Protectionism

[Toro]

can you expand on your net job loss/depressive theory?

the UK is a prime example of a country which has not emplaced policy competitive with other countries. as a direct result of a failure to protect their industry with the aim of unsubstantiated returns of a free market, english industry and their job market has suffered considerably. when does the state of the job market become 'important to national security'?

I'm not sure what you are talking about.

I think its telling in the British political culture that no one really seriously considers going back to the model of the UK in the 60s and 70s, when there were all sorts of industrial policies designed to protect British industry, but which made them enormously inefficient and contributed to the country's relative slow growth. I remember watching the 1992 British general election when the BBC called a majority government for Neil Kinnock based on exit polls. But within two hours, it was clear that the British could not bring themselves to vote for Labour, despite Kinnock's attempt to modernize the party, saying one thing when asked as they left the polling both but doing another in the polling booth. It wasn't until Labour selected as leader a moderate with little connection to Labour of the 60s and 70s which ran the country into the ground at the behest of the unions in the name of protecting British industries and jobs that Labour became electable again. Now, Labour looks like a moderate social democrat party rather than the protectionist statists that brought the UK to its knees.

This is not a screed for unfettered free markets. The problem in Britain as I see it is that it became too reliant on the financial industry. Governments around the world, particularly this one in the United States, interfered too much in the creation of credit, i.e. the Federal Reserve, by continuously bailing out financial markets, and allowing financial firms to take on too much debt. Central banks should have clamped down on speculation sooner, placing regulations on the amount of debt banks could take on. But the City brought in too much money to HM Treasury, so no one was willing to clamp down when things were good. That's common throughout history.

 

[Missourian]

Interesting thread...rate this thread using the toolbar.


I gave it an excellent. Great info.

 

[antagon]

can you expand on your net job loss/depressive theory?

the UK is a prime example of a country which has not emplaced policy competitive with other countries. as a direct result of a failure to protect their industry with the aim of unsubstantiated returns of a free market, english industry and their job market has suffered considerably. when does the state of the job market become 'important to national security'?

I'm not sure what you are talking about.

I think its telling in the British political culture that no one really seriously considers going back to the model of the UK in the 60s and 70s, when there were all sorts of industrial policies designed to protect British industry, but which made them enormously inefficient and contributed to the country's relative slow growth. I remember watching the 1992 British general election when the BBC called a majority government for Neil Kinnock based on exit polls. But within two hours, it was clear that the British could not bring themselves to vote for Labour, despite Kinnock's attempt to modernize the party, saying one thing when asked as they left the polling both but doing another in the polling booth. It wasn't until Labour selected as leader a moderate with little connection to Labour of the 60s and 70s which ran the country into the ground at the behest of the unions in the name of protecting British industries and jobs that Labour became electable again. Now, Labour looks like a moderate social democrat party rather than the protectionist statists that brought the UK to its knees.

This is not a screed for unfettered free markets. The problem in Britain as I see it is that it became too reliant on the financial industry. Governments around the world, particularly this one in the United States, interfered too much in the creation of credit, i.e. the Federal Reserve, by continuously bailing out financial markets, and allowing financial firms to take on too much debt. Central banks should have clamped down on speculation sooner, placing regulations on the amount of debt banks could take on. But the City brought in too much money to HM Treasury, so no one was willing to clamp down when things were good. That's common throughout history.

that last bit is exactly what i am talking about. the brit economy has shrunk back to the square mile and canary wharf, while the remainder of the job market collects benefits, sells cell phones or coffee or works for the government passing out benefits.

i recognize that the pathway of brit industry in the 70s was not sustainable, but argue that the industrial policy over-empowering unions was the drag which stifled growth. that drag has not gone away, however. can you really characterize 1% growth as growth? the country is cannibalizing financial services to support their welfare state and public infrastructure. i argue that this post-thatcher economic drag is specifically because thatchers approach to economics took a mutually exclusive position between fin. svcs and industry. these are not mutually exclusive, necessarily. the presumption that it is has people growing up without an idea of what work is, and getting paid to play xbox instead.

these consequences are externalities unaccounted for in free-market theory, among imperfect markets and the role of states in competitive business and trade environments.

 

[loosecannon]

Dumb argument.

What people who favor globalization and detest protectionism, you, fail to see is that every nation is a closed loop and an open loop.

