Neoliberalism explained 3 - Free trade and comparative advantage

[Loren Pechtel]

Thanks for the good laugh. China for example wasn't invaded and it's pulling itself out of poverty by recognizing trade is the answer.

But dismal gave a good example of Cuba.

China completely bought into the US system. It opened up it's population to be freely exploited.

What China shows is that there is no conflict with modern capitalism and totalitarian government.

Cuba was attacked vigorously from day one. Terrorism and a blockade.

Lets take a look at China since you seem to feel they took a bad route.

1) To me the most telling thing is the height of the people. When I was first there I could see over the crowds. My eyes were above the top of the hair of everyone around me. This was the effect of growing up under the communist system. However, it was nearly 20 years since the restrictions were eased, the ones coming of age had grown up under the semi market economy--and soon my line of vision started being blocked. I'm still normally the tallest person on the street but by now I see through crowds no better in China than in America. Changes like that in a single generation are not due to evolution, they are due to nutrition. People were eating better.

2) When my MIL first needed a helper they were readily available at about $2/day + room and board. By the time she died the basic price was around $10/day and few wanted a job that put them on call 24/7. That wasn't very many years. The low wage workers had a tremendous boost to their standard of living.

3) The level of renovation in Shanghai is incredible. (I'm singling it out because of my knowledge of it, I have no reason to think it's not representative.) We were trying to find an address on a street my wife had been down ~10,000 times. Absolutely nothing was familiar except for a few business names. Total replacement in the 15 years since she had been there last. There are still pockets that haven't been replaced but they're fewer and farther between every year.

 

[Loren Pechtel]

Thanks for the good laugh. China for example wasn't invaded and it's pulling itself out of poverty by recognizing trade is the answer.

But dismal gave a good example of Cuba.

Untermensche longs for the good old days before trade when China's GDP per capita was humming along at $200 per year and mass starvations were the norm. But, hey at least people weren't being exploited. Unless you count the government forcing you to work for $20 per month "exploitation" or something instead of "freedom". Of course, as an anarchist, Unter knows the government controlling every aspect of the economy and/or starving you is freedom.

Fool, you don't get it! Leftist governments can't exploit! That's purely an artifact of the right.

Pay no attention to the fact that all the really fucked-up places I have been have either been in Africa or have been in the Soviet bloc.

 

[RVonse]

So should have Michigan tried to put in tariffs so that the South couldn't get those jobs? Do the short term gains outweigh the long term gains?

Obviously we want to freeze all output/prices at high enough levels so that producers can pay high wages to everyone. Sure, consumers will pay more for things, but it's not like consumers and workers are the same people or somet

Obviously we want output/price to be at the lowest possible level but we also want to pay our employees (who are also the customers) as high as we possibly can. Increasing productivity (Henry Ford style) through automation. Yes that will result in the workforce getting reduced unless increased sales from lower price levels make it up. But increasing productivity through automation is the only real way to build a stronger nation.

Increasing profits by exploiting cheap labor through rigged trade agreements is only a recipe for a bankrupt nation and a rich oligarchy. Something similar to where we see the US today.

 

[RVonse]

Untermensche longs for the good old days before trade when China's GDP per capita was humming along at $200 per year and mass starvations were the norm. But, hey at least people weren't being exploited. Unless you count the government forcing you to work for $20 per month "exploitation" or something instead of "freedom". Of course, as an anarchist, Unter knows the government controlling every aspect of the economy and/or starving you is freedom.

Fool, you don't get it! Leftist governments can't exploit! That's purely an artifact of the right.

Pay no attention to the fact that all the really fucked-up places I have been have either been in Africa or have been in the Soviet bloc.

People like Harry Dent will tell you that China is currently in a huge bubble that will eventually break with catastrophic consequences. The rural pheasants that moved to the big cities will have no where to move back to.

Do you agree and if so how do you think this will play out?

 

[bilby]

Fool, you don't get it! Leftist governments can't exploit! That's purely an artifact of the right.

Pay no attention to the fact that all the really fucked-up places I have been have either been in Africa or have been in the Soviet bloc.

People like Harry Dent will tell you that China is currently in a huge bubble that will eventually break with catastrophic consequences. The rural pheasants that moved to the big cities will have no where to move back to.

Do you agree and if so how do you think this will play out?

I think he is just grousing. There's no need to quail at the thought. But maybe that's just sniping on my part. If the bubble does burst, we will all have to duck, or our goose will be cooked. I will just swan off now.

 

[Loren Pechtel]

Fool, you don't get it! Leftist governments can't exploit! That's purely an artifact of the right.

Pay no attention to the fact that all the really fucked-up places I have been have either been in Africa or have been in the Soviet bloc.

