Wherein Lies Trade’s Benefits

by Don Boudreaux on November 14, 2011

in Myths and Fallacies, Seen and Unseen, Trade

Here’s a letter to the New York Times:

Discussing expanded American trade with the Chinese, President Obama told a business group in Honolulu “those are potential customers for us in the future” (“Obama Sees an Opening on China Trade,” Nov. 13).

Yep.  And a bigger pool of customers is indeed good because in many industries it encourages larger-scale investments and R&D projects that allow firms to produce and sell at lower per-unit costs than are possible with only a smaller pool of customers.

But with his comment Mr. Obama singled-out the least-important benefit of American trade with China.  Had he instead singled-out the most-important benefit he would have said instead about the Chinese people: “those are potential producuers for us in the future.”

To make this point is not to cavil.  It is to warn against being misled by the flawed mercantilist notion that trade’s benefits lie in what we produce for others.  In fact, trade’s benefits lie overwhelmingly in what others produce for us.  Emphasizing the growth of exports fertilizes the soil on which the greedy, grasping, destructive weeds of protectionism grow.

Sincerely,
Donald J. Boudreaux

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{ 87 comments }

muirgeo November 14, 2011 at 5:01 pm

This just doesn’t make sense to me.

If I’m a company am I glad if I have low cost on my inputs if I’m not producing or selling anything?

We become wealthy by producing things not from buying cheep things on credit.

PrometheeFeu November 14, 2011 at 5:12 pm

You mean to tell me what makes you happy is the fact that you have to be at work from 9 to 5, not the fact that they cut you a check at the end of the month?

muirgeo November 14, 2011 at 5:43 pm

Yeah… if you are cutting a check. Have you noticed the unemployment rate?

John Muir November 14, 2011 at 5:13 pm

Muirgeo, if the Chinese government subsidizes the cost of making a product that is sold to American consumers, then American consumers increase their wealth as they are buying things below the actual cost of making it. The Chinese government gets poorer as it is essentially giving away wealth by subsidizing those goods.

Let’s put it this way. You work for days building a house then give it to me. I am wealthier than I was before though I did not produce anything. You produced a house, but since you gave it away, you are poorer for the effort.

It really is pretty simple. But, I doubt that your ideology will allow you to see that you are a “useful idiot” to the corrupt politicians and the crony capitalists.

muirgeo November 14, 2011 at 5:49 pm

“….the Chinese government subsidizes….”

Is the Chinese government subsidizing this or is the American debt and our obligations subsidizing it? Or is our tax structure that incentivises sending production off shore subsidizing these imports?

I think you guys like to oversimplify.

It seems to me we are against protecting American production in our own country and instead protecting American production in other con tries. It’s like reverse protectionism as best as I can see. But you guys seem ok with the hypocrisy.

Craig S November 14, 2011 at 6:19 pm

we are against protecting American production in our own country and instead protecting American production in other con tries

I recently bought a car made in California by a Japanese car company. Did I buy a Japanese car? I’m pretty sure it counts against the fiction know as the trade deficit, but who were the workers that built it?

Invisible Backhand November 14, 2011 at 8:05 pm

No. But your getting closer. You are a useful idiot to the corrupt politicians and their political cronies asking for subsidies from the US taxpayer. The consumer is who counts. If China stops subsidizing Chinese goods, then American producers will rush back into the market to satisfy consumers desires. But, the Chinese can’t stop. If they did, their export driven economy wiuld derail and there would be revolution that would topple the CPC.

Methinks1776 November 14, 2011 at 8:53 pm

How can this be useful to anybody?

Muirdiot in action

Stone Glasgow November 14, 2011 at 11:38 pm

Gosh you’re such a racist Methinks!

vikingvista November 15, 2011 at 12:02 am

“Gosh you’re such a racist Methinks!”

Yeah, if stupid is a race.

muirgeo November 15, 2011 at 1:02 am
Methinks1776 November 15, 2011 at 1:32 am

Are you trying to say you’re related to Herman Cain, Muirdiot?