Globalization seeks to make the world's economy one huge mobius strip,or serpentine belt, open in every way.

But every nation still has their own closed loop or current accounts balance. In our case we have twin deficits which means because we get such great deals on Chinese shit cheap we spend more money on their shit than they do on ours and we become poorer, every single month.

Current account deficits do not make us poorer (necessarily). You can see this in an example of a two-nation economy.

Let's say that you have two economies - countries A and B - that are in an equilibrium state such that there is no current account deficit between the two. Trade is in "balance." Now lets say that in country A, there is a technological breakthrough which makes profitability and economic growth higher which causes capital in country B to flow into the country A. This will cause country A to have a capital account surplus with country B. Since a capital account surplus must equal a current account deficit, i.e. a trade deficit, country A will run a trade deficit with country B. Yet you cannot argue that country B is better off than country A. Because country A is now richer, it will demand for goods from abroad, increasing its imports and thus incurring a trade deficit. As wealth rises in country A, it will increase its demand, including demand from abroad. This trade deficit with country B will be financed by country A.

Of course, the world is a much subtler place. The protectionists point to Chinese currency manipulation as a reason to slap on tariffs against China. However, because of the yuan peg to the dollar, China has to recycle dollars back into the states, which means it increases the demand for US bonds which lowers interest rates. Thus the cost of capital in America is lower than it otherwise would be, which benefits the American economy, even though the policy of pegging the yuan has hurt specific sectors of the US economy. China has not hollowed American manufacturing. It has hollowed out low-productivity manufacturing. This country is still the largest manufacturer in the world by far. However, the cost of lower interest rates has been the transfer of low productivity jobs to Asia.

It has also created other problems. The pegging of the yuan to the dollar has created enormous imbalances in the world economy. It has contributed to the housing bubble and thus the financial crisis. It has created a housing bubble in China. It has created an enormously skewed economy in China, which has too much capacity, and will one day crash. But it is hard to see how slapping tariffs on Chinese goods would alleviate this. Tariffs would lower demand for our bonds and cause interest rates to rise, which is the opposite of what we want. The best thing to do would be to forcefully argue to China that it is in China's best interests to allow the yuan to float.

sorry but I disagree with almost every point you made.

Esp the one in which you assumed that I was suggesting slapping tariffs on Chinese goods.

protectionism is essentially a globalized economy shift back n the direction of mercantilism.

And mercantilism works. it has always worked and it always will. That is if you goal is to become a wealthier nation relative to other nations.

Unfortunately i really do consider the rest of what you discussed to be double speak. it reminds me of the saying; "they were the best and the brightest and they were wrong".

on the other hand if you are talking about exchanging actual resources rather than what you call low productivity (manufacturing) jobs then yes you would have had at least one excellent point.

as for the yuan peg really being a wash because our capitol costs are reduced by China holding large $ reserves I simply can' imagine what point you are trying to make.

China is playing a game of mercantilism hardball. Just like Japan did pre 85. In both cases huge amounts of US wealth shifted toward Asia and never returned.

Japan would never have become a leading economic force in this world without gaming us with their mercantilist peg to our dollar then. hen they fucked up ad broke the peg and everything blew up in their face.

China really doesn't have the RE boom most people think they do, nor are they in any real danger of a meltdown, unless it is social meltdown. they understand that they can't break the peg at once which would trigger a REAL RE bubble! Like the one that doubled the price of RE in Japan in the late 80s.

but if you like being gamed by the Asians via currency manipulation....fine. You will love the next 20 years.

Meanwhile we need to beat the Asians at the game of mercantilism or they are gonna end up owning not just our federal debt but our national parks and our homes, mortgages, and retirement accounts.

that is the kind of protectionism i am referring to.

 

[Toro]

Mercantilism is a discredited policy.

 

[loosecannon]

Okay, let's ask this question on those who are against all forms of protectionism. I'd really like to know what's wrong with these uses of protectionism.

1. China. Unfairly pegged currency to foster an economic war (killing us with kindness) against the US. Should there be some form of trade barrier to prevent this?

Imo absolutely!

Romer and Geithner keep complaining that the "problem' with the stalled recovery is a lack of demand.

But even if that demand was robust the money would be spent on imported goods sending half of it overseas.

The stimulus failed because of the peg, or it worked because of the peg but it drove China's recovery, not ours. The BRIC nations are all doing great; brazil, Russia, India and China.

