(12-12-2015 10:36 PM)Samseau Wrote: The problem with his analysis is that he assumes everyone can compete equally in a global playing field. But it's not even close to the case. Other countries impose tariffs or only support certain American companies (often stuffed with foreigners) to do business with them. Regular Americans are shut out of production markets in this way while these same companies then sell goods at fire sale prices.
To make matters worse, these production companies in places such as China, Mexico, etc, have a set of laws in place to keep their population enslaved while they work to produce crap for America. China, for example, has a currency peg set at roughly 6:1. So no matter how much a Chinese worker saves, his dollars of value are always worth six less than American dollars. So if America prints 3 trillion dollars, that means his base currency supply has also necessarily devalued by 18 trillion.
The end game is that the Chinese man works until he dies because he will never accumulate savings, and the American man goes without real work until he dies because his country men have no jobs and cannot accumulate capital to start new businesses.
The only reason this state of affairs occurs is because of collusion between both American and Chinese elites; American elites know they can use Chinese slave labor to sell dirt cheap goods in American markets and hog all the cash and profits for themselves (which is why the income disparity has gotten so bad in America), while Chinese elites secretly use the immediate profits they gain to buy American goods and convert to American dollars yet simultaneously placing capital controls on the average Chinese person so they cannot do the same.
The reason why bitcoin and gold are so popular in China is because it is a way for the average Chinaman to escape the capital controls and brutal currency peg. By changing his Chinese dollars into bitcoins he can avoid the steady devaluation of his money. This is also the reason why the Chinese elites buy up tons of American property in major cities, because these places are priced in American dollars which are worth 6 times as much as Chinese dollars, via the peg.
The ultimate situation today is not much different than the old slavery system of the American south. You had the working black slaves (chinese), high unemployment among free whites (Americans), and the rich plantation owners (corporate shareholders). Since slaves are forced to work below a market wage, just like the Chinese are via their peg, there is no chance for the free men to compete with their labor on an open market because free men would never work for the pitiful wages given to the slaves.
Libertarian and classical economists got it wrong on free trade. They did not consider how international markets could be manipulated to turn groups of people into slaves for the sole benefit of an elite few. I don't know many libertarians who support slavery, so usually when I point out the above analysis they quickly change their opinion on how free trade is supposed to operate.
Trump has a very sensible plan regarding free trade. His official policy paper states that total free trade will not occur unless the country America does trade with also applies the same labor laws and currency standards that we do. There will be no more enslavement of third-worlders in the name of global profits under the Trump administration. Countries, such as China, who refuse to comply will be met with huge tariffs that will force American companies to think long and hard before they start opening up sweat-shops in these countries.
(12-13-2015 10:18 AM)Orion Wrote: The problem with free trade as libertarians preach it, is that it is an utopian ideology. It stretches far beyond scope of economy.
Any economy that isn't totally utilitarian, stripped of any religious rituals (DONT TOUCH MUH FREE MARKET), has some kind of ideology ingrained into it. Hence we name them, socialism, capitalism, whatever.
Purpose of economy is to serve people. Since people are by their nature wicked and imperfect, so is their economy. To imagine an infallible economic system in an world filled with crime, war, fraud, corruption is the next most stupid thing in the world after communism.
Point is, don't meddle in free market as long as the benefit outweighs the cost. If cost becomes too high (huge income gaps, corporations becoming stronger than state, interests of corporation hurting population such as waste, global warming, oil prices), then intervene and fix the problem.
Flawless mechanisms don't exist, kids.
Mercantilism/protectionism is basically the government acting on behalf of a small group of producers against the rest of the economy as a whole. It's a tenet of the welfare state, corporate egalitarianism basically.
Samseau, your first sentence says that free marketers are wrong to say that differences in fortunes for domestic vs foreign competitors are not down to unequal competition, with the implication that tariffs are therefore needed to even the playing field. This is the same rationale used by feminists to explain why women are underrepresented in STEM and therefore we need quotas or some other forced madate to increase their numbers. Both comparative advantage and biology are natural occurrences which have to be ignored to placate domestic producers and women on the short end of things, when they should both focus on what they're good at.
Orion states that the economy should serve people. I agree, but I don't understand how arbitrarily forcing regular consumers to pay artificially high prices serves anyone (except the few recipients of artificial high prices). The extra money spent on the 'protected' interest could have been spent elsewhere. That elsewhere is now not getting paid, and the consumer is also deprived of what 'elsewhere' would have sold him. The only person who wins is the protected class the government chose. The same government which is made of people, who Orion says are inherently evil or prone to mistakes. Why are they magically qualified to be arbiters of who and what individuals should deal with in the market? Everyone else loses.
The US lost its manufacturing base over the last three decades or so is primarily because because of poor regulatory policy, not cheap labor overseas. To argue that cheap third world labor undercutting the US worker is the cause is to argue that such labor was invented 30-40 years ago, when US manufacturers started to offshore. The reality is that this cheap labor has always existed. Yet US manufacturers preferred to pay high US wages, because they came with high US productivity, among other benefits that don't exist in some third world sweatshop.
