What’s so great about home ownership? There are data to support that home ownership, by erecting economic barriers to mobility, increases unemployment. I don’t know why way back when the government decided home ownership was a social good and elected to subsidize it with income tax deductions and mortgage subsidies, but maybe it wasn’t such a good idea.
The notion that “we should do things ourselves” seems so simple and obvious. But complex problems do not have simple solutions. Many governments have tried the simple and obvious solutions of government control only to find that it is like nailing jelly to a tree… you need more and more nails and you run out of nails while the jelly is still refusing to cooperate. It’s the law of unintended consequences and all that.
The economic theory that proposes “let’s do everything ourselves and be self-sufficient” is called autarky and its proponents claim it creates jobs and gives the country independence from the outside. In reality it has never worked out.
Let us see examples of how it has fared in real life in recent history:
Spain had very heavy duties until Franco’s death… which protected Spanish jobs. You could buy a car made by Spanish jobs but which was crap or, if you wanted an imported car you had to pay a ton of duties. For decades the Spanish built and drove crap until the market opened up. I lived through those last years of Franco and people who defend protectionism just have no idea what they are really proposing. Yes, it protected jobs, crappy jobs for making crappy junk in a crappy country.
China is not mentioned in the wikipedia article but it is a huge example of autarky during the Mao years. Anyone who has read about the history of China during those years knows the misery it caused. Then in the 80s China began to open up and trade and look, they’re doing quite a bit better.
Cuba of course is very protective of its jobs. No importing anything into Cuba. No sir.
Venezuela is a case in progress. I’ll let you guess where they are headed.
Open and free trade has always benefitted both sides. The EU is a clear case of countries which realized that protectionism was not helping. It has been a huge success in terms of economic productivity. Trust me. Or ask Ukranians their opinion.
That’s understandable.
But people have also given real arguments. I haven’t seen you address those real arguments, though maybe I’ve missed it. When there are two or more people arguing against you, the best policy is to respond to the smarter one. Otherwise, it can look like whining about superficialities to avoid engaging with actual substance.
This is an important point.
You are right to raise this point.
But it’s not an argument on its own. There’s no counterfactual. There’s no standard for comparison. Maybe Germany and Japan would have done much better if they had not used protectionism. Or maybe something else is working here. Maybe protectionism helps developing countries and doesn’t help developed countries. I can use a lot of econ buzzwords to make the argument that protectionism can for a limited time help a growing economy, but the argument falls apart after the country has successfully industrialized. Protectionism isn’t generally a good idea, but this exception might be important. I can go into this in slightly more detail if you want.
A certain amount of bitching about economists is good and healthy, but we reach a limit when we bitch to the exclusion of responding to real arguments.
Germany (the EU) is not protectionist. Or you need to prove otherwise.
The EU buys more than the USA from China.
But the EU sells much more than the USA to China. wiki
It is not protectionism. It is that German engineers are selling advanced services to China where they are building hospitals, trains, powerplants, dams… I have seen it in China. Why is China buying trains from Siemens and not from America? It is not German protectionism of its internal market, that’s for sure.
What we have is false premises (Americans are worse off), false reasoning (it is due to job outsourcing) which leads to false solution (protectionism). Everything is wrong, from start to end.
Protectionism, like some medicines, can be indicated for very specific purposes and being aware of side effects. There is no doubt that Chinese autarky 1950-1980 had disastrous effects on the economy but it also allowed China to remain independent from outside colonialism. It was at a huge economic, human and social cost but they managed to ward off the USA who had wanted to have a puppet in China and who had helped the losing side during the civil war.
If you take a country like Cuba or Vietnam and suddenly open it up to the world it will disappear as it will be bought out by rich people and rich countries. You need a temporary period of transition and adaptation so you can maintain control of your own country.
But the thought that the economy of America needs to protect itself from that of poorer countries is ludicrous.
Americans per capita consume four times more energy than Chinese people. And I would say that a lot of the energy consumed in China is for manufacturing goods to be sold to western countries so that in their personal lives Americans consume even more in proportion to Chinese people.
That some Americans would want to improve their economic situation at the expense of people who are much poorer says a lot about those who would propose it. They do not have my sympathy at all.
