thanks I now understand this as equating to:
agreed statement: America not in debt (as a whole) == no trade deficit.
agreed statement: America in debt (as a whole) == trade deficit.
Exactly. Well, what really matters is the change in indebtedness/savings, not the actual value. So if we are not losing savings or increasing indebtedness, and if we are not printing money, we will have no trade deficit.
This is the problem. If we produce equal to or greater than the Chinese, we destroy our standard of living, and work ethics. In other words, we become the cesspool China is today.
So we may choose to produce less, and work less, and have better safety practices, etc. That's fine -- we'll still be fully employed, but we won't have more material wealth than the Chinese. We don't have to "compete" in the way you're thinking of it. But if we believe we can produce less and have more material goods, we're fooling ourselves.
If we do not produce as much as the Chinese per capita, our standard of living will be lower -- regardless of what tariffs are put into place.
To be clearer, I should have said that in the long run, we will not be able to consume as much material goods as the Chinese per capita, if we do not produce as much. Do you still disagree? If so, how do you believe we could continue to consume more than we produce? Or, how do you believe the Chinese could continue to produce more than they consume? It's impossible.
In a land where manufacturers have shut down their plants long ago, if tariffs were created on imports from countries not supporting the same work ethics, pollution standards, safety standards, slave labor, child labor and floating of their currency as the United States does, that would mean our manufacturers could then compete.
You're putting too much emphasis on competition, when all that really matters is production. Think about it -- if anyone's unemployed and wants a job, there is a price at which someone will employ them. Taking red tape out of the picture, then, we can have full employment. The total amount America produces is its total wealth. High tariffs would make it so that that wealth is traded within the U.S., rather than outside it -- but that doesn't really help the situation. If we find that the goods we produce can be traded outside the country, for something better, doing so is beneficial.
The reasons we are not producing effectively are debt and inflation, and the reasons we have unemployment are red tape and overhead. Otherwise, we would be productive. Whether that production would take the form of manufacturing, or whether we would find something we're better at producing, it's impossible to say. That's why central planning doesn't work
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This would create new factories and manufacturers sprouting up everywhere throughout America. Americans now working selling Chinese goods would then get better paying, skilled, jobs making those goods in those new factories.
At best, tariffs can act as a band-aid, to stop people from borrowing to buy foreign goods. In reality, though, most of the indebtedness is being caused by governments, and all of the inflation is being caused by the federal government and banks. The reason for the malemployment now is not mostly individual borrowing -- and even individual borrowing is better solved by allowing the credit markets to adjust, rather than holding rates low, as the Fed does.
Trade deficits are the symptom, not the disease. Let credit rates increase, stop governmental borrowing and inflation, and the problems would resolve themselves -- far more effectively than tariffs ever could. What is needed is a reallocation of resources. Freedom's the only way to allow this to happen.
However, for countries who have the same standards as we do, no tariffs would be needed. In other words, nations would strive to better the living standards of their populations in order to trade with us, rather than we lowering our living standards in order to trade with them.
You don't have to have lower living standards to trade. You can produce less, but sell it at the same price. (Or, better yet, you can produce something different, that you are more efficient at producing).
Right. If we would lower our living standards so that work safety is sacrificed and we work on weekends in order to compete, we would be able to compete with other countries whose workers work in unsafe conditions and sacrifice their weekends to compete. It’s a race to the bottom.
Or, we can sell half as much stuff, at the same price as the people who work twice as much. We'd have less material goods, but we'd have more free time.
Let’s just talk nations for now. Trading with countries having impoverished conditions has caused domestic manufacturing to leave this country in search of more profitable slave labor conditions. This created loss of good paying, skilled, jobs which directly caused our debt as a nation.
Again, this is backwards. Artificially low interest rates caused people to borrow huge amounts of money, a great deal of it for housing. Politicians borrowed huge amounts of money because that's what they do. They inflated because that's what they do.
The spike in debt happened before the recession, you'll recall.
Debt caused the phony economy, and regulations are preventing us from adjusting, and are keeping unemployment high. Continued government spending is also continuing to keep the phony economy propped up.
Yay!
Your analogy describes a violent, non voluntary interaction. In these situations, there is often a loser and a winner.
The fact that we have a nation voluntarily destroying our domestic manufacturers with its “free” trade is what seems violent to me.
I think you dodged my point here.
In a voluntary interaction, such as free trade, both sides benefit.
Only when “free” trade is “fair” trade and we trade with countries that respect the same ethics, environmental, safety, slave labor, child labor, and floating of currency rules. In other words, only when everybody plays by the rules.
