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Source link: http://archive.mises.org/15374/job-killing-labor-costs-and-the-manufacturing-sector/

Job-Killing Labor Costs and the Manufacturing Sector

January 20, 2011 by

If the cost of labor increases, someone has to pay for it. Laborers may pay in the form of decreased work opportunities, investors may pay in the form of decreased returns on capital, or consumers may pay in the form of higher prices required by increased costs. FULL ARTICLE by Christopher Westley

{ 87 comments }

Bogart January 20, 2011 at 9:25 am

Wrong!!! Krugman sez it is a lack of demand and government regulation that is the issue.

Ken January 23, 2011 at 10:15 pm

Maybe the government could mandate demand. :-)

guard January 20, 2011 at 10:30 am

“It is obvious that current levels of manufacturing output could be achieved with higher levels of labor input than we see today.”

Huh? I thought it was good to be more efficient. Don’t we want to increase the use of capitol?

RWW January 20, 2011 at 8:54 pm

No no, the Capitol is already far too involved. :)

labeling systems February 24, 2011 at 2:46 pm

That’s good RWW. A solid background of efficient infrastructure with labor makes for a perfect foundation.

Ohhh Henry January 20, 2011 at 10:32 am

It is one thing if electronic manufacturing moves to Asia because Asians have comparative advantages in their production, but quite another if it moves to Asia because of artificial costs placed on domestic producers.

The Big Lie that is killing jobs in America is that Asians are working in slave conditions, and to take the slightest step to ease the problems of employers would be to reduce American workers’ conditions to the slave status of Asians.

To reconcile this destructive policy with human action, one must consider the motivations of the union leaders, community leaders (so called) and other influential people in the USA who make their living from advocating (or so they claim) on behalf of American workers. They enjoy job security either because of direct government funding (of the poverty industry, of academia, etc.) or because of union legislation which favors large, officially-recognized unions whose top level leaders and bureaucrats will continue to receive their salaries and perks as long as their workers’ jobs are not entirely extinguished – which they never will be as long as the government can be convinced to subsidize the last remaining large, unionized companies. Far from suffering as a result of killing jobs in the USA, these elites actually benefit because the worse the situation becomes, the stronger the case they can make to the government that their services (so called) are more critical than ever.

Lee January 20, 2011 at 10:40 am

I don’t know or pretend to know a damn thing about economics; the couple of courses I had in college left me convinced the field is indeed “dismal”. What I do know and believe however, is the evidence of my own senses. When I drive around and see crumbling factories, when I find it literally impossible to buy a huge range of American made products while socialist and communist countries thrive on making products once made here, when I see a steadily declining standard of living and falling of wages relative to cost of living, when I see homeless numbers like haven’t been seen since the Depression. I also know wages of the people who actually produce things are always the scapegoat for whatever ills of the economy. We all know “figures” can mean anything one wants them to mean; the government has given us what should be a Phd course in how to lie with them. Considering the present situation I do believe it is very pertinent that free trade used to be considered a fundamental of socialism, not capitalism. In a free world free trade might be fine. But the world is not free and is getting even less so. Before the basic purpose of government became ‘economic equality’ , the basic purpose was considered to be defense of it’s people in a competitive and hostile world.

George January 20, 2011 at 11:16 am

What you see depends on where you drive. Manufacturing facilities in the rust belt are crumbling away because the people there priced themselves out of the market with inflexible workplace rules and demands for pay that is far more than their labor is worth.

Manufacturing is thriving in the southeast where companies like Hyundai and Toyota set up shop. Unions are generally unwelcome in that region and the folks there have a much better work ethic than the workers in the rust belt.

In the southeast you get high quality labor at a fair price. In the rust belt you get inflexible union rules and workers who don’t care and want too much.

Lee January 20, 2011 at 11:57 am

I’m in southeast Louisiana. I won’t attempt to defend the excesses of some unions in some places but that’s certainly not the problem here.

Anthony January 20, 2011 at 2:16 pm

Lee,

Take a look around this website… do some searches or peruse the “daily” section. There are a lot of great resources that can help clarify the issue… contrary to popular opinion the case for free trade is actually quite straightforward and elegant, at least when it is grounded in logic.

I think you might find Austrian economics less dismal (in the sense of it being less convoluted, confused, contradictory, complicated and inconsistent) than the mainstream variety you would have studied in college.

biomedlives January 26, 2011 at 10:02 am

So when, free trade enthusiasts, will current economic policies bring us a lower trade deficit? Perhaps, though, you don’t see the chronic trade deficit and the accumulation of large reserves by China as problems.

Colin Phillips January 26, 2011 at 10:05 am

What do current economic policies have to do with free trade?

Vanmind January 29, 2011 at 1:02 pm

The need for a “positive trade balance” is a lie.

biomedlives January 26, 2011 at 10:06 am

“…regulations have by their general obstructive tendency.. ” Without regulations, we could have thalidomide, heavy metal ions in the water, and E. coli in our food.

Colin Phillips January 26, 2011 at 10:38 am

Well, yes, in a free society, you would be welcome to add all of those things to your diet, if you wanted to. I wouldn’t stop you, but I wouldn’t shake your hand either. In general, because those things are widely considered harmful, most people would choose not to buy food, water, and medicine from someone who did not take pains to show he had removed these things. It’s quite simple really – if government is able to solve a problem, the free market is also able to solve that same problem, usually incredibly more fairly, justly, and efficiently.

Vanmind January 29, 2011 at 1:06 pm

Unlikely. It is regulation and the inherent liability limits of being a politically-connected company within a regulated environment that leads to things like poisoned consumer products and environmental disasters. Under free markets, almost no company would dare to defraud people in such ways.

bobobberson January 21, 2011 at 12:16 pm

Well then surely you know of the almost 1 billion dollar investment of the SeverCorr (now Severstal) steel plant near Columbus, MS. New jobs, and new manufacturing capacity.

http://www.severstal.com/eng/businesses/international/north_american/columbus/
http://en.wikipedia.org/wiki/SeverCorr

From their website:
# In process of Phase II expansion, which will double the plant’s capacity with startup scheduled for 2011
# 19 Southern automaker assembly plants are located within 450 miles
# Hundreds of acres on mega site set aside for downstream processing and service partners
# Named as a “Best Place to Work in Mississippi” for 2009
# Received Steel Manufacturing Association award for no lost work accidents in 2009

Also check out their facility in the rust-belt:
http://www.severstal.com/eng/businesses/international/north_american/dearborn/

Charlie Virgo January 20, 2011 at 2:29 pm

It’s probably not a good idea to preface your paragraph about economics with the line, “I don’t know or pretend to know a darn thing about economics”. Anything you say after that is automatically discredited.Anyways, what you’re saying is incorrect. Like Ohh Henry, says, whether you find factories or not depends on where you look. You also have to take into account the fact that manufacturing now is not the same as it was 50 years ago, mostly because of advances in technology. We don’t need the sprawling plants and corporate cities that we once did.”Considering the present situation I do believe it is very pertinent that free trade used to be considered a fundamental of socialism, not capitalism. In a free world free trade might be fine. But the world is not free and is getting even less so.”-I’m curious to know what you mean by this. Free trade is certainly not a principle of socialism, if that’s what you’re getting at. And whether the entire world is free or not doesn’t play a part in whether we should have free trade. The purpose of free trade is to buy products from countries that can produce them easier than us (and vice versa), allowing both parties to produce what they are best at. Whether the other country is communist or not shouldn’t play a part in our decision to engage in commerce with it. Also, consider that, according to Friedman, there is a direct link between the economic and political freedoms that a person enjoys. So as we encourage free trade with other countries we will also be helping their citizens have more liberty.

