Let's be clear.  The reason for the economic woes is the diminished purchasing power per capita of the developed world's economies.  If the consumers in developing countries where products are made have low purchasing power, and consumers in the developed economies also have poor purchasing power because jobs have been outsourced to developing countries, WHO IN THE WORLD IS GOING TO BE ABLE TO AFFORD THE PRODUCTS THAT ARE PRODUCED?  Nobody, that's what.

Protectionism will FORCE the developing word to sell their products in their own countries at prices which their own people can afford, thereby boosting the economies of developing countries.  Meanwhile, the developed world, after re-'developing' their manufacturing base, will create jobs and thereby improve the purchasing power of their consumers.

The developed world will have to pay off its debts however in order for this to work, and to do this taxes would have to be raised and massive infrastructure projects would have to be committed to in order to make accessible those natural resources still in the developed countries, these resources necessary to support the renewed manufacturing sector of the economies of developed countries.  We're talking massive spending on infrastructure development as well as massive tax increases.

In referring to the Laffer curve, it would have to be redrawn entirely to suit the paradigm shift society would have to experience in order for the measures I am speaking of to have a positive outcome.  The paradigm shift would have to be quick and sudden, like the shit to a war-time economy.  But instead of wasting resources blowing things up, we'd be BUILDING infrastructure for the future.

> Little Paul wrote:

> "Let's be clear.  The reason for the economic woes is the diminished purchasing power per capita of the developed world's economies."
No, its the increase in production cost of almost everything. Same effect, different cures. More people want to use earths resources, and there are fewer, so prices go up.

Disagree.  Resources are abundant, but not accessible from our current infrastructure arrangement.  Proper investment in infrastructure development is essential in lowering the cost of resources and production of goods.

"Who's going to pay to build the roads and rail-lines to those inaccessible areas?  Who is going to construct the power-plants necessary to fuel industry in remote areas?  Corporations?  Haha!"

China is investing heavily into infrastructure in South America and other developing regions.

Now guess who is gonna  mine, cut, fish and/or gather all the resources in those areas?

> Cardboard Robot wrote:

> "Who's going to pay to build the roads and rail-lines to those inaccessible areas?  Who is going to construct the power-plants necessary to fuel industry in remote areas?  Corporations?  Haha!"

China is investing heavily into infrastructure in South America and other developing regions.

Now guess who is gonna  mine, cut, fish and/or gather all the resources in those areas?

Well, I suppose South Americans will do the work.  The real issue is that Chinese manufacturers will be able to purchase resources at discount, insider prices, giving an even greater advantage to the Chinese manufacturing sectors.

"Disagree.  Resources are abundant, but not accessible from our current infrastructure arrangement.  Proper investment in infrastructure development is essential in lowering the cost of resources and production of goods."
I disagree in turn, but I will answer to your long previous post first, as you put a lot of effort in it, before reacting to this one.

On the trade issue...

> xeno syndicated wrote:

> > Zarf BeebleBrix wrote:

> Um.... so... you want to increase the cost of the very government projects you wish to institute?  Um... yeah, that's not a net revenue gain when the government is essentially the one paying the tariff to itself. 

The increased costs are justified because since the production is domestic and profits are held / re-invested domestically it creates jobs and stimulates the economy.

Okay, no... this just doesn't make sense, by basic economic rules.  Now, in the last thread in which we did this free trade debate, I already explained the concept of comparative advantage... your response was "I understand the economic reasons for trade, but..." so I'm asssuming I don't need to repeat that part.

So... let's get to what we're claiming here.  Your argument is that there will be a net benefit to the world economy because profits will be held domestically, where they are re-invested domestically.  Okay... but where does that leave us.

1: Let's consider this from a global economic perspective.  Your only claimed advantage is that money will be reinvested in otherwise net importing nations.  But remember, people in third world nations still reinvest money.  If we're talking about natural resources controlled by governments, the governments will use the money for spending programs, bringing it into their own economy.  If you're talking about privately owned natural resources, they'll do similar reinvestment.  Even if we assume the worst case scenario in which one person obtains the surplus from trade, such as a dictator stealing billions in oil windfalls from a country, that dictator is going to put the money in a swiss bank account... which would then be reinvested by the banks.  Either way, reinvestment is inevitable, so you can't really claim that as a net benefit to global economic efficiency, because whether the money is reinvested within the US economy or the Colombian economy, it's still a reinvestment.

2: That being said, comparative advantage is the tiebreaker.  In a no-trade world, countries would need to establish replacements for every resource they previously obtained through trade, which at the very least would increase the cost of all those resources.  That means people have to use more money to obtain resources they would otherwise need, and thus they obtain less resources overall.

3: The vast majority of global trade just doesn't fit your definition of trade asymmetry.  The biggest trade partner to the US, for example... is Canada.  Most European nations will see their global trade dominated by trade with other European nations.  Japan's biggest trade partners are the US and China (in the 1st-3rd world scale, they would be a nation clearly headed toward developed status).  With relatively few exceptions, these nations have relatively stable and reciprocal trade ties to one another.

