The high cost of "job creation" vs. the benefits of competition and low-cost production
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They want more jobs because they actually want more money.
But "more jobs" can mean LESS money, or less real income, to everyone, if those "jobs" are artificially produced by the government subsidizing them or rewarding less competitive companies in order to artificially produce those "jobs" which cost more than they produce in value produced by the workers. Such as more STEEL jobs brought back from China where that steel was produced at a lower cost and thus more efficiently for American companies and consumers who need the steel produced. What good are these "more jobs" when the only result of them is to drive up the cost of steel production and thus the prices of steel products?
What you don't understand about economics is astonishing.
• Lower wages produce a combination of lower prices for the goods and higher profits for the corporation.
(i.e., lower wages to certain lower-value or less competitive workers, which are the only workers who are paid lower wages if the competitive market prevails and wages are set by supply-and-demand (and possibly a large number of workers, but probably not most, though maybe most workers whine that they are "low-paid"))
Those lower prices and higher profits are good for everyone except those few lower-value workers paid less according to their lower value. All consumers benefit, and the company also benefits as a reward for this benefit to consumers.
Why isn't it good for a company to be rewarded for making consumers better off? In addition to the lower prices ALL workers pay as consumers, there are some workers who are actually made better off by the lower wage level because this now enables them to get hired (at this lower wage), whereas they could not get hired at the higher wage level (i.e., workers disliked by the job screeners and so excluded, but accepted at the lower wage). So the ones worse off are a tiny few lower-value workers whose income is a little lower -- and if it's really all that bad for them, they're free to quit.
And ALL workers, including the lower-value ones, benefit from a more competitive economy, as consumers = the whole population.
• What determines how far the price goes down vs. how much is retained as profits is how much competition there is in the market.
You're saying there's a
need for increased competition. But if you recognize this, then you also recognize the benefit of free trade and cheap labor and downsizing and outsourcing. You can't claim we need more competition without also admitting the benefit of free trade and cheap labor and downsizing and outsourcing and automation, which are all forms of increased competition in the market.
Steps can be taken to increase competition among the giant corporations: corporate-bashers could make themselves useful by crusading for a more competitive market, to the benefit of consumers. But if all they do is sink into crybaby whining on how to force companies to pay workers more, at the expense of consumers, they only make the economy less competitive and weaker. The solution is not to redistribute wealth from employers to wage-earners = less competition, but to impose more rigid competition onto all producers -- to make EVERYONE better off, i.e., society, the consumers. Not just to provide costly babysitting slots to some whining job-seekers, which is what your (and Trump's) "jobs! jobs! jobs!" crusade is about.
• The modern corporations are masters at avoiding competition and gaining control over the prices paid for their products.
Read this. And this. Also this.
Nothing at these urls suggests that we need more corporate welfare or subsidies or protection to companies to "create jobs" or "bring back jobs" from China to appease whining job-seekers. If anything, Trump's China-bashing and protectionism cause companies to become LESS competitive, as also the GM deal in Michigan probably made GM less competitive. The "job creation" hysteria has probably increased the problem of concentration (= less and less competition between companies). Most of the "job creation" crusade is biased toward the very large corporations and stomping down more on the small companies.
So your competition argument here is a further reason why we should put an end to the "Jobs! Jobs! Jobs!" preaching and let the market choose the winners and losers, rather than the state and its blowhard demagogues like Trump and Bernie Sanders pandering to the idiot voters and mesmerizing them with their "jobs! jobs! jobs!" babble, which has nothing to do with promoting competition, but is more about thwarting it.
• This means that the savings from lower wages go for the most part to higher profits, not lower prices.
They go to both together, and both are good for consumers, who benefit not only from lower prices but also from the more efficient companies being rewarded and thus incentivised to produce more.
Your links above are about the new industries, dominated by Facebook and Amazon, etc., where there might be an issue about lack of competition. This has nothing to do with any need to subsidize GM or other traditional companies, to produce "jobs! jobs! job!" in auto or steel and other high-profile sectors which have symbolic appeal to the masses.
The general rule that MORE COMPETITION is always an improvement agrees totally with the point that we need less of the "job creation" corporate welfare, the picking winners and losers by the state, the protectionism of Trump and Sanders. Instead of this crybaby economics, what we need is pressure on companies to compete more, to better serve consumers, to cut costs, to replace workers with robots and computers and with cheap labor, to downsize and outsource, etc., all of which helps produce both higher profit and lower prices to consumers. That's the lesson to learn from your above links on competition.
