A Lesson in Economic for Liberals

[BluePhantom]

Let me ask you one question (despite my lack of hope I'll get a straight answer, I'll ask it anyway).

I'll give you a straight answer. No need to be a jack ass.

Why do we have trade deficits with countries like France, Germany, Japan, Canada and quite a few others where

1. labor is not cheap
2. regulation is not limited, i.e., environmental laws etc.
3. energy is not cheap
4. taxes are not low
5. healthcare is universal

Well the answer to that question is a thread unto itself and the reasons also depend on the specific nation you are talking about. Trade deficits with Canada for example have a lot to do with their oil exports to the United States while that's not a factor when considering a trade deficit with Japan. However, there are several big reasons why we see this:

1) The United States tends to honor our free trade agreements and we allow other nations to get away with not honoring those agreements. As a result the prices of our exported goods are artificially inflated in foreign markets due to tariffs, penalties, taxes, etc. That means our goods are particularly more expensive in foreign markets as compared to domestic goods.

2) We are a nation of spenders. We spend money like pigs. If you give the average American $10 they will spend $20. If the next day you give them $20 (thinking that they spent that much yesterday) they will spend $40. We also consume raw materials like ravenous dogs. The more we have the more we consume. We are also a very impatient society. We want things NOW and we are not willing to wait for them to develop over time. Other nations do not have that mentality...at least not to the degree that we do.

3) We are a very large and very populated nation. We have the third highest population in the world behind only India and China. Now consider that in combination with point #2.

4) We refuse to tap our own energy resources and instead buy energy from other countries which is a major contributor to our overall trade deficits worldwide.

Now when you combine all this you create a lot of problems economically. Let's take the auto industry as a single example.

A previous poster correctly pointed out that Japanese cars are superior to American cars in quality. That's true. The question is "why?" It's not that American industry can't build a durable car, it's that they won't. Depending on the year and the source you look at most studies suggest that the average American family buy a new car every 3-7 years roughly. Let's just split the difference at 5 to make the point.

Ok well the mentality of the American auto industry is: "why build a car that will last 10 years when our customers are only going to keep it for five? Furthermore, if the American consumer is happy buying a car every five years we really don't want it to last ten years because we want to force them into a position where they must buy a car at such a time as they would be normally comfortable doing so anyhow. That means we can cut back on the quality of of parts and production as it relates to durability and that means we spend less money on production and minimize costs."

Now one might think that means they can charge less for the car because they are building it at a lower quality. On the surface that's true...BUT because of our instant gratification culture investors are not satisfied with that. They demand the highest rate of return on their investment in the fastest time possible. This creates an environment where corporations are forced to emphasize short-term financial objectives instead of long-term financial objective. Japan on the other hand is the exact opposite. The Japanese investor is willing to accept lower short term returns so long as the overall rate continues to rise over time.

It's a little baseball. The Japanese are happy to hit 12 singles in a row. Americans don't want singles. We want home runs....fuck that....we want grand slams. Well sometimes we get one....usually we strike out over time swinging for the fences too often. But that's ok with us because we don't mind that we are driving expensive, gas hog, high maintenance, low durability cars of overall inferior quality. Dodge Chargers (for example) look cool, attract chicks, and make our neighbors jealous and that's what we value. The fact that it will be dead in five years is irrelevant. We will feel good now.

Well other countries don't have that mentality. Their consumers are not going to purchase a Dodge Charger that is all those things I mentioned above in addition to the artificial price inflation placed upon it by their government.

Combined with our ridiculous oil policy it's really not that hard to figure out why we run trade deficits. Now reverse all that....establish energy independence and start embracing long-term financial objectives and that trend will quickly reverse....and I might add you will see countries like Canada suddenly unable to provide all the entitlements to their citizens that they do because we will no longer be flooding them with the money with which to do so.

Is that straight enough for you?

 

[BluePhantom]

Thats just...so wrong...

The real comparison is between developed and developing countries. In fully developed countries a small country can achieve the same % GDP growth as a larger one.

No shit jack ass. That's my point. In fact it's easier for a smaller nation to do so because they require less gross income to achieve superior results when reflected as a percentage. Let's use real small numbers....I am sure you can handle that. If you make $100 one week you only need to make $105 the next week to realize a 5% increase. If I make $10,000 in the same time frame I have to make $10,500 the following week to equal your performance when expressed as a percentage. Percentages can sometimes be deceptive. I would rather have only a 2% increase on $10,000 than a 5% increase on $100....wouldn't you?