That's untrue. Suppose I work on my own farm, growing my own crops. I have a good deal of free time, and work safely. Now suppose my neighbor works around the clock to produce the maximum possible.
Now, suppose I have a turnip. I want a carrot. My neighbor has a carrot, he wants a turnip. If we trade, we both benefit. The question of how he obtained his goods is irrelevant. A trade benefits both parties -- or they wouldn't do it.
exactly: we should not be trading with China unless they vastly change their behavior and ethics.
You didn't respond to my point here, you changed the subject.
Now, I could agree with boycotts of China, in order to get them to change their abusive behavior (although I would prefer an effort that goes after the Chinese government more directly, rather than Chinese business). This should be accomplished by free individuals, however -- not government.
If two people want to trade justly acquired goods with each other, I do not have a right to forcibly stop them, nor does the government. I don't own them, their lives, or their goods.
not if it’s done on an uneven playing field. Also don’t forget: there is a “human” cost for child labor, there is a “human” cost for slave labor, there is an “environmental” cost for spewing pollution into the air and depositing mercury into the ocean, and there is an “American” cost when other nations manipulate their currency by pegging it to the U.S. dollar so that it does not naturally float.
Materially, trade benefits both participants. If goods are acquired violently - as in slave labor - then I would support forceful prevention of that trade, and justice for the perpetrators.
If goods are only acquired in a way I consider unethical, or unpreferable, boycotts are a good response, as is support for better alternatives. Buying fair trade, for example, is a good way to combat low wages in third world countries.
I agree that if there is no debt as a nation, then there is also no trade deficit as a nation (we’re not buying anything because we can’t afford it). To get out of this mess, we need tariffs on imports from unethical nations like China.
We don't need no debt -- we need to stop increasing debt. Let interest rates rise, stop government spending, and government inflation, and we'd be on our way to recovery tomorrow. There'd be a tough period as the phony economy collapses -- while malls close and before factories open -- but I think we'd be seeing improvement within a year.
Right- we’d all work for slave wages: in other words, impoverish ourselves to compete with workers in other impoverished nations.
What we produce is our wealth. I can't emphasize this strongly enough. What nominal wages are doesn't matter. Cut the prices of everything by a factor of 100, and cut wages by a factor of 100, and no one's quality of life will change.
If you get one thing I say, get this: Ignore the movement if little green pieces of paper, and look at what happens to the actual wealth. That's how to understand an economy.
The second really great trick is this: Take it to a personal level. Imagine if you, as an individual, were a nation, or imagine your family were a nation. That helps one avoid being confused by distractions that impede understanding the essentials.
Wages will be equal to the value of what is produced. Tariffs are really just a roundabout way of cutting wages. If wages and prices of domestic goods both fall, as they should, buying foreign goods will be more expensive. Tariffs have the same effect -- making foreign goods more expensive -- but instead of being done efficiently, by the market, it is done inefficiently, by politicians.
This also, indirectly, and quite frightenly, moves toward a one world government.
I don't follow how free trade leads to one world government. It seems to me that freedom is the opposite of tyranny.
ok, so far.
??? (10 widgets/hour) * (100 hours/week) == 1000 widgets per week.
??? ( 5 dinners/hour) * (100 hours/week) == 500 dinners per week.
I am assuming the 2000 widgets per week and 1000 dinners per week are a result from loss of safety standards?
Yes, I supposed that they could produce more because they had lower safety standards.
okay, so to compete with them you’d have to work like a slave in unsafe working conditions for pennies. got it.
right.
right.
I must admit, you present a very compelling argument.
Thanks
.
However, it seems there is a flaw in the logic.
Ruh roh.
Your example works for a nation containing a total of 2 people. Both people have a salary decrease of 10% at the same time.
Well, I think their salary decreased by 90%, but ok.
This would mean the value of the dollar increases.
Yes. Things are being made cheaper, so one dollar buys more.
Now modify your example to a nation of 300 million (the U.S.). For your example to work, 300 million people would have to have their salaries decreased by 10% at the same time. What would this cause?
Well, over the course of, say, 100 years until the dollar increases in value to that extent, there would be mass starvation, poverty, etc. in our country until that change worked itself through the entire country: say, for a hundred years (if we survive that long).
It would happen almost instantly -- a few months or a year at most -- and during the intermediate time, we'd be living high on the hog off the increased value of our savings. What's more, the first thing to adjust downward is prices -- as the cheap goods hit the market -- and wages follow shortly after. Businesses will not be able to pay employees more than the value of what they are producing. Wages will adjust downward almost immediately
Again, for what you describe to occur, we would need to have persistent undesired unemployment, which is impossible in a truly free market.