Matthew Swaringen January 20, 2011 at 2:32 pm

“Before the basic purpose of government became ‘economic equality’ , the basic purpose was considered to be defense of it’s people in a competitive and hostile world.”

I would call this mercantilism, and the results at the time of this policy was not to help people, but instead to keep them impoverished. The purpose may have been defense but like most government interventions the unintended consequences were much different than what the policy was set out to do.

All other things being equal, am I better off if I have 200 people to trade instead of 20? The answer is undoubtedly yes. So the government coming in and telling me I can’t trade with 180 people because they are from x country or they’ve exceeded their quota for sales or they don’t sell here because the tariffs prevent them from making trade/etc. is completely unhelpful to me.

Labor is a subset of trade, so the same logic applies.

RWW January 20, 2011 at 8:59 pm

…while socialist and communist countries thrive on making products once made here…

Socialism and communism are relative terms these days. Look around you in the good old USA.

…the basic purpose was considered to be defense of [its] people in a competitive and hostile world.

I don’t much care what purpose the state once claimed to serve, and what purpose it now claims to serve. In reality, the state can only do harm.

BuckeyeChuck January 21, 2011 at 11:57 am

“What I do know and believe however, is the evidence of my own senses. When I drive around and see crumbling factories, when I find it literally impossible to buy a huge range of American made products while socialist and communist countries thrive on making products once made here, when I see a steadily declining standard of living and falling of wages relative to cost of living, when I see homeless numbers like haven’t been seen since the Depression. I also know wages of the people who actually produce things are always the scapegoat for whatever ills of the economy.”

There was a time when people “knew” the earth was flat, and that the sun revolved around the earth, and that all matter was comprised of four basic elements. They “knew” that disease was caused by evil spirits and the bloodletting was an effective cure. They “knew” all of these things becaue their senses told them.

Believing one’s senses is natural. Blindly relying upon them without recognizing their limitations leads to error.

“But the world is not free and is getting even less so.” Agreed.

“Before the basic purpose of government became ‘economic equality’ , the basic purpose was considered to be defense of it’s people in a competitive and hostile world.” This is a matter of opinion that very few here share. I think the basic purpose of government has usually been to tyrannize one group of people for the benefit of another, and I also think this has often been called “defense of its people in a competitive and hostile world.” Neither purpose you list is moral because people in such systems are not free, which is the natural yearning of the human spirit.

Mr E January 20, 2011 at 11:35 am

What you have to understand about outsourcing is that it’s the transfer of US technology to countries that have cheaper labor based on exchange rates. So whatever country prints new money out of thin air faster, they will have cheaper labor based on paper exchange rates. Additionally, outsourcing is not cheap. Other countries have industrial policies which means that to encourage outsourcing they create all the fiat money out of thin air that is necessary to induce foreign manufacturers to setup shop overseas. Trade to a large extent today is really just a money printing out of thin air game.

In today’s world you have countries like the US that creates money out of thin air and provides tax credits to fund outsourcing. The money printing stimulus packages have given the US multinationals record profits in which they are taking those funds to invest overseas. Contrary to what is told, the stimulus packages did create a lot of jobs but just not in the US. While the US creates money to fund outsourcing and artificial consumption, other countries create money out of thin air to fund production and to induce companies to setup shop in their country. Additionally, countries with industrial policies endlessly back their private companies with the printing press whether they are profitable or not which allows foreign competitors to dump products overseas below cost. So if it costs 5K to make a product they will sell it overseas for 3K in which the foreign central bank creates new money out of thin air to cover the difference between the price to make and price sold below cost abroad. Policies like this allows competitors to put out of business their rivals and to absorb their capital.

Countries like Japan and Germany have just as high as taxes and higher labor costs then the US and they have trade surpluses. The reason being is that they use their printing press to fund investment in manufacturing. The US on the other hand creates money out of thin air to fund outsourcing.

greg January 20, 2011 at 12:08 pm

It is not about how much you pay someone per hour, it is about the labor cost per unit and the total percentage of labor cost per unit. In China where manufacturing is labor intensive, the percentage of labor cost per unit is very high. When the Chinese manufacturer has to increase the pay level, it has a major impact on the total cost. Whereas in the US, the percentage cost for labor is low and as productivity picks up, the effects of labor cost does not have a major impact.

There are other cost to consider and when they rise, the decision to shift manufacturing back to the US makes sense. I can tell you that prior to the huge increase in oil cost, the cost to manufacture one of my items had a slight advantage to use Chinese manufacturing. Due to lack of control, I manufactured the item in the US. And when the cost of oil took off, the cost of distribution rose and the advantage turned to the US.

You have to understand that when you are running a business and your competition gains an advantage due to lower labor cost, most of us have only two choices, go out of business or decrease our unit cost. Moving our operation to the lower cost area is not an option to most of us because of the whole cost of setting the business up again. So if we want to stay in business, we need to invest to increase productivity. And this is what you are seeing in the US today, increased productivity which takes away from the importance of labor in manufacturing.

Increased productivity also allows us to use less skilled labor to run the equipment. This allows companies to move their operations to areas that have better tax and living conditions. Hence the move from the NE to the SE.

Finally, you need to figure out the total cost of labor as a percentage of the retail cost of an item to get a better understanding of the effects of manufacturing labor. Using the item I manufactured will give you an idea.
Retail price: $12.99
Wholesale price: $7.00
Distributor price: $3.50
Cost to manufacture: $1.86
Labor cost per unit: $.20 or about 2%
The amazing thing is I paid my sales rep $.70 to $1.40 per unit to set up sales to distributors and wholesalers. The point here is the cost of manufacturing labor does not effect the overall price as much as people lead you to believe.