Randy November 15, 2011 at 6:26 am

Muirgeo; “against protecting American production”

I don’t want to “protect” anyone’s production, and Quality products don’t need protection. Here I’m using the TQM definition of “Quality” meaning “what the customer wants”. Within this framework, “Protection” can only mean forcing the customer to take something other than what he or she wants.

kyle8 November 15, 2011 at 3:18 pm

These are the same idiot who claim we are always on the side of big business against the little guy.

But then they want to use tariffs to raise prices on the little guy to subsidize big business.

Ubiquitous November 14, 2011 at 5:29 pm

If I’m a company am I glad if I have low cost on my inputs if I’m not producing or selling anything?

In this case, the “low cost” is simply the retail price you pay for inexpensive imports from China, and your “inputs” are simply your consumer end-user satisfactions. Ideally, it would be great if we could get the low cost down to zero so that the imports become the same as a free good — as sunlight is in the daytime.

We become wealthy by producing things not from buying cheep things on credit.

We become wealthy by finding ways to lower the value of economic inputs compared to the value of economic outputs. One way of doing that is to have someone else produce everything you want and need and sell it to you cheap . . . or, better yet, give it away for free.

Randy November 14, 2011 at 7:28 pm

Well said.

vidyohs November 14, 2011 at 5:42 pm

“buying cheep things”

As long as we stick to small poultry we shouldn’t get into too much trouble.

Craig S November 14, 2011 at 6:16 pm

“We become wealthy by producing things not from buying cheep things on credit”

We produce as much or more as we ever have. Don has posted several times data showing US manufacturing is at or near all time highs.

The division of labor is a pretty simple concept really. By letting people in lesser developed countries do work harder labor, we are free to do other, productive things.

yet another Dave November 14, 2011 at 6:38 pm

We become wealthy by producing things…

What is the purpose of producing things? As in what’s the point, why do it?

Sam Grove November 14, 2011 at 8:48 pm

This just doesn’t make sense to me.

I knew that.

Nikolai Luzhin, Eastern Promises November 15, 2011 at 7:06 am

Muirgeo

The worst thing we do in the USA is import from China.

All the “trade is great” crew are only part time economists, unfamiliar with location theory and the rule of returns to size, which knowledge is required to make one a full time economist

“Comparative Advantage” is only a “short term” advantage. Overtime, people can mimic what you do and you loose your advantage.

The long term rules are location and returns to size.

Under location theory, you move as close as possible to your largest customers. Thus, as China grows and buys more, the pressure to move all economic activity to China will grow (this is the force ripping apart Europe—all economic activity has been moving from Italy, Greece, etc. to Germany)

Second, there are all the rules on return to size, efficiency. China’s market will ultimately be three times ours and India, the same. American Exceptionalism is not a rule of economics. The efficiencies of their local firms will destroy everyone else. Here, again, we have Germany as the proving ground. Its firms are larger than firms in Spain, Italy, and Greece, making the southern EU a killing ground, economically.

Randy November 15, 2011 at 7:43 am

It occurs to me that you are in the wrong place if you want to complain about the folks who are importing from China (or Korea, India, Vietnam, Hondura, etc., etc., etc.,). That is, you’re here talking to us when you should be at K-Mart, Home Depot, Lowes, Walmart, Target, The Gap (etc., etc., etc.), talking to the millions upon millions of people who are revealing their preference for the imported products. That’s who you have to convince. And what do you have against these people anyway?

John Muir November 15, 2011 at 8:11 am

LOL, Luzha! China will always be poorer than the United States. They are building ghost cities and selling goods below their cost to make. Any company doing what the Chinese are doing would be bankrupt.

Any your view on Europe is stupid to say the least. You should stop listening to socialist propaganda.