 

[BluePhantom]

cool so you can quote a lot of facts you clearly dont understand. and you talk like your amazing.

Are you basing that statement on GDP? Well no ours is roughly 24 times that of Sweden and Norway combined.

Again, your either intentionally being misleading or...........

yeah...blah, blah, blah. I will refrain from quoting all your other blathering.

Ok genius....did you miss or ignore that I was asking for the posters definition of "outperform?" Did you miss or ignore the point that it depends on what indicators you are looking at? Did you miss or ignore that I addressed GDP per capita? Did you miss or ignore that I never said the American economy was the best. In fact I believe the overall point is that the American economy is not performing nearly as well as it should and I point out why.

 

[BluePhantom]

So we dont want what you admit works so good for the swedes and the Norwegians because of some contrived notion of liberty you personally hold?

oh and I might point out that I am FAR from the only person who has an issue with government ownership of business and direct competition with private industry. Aside from Maxine Waters and Nancy Pelosi and those of her ilk, I think you will find that most people have a huge problem with it.

 

[Foxfyre]

Blue Phantom, calm down. You have a most EXCELLENT thesis here and presented it competently and effectively. At least for those who are interested in actually being educated on economics.

The leftists/statist class warfare promoters, eternally brainwashed and unwilling to be educated, of course won't debate you on the merits of your thesis but have predictably been diverting and baiting you to create a foot fight and derail the topic. Don't take the bait.

You were quite right in your statement that business is mostly not in business to promote the general welfare or to benefit anybody but those in business. That is the way the free market works. And when it is allowed to work as unfettered as possible and still secure everybody's unalienable rights, it is the most efficient, effective, and yes beneficial system ever devised by humankind.

In one of my very favorite Walter Williams essays "An Economic Miracle", he says this:

. . . .The average well-stocked supermarket carries over 60,000 different items. Because those items are so routinely available to us, the fact that it is a near miracle goes unnoticed and unappreciated. Take just one of those items — canned tuna. Pretend that Congress appoints you tuna czar; that's not totally out of the picture in light of the fact that Congress has recently proposed a car czar for our auto industry. My question to you as tuna czar is: Can you identify and tell us how to organize all of the inputs necessary to get tuna out of the sea and into a supermarket? The most obvious inputs are fishermen, ships, nets, canning factories and trucks. But how do you organize the inputs necessary to build a ship, to provide the fuel, and what about the compass? The trucks need tires, seats and windshields.

It is not a stretch of the imagination to suggest that millions of inputs and people cooperate with one another to get canned tuna to your supermarket.

But what is the driving force that explains how millions of people manage to cooperate to get 60,000 different items to your supermarket? Most of them don't give a hoot about you and me, some of them might hate Americans, but they serve us well and they do so voluntarily. The bottom line motivation for the cooperation is people are in it for themselves; they want more profits, wages, interest and rent, or to use today's silly talk — people are greedy.

Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, "He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." Adam Smith continues, "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."
Economic Miracle by Walter E. Williams on Creators.com - A Syndicate Of Talent

 

[cbirch2]

Thats just...so wrong...

The real comparison is between developed and developing countries. In fully developed countries a small country can achieve the same % GDP growth as a larger one.

No shit jack ass. That's my point. In fact it's easier for a smaller nation to do so because they require less gross income to achieve superior results when reflected as a percentage. Let's use real small numbers....I am sure you can handle that. If you make $100 one week you only need to make $105 the next week to realize a 5% increase. If I make $10,000 in the same time frame I have to make $10,500 the following week to equal your performance when expressed as a percentage. Percentages can sometimes be deceptive. I would rather have only a 2% increase on $10,000 than a 5% increase on $100....wouldn't you?

still no...

we use percent gdp to correct for the size of the economy. your essentially correcting for size twice.

heres the scenario.

If you have $100, you have to make $105 for a 5% increase. If you have $10,000 you have to make $10,500 for a 5% increase.

Your right up until that point, and after that you go wrong.

Your argument is that its easier to raise $5 than it is to raise $500, but that depends on how much money you have already. Its harder to raise $5 when you start with $100 than when you start with $10,000. Thats why we measure GDP growth as a percentage, to eliminate that discrepancy. Your all backwards

It doesnt matter if the size of the economy is $1 billion or $1 trillion, 5% growth is no harder or easier for either economy based on those stats.

 

[uscitizen]

As long as we are doing lessons, "economic" in the title should have been "economics".

 

[American Horse]

As long as we are doing lessons, "economic" in the title should have been "economics".