Herb January 20, 2011 at 12:31 pm

Companies only will go offshore if they can then turn around and import their products with 2% tariffs. We need to protect our markets also with much higher tariffs like we had from 1792 until the 1980′s

Anthony January 20, 2011 at 2:11 pm

Herb,

Do a search for protectionism or free trade on the “daily” section of this site… you will find many well written, simple, clear and concise articles that show why free trade benefits society while tariffs always hurt society as a whole. If you are amenable to logic you might find that your perspective on the issue will change rather dramatically.

Herb January 20, 2011 at 2:19 pm

Anthony,

Perhaps you are the one needing “logic.”

In addition to what I said earlier, minimum wages need to be set much higher also, more along the lines of a “living wage”. If the private sector does not provide sufficient employment to bring the unemployment rate down to a reasonable level then it is government’s job to step in and provide that employment directly though public works projects. Yes this is Socialist and yes this is a better way to run a society. Just look at many countries in Europe and you will see much more successful societies where for the most part people can pursue their lives without fear of poverty, everyone has good quality health care, old age security, etc…

What you will not see in these European countries is the very rich nor will you see the very poor. This is an overall better situation in the long run. True, if you want to become filthy rich than this is not for you but most of us just want to live a meaningful life and “becoming rich” is just not important.

Charlie Virgo January 20, 2011 at 2:41 pm

Unfortunately, Herb, I can’t see Europe very clearly what with all the rioting and smoke bombs due to the super successful Socialist system over there. Maybe when it clears up I’ll see the great things you’re describing, but history suggests otherwise.

The problem with your argument about minimum wages is that you assume too much. Explain, if you would, why I am not paid $7.50/hour even though that’s all my company is legally obligated to pay? It’s because my job is worth more than that and my company knows that if it didn’t pay more, than I (and all my coworkers) would go to a companies that did (putting my current employer out of business).


Socialism is something that sounds great in your mind until you realize that it’s: impossible to enforce in any sort of modern economy (no single organization can determine how much of each product is needed, the market is the only one), unfair/immoral (why should I be compensated equal to someone with less skill?) and detrimental to society (if I’m getting paid regardless of production, why produce much?). For an excellent example on why this is so, I recommend “Pictures of a Socialistic Future”, it’s an awesome read.

Colin Phillips January 20, 2011 at 2:41 pm

Wow.

Herb, you’re either a troll, or you are quite new to this site. I hope you have fun exploring, because there are some ideas on this site that are going to blow your mind, if you’re open to them.

A few general tips: People on this site can be quite demanding, and you are expected to be able to justify everything you say. I think you will find many interesting conversations in the comments section, but don’t be surprised if people mock you for the kinds of ideas you expressed above.

For example, you said: ” minimum wages need to be set much higher also, more along the lines of a ‘living wage’. ” Why use the word “need”? If someone wants to work, and is willing to accept a job that pays less than what you consider a living wage, why should you stop them? They will earn more by having a low-paying job, than by *not* having a higher paying job.

In fact, if you think about it, a minimum wage automatically destroys all jobs which can only survive at lower pay, creating unemployment. If this weren’t true, why could we not just say that the best ‘living wage’ is, say $100/hour? Any business that could not make at least $100/hour out of each employee would go bankrupt, and all the employees would be out of a job. Not by their choice, but by yours. By supporting a minimum wage, Herb YOU are partly responsible for the unemployment rate, not ‘the private sector’. And since it is YOU that supports the minimum wage, why should anyone but YOU “step in and provide that employment directly” – why make all the taxpayers pay for YOUR idea of a “living wage”?

Herb, I really hope you’re not a troll. I really hope you’ve been sent here by someone who cares for your education, and wanted to expose you to new ideas for your benefit. And I hope you have enough of an open, thoughtful, intelligent and humble mindset that you can take the time to do some reading on this site.

Until such time though, you have branded yourself a socialist, and some people here are, I’m quite sure, going to rip you to shreds. Keep your chin up, and the worst will be over soon. Don’t run away, though. The perspective you get from a deeper understanding of human action and its real consequences is priceless.

Good luck!

Matthew Swaringen January 20, 2011 at 2:43 pm

Herb, you state conclusions but not reasons. Thus delivering “logic” is not something that you are doing.

If you haven’t learned to think from a starting point or axiom to those conclusions you haven’t learned logic. If you have done this, then you should explain that rather than giving a bunch of typical social-democrat mumbo-jumbo.

Have you not seen the riots in these perfect European countries? Their perfection is in your imagination, they have numerous problems of their own, and where they do better than we do they tend to have less regulation. Yes, indeed they may have some socialist policies that we don’t have, but they don’t have many of the ridiculous policies that we do.

You seem to be combining a confusion of causation/correlation with bad information to reach your conclusions.

J. Murray January 20, 2011 at 2:48 pm

The problem with those statistics is that they’re always isolated on a nation-by-nation basis.

http://www.timbro.se/bokhandel/pdf/9175665646.pdf

This is a wonderful study on that very subject. While it’s a little old at 2004, it demonstrates that even the lesser level of socialization of the USA is far superior to the European model when everything is normalized. European Socialism relies heavily on manipulating statistics and avoiding normalization because without the normalization, the “more even” income brackets create an illusion of greater egalitarianism.

For a basic summary, the Top 15 European Union nations averaged (including France, Germany, and Sweden) are on the economic level of Arkansas if all of their economic indicators (GDP, poverty rate) were calculated identically to the way it was done in the USA. Basically, the study treated each European state as if they were a state in the USA. The results are astounding. With the exception of Luxemburg, every single EU member state would be counted in the bottom 25% of the USA in income levels and also have highest poverty rates in the country. A full 40% would be considered living in poverty if Sweden was a US State, this is *INCLUDING* all those social benefits like free health care and welfare payments. The average Swede is worse off than many of the poor members of America. Again, with the exception of Luxemburg, the *AVERAGE* European lives slightly worse than the lowest 1/5 income bracket in America. The average citizen of Luxemburg lives about as well as the lowest 1/5 of America.

You might want to reevaluate your thinking process. Horrendous use of statistics has generated huge imbalances toward the so-called superior socialist model. Even things like universal health care when normalized around a single standard demonstrate the vast supriority of the market produced system, like how the US has the highest life expectancy in the world when accidents, suicides, and murders are removed from the calculations and also has the world’s best infant mortality rates when pre-mature births in the US are called miscarriages as opposed to adding to the infant mortality statistic like they are in the European states.

Sure, the US system is broken, but only because we’ve allowed socialism to creep into our lives. But going further down the path toward the European system, including the vaunted Swedish system, would just make things here worse.

Walt D. January 20, 2011 at 5:38 pm

As a good point of rhetoric, Milton Friedman once pointed out that there were more (indigenous) Africans who owned cars under apartheid in South Africa, than the total numbers of cars in the old USSR!

