because while restrictions on trade maybe beneficial in special circumstances, there is no way that anti-free-trade but pro-free-immigration are economically optimal: they work in conflicting directions!

      What it feels like to be an average American has nothing to do with the truthness or falseness of the statement “free migration and free trade are equivalents”. If the average American doesn’t *feel* that that is true, it says more about the inability of feelings that evolved in a tribal setting to comprehend the complexity of the modern world than the validity of the statement.

      • david said, on January 4, 2012 at 10:57 pm

        I know I’m arriving to the party a bit late, but I really need to respond to the facile argument that free trade and the free movement of people across borders are equivalents (even in solely economic terms).

        First of all, unless you wanna live in theoretical-land your whole life, we should really talk about “free” trade as it actually exists. it tends to take the form of level playing fields in the sectors where the more powerful country (usually the US) has vast advantages (either due to technological superiority, economies of scale, or straight-up subsidies) and wildly unequal terms where the more powerful country still has a bit of catching up to do. not that the citizens of the powerful country tend to benefit for these agreements, as one of the more obvious effects of agreements like NAFTA is job insecurity. no, the benefactors tend to rank a bit higher on the totem pole. these agreements tend to assign more rights to corporations, allowing them to sue foreign governments for “interfering with trade” (a tactic that is frequently used in increasingly absurd circumstances). these free trade agreements (along with their tag-team buddies of SAPs which show up as terms of repayment of the debts you seem to think are so necessary) also tend to privatize essential public sectors (the cochabamba waters protests immediately spring to mind as an example of the economic effects), liberalize financial markets, and generally undermine popular sovereignty. those same free trade agreements also do very little to change the current agreements about movement of people across borders, which would be nice, since these agreements (in the americas at least) really tend to ramp up immigration. but that’s for another discussion.

        so i’ve argued free trade agreements prioritize the economic needs of powerful nations, take public utilities from public lands, increase job insecurity, open weak, unproven currencies to wild speculation, consolidate corporate power, and undermine sovereign rights, including environmental and labor protection (numerous successful suits have been filed by corporations against countries that have blocked key acquisitions and projects based on concerns about worker conditions or environmental preservation). admittedly, this is what actual free trade agreements do, not what economists have done their best to assure that free trade agreements are supposed to do. i would be very interested in seeing a genuine free trade agreement that actually manages to close all these loopholes and institute genuinely fair and free trade (but i’m not holding my breath)

        what does free movement of people do? admittedly, it can decrease job security, and potentially depress wages, at least insofar as our new foreign buddies tend to send their earnings out of the country in the form of remittances. of course (although i’m against this) we could impose a heavy tax on these remittances, thus encouraging money to stay in the economy, which (in theory) could mitigate some of the more negative economic effects on american workers. it also has the added benefit of giving rights and privileges to anyone who wants to make the sacrifice of leaving their homeland and traveling to a foreign (and in the case of the us, increasingly xenophobic) land, and virtually eliminates institutionalized second-class citizens (at least for reasons of citizenship) there are a number of different paths we could take, and many of them have conflicting effects. without looking at the actual details, we can’t draw any useful conclusions. so your trite little truism completely stops making sense when we realize that a) sometimes effects outside the strictly economic are important (and i would even argue that most economists are excluding far too much from the realm of economics) and b) both “free trade” and free movement of people have a number of different economic, political, and social effects, and sometimes you want to mitigate some of the different effects of them. so arguing that you can’t do something because it interferes with something else that is supposedly beneficial is like saying you can’t have a government and a market system, because sometimes the government interferes with the market (this is also ignoring the fact that the market completely relies on the interference of the government to maintain itself, but again, that’s for a different debate)

  5. tudell said, on October 7, 2011 at 7:28 pm

    my personal fav is “Demand three: Guaranteed living wage income regardless of employment.” Really? so the choice is 1. work my tail off or 2. sit on my tail. either way I get paid the same? The easiest way to debunk this is to use grades instead of money in this argument. Everyone gets a passing grade depite the level of effort expended. The pseudo intellectuals will inevitably complain about the fairness of such a distribution. America has an achievement economy. You get paid for what value you bring to the market place.
    In the end we can debate economic theorys but saying “I want it all and I don’t want to work for it” is more than a bit disturbing to me.

  6. Ashley Spencer said, on October 8, 2011 at 1:20 am

    There are way too many unrealistic demands on the Occupy Wall Street demand list. America needs to reinstate the Glass Steagall Act, which was repealed by Congress in 1999, a major victory for Wall Street. The Glass Steagall Act was enacted after the Great Depression kept banking and investing separate. The Glass Steagall Act was a major contributor to economic stability and without it Wall Street can do almost anything, regardless of America’s economic stability and viability. America must reinstate the Glass Steagall Act. This should be the first goal on this list of demands.

    • Navin Kumar said, on October 8, 2011 at 1:18 pm

      The GS act was repealed because it was pointless: banks had found n ways to circumvent it.

      The problem is that the basic function of a bank – borrow short, lend long – can take many forms. The solution is to follow the rule: if it looks like a bank, it’s a bank, and ought be regulated as one. But that’s hard because it’s not clear what is a bank and what isn’t – untill a run happens. See Krugman’s Return of Depression Economics

      Plus, it’s not clear if regulators will be better informed on risks than the banks they regulate. It’s therefore not clear if they could’ve stopped it in the first place.

      Clearer list on the second link.

