The Economic Conspiracy

Bernard, You mentioned Douthat’s Times op-ed on the just-ended Trump RNC convention. Douthat writes, “…the perpetual Beltway push for increased immigration … the entire elite vision of an increasingly borderless globe … 15 years of economic disappointment.” I see these matters as politicians paving the way for corporations to increase stockholder profits by offshoring production and parking profits overseas, untaxed. The corporations (who lately have become “people”) and their stockholders respond by funding the politicians in various ways, for example paying politicians large sums just to speak to employees and stockholders. Trump and Bernie are right that the system is rigged, and that Hillary is as corrupt in this sense as anyone could be. Or is it really corruption? I believe the Clinton undoing of Glass-Steagall and the conservative Supreme Court’s decision in Citizens United are two signal events involving BOTH parties equally in the conspiracy. These acts, along with trade agreements, made it perfectly legal to take jobs and profits offshore, to globalize economically. Unfortunately we haven’t correspondingly globalized politically, we (the world) haven’t established one set of international laws for how commerce can move money among sovereign nations to avoid taxes and to arbitrage currency differences. The “economic disappointment” of the quote above applies only to the middle and lower classes, not to the elite, who have done extraordinarily well in the past 15 years, even the past 30 or so years. Do I make sense? I’m certainly no economist… Wayne

Wayne,

Not being experts has not stopped us from expressing our opinions in the past. Indeed, as far as opinions go, ours are at least as good as the next guys’.

I’d like to remark on an item from Ross Douthat’s column that you cite: “…the perpetual Beltway push for increased immigration ….” This seems odd to me, and I’m sure that Douthat knows better. Inside the Beltway the political system is paralyzed with both parties split. Everyone is in favor of “reform”, but inside the Beltway has no consensus. The Republicans are split between their nativist isolationist Tea Party core voters, who love the idea of Trump’s wall, paid for by the Mexican government, and made 10 feet higher because the Mexican government objected to the idea, and the old time main stream business wing, represented by Wall Street and the Chamber of Commerce. The Wall Street Journal editorial page has long called for more immigration. The Democratic Party is also split, part way, between its union wing, which it itself split, and which fears non-union immigrant labor, and much of the rest of the party, which welcomes immigrants, but wants immigration controlled, systematized, and made more liberal and kind. I’m puzzled why Douthat thinks that there is a “perpetual Beltway push for increased immigration.”

Accusations of corruption are broad brush smears, and I think we ought to limit them to appropriate circumstances. The idea that Hillary Clinton has been bought by Wall Street and now does their bidding seems an odd thing to say about a candidate who promises to strengthen the Dodd-Frank law, against the loud objections of Wall Street, and who heads a party with a platform that calls for breaking up so-called “too big to fail” banks. And that has Sen. Elizabeth Warren as a distinguished and exciting leader, and that is working hard to make some of Sen. Bernie Sanders’ ideas its own.

I don’t mean to say that there is no corruption in the system or that money has no or little influence. Of course money is important, and the Supreme Court in decisions such as Citizens United and the recent reversal of former Virginia Gov. McDonnell’s corruption conviction defined corruption out of existence.

As for the system being rigged, by which Trump and Sanders are referring to the candidate nominating process, that may be true, but the rigging of each party’s rules benefitted them more than their opponents. After the first few primaries, the Republican system turned to winner take all or winner take most elections, and Trump was able to collect pledged delegates in large numbers, and exclude his rivals, with a plurality of the votes cast. On the Democratic side, all of the primaries involved proportional allocation of delegates, and this allowed Sanders to collect delegates and to stay in the race even as he lost ground to Hillary Clinton as the season advanced. If the Democrats had had the same system as the Republicans, Clinton would have won in a landslide. As for the super-delegates Sanders criticized as part of the party’s way of empowering insiders, Clinton won the majority of delegates without them, and Sanders oscillated between criticizing the super-delegates for existing and supporting Clinton and arguing that the super-delegates should vote for him even though Clinton was winning the majority of primary delegates.

Finally, you have general comments about globalization. You have correctly pointed to some of the damage done by globalization, but do not mention the benefits. I’ll say that as far as I know, as an amateur economist, economists are in general agreement as to the benefits for everyone of free and open trade, and the movement of capital and people. Indeed, the theory of comparative advantage is one of the few actual theorems of economics. But the full operation of this theory would require that each of the nations involved help those within its own borders who are hurt by it. Unfortunately, we haven’t done as much as we could have in this. This leads respected students of trade, such as Paul Krugman, to temper their approval of trade deals.

Here’s an interesting graph about one of your points, and it is a good question, now much debated, what if anything we ought to do about this. I got this from Barry Ritholz’s blog. Do you recognize any of these firms?

Bernard

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