People like Harry Dent will tell you that China is currently in a huge bubble that will eventually break with catastrophic consequences. The rural pheasants that moved to the big cities will have no where to move back to.

Do you agree and if so how do you think this will play out?

I have no doubt there will be trouble but I don't even want to guess just how bad things will be when they fall apart. Debt:GDP is getting way out of hand and I see the government trying to prop up the stock market which is bound to fail (the value simply isn't there) but it's going to magnify the blowup when it happens. (Example: They are allowing people to use their house as collateral to avoid margin calls.) We can already see things coming apart (the ghost cities are a way of propping up the economy).

I don't know how well the government will handle the crash and I rather suspect it won't be in power anyway.

I don't know what rural pheasants you are talking about, though. I see almost no wild birds of any kind in the cities, let alone pheasants.

 

[dismal]

Fool, you don't get it! Leftist governments can't exploit! That's purely an artifact of the right.

Pay no attention to the fact that all the really fucked-up places I have been have either been in Africa or have been in the Soviet bloc.

People like Harry Dent will tell you that China is currently in a huge bubble that will eventually break with catastrophic consequences. The rural pheasants that moved to the big cities will have no where to move back to.

Do you agree and if so how do you think this will play out?

Define what you mean by "catastrophic". Would GDP per capita being cut in half to only being 10x greater than it was 30 years ago be "catastrophic"? Or do you require tens of millions of people starving like they had in the "Great Leap Forward"?

https://upload.wikimedia.org/wikipedia/commons/2/2b/GDP_per_capita_of_China_and_India.svg

 

[RVonse]

I don't know what rural pheasants you are talking about, though. I see almost no wild birds of any kind in the cities, let alone pheasants.

 

[RVonse]

People like Harry Dent will tell you that China is currently in a huge bubble that will eventually break with catastrophic consequences. The rural pheasants that moved to the big cities will have no where to move back to.

Do you agree and if so how do you think this will play out?

Define what you mean by "catastrophic". Would GDP per capita being cut in half to only being 10x greater than it was 30 years ago be "catastrophic"? Or do you require tens of millions of people starving like they had in the "Great Leap Forward"?

https://upload.wikimedia.org/wikipedia/commons/2/2b/GDP_per_capita_of_China_and_India.svg

His prediction is exactly like tens of millions of people starving with no way to go back to their farms.

 

[LordKiran]

Untermensche longs for the good old days before trade when China's GDP per capita was humming along at $200 per year and mass starvations were the norm. But, hey at least people weren't being exploited. Unless you count the government forcing you to work for $20 per month "exploitation" or something instead of "freedom". Of course, as an anarchist, Unter knows the government controlling every aspect of the economy and/or starving you is freedom.

Fool, you don't get it! Leftist governments can't exploit! That's purely an artifact of the right.

Pay no attention to the fact that all the really fucked-up places I have been have either been in Africa or have been in the Soviet bloc.

I notice how you left out the puppet democracies propped up by the glorious democratic crusaders of the USA.

Also I'm so sorry that you're so misinformed that you'd falsely equate Soviet Russia and her satellites with contemporary socialist states or socialism as a concept.

 

[SimpleDon]

It's a good question. Why one imaginary line over another. Why stop at state and put tariffs on counties within a state or even at the subdivision level. Make sure every neighborhood is self sufficient.

Why not individuals? Think how many hours of work you lose out on by not building your own car and growing your own food!

coloradoatheist and dismal,

Your point is that anything can be taken to absurd extremes. That seems to be your point in almost all of your posts.

I agree with you, that the extremes are always wrong, that we can have too much of a good thing, that it is wrong to raise the minimum wage to $100 an hour, that taxes can be too high, that we can have too much regulation, that not everyone should go to college, that we need to have policemen, that we don't have infinite pools of profits to redistribute as wages, that we can't get rid of taxes completely, that the deficit can be too high, etc.

These are not especially illuminating additions to their respective discussions.

Do you have anything else to add to this thread?

Do you agree with the OP that comparative advantage isn't valid and isn't an argument supporting free trade?

Do you have any other arguments supporting the concept of free trade or is the slippery slope of "it will result in trade wars between individuals otherwise" your best one?

I can think of arguments supporting free trade that don't involve comparative advantage. For example,

Globalization is inevitable in spite of our efforts to avoid it, it is better to get out in front of it to minimize its negative impacts. This would be a stronger argument if this is what did and what we are now doing. But we seem to have embraced globalization because of those negative impacts on society and our economy, mainly because of the suppression of wages in the US and the subsequent increase in profits.