Less competition: So the "jobs! jobs! jobs!" crybaby economics of Trump and Sanders is about bribing companies to provide extra jobs, to cut special deals in the back room to pay them so much subsidy for each new "job" they create, and protect them from having to compete;
More competition: While the MORE-competition economics means companies must earn every penny, in the market, without any profit other than from the higher efficiency in their production to serve the consumers, including the efficiency of their lower-cost workforce. This SERVING CONSUMERS is their social function, not providing sympathy slots for needy job-seekers, which only makes the production more costly and less competitive.
• Higher profits go overwhelmingly to the already rich, the 1% and even more so to the 0.1%.
And therefore what? "Bring back the factories" and drive up the cost of production so we all have to pay higher prices? How does that change anything except to make it all worse? If they gain "higher profit" by making the production better and serving consumers, why does it matter if that higher profit went to the already-rich? Stop obsessing on who is profiting from the improved production, and instead focus on making the producers more competitive so their performance improves -- and bashing ONLY the companies profiting from something other than serving consumers.
Some forms of wealth redistribution might be appropriate, but not a form which REDUCES the wealth by making the production of it less efficient, like the GM subsidies in Michigan or Trump's China-bashing and protectionism which punishes consumers with higher prices.
Corporate welfare to GM and protectionism is more likely to benefit the super-rich than to redistribute the profits from the rich to the little guy.
• What has happened is the conversion of middle-class wages into profits for the upper class.
Some of that is appropriate because it redistributed wealth from the less competitive to the more competitive. And the part that was not appropriate is not corrected by your solution of redistributing wealth away from the more competitive to the less competitive. Rewarding producers for being less competitive, e.g., "bringing back the jobs" from China, is no solution to anything. I.e., driving up prices and making all consumers worse off makes the economy worse, even though it might be accomplished by increasing the incomes of some of the less competitive, such as by putting them into factory "jobs" where they're paid 10 times as much as a foreign worker would be paid. Such crybaby forms of redistributing wealth end up making everyone worse off. It's better not to redistribute wealth at all if the only way you do it is by making the producers less competitive.
If you want to convert some profits back to middle-class wages, do it by making the production better, by increased competition, improved performance by the workers, not by pandering to whoever whines the loudest and giving them a subsidy which everyone else has to pay for.
Whatever is wrong and needs fixing, the solution is to increase competition and improve the performance of the producers, not to feel sorry for the less competitive and give them subsidies to prop up their costly "jobs" or inefficient production. Higher wages to workers does not make the economy better unless it's a result of their improved performance, because it's this better performance which produces the wealth, not a higher income paid to them out of pity or out of an obsession with factory jobs for the sake of factory jobs.
• The high earners save more of their incomes than the poor and the middle class does.
Why does that matter? If your point is that some of those super-rich don't pay high-enough taxes on their income, or have more wealth saved up than they earned by being productive, that is not corrected by bribing them to "create jobs" at higher cost to taxpayers or consumers.
Some higher taxes might be part of the solution, but not redistribution by forcing employers to pay higher wages to uncompetitive workers, out of pity for them, which just drives up costs. And also not the no-higher-taxes religion and phony "job creation" in the form of tax breaks to "job-creators," which is just as fraudulent as "job creation" through protectionism or corporate welfare which pays companies to "bring back the factories" to provide the babysitting slots for needy job-seekers.
But some genuine higher taxes, to raise revenue, is part of the solution.
The genuine debate over higher or lower taxes is not about "job creation" out of pity for hapless job-seekers, but simply about raising the necessary revenue to pay for the legitimate government functions, infrastructure, etc. We don't need the Bernie Sanders class-warfare crybaby arguments for higher taxes -- and yet in some cases we need the economics argument for reducing the budget deficit and getting the needed revenue (e.g., from higher taxes), along with an end to the phony "jobs! jobs! jobs!" clamor of Republicans demanding corporate welfare for the "job-creators" (i.e., babysitting-slot-creators), which wrongly makes some of the rich richer and drives the deficits higher.
• This has increased income inequality, increased the value of the stock market where the rich save, increased real estate prices, increased public and private debt, and increased the instability of the financial markets, none of which is desirable.
Not all the above are bad. But the extreme public debt is bad, and part of the solution is a need for some tax increases. Not to provide "jobs" to someone, but to raise the needed revenue and reduce the budget deficit. It's really simple, but the "job creation" babble distorts the logic and prevents the demagogues from making the difficult choices, because they have to pander to the "jobs! jobs! jobs!" crusaders as their first priority. Without the "jobs! jobs! jobs!" hysteria in the way, it would be possible to fix some of what's wrong.
• This has reduced the demand in the economy and the economic activity.
It doesn't matter whether these increase or decrease. And there's no need for government to "stimulate" more demand or economic activity. There is no scientific or objective measure of how much "demand" or "economic activity" is the right amount.
• The economy, as you rightly noted, is demand-driven.