      • Doc said, on October 13, 2011 at 11:39 pm

        I certainly would not look to Krugman for any economic advice. Haven’t you noticed that the only economists that are awarded the Nobel are socialist/communists?

      • Navin Kumar said, on October 14, 2011 at 12:46 am

        That’s not true, unless you take a very very broad meaning of socialist/communist.

        All economists favour some government intervention in the economy, to combat externalities, provide public goods etc. Even Milton Friedman won his Noble for work in monetary policy, a specific form of government intervention.

        And all economists favour a system based on private property and the price system. Yes, even Krugman. Read any of his international trade articles. It’ll surprise you how non-left-wing he is in his own field.

  7. The Big Guy said, on October 8, 2011 at 8:35 pm

    I agree with your economic evaluation. And you are right, I am a conservative (mostly in the economic sense) and I believe in free trade but not open borders. Free trade nets us the best economic advantage without much social cost. Open borders are/would be a gateway for a lot of negatives to enter our (or any other for that matter) nation: drugs, (sex) slaves, criminals, terrorists, etc. I want to import goods, not social problems, from other countries. Open borders would be an end to domestic law and national sovereignty. But, I will concede that we should improve our imigration policy. I would love to streamline and ease the process for getting a HB-1 Visa and drain the rest of world of their scientists, engineers, doctors, researchers, skilled craftsmen, etc.

    • Navin Kumar said, on October 9, 2011 at 10:02 am

      I don’t really think that foreigners are any nastier or nicer than my own citizens. Plenty of drug dealers etc are nationals and plenty of immigrants are hard working men. Social problems are hardly limited to immigrants. If I’m not mistaken, Asians and Mexicans do relatively well in your country while African Americans face enormous hardships imposed by drug violence, incarceration etc. And you don’t exile them, do you?

      Sex slavery is probably enabled by the fact that these girls have no better way of reaching a better labour market and if you’re going to threaten to deport anyone you rescue, their incentive to cooperate in their rescue goes down, no?

      If you’re going to argue that immigrants are more likely to be anti-social elements, then I find myself asking: how many hard working men are you willing to keep out in exchange of X drug dealers. Put another way: suppose a population of immigrants consisted of p workers and 1-p drug dealers, but you can’t tell which is which. For what high value of p would you be okay with letting the population in? 90%? 95%? And do you know for a fact that p<your threshold?

  8. Jonathan Leibovic said, on October 9, 2011 at 1:45 am

    Your post is contradictory. You claim that free trade and open borders have the same effect, then clearly state that they have different social effects.

    You also claim that “few people actually focus” on the social effects. This is ignorant. There are tens, if not hundreds, of thousands of people across this continent who are committed to immigration reform. They understand (unlike you) how difficult and painful it can be for people to cross the border; that it’s not a simple matter of moving pawns across a chessboard or ions across a concentration gradient. The migration of large groups of people has HUGE consequences, social as well as economic (and the idea that “social” effects can somehow be separated from “economic” effects is just downright weird).

    And finally, when people like Lloyd Hart criticize “Free trade”, they do it because they know damn well that current trade policies between the US and Mexico are not free at all. Not only do subsidies distort markets, but political forces maintain a disproportionate balance of power, and capital, between nations.

    • Navin Kumar said, on October 9, 2011 at 9:48 am

      Yes yes. I know. I said as much. You’re missing the point: both right wingers and left wingers cite economic reasons for opposing/supporting free trade/immigration. If you hold continue to hold such notions due to other reasons, good for you – no quarrel. But if you’re going to cite economics, economics isn’t going to be nice.

      As to why I focus on economic arguments: this is an economics blog.

      Comforting to know that you think trade between the US and Mexico should be even more free than it is. I fully agree with you.

  9. Torbjorn said, on October 9, 2011 at 6:11 am

    Hillary
    if a company has a yearly profit of 300 million it’s quite easy to figure out how many employers the company can afford who can be paid 20 per hour. But then of course you have to value people more than profit. I don’t like seeing people in poverty, poorly educated or deprived of health care.
    if the world consists of 51 and one lends to 50 and therefore their (the 50) economy/spending power goes to build the wealth of one instead of paying for the necessities in their own lives how and who’s economy does it hurt to release (i.e. to cancel all debts) this spending power?

    • Navin Kumar said, on October 9, 2011 at 9:44 am

      Well, if the one guy is in charge of all the credit flowing in the economy, then cancelling all debt more or less bankrupts him, ending all credit and resulting in a massive credit crunch, the effects of which I’m sure you’re familiar with.

      Also note that the “one guy” is actually everyone who saves money and invests it in what are now bum assets e.g. senior citizens who will lose their life savings under such a move.

      Alternatively, one could cancel all debt and put the government (i.e. taxpayer) on the hook but that results in all kinds of nuttiness. Would you rather spend $100,000 on helping 20 sick people who visit the ER or on paying off the college debt of some Gender Studies major?

  10. Charlie said, on November 2, 2011 at 4:12 am

    You don’t even have to have done third year international trade. I learnt this studying high school economics.

  11. […] Note that what the activists are opposed to is not free trade: it’s the tightening of Intellectual Property laws. I keep seeing this repeatedly: the conflation of free trade (no restrictions on the movement of goods and services between countries) and neo-liberalism (a wide ranging set of policy recommendations, from broad-based taxes to floating exchange rates , one of which is trade liberalization). It’s happened on this blog. […]


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