What happened over the last 30 years was a constant, increasing layering of taxes, fees, licenses, healthcare costs, and other regulations that slowly made it uneconomic to hire and produce in this country. Slapping a tariff on foreign goods won't magically bring jobs back the US because the underlying impetus to production is mired in red tape. Administrative, compliance and legal jobs are what we produce now.
What a tariff will end up doing is forcing the already broke US consumer to go into an increased amount of debt in order to buy the same goods. A Honda or Toyota which costs 35% more isn't going to change the fact that hiring more workers to produce Fords in Detroit is an extremely high risk way to make a profit. What would probably happen is American production wouldn't increase, but rather they'd merely raise their prices to a level that was still under the foreigners. In the end you'd have consumers going deeper into debt, buying the same amount of cars. The only winners are the auto companies and their shareholders, who end up getting extra money forced down their throats by the tariffs.
The fact the Chinese manipulate their currency, to the detriment of the Chinese worker and to the benefit of Chinese elites, does not mean we should engage in counter manipulation of any kind, which will be to the detriment of our workers and the benefit of our elites. Right now all the production in China is basically unavailable to Chinese workers because of the peg. This is why they gravitate to gold and bitcoin like Samseau said. The production ends up as consumption in the US. The Chinese elites win, as they get paid either way.
If the peg was lifted, and the yuan rose, the only thing that would change is that the production would be consumed by Chinese instead of Americans. The manufacturing base is already in China; they are doing the producing. The change in currency values determines who the consumers are. This is different to the problem we're ostensibly trying to solve here, which is who the producers are. The peg can't see to that, it has to come from the other factors I mentioned before.
I absolutely agree that the current set up is detrimental to Americans, but not because foreigners have 'stolen' our jobs or manufacturing base. I don't like it because we've shot ourselves in the foot with poor regulations, and then used China, debt and the fact that the dollar is the world reserve currency to shield ourselves from the negative consequences of those actions, meaning we're resistant to the meaningful changes needed.
Samseau writes that the classical economists couldn't have understood how international markets can be manipulated, so they were wrong in that we should be allowed to manipulate back. At the end of the day that Chinese manipulation has left their workers unable to consume the fruits of their labor, going to Americans who didn't produce it.
Reverse manipulation from us is going to leave American workers less able to consume Chinese goods they didn't produce, while doing nothing to bring about more American goods, all things left equal. It's not a case of American goods vs Chinese goods, but Chinese goods vs less Chinese goods. There is no option for more American goods because of the high regulatory and tax burdens involved.
The classical economists understood the errs of mercantilism/protectionism 200+ years ago
precisely because their economies were constantly bogged down by tariffs in one sphere or another. The fact that the US has a long history of tariffs leads people to believe that it was those policies which created the wealth and production booms it experienced.
The truth is that no tariff in the history of the world has ever created wealth. They have merely transferred wealth from one entity to another, more specifically from the rest of society to (usually inefficient) producers, under the guise of the national interest.
That is the limit government can aspire to, transferring wealth, yet so many apparent conservatives look on mercantilism as a positive force. I'll never understand that, but my guess as to why people cling to it so tightly is because of wanting to avoid the 'globalist' aspect, and the fact that protectionism pays lip service to the 'national interest.'
I'm as much opposed to 'globalism' in that Marxist one-world government, NWO, Soros sense as anyone here, but most people wrongly associate terms such as 'free trade' with that nonsense. The reason being that many think that free trade = garbage such as NAFTA and TPP.
I've said before that real free trade doesn't need 'agreements.' Free trade just means that two entities, who may be based in different countries, can choose to associate and exchange resources with one another to their mutual benefit. As long as there is no criminal element to it all, there is no problem.
This perversion of language, which parallels the perversion of language seen in the cultural area as we discuss on this forum, then leads to the following logic: NAFTA/TPP/Trade with manipulators like China is bad. But it is free trade. Free trade is a core part of the free market. Thus, since NAFTA/China is bad, the free market giving us a bad thing.
So we turn to the government to fix the flawed market with tariffs. Yes, markets, as anything man made, is flawed. However tariffs add to the flaws by wasting resources favoring interests, which by their nature of 'needing' favors suggests that they're a drag, at the expense of the economy as a whole.
This is my biggest beef with Trumps campaign so far, I've touched on it before. It won't prevent me voting for him in the slightest, and encouragingly I've heard him touch on the real issues of regulation, taxes and health care specifically as they pertain to business formation. If he wins and goes through with his tariff plans, I'll be disappointed, but if he does the right things elsewhere it won't matter too much. The rest of the Trump platform will outweigh the mercantilist element, the same way modern economic progress has generally outweighed the mercantilist factions which it has dragged along for the last 300+ years.