Unfair Competition from Robotland

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This campaign season brings many complaints about “shipping jobs overseas.” Candidates promise to crack down on the offending corporations. American workers and the United States as a whole must compete on a slanted playing field against foreigners paid much below a dollar an hour. Moreover, the foreigners manipulate their currencies. They buy less from us than we from them, putting the US into a trade deficit (more exactly, a current-account deficit) costing us many billions of dollars a year. China, Japan, and Mexico count among the worst offenders. Free trade is fine, but only when it is fair.

In a similar but imaginary scenario, technology has advanced so far that “Robots” (in a stretched sense of the word) displace American workers at costs equivalent to Robot wages of 50 cents an hour. What is the difference between shipping jobs to Bangladesh and shipping jobs to Robotland? Well, Robotland does not have a balance of payments, so it cannot be accused of buying less from us than we from it, fleecing us of the difference. In the real world, automatic market mechanisms, if allowed to operate, forestall worrisome trade deficits and surpluses; and if the foreigners do make unbalanced sales to us, what can they do with the money? They acquire American bank accounts, securities, and properties, so supplying us with financial capital on advantageous terms.

What sense does the notion of one country competing with others have? Does it mean that international trade is a zero-sum game, with countries squabbling over shares in a fixed total of gains? On the contrary, international trade and advanced technology are alike in making desired goods more abundant. One country’s relatively low standard of living would trace to technological and entrepreneurial backwardness and perhaps to bad government. It would be absurd to blame its relative poverty on incompetent trade-policy negotiators.

One country’s relatively low standard of living would trace to technological and entrepreneurial backwardness and perhaps to bad government.

In the real world, conceivably, Robotland technology might displace many American workers, inviting Luddite arguments. I do not want to get into that issue here. I merely ask what the difference is between the scenarios of foreign competition and robots.

I wish that today’s vapid political debates could give way to ones with candidates testing one another’s policy-relevant understanding by posing questions like the one about robots. Other questions might be: How do your trade-policy proposals square with the principle of comparative advantage? What light might the absorption approach to balance-of-payments analysis shed on a connection between a trade deficit and a government budget deficit? In what sense is the Social Security trust fund a reassuring reality and in what sense a deceptive farce?

Unfortunately, such questions would not faze Donald Trump. He would respond with vicious personal insults and with reiterations of his own excellence. Anyway, allowing such questions could be entertaining. They might even enlighten some voters.




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Comments

Jim Stiles

I think that the jobs lost to robots may be overstated by economists. Robots are really stupid compared to humans and need to be programmed for all of their tasks. Robots are non-biological entities that require periodic maintenance and repair. The jobs programming and repairing robots pay more than assembly-line jobs, so the overall productivity of the domestic workforce is increased. I think that the improvement in overall domestic productivity outweighs the short term loss in employment, but I am not an economist. I suspect, but cannot prove, that the disruption to the domestic economy is less when assembly line jobs are replaced with robots than when those jobs are shipped overseas.

Scott Robinson

Dear Leland,

Very good job raising the issues of the brain deadness of political debate about trade. I recently read this article by Walter E Williams about the "Trade Deficit Angst": http://humanevents.com/2016/03/23/trade-deficit-angst/
This article is good because it illustrates a point that is often not mentioned when the talking heads discuss trade. Its point is that we are in a trade deficit with the grocery store at which we shop. This then begs the reader the question, "Is this deficit so bad for you?" This is a good point that I know I didn't ever consider. I have previously been guilty of saying, "Free trade is bad, like free labor, slavery. We should have fair trade so that we can compete with others who engage in the same business as we do." This argument sounds good, but when I look at it more deeply, it is superficial. I think that this is why the similar argument is so common to political discussion. The argument is, "Look out, the free trade bogey man is going to steal your job." This argument is the same for robotland, just replace "free trade" with "robotland." I know, I've probably given the longwinded description of the scare tactic that you did when you said, "Luddite". This does illustrate why we should fully examine the issues, especially if they illicit a big fear factor.

Good Article,
Scott

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