Typo; and you well know they are impossible to correct in the thread title once posted.
Nit-picker!

 

[CrusaderFrank]

You need to re-title this thread to "A lesson in non-fact-based right-wing economic dogma for liberals."

you are free to correct my math, but I hate to tell you pal. That's precisely how it all works. And the longer the chain of distribution the more amplified the effect becomes.

The problem isn't your math, it's your underlying assumptions and the factors you leave out of the equation, like labor costs for Foreign, Inc., and the trade and monetary practices of Foreign, Inc.'s foreign government. You are isolating the impact of taxes and regulations when these are not isolated factors. Your entire edifice of theory is made useless by this error.

Oh, really?

Enlighten us on foreign labor costs vs. American unionized labor costs!

 

[CrusaderFrank]

you are free to correct my math, but I hate to tell you pal. That's precisely how it all works. And the longer the chain of distribution the more amplified the effect becomes.

The problem isn't your math, it's your underlying assumptions and the factors you leave out of the equation, like labor costs for Foreign, Inc., and the trade and monetary practices of Foreign, Inc.'s foreign government. You are isolating the impact of taxes and regulations when these are not isolated factors. Your entire edifice of theory is made useless by this error.

I said Foreign Inc. started with the exact same parameters. However the nation in which they operate is choosing not to regulate, not to tax, and not to unionize. As a result the actions of the American government do not affect Foreign Inc.

The basic flaw is that you set up a thought experiment and asked Liberals for their input.

Do you see the problem?

 

[CrusaderFrank]

The problem isn't your math, it's your underlying assumptions and the factors you leave out of the equation, like labor costs for Foreign, Inc., and the trade and monetary practices of Foreign, Inc.'s foreign government. You are isolating the impact of taxes and regulations when these are not isolated factors. Your entire edifice of theory is made useless by this error.

I said Foreign Inc. started with the exact same parameters. However the nation in which they operate is choosing not to regulate, not to tax, and not to unionize. As a result the actions of the American government do not affect Foreign Inc.

And HERE is what Foreign Inc. looks like...

Detroit, USA

Home of the UAW

 

[BluePhantom]

Blue Phantom, calm down. You have a most EXCELLENT thesis here and presented it competently and effectively. At least for those who are interested in actually being educated on economics.

The leftists/statist class warfare promoters, eternally brainwashed and unwilling to be educated, of course won't debate you on the merits of your thesis but have predictably been diverting and baiting you to create a foot fight and derail the topic. Don't take the bait.

You were quite right in your statement that business is mostly not in business to promote the general welfare or to benefit anybody but those in business. That is the way the free market works. And when it is allowed to work as unfettered as possible and still secure everybody's unalienable rights, it is the most efficient, effective, and yes beneficial system ever devised by humankind.

In one of my very favorite Walter Williams essays "An Economic Miracle", he says this:

. . . .The average well-stocked supermarket carries over 60,000 different items. Because those items are so routinely available to us, the fact that it is a near miracle goes unnoticed and unappreciated. Take just one of those items — canned tuna. Pretend that Congress appoints you tuna czar; that's not totally out of the picture in light of the fact that Congress has recently proposed a car czar for our auto industry. My question to you as tuna czar is: Can you identify and tell us how to organize all of the inputs necessary to get tuna out of the sea and into a supermarket? The most obvious inputs are fishermen, ships, nets, canning factories and trucks. But how do you organize the inputs necessary to build a ship, to provide the fuel, and what about the compass? The trucks need tires, seats and windshields.

It is not a stretch of the imagination to suggest that millions of inputs and people cooperate with one another to get canned tuna to your supermarket.

But what is the driving force that explains how millions of people manage to cooperate to get 60,000 different items to your supermarket? Most of them don't give a hoot about you and me, some of them might hate Americans, but they serve us well and they do so voluntarily. The bottom line motivation for the cooperation is people are in it for themselves; they want more profits, wages, interest and rent, or to use today's silly talk — people are greedy.

Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, "He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." Adam Smith continues, "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."
Economic Miracle by Walter E. Williams on Creators.com - A Syndicate Of Talent

That's a fantastic quote and 100% accurate. In reality I am not upset. The conversation is actually going precisely where I intended it to. My goal was to introduce some very basic economic concepts in such a manner that was so simple a child could understand them (and indeed my 11 year old daughter gets all this perfectly). From there we could launch into a discussion on more advanced concepts that confound or enforce those initial concepts and discuss how to set government policy in order to balance it all in such a way where we maximize our profits while still being able to maintain a reasonable degree of environmental and workers protections.