El Tonno January 20, 2011 at 6:43 pm

Luxembourg is very special as several tens of percentage of its workforce drive in from neighbouring countries in the morning and leave in the evening. It’s like D.C. but with lots of banks instead of administrative buildings.

Talking about administrative buildings, if you manage to be state employee in Luxembourg, you have won. Salaries are really, really good, way higher than in the private sector, up to twice if you can believe that. Which also explains why 1/5 of the local population is in state-sponsored jobs.

J. Murray January 21, 2011 at 7:33 am

Exactly, but compare it to America’s D.C. and Luxemburg is once again back into high poverty rates. Washington D.C. more than doubles Luxemburg’s per-capita income. D.C. simply has much, much more to absorb because of the lesser extent of socialism of the surrounding areas.

George January 20, 2011 at 2:49 pm

The private sector provides wages commensurate with your skills and productivity. They do not need to raise their rates, you need to increase your skills, productivity and work ethic to merit a higher wage.

In the U.S. 10% unemployment is an aberration that happens once a generation, in Europe it’s the norm even in the best of times, do you consider this better?

In Europe they’re imploding under the weight of the system you’re clamoring for and if they’re not bailed out several of those nations will default, do you consider that better?

You say it’s an overall better system and that’s your opinion, but it’s not up to you to decide what’s best for everyone else. If you want to live in that kind of a system then move to France and become a French citizen. If you stay here it means you consider that to be in your best interest.

Iain January 20, 2011 at 2:44 pm

Herb-

Yes Europe may have some of those things, but on the backs of fiture generations.

Herb January 20, 2011 at 3:45 pm

Interesting comments on my post. Then why are the people of Scandinavia consistently the “happiest” people in the world. I think Denmark is #1 with the rest of Scandinavia right up there?

Having traveled to Scandinavia over the years I have noticed that they do not have this huge “distrust of Government” syndrome that we seem to have here. Probably because their form of government actually works whereas ours which is dominated by big money and big corporate interests does not. Everyone I’ve run into over there is quite supportive of their form of government and they are universally repulsed and astonished by our wealth disparity and the fact that not everyone here has access to basic health care.

Beefcake the Mighty January 20, 2011 at 4:09 pm

I suppose it has never occured to you that the reason Scandanavian countries are the way they are is because they’re populated primarily by Scandanavians?

Gil January 20, 2011 at 10:21 pm

That made snese. :\

Horst Muhlmann January 20, 2011 at 5:23 pm

Then why are the people of Scandinavia consistently the “happiest” people in the world?

Says who? And by what standard?

I think Denmark is #1 with the rest of Scandinavia right up there?

How does Denmark compare to Danish-Americans? Actually, I’ll concede that point to you since according to Heritage, The United States is more socialist than Denmark. Denmark has an Economic Freedom score of 78.6 compared to 77.8 for the US.

I hope you stick around. Unlike other left-leaning posters, who have been quite belligerent, you seem to be a nice guy so far.

Daniel Hewitt January 20, 2011 at 9:53 pm

He does seem well meaning, and comparative advantage is a difficult concept to wrap your head around at first. Essays like this – leftists defending free trade – can be useful for folks like Herb (if he’s still reading this).

http://web.mit.edu/krugman/www/ricardo.htm

Walt D. January 20, 2011 at 5:43 pm

“Then why are the people of Scandinavia consistently the “happiest” people in the world. I think Denmark is #1 with the rest of Scandinavia right up there?”
Why do Denmark and Sweden have much higher suicide rates, particularly for women, than the US?

integral January 21, 2011 at 3:13 am

We’re so happy in scandinavia that sometimes it just blows our minds… right out of our skulls.

bobobberson January 21, 2011 at 12:23 pm

If they are so happy, how come their suicide rate is above the US? How come female suicide is 2x the US?

http://en.wikipedia.org/wiki/Suicide_rates

Jim January 20, 2011 at 3:46 pm

While I certainly don’t disagree with the gist of the article, I think it’s a little too much of a generalization to say that so much efficiency gains have come only as a result of regulation. Using the soda fountain example, why would the fast-food restaurant not still want customers to get their own drinks, and reduce labor demands, simply because they want to increase their profit margin?

Lee January 20, 2011 at 4:45 pm

Charlie Virgo

You’re not really telling me that knowledge of economics should trump what I can see with my own eyes, are you? I’ve read Alice in Wonderland but I don’t base decisions on it.

Yes, manufacturing plants do change depending on the product; some don’t change very much. Since I live in an area where forestry products have always been the big industry that’s certainly the case around me. And that certainly doesn’t negate what I said about not being able to find American products.

Since I consider most modern printed materials heavily tainted with Communism, I get my definition of free trade from the article on Socialism in the 1909 edition of Encyclopedia Britannica as well as other sources. But again, I really don’t need to see it in a book; I have the evidence I can see with my own eyes.

“Free trade helps everybody..” . I don’t want to help everybody, Charlie; why should I want to help people who intend to kill me or make me a slave? Communism is the enemy of anyone who wants to be free. As long as Communist behavior seems bent on world domination it will remain so. And please don’t tell me this garbage about Communism being dead. It’s an amorphous, chameleon-like system to begin with and it’s merely changed it’s form. Mostly out of dire necessity, I might add, before they all starved to death.

Anthony January 20, 2011 at 9:42 pm

“I don’t want to help everybody”

So you would rather impoverish yourself and your neighbors then giving people the freedom to choose who they trade with? And the best way you can think of to fight communism is to adopt mercantalist policies?

The way to fight communism is by fighting for freedom, and by arguing that people should not be allowed to trade without the government’s permission you are fighting against freedom.

elgecko84 January 20, 2011 at 11:18 pm

Lee,

I’m not suggesting economics take the place of reality, I’m suggesting your reality is too narrow, you just need to widen your gaze is all. I’ll use Louisiana as an example. According to the National Association of Manufacturers, the forestry industry upon which you are basing your argument (” Since I live in an area where forestry products have always been the big industry that’s certainly the case around me”) is only the 10th most productive element of LA manufacturing. So by only focusing on what is around you (i.e. the relatively small forestry industry), you are missing the fact that oil, metal, chemical, aerospace (ok, you probably aren;t going to use much of that one), machinery and various other products are indeed manufactured right there in LA. On a global level, the US produces 21% of all manufactured goods. That’s not to say your shirt wasn’t made in China and your toaster in Taiwan, but it’s still more than any other country. You can check my stats here: http://www.nam.org/~/media/538F597F8FC544769336123AA3AB12C6.ashx


“I don’t want to help everybody”