Nikolai Luzhin, Eastern Promises November 15, 2011 at 8:51 am

Randy and John Muir

what idiots

I write that Germany is winning because of the rules: it is the largest market, has the largest firms, etc., and you call this “socialism”

You simply call anyone who points out you are wrong a socialist,

Go read the literature. Hell, the WSJ, yesterday, had a piece on Italy having trouble competing because it has smaller, family owned firms.

to understand or be an economist, you have to have all the tools including understanding location theory and the rules on return to size, large numbers, etc.

GAAPrulesIFRSdrools November 15, 2011 at 8:56 am

to understand or be an economist, you have to have all the tools including understanding location theory and the rules on return to size, large numbers, etc.

Actually the economically literate don’t use the phrase “return to size”, they discuss “economies of scale” and your use of a cumbersome alternate identifies you as a poseur, troll.

Jon Murphy November 15, 2011 at 9:01 am

“Go read the literature. Hell, the WSJ, yesterday, had a piece on Italy having trouble competing because it has smaller, family owned firms.”

*facepalm*

You didn’t read the whole article, did you?

“There’s just one problem. “Our policy has always been not to grow,” says Sergio Dell’Orco, the 64-year-old head of the recycling-machine maker from Tuscany. Among other issues holding the company back are strict labor laws and an inefficient legal system “that become difficult to work under if you’re big,” he says…ions, meanwhile, are opposed to government proposals to loosen Italy’s labor laws. They have vowed to paralyze the country with strikes if the government attempts to pass such measures.

Behind the country’s stunted businesses lie the habits and fears of a long line of family entrepreneurs who cling to control of their companies late into life. Hemmed in by a thicket of regulation and legal restrictions, many of these families have learned to survive by doing business within networks of trusted customers and suppliers, rather than taking risks by dealing with outsiders.”

The article is about how the government and labor laws punish growth.

Nik, why don’t you leave economics to the professionals and go toddle away back to the dunce corner.

Jon Murphy November 15, 2011 at 9:07 am

I really don’t get you, Nik. You decry large American companies for oppressing the poor, but then you decry Italy for having too many small companies and applaud Germany for having “The largest firms”.

So which is it man? Big companies or small?

Randy November 15, 2011 at 9:21 am

Luzha,

Re;“You simply call anyone who points out you are wrong a socialist”

I didn’t call you a socialist… this time… though most certainly you are and I don’t know why you would deny it. And, honestly, I only respond to the points that interest me, not everything you say, as much of what you say is either nonsense or cut and paste socialist propaganda.

John Muir November 15, 2011 at 9:43 am

Nikki, thanks for proving yourself wrong by citing the WSJ article. You are such an idiot that you have to be a socialist. There is just no other explanation for such stupidity. And this is not the first time that you have done this either.

anthonyl November 15, 2011 at 12:36 pm

Why do you think Rome fell?
Bogged down by rules. Economic self-strangulation. Too much caring about the small producer. Too much protectionism.

vikingvista November 15, 2011 at 12:58 pm

Not to mention a substantial welfare state.

Methinks1776 November 15, 2011 at 2:46 pm

The more corrupt the state, the more numerous the laws.

-Tacitus

Nikolai Luzhin, Eastern Promises November 15, 2011 at 10:37 am

this is a new post.

I have to repeat myself, again explaining why Randy and John Muir are idiots.

rather than admit they are wrong, they just throw up red herrings.

Some Italian firms may not want to grow. Italy has union’s etc. All of which is true but is besides the point (these points only make a bad situation worse). Location theory, returns to scale (whatever label one wants), and other concepts make comparative advantage meaningless in the long run.

Trade is not a solution to our long run situation.

There is only one solution and that is being more effective at managing our affairs than anyone else. We have to be the first to see and the first to navigate every shoal. That means we should see if our firms are too small to compete or too large (and hence to big to fail and to controlling of economic and political activity).

If our firms are too small we have to ask why? And we have to ask questions with much more common sense about what to do about a situation.