And the world wide recovery was actually quite strong until this summer when china intentionally put the brakes on their economy to avoid bubbles forming and discourage foreign investment.

But the recovery was only realized by nations whose currencies are suppressed.

Which is why japan is lamenting a strong yen, the EU had to erect a false PIIGSbonds crisis to suppress the Euro, and why the US can't revive our own economy no matter how much stimulus we employ.

In a globalized marketplace the race to the bottom is about suppressing your currency to win the current accounts balance game and the resource game.

The weakest currency wins.

 

[loosecannon]

Mercantilism is a discredited policy.

Not in any way shape or form.

It fell out of grace because as early as the slave trade the brits wanted a globalized world market.

So they did what they always do, craft economics studies to justify globalization, monetarism and fractional reserve banking.

Dissatisfied with capitalism, the capitalists needed a widely accepted rationale that persuaded the world to adopt laws and practices that allowed credit to displace capital.

Which is why we aren't on a gold standard anymore.

Formal econ studies are merely an indoctrination into an ideology that serves the financial class exclusively.

Mercantilism has always worked and always will.

The Chinese and Japanese practice it today and we don't.

Who is winning?

 

[loosecannon]

2. Thai sweatshops (yes they're everywhere, but I'm just using this example). If we know the laborers are being used essentially as slaves, and pocketing the difference given them by the unfair economic economic advantage brought about by such inhumane treatment, should we foist a tariff on them to make them pay the equivalent of what they would if they had hired American workers, and not 'slaves'? I don't care about the social ethical aspects, I'm talking national economic protectionism.

No. Many of them actually want those jobs because....nearly 1/3 of the world lives on a few dollars a day.

The Clintons actually want to reorganize Haiti around sweat shops. They envision sweat shops villages surrounded by refugee camps spawning towns, spawning redevelopment. And just maybe that is the most feasible model for Haiti to recover.

3. National oil companies. Should a barrier be placed against companies who are able to compete and dominate a market solely because their nation unfairly subsidizes them and protect our nation's companies who are not subsidized?

Until we each manage to wean ourselves off of cheap oil i suggest we all stop bashing big oil and bow down to it's Meccas each day at 10am, 2PM and 6PM for 5 minutes of reverent prayer.

We spill more oil than the oil companies do, and they do what they do because we are utterly reliant upon that oil for our very lives.

Just My opinion.

 

[Toro]

Mercantilism is a discredited policy. The world grew rich off free trade, not mercantilism. Both Japan and China have benefited from technology transference, inclusion into the global trading system, mass education, and strong cultural institutions, not mercantilism.

 

[Toro]

But what anyone with with the most basic understanding of arithmetic knows is Americans cannot maintain their standard of living while at the same time competing with a foreign workforce that can subsist on a fraction of the prevailing American wage.

Wages are paid based on productivity. The more productive you are, the more you will be paid.

The foreign workforce that is paid a fraction of the prevailing American wage is paid this low wage because the foreign workforce is much less productive than the average American worker. The work that has gone offshore has been predominately lower productivity tasks.

This is the employment cost index for manufacturing. It measures total wages and salaries paid to manufacturing workers. As you can see, it has been rising despite offshoring.

 

[loosecannon]

Mercantilism is a discredited policy. The world grew rich off free trade, not mercantilism. Both Japan and China have benefited from technology transference, inclusion into the global trading system, mass education, and strong cultural institutions, not mercantilism.

The world grew rich under mercantlism too. but it was replaced with psuedo free trade and globalization and nothing good happened until the industrial revolution.

That's strike three, you are out.

Meanwhile China is clearly adhering to mercantilist tactics TODAY, and cleaning clocks.

Mercantilism - Google News

browse and learn, butterfly.

'Or to put it differently, right now we’re in a world in which mercantilism works.'

~summarizing Krugman who recently wrote in his column in the times: "Mercantilism works"

Fondsnieuws.nl - Krugman bepleit sancties VS tegen China

Krugman: ' Mercantilism Works'

Krugman: “Mercantilism Works” ? Mises Economics Blog

Do you need more links?

 

[loosecannon]

But what anyone with with the most basic understanding of arithmetic knows is Americans cannot maintain their standard of living while at the same time competing with a foreign workforce that can subsist on a fraction of the prevailing American wage.

