Small scale business is inefficient. The goods produced are more expensive, and the evidence is that people are not willing to pay that increase in order to “buy local”.
Some people would be happier owning a business. I sure as hell wouldn’t, too stressful. And cite that people working for a small business are happier?
Many people prefer the relative security of working for a megacorp, control or no, than the risks involved in a small business.
You might, the evidence suggests the vast majority of people would not.
I for one don’t think I would like the stress of running my own small business. Not only do I have to worry about my business failing and possibly incurring a lot of personal liability, I have to worry about my staff as well. Ergo, I don’t think I would be happier.
My employer isn’t going to lay me off for no good reason. If reduced trade barriers lead to a stronger, more dynamic economy, and I think that there is evidence that they do, it makes me happier to know that my employer is less likely to lay me off and if it does, my chances of finding another job are better, as are the chances of succeeding were I to go into business for myself, not that I would.
Not all decisions are based on economics. A product may be cheaper to import but it might be wiser to have a secure domestic supply even if it’s more expensive.
For example, consider electronics. Let’s say a modern national economy is dependant on a continuing supply of new electronics. You could build up a domestic electronics industry via protectionism or you can buy them from another country with an existing electronics industry for half the cost. Economically, the obvious smart move is to import your electronics. But politically it’s an unwise decision - you’ve now made your country vulnerable to the other country’s ability to cut off your electronics supply and collapse your economy.
It is pure BS. Everything is “strategic” if a country does not want to depend on external suppliers. Food. Clothing. Machinery to make food. Machinery to make clothing. Machinery to make machinery to make food. Machinery to make machinery to make clothing.
Oh. I forgot arms. Arms. Machinery to make arms. Machinery to make machinery to make arms.
You get the picture. Anything which is protected because it is “strategic” is in reality protected for purely political reasons.
In general protectionist policies protect an industry at the expense of the rest of the economy of the country. A protectionist policy generally will not allow an industry to become competitive. What it promotes is making a fast killing by taking advantage of the policy and then closing shop and moving on to something else.
People also like the freedom to buy the product they want at the lowest possible price. If local business is propped up at the expense of this freedom, then we have a conflict of interest.
My understanding is that this was a widely held belief internationally on the eve of WWI, leading to the protracted nature of the war. Arguably, economies are much more intertwined now than they were in 1914, but I thought this was worth mentioning anyway.
Yeah…basically that’s total nonsense. There is a little thing called “economies of scale”. IOW, for capital intensive industries, ie steel, airlines, automotive, shipping, pretty much anything that builds lots of the same things or small numbers of very large things, it is not economically efficient to have a lot of companies manufacturing them. You can’t have 5 guys building jumbo jets in their parents basement. A couple MIT guys can’t build 1000s of cars a month in their parents garage. Not everything lends itself to being a cottage industry.
Everyone can’t own their own business, either. Someone has to actually do the work. And small businesses aren’t necessarily better than large ones. Small businesses tend to be more vulnurable to cash flow issues. They tend to not have a lot of opportunity for advancement unless they are growing into large businesses. Small businesses often are constantly scrambling for work and tend to be unstable. And I’ve often found that small businesses tend to have less (or at least inconsistant) employee protection than large ones, which typically have massive HR and legal departments enforcing corporate / regulatory policy,
Basically, it’s a romantic notion that small businesses are somehow morally superior to large ones.
In my experience, small-scale business isn’t very friendly to workers. Every job I had where I had horrible working conditions was a job working for a small business. Small businesses are often on the ragged edge of staying alive, and this puts pressure on the owners to put pressure on everyone else. Low pay, lots of overtime, and a chance that in any given month I might not get a paycheck if the small business is having cash flow problems. And when you work directly for the owner, there’s no manager over his head to keep him from abusing his employees. Finally, small business owners are often not trained in management and can be far more difficult to work for because they don’t always know what they’re doing.
I’d like to understand the logic that says a person who works for a small business has more freedom than one who works for a large business. How do you come to that conclusion? I work for one of the biggest companies in the world, and I have a great job - the best job I’ve ever had. I have job security, it’s almost certain that the company will be around for decades, there’s a professional HR department to help me with employer issues, an ombudsman… I get medical benefits, a retirement package, etc.
If you look at the ‘working poor’ who have few benefits and no health care, the vast majority of them work for small businesses. So please explain how that equates to ‘freedom’?
And when you’re done with that, you could also explain how I’m more free if everything I buy is more expensive, and if a third party is blocking me from buying the goods I want because they aren’t made locally. Explain how, as a business owner, I’m made more free by having a government agent prevent me from selling my product to a customer who wants to buy it, just because he isn’t ‘local’.
Your prescription for ‘freedom’ is to force people to work in crappy jobs, buy inferior goods, and pay more for them. Your ‘freedom’ prevents people from buying certain things and selling certain things.
It’s an awfully strange definition of ‘freedom’ you have.
I’m curious - have you worked for both a large and small company? Because I have, and what you wrote above is completely alien to me. That ‘personal relationship’ with a small business owner is very often a lousy relationship. As I said, small businesses are often under stress, and that puts stress on the relationship between owner and employee. I’ve had employer-bosses renege on contracts with me, I’ve had them yell constantly at their employees because the business in trouble, and I’ve had them run into cash problems and not be able to pay their payroll.
In contrast, managers in large companies have to know how to deal reasonably with employees. The company often gives them training in employee management. And there’s almost always reasonable recourse if you get a bum deal from your manager.
In almost all cases.
In my experience, trade barriers do not result in mutual respect. They result in resentment and the sense that someone is getting something they shouldn’t get. As for human dignity, how about the dignity of the poor person in the other country who is now starving or subsistence farming because you yanked his market out from under him by force? Or does human dignity only count for ‘your’ people?