If N.Korea is better than us at making a widget, which will save us money and resources to produce things we are better at, why wouldn’t we take advantage of that? I understand it’s a difficult concept at first, but it always goes back to looking at the big picture. Would we be dealing with N.Korea, or any country really, if it wasn’t going to be profitable for us as well? Your post insinuates that the communist country is the only one that benefits. But that isn’t the case, or else we wouldn’t be bargaining with them. So aside from the point that Anthony makes below, that economic freedom leads to political freedom (and the destruction of communism), we also end up using our own resources more efficiently, leaving more for use in other areas. So you see, it’s not a question of choosing economics or reality, it’s understanding how economics describes reality.

greg January 20, 2011 at 5:43 pm

The trick is to have a multiple streams of revenue. I am not talking about getting wrapped up in some pyramid scheme or anything like that. There are many businesses you can start yourself with little to no money out of pocket. I started an eBay business 3 years ago that is still running strong today. The peak was profiting around 1400 per month and is currently around 600. That still pays my utilities plus a little. My big hopes are on my other one.My wife was fired from her job mid 2008. I was fired from my job Jan 3, 2009. Of course the first few weeks were a shock and I was on the verge of falling into depression. I pulled myself out of bed one morning with the realization that I really have the opportunity of a lifetime! I have the time to do what I really wanted and enough money coming in to stay afloat while I chased my dreams.1st I wanted to get into shape. I went for a run and was able to go almost 1/2 mile straight. I kept running and got up to about 3 miles but realized I would never accomplish “getting into shape” unless I set a goal and did whatever it took to achieve it. I decided to set the high goal of running a full 26.2 mile marathon, even though I haven’t ever ran a race longer than a 1/2 mile track meet in high school almost 20 years ago. I completed my 1st marathon on Oct. 24th, 2009.2nd I wanted to start my own business. I had a construction background and little investment money. I decided to go with a sweepstakes directory. I entered some before with some success and thought with as bad as the economy is, I bet a lot of people are looking for a way to get some extra money themselves. A few thousands bucks later my website http://www.SweepsPlay.com went live. I had to go back to work because it doesn’t make enough to support us yet, but it is growing. Hopefully in the next year or so my wife and I can be home together again and spend time doing what we love without the stresses of money on our shoulders.My point is that if you have lost your job, it is tough. I know, I have been there. Just keep your head up. It could be the best thing that ever happened if you take advantage of the opportunity. If you still have your job, even better! Plan ahead in case you lose it. You can’t imagine how good it feels to have enough money to live on coming in from 2,3, or even 4 different places! Good luck.

Nick Bradley January 20, 2011 at 5:53 pm

There are more government interventions that have negatively impact the manufacturing industry besides labor regulation.

To begin, let’s begin with our corporate tax structure. Currently, the United States is the only industrialized country in the world that taxes profits made overseas. As a result, there is a trillion dollars of corporate profits within multinationals that ‘cannot come home’. So, what do they do with this money if it cannot be repatriated? Simple: more foreign subsidiaries! European producers, with far more onerous regulations, can still export goods and services and they have exports exempted from the VAT.

An easy, pro-manufacturing tax reform would be to replace the Corporate income tax with a VAT — with exports deductible. A 2% VAT would cover the entire corporate income tax and prices for US consumers wouldn’t go up one penny.

Additionally, the red tape encountered when trying to build a factory in the US is much more difficult than China. Environmental regulations, permits, payoffs to local governments for road construction, etc. These difficulties are not encountered in the third world.

The global arbitrage between Western Workers and the Rest of the World’s Workers is shrinking — the productivity gap between a middle-income country (e.g. Brazil) and a rich country (the US and Western Europe) is much smaller than the wage difference. new manufacturing will continue to spring up in Middle Income countries until the labor output per dollar of wage is the same…adjusting for disparate capital costs in different markets, shipping costs, local taxes, etc.

If the United States REALLY wanted to increase manufacturing, they would import cheap migrant labor to work in factories. Is it better to have a US auto plant staffed by Mexicans in Monterrey, or to have a US auto plant staffed by Mexicans in Michigan?

J. Murray January 20, 2011 at 6:07 pm

I think you missed the point of the article. US manufacturing is increasing, rapidly, it’s the employment in those sectors that is shrinking. It’s thanks mostly to the rapid increase of mechanized factories in non-union states. The real question we should be asking is why the large glut of experienced factory workers aren’t being picked up by new manufacturing interests.

The current market segments the US leads the world in manufacturing are ones we don’t normally see in our day to day lives, such as medical equipment and anything that’s big (planes, ships, earth movers, etc). We tend to get confused when all the things we see in our day to day life have a Made in China sticker on them, but tend to forget that all that stuff is simple, easy to produce things. The US still leads the world in complex production.

Nick Bradley January 20, 2011 at 6:35 pm

No, US Manufacturing is not increasing rapidly — it is keeping pace with global growth — about 1/5th of global manufacturing over the past 30 years. Now, you are correct that US manufacturing is far more capital-intensive than it was in the past — real output per US manufacturing worker has tripled over the past 40 years.

But I don’t think you can argue with the statement that a firm takes into consideration all costs and benefits when selecting a production site — right? So with a combined state and federal corporate income tax rate of 40 – 45%, a firm would have 66% – 80% more capital to invest overseas vs. reinvesting in a US Plant. GM takes in more revenue from overseas sales than domestic sales…they are NEVER going to bring that capital home for reinvestment unless they want to pay a punitive tax.

If it weren’t for all the non-labor intervention, there would still be more manufacturing jobs, albeit capital-intensive manufacturing jobs.

Lee January 20, 2011 at 6:35 pm

Point taken, J. Murray, and not a bad one. But I also remember the days of “japcrap”, before Japanese products began surpassing American products in quality. My impression was that new factories in Japan based on increasing sales, as opposed to antiquated factories here with declining sales, was a large part of the reason. Most Chinese products I’ve seen are very inferior to those we once produced. But I have no reason to believe they will remain so. Then What?

Lee January 20, 2011 at 10:09 pm

Anthony

Sorry for my ignorance of economics; I thought mercantilism died a couple of hundred years ago; didn’t realize it lasted until NAFTA.

The simple fact remains that what has impoverished my neighbors and I is free trade, or at least what passes for it.

Again, pardon my ignorance, but how will helping Communists help me attain freedom__the “freedom” of death?

Anthony January 23, 2011 at 4:15 pm

Sorry Lee, I am not sure if I can get past your bias… you say “sorry for my ignorance” (sarcastically, of course) but you don’t even seem to be listening to what anyone here is saying. I will try one more time:

“Free trade” means just that… that people are FREE to TRADE with other people.

Mercantalism is the practice whereby “the ruling government should advance these goals (increasing the welfare of the nation) by playing a protectionist role in the economy by encouraging exports and discouraging imports, notably through the use of subsidies and tariffs respectively.”