Wages are paid based on productivity. The more productive you are, the more you will be paid.

absolute bullshit. When productivity increases wages don't follow suit.

And many of the most productive people are paid 1/100 as much as CEOs in global corps. In fact the CEOs are often arguably the least productive wage earners on earth, often making bank while their own firms collapse beneath them due to wholesale mismanagement.

Yet the multi million $ parachutes and pensions in no way reflect your shallow theory.

The difference between econ theory and econ reality is as the difference between fantasy and reality.

 

[Toro]

Mercantilism is a discredited policy. The world grew rich off free trade, not mercantilism. Both Japan and China have benefited from technology transference, inclusion into the global trading system, mass education, and strong cultural institutions, not mercantilism.

The world grew rich under mercantlism too. but it was replaced with psuedo free trade and globalization and nothing good happened until the industrial revolution.

That's strike three, you are out.

Meanwhile China is clearly adhering to mercantilist tactics TODAY, and cleaning clocks.

Mercantilism - Google News

browse and learn, butterfly.

'Or to put it differently, right now we’re in a world in which mercantilism works.'

~summarizing Krugman who recently wrote in his column in the times: "Mercantilism works"

Fondsnieuws.nl - Krugman bepleit sancties VS tegen China

Krugman: ' Mercantilism Works'

Krugman: “Mercantilism Works” ? Mises Economics Blog

Do you need more links?

The world grew rich under free trade, not mercantilism. You don't understand economic history.

Krugman is generally supportive of free trade.

trade remains beneficial in general, even between relatively similar countries, because it permits firms to save on costs by producing at a larger, more efficient scale, and because it increases the range of brands available and sharpens the competition between firms.[27] Krugman has usually been supportive of free trade and globalization.[28][29] He has also been critical of industrial policy, which New Trade Theory suggests might offer nations rent-seeking advantages if "strategic industries" can be identified, saying it's not clear that such identification can be done accurately enough to matter.

Paul Krugman - Wikipedia, the free encyclopedia

If you want that last sentence translated, Krugman is criticizing mercantilism.

 

[Toro]

The study was before the Financial Crisis, but the Crisis was not due to trade.

* Trade has had no discernible, negative effect on the number of jobs in the U.S. economy. Our economy today is at full employment, with 16.5 million more people working than a decade ago.
* Trade accounts for only about 3 percent of dislocated workers.Technology and other domestic factors displace far more workers than does trade.
* Average real compensation per hour paid to American workers, which includes benefits as well as wages, has increased by 22 percent in the past decade.
* Median household income in the United States is 6 percent higher in real dollars than it was a decade ago at a comparable point in the previous business cycle. Middle-class households have been moving up the income ladder, not down.
* The net loss of 3.3 million manufacturing jobs in the past decade has been overwhelmed by a net gain of 11.6 million jobs in sectors where the average wage is higher than in manufacturing. Two-thirds of the net new jobs created since 1997 are in sectors where workers earn more than in manufacturing.
* The median net worth of U.S. households jumped by almost one-third between 1995 and 2004, from $70,800 to $93,100.

Trading Up: How Expanding Trade Has Delivered Better Jobs and Higher Living Standards for American Workers | Daniel Griswold | Cato Institute: Trade Policy Analysis

 

[Toro]

Mercantilism was the dominant philosophy of the 18th century when it was displaced by free trade. The first great wave of free trade occurred in the 19th century that lasted up until WWI. From WWII onward, the world has generally been lowering tariff barriers. The average tariff at the end of WWII was ~40%. Today it is less than 10%.

Economic Growth in the 1990s

 

[Toro]

There have been numerous empirical studies concluding that openness and free trade are beneficial to economies whereas protectionism and mercantilism are generally destructive.

# In general, living standards in developing countries are not catching up with those in developed countries. But some developing countries are catching up. What distinguishes them is their openness to trade. The countries that are catching up with rich ones are those that are open to trade; and the more open they are, the faster they are converging.
# Poor people within a country generally gain from trade liberalization. The report concludes that "trade liberalization is generally a strongly positive contributor to poverty alleviation. It allows people to exploit their productive potential, assists economic growth, curtails arbitrary policy interventions and helps to insulate against shocks". This concurs with a new World Bank study by Dollar and Kraay which, using data from 80 countries over four decades, confirms that openness boosts economic growth and that the incomes of the poor rise one-for-one with overall growth.
# Some people do lose in the short run from trade liberalization. Some are well-off, others not. The report argues that the plight of the losers should not be ignored, but that the right way to alleviate their hardship is through social safety nets and job retraining rather than by abandoning reforms that benefit most people.

