The cost of a free market system.
Whenever you start talking to people about the economy, you begin to hear a lot of very nebulous, theoretical comments. Seems like for many people that common sense just gets thrown out the window. All of a sudden, logic and reason don't apply. Water runs uphill. Dust swirls against the wind.
Free trade will make us all better off...
We decided a long time ago in this country that there was a real necessity for a minimum wage. Left to its own devices, the market would set wages all on its own, without any necessity for government interference. It would not necessarily, however, set living wages for all jobs. Many people would end up with levels of compensation that were unacceptably low.
So, we as a nation made a decision to step in, to intervene. We did not abandon the free market system, but we understood instinctively that we needed to place some controls on how it functioned and to guarantee some minimum level of compensation. It was not, fundamentally, an economic decision. It was a social one. It was a moral one.
How then did we decide to accept an international trading system which has no controls whatsoever on levels of compensation or standard of living? If we understood that it was necessary to set some sort of minimum wage inside of the United States, then what did we think exactly was going to happen when we linked our economy directly to that of the rest of the world and took down all barriers, not only to the importation of goods, but also to the exportation of our jobs and our manufacturing base?
We knew when we adopted a minimum wage that it needed to be put in place across the country and that it needed to be put in place by legislation. We saw that efforts by workers at one plant or in one industry to push for a minimum wage would otherwise always be undercut by the ability of a business to simply close up shop and move to another state in search of cheap, exploitable labor.
Did we think that the laws of human behavior that made this true did not apply on a global scale? Why would any company motivated primarily by the desire for profit continue to operate inside the United States and pay living wages to its employees when it could move offshore and hire workers paid next to nothing?
The same goes, of course, for all the other laws and regulations enacted to control the conduct of businesses on our soil. We enforce environmental and work place safety standards uniformly. We do not ask businesses if they want to comply. These standards mean additional cost. There is no competitive advantage to their adoption. A single business voluntarily taking expensive steps to clean up emissions would be put out of business by its competitors in short order.
We believe in the free market, but we understand as a matter of common sense there was be some degree of regulation and control. Businesses will not spontaneously clean up the effluent they are dumping into our rivers. They will not out of the goodness of their hearts buy safety equipment and put in place measures to ensure worker safety. We need to mandate these measures, and, to maintain a level playing field, we need to enforce the same standards across each industry.
But, in the world of free trade, we apparently understand none of this. We act as if all of these factors are invisible to us. A company manufacturing here inside the United States is subject to regulations and controls of all sorts. When it closes up shops and moves across the border to Mexico, it is subject to none of them.
Is it really that hard to predict the end result? If I can move my business offshore, pay slave wages, poison the earth, escape responsibility for workplace injury and death and put my profit margin through the roof, why on earth would I not. I am a businessman. I am in business to make a profit.
We talk a lot about level playing fields and open competition in connection with free trade. The fact is, though, that this playing field is anything but level. Suspending all logic and common sense, what we have created is a situation in which our domestic industries, subject to all sorts of regulations and controls, are now expected to compete with businesses operating abroad, which are free of any such restraints.
Common sense dictates that something about this equation has to change. Either we have to accept that our workers will be brought down to the level of those abroad against whom they are competing or we need to intervene in some fashion to protect our citizens from unfair competition. This is not abandoning a free market system. It is using our heads.