Climate change is the best example. It is a real potential issue, which no market can solve. However, the Democrats have been just about as stupid by floating proposals for cap and trade (which is merely a bill to have the middle class pay commissions to Goldman Sachs and use the taxes to give out higher welfare checks).

The Founding Fathers foresaw this capture of the government by special interests, but they had only limited vision as to what tools were available. They could not foresee the speed and breadth of challenges we face today, so they opted toward a do nothing gov’t. It isn’t working and isn’t going to work in the future.

We need to move to a model of effective gov’t that fights special interests on all sides with more powerful tools—more democracy and transparency, less divided government.

John Muir November 15, 2011 at 10:41 am

Muirgeo, is that you? Or, is stupidity now contagious? Thanks, Luzha, for proving, yet again, that you don’t know what you are talking about.

Randy November 15, 2011 at 1:29 pm

Luzha,

Re; “our firms”

They’re not yours.

SaulOhio November 15, 2011 at 7:50 am

Muirgeo simply doesn’t understand that we produce in order to consume. Production is not an end in itself.

John Muir November 15, 2011 at 8:04 am

Muirgeo simply doesn’t understand

Not much of anything from what I’ve tread of his posts.

Methinks1776 November 15, 2011 at 8:19 am

What does Muirdiot understand? This should be a short list. Likely a blank list.

GAAPrulesIFRSdrools November 15, 2011 at 8:57 am

What does Muirdiot understand?

Psychosis.

vikingvista November 15, 2011 at 12:20 pm

He has to have a very sound understanding to keep the weight of bullshit in his head from falling over.

brotio November 17, 2011 at 12:37 am

This just doesn’t make sense to me.

The article contained words, sentences, and paragraphs. No one here is surprised that it didn’t make sense to you.

Invisible Backhand November 14, 2011 at 5:06 pm

Wyden also highlighted a recent complaint to the World Trade Organization (WTO) by the Office of the US Trade Representative (USTR) over nearly 200 subsidy programs that China has failed to notify the WTO of, as required under the body’s rules. In a statement announcing the US complaint, which also cited India, USTR’s Ron Kirk described the lack of transparency as “simply intolerable”.

“It is past time for China and India to be transparent about their subsidy programs, and that includes meeting their notification obligations like other WTO members,” Kirk added. “China and India are among the largest exporters in the WTO, and it is simply not acceptable that they continue to evade their transparency commitments.”

http://optics.org/news/2/10/15

Methinks1776 November 14, 2011 at 5:35 pm

I don’t give a damn what the hall monitor says.

Ken November 15, 2011 at 1:41 pm

You don’t sound ethical, Methinks1776

vidyohs November 14, 2011 at 5:44 pm

“and it is simply not acceptable that they continue to evade their transparency commitments.””

Damn those sneaky tricky Asians, how dare they act like a democratic (Pelosi promised) congress!

SaulOhio November 15, 2011 at 2:13 pm

And why does that mean we need protectionism? So China’s government is subsidizing the production of goods that we Americans want. This is harming the Chinese people, and that is bad. But it is not harming us. In fact, it benefits us.

The solution is to end all those Chinese subsidies, not impose more violations of the free market.

PrometheeFeu November 14, 2011 at 5:11 pm

This sort of error is becoming seriously annoying. It’s a form of cargo cult really. You don’t want a job, you want the pay from the job. (If you do like your job as I do, you could always pursue it as a hobby AND have the pay) As an extension you don’t want to trade with people. You want the stuff they give you in return for what you gave them.

If the Chinese government was to start sending us free food, electronics and cars, Mr Obama and his cronies would be on television 24/7 to tell us how horrible it is that we are getting free stuff because it kills american jobs.

anthonyl November 15, 2011 at 12:40 pm

That would be “dumping.”

Bret November 14, 2011 at 5:30 pm

Great letter!

