Is globalization dead or dying?

[Guardsman Bass]

K.A. Pital, your own chart literally shows a rise in the real average wage after the mid-1990s downturn, which continued even at a slower pace once the recession hit in 2007. This despite the supposedly negative effects of NAFTA on Mexico (speaking of which, Mexico's percentage of GDP exposure to trade is much higher than the US).

As for the 15,000 jobs figure, if it's from PIIE, then you know it's got to be on ground firm enough that even they won't deny it. PIIE is as pro-international trade as a think tank can be.

This "value" is not value for the workers. No value for the workers? Fuck that "value" and fuck the fucking fuckers.

It's lower prices for goods and services as well as greater overall economic growth, which raises living standards and which can raise overall wages as well (it's not a coincidence that that last time the US had broad wage growth was in the late 1990s, when unemployment was low and economic growth strong). As I said before, it doesn't show as much because the US economy is not particularly heavily exposed to trade, and because the rise in costs of non-trade expenditures - health care, housing, education - have swamped it.

[K. A. Pital]

So in 4 decades of globalization, US average real wages show a near-zero growth.

In 2 decades post-NAFTA, Mexico's avg real wages show near-zero growth.

But the benefits, of course, are visible.

[Kingmaker]

It's not exactly clear that the claim that income is stagnant is correct, rather than being the result of simplistic analysis. I already linked to one paper that discusses the issue.



Simpson's paradox in action, or why it is important to ascertain what kind of fruit you are looking at when making comparisons.

The findings in this article are consistent with recent research showing that the largest income increases occurred at the top end of the income distribution. However, the findings here are not consistent with the view that the incomes of middle American households stagnated over the past 30 years. Income for most middle American households increased substantially.

Incomes of the middle 50 percent of households—between the 25th and 75th percentiles—increased by at least 22 percent and as much as 59 percent for most household types, with gains exceeding 30 percent for most households.

Source

There are additional issues comparing wages across time, such as the increasing prominence of non-wage compensation:

Key points: A rough estimate is that 8 percentage points would be added to median household income growth if the nonmonetary income excluded by the Census but included by the BEA could be assigned to households. This raises the range of median gains for most household types to 44 percent to 62 percent.

--
Frankly, claims that standard of living is the same now as it was in 1976 is ridiculous on its face, even before we start looking at statistical break downs of the subject.

[K. A. Pital]

Why it is "ridiculous on its face"? The standard might have as well worsened since then, as the purchasing power of wages is dropping relative to housing. Which means it is more expensive for the average worker to get a home, be it house or apartment. Although this was not as bad in the US compared to several other, more trade-exposed European countries that Bass asked about.


Trying to substitute personal worker wages with household income is a very cheap trick, which won't fly. Household income is different from wages earned by a working adult. Do I need to explain further or you have already realized your mistake?

Trying to attack the claim of wages being stagnant, please stick to wages. I have no desire to argue about general income, where capitalists are lumped together with workers. Only the well-being of workers is my concern. I can very well imagine globalization producing gains for capitalists. That much was clear from the start.

[madd0ct0r]

Presumably household income over that period includes more women going out to work?

[K. A. Pital]

Of course.

First of all, real household income should rise even if wages stagnate when dual-income households become the norm, otherwise this pretty much would mean a halving of real wages. In fact, only the stagnation - and for some age cohorts a decline - of wages could explain why the rise in real median household income has been so modest that it can itself be considered stagnant over decades.

Second, household income is not equivalent to working-class wages as it includes non-wage incomes of top households (capitalists and their paid capital-administrators, the CEOs, who earn 200-300 times the average employee), and is therefore already skewed towards a higher volume of income than pure wage incomes.



If I sum up my wage and the CEO wage and the income of the capitalist, I might get a nifty cool number which doesn't help me one bit as my wage income isn't rising at all.

Same applies to dumbass attempts to use PCE instead of CPI to overstate wage and income growth:

PCE, on the other hand, includes all goods and services consumed in the U.S. whether they are purchased by consumers or by employers or federal programs on behalf of consumers.

Once again, the focus of my concern is workers. Not employers, not capitalists, not corporations, not the US government. End of story.

A final point on the attempt to sneak in with PCE: this deflator changes weights according to substitution, for example, if bananas become expensive, consumers start eating apples which are cheap. As this demonstrates a notable pressure from the market for the consumer to switch to a cheaper and ceteri paribus less preferred product, were it only a matter of choice alone, CPI rightly keeps product weights fixed. PCE deficiency can be easily seen in the following event: if a consumer's wages rapidly fall and his consumption of Austrian leather jackets that cost 500 dollars a piece shifts to cheaper fake leather from China 10 bucks a piece, PCE would see this as a less severe drop in quality of life compared to CPI. Of course, you can still argue that substituting quality with crap increases happiness, and that the workers can now buy a huge pile of crap with their wages, which means they're "better off".