Actually, yes I would. I would love that.
Just the opposite. I would like for workers in foreign countries, and here in the US for that matter, to get a larger piece of the pie, that is right now going into corporate profits and more consumer goods for those lucky few who earn enough to buy them. The comparative advantage that these other countries have is desperation of their populace and willingness to be exploited. That is not a comparative advantage that I want as the basis of the world economy.
I would gladly take a decrease in my standard of living in exchange for higher wages, lower unemployment and a shorter hours world wide. But I may be in the minority in that view.
Buck,
That is a very unorthodox definition of the concept of comparative advantage.
How would US protectionism help workers in poor countries?
Considering the second biggest source of imports to the US is Canada, do you think Canadian workers’ comparative advantage* is in “desperation of their populace and willingness to be exploited”? Because US protectionism would affect imports from Canada too.
*Again, I have never heard of poverty as a comparative advantage. One can have a comparative advantage in the production of particular goods but I am simply unfamiliar with poverty, wealthy or anything of the sort being a comparative advantage.
Inequality worldwide is decreasing.
Poverty-stricken people around the globe are getting a bigger and bigger piece of the pie. Inequality is still monstrous, but it is decreasing.
They are getting richer.
They are getting richer in a way that makes you, personally, feel squeamish.
The current round of globalization is the biggest anti-poverty campaign in the history of the world. Never before have so many people come out of desperate subsistence conditions so fast. Nothing else has ever worked as well.
But you don’t like it. You don’t want it as the “basis of the world economy”. You say they’re “exploited” when wages in China increase 10% annually, and when it’s the very promise of those wages that is pulling them like a magnet from the countryside into the cities. But okay. You don’t like it. I just don’t see any reason for your dislike beyond the initial emotional reaction. It looks like this genuinely effective process doesn’t measure up well against your noble idea of how the world would ideally work. That’s completely normal. It doesn’t live up to my noble ideas either. But at some point, it’s worth looking at what actually works rather than what we fantasize about. And this current process? It’s working. For all its many flaws, it’s working faster to eradicate poverty than it’s ever worked before. All the noble ideas in history of a few warm-hearted men in charge, controlling the whole system and guiding the workers to the future of material abundance, always ended in disaster. But this ugly process we have today is leading to a more equitable world with less poverty.
I’ll take the ugliness that works over the fictional ideal.
[QUOTE=Hellestal]
I’ll take the ugliness that works over the fictional ideal.
[/QUOTE]
Exactly.
So when Mercedes Benz opens a manufacturing plant in Alabama to take advantage of lower costs there than in Germany you would object because they are “taking advantage of the desperation of their populace and willingness to be exploited” by working at lower wages and without benefits which are enjoyed by German workers?
Does anyone really think that American workers would benefit by a refusal by other countries to buy American goods until American workers are guaranteed benefits similar to German workers? Really?
Ask Evil Captor. I was responding to his rant about how things were better decades ago and that home ownership is “down”.
Can we see that data? It’s had to believe that if everyone owned a home that would be a barrier to mobility.
Well, I’ll agree that subsidizing home ownership isn’t a good idea. But we’re stuck with that, and I don’t see it changing anytime soon.
I am always mystified by the anti-globalization crowd who want us to stop trading with China as a way to protect Chinese workers from exploitation. So the better alternative to a low paying job is no job at all? How does that work?
It reminds me of an old joke about a guy driving a big car too fast at night on a country road and he hits a farmer’s cart being pulled by a mule and sends the whole thing into the filed. So he gets out of the car with a flashlight and starts looking around and sees the farmer’s dog all hurt and bloody and he says “I cannot bear to see this suffering” and he gets a gun from the car and finishes off the poor dog. Then he continues searching with the flashlight and finds the mule in the ditch, also very badly hurt and he says “I just cannot bear to see this suffering” and with that finishes off the mule with a well placed shot. He then continues to search with the flashlight and then sees the farmer, also bloodied and hurt but as he shines the ligh on him the farmer says “Hey I’m fine! Funny how I came out without a scratch!”.
So the solution to the “exploitation” of Chinese workers is to send China back 40 years to when there were no exploiting jobs… nor food to put on the table. So what if they starve by the millions? At least they are not being exploited.