There is no government in North America (before OR after NAFTA) that does not subsidize industries, directly and indirectly, nor is there a government that does not have tariffs on (most) imports. Since you have argued against free trade, I reasonably assumed that you (like most governments) were taking a mercantalist position.

You say “How will helping Communists help me attain freedom?”
A better question is “how will preventing my neighbors from voluntarily making mutually beneficial exchanges help me attain freedom?”. I believe that it falls on you to answer that question before you can in good conscience argue for taking freedom away from other people.

Iain January 24, 2011 at 8:29 am

It is interesting to see how many ways ideas can be seen and used to advance many different ideologies.

Vanmind January 29, 2011 at 1:10 pm

You remain ignorant of economics because you insist on not learning anything about your ignorant opinions.

Daniel Hewitt January 20, 2011 at 9:57 pm

Lee,

Trust me, this article is well worth your time reading.

In Praise of Shoddy Products
http://mises.org/daily/1701

Lee January 20, 2011 at 10:47 pm

Daniel

Thanks for the reference; I’ve read the article. There’s some of it I can easily agree with; not all products need to be long lasting; I’ve made the same argument with people a number of times.But particularly in regard to free trade, as much as I hate to analyze people, I can’t help getting a heavy sense of cognitive dissonance. Would he have said the same things if only American products were involved? Neither do I believe the availability of cheap shoddy products is necessarily any great boon to the poor; I think in many cases they got better products with less real outlay of labor.

Mr E January 21, 2011 at 1:34 am

Labor costs above the value of the product they make is always a receipe for unemployment. There is no argument there but what I think needs to be mentioned is that the decline of manufacturing in the US is not the result of free market forces and most of it is not related to labor costs being above the workers marginal productivity value or automation. A lot of it is due to outsourcing. Only some type of central economic planning could have led to the massive deindustrialization of America. That’s where the NAFTA and WTO entities come into play. These entities with their trade decisions done behind closed doors decide what sectors are going to be benefited at the expense of others. For instance the WTO allows developing countries to retain tariffs of 30% to protect industries considered infant. Also outsourcing is not cheap. Money is created out of thin air to fund the outsourcing of US jobs. The deindustrialization of America involved entities like NAFTA, WTO and the Central Banks all working together.

A lot of the decline of manufacturing employment in the US has been due to outsourcing. Technologies and industries that the US created and should have the advantage in have went overseas all to take advanatage of cheaper labor based on exchange rates due to other countries policies of creating new money out of thin air faster. Other countries have active industrial policies where to encourage outsourcing they use the printing press to create as much new money out of thin air as needed to encourage outsourcing. Besides this practice other countries create new money out of thin air faster relative to a trade partner to make their exports artifically cheaper and to have their labor based on exchange rates artificially cheaper than a trade competitor. For those that think they do the US consumer a favor by undervaluing their products, remember foreign companies have taken those dollars that US consumers gave them to buy and acquire over 16,000 US companies during the last 30 years. Furthermore some countries endlessly back their private companies whether profitable or not with the printing press which allows these companies to dump products overseas at prices below cost which puts domestic competitors out of business and leads to the absorption of their capital. Trade in a lot of instances today is really just a money printing out of thin air game.

Besides monetary intervention, tax rates also have an affect when it comes to outsourcing but to a lesser extent. Corporate tax rates on paper could always be much lower. It never made sense to me to allow products from protectionist countries to come in for free while we tax producers to produce in the US. Yes depending on the state you manufacture in, combined Federal and State tax rates on paper could be up to 45%. However, it’s important to note that the average effective tax rate paid after deductions and credits have been taken into account come out to 15-25%. Also there are many loopholes in which tax rates come out to less. When taking companies that use tax shelters and outsource actively into account some may pay 0% in taxes and some even get money back which means they pay negative taxes. But what’s important to note about taxes is that when US corporate tax rates were much higher in the past, the US actually produced more which was due to the fact that there were always loopholes. So even though US corporate tax rates on paper are still one of the highest in the developed world they have declined throughout the years which makes one wonder why manufacturing has continued to shrink? The answer being that the multinationals get subsidized with printing press money either from their home country or from a foreign country to outsource.

To make the point that monetary intervention and not labor and tax rates are the main causes of US outsourcing lets look at Japan and Germany. Japan has higher tax rates, higher labor costs, an undervalued currency and very little natural resources. Yet they have a trade surplus. Germany has higher labor costs and relatively high tax rates close to the US and yet they have a trade surplus. What these countries have in common is that they have an industrial policy. So no matter what tax rates or labor costs are, the printing press is used to for their objective of trade surpluses. But besides using the printing press to fund investment in manufacturing, they also have policies to encourage savings. The US on the other hand uses the printing press to fund outsourcing, bases abroad and artifical consumption which is not a policy for economic growth. And when it comes to China they use the printing press to encourage foreign companies like from the US to setup shop there by funding the outsourcing of factories and by making their labor cheap based on the paper exchange rates which is determined by government fiat. So trade in a lot of cases today is really just one big money printing out of thin air game with computer key clicks.

Lee January 21, 2011 at 7:23 am

George Estabrooke, a hypnotist, is quoted as saying, “There’s two ways to kill a cat. One is to mess him up with a club. The other is to convince him that chloroform is good for fleas.”

Practically every day the advance of Communism is marked in the daily news, though never ever referred to as such. Free trade is touted for all it’s wonderful blessings, “comparative advantage” ect.; the lion will be tamed and lie down peacefully with the lamb. I’m reminded of the frequency claims are made that FDR, while promoting Socialism to the fullest extent of his capabilities, was really “saving capitalism”.

Regardless of what one thinks about the Civil War I think we can agree that one of the prime factors in the South’s loss was that it had depended on free trade rather than developing it’s own industries_which of course had nothing to do with Communism_and when war came it was unable to produce the necessary materials.

Not too many years ago I learned to my great surprise that, during FDR’s war, Japan sank three times as much of our shipping as we did theirs; all that saved us was our tremendous capacity for manufacture. Would the war have happened if we’d had free trade? Maybe, maybe not; you just have to guess at what the Japanese mindset would have been. But it’s much easier to guess the Communist mindset now. They are still bent on bringing every individual on this earth under total control.

Sorry guys, but until you can show me a totally defanged and harmless Communism, I’m not buying the flea medicine.

Tom January 21, 2011 at 12:33 pm

They are still bent on bringing every individual on this earth under total control.

Are we talking about the Chinese or the U.S. Congress?