Michael Tyson November 14, 2011 at 5:56 pm

I agree that protectionism is largely absurd and is embraced wholeheartedly by the Obama Administration. However, I think there is potentially one aspect in which there could be some truth to a complaint over subsidy programs, or currency devaluation.

I’m not sure how correct this notion is because I’m not trained as an economist. I’ll write it like a logical argument:

1. The accumulation of capital goods increases the productivity of workers and consequently increases wages over time (generally)
2. The trade policies of China could attract Foreign Direct Investment in an amount greater than a free trade situation would.
3. There is a limited amount of FDI to attract.
4. FDI increases the accumulation of capital goods in a country.
5. A subsidy/currency trade war to attract FDI is economically inefficient.
Therefore, it is appropriate to prevent artificial means of bolstering exports.

I understand that exports are not good for their own sake, only for the imports that they purchase. However, could China gain a long term advantage by the accelerated accumulation of capital goods?

If I’m off-base here, could someone point out how?

Rick Hull November 14, 2011 at 6:15 pm

What’s your basis for point #2? I’m a little hazy on the details of FDI, but what would make investment returns in China more attractive? That production is subsidized is an indicator that the producer is not truly profitable. Are you thinking FDI would capture government subsidies?

Michael Tyson November 14, 2011 at 6:31 pm

It depends on the situation, but if it’s currency devaluation then the products will be artificially cheaper due to labor inputs and the firms would then sell the product elsewhere. If it is a subsidy, the company wont mind the free cash. I think it is part of the cause of the very large portion of the Chinese economy that is based on foreign trade.

Jon Murphy November 14, 2011 at 8:23 pm

You are a little off base, and here’s why:

FDI is considered an Import (example, if Honda builds a factory in the US, that’s counted as an import to the US and FDI in the US).

A devalued ruminbi means that Chinese exports are cheaper relative to domestic counterparts. Chinese imports are more expensive compared to domestic counterparts. So, because of the devalued ruminbi, FDI is actually more expensive (in currency terms) then domestic counterparts (however, costs are lower in China relatively speaking, which is why it is still an attractive place to invest).

Does that help?

Methinks1776 November 14, 2011 at 8:55 pm

“renminbi”. Now say it ten times fast. Actually, say it ten times in a row at any speed.

vikingvista November 14, 2011 at 11:06 pm

renminbirenminberandminbeerandminbeerhandmebeerhandmeabeer.

Methinks1776 November 14, 2011 at 11:08 pm

Exactly my point. You can’t say it without sounding like either a drunk who is trying to give the impression that he’s not or one who is too drunk to care that he’s slurring his gibberish.

vikingvista November 14, 2011 at 11:13 pm

I always shoot for the latter.

Methinks1776 November 14, 2011 at 11:34 pm

It’s the more dignified option.

kyle8 November 15, 2011 at 3:21 pm

So if this causes the Chinese to become wealthier then why is this a problem? They will demand higher wages and will therefore be bigger potential buyers for our products.

W.E. Heasley November 14, 2011 at 6:07 pm

Scenario 1: Say you purchase a Chinese import that is subsidized by Chinese taxpayers via Chinese politicos through the mechanism of Chinese government. Say the item is $100 to produce and ship. You buy it for $90 as it is subsidized by Chinese tax dollars. You have gained value at the expense of the Chinese taxpayer.

Scenario 2: Say you are required to purchase a made in the USA energy source [wind, solar, bio-fuels] that is subsidized by USA taxpayers via USA politicos through the mechanism of USA government. Say the mandated energy items costs $90 to produce and ship. You buy it for $100 as it is subsidized by USA tax dollars. You have lost value at your own expense.

Kevin L November 14, 2011 at 7:15 pm

The president’s recent words on China have opened my eyes to something I’d never realized. I have an enormous trade deficit with local grocery stores, since I’m constantly buying things from them at discounted prices and they never buy _anything_ from me. So from here on out, I’m going to impose a grocery excise on myself of 5%, which will go to fund investment in gardening tools, books, and supplies so I can be grocery-independent. Maybe when I start getting my food by more expensive means, the grocery stores will get the message and stop imposing such an enormous trade deficit on me.