[TithonusSyndrome]

Oh come on, you really think that it's such a preposterous idea to suggest that economics institutions across the world have been influenced by the wealthy so as to promote their interests at every level?

Yes. Yes, I do. A vast right-wing conspiracy theory is not evident in political affiliations of economists.

Whoa whoa whoa, the only person forwarding a notion of a "conspiracy" here is you. I realize it must be tempting to try to gin up some association between my argument and that of an extreme fringe movement, but there is a substantial difference between premeditated conspiracies and provisional, improvised, emergent consensus. The former requires a degree of agency that we can both agree is unreasonable to expect being planned and executed at certain scales; the latter is practically unavoidable and impels otherwise reasonable and conscientious people to participate in them as part of a Darwin's wedge.

At any rate, if it's forthright conspiracy you want, even that does exist in some measure.

It's even more apparent when you consider the typical conduct of fringe economists. Richard Wolff, the gentleman you quoted, has also said:

The notion of "refuting" an economic theory is itself crude and inappropriate. That applies to Marxian theory as to all other theories. These are rather different ways to think about an economy, to approach grasping its structure and dynamic. To ask if an economic theory is true and another false is like asking if eating with knife and fork is true while eating with chopsticks is false.

That should be a good indication as to why he's not taken seriously and nobody is interested in understanding him.

I don't understand why you think it's objectionable that Wolff is open to using different economic methodologies to approach various problems on a case-by-case basis, and isn't the doctrinaire Marxist boogeyman of yesteryear; this is little removed from someone explaining the basic philosophy of science by saying that "all theories are wrong, but some are useful."

If, however, you're just rejecting him on normative grounds, then you might be proving my point more than you want to admit.

[Kingmaker]

Whoa whoa whoa, the only person forwarding a notion of a "conspiracy" here is you.

Stas opened with the claim that lamestream economists are basically all corrupt shills deliberately fabricating research in support of capitalist interests. Unless the suggestion is that they all spontaneously decided to do this (which is even more implausible), that implies a significant degree of conspiracy. And it still doesn't jive with the reality of economists' political beliefs (other than, I suppose, that they're overwhelmingly not Marxists).

I don't understand why you think it's objectionable that Wolff is open to using different economic methodologies to approach various problems on a case-by-case basis

He's not just doing that; he's rejecting the notion that a theory can be falsified. That's a bit of a red flag when it comes to the question of whether or not someone is doing real science.

[K. A. Pital]

It just implies broad and strong self-interested bias, just as right-wing stink tanks deny climate change for a dime. If they won't, the dime's gonna dry up. Doesn't take any conspiracy for that. So no conspiracy is implied. There's no conspirator and no coordinating center. It's basically a money question.

That's a bit of a red flag when it comes to the question of whether or not someone is doing real science.

Funny that you say that as the mainstream is relying on the same red-flagged axiomatic assumptions, just a different set of them.

[TithonusSyndrome]

Whoa whoa whoa, the only person forwarding a notion of a "conspiracy" here is you.

Stas opened with the claim that lamestream economists are basically all corrupt shills deliberately fabricating research in support of capitalist interests. Unless the suggestion is that they all spontaneously decided to do this (which is even more implausible), that implies a significant degree of conspiracy.

What part of "emergent consensus" are you not comprehending? This is literally like the creationists who propose false dilemmas between intelligent design and their strawman vision of a Hoyle's Fallacy. Darwin's wedges can be insidious and slow-acting, causing alterations to the cultural landscape without having to resort to premeditation OR uniform spontaneity.

And it still doesn't jive with the reality of economists' political beliefs (other than, I suppose, that they're overwhelmingly not Marxists).

They're not Marxists, no, but that doesn't mean they're not apologists for rich people. Even ostensibly "left" economists in much of academia engage in this.

I don't understand why you think it's objectionable that Wolff is open to using different economic methodologies to approach various problems on a case-by-case basis

He's not just doing that; he's rejecting the notion that a theory can be falsified. That's a bit of a red flag when it comes to the question of whether or not someone is doing real science.

So apparently Wolff is more conscious of the fact that present economics is a social science where the hard and fast rules of falsification aren't as applicable than you are. He may see the value in falsification, but doesn't believe that economics as it exists now can responsibly lay claim to being falsifiable, and there wouldn't be anything remiss about that.

[Kingmaker]

What part of "emergent consensus" are you not comprehending?

It's hypothesized origin. Why have economists collectively all decided to support liberal economic theory in spite of the apparently devastating evidence against it? With Creationists, I can point to a shared prior fundamental belief motivating their opposition to consensus in biology and geology. I can also note that they are a fringe group within academia (to the point of saying they are 'within' academia is underselling it). There's no comparable factor for economists.