And sacrifice some of mine too, while you’re at it. If you want to sacrifice your own earnings, go for it. Buy local. Buy fair trade products. That’s your right. Just don’t presume that your values are mine and put a gun to my head to force me to comply with yours.
That general approach to economics is responsible for an awful lot of human misery - especially in the undeveloped countries. It’s another way of saying, “We’ve got ours, so now we’re slamming the door on those of you still trying to climb out of destitution and poverty.”
It seems obvious to me. If you value other things besides the bottom line, like quality controls, minimum wage, no use of child labor, pollution standards, and other similar things, then protectionist economics is a benefit. If you tax foreign goods that have lower standards of production than goods made locally, you encourage your values to spread by sacrificing the third-world labor discount.
Also, if you’re on the other end of the spectrum, and trying to gain a bigger share of the industry pie, it’s to your benefit to protect your industry diligently. China’s economy is growing at a crazy rate under probably the most strict planned economy standards we’ve seen from a major country in 50 years. You can’t reasonably argue that their protectionist economic policy is hurting their economy.
The argument for comparative advantage sounds great in theory but isn’t practical in the real world. Under this model, a country specializing in agricultural products will always be poor because increased global supply causes price to fall. On the other hand, a high tech industry like Boeing uses the same specifications, technology, and machines to build aircraft in China as it does in the U.S. The only difference is labor cost. What is the comparative advantage for U.S. produced aircraft? And comparative advantage doesn’t explain the success of Japan’s products. Japan is not a low wage country nor does it produce large quantities of steel to build cars.
The only special interest group pushing comparative advantage or free trade is the small investment class, the owners of capital. This exclusive group has accumulated astronomical wealth in the unregulated capital markets, and they are the only group benefiting from the current U.S. political and economic system.
Also, when Japan did bring manufacturing to the U.S. during the Reagan administration, Japanese automakers hired a token number of American workers to satisfy critics and manufactured cars designed for the Japanese market not the U.S. market, which is protectionism.
Small companies tend to be the worst when it comes to cheating laws and rules. I remember a specific case from some years ago. Milk producers were adding illegal additives to preserve milk life and it was found it was the tiny, family-run farms. A small farm can suffer if a single batch of milk has to be dumped and it is the same person who benefits and who adds the preservative. He has a great incentive to cheat. Now take a large industry with shareholders, board of directors and workers. Is the individual worker by himself going to add junk and risk fines or jail so the shareholder can get a larger cut? Is the boss going to tell the worker to do it and risk being accused of a crime? In a large corporation it takes a conspiracy of several people to do anything like that and they are much more easily discovered.
No. Allowing poorer countries to develop economically means they will develop higher standards. Denying them the opportunity to develop means they will never be able to do that. Spain was shit-poor after WWII and became the cheap labor source for manufacturing. After some decades it had a fully developed economy, joined the EU and has the same protections. Does anyone think isolating Spain until they had the same levels would have worked? Of course not. Spain would have continued to be a poor country.
Saying China needs to have our level of protections before they can sell to us is disingenious. These arguments are always cloaking the ugly truth of protectionism as a pure trade advantage.
America does not subscribe to Kyoto and other environmental laws which the EU does. Should the EU stop buying from the USA until such time as the USA ratifies and implemets the Kyoto protocols?
Domestic business, when protected, can lead to abuse.
Depending on foreign business, and sending them needed monetary supply, when they don’t follow OSHA rules, environmental rules, minimum wages standards, etc, can lead to abuse.
Regulation is the only way to keep economics sound, and regulators tend to slack off.
Why? I can understand that another country which lacks a comparative advantage and subsidizes production of and/or imposes high tariffs on whatever agricultural productwe are talking about can keep a country with a comparative advantage poor, but I don’t see how what you are saying is necessarily true.
Productivity is the basis for comparative advantage. That can be because wages are low or because of technological innovations or because of better access to input materials, etc.
Are the capital markets unregulated? I don’t believe that is true. Also, I dispute that you are not benefiting from America’s political and economic system, not that America doesn’t fool around with protectionist policies.
Oh, I thought of another economic protection that can be a good thing: patents. This, of course, can be abused and as I understand it, has been lately.
Which people would that be? Some people are willing to pay more for local goods personally and others are not. On the general question of protection vs. globalization, there’s ample evidence that most people would like to shift towards protection. (Cite) On the specific question of jobs, it seems clear to me that people like the idea of shipping everyone else’s job overseas much more than they like shipping their own. Take the fact that the rich were very pro-trade back when only manufacturing jobs were sent elsewhere. Once companies began outsourcing white-collar jobs, the rich suddenly turned against free trade. Ultimately it seems the answer comes down to common sense. Would an ordinary person trade a secure, well-paying job for slightly cheaper socks and spatulas?
Spain was dirt poor because the Fascists got their asses kicked. You can draw similar comparisons to countries like Mexico, which is still dirt poor 100 years after their asskicking even though there’s almost no protectionist economic policy preventing them from manufacturing and selling stuff.
Again, with the China example, the Chinese protect their industry to an unheard-of degree, sometimes even outright banning foreign products that compete with their stuff. It’s my argument that this extreme degree of economic protectionism is helping to drive their current economic boom, and that the rest of the world is starting to realize that a planned economy is not necessarily a harbinger of the apocalypse.
Thanks, I found that out after I posted that, but I missed the edit window. The post I wrote after is the one to address, if that makes any sense.
SPIN-FREE ECONOMICS by Nariman Behravesh is what I am reading. The author is the chief economist at Global Insight. I can’t vouch for the accuracy of the title, obviously.