Bastiat Smith November 14, 2011 at 11:17 pm

Yep.

Stone Glasgow November 14, 2011 at 11:41 pm

Yep

Ken Royall November 15, 2011 at 1:35 am

Your analogy is not exactly right. In the case of the local store, clearly they do buy products and services from other Americans and they also employ people who may buy your product or service.

If China sells us things at cheap prices that is great, but if they never buy anything in return at some point we do experience economic losses from that. Why is everyone here pretending that no production has left America and gone overseas?

There are real companies who once employed real people that are no longer here. And many of those people have not found other work at all or a job at a comparable wage. That means they can’t buy things, from the Chinese or anyone else. How is that good?

I am totally against a trade war with China but you are never going to convince people who have lost their jobs that our enormous trade imbalance with China is a good thing. I have a buddy in biotech who has a PhD, he is no dummy. He sees guys like himself being thrown into the street because of jobs moving to China and India. These people are highly specialized and now have no place to go within their profession. I understand that he is not an economic genius but it seems to me he does have a point.

I don’t see why we shouldn’t be trying to become more competitive globally and increase our exports. Some of the people here act as if what we produce doesn’t matter at all. Is Germany, one of the few semi solvent countries in the EU, doing a bad thing by running a trade surplus? You guys are a bit too abstract for me.

Following your logic, I suppose Obama should tax and regulate the crap out of businesses here in the states. Exports are overrated anyway right? Who needs to worry about increasing productivity and lowering the costs of doing business? The Chinese are going to subsidize their low prices to us so we should just sit back and let them make everything. Where we get the money to buy the stuff I have no idea. Some of you say their production frees up labor here for other uses. I agree. But we have a lot of people freed up and nobody is hiring them. Isn’t that a problem? Call me nuts but if we can call off the regulatory dogs and lower the corporate tax rates we can regain some ground economically. I think that is a good thing.

dsylexic November 15, 2011 at 6:33 am

China buys 4 times more in 2010 from the US than in 2001.
they obviously dont buy the same stuff they can produce.they buy heavy machinery ,power equipment and fruits(ha -those damn mexican workers benefit)

Table 1: China’s Trade with the United States, 2001-10 ($ billion)
Notes: *Calculated by USCBC. US exports reported on a free-alongside-ship basis; imports on a general customs-value basis.
Source: US Department of Commerce; US International Trade Commission (ITC)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US exports 19.2 22.1 28.4 34.7 41.8 55.2 65.2 71.5 69.6 91.9
% change* 18.3 14.7 28.9 22.2 20.5 32.0 18.1 9.5 -2.6 32.1

Jack Fraser November 15, 2011 at 10:02 am

I can’t really take the time to comment on the substance of your post. However, I would point out Germany has benefited from a much weaker currency than they would otherwise have due to the profiglacy of their peripheral European partners. To me, this whole EU internal negotiation stinks as a result.

Nikolai Luzhin, Eastern Promises November 15, 2011 at 2:54 pm

Ken

You write:

I am totally against a trade war with China but you are never going to convince people who have lost their jobs that our enormous trade imbalance with China is a good thing. I have a buddy in biotech who has a PhD, he is no dummy. He sees guys like himself being thrown into the street because of jobs moving to China and India. These people are highly specialized and now have no place to go within their profession. I understand that he is not an economic genius but it seems to me he does have a point.

This is happening because of location theory, as per my observations above. People want to get to where the action is fast. The best example is Sun Records, Memphis 1952. Look at all the artists who found there way there in 3 years. This pattern of human migration kills all those left behind and the good ole USA is being left behind.

There is no future in trade, none.

rhhardin November 14, 2011 at 8:16 pm

It’s more people to trade with, the benefit being a higher shared producer and consumer surplus on each transaction, the more people there are that specialize variously.