• Corporations won't invest unless they have the reasonable expectation that they can sell the product produced by the factory they are investing in.
• The rationale behind free trade as good for all involved is called comparative advantage, the idea that each nation has . . .
A better "rationale" for free trade is "Live and let live." It's about letting us be free to make our own individual choices rather than being dictated to by someone in power who presumes to know what's good for us. Usually they don't know, and that's why they're wrong. Your free-trade-bashers make us worse off, suppressing competition, causing false incentives, and thus hurting all consumers. Freeing us from these demagogues is the rationale for free trade. Only if this is what "comparative advantage" means is it the rationale for free trade.
. . . the idea that each nation has some products that it does better at producing and if all of the nations concentrated on producing the products that they do better and import the rest of what they need, the result would be beneficial for all of the nations.
Or, do whatever you're best at, rather than trying to do everything yourself, and always keep improving your performance, doing what you're best at, encouraging other producers to do the same so you can benefit from their advantage -- ALL producers, no matter who or where. But if you don't think it's good for producers to perform better and do better work, then maybe you're against free trade. Only this is the "rationale" for free trade, whether it's called "comparative advantage" or some other term.
The "advantage" refers to what someone is better at doing (offering, selling, producing), and the "comparative" is their superiority at doing it, meaning better than someone else, or better at doing THIS rather than THAT. So doing better, or performing better is the point. And so "comparative advantage" makes sense if it refers to superior performance or producing a better outcome. If it doesn't mean this, then it is not the "rationale" for free trade, which is based on the principle of producers doing better by choosing what to specialize in and being free to serve all consumers everywhere.
And you miss the point if you obsess on "nations" as though it's only "nations" that matter -- it's about all people or groups or individuals who produce anything:
Let people trade, let groups trade, let nations trade, according to whatever they choose to produce -- don't erect artificial barriers dictating who may trade with whom, or what may be traded, or penalizing certain trade, which always punishes some in order to promote the narrow interests of others who have more power. We don't need to obsess on "comparative advantage" or other textbook abstractions. WalMart and the shoppers at WalMart know the benefits of free trade without the "comparative advantage" jargon.
(And the Heckscher-Ohlin model, tell me if this is part of your rationale for free trade.)
Why do you want to make free trade into something complicated? When it's simple: People are not bothering you when they buy and sell, or produce and consume. So why can't you just leave them alone, instead of trying to curtail them and preaching your phony "jobs! jobs! jobs!" theories at them? Why do you make a fuss over someone buying a cheap foreign import or hiring cheap foreign labor? It's none of your business. Why do you obsess on the "nations" people belong to? You could just as well divide people according to religion or astrological sign, or many other categories.
You need to outgrow your obsession to divide everyone into categories of race or nationality or tribe, herding them into this corral or that and branding them like cattle, and dictating which category may do business with which or who should be penalized because they crossed your artificial barrier in their shopping for a lower price. EVERYONE should be entitled to shop for a better deal -- every buyer and seller, or every producer and consumer. Including every employer. They should be allowed to shop not only globally, but even throughout the Universe, if possibly there's another source out there anywhere offering a better deal, for ANYthing. Across ALL barriers, across ALL categories of race or tribe or species. None should be a slave to the group s/he belongs to.
The "rationale" for free trade is letting ALL producers choose for themselves which is the best production for them to do (from among ALL the different types of production legally allowed), and letting ALL consumers choose from among ALL the stuff being produced, without artificial barriers imposed onto them because the demagogues pander to this or that special-interest producer. This freedom of producers and consumers to make choices works best for everyone, because we're each an expert on what's good for us individually, or what our potential is, so we will each make the best choice. That freedom for every producer and consumer creates the real ADVANTAGE in "comparative advantage," if this term really means anything that matters. And if it doesn't mean this, then it's not the "rationale" for free trade.
• There is little reason to believe that comparative advantage was true in 1819 when the idea was first put forward, but it is a certainty that it is not true today.
This theory basically means that there is an "advantage" when producers can SPECIALIZE in what they're best at. But you can distort it to mean whatever goofball word-game you want to play with it, in which case it is irrelevant. If you want to say something coherent, you need to stop masturbating on this one term and deal with the basic questions of the efficient production and distribution of the stuff. If you deny that specialization serves any benefit, then you're just a nutcase. And specialization is really all that "comparative advantage" is about. The rest is word games.
• China enjoys an absolute advantage over the US, lower labor costs, but no comparative advantage.
I have explained all of this to you before.
You've explained nothing with your platitudes and jargon -- your "comparative advantage" babble is disconnected to anything relevant. You have to advance beyond the clichés and nomenclatures.