Charlie Virgo January 21, 2011 at 6:50 pm

The problem with your argument is that you begin with faulty information. Your definition of free trade is wrong to begin with, so it makes perfect sense you will come to incorrect conclusions. Free trade refers to a person’s ability to do business, free of tariffs or taxes, with whomever they choose. It does not mean communal living, where everyone shares available resources equally. It seems to me that you are confusing the two things. Free trade is about competition and the rewarding those who are best (aka, capitalism), which is why it is so vilified by socialists (who want everyone to be equal). So while we are operating with one definition, I believe that you have been operating with another. We are not advocating equality in trade, but liberty. As I was reading through various socialist parties’ perspectives on trade, I noticed they use the term “Fair Trade”, perhaps this is where the confusion originated? Because to be honest, no one who believes in Austrian economics is going to support socialism or communism, they are very things we are trying to destroy.

nate-m January 21, 2011 at 7:23 pm

People act like the central control of China means ‘that they can get stuff done’.

Which is very far from true. The central control and management is a liability of theirs. In order to progress and ‘dominate the world’ they will have to stop their socialist ways.

Our greatest threat to liberty, for the past 100+ years, has always been our own government. The Nazis maybe came close. I don’t know. But it is certainly our government right now.

The only way the Chinese can ‘win’ domination over us is if our government continues to de-ball our capitalism, tax us to death, burden us with regulations, and continue spending like a maniac. If we continue down this path the Chinese will probably win, not because of free trade agreements, but because our government destroyed us first.

Capitalism is the cancer that rots the Chinese government from the inside out. It’s our best weapon against any menace that they can generate. It does not matter how much they manipulate the currency because playing games with money will only weaken their ability to engage in truly profitable economic behavior and the only way their manipulations can affect us negatively is through our own government and federal banking system.

Colin Phillips January 22, 2011 at 8:17 am

Exactly right.

Daniel Hewitt January 21, 2011 at 9:01 am

Lee,

Trade does have a wonderful anti-war function. Belligerents isolating themselves from each other economically is a necessary precursor to war (I think you imply that also?). More trade = less war; that’s a good thing. Nobody can show you a totally defanged and harmless communism. We cannot even show you a totally defanged and harmless democracy. They don’t exist.

Back to comparative advantage, Art Carden has written some great stuff explaining it clearly. They are worth your time reading. Even if you remain unconvinced, you will have a sharper understanding of what you disagree with!
http://mises.org/daily/3744
http://blog.mises.org/13753/gains-from-trade-with-extreme-differences/
http://blog.mises.org/13752/gains-from-trade-an-example/

Lee January 21, 2011 at 12:51 pm

Tom

That’s precisely my point. There doesn’t seem to be much difference.

Gordon Hilgers January 21, 2011 at 6:52 pm

Well, well, well. Isn’t it simply beautiful, munificent, magnamonous, humble, virtuous and utterly selfless that business is “forced” to budget cut from the bottom when times are hard? From the bottom of the pile. The lowest echelon of employees. In a nation in which two percent of the population controls 50 percent of the nation’s wealth, in a nation in which there are over 51 million people living at or below the poverty line, in a nation when the so-called minimum wage is too small for even the most resourceful person to live on, in a nation in which 98 percent of the population controls about two percent of the wealth, we’ve got owners who are “forced” to cut the jobs and the salaries of their lowest-paid employees. Not too long ago, I perused a chart that showed income disparities between the richest and the poorest that tracked 100 years of disparity, and you know what? Never before, never before has America had such a disparity between the richest and the poorest. This, in an Orwellian turn of phrase, is “equality in America.”

Lee January 21, 2011 at 7:41 pm

Charlie

WUT???

What exactly is it you think about what I think? Whoever said anything about communes?

Yes, capitalism is about competition. So is war. That’s precisely why I want the deck stacked in my favor; I certainly don’t want a “fair game” or “level field” with my enemies. When commies sprout angel wings maybe-maybe I’ll believe we can have peace and cooperation. But from where we are right now cooperation just looks like suicide.

Charlie Virgo January 21, 2011 at 9:55 pm

I brought up communal living because that is the goal of socialism/communism, which you are incorrectly associating with free trade. In other words, each of your posts is tying free trade to communism, which is entirely impossible since that is one of the first things to go during the implementation of communism. It isn’t the advancement of free trade that is to blame for socialist and communist policies, it is the lack of free trade. You keep associating the wrong principle with communism (btw, are you a member of the John Birch society?). If you want the deck stacked in your favor, you will need to get the most out of your available resources, which is the exact purpose of free trade. Just in case I haven’t made myself clear: capitalism=competition=”free trade” while socialism=equality=”fair trade”. By opposing free trade, you are not only opposing your own freedom, you are limiting your progress. Also, you can stop trying to convince me that communists are bad and want to take over the world, I already know that. I am simply showing you the most effective way to combat them.

Lee January 21, 2011 at 11:08 pm

Since we obviously have a severe disagreement about who likes free trade, let me just ask you a couple of simple questions: Why would a “one world” system want anything other than free trade?
Second, has free trade helped Communist China?

Anthony January 21, 2011 at 11:53 pm

Yes. Trade has brought standards of living up immensely in China…

By the way, you still have not shown why you think that giving people the freedom to trade outside of national borders is communist while forcibly preventing people from trading across borders if the capitalist, freedom promoting choice.

Charlie Virgo January 22, 2011 at 12:24 am

Those are very good questions.

1. You are still confusing “free trade” and “fair trade”. I don’t know how else to explain the difference. A “one world” system is based on “fair trade”, where everyone is given equal opportunity. This is NOT what is best. The IMF is not advocating free trade when they promote a single global economy/currency/government, they want to be able to control trade and make it accessible to countries that are currently being left out (since they have little to offer). Again, this is NOT free trade, this is what socialists call fair trade.


2. Free trade has definitely helped China. It is one of the reasons that capitalism is being to take hold. And as we both know, capitalism and communism are polar opposites. So if you really want to rid the world of communism, you should be encouraging free trade, not opposing it. I will also reiterate my point that you are only focusing on the benefit that China (in this case) receives, have you thought about how it would help us?

Anthony January 22, 2011 at 12:05 am

Gordon Hilgers,

You obviously have not yet had the opportunity to do much reading here. There is far too much for me to re-write in this post, but why don’t you do a search for “income inequality” or “minimum wage” here (go to the home page to do a full search of this site)? Pick an article that sounds interesting to you and read it… I can guarantee it will challenge a lot of your beliefs and hopefully get you interested in learning more. Even if you are almost 100% sure of your positions try keep an open mind. You might be surprised at how much your views can change.

Regards,
Anthony

Anthony January 22, 2011 at 12:19 am

Here are some links that might help:

http://mises.org/daily/1229 (a short, easy to read but very interesting article on income inequality)

http://www.forbes.com/2009/10/16/minimum-wage-labor-economics-opinions-contributors-art-carden.html

Take 20 minutes to read these articles, and if you still feel the same way about minimum wage or inequality I would be happy to answer any questions you have.