Forget the money, which just arranges those matches across time and person. If you focus on money then you’ve forgotten the point; and you see producer and consumer as separate, which positively obscures the point.

Darren November 14, 2011 at 8:22 pm

“those are potential producuers for us in the future.”

That’s wouldn’t have gone over well with the unions: More potential producers –> more competition –> more jobs moving to China. One can see the long-term benefit of jobs moving to another country, but short term it sucks for those who lose their jobs here and I suspect unions are more than happy to encourage the fear of that happening among their members.

nailheadtom November 14, 2011 at 11:28 pm

None of us residents of Animas, NM have borrowed any money from the Chinese. Some of us still owe on our pickups and mortgages but they were all financed through the bank or credit union in Lordsburg or Las Cruces. Any money that’s owed to the Chinese is the interest and principle on treasuries that they bought from the US government. These bonds were sold to anybody that wanted to buy them to finance stuff like new aircraft carriers, river dredging, research into frog mating and EPA pogroms on small manufacturers. If the government gave up on solving every problem by hiring a battalion of bureaucrats to bury it in regulations and money we wouldn’t be having this discussion.

David Coplin November 15, 2011 at 2:04 am

A correct understanding of poverty will elucidate a correct understanding of economics as
well as a correct understanding of our current economic situation.

While I am not an Austrian proponent I have made the subjective basis of economics the
foundation of the economic theory laid out in the ebook referenced below. But I come
to very different conclusions regarding monetary policy, credit operations, taxation, and the
definition of individuals and enterprises in any economic system. I also compare communist
economic systems to our current western credit economic system and believe that Keynes
made an invaluable contribution to economics with his concept that an economy can function
at any level of production. But I also support market mechanisms as the driver of any
successful economy instead of government spending.

Given the plethora of ideas about just how we should proceed in order to improve our
current economic situation, I’ve added my own. I would really appreciate your review of
the economic principles proposed in the following ebook
http://www.smashwords.com/profile/view/povertyandthefoundationofeconomics
and your comments on any errors that you find. If you do not have the time to do
this, I would appreciate your assigning the task to your friends as an exercise.

As long as we continue to use the western credit system as the primary driver of
economic production the wealthy will continue to control the means of economic
production and poverty will be a guaranteed result. The link above describes an
alternative economic system that will eliminate poverty and maximize economic
production.

Thank you for your time and attention in this matter

Randy November 15, 2011 at 6:37 am

In my experience, poverty has far more to do with laziness and stupidity than with who controls the means of production. Also in my experience, greater access to the means of production is granted to the non-lazy and non-stupid.

Nikolai Luzhin, Eastern Promises November 15, 2011 at 6:53 am

this comments show how lazy and stupid Randy happens to be

by far the single biggest cause of poverty is crime and the threat of crime.

Gallup Chairman Jim Clifton, has written a remarkable new book, The Coming Jobs War, in which he documents, for example, that there is little entrepreneurial effort in most all of Africa because most people are afraid to ever leave their homes to travel even 100 yards to be in business or work

Any reasoned observer of America’s inner cities will realize that crime and the threat of crime is what creates everything else.

Randy November 15, 2011 at 7:47 am

1. Criminal behavior is a form of stupidity.
2. Living in a place with a high rate of criminal activity is another form of stupidity.

Randy November 15, 2011 at 7:53 am

P.S. Relying on politicians who will not or cannot put an end to criminal activity is yet another form of stupidity.

Methinks1776 November 15, 2011 at 8:32 am

Hey, Randy, it’s in a book. That’s all Luzha needs to know. Okay? It’s in a damn book! They wouldn’t have published it if it weren’t true. Right? No critical thinking necessary. Especially if you’re a giant puddle of crap, unable to think.

I mean, in Egypt, people aren’t afraid of being attacked as they travel from home to work, yet the country has been sliding into poverty ever since Nasser decided to ally himself with Khruschev and take up socialism. The Europeans aren’t scared either, but the average Frenchman can scarcely hope to live as well as the American poor. And in the Soviet Union we also didn’t fear for our impoverished lives walking from our communal hovels to the Kolkhoz every day.

