As a firm capitalist I believe that the market(s) seeks the most efficient route to profit. The global market isn’t strictly capitalistic but there’s enough freedom between countries that there are similarities. Therefore, in my view, the fact that we currently have $trillions in trade means that shutting off trade immediately makes the markets much less efficient. A less efficient market means more people out of work, less money to spend, fewer goods to buy.
My question: given that you can’t see a downside to ending all international trade, do you see a downside of ending all interstate trade?
Look I’m not a proponent of isolationism. But since the topic came up, I haven’t found the overall downside. Your question is irrelevant. If we are isolated, the rest of the world doesn’t count in the equation. Assuming your beliefs were facts, the efficiency of the market is just based on different factors. And since we’ve eliminated a huge loss, I’d say efficiency would increase until we’ve hit a limit based on the lack of trade.
Sticking to facts, markets don’t seek things, people do. The advantage of deficit trading to some people doesn’t translate to benefit for everybody, as I said before, it’s an overall loss.
Can anybody point out a true economic downside, given we can make the transition without an xtisme type cell phone disaster? I understand eventually we may have more production capacity than we can use, and might want to begin exporting at that point, but as long as we are steadily leaking money through the trade deficit, what are we giving up by becoming isolationist? Seriously, tell me, I’m having an existential crisis here.
Right - but the question is, which people will be out of work? Currently there are people on other countries who are willing to work for a great deal less pay than people in the united states will (or given minimum wage, less than the people in the states are allowed to minimally be paid). So when you cut off the trade, the people “out there” will lose the jobs of making stuff for people “here”. This would necessarily increase the market for US labor (or for automation), which could end being beneficial to the locals at the expense of the growth in the foreign country.
Of course if goes both ways; people here who make stuff for export would find themselves unable to find buyers in the quantities they are accostomed to, and will find themselves shrunk out of the market. Who would come out ahead in the long run is hard to tell - aside from the fact that those currently profiting directly from the actual business of importing/exporting would take it in the teeth.
This is not how the world works.
You are, for starters, committing the shopper’s-view-of-the-world fallacy, which is the common misapprehension that everything that is made are the things that consumers buy; in fact, most businesses buy and sell things that are not sold to individual consumers.
This is ESPECIALLY true of the USA. America’s really hot export items are things like airplanes, medical equipment, semiconductors, military goods, industrial machinery, and other stuff you don’t pick up in Wal-Mart. If you erect trade barriers many of those industries die entirely or would be a fraction of their former selves, unless you think there’s a big market in the USA for 777’s nobody will be able to afford to fly on.
Secondly… gahhhh. ** Trade benefits both parties**. That’s why people trade things. That’s why YOU buy things. Would YOU be better off if you weren’t allowed to trade? Of course not. You’d die. Would your household be better off if it could not buy and sell things? Of course not; you’d probably all die. Would your town be better off if it had to be totally self sufficient? Of course not. I really don’t want to go through the concepts of comparative advantage and all that again, but it’s important to note that if two parties stop trading for a reason other than the benefit of trading, it hurts them BOTH, not just one of them.
Dr. Love asks a question I’ve asked many times before that anti-trade people never, ever have an answer for; if you think the USA would be better off without international trade, should you not also think your state would be better off without interstate trade?
Would California and the USA both be better off if all trade between the two was banned? That’s insane, isn’t it? But it’s almost exactly equivalent to cutting off trade between the USA and Canada, which is the USA’s largest trading partner and, by happy coincidence, about the same size in population and economic clout as California. Why would cutting California off be bad, but cutting Canada off be good?
And the price of clothes will double. That sounds like an economic disaster. Why are cheap clothes not good, economically speaking, for the Americans who don’t work in clothing?
Without international trade every single functioning country in the world would be worse off. Every one, without a solitary exception. (I assume broken countries like Somalia can’t really get any worse.) Some would be even worse off than others, but they would all be worse off. It is just the height of ignorance to suggest otherwise. The REASON countries trade is that it makes them better off. They trade because two parties get benefit out of it. If you take that choice away from people they have no choice but to select less beneficial options.
This is not a matter on which there is any general dispute whatsoever among the people who actually study this stuff.