You have never explained why an American should not buy something from China, if it's a good deal -- i.e., if the buyer profits from the lower-cost labor in order to gain something which would otherwise be more costly. What is wrong with the American getting the product at a lower price? taking advantage of the lower-cost labor?
You have never explained why the American should be curtailed from buying a Chinese product. You've not shown how your China-bashing is not just pure xenophobia.
If you can't translate your China-bashing "comparative advantage" babble into the economics of supply-and-demand and the production to benefit consumers through competition by producers to better serve consumers, then why should anyone pay attention to your meaningless jargon about "comparative advantage" which is unrelated to what matters? What matters is producing the stuff for those who want it, and doing the best at producing it, including doing it at lower cost. As long as you don't address this, why should anyone pay attention to your babble?
When we discussed this previously, you retreated into declaring that there is no comparative advantage, which is true, and there is no absolute advantage, which is not true, there are only advantages for free trade, which is correct if you are a member of the 1% or so much more so the 0.1% of the income earners but if you a member of 99%, not so much.
This kind of incoherent babble does not answer why it's wrong for the American, rich or poor, to benefit from the lower-cost labor. Why is it wrong to want the product at a lower price? How is anyone made worse off? Obviously the American is better off to have it at lower cost, and the Chinese worker is better off to be paid for doing that work. Why are you unable to answer such a fundamental question? Your abstractions about the 1% or .1% don't answer anything. Your semantics about "comparative advantage" and "absolute advantage" don't say anything about improving the production to better serve consumers.
What good is your blabber if it totally ignores anything about BETTER PERFORMANCE by producers, or improving the stuff produced or improving the distribution of it to consumers?
I also pointed out that whatever savings that the vast majority of people gained from lower prices for their underwear and such, had to be balanced by the costs of the income inequality also produced by the trade;
Whether there's "income inequality" or not, everyone is made better off by the trade. You can't identify anyone being made worse off by people trading, even if some gain at a higher rate than others. The very poorest people are made better off by the trading, regardless of the inequality -- whether it increases or decreases. The poorest are made better off by doing business with the rich, selling to them or buying from them. Any combination of anyone doing business with anyone else is always a net benefit overall, regardless of what class or category they belong to -- from the top .00001% to the bottom .00001%.
Does trade widen the gap between rich and poor?
Then why not also Protective tariffs between states, or between cities?
To protect the local jobs.
If you're right that the "income inequality" is bad, and this is caused by the trading, which has to be curtailed, then you also have to curtail the trade
within the nation, not only the trade with other nations outside. Meaning you must favor high protective trade barriers BETWEEN CITIES, so that trade between cities is curtailed, or between states, etc. Your logic then is to draw lines around people everywhere, around communities, neighborhoods, and curtail trading across these lines. Also separate people into races and religions and curtail trading between these, so that Blacks buy only from Blacks, and Hispanics only from Hispanics, and Catholics only from Catholics, etc.
(Don't laugh. There are groups which advocate such trade balkanization. There are Black activists who advocate for Blacks to buy only from Black companies,
https://www.buyblackmovement.com/Home/ -- to build the Black Economy -- like Trump's delusion to strengthen America by having Americans buy American. This delusionalism takes many forms. Some cities promote "buy-local" campaigns, thinking it will "grow" the local economy. These delusions are based on emotional impulse only. Similar to Pyramid-building schemes, claiming an economic advantage is gained by keeping one's business limited to within the club, and seeing it as treason to patronize outsiders.)
Because if "income inequality" results from people trading with the wrong nation, it must also result from them trading with the wrong race or religion, and to minimize the "income inequality" it's necessary to restrict all the trade between any groups or with other groups. So you keep everyone in their place and no one can become richer by competing better and "dumping" their product into a different group's territory and causing inequality according to your worldview.
But you obsess on NATIONS only, or barriers between nations, while ignoring all the other categories and boundaries where barriers could be erected.
You've not shown how trading across a national boundary imposes a cost -- like more inequality -- while trading across a religious or racial or tribal boundary does not. Or a city or state boundary. How does trading across the artificial boundaries cause this damage, or this greater inequality, or whatever evil you imagine it causes? Why was there no damage when the trading went on
within the geographical boundaries, but suddenly when it crosses that border, or that boundary -- suddenly there is this damage, which you call "income inequality" (or whatever else you want to call it)?
lower wages for the vast majority of the workers, higher rents and housing prices, and higher tuition and resulting student debt as we tried to relieve the burden of taxation of the high-income earners.
So you think when an American buys something from China it causes higher rents and housing prices and tuition? You're deranged. You need therapy. People have been locked up for lesser derangement than you're suffering from. You have no evidence that buying products from China causes higher housing costs or higher education costs or any other higher costs.
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