>As for resources, those are across the board tariffs anyway.  Charging a business a tariff on needed imported resources has the exact same effect on trade as charging the business a tariff on the resources needed to produce that tariff.

The purpose of tariffs on imported goods is to promote businesses to purchase domestically produced goods, thereby keeping profits, investment, and JOBS in the country.

This is already answered above, and doesn't indict the thesis of my argument here, that resource tariffs are a tariff on everything produced by that resource.

>One other note: The Great Depression problems weren't just an isolated trigger of US tariffs.  When the US placed its tariffs on imports, other countries retaliated by placing tariffs on US exports... thus starting a trade war.  This type of trade war still occurs in modern times... remember the steel tariffs during the Bush years? 

Yes.  It's been long enough now that developing economies have benefited from liberal trade policies of the developed world without reciprocating with corresponding liberal trade policies. Instead, they perpetuate an justice against their own people by taking measures to sabotage the development of their own domestic economies so as to keep wages low and thereby maintain their dominance in exports markets.  These developing economies are fully capable of developing their own consumer-based economies and for the good of everyone they need to do so now.  Weened them off their reliance on their exports sectors by adopting protectionist policies.

Protectionism would be better for everyone long-term.  It would force the developing world to do the right thing and develop consumerism and services-based sectors in their domestic economies, and it would restore the developed economies resource and manufacturing sectors, leveling the playing field for all.

1: How is a nation supposed to build a middle class when they don't have the trade basis upon which to develop infrastructure?  The United States only began to develop a middle class when it became a big exporter of agricultural and light manufactured goods (mid-19th and 20th century).  The same can be said of a few developing nations that have engaged in international trade... South Korea, Japan, Taiwan, Singapore, Hong Kong, China... it's a pattern that's hard to ignore.  Trade provides a flow of capital to producers and consumers in the developing world, which in turn allow consumers to buy products and producers to expand their industries... in time, this means the nation will begin importing from the developing world as their middle class grows.

But what about the other side of the coin?  Have you noticed how every isolated economy in the world ends up destitute?  Where is Cuba's booming economic growth?  How about the North Korean economy?

How about in Africa?  Trade with African nations only really occurs with nations that have access to key natural resources (oil, gold, or diamonds, for example).  Now, I grant that these particular countries haven't fared well when trading with the developed world (I'll get to this later).  But what about those nations which aren't engaged in trade with the West at all?  By your theory, they should be fully able to develop their own consumer middle class networks, and thus their own industries and developed economies.  To say this isn't the case would be an understatement.  This could also be brought further to indicate that tribal societies, being free from trade, should functionally be able to have technology as good, or better than, US technology.  In fact, not only are the best examples of protectionism not effective... they are the worst regions of economic destitution in the world.  At what point can we say that a pattern isn't mere coincidence?

2: What developing nations are you talking about here which haven't reciprocated trade barriers?  Seriously...

Are we talking about East Asia?  We literally just signed and ratified a free trade agreement with South Korea a little over a week ago.  The US has free trade agreements all over the place in the developing world... South an Central America, NAFTA, Israel, etc.  On top of that, the General Agreement on Trade and Tariffs sets the ground for a global framework for tariff reduction which has done pretty well in enforcing free trade... (with one glaring exception recently, but I'll get to that in one moment).  There's currently 151 members in the World Trade Organization, and all members negotiate with each other simultaneously (nations in the WTO are bound by what's called a Normal Trade Relations status, whereby they are prohibited from establishing lower trade barrier levels with some nations than they would normally... with a couple exceptions (in particular, free trade zones such as NAFTA, and trade sanctions such as against North Korea).

3: Your claim that developing nations aren't building a consumer base... are actually probably a result of a lack of free trade in many instances.

When the United States developed its economy, agriculture was an important cash crop in bringing capital to the country, especially from southern states.  Not that it's an end-all problem solver in itself, but it's definitely a decent start to eventual development, because the US was stepping away from subsistence farming and toward export-driven farming, a short term net increase in revenue for those farmers.

Now let's fast forward to today.  The United States and European Union have crossed the threshold of industrialization, transforming to service-based economies.  In turn, industrial production is shifting toward East Asia...

But what about agriculture?  From a technology perspective, the United States and Europe are way beyond the need for an agricultural economy.  Yes, the United States has technology that helps it develop food more effectively... but does it accurately reflect how agriculture is currently produced, considering the mix of land values, higher labor costs, and environmental standards?

The US has a huge farm subsidy program in place.  We're talking about hundreds of millions of dollars every year paid to farmers to produce food.  This reduces the cost of production for US farmers to where they don't actually have to price food based on the cost of production.

The European Union's farm bill, depending on the crop we're talking about, is in many areas even worse than the US policy.  It's not just in the amount of money invested, though.  The EU's Common Agricultural Policy pays farmers specifically to export crops... so prices in EUrope will stay higher, but prices in the rest of the world will be depressed, relatively.

Normally, I wouldn't say subsidies are necessarily a problem.  The US and Europe sell their food globally at relatively dirt cheap prices... and the subsidy essentially gets transferred to foreign consumers.  Stupid on the part of the developed world, but tolerable.