Well, right, presuming that the rest of the world stays non-isolationist. I was sort of thinking of the (entirely separate) question of what would happen if some of these necessarily food-importing countries rather foolishly decided to slam their own borders shut.
This is true. Both liberal and conservative economists agree that free trade benefits everyone.
One slight disagreement I’ve seen is that some economists have evidence for developing countries’ using trader barriers to protect their emerging industries. The type of emerging industries where the products can be sold on the global market. (One example would be Japan’s protectionism helping Toyota Honda Nissan to success.) However, that’s a specific type of economic game plan and it isn’t what people are talking about in this thread. Instead, they want to protect (or resurrect) yesterday’s industries – textiles and clothes. If the USA were to stupidly start making all its own clothes, no other country would buy them – they cost too much. I’m not so sure USA citizens would buy them either – they’d rather smuggle in the cheaper ones from Mexico or Costa Rica.
Good Lord, you people would greatly benefit from a crash course in comparitive advantage.
Short answer: our standard of living would massively plummet. While I don’t forsee starvation etc., as people would adjust (cheaper grains instead of those French cheeses the liberals enjoy and Kobe beef the conservatives favor 
)
It could be helpful to look back to a time where we had similar conditions - the early 1800s? Post WWII? Back to one car per household (because that’s all someone could afford and one TV - or radio - for similar reasons)?
Also, make no mistake: it’s not a fixed game, so people would adapt. Unionized labor would seize the advantage and drive up the cost of everything they could get their greedy mitts on.
Not sure what the OP impact on foreign travel/tourism would be, depends on how you’d define the question.
Well, our oil based economy would collapse almost overnight. No worries, though, we’ll just switch to nuclear and run everything on batteries. That will take a few decades, of course, but then we’re set. Oh wait… those rare earth metals you need to make the batteries-- they mostly come from China. Oops!
Hey, Little House on the Prairie is the real America anyway.
For some definitions of “massively plummet”. There’s some slim possiblity that some of the improvements to society have been due to other reasons besides comparative advantage, like perhaps technological development and improvements to various business/manufacturing processes.
Not that there wouldn’t be a hit - but it’s certainly debatable where the blow would land.
The blow would land mostly on the poor and middle class. The rich could afford to pay the new outsized costs of everything. Imagine no TVs, flatscreen or otherwise. While that may be a good thing (it would certainly help newspapers and magazines), it would certainly change things (is there even an American TV manufacturer anymore, besides Curtis Mathis… assuming they even exist these days).
Yeah, see, that’s easy to assert, but I’m not sure it holds. Remember, the presumption is that we’re bypassing any problems that might occur due to the drastic changes in supply/demand, and that therefore as many TV-manufacturing factories as necessary will have been built locally. It’s not like the process for manufacturing TVs is a closely-guarded foreign secret.
And again, the strong probability is that wages would at least start to rise along with prices, what with all the new manufacturing you mention requiring laborers. But more than that, it’s not like the prices are all going to go completely crazy regardless. After all, prices aren’t just this magic number that skyrockets mindlessly - they’re an attempt by sellers to balance costs with what people will pay. Which includes as a factor what they can pay. There is little point in building a factory to only sell TVs to the millionaires of america, when they could set the price more reasonably and get at least some of the middle-class market.
This is not to say that I’m certain that nobody would be priced out of the market, or that the sudden surge in manufacturing jobs and the like would necessarily fully compensate for the upward pressure on prices. But I am saying that it’s not as simple a situation as you present, and the chance of supermarkets suddenly being full of things that nobody can afford is essentially nil.
I’m doubtful that a country could remain democratic with a completely isolationist policy. Large segments of our society would seek to emigrate, and the kind of controls you’d have to have in place to keep out all foreign goods would lead to a police state.
I understand what you’re trying to say, Begbert, but one just has to look at the situation today. TV et al manufacturing doesn’t happen OCONUS because we were trying to screw the American labober. It happened because they were massively cheaper, even after accounting for shipping, tariffs, etc.
It is the height of insanity to assume that costs for those goods that currently ended up being offshored wouldn’t rise massively, even given the new market dynamics you describe. By the way, it isn’t just manufacturing - there is a ton of software coding that happens in India, pharma development and manufacturing in other low-cost countries, etc.