I just didn't realize it would take them this long to get step one through their heads.

 

[Bfgrn]

Blue Phantom, calm down. You have a most EXCELLENT thesis here and presented it competently and effectively. At least for those who are interested in actually being educated on economics.

The leftists/statist class warfare promoters, eternally brainwashed and unwilling to be educated, of course won't debate you on the merits of your thesis but have predictably been diverting and baiting you to create a foot fight and derail the topic. Don't take the bait.

You were quite right in your statement that business is mostly not in business to promote the general welfare or to benefit anybody but those in business. That is the way the free market works. And when it is allowed to work as unfettered as possible and still secure everybody's unalienable rights, it is the most efficient, effective, and yes beneficial system ever devised by humankind.

In one of my very favorite Walter Williams essays "An Economic Miracle", he says this:

. . . .The average well-stocked supermarket carries over 60,000 different items. Because those items are so routinely available to us, the fact that it is a near miracle goes unnoticed and unappreciated. Take just one of those items — canned tuna. Pretend that Congress appoints you tuna czar; that's not totally out of the picture in light of the fact that Congress has recently proposed a car czar for our auto industry. My question to you as tuna czar is: Can you identify and tell us how to organize all of the inputs necessary to get tuna out of the sea and into a supermarket? The most obvious inputs are fishermen, ships, nets, canning factories and trucks. But how do you organize the inputs necessary to build a ship, to provide the fuel, and what about the compass? The trucks need tires, seats and windshields.

It is not a stretch of the imagination to suggest that millions of inputs and people cooperate with one another to get canned tuna to your supermarket.

But what is the driving force that explains how millions of people manage to cooperate to get 60,000 different items to your supermarket? Most of them don't give a hoot about you and me, some of them might hate Americans, but they serve us well and they do so voluntarily. The bottom line motivation for the cooperation is people are in it for themselves; they want more profits, wages, interest and rent, or to use today's silly talk — people are greedy.

Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, "He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." Adam Smith continues, "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."
Economic Miracle by Walter E. Williams on Creators.com - A Syndicate Of Talent

What I see today is the brainwashed 'Marketist'...ideology driven right wingers like you who have no concept of markets. There is no such thing as a free market; all markets are constructed. All markets have rules. The 'as unfettered as possible' ideology can be just as catastrophic as Marxism.

One politically popular myth, that free market economics and government non-intervention provide the basis for true democracy, flies in the face of history. The first democrats, the classical Athenians, had a word for the ideal free marketer, the homo economicus, working for his own economic gain but unconcerned with the community. It was not particularly complimentary, the ancestor of our word “idiot.” Pericles expressed the sentiment underlying this: “We regard the citizen who takes no part in these [public] duties not as unambitious but as useless…”

Over the past half-century we have seen lower tax rates and less government interference. We have come a long way toward free enterprise from the proto-socialist policies of Franklin D. Roosevelt. Since the Kennedy Administration we have reduced the marginal tax rate on our highest incomes from the 91% that remained in effect from the 1940s into the mid-1960s (and a brief peak of 94% during World War II) to 28% in the 1986 tax code. Yet our economic growth has slowed.

Decade/Average Real GNP/per Capita GNP Growth
1960-1969 4.18% 2.79%
1970-1979 3.18% 2.09%
1980-1989 2.75% 1.81%
1990-1994 1.95% 0.79%
(Maddison, Monitoring the World Economy 1820-1992 p. .183, 197)

Despite our adoption of the most enlightened free market policies, our performance resembles that of a declining Great Britain in the late nineteenth century.

Free market apologists contend the closer we come to pure laissez faire, the better. But there is little evidence for even this position. The U.S. has come closer to laissez faire than most other countries, especially since the Reagan Administration. If free market policies are the best economic policies then we should have experienced the most robust growth in the world during this period. But this has not happened. We have been outstripped by our trading partners.

 

[BluePhantom]

The basic flaw is that you set up a thought experiment and asked Liberals for their input.

Do you see the problem?

Oh yeah. I am working on them. Of course some people aren't interested in the discussion, just the debate. Take cbirch...one minute he argues that I am wrong about GDP growth as a percentage based on the size of the initial data, then when I correct him and say "no I agree with you on that point" then he argues something completely different. He's arguing just to argue. Eh....whatever.

 

[BluePhantom]

Free market apologists contend the closer we come to pure laissez faire, the better. But there is little evidence for even this position. The U.S. has come closer to laissez faire than most other countries, especially since the Reagan Administration. If free market policies are the best economic policies then we should have experienced the most robust growth in the world during this period. But this has not happened. We have been outstripped by our trading partners.