So apparently Wolff is more conscious of the fact that present economics is a social science where the hard and fast rules of falsification aren't as applicable than you are.

Why, pray tell, is falsifiability less applicable to social sciences? We may have understandably less confidence in a given theory than we would in the natural sciences, but we can still identify pseudoscience.

[TithonusSyndrome]

What part of "emergent consensus" are you not comprehending?

It's hypothesized origin. Why have economists collectively all decided to support liberal economic theory in spite of the apparently devastating evidence against it? With Creationists, I can point to a shared prior fundamental belief motivating their opposition to consensus in biology and geology. I can also note that they are a fringe group within academia (to the point of saying they are 'within' academia is underselling it). There's no comparable factor for economists.

I said in my first post that the origin would have been with the wealthy who underwrite so many economics institutions. Again, this isn't a "conspiracy" in any sense of the word; they are simply reacting to what they deem to be a threat to their interests or the supposed liberty of all citizens or however they justify it on a case-by-case basis, where and as it reaches their attention. There's no premeditated design and there definitely isn't a spontaneous change in thought across the discipline; it's just a classic Darwin's wedge propelled by people with an interest in subsidizing, as Johnathan Chait phrased it, "pro-wealthy apologetics."

You keep saying that this is disproved by the fact that a majority of economists are liberals or something like that, which I am expected to take at your word, but again, this doesn't preclude them from being apologists for the rich. Pro-rich apologists are hardly incapable of becoming standard bearers for Keynesianism.

So apparently Wolff is more conscious of the fact that present economics is a social science where the hard and fast rules of falsification aren't as applicable than you are.

Why, pray tell, is falsifiability less applicable to social sciences? We may have understandably less confidence in a given theory than we would in the natural sciences, but we can still identify pseudoscience.

You literally just had this conversation a while ago with Stas, discussing new developments like behavioral econ and the like in contrast to the established norm in econ. The majority of mainstream economics in their present incarnation are basically a hodgepodge of axioms, which is no crime in the absence of anything more sophisticated, but it would be irresponsible to say you could falsify them until you well and truly have arrived at the new development, which isn't quite there yet.

[K. A. Pital]

Only a tiny subset of theoretical observations in economics can be directly falsified anyway. Most of it is unfalsifiable (marginal utility, marginal product, efficient market hypothesis - these are all at their core unfalsifiable). Economics is in a pre-scientific state currently.

A simple example with the long-discussed NAFTA here.

Exhibit one: the share of international trade in Mexico's GDP has risen massively after NAFTA:

Exhibit two: real GDP per capita in Mexico.

Exhibit three: real GDP per capital annual growth in Mexico and Latin America without Mexico:

Exhibit three: real wages in Mexico:


I think anyone looking at these numbers would think long and hard about the benefits of free trade agreements. When your out-of-NAFTA neighboring countries massively outperform you, that's a bad sign.

Or maybe just trading with the US sucks donkey balls? Don't know at the moment, but certainly something to investigate. Mexico is a developing country within a free trade area with the world's largest economy, and yet is is one of the worst performing emerging economies of the last decades, performing worse than OECD on the average:


It does not even mean trade itself is bad, either - just that there are different situations and sometimes trade can bring benefits for some countries, but it does not mean trade automatically brings benefits to all nations in any situation, at any time under any conditions. The inability to realize such a simple thing and instead resort to axiomatic "globalization good, trade good" mantras is not convincing at all. Neither to me, nor to the population of the adversely-affected nations.

[mr friendly guy]

Whoa whoa whoa, the only person forwarding a notion of a "conspiracy" here is you.

Stas opened with the claim that lamestream economists are basically all corrupt shills deliberately fabricating research in support of capitalist interests. Unless the suggestion is that they all spontaneously decided to do this (which is even more implausible), that implies a significant degree of conspiracy. And it still doesn't jive with the reality of economists' political beliefs (other than, I suppose, that they're overwhelmingly not Marxists).

I read that as implying bias from a conflict of interest, and since all these economists share the same interest.....

The only way for them to actually be in a conspiracy is that they actually have communicated clandestinely, agree that their findings are wrong, and agree to all publish the erroneous theory. I know people like using the term conspiracy, but for a conspiracy to actually occur, the conspirators must actually conspire with each other, ie "a secret plan by a group to do something unlawful or harmful."

If you and I both argue against a poster on SDN because we disagree with them, its not a conspiracy. If however, we both communicated with each other via PMs to gang up on this third poster, we did conspire.

