Thom Hartmann: So the evisceration of the American middle class rolls on. We’ve lost 14 million manufacturing jobs just in the last decade and too many to count. Actually we had, it’s too late to pull it up. I had this ad from the International Ladies Garment Workers Union. And you can find this on YouTube, you can Google this thing. 1981 ad where they came, “look for the union label.” There is no more International Ladies Garment Workers Union. Because there’s no more manufacturing of ladies garments in the United States.

With us is Jason Clemons, director of research and strategic planning and budgeting over at the Pacific Research Institute, PacificResearch.org, part of the vast right wing conspiracy. Hey Jason.

Jason Clemons: How are you.

Thom Hartmann: I beg your pardon?

Jason Clemons: I said hello, how are you.

Thom Hartmann: Oh. I’m fine. Why is this a good thing that we’re sending all our jobs to China?

Jason Clemons: Well I guess the first point of contention would be that we’re sending all of our jobs to China. If you look at the economic research, there’s two effects, and I think…

Thom Hartmann: Two effects of what?

Jason Clemons: Well two effects of what I’m going to talk about in terms of you can be exporting jobs but also importing jobs. And so right now it seems to me the discussion that you’ve been having is how many jobs, particularly in the manufacturing sector as I understand, your discussion, have been sent abroad. The problem with that is it ignores the ramp up in jobs, particularly middle and upper level jobs that seem to go along with the exporting of those lower service level jobs.

So as an example, there’s a whole set of papers that have been done by economists looking at what happens to firms when they outsource, within the United States. And all of the papers agree that what happens is the firm becomes more efficient, that is it becomes more competitive with other firms, and it actually hires more Americans. Now the mix of those jobs obviously changes. But the net employment effect in the United States is actually that those firms have employed more Americans not less.

Thom Hartmann: How is that possible? Tell me one manufacturer, for example, of women’s clothing in the United States that has more employees now than they did in 1980.

Jason Clemons: Well no, but the question is…

Thom Hartmann: Can you name one blue jean manufacturer in the United States that has more employees than they did in the 1980s?

Jason Clemons: No but...

Thom Hartmann: Can you name one television manufacture in the United States that has more employees than they did in the 1980s?

Jason Clemons: You’re going to go down the list then?

Thom Hartmann: I will. Give me your list. RCA used to make TVs in the United States, I used to work for RCA as an engineer in 1979. And you know, we made televisions in the United States and we don’t anymore.

Jason Clemons: Okay so I think you’re conflating now two things, and so we should probably jump back to the first. Your question was how can it be that a firm is employing more people if it’s outsourced, particularly…

Thom Hartmann: Well actually, my larger question, and you know, I don’t have a problem with people moving across borders. Obviously you’re from Canada, right?

Jason Clemons: Yes.

Thom Hartmann: Okay. You know I can catch your accent fairly easily. You know our call screener, Julie, is from Uganda. Shaun, our producer, is from Canada. We have a lot of people, you know I have no problem with people being here legally working, helping out, doing things.

But in 1880, or in 1781 Alexander Hamilton put forward his 11 point plan for American manufacturers to George Washington at Washington’s request. Because Washington, in order to be sworn in to office in 1781 as president, had to go to Daniel Hinsdale in Hartford, Connecticut to get a suit made because he was the only guy in the entire country that made fine menswear. Because it had been impossible up to that point, because of the tariffs that the British had had.

And so by 1793 congress had adopted virtually everything in Hamilton’s 11 point plan. The first of them being tariffs on imported goods. We had an average tariff in the United States from 20 to 40% over a 200 year period up until the 1980s and that tariff paid for 100% of the cost of the federal government up until the Civil War. It paid for 2/3 of the cost of government up until the end of World War I. It paid for a full 1/3 of government until the end of World War II. And government radically increased in size up until World War II.

And now our average tariff into the United States is 2%. What has resulted out of that is that people like Phil Knight and Carly Fiorina have become millionaires and billionaires and the average working person in America is saying you want fries with that?

Jason Clemons: Okay sorry there’s so many mistakes with what you just said I’m not sure where to begin. So …

Thom Hartmann: So Alexander Hamilton didn’t propose this in …

Jason Clemons: No, no, hold on. Let me, I didn’t interrupt you, I let you go on, so let’s start with your basic premise. That tariff laws can impede the natural progression of an economy to protect vested interests. There is a great deal of economic literature showing that in fact that doesn’t occur. What naturally happens is that societies move from agrarian societies to manufacturing based or industrial societies, and then moves to service economies. And so if you look…

Thom Hartmann: And then fall apart.