Personally, i would not go that far. As I have said before the government must be funded and unless we wish to become a socialist nation and allow government to compete directly with private industry (as cBirch seems to endorse) we need a reasonable level of taxation. History has shown that if left completely to their own devices, business will rape the workers and piss all over the environment. So we need a reasonable degree of worker protection and regulation. However, the trade off for these things is undeniably a reduction in the profitability of business and industry which is the driving force that defines the economic health of a nation.

The problem comes when taxation, regulation, unionization, etc exceed their base purpose to such a degree that business can no longer maneuver and maintain profitability. When you raise taxes because you need money to fund turtle tunnels (an extreme example I know but an example nonetheless) you are sacrificing profitability in order for wasteful bullshit.

I don't think you will hear many people argue that we should lift regulations that provide clean drinking water (despite what Pelosi says), but what we have now is a business environment where we have tons of completely unnecessary regulations and regulations that are political in nature and are not supported by any scientific evidence that would justify their existence.

See what I am getting at?

 

[cbirch2]

The basic flaw is that you set up a thought experiment and asked Liberals for their input.

Do you see the problem?

Oh yeah. I am working on them. Of course some people aren't interested in the discussion, just the debate. Take cbirch...one minute he argues that I am wrong about GDP growth as a percentage based on the size of the initial data, then when I correct him and say "no I agree with you on that point" then he argues something completely different. He's arguing just to argue. Eh....whatever.

Your contention was that 5% growth in GDP is easier for a smaller country than it is for a larger country, if both countries are considered fully developed. Thats wrong. Im not arguing for arguments sake, im arguing because your wrong.

 

[American Horse]

The first democrats, the classical Athenians, had a word for the ideal free marketer, the homo economicus . . .

If this is sound historically why use Latin words instead of Greek ones; which would be more like oikonomos andras?

Makes it look as if the historical/ethnological scholarship of your source is of questionable quality.

 

[cbirch2]

Free market apologists contend the closer we come to pure laissez faire, the better. But there is little evidence for even this position. The U.S. has come closer to laissez faire than most other countries, especially since the Reagan Administration. If free market policies are the best economic policies then we should have experienced the most robust growth in the world during this period. But this has not happened. We have been outstripped by our trading partners.

Personally, i would not go that far. As I have said before the government must be funded and unless we wish to become a socialist nation and allow government to compete directly with private industry (as cBirch seems to endorse) we need a reasonable level of taxation. History has shown that if left completely to their own devices, business will rape the workers and piss all over the environment. So we need a reasonable degree of worker protection and regulation. However, the trade off for these things is undeniably a reduction in the profitability of business and industry which is the driving force that defines the economic health of a nation.

The problem comes when taxation, regulation, unionization, etc exceed their base purpose to such a degree that business can no longer maneuver and maintain profitability. When you raise taxes because you need money to fund turtle tunnels (an extreme example I know but an example nonetheless) you are sacrificing profitability in order for wasteful bullshit.

I don't think you will hear many people argue that we should lift regulations that provide clean drinking water (despite what Pelosi says), but what we have now is a business environment where we have tons of completely unnecessary regulations and regulations that are political in nature and are not supported by any scientific evidence that would justify their existence.

See what I am getting at?

Now this is actually a decent post.

But you cant just imagine all tax money is at the expense of economic growth. How much future private sector growth was created by the governments decision to spend tax money creating ARPANET, the original internet?

"I don't think you will hear many people argue that we should lift regulations that provide clean drinking water (despite what Pelosi says)"

Actually the bush administration took great steps to exempt halliburton and other oil/natural gas companies from the clean water act and the safe drinking water act.

 

[BluePhantom]

Your contention was that 5% growth in GDP is easier for a smaller country than it is for a larger country, if both countries are considered fully developed. Thats wrong. Im not arguing for arguments sake, im arguing because your wrong.

Yeah.....uh huh.

 

[cbirch2]

Your contention was that 5% growth in GDP is easier for a smaller country than it is for a larger country, if both countries are considered fully developed. Thats wrong. Im not arguing for arguments sake, im arguing because your wrong.

Yeah.....uh huh.

How about instead of just posting smileys you articulate your point.

Am i wrong in thinking that "Your contention was that 5% growth in GDP is easier for a smaller country than it is for a larger country"?

If im correct in thinking that, then your wrong.

If i misunderstood your point, i apologize.