I’d suggest that the rise in employment would be greatly overshadowed by the loss of many high-paying jobs - how many 747s does America need, for example? If Boeing can’t sell them to China and others, how big does Boeing look, with how many jobs? How much money does it now cost to arm our military, the Buy America Act notwithstanding? Everything from the software you are using to run your computer to read this, to half the parts in the car you drive, would skyrocket, making the cost of goods out of range of many (most?) of Americans.
It would probably drop us back to a standard of living equivalent to a third world country.
PS I think your comments about pricing theory are probably way beyond the scope of an internet board. Short answer: it would depend on a ton of factors, including the type of competition (monopolistic, oligopoly, broad, etc).
Assuming some TV manufacturers set up shop in the US to fill demand, not a crazy assumption, they would certainly price them at a number where they could sustain a long term profit. Since there isn’t a ton of barriers to entry, there’d be a few manufacturers probably.
I know all this stuff, I’m not a proponent of isolationism. The problem is that the US is leaking money right now. And its the money of the middle class, not the rich, or the poor who don’t have any. And your appeal to authority killed your argument, not because of the fallacy, but because those people were wrong! They were the ones that created the housing bubble, the trade deficit, soaring health case costs, the BP catastrophe, etc…
Do you have a solution for the huge money leak? It may be working for the rich, but it’s not working for everyone else. They save a few bucks buying cheap clothes at Walmart, and lose a fortune when they don’t have a job. You are proposing that more of the same is the solution to the problem it caused.
I am a proponent of rational protectionism, which is what the rest of world practices, because most countries aren’t willing to sell out their own population for the benefit of the few, because they’ve done it before, and it’s part of their history, and they’ve encountered the inevitable result, which some of them are still suffering from. I don’t want that to be the way we learn the lesson.
BTW: My state Rhode Island, couldn’t support itself if we isolated from the US, but so what? The rest of the country would be better off without us. You won’t live if your heart is seperated from your body, but you might die if a cancerous tumor isn’t removed. Your analogy of state isolationism is analogously nonsensical.
It’s not a fallacy if you appeal to someone who is an actual authority.
And “those people” are not who he’s talking about. He’s talking about economists who study this sort of thing for a living-- academic economists, not investment bankers.
The trade deficit wasn’t a good thing, but it certainly wasn’t bleeding us out. You’re confusing the disease with the symptom.
On one level, the trade deficit was a boon to us. Countries all over the world were sending us goods that we could enjoy, and what were we giving them in return? The mere promise to pay them back someday. They were supplying us with real material wealth, in exchange for pieces of paper. I’m not suggesting a debt default would be peaches and cream here–but the worries about debt pressure from around the world disappeared the moment we had our financial crisis and the world decided the US dollar was the place to take refuge.
We are now in the position to slightly devalue the dollar with significant positive consequences. That is exactly where you begin to balance the trade deficit. Will this piss China off? Most probably. Who cares? It’s their standard policy to undervalue their currency. We can get away with devaluing our own a smidge (and if we can get the ECU and the BoJ to go along with it, all the better).
It’d be best if you looked up concepts like comparative advantage. We don’t have a trade problem. We have a money problem. Look to the Fed, not the ports.
How can you simultaneoulsy argue that tons of manufacturing (and software coding) was moved offshore because it was cheaper and simutanously that moving the entirety of that manufacturing back to the states wouldn’t create a large number of jobs?
And also - the difference in costs isn’t necessarily that much more in all cases - the difference could be small and still justify importing. And to the degree that costs are different, the bulk of that money gets injected straight back into the american economy anyway. Yes somebody will be making less money, but it won’t be the workers; it will be the stockholders and corporate owners. Upper class rather than middle class america.
Again, not to say that there wouldn’t be a hit to GDP - comparative advantage is definitely real. However - third world country? Pull the other one; we weren’t a third-world country back when we actually were mostly isolationist with regard to the manufacturing in question.
(And why is discussing prices outside the scope of this thread? Because it counters your theory that everything will become too expensive for the common man to buy?)
We don’t make TVs ,computers, and lots of electronic components. We make very few clothes and shoes. We don’t make toys or jewelry. We don’t make most of our pharmaceuticals or cosmetics.
It would take a long time to ramp up what we need. Sort of like starting over.