Adam Smith lived in an economic world much different than ours.  To apply the conclusions from his observations today would be to have him support what he never would.  He is the darling of the supporters of big business and of the upper class.  Both believe that the lessie fare doctrine of Adam Smith promotes their financial interests.  Such a position is contrary to the chain of analysis which led to his lessie fare doctrine.  To begin, Adam Smith put the quality of life of the British people before all else.[1]  And from this he argued in The Wealth of Nations that a tariff served the manufactures by permitting them to increase their profit margin.  It was this increased cost of manufactured goods that entailed a reduced quality of life for the masses.  Adam Smith knew that in his day unrestricted foreign competition would force manufacturers to adopt economies in production and a lower profit margin, and thus benefit all the workers.  He also knew that in the 1770s, given the already low wages, that among the cost reductions would not be the lowering of laborers’ wages, for wages were at a subsistence levels.  Adam Smith opposed tariffs primarily because of the burden they placed upon the masses.[2]  He stated that the principal benefit of a tariff was to the manufacturer whose purpose it was to increase his margin.  For Adam Smith, effects justified the lifting of tariffs.

Today there is great disparity of wages between countries.  In countries with high wages for labor, doing away with most tariffs and other trade restrictions cannot be justified by its effect on the quality of life of all the masses, as Adam Smith had done .  Those who call up Smith’s Lessee Fare arguments abuse his justification.  Lower wages were precluded by subsistence wages in Smith’s day.  In our country there is room for wage cuts.  To get around this Milton Freedman and other conservative economists argue {hereafter I will just use Freedman to stand for their ilk} that wage cuts the flight of unskilled production jobs will encouraging the masses to obtain better education so that they may obtain higher paying skilled employment.  Milton’s analysis gives me moral indigestion—I too am a utilitarian. 

Before going further, let me disabuse their pseudo-proof which is part of the doctrine of Regannomic.  It is argued that our current prosperity is based in part upon cheaper imports, the creation of high-paying jobs which has been created and supplant those lost in the manufacturing sector, and the liberal tax reductions given corporations and the wealthy.  First there has not been a growth in the better paying jobs; moreover, in real dollars there has been a moderate decline in the average per hour wage since 1972.  Economic growth has occurred through increasing productivity over the last several decades.  Workers’ prosperity has remained stagnant for decades while corporate wealth has increased.  This increase is not based upon Regannomics, but on increased productivity of workers.  The increased wealth of U.S. corporations has gone principally into expansion of production into foreign lands, the parking of funds in the various liquid markets (stocks, bonds, t-bills, futures, etc.), and into corporate buyouts.  The growth in U.S. dollars has been created through debit; namely, the borrowing of money.  Our current federal debt is in excess of $4 trillion.  And as Alan Greenspan has repeatedly warned in 2004 that its future costs—especially when interest rates rise to traditional levels—will cripple our economy.[3]  The growth in our economy thus is primarily the result of increased productivity of workers and the increased federal debt.  Putting more money in the hands of the rich and corporations and the reduction of tariffs are not significant causes of out expanding economy. 

It is not how well things are but how much better they could be and how much worse they are likely to get.  There is another fiend on our economic horizon—besides that of interest payment on the federal debt when rates increase.  It is the dark specter of the move from durable goods to a service economy and now the outsourcing of jobs in the service sector.  A review of the consequence of our brand of global capitalism and its consequences will occupy the remainder of this paper.  

First, it is not possible, unless one wishes to return to a condition near that of 18^th century England for the masses, to compete with the $1/hour workers of the third-world countries—adding the cost of freight, would raise this to 1.50/hour.[4]  Fifty years ago the economy in production created through advanced machines had lowered the labor cost per item of most U.S.-made products to the same percentage as that of those made in a third world countries.  The machinery advantage permitted the growth of domestic shoe industry, clothing industry, and electronics industry to name three.  Today China, Singapore, Korea have those advanced machines, and thus their cost of labor per item is much lower than the same made in the U.S.  Items requiring a small labor costs, such as cold rolled steel and computer chips continue to be made in this country.  Other items such as automobiles, because of a complex system of quotas and tariffs, are also made here.  However in the last 3 decades most manufacturing has been moved to the Orient, India, and Mexico, and this exodus continues. 