But, no. Poverty is not allowed to fester because the population is dis-empowered by a political kleptocracy which prevents anyone from bettering their own lives. No. It exists because there just isn’t enough command and control by the state.

John Muir November 15, 2011 at 8:17 am

Luzha, social welfare programs subsidize laziness and stupidity, which leads to greater crime. First, increase the presence of police in those areas. Next, eliminate social welfare programs.

kyle8 November 15, 2011 at 3:23 pm

Typical lefty lunacy. You got the cart before the horse as usual. Crime does not lead to poverty, poverty leads to crime.

kyle8 November 15, 2011 at 3:24 pm

Or rather, the same factors which cause poverty also cause crime. Lack of respect for yourself or others, inability to delay satisfaction, chemical dependency, ignorance, etc.

Fred November 15, 2011 at 8:24 am

aye

Jon Murphy November 15, 2011 at 7:57 am

One thing that confuses me about all this discussion is this:

Free trade proponents argue for free trade as it increases competition and lowers prices for consumers (thus forcing companies to cut costs and/or lose profit), gives people more choice and helps lift poverty worldwide.

Protectionists (willingly or unwillingly) support higher prices for consumers, thus higher corporate profits because of less competition, and raising the poverty threshold worldwide.

And yet, free-traders are the useful idiots of the corporations. Explain that.

Methinks1776 November 15, 2011 at 8:35 am

Just as soon as I get an explanation why China subsidizing our consumption is bad, yet “the rich” subsidizing the consumption of “the poor” is good.

nailheadtom November 15, 2011 at 1:55 pm

Terrific!

vikingvista November 15, 2011 at 3:25 pm

Right for the jugular!

anthonyl November 15, 2011 at 12:14 pm

Don’t ruminate on the production side of things or any one side but think of the whole system. We are never just produces or consumers everyone participates in all these activities. Don is just asking us to adjust our idea of what wealth truly is. It’s not just as in immortal words of Bubble when asked what she does answers “I get paid.”

Invisible Backhand November 16, 2011 at 12:32 pm

Despite a lot of publicity about how cheap labor is in China, Nitzschke said the problem is not the low labor costs, which account for less than 10 percent of total manufacturing costs.

The Chinese can’t compete without subsidies because they don’t produce efficiently, he said. They have too many workers per machine, too many problems with quality management and their transportation costs are higher.

“Without subsidies they would have a zero chance of being competitive,” he said.

http://www.renewableenergyworld.com/rea/news/article/2011/11/solarworld-circulates-petition-for-european-trade-complaint?cmpid=rss

Floxo December 14, 2011 at 1:58 pm

Free trade can be mutually beneficial. There are gains through comparative advantage and gains from industries with increasing returns to scale. Technically, both home and foreign benefit by restructuring to produce at different and mutually advantageous points on their respective production possibilty frontiers (ppfs).

Opening trade may allow a third type of restructuring: industrial relocation. Industrial relocation will occur where the capital stock within an industry is internationally mobile but some factor of production is not. If also the factor can be obtained in greater relative abundance and at lower cost overseas then there is an incentive for firms within the industry to relocate to foreign and so lower their costs. Typically the immobile factor is labour.

Industrial relocation is not benign. Just as there is an increase in the capital stock of foreign so there is a decrease in the capital stock of home. The ppf at home shrinks and the ppf of foreign expands. Whether or not trade is beneficial then depends on whether or not gains from comparative advantage and increasing returns to scale outweigh losses from relocation.

The issue is absolutely critical. Recent years have seen a rapid increase in FDI (foreign direct investment) associated with industrial relocation. It may be that the wage stagnation experienced by developed countries is a direct consequence. It may also mean that it will be more difficult for developed economies to grow out of the current recession.

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