Interesting line of thinking. I cannot stand to see people being exploited. Let me put them out of their misery.
They have never worked stoop labor as subsistence farmers.
How would you go about this exactly? You vastly misunderestimate the complexity of the issue. The only ones who whould benefit would be tax accountants and lawyers.
60 or 100 years ago big manufacturing corporations did pretty much all they could in-house. A car manufacturer would manufacture engines, bodies, etc. Today it no longer works like that and the economy is much more productive for it.
A refrigerator manufacturer might buy the parts from many different vendors or manufacturers and assemble them. This means the motor-compressor assemblies are purchased from a firm that specializes in that … and which serves other manufacturers as well … and who might buy from other specialized manufacturers down a long chain.
It may be that a manufacturer no longer manufactures at all but subcontracts even the assembly and packing and distribution. Even if they manufacture it is common for European car manyufacturers to subcontract logistics and distribution so you have one logistics company who is handling the logistics of quite a few competing car manufacturers.
Most people just do not realize how incredibly complex today’s economy is… and how much we all benefit from this.
So, suppose a manufacturer of torgas is buying a key component from an American company but changes his source of supply to a Chinese company. The American company loses market and jobs.
What if an American company has an initial choice of buying from an American company or from a foreign company? Are you going to penalize an American individual or firm for buying what is perfectly legal?
What if an American company owns a company in China? Or do you prohibit American corporations from owning subsidiaries abroad?
It is not so simple. It doesn’t even look simple at first sight.
This type of deceptively simple solution leads to trouble. Generally it is best to have a framework where people and corporations have freedom to make their own decisions and where their decisions lead to a healthy economy. Once you start pushing people in other directions you have a huge task with supervising and checking … and they will still manage to do what they want.
Once you start controlling one thing you get into a chain where you have to control more and more. Venezuela is a very good example of a country where a few controls were not producing the desired results so they just put more and more controls in place. All the while blaming some “bad guys”, “speculators”, “counterrevolutionaries”, etc.
Many corporations in Europe will have a mother corporation in Ireland, where corporate taxes are low, and might then have daughter corporations in other countries but the profits are generated in Ireland while in the other countries there are no profits to tax. Dell is one of them. Google is another.
Spain has had a succession of incompetent governments, each one worse than the previous, who always manage to come up with simple, hare-brained ideas to resolve these complex problems… Instead of, you know, trying to do what better-off countries do which is to work a bit harder and cut back on corruption and alcohol.
But no, minister of finance, Montoro, has said he will penalize corporations which practice “agressive fiscal engineering”. In other words, he plans to assess fines on corporations which are not doing anything illegal. This clown opens his mouth to state he will be doing something which is clearly illegal and not within his power. And this kind of thing happens in Spain twice a week. And Spaniards do not understand why Spain’s economy is in shambles and unemployment is the highest in Europe at something like 27%. And, mind you, this is a “conservative” government. The previous Socialist government was even worse. It is hopeless. We are going “the south American way”.
Beware of simple solutions to complex problems.
Yes, Americans, like everybody else in the world, want jobs with high salaries but want to pay low prices which do not cover such costs. They want to buy dollars for a quarter. And politicians promise it can be done if you only vote for them. And the ignorant public keeps voting for clowns who promise much and know nothing.
The American economy has many advantages which make it productive and messing with that will only make things worse.
In my view the American economy has some drawbacks and could be improved but the main obstacle are the American people themselves not the Chinese. The problems of America are caused by America, not by foreign competition.
What if the American company closes shop completely, and the owners take their capital, incorporate in the Grand Caymans and open up a factory in Malaysia? You could then tarriff non U.S. - oh, lets say washing machines - but if all U.S. companies who make washing machines move out of the country for the tax, labor, environmental and other “pro business” policies, you now have consumers paying more for washing machines because of the tariffs and no jobs. Plus, the large consumer markets around the world have responded to our washing machine tariff by putting a tariff on all U.S. developed software - making it harder for us to operate in a space where we currently have an advantage, and we lose jobs in the software industry, too.