Properly targeted trade liberalization with our neighbor nations could go a long way to helping solve our problems with illegal immigration. While probably nothing can be done to deter the seasonal flood of pale white people from the north to Florida every winter, the brown, rapist ladened, or so we have told by our President Elect, brown wave of illegal immigrants from the south are coming here for economic reasons.

If they could get well paying jobs in their country created by our nearly ½ trillion dollar trade deficit they would probably much prefer to stay home. However, once again, we didn't do this, once again spending most of the money across the world's largest ocean as if some very powerful people profited from the wage suppression effect of illegal immigration.

Or am I just an old, cynical conspiracy theorist?​

I am only trying to help.

 

[coloradoatheist]

Why not individuals? Think how many hours of work you lose out on by not building your own car and growing your own food!

coloradoatheist and dismal,

Your point is that anything can be taken to absurd extremes. That seems to be your point in almost all of your posts.

I agree with you, that the extremes are always wrong, that we can have too much of a good thing, that it is wrong to raise the minimum wage to $100 an hour, that taxes can be too high, that we can have too much regulation, that not everyone should go to college, that we need to have policemen, that we don't have infinite pools of profits to redistribute as wages, that we can't get rid of taxes completely, that the deficit can be too high, etc.

These are not especially illuminating additions to their respective discussions.

Do you have anything else to add to this thread?

Do you agree with the OP that comparative advantage isn't valid and isn't an argument supporting free trade?

Do you have any other arguments supporting the concept of free trade or is the slippery slope of "it will result in trade wars between individuals otherwise" your best one?

I can think of arguments supporting free trade that don't involve comparative advantage. For example,

Globalization is inevitable in spite of our efforts to avoid it, it is better to get out in front of it to minimize its negative impacts. This would be a stronger argument if this is what did and what we are now doing. But we seem to have embraced globalization because of those negative impacts on society and our economy, mainly because of the suppression of wages in the US and the subsequent increase in profits.

Properly targeted trade liberalization with our neighbor nations could go a long way to helping solve our problems with illegal immigration. While probably nothing can be done to deter the seasonal flood of pale white people from the north to Florida every winter, the brown, rapist ladened, or so we have told by our President Elect, brown wave of illegal immigrants from the south are coming here for economic reasons.

If they could get well paying jobs in their country created by our nearly ½ trillion dollar trade deficit they would probably much prefer to stay home. However, once again, we didn't do this, once again spending most of the money across the world's largest ocean as if some very powerful people profited from the wage suppression effect of illegal immigration.

Or am I just an old, cynical conspiracy theorist?​

I am only trying to help.

I guess we are confused why you don't think that doing something cheaper isn't a comparative advantage?

By your question, why should we trade at all?

 

[SimpleDon]

Such an occurrence has actually taken place with auto manufacturing which used to be primarily based in Detroit, Michigan but now based in Tennessee and Alabama. I would say most of the movement of manufacturing had to do with strong unions in Detroit but no unions in the southern states.

And I would also venture to say (but can not prove empirically) that the damage to Detroit, Michigan was far greater than the advantage of greater wealth going to the southern states. And I would also argue (but once again have no evidence) economy of scale is far worse in the southern states than it was in Detroit. It takes a lot of skilled people to engineer factory automation and those people now must travel from Detroit to many of these remote locations.

Some may argue that the quality of cars is now better than it used to be. But I would argue that the price of cars is much more now too.

I agree with the OP.

So should have Michigan tried to put in tariffs so that the South couldn't get those jobs? Do the short term gains outweigh the long term gains?

No, obviously we should repeal the Taft Hartely Act and the concept of right to work.

We should block tax abatement for new installations of plants moving from other states, possibly by the positive expediency of requiring that any tax abatements have to be extended to existing business installations too.

 

[coloradoatheist]

So should have Michigan tried to put in tariffs so that the South couldn't get those jobs? Do the short term gains outweigh the long term gains?

No, obviously we should repeal the Taft Hartely Act and the concept of right to work.

We should block tax abatement for new installations of plants moving from other states, possibly by the positive expediency of requiring that any tax abatements have to be extended to existing business installations too.

Why? Because you don't think people are smart enough to make their own decision on the conditions of their work environment?

 

[SimpleDon]

One can always call things "free" trade but isn't free trade really where nations can completely control what capital is doing in their nation?

That is the freedom of nations.

Huh? Can any trade then be considered free because we use money to do it instead of straight barter?

Yes, because free trade just means free of tariffs and restrictions on capital and technology transfers. And because ours is a monetary and not a barter economy.

I think that you are misunderstanding some of the concepts of your chosen economic faith. In the most extreme of neoliberalism, the Austrian/Libertarian simplification for the complexity challenged, there is the idea that fiat money has no value in and of itself, economists would say that it isn't a storage of value.