         Fine, you might think, who wants those repetitive factory jobs; better that a large percentage of our laborers to regain employment undergoing the acquiring of special skill—this is what Freedman argues.  However, as American companies establish factories overseas and as overseas corporations develop connections with and knowledge of the American market, the trend of foreign economic inroads grows.  The production by foreign corporations and U.S. plants overseas of toys and other cheap consumer items during the 60s was the training which permitted the expansion into more sophisticated markets.  In the last several years there has been a trend towards doing away with those skilled jobs which were supposed to replace the lost factory jobs.  Freedman’s analysis of the need for ever-increasing need for a skilled labor force no longer stands.  For example, most technical support for consumer computer items has been transferred to India.   I have spent hours on the phone to India talking to technicians holding a Masters in computer science.  They were aiding me in restoring my virus-infected computer and other Window’s XP problems such as the undoing the partition (or making D smaller) of the hard drive of the laptop upon which I am writing this paper—there is no quick & easy fix.  (I have a full-size Microsoft keyboard plugged in).  This week (8/18/4) my printer went down, and again the 800-number connected me with India.    And yesterday I read in Business Week of how 3 European drug companies have started outsourcing drug research and clinical trials to India, at about half the cost. The one thing corporations consistently do is that of maximizes profits.   

          In the 1800s there was debate over the loss of jobs due to machines.  Some people warned that there would be a new wave of social unrest and political instability as employment opportunities vanished.  And there was—just look to Europe in 1848.  We are heading into another such period of increasing unemployment based upon globalization.  Adjustments need to be made, but they effect profits, thus our politicians are not willing to act decisively. 

         What will happen when jobs leaving at a faster rate then they are created, and when the trend becomes accelerated during the next recession?  We cannot survive as a service economy.  In our economy it is the service sector that has picked up the loss of jobs from dwindling farm and factory jobs.  However, it is the back of labor that provides the foundation for the service jobs.  We cannot support the cooks, barbers, and car mechanics by the work of accountants, cabbies, and magazine article writers.  Ultimately it is the manufactured goods and export items that make provide the wealth and thus goods that those in the service-industries consume.  Things of innate value form the foundation of trade within a society.  Food, lumber, steel, cars, furniture, clothing, etc., are the things of value that those in service sector—as in all other sectors--consume.  What happens when the percentage of these items shrink another 20%?  Imports increase.  Without raw materials to export and ever decreasing manufacturing, we have an imbalance of trade.  This imbalance can only go so far; at some point the U.S. dollars in foreign hands will own us.  We will be bought out by the Sonys and Toyotas, and our condition will become as those of many third-world countries, where the means of production will be in foreign hands.  Moreover, international corporations whose origins were in this country, they are not truly American corporations, but rather  global entities.  Their behavior is like in kind to that of Sony and Toyota.  Ever worsening conditions for workers is not their concern, and a U.S. economic slump means a shift to more prosperous soils.       

   Corporations stand for profits.  If our government stood for the best interest of this country, then it wouldn’t allow the flight of skilled positions to continue.  But are politicians are in bed with the contributors to their elections.  In 1950 over 30% of labor was in unions, and the unions backed only the Democrats.  But now with 15% of labor unionized, the Democrats sleep in the same contributions’ beds as the Republicans.  What big business wants, if it’s politically feasible—and just about everything is—they get.  NAFTA (passed under the Clinton Administration) would never have passed in the 60s because of labor influence upon the Democrats, nor would the Republicans wish to lose an even greater percentage of labor’s vote.  But the mind and heart of Americans masses are much different than the 50s:  65 years of capitalistic press and that there has been a marginalizing of union and labor as a political & educational force has resulted in that the masses have much more faith in the wolves who employ them and in the politicians whom they.  Without the enlightened self-interest of workers exerting a political force, our government ever increasingly services the interests of big-business first.            

We need tariffs to protect jobs and thus promote economic prosperity. Moreover, the income from tariffs permits the reduction of other forms of taxes.  If we adjust the vision of the numbers concerning economic conditions, say for the 50s when protectionist tariffs were globally the norm so that there is an allowance made for ever increasing production not primarily through foreign competition, but through mechanization and computerization, then the comparison between now and 60 years proves that tariffs are not counter to the interest of labor, rather they are counter to the interests of global corporations. 

Politicians are not about to offend the primary source of the funding for their elections—thus the need for contribution reform.  Their lack of tariffs is just one more proof that they have developed the vision of international corporations, the vision of globalization.