Pundits debate free trade, trade deficits, protective tariffs, a strong or a weak dollar. But what does it all mean? Do you have to have a Ph.D. in economics to understand these concepts? Gregory Rehmke says no. The program director for Economic Thinking, editor of EconomicThinking.org, and co-author of The Complete Idiot’s Guide to Global Economics discussed economic issues with Mitch Kokai for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Kokai: Why is it so important for us to know about global economics?
Rehmke: Well, there’s so much negative news on globalization, and the negative stories are more newsworthy than the positive stories. So clothes getting less expensive, other products getting less expensive — those don’t sound like stories. But when a factory shuts down, or a textile plant shuts down, or Levi’s stops making blue jeans in the United States, those are headline stories because 500 people lose their jobs. But the positive story, the jobs created — North Carolina is huge in exporting products around the world — those stories are bits and pieces for them. So I often tell students the cheap jeans — inexpensive blue jeans people buy — that’s part of the story, but the rest of the story is what people do with that extra money. They buy coffee. They buy other products. They go to a restaurant. That creates jobs, income, and employment elsewhere.
Kokai: We won’t have time to read the whole book [during this interview], but what are some of the key messages people should get out of The Complete Idiot’s Guide to Global Economics?
Rehmke: Of course, there is a whole range of subjects in The Complete Idiot’s series. My sister married a Catholic and bought The Complete Idiot’s Guide to Catholicism, so she could get the story boiled down. And I’ve written a lot on economics but was impressed with The Complete Idiot’s editors who boiled down the ideas and tried to make them shorter and more concise and more understandable. But basically this story is about trade, and whether it’s trade between people in North Carolina and South Carolina, or people in North Carolina and China or Costa Rica, it’s the same story. People are making products in one place that someone else wants, and buying products from someplace else. I think the theory is that there is only a limited number of jobs, and so if a job is offshored or outsourced, that that job is gone forever. And that’s just not the case. So part of what the book looks at are the positives and negatives of globalization. There are tradeoffs and all sorts of things, but overall, people are getting wealthier, not only here in America but in other countries — particularly India and China — even with the downturn we’ve had recently. Still, the success story of international trade has been stunning over the last 20 years.
Kokai: The fact that someone saw a need for The Complete Idiot’s Guide to Global Economics suggests that a lot of people really don’t know how the global economy works. Given your line of work with Economic Thinking, what is your sense of just how well people understand the basics of, not only global economics, but economics?
Rehmke: There’s a pretty weak understanding of economics around the world, and it’s a challenge because a lot of people, if you work in a large corporation, you really don’t see the nuts and bolts of supply and demand. You’re in a big bureaucracy, and more and more government employees lack that understanding. Teachers, of course, often are teaching — not actually running a business — so they have less insight into that. I think some of the key things are — the wage level. People seem to believe that government or unions or somebody has to protect workers from their employers, and that’s a fundamental problem. And whether that’s in America they see that concern, or whether it’s in Vietnam, they say people need to be protected against Nike or some other company that’s employing these workers. And the reality is that the best protection for employees is competition, is choice. So Nike makes shoes in Vietnam, but so do 20 other companies, and Nike’s biggest problem is keeping their employees. They train them, and then they get hired away at higher wages by someplace else. Now Nike complains that they have to keep raising wages, and so do other companies, but this competition, this is choice. Workers don’t need protection from their employers. I would argue, instead, they need the widest range of opportunity so the people should be able to start companies easily. And that’s the freedom that pushes wages up; it’s productivity that determines wage rates.
Kokai: We discussed the fact that the knowledge of economics is generally pretty weak. In addition to writing this book that we’ve just discussed, you were involved in a lot of different ways in trying to get economic messages to younger people. What are some of the ways that you have found that can get good basic economics into the heads of the young skulls full of mush?
Rehmke: Well, I’ve worked a lot with high school speech and debate students, high school and homeschool speech and debate students, and they’re debating public policy ideas, and that gets them engaged — so not just listening to lectures or studying a textbook. They’re actually planning to give a debate or a talk, and so they’re curious about ideas and want to learn both sides of issues. So that’s one way [of] working with that audience. Another big way I’ve found is [that] students are genuinely interested in environmental issues and in international issues. When they see — whether it’s on MTV or in the newspaper or somewhere — people starving in Africa or dying in India or suffering in South America, they want to know how they can help or what the problems are. And I’ve had at our seminars, we’ve had young people give lectures who grew up under communism in eastern Europe. [At] our seminars in North Carolina, we had a young woman from Kenya [who] was here when she was just 21, and she talked to the students about growing up in Kenya, what life was like, and how she had two uncles with master’s degrees who couldn’t find jobs, and it was so hard to start a business, and they had no global corporations, or very few. No sweatshops. So she later did some documentaries for the BBC and was on with John Stossel, and she just basically said in this debate on sweatshops that nobody in Kenya feels exploited by corporations offering wages. They’ll line up in huge numbers to get a job at a few dollars a day because they’re so poor. And so, trying to explain to students the sources of wealth — that people are poor in Africa and India not because of colonialism or imperialism directly, [but] more because their leaders and their institutions haven’t allowed them to trade, to start companies, to establish property rights. So they want to know why people are poor in Africa, and that’s one of the things I talk to them about.