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The jobs were lost because of corporate promoted trade agreements such as NAFTA and the WTO.
Not exactly. The "production of goods" in the US has continued to increase while employment in the "production of goods" has continued to decrease since the mid-1950's - long before the WTO or NAFTA. This graph does not show that the WTO or NAFTA affected the long term trends one way or the other.
OTOH, you are right about the effect that full employment has on wages and working conditions. Obviously, republicans understand this also and fight the effort to stimulate the economy and bring down unemployment precisely because they know that this would mean pressure to increase wages and working conditions which would, in their view, hurt profits. They hide behind a mantle of 'fiscal responsibility' to hide the real reason for their austerity policies.
just countries that are part of NAFTA or other 'free trade' agreements. Those other countries have stronger middle classes even though they have experienced similar declines in manufacturing employment.
Agreed. And our trade deficits with 'free trade' countries is much, much less (48% exports, 52% imports) than with those countries with which we do not have special 'free trade' agreements (39% exports, 61% imports). Unless there is another explanation, that does not show that these agreements make our trade deficit worse.
Krugman: 85% of consumer spending in America is on American-produced goods and services
Barry Ritholtz sends us to a San Francisco Fed paper from last summer that makes a point on which many people seem confused: despite globalization and all that, the bulk of a consumer dollar spent in America falls on American-produced goods and services.
The reason this matters — or at least one reason it matters — is for discussion of austerity, stimulus, and all that. I often get comments along the lines of “Well, maybe stimulus worked back in the old days, but now it just means spending more on stuff from China”. In reality, that’s nowhere near true.
Why? For one thing, most consumer spending is on services, few of which are really tradable. For another, even if the thing you buy in WalMart says “Made in China”, the price includes a lot of US value-added in the form of transportation and retailing costs.
So we’re still a country where about 85 cents of your consumer dollar is spent at home, one way or another. And this means, among other things, that the rules of macroeconomics haven’t changed nearly as much as people imagine.
http://krugman.blogs.nytimes.com/2012/01/16/not-so-global/
According to Krugman, Canadians spend about 75% on domestic goods and services, Germans about 70%, Swedes less than 60%. Less than 2% of consumer spending here is on Chinese-produced goods.
The really progressive countries with the strongest middle classes spend less on domestic products and services than Americans spend.
It is easy to counter studies and statistics with fear and emotion. (Don't talk about global warming there is snow outside. Don't raise the minimum wage, we know that will cause unemployment, because the 'job creators' will hire fewer 'more expensive' workers.)
Fortunately, it is easy to counter what the right knows to be true with those damn studies and statistics. It is what Krugman does best. The fact is that people in progressive countries with strong middle classes spend more on imports than people who live in countries where income is skewed towards the rich.
That must infuriate "tea party republicans who are more critical of free trade agreements."
Of course it may be that increased trade does not cause a strong middle class. Perhaps countries where liberals govern have progressive taxes, strong unions and effective safety nets, which lead to a strong middle class, and just choose to be open foreigners and their products because they believe that openness is a liberal value while conservatives peddle fear of "them" and "their" products.