Brett in Manhattan January 24, 2011 at 12:24 am

You left out that most of the 98% percent has access to technology that the top 2% couldn’t have dreamed about only a few years ago.

Steve Jobs made his money by selling products to everyone with a few hundred bucks, not just the so-called elites.

Of course, Marxists tend to avoid these “inconvenient truths.”

Julie January 22, 2011 at 1:09 am

I’m interested in the assertion that manufacturers are hiring less because of the cost of health reform. What are these costs, specifically? I have seen several articles saying that a surprising number of small businesses have been taking advantage of the tax credits in the bill to begin offering health insurance to their employees, which of course is an additional cost, but since it is voluntary, I doubt that is what you are referring to?

Lee January 22, 2011 at 10:59 pm

http://www.marxists.org/archive/marx/works/1847/09/30.htm

I suggest anyone interested in free trade check Marx’s comments at the end of the article.

Anthony January 23, 2011 at 4:36 pm

Lee,

First of all, Marx did not support free trade because he thought it was consistent with communism… he supported free trade because it was consistent with capitalism (because he thought that once the world had enough capitalism it would “result the struggle which will itself eventuate in the emancipation of the proletarians”).

Second, and more important, it DOES NOT MATTER IN ANY WAY whether Marx or anyone else supports free trade or not, regardless of their reasoning. There is an extremely powerful logical argument in favor of free trade and that is why we support it. Do you really expect people to oppose free trade because just someone they don’t like supports it?

Lee January 23, 2011 at 5:33 pm

Yes, Anthony, that’s precisely the point: Marx supported it because he thought it would kill capitalism. Check the history of who has supported free trade in this country; up until the Bush twins, who with their own and the media’s connivance managed to pass themselves off as conservatives, when in fact they were probably the most leftist since FDR.

As a matter of fact I do expect the majority of people to support it in a herd mentality, just as they supported the Bush twins while they pretty much destroyed whatever was left of this country; all they had to do was wave the flag and thump a bible occasionally and too many people never actually looked at the effect of what they were doing.

Anthony January 23, 2011 at 8:08 pm

Lee,

Did you read my second point? What Marx thought does not matter… he based his argument on a large number of erroneous assumptions that have been thoroughly debunked here. I will say it again: who has supported free trade and why has NO bearing on the legitimacy of free trade.

How about this: if you hate trade so much then you should refuse to buy anything that has at any point left your country, or that was made with anything that has left your country. Would that make you better off? Or have you benefited first hand from international trade?

Better yet, you should not trade with anyone outside your household. Think of all the jobs you would save if you refused to trade with anyone! You could make your own car, your own clothes, and you would be guaranteed lots of work to do.

On a more serious note, if you can see the benefit of trade within a country how can you fail to see that there trade outside of your country is also beneficial? How does crossing an arbitrary line on the ground make the difference between trade being beneficial and trade being harmful? Think about it.

Charlie Virgo January 23, 2011 at 9:05 pm

It’s amazing to me that someone can read that and come to the conclusion that you have. If you read it carefully, you will see that he is actually opposed to free trade because he believes it leads to the destruction that communism requires. Here is the quote I am referring to:

“by Free Trade all economical laws, with their most astounding contradictions,…will result the struggle which will itself eventuate in the emancipation of the proletarians”


Charles Manson employed similar logic. He taught that if Blacks and Whites were allowed to mingle, it would result in the great racial war that would put him in power over the Blacks. Just because he was promoting desegregation doesn’t mean he wasn’t a racist. Similarly, Marx believed that free trade wouldn’t actually work, which is what he needed for his theories to take hold. This doesn’t make him a proponent of free trade, because he actually believes it will fail.


Using your logic, then, you would have to say that free trade is a good thing, since Marx didn’t believe it was effective (“Free Trade…will result the struggle which will itself eventuate in the emancipation of the proletarians”).


While I agree with you that the Bushes were much more leftist than many people realize, it has more to do with their foreign, monetary and civil rights policies than anything. Unfortunately, what you haven’t realized is that you are the one drinking the feaux “patriotic” kool-aid by demanding products only be made in America. Some states are more socialist than others (I live in AZ, and both CA and NM are MUCH more socialist) but that doesn’t mean it isn’t in my best interest to buy things from them. Because in the end, and this is very important, capitalism will ALWAYS trump socialism. Free trade is simply the most efficient way for capitalism to do it. What you are arguing is that less efficiency, higher costs and poorer quality (how unpatriotic of me to suggest another country could produce something better than us…) is the best way to go. I recommend thinking more about Anthony’s argument because you manipulated it in order to ignore what he is really saying.

Lee January 23, 2011 at 9:43 pm

Guys, I think we may just have a very fundamental difference in the way we look at things. I have to admit I’m extremely isolationist and independence minded; above all else I value self-reliance, and that goes from the individual to the national. I have no taste for any international trade beyond sheer necessity.

But I’m being sincere when I say thanks for taking the trouble to put me to the test. Someday I may decide I’m wrong; I’ve been wrong about a lot of things before and doubtless will be again. But that’s why we’re here, isn’t it.

Colin Phillips January 24, 2011 at 2:51 am

Lee,

Nobody’s saying that you shouldn’t be independence-minded, there’s nothing wrong with that (other than losing significant opportunities for trade with people with a different comparative advantage than you, which is your choice). But by advocating the restriction of free trade, you are advocating removing that choice from other people – essentially destroying their independence, as they should ask you at each trade whether you approve of their trading partner. Thus, by restricting free trade, you are an enemy of self-reliance, not a friend. People will be forced to rely on your judgement rather than their own.

Iain January 24, 2011 at 8:27 am

Thank you, Colin, for explaining that rather well.

Charlie Virgo January 24, 2011 at 2:53 pm

That’s a very good point Colin.

Iain January 24, 2011 at 8:26 am

What I want to know is what happens when the insurance companies go out of business? Does that mean people working there will lose their retirement savings automatically and permanently? Is this what happens with these kinds of bills?

jnewsham January 25, 2011 at 3:30 pm

So government intervention and rising labor costs caused unemployment. In the late 1990′s and early 2000′s productivity rose but workers wages did not. Fewer workers accomplished more for less. In earlier periods when productivity rose, the fruits of productivity were shared with labor. In this period the wealthy enriched themselves and used the money to exert influence on the the political process to deregulate until their unregulated greed crashed the economy. The great strength of this country is in the middle class and working class which are being devistated by a 30 year period of redistribution of wealth to the upper class. We are stuck in this recession because the middle and working class workers who formerly consumed the manufactured goods have had their wages reduced, lost the jobs or had them cut back. While corporations based in the Cayman Islands, whose workers are overseas, claim the rights of US citizens. And workers must read smug articles about how they are to blame.

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