At the same time, the chinese would either live like zillionaires or decrease the number of their work hours to 40 hours per week (which is probably what would happen). This would allow them to live the middle class lifestyle we in America are living right now.
You're right, they probably would change to a 40 hour work week, and increase safety, since they value these aspects of quality of life just as we do. And here you have the real way to increase equality: freedom.
So the result of all this is that you would have the chinese assuming our middle class lifestyle and our population living in dire poverty, possibly not able to exist, for the next 100 years until all this works through our system. And after all this what happens?
The chinese start working their 100 hour weeks again…we decrease our wages another 10% and instead of making $40 per week we instead make $4 per week. However it will take another hundred years for it to work itself through our nation of 300 million people. So for 200 years we live in dire poverty and the chinese assume a middle class lifestyle going back to 40 hour weeks.
And on and on.
I think you're letting your imagination run wild. Again, the adjustments we're talking about, in a free society, take months, not years. It does not take long for supply to meet demand at price.
Freedom would not lead to poverty for either us or the Chinese, as I described above. You're viewing this as a zero sum game, when it's not at all. The amount produced is the amount of wealth -- this is true for both China and the US. Our production is not negatively effected by China's existence. At worst, there is no effect, and we simply produce what we need on our own. At best, we can trade what we produce with them for things we want even more.
Furthermore, free trade allows a degree of specialization, which increases everyone's wealth. It may be that we're better at certain things, and don't need to all be in factories. We run Microsoft, and other major computer companies. Entertainment is largely centered here, as is advertising and branding. With high tariffs, we've all got to be in factories making widgets, and every other thing we need -- but it may be that it's more efficient for the Chineese to make our widgets, while we can work in other sectors, where we are more productive.
So what’s the point? We are basically reversing the lifestyles of Americans and Chinese by trading with people that have uneven playing fields (working their workers 100 hour weeks). Why not, instead, sit in the driver’s seat: until the Chinese pull their ethics to be up to ours slap a tariff on their goods?
The point is, in the example I gave, we and those in the foreign nation are both just as good at making widgets and TV dinners. In this case, there's really no benefit to trade. It evens out prices, but has no real effect on quality of life one way or the other. The reality, is, however, different countries are good at different things.
Let's change our example slightly to reflect this. Suppose, as before, that my compatriot and I can make 200 TV dinners a week each, or 400 widgets. In our economy, then, just as before, TV dinners cost $2, and widgets cost $1, and we both make $400 a week. Each of us can buy 100 TV dinners, and 200 widgets per week, just as before.
Now the foreign nation enters the picture. This time, however, instead of making 1000 TV dinners or 2000 widgets a week, they each can make 2000 TV dinners or 2000 widgets. That is, while we're better at making widgets, they're equally good at TV dinners and widgets. As before, they make $200 a week. This means the widgets their nation produces cost ten cents, and so do the TV dinners they make.
Now, the value of my job, making widgets, has dropped to $40 a week, as before, since that's the value of what I'm producing (400 widgets a week). My compatriot's salary, however, has dropped all the way to $20 a week (he makes 200 TV dinners a week, which are now only worth ten cents).
He quits his job and gets a job with me, in the widget factory, since it pays better. Now we both make $40 a week. What can we buy?
We now can buy 200 TV dinners AND 200 widgets a week. That's 100 TV dinners per week RICHER than we would be otherwise. If we'd put up huge tariffs, what would have been our wealth? Only 100 TV dinners and 200 widgets per week.
incorrect: your true wealth is what you produce – (it’s “human” cost in slave labor) – (it’s “human” cost in child labor) – (it’s “environmental” cost) – (it’s “human” cost due to lack of safety) – (how much the government of your country subsidized your product) – (how much the government of your country manipulated it’s currency to be unnatural when it trades).
I'm talking material goods here. The total material wealth of your country is the total amount it produces, period. You can't consume more than you produce, in the long run. Ignore the movement of little green pieces of paper. We make stuff. What happens to that stuff? We consume it, or we trade it. If we trade it, that's equal value for equal value, so no net gain or loss. We then consume what we traded for.
The only way we can consume more than we produce is if goods are entering the country without goods leaving the country. Why would this happen? Either someone's feeling charitable, or we sent them an IOU. That's not sustainable.
Thus, in the long term, you can only consume what you produce.