Jason Clemons: Well I would disagree with you on that, they don’t fall apart.

Thom Hartmann: Well just take a simple example here Jason and let’s talk at a macroeconomics level. Adam Smith in Wealth of Nations. His central thesis was that in order for a society to have wealth it had to have manufacturing. And the example that he used was a tree limb on the ground. He said if you …

Jason Clemons: No actually…

Thom Hartmann: … make that tree limb into an axe handle you have increased the wealth of the nation.

Jason Clemons: That is a misread of Smith’s Wealth of Nations.

Thom Hartmann: I’ve actually read it, have you?

Jason Clemons: I’ve read it three times. And I’ve read his more important work…

Thom Hartmann: His more important work was a Theory of Moral Sentiments.

Jason Clemons: Okay Adam Smith was asking a narrow question in the Wealth of Nations which is why do we see certain countries prospering relative to other countries that seem very similar with one another. And his conclusion was that institutions and incentives matter, okay?

Thom Hartmann: Certainly.

Jason Clemons: And if you go through his…

Thom Hartmann: And those institutions and incentives can be, those incentives can be provided by government.

Jason Clemons: No. No in fact the main conclusion of Smith was the importance of trade. The main, I mean, Smith if anything was anti-mercantile which in fact you’re…

Thom Hartmann: within rational limits.

Jason Clemons: … hold on. You’re making an argument that is along the lines of the mercantilists in Britain, in many ways.

Thom Hartmann: Yes, absolutely I am.

Jason Clemons: Okay. Smith, if nothing else, the Wealth of Nations was aimed at undoing the mercantile system in Britain. I mean he, point blank, in Wealth of Nations as well as in his private correspondences, is extraordinarily critical of the mercantile system where…

Thom Hartmann: But what he was critical about that system was the corruption of that system. You had a mercantile system in the UK where the House of Lords was also the board of directors of the East India Company.

Jason Clemons: No, no. It’s corrupt because it relies on the democratic decision making process whereby …

Thom Hartmann: There was no democratic decision making process in 1776 in England.

Jason Clemons: No, sorry, Smith’s argument in terms of the problems in the mercantile system is that it was narrow vested interests that were able to gain at the expense of the masses.

Thom Hartmann: Right. And they were gaming the system which is what we have again. But the question, the question…

Jason Clemons: Well no, in fact as you open free trade you’re opening it to the masses and taking, I mean the easiest way for firms to make large amounts of money are to grant them monopolies, whether that’s sector monopolies or geographic monopolies.

Thom Hartmann: I am not, I am, like you and like Adam Smith, I am an opponent of monopolies. But in the minute that we have left, just, how can a nation build wealth simply by you wash my car, I mow your lawn. Simply by having a service economy?

Jason Clemons: No, no.

Thom Hartmann: Where does the wealth come from?

Jason Clemons: No, a service economy includes accountants, it includes doctors and dentists…

Thom Hartmann: Right, how do any of those people increase the wealth of the nation?

Jason Clemons: By adding value. I mean the fallacy of what you’ve just said is that there is a fixed sum of value in any economy.

Thom Hartmann: Yes.

Jason Clemons: And if we haven’t learned anything in the last 200 years it’s that if you use market mechanisms you add value, you expand the pie, you expand income and opportunity.

Thom Hartmann: Then why has the wealth of American diminished so radically since we started engaging in free trade?

Jason Clemons: And, are you serious?

Thom Hartmann: Yeah.

Jason Clemons: Oh I don’t know by what measure you could… I think we are much better off now.

Thom Hartmann: The, middle class America has been wiped out, and the upper class has moved over 1.2 trillion dollars off shore.

Jason Clemons: That’s a function of the tax code.

Thom Hartmann: Yeah, well…

Jason Clemons: The tax code creates a strong incentive for firms to leave their surplus cash abroad.

Thom Hartmann: Jason we have found a point of absolute agreement. Jason Clemons, you can read his work over at Pacific Rsearch.org. Jason thanks for coming on for an uncommonly intelligent conversation.

Jason Clemons: Thanks for having me.

Transcribed by Suzanne Roberts, Portland Psychology Clinic.