[Beowulf]

http://www.cfr.org/trade/naftas-economic-impact/p15790 <- here's an article on the topic of trade from the CFR (NAFTA in particular). It's not scholarly itself, but it cites a number of scholarly articles. Sure, it's written by corrupt lapdogs and cites corrupt lapdogs, but it gets the point across.

Let us examine the facts, then:

A 2014 PIIE study of NAFTA's effects found that about 15,000 jobs on net are lost each year due to the pact—but that for each of those jobs lost, the economy gains roughly $450,000 in the form of higher productivity and lower consumer prices

Do you understand what exactly is written here? This means that actual people are losing their jobs, and it is little consolation to them that "the economy" - an abstract blob of GDP, of which an ever-greater share is taken by the rich and ultra-rich, as I am sure you are aware - gains extra 450,000 bucks. In fact, let's consider that each of the 15000 employees had a wage of 30k dollars. This is not much, by American standards, or so I hear. This means that 15000 lost workplaces have resulted in labour - the workers, which are the majority in every society - losing a total of... 450 000 dollars.

I am sure that one can argue the general benefits exceed losses, because capitalist profits are rising. Indeed, any lowering of the price of labour usually drives up the rate of profit - and vice-versa, a more expensive workforce tends to accelerate the drop in the rate of profit, which actually occurs anyway due to competition and rising investment.

Let's say, though, these are cheap workers who lose jobs, and each gets just 20k yearly. This results in a loss of 300000 USD which, compared to the benefits of 450 000, leaves just 150k left. And this benefit is first and foremost a capitalist benefit, not for the workers.

So even in your own article meant to defend NAFTA from criticism I already see deep flaws in reasoning.

Whaa? I can't believe no one else caught this. The economy doesn't gain $450k / year. It's gained $450k / job lost / year. The workers may have collectively lost out on $450k (assuming $30k / year), but the economy is ahead by... $6.7 billion. Now admittedly, this is a fraction of 1% of the US economy (because US economy is huge!).

[K. A. Pital]

Sure, my bad. If the economy gained $6,7 billion, it is a net gain. The exact fraction is 0,036% or 0,00036 of GDP.

This constitutes a bit of a problem, though - if the gains are so miniscule as to border on irrelevance, there is hardly a definitive cause for NAFTA here.

[Guardsman Bass]

This constitutes a bit of a problem, though - if the gains are so miniscule as to border on irrelevance, there is hardly a definitive cause for NAFTA here.

It's an "every bit helps" situation.

I'm a little skeptical of your first chart on Mexico. Mexico in the 1960s and 1970s was undergoing a massive expansion in oil production and exports, so a decline in trade as a percentage of GDP seems rather unusual (unless it's not counting petroleum exports, in which case it wouldn't be surprising at all).

As for economists, there's a massive divide in empirical/experimental support between Micro-Economics and Macro-Economics. Macro-Econ tends to be the most public attention for obvious reasons, but talking about it as if were all of Economics isn't meaningful.

At least in the US, macro-economists also tend to divide between "freshwater" and "saltwater" schools, with the latter being pro-interventionist/keynesian while the former are Milton Friedman-ish (or stranger). "Saltwater" economists dominate the field, although "freshwater" economists are prominent because simplistic version of their beliefs are cherished and promoted by conservatives and big business in the US.

[K. A. Pital]

This chart (trade share of GDP) corresponds to the World Bank database as well.
http://data.worldbank.org/indicator/NE. ... cations=MX

I think it must be counting petroleum exports - they were simply insignificant next to Mexican GDP, and thus have not impacted the share of trade much:
http://data.worldbank.org/indicator/NE. ... cations=MX

Actually, Friedman isn't the worst type of economist out there. He at least tried to produce predictions that could have been falsified (even if his arguments were built on the same unfalsifiable neoclassical concepts of utility maximization). The problem is that the whole field is not producing testable predictions, and even if it seems a hypothesis has been falsified by observation (non-adjustment to marginal product, no actual fulfillment of the efficient market hypothesis), nothing has been discarded in the field as there are simply no theories in the macro field that could serve in the place of the above. Various tricks are being applied to keep even failed predictions in the field.

Hence, pre-scientific state. And as economists depend on governments and, noawadays, corporate private businesses to bankroll their research, they are hard-pressed to produce claims that something has been significant when, in fact, it was not.

A congressional investigation into the effects of NAFTA came to the conclusions of insignificance. But various "free enterprise insitututes" chock-full of econ graduates kept singing praise to it for no real reason.

Nations where real wages have been stagnant (US, Germany, Japan) are also quite open, globalized economies, so the question about trade benefits remains. This stagnation also cannot be handwaved away just because of the US inflation indexes (CPI, PCE) - this has no impact whatsoever on other top-industrialized and top-exporting countries.