However, Africa proves the problem behind this policy.  In countries that have little to no stable infrastructure, nations only generally have two areas to develop their economic health: agriculture and raw material harvesting.  Raw material harvesting is alright for nations which actually have them.  Otherwise, the developing nations are forced to revert to agriculture.  But if agriculture prices are depressed because the US and Europe are driving prices down with subsidies to the point where developed economy farmers can outcompete developing economy farmers for reasons outside their ability to efficiently manufacture goods... people in these nations have no choice but to step outside the labor market, because the labor market itself is uncompetitive.

4: How does this even work with comparative advantage?  We've gone through this debate before less than a month ago, and you've actually acknowledged you understand how comparative advantage works, so I don't get how this is still an issue.  You even recognize here that these countries provide a service the developed world can't provide (cheap labor), which is the reason why the developed world can utilize trade.  Remember, we're talking about workers able to work at 1/5 the wages of developed world workers.  That means prices would have to be increased to match the new cost of production.  Mathematically, it just doesn't make sense.

EDIT:
5: Even if you're 100% right on everything else, your model still doesn't take into account losses from the economic transition.  Current production rates throughout the world assume an economic model with international trade, because manufacturers take advantage of economies of scale to produce at levels for global consumption.  Any change to the current trade model would see short term price shocks across the board.  Exported goods would be oversupplied at the domestic level, and imported goods will similarly see a shortage.  New factories would have to be put into place, doing work that factories in foreign countries were already doing before.  Existing factories would sit idle, representing another loss to productivity.  Essentially, this forces every economy to create new production to duplicate production which was already in existence at the time, and also leaving idle old production facilities meant for export production.  This is another of those expenses for which protectionism just can't account.

> xeno syndicated wrote:

> Yes, they do.  They know exactly what has to be done, but lack the political will do do it.

Normally, when I say "lol..." it's very rare that I, in fact, did laugh out loud in response to an argument.  This would be the exception, at least with regards to trade barriers.

1: How politically easy is it for a politician to say "All our economic problems are a result of this foreign nation which isn't playing fair."  It's one of the few political stances that won't offend any voters because nobody among the potential voter base is being accused.  The argument only relies on the existence of a third party which has no legal ability to retaliate within the nation's democratic system.

2: Three words: American Farm Bureau.

It's probably one of the biggest lobbies in the US.  It has one, and only one, voting issue: the protection of US subsidies to protect domestic farmers from foreign imports.  And it has the ears of both sides of the political aisle... to the point where when Bush Jr. tried to cut farm subsidies during his second term... his argument was completely overrun by both sides in the legislature opposed to him.

Your turn.  Care to name a lobby as strong as the American Farm Bureau that lobbies as hard as the American Farm Bureau on that issue?  Remember... even if you find some other lobby that's as big as the American Farm Bureau... the AFB is focused solely on this issue... a lobby that's 3 times the size of the AFB, but has about 20 different issues they care about, can't match up relatively, because they'll have to focus efforts on one issue or another, distribute wealth, and make sacrifices on some bills to win out on others.

3: You really contradict yourself here, actually.  You say earlier in here that the US doesn't generally benefit from international trade.  How can US businesses be losing from international trade... yet maintain the political power to work... against their own interests by perpetually promoting foreign competition?  It would be one thing if US businesses as a whole were doing alright from international trade... but you specifically argue that we're losing out...

why cant we subsidize industries instead of using terrifs? similar effect, seems the better choice in my eyes

Before I go through your points, which I will regardless, please indicate where I said the US doesn't benefit from exports?

> xeno syndicated wrote:

> Before I go through your points, which I will regardless, please indicate where I said the US doesn't benefit from exports?

Did I indicate you said that?  My mistake.  My stance on exports with regards to this argument is covered in the retaliatory tariff argument (that the US does benefit from exports, but as a result of a tariff on imports, won't be able to benefit from exports because foreign nations will retaliate against us with their own tariffs, as was shown with both the Smoot-Hawley in 1930 tariffs and the steel tariffs in 2002).

I'd argue that the Smoot-Hawley Tariff was, if anything, one of the single biggest contributors to the Great Depression.  The New Deal policies are a separate issue (there are definitely arguments both ways on this particular issue, but I'll leave that to Flint or one of the other people who have a more definitive stance on the issue).

> xeno syndicated wrote:

> It's very simple.  One way to solve it would be to simply put everyone who is unemployed to work on government infrastructure projects, new bridges, more roads, passenger train-lines, etc..  Include for the worker all benefits imaginable: health, dental, housing, food subsidies.   Raise taxes on everyone, institute trade protectionist measures and tax incentives to new business in domestic industrial / manufacturing production.  Use funds to pay back the debt ASAP.  We could do so in a matter of years rather than decades.

After debt is paid-off in like 5 years, then lower taxes.  And let free-market capitalists have another go at it; this time police them better.

There are two types of unemployed people. Lazy idiots or sick - be it mentally or physically - people. Neither should have any part in construction bridges.