Then your conclusions are obviously going to be wrong.
In real terms, Americans are on average no better off than they were 30 years ago;
That simply is not true.
The way you get to a figure which seems to show that it is is by looking at median household income.
And median household income is a horribly misleading figure.
Firstly, household size has changed. Meaning that income per person in the median household has risen even if household income has stayed static.
Secondly, the measurement used is of income, not compensation. And in the US this is important (much more so than in the UK) because the majority of US households get their medical insurance as part of working compensation but not as part of working income. And yes, the cost of such insurance has been soaring in recent decades. It\’s not just the cost that\’s risen, so has the effectiveness of the care that is purchased: it\’s not purely inflation here. Which means that household compensation has been rising in a way that is not captured by the statistics.
Yes, this is important. Because if you start by saying that the average household hasn\’t gained from the past 30 yeasr then you\’re going to end up thinking that there\’s something terribly wrong with the way the economy has been working these past 30 years. But if you note that actually household income has been rising then you\’re less likely to make that mistake, aren\’t you?
Sure enough, the world as a whole is getting a whole lot richer. In the past decade alone, the global economy has doubled in size. But most of the benefits of this explosion in activity have gone to the developing world and, in the West, the already rich, highly educated and talented. The wealth divide has widened to record levels almost everywhere.
But having made that correction, let us now ignore it. And let us be good little liberals as we do so.
We already rich people haven\’t been getting any richer. We people already living as high on the hog as any society of humans has ever done have just been treading water. At the same time hundreds of millions, billions in fact, of the formerly destitute are now not just getting three sqaures a day, they\’re joining us high on that hog, becoming middle class, bourgeois.
As good little liberals, if this was a deal offered to us, should we take it? I\’d say yes, absolutely, this is not just desirable it is our moral duty to not just accept it but to embrace it. You know, aiding the poor in getting rich sort of thing?
The principles of free trade are the same for nations as they are for individuals. Rather than trying to produce everything we need to live, most of us choose to work in quite specialist forms of employment, the product of which we sell to others. We then use the proceeds to buy in other goods and services. Nations ought similarly to derive a collective economic benefit by specialising in the things they do best and then trading with others for the rest.
No, a country is not a household. and that\’s not even comparative advantage, that\’s absolute advantage. And the case for trade rests on comparative, not absolute. It is individuals, companies, associations of people, who should concentrate on doing whatever it is they do least badly, not nations doing what they do best.
Adam Smith’s “invisible hand” cannot operate efficiently in a world of wildly different labour standards, attitudes to the rule of law and manipulated currency values.
Complete and total bollocks. Partly that Smith didn\’t wibble on about invisible hands (his actual one use of the phrase in WoN is actually a reference to how people will naturally employ their capital at home rather than go for the extra profits available from investing aborad) and more importantly, there is absolutely nothing at all about markets which means they cannot operate with such different attitudes. Such differences are just another thing that markets will arbitrage, that\’s all.
In the long run, all nations must become better balanced and self-reliant. It was madness to outsource so much of what we used to do to foreign climes, just as it is unsustainable for China and other surplus nations to rely on ever-growing exports.
Where are the jobs going to come from, it is often despairingly asked, in Western economies? There’s a simple, if challenging answer: by returning to the way we were and doing more things locally. And that starts with washing our own sprouts for the Christmas dinner table.
I fear that Mr. Warner (for it is he) has been bitten by a very nasty bug. He\’s turned economic nationalist; wibble about the soul of the nation and the way that the darkies are polluting it cannot be far behind.
Trade is just the side effect of the division and specialisation of labour. And one needs only to look at \”home made\” anything to see that reversing that makes us poorer.
Import substitution – they taught me in development economics thirty years ago that it was stupid. Still is too…
Tim, your link goes nowhere. It should be
What’s happening at the Telegraph? First it recruits Mary Riddell from the Guardian stable of bleeding hearts and crap journalism. Then it climbs onto the warmist band-wagon with Geoffrey Lean and – Queen of the Churnalists – Louise Gray. Now it’s Jeremy Warner seeking a regular place on CiF.
I read the article this morning in disbelief. A fallacy on every paragraph – the stuff about incomes, the lump of labour/fixed wealth nonsense; nationalism, misunderstanding of the law of comparative advantage. Sheesh.
Maybe he is channeling Richard Murphy. It is like a sort of disease.
two additional parts of US compensation:
company match of 401(k) contributions and , in many cases, college tuition reimbursement for employees.