11 August 2011

Riots and Free Trade


Here’s a chilling excerpt from a paper entitled The Los Angeles Riot and the Economics of Urban Unrest:

What caused the 1992 L.A. riot?  While this question has no definitive answer, the evidence presented in this paper does suggest that South Central L.A. had some characteristics that made it more likely than other cities to explode into a large scale riot.  Our empirical results suggest that the ethnic diversity of South Central L.A., the high unemployment rates of young black men in that area, and the sheer size of Los Angeles all help explain the 1992 riot.  [Emphasis added.  HT: Chuck.]

One of the effects of free trade has been to increase unemployment in manufacturing industries.  Jobs in these industries are generally low-skill, and the proper domain of younger males, at least given the labor market value of young males (hint:  it’s really low since young males tend to lack intellectual capital, i.e. skills).  So, since there are fewer jobs available to young men as a result of free trade, and since young men without jobs are more prone to rioting, it would appear that free trade has a probable role in setting the stage for future riots.

Of course, it is entirely possible to avoid this possibility.  The government can either impose wage parity tariffs on all imports, which would have the effect of ensuring that any imported product would have the cost of minimum wage labor factored in, or the government can stop making illegal for young males to compete with foreign labor and production on price, which means eliminating minimum wage laws.  It is absolutely ludicrous for the government to have policies that hamstring domestic labor and favor foreign labor.  Something has to give eventually, and let’s hope it doesn’t take a large number of unemployed males rioting in the streets to convince the government to set a pro-domestic labor policy.*

* While I’m on the subject, I’d just like to note just how completely horrible it is that the government’s current economic policy is in the worst possible interest of the citizens it claims to represent.  Free trade only benefits domestic consumers because it enables them to buy goods at lower prices than they normally would.  Of course, the general price of goods wouldn’t otherwise be high in the first place if the stupid government hadn’t set policies that drove up the price of goods in the first place.  Between inflation, minimum wage, asinine “corporate” taxation, and incredibly cumbersome regulation, the government has managed to concoct a perfect storm of skyrocketing prices.

The only thing that obfuscates this fact is the presence of foreign trade, which the government welcomes because it helps keep consumers from knowing the true cost of government interference.  Of course, this charade can’t be kept up forever because foreign labor will eventually become more productive, leading to increased demand, leading further to increased prices (wages).  As this happens, the buying power of foreign labor will increase, relatively speaking, and drive up the price of goods on a broad, international level, meaning that Americans will eventually pay more for goods anyway.  By the time this happens, though, the American economy will have been so hamstrung as to become permanently crippled.

And that’s why I hate the American government and the politicians and bureaucrats that run it.  They are fools, every last one of them.  They, and I mean this literally, deserve to rot in the bowels of hell for all eternity for the fraud, deceit, and destruction that they have practiced against the American people.

2 comments:

  1. I think your penultimate paragraph _significantly_ overstates the significance of wage levels in the overall equation governing the relative cost of labor in the US vs overseas.

    An American whose productive capacity doesn't justify paying him at least the present minimum wage is most likely unemployable in America at _any_ wage above $0. Indeed, given the immense and growing regulatory burden that attaches automatically to the marginal hire here, I suspect most of them would still be nonviable even if they _paid_ their employers to hire them.

    The flip side of that coin, though, is that rising overseas wages from improved productivity don't necessarily foretell a meaningful rebalancing of trade. Prices will, of course, have to rise if and when wages rise, but the US will not ever become competitive with the countries to which we presently outsource unless we deal with the regulatory leviathan that makes it uneconomical to hire workers at _any_ wage unless they're extremely productive.

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  2. Since we have no data with which to compare hypotheses, we will simply have to disagree about your first assertion.

    Your second assertion is simply asinine, and devoid of actual history. Unemployment tends to increase with raises in the minimum wage. Why? Because there is, in fact, marginal labor. As such, there are undoubtedly people in America who are employable only below minimum wage but above $0.

    I agree with your third assertion on its technical merits, but I will say that it is probable that improved productivity does foretell a meaningful rebalancing of trade.

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