Money moves. Lots of money moves very easily. There is no reason someone wealthy needs to run his business in the U.S. or live in the U.S. (unless they have a business tied to physicality - its hard to build skyscrapers in Chicago from Bangalore) - and if it feels onerous to them to do so because of taxes or regulation, they will move. But that doesn’t mean you should have a laissez faire business environment with no controls, regulation or taxation - just that you need to make sure you are playing a balance where the benefits of running your business in the U.S. are bigger than the costs of those controls.
I will point out that mrAru does quality assurance for a company that makes stuff for the cell and radio industries and it sources components from Europe, the US and China. He notes that the same component sourced from Europe or the US has a 95% pass rate while the component from China has a 40% pass rate. I make no pretense at understanding what goes on in the minds of corporate HQ, but I can not see why in hell they continue buying from China - even if the cost is so low they can apparently make a profit while having to rework 60% of every shipment to get it to the correct specs.
And yes, I would rather see actual manufacturing and call centers come back to the US. If some other country wants to have factories and call centers, let them develop their own businesses. I don’t feel that planing a tariff on their products is good - but I do feel we should not be outsourcing. [speaking as someone who had 2 successive jobs outsourced.]
This is a tangent but, anyway, I can see how a family which owns a home would be more reluctant to pull up stakes and move than a renter. It is much more complex if you have to sell a hous a buy a new one, and there are costs involved. And In America it is not so bad but in Spain it is a nightmare. When you purchase a home in Spain the taxes and costs are outrageous and it is a sunk and lost cost. You will never see it again. Just by the act of purchasing a home you have paid a ton of money which goes to feed bureucrats and other parasites and slime. If you move and sell a month later it just cost you several years salary. And the same goes for the bureucracy and red tape. It is a nightmare. So, in the case of Spain, yes, definitely I can see how home ownership is a barrier to mobility. Furthermore, the rental market is a nightmare for owners and so there is not much supply. This and a traditional mentality of “own your home” makes Spain a country with very high home ownership. This and a sense of entitlement mean Spaniards generally do not consider moving for a job.
Another point right now is many people have mortgages which are under water and could not sell even if they wanted.
So, even in some cases where people moved abroad to get jobs, they are still stuck with paying for an underwater mortgage for a property they cannot afford to sell because they could not come up with the difference.
And to top it off in Spain there is no such thing as personal bankruptcy. You own your debts until the day you die. There are only two ways to settle a debt: pay up or die.
The whole thing is surreal and difficult to believe.
OK. But like I said, you need to take that up with Evil Captor. He’s the one who proposed shrinking home ownership as a gloomy scenario.
More to the point, though, is that the idea that people generally lived better in 1960 than they do now is not supported by the facts. There are any number of indicators that will demonstrate that.
As someone who has been working in purchasing of electronic components and systems for decades I call BS on this. As in totally made up on the fly and devoid of any connection or resemblance with the real world.
First of all 95% pass rate is good? Please! You cannot possibly know anything about this topic.
Second, manufacturers in any country, including China, will specify a quality rate and give it to you. It is part of the specification of the contract. And if you want 100% testing they will test and guarantee every last component shipped to you.
In my experience those who claim bad experiences with Chinese suppliers are small, unprofessional outfits which deal with similar outfits in China and are not really prepared or qualified for what they do.
Really. There are huge American and European corporations which have huge factories in China and everything works just fine but Joe the EBay seller wants to convince me that “China is terrible and everybody is pulling out of there”. Yeah, sure.
What makes it comical is that it is the same reaction that we heard about Japanese stuff 50 years ago. It was terrible crap. Americans laughed when they heard the Japanese would be trying to sell cars in America! Ha. In the center and capital of car manufacturing! Well, the 70s came and went… then the 80s… and American car manufacturers could no longer just laugh it away.
Today it is China. yeah, terrible stuff, junk. Suuuuure. But while some Americans like to dismiss Chinese stuff like that, in the meanwhile China continues to make and sell more and more and higher tech stuff. Some americans feel threatened and are in denial. In the meanwhile Germany has taken a different approach, they have realized China has a ton of money to spend and they are selling them high tech services.
You (generic you) want that but are not willing to pay for it.
What do you think they have done? That’s exactly what they have done.