Yay for free trade

I came across this nifty analysis paper today.

"Trading Up: How Expanding Trade Has Delivered Better Jobs and Higher Living Standards for American Workers"
http://freetrade.org/node/782

The author does a nice job of analyzing how middle class income has changed over the last 40 years or so, and what impact trade has had on both employment and wages. It fairly well demolishes the standard protectionist arguments that free trade is hurting our manufacturing sector, taking our jobs, and lowering our wages.

Key points:

• The manufacturing sector is actually doing very well, with record revenue and record profits. It employs fewer people because of efficiency gains through technology.
  
• Trade has had no discernible, negative effect on the number of jobs in the U.S. economy. Our economy today is at full employment, with 16.5 million more people working than a decade ago.
• Trade accounts for only about 3 percent of dislocated workers.Technology and other domestic factors displace far more workers than does trade.
• Average real compensation per hour paid to American workers, which includes benefits as well as wages, has increased by 22 percent in the past decade.
• Median household income in the United States is 6 percent higher in real dollars than it was a decade ago at a comparable point in the previous business cycle. Middle-class households have been moving up the income ladder, not down.
• The net loss of 3.3 million manufacturing jobs in the past decade has been overwhelmed by a net gain of 11.6 million jobs in sectors where the average wage is higher than in manufacturing. Two-thirds of the net new jobs created since 1997 are in sectors where workers earn more than in manufacturing.
• The median net worth of U.S. households jumped by almost one-third between 1995 and 2004, from $70,800 to $93,100.
• The large majority of Americans, including the typical middle-class family, is measurably better off today after a decade of healthy trade expansion.

A boring proposal (for congressional election reform)

People often wonder why we can’t seem to clean up Washington politics. Term limits, campaign finance reform, and lobbying rules have failed to significantly reduce the effects of corruption, greed, and special interests in our capitol. In large part, the problem is that our method of selecting and electing our representatives in Congress creates a set of perverse incentives. In order to win a seat in the senate or the house, our legislators must pimp themselves out in order to raise enough cash to run a successful campaign. Then once in office, their greatest incentive is the desire to stay in office, and to do so they must continue the pimping. By accepting large donations from special interests, they become beholden to these minority groups. An enormous amount of their time is spent on fundraising and campaigning to stay in office, which is time not spent doing their real jobs. And far too often, they promote and support positions that they think are popular, regardless of whether they think they are right, because they don’t want to be accused of being “soft on drugs” or “weak on defense”, for example, even when they may privately believe that the war on drugs and the war on terrorism are headed the wrong way.

What’s the solution? To fix the problem, we need to realign our representatives' incentives. I think one large and necessary step in the right direction is to change the way some of them are elected. Here is my proposal:

1. We would start the reform with just one half of Congress, most likely the House of Representatives. Or we could experiment with this in state legislatures before attempting reform at the Federal level.
2. Rather than electing a specific candidate to a seat in the House, we would elect an elector. The electors would campaign and be chosen in much the same way as a representative is today, based on their values and ideologies.
3. The winning elector would select a pool of the most qualified candidates which represent the values and ideologies upon which he was elected. The pool would contain something like 10 - 20 candidates.
4. One of these candidates is selected at random as the “winner.”
5. At the next election, we go through the same process. The incumbent may be chosen by an elector as a candidate in the next selection pool, or may run as an elector himself, but cannot be directly re-elected to the same office.
6. The legislators should be well paid, with salaries comparable to what they can or have earned in the private sector.

The advantages of this system are:

1. Because we are not voting for an individual, and the ultimate winner is selected at random from a pool, it is pointless for the candidates to campaign. No campaigning means no fundraising, no pimping, and lobbyists have no power over them.
2. We still get to vote for a set of values and ideologies that we support, even if we are not voting for an individual.
3. Because they are not constantly living in fear of the next election, legislators will be freer to make “politically dangerous” decisions, such as ending the drug war.
4. Quite often, the people who want to be politicians are not the people who are the most qualified and can make the best decisions. Under this system, we might actually get smarter politicians who can make better decisions. If I were an elector in this system, I would select CEOs and economists to fill my pool of candidates, because they have the best understanding of how to manage large organizations and how political decisions impact our economy. However, CEOs and economists rarely run for office, probably because they can make more money elsewhere and are repelled by Washington politics.
5. Because they are well paid in office, they will be more immune to corruption; they will not be so tempted to seek donations/bribes from lobbyists for personal expenses, and will not be so reluctant to leave their often lucrative private sector jobs to enter the legislature.

The problems I see with this plan are:

1. Since representatives cannot be directly re-elected, there will be a high turnover rate, and few or no people with long-term experience in office. However, I am only suggesting that we apply this to one-half of Congress, so hopefully the other half can continue to benefit (or suffer) from whatever wisdom and connections career politicians tend to accumulate.
2. Since there is an element of randomness, we can never be sure exactly who we’re electing. However, I don’t think that it will really be any worse than what we have today, which is politicians who regularly change their minds and renege on campaign pledges.
3. Electors might tend to select "cronies" to fill the candidate pool rather than those who are most qualified. A possible solution to this is to prohibit them from selecting relatives and those with whom they have business relationships.

What do you think? I’d love to get some feedback.