Combine this with the idea that money, savings and debt are not important, that money only casts a thin veil over the basic barter nature of the economy, another falsehood of neoclassical economics, and you might reach a conclusion like yours.

But this is only a guess. Do you understand the reasoning behind your statement?

 

[coloradoatheist]

Huh? Can any trade then be considered free because we use money to do it instead of straight barter?

Yes, because free trade just means free of tariffs and restrictions on capital and technology transfers. And because ours is a monetary and not a barter economy.

I think that you are misunderstanding some of the concepts of your chosen economic faith. In the most extreme of neoliberalism, the Austrian/Libertarian simplification for the complexity challenged, there is the idea that fiat money has no value in and of itself, economists would say that it isn't a storage of value.

Combine this with the idea that money, savings and debt are not important, that money only casts a thin veil over the basic barter nature of the economy, another falsehood of neoclassical economics, and you might reach a conclusion like yours.

But this is only a guess. Do you understand the reasoning behind your statement?

I am trying to understand what you wrote, but having a hard time.

Pure free trade allows the person who grows and kills the chicken to trade those things with someone who has something that farmer values. Instead of direct trade no between those two we use the intermediary government supplied money to represent a value that both people understand can be used as a third party. So unter's argument was that if this third party manipulates the place holder it's no longer free trade.

 

[Loren Pechtel]

Fool, you don't get it! Leftist governments can't exploit! That's purely an artifact of the right.

Pay no attention to the fact that all the really fucked-up places I have been have either been in Africa or have been in the Soviet bloc.

I notice how you left out the puppet democracies propped up by the glorious democratic crusaders of the USA.

Also I'm so sorry that you're so misinformed that you'd falsely equate Soviet Russia and her satellites with contemporary socialist states or socialism as a concept.

Did you not notice the "I have been in" part? I am referring to things past because that's when I was there.

There's poor and then there's Soviet-fucked-up like WWII battle damage in the capital unrepaired after 30 years. (I'm not talking about a memorial or the like, just plenty of places chewed up by heavy machine gun fire.)

 

[Loren Pechtel]

Why not individuals? Think how many hours of work you lose out on by not building your own car and growing your own food!

coloradoatheist and dismal,

Your point is that anything can be taken to absurd extremes. That seems to be your point in almost all of your posts.

I agree with you, that the extremes are always wrong, that we can have too much of a good thing, that it is wrong to raise the minimum wage to $100 an hour, that taxes can be too high, that we can have too much regulation, that not everyone should go to college, that we need to have policemen, that we don't have infinite pools of profits to redistribute as wages, that we can't get rid of taxes completely, that the deficit can be too high, etc.

You are attempting to present arguments for moving in a certain economic direction. They all act as if there is a single force at work, extremes are not ruled out.

A standard way of rebutting an argument is by showing it leads to an obviously false conclusion and that's what they are doing.

Pointing out that they are taking it to an unreasonable extreme is not a defense, you either need to show their conclusions are wrong (which you are not attempting to do) or back up and revise your argument.

 

[laughing dog]

coloradoatheist and dismal,

Your point is that anything can be taken to absurd extremes. That seems to be your point in almost all of your posts.

I agree with you, that the extremes are always wrong, that we can have too much of a good thing, that it is wrong to raise the minimum wage to $100 an hour, that taxes can be too high, that we can have too much regulation, that not everyone should go to college, that we need to have policemen, that we don't have infinite pools of profits to redistribute as wages, that we can't get rid of taxes completely, that the deficit can be too high, etc.

You are attempting to present arguments for moving in a certain economic direction. They all act as if there is a single force at work, extremes are not ruled out.

A standard way of rebutting an argument is by showing it leads to an obviously false conclusion and that's what they are doing.

Pointing out that they are taking it to an unreasonable extreme is not a defense, you either need to show their conclusions are wrong (which you are not attempting to do) or back up and revise your argument.

Unrealistic extremes that conflict with reality do not effectively rebut any argument about reality. Using unrealistic extremes simply makes the argument either look desperate or intellectually dishonest or idiotic.

 

[Loren Pechtel]

You are attempting to present arguments for moving in a certain economic direction. They all act as if there is a single force at work, extremes are not ruled out.

A standard way of rebutting an argument is by showing it leads to an obviously false conclusion and that's what they are doing.

Pointing out that they are taking it to an unreasonable extreme is not a defense, you either need to show their conclusions are wrong (which you are not attempting to do) or back up and revise your argument.

Unrealistic extremes that conflict with reality do not effectively rebut any argument about reality. Using unrealistic extremes simply makes the argument either look desperate or intellectually dishonest or idiotic.

No, the fact that the argument permits them shows it's flawed.