Eldis - an Eldis Resource

 

[Toro]

Per capita GDP growth in the post-1980 globalizers accelerated from 1.4 percent a year in the 1960s and 2.9 percent a year in the 1970s to 3.5 percent in the 1980s and 5.0 percent in the 1990s (Chart 1). This acceleration in growth is even more remarkable given that the rich countries saw steady declines in growth from a high of 4.7 percent in the 1960s to 2.2 percent in the 1990s. Also, the nonglobalizing developing countries did much worse than the globalizers, with the former's annual growth rates falling from highs of 3.3 percent during the 1970s to only 1.4 percent during the 1990s. This rapid growth among the globalizers is not simply due to the strong performances of China and India in the 1980s and 1990s—18 out of the 24 globalizers experienced increases in growth, many of them quite substantial.

Finance & Development, September 2001 - Trade, Growth, and Poverty

 

[Toro]

Countries that opened up to trade the most have benefited the most.

News & Broadcast - Poverty Drops Below 1 Billion, says World Bank

 

[Toro]

Free trade has been beneficial to America.

This article summarizes the economic payoff to the United States from its postwar trade opening and estimates the potential future gains from more opening going forward. To quantify these gains, we survey different methodologies and estimates. We find that trade opening since World War II has added between $800 billion to $1.4 trillion to the US economy, or about $7,000 to $13,000 per household. More speculative estimates of the potential additional gains from removing the rest of US trade barriers range from $400 billion to $1.3 trillion, or about $4,000 to $12,000 per household. Since trade opening permanently raises national income, these gains are enjoyed annually. Trade opening inevitably entails adjustment costs. We estimate that the lifetime cost of all worker dislocations that have been triggered by expanded trade in the United States could be as high as $54 billion, although probably less. The permanent gains from past and potential liberalization easily swamp the modest sums necessary to alleviate the temporary pains of adjustment. In the future as in the past, free trade can significantly raise income - and quality of life - in America.

The Payoff to America from Globalisation

 

[loosecannon]

Mercantilism is a discredited policy. The world grew rich off free trade, not mercantilism. Both Japan and China have benefited from technology transference, inclusion into the global trading system, mass education, and strong cultural institutions, not mercantilism.

The world grew rich under mercantlism too. but it was replaced with psuedo free trade and globalization and nothing good happened until the industrial revolution.

That's strike three, you are out.

Meanwhile China is clearly adhering to mercantilist tactics TODAY, and cleaning clocks.

Mercantilism - Google News

browse and learn, butterfly.

~summarizing Krugman who recently wrote in his column in the times: "Mercantilism works"

Fondsnieuws.nl - Krugman bepleit sancties VS tegen China



Krugman: “Mercantilism Works” ? Mises Economics Blog

Do you need more links?

The world grew rich under free trade, not mercantilism. You don't understand economic history.

Krugman is generally supportive of free trade.

trade remains beneficial in general, even between relatively similar countries, because it permits firms to save on costs by producing at a larger, more efficient scale, and because it increases the range of brands available and sharpens the competition between firms.[27] Krugman has usually been supportive of free trade and globalization.[28][29] He has also been critical of industrial policy, which New Trade Theory suggests might offer nations rent-seeking advantages if "strategic industries" can be identified, saying it's not clear that such identification can be done accurately enough to matter.

Paul Krugman - Wikipedia, the free encyclopedia

If you want that last sentence translated, Krugman is criticizing mercantilism.

criticizing it because he is an admitted whore to globalization.

i rest my case.

He still says that it WORKS!

The world grew rich under free trade, not mercantilism. You don't understand economic history.

Asked and answered. The world grew rich under both mercantilism and faux free trade.

But it was the industrial revolution that drove our progress, definitely not the rejection of mercantilism, or the embrace of free markets, neither of which ever occurred.

that is 4 strikes. You must like self humiliation.

And i get econ history just fine, butterfly.

Anybody with a mere 155 IQ and a modest penchant for econ knows that it is self evident that mercantilism has always worked and esp so today.

just ask the central government of China. it's their bread and butter and our demise.