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Source link: http://archive.mises.org/5045/the-blessings-of-economic-sanctions/

The Blessings of Economic Sanctions

May 14, 2006 by

Iran has been concerned about threats of economic sanctions since the beginning of the year. But why? If trading with another country is bad, as we are continually told by nationalist conservatives and some well-known economists, then Iran should rejoice if the whole world refused to trade with it. Sanctions should be looked upon as a great economic blessing. Long live autarky.

{ 21 comments }

M E Hoffer May 14, 2006 at 9:59 pm

Mr. Vance,

I think you overstate the case being made by some, whom you term “nationalist conservatives”, by summing it up as : “trade with other countries is bad.”

Speaking for myself: I think that if we trade on the basis of financial price, alone, than we open ourselves to importing far more than the goods themselves. Shortly, the conditions under which those goods were made. If I understand the following, below posted, correctly, do we not force back in time our own progress when we trade, on basis of financial expediency, with the retrograde regimes mentioned?

http://austrianeconomists.typepad.com/

A few days ago I posted on my forthcoming paper with Josh Hall on international labor standards and economic development in the Journal of Labor Research. Our analysis of countries in Sub-Saharan Africa found that not a single nation in this region of the developing world has satisfied the development threshold the highly developed world satisfied when it when it introduced various labor standards. This is true for every major labor standard in place in the U.S. The average Sub-Saharan country is between 100 and 300 years from reaching this threshold, depending upon the standard one considers.

Josh and I have just added some additional work in this paper, considering the same question for so-called “sweatshop-intensive” developing countries–developing nations believed to be home to the largest concentrations of child sweatshops on the globe. The results of our study confirm our findings for Sub-Saharan Africa: increased labor standards for these nations are also highly premature.The average sweatshop-intensive country is between 35 and 100 years from the development-appropriate threshold for various labor standards.

Of particular interest for these countries are labor standards prohibiting child labor. We find the average sweatshop-intensive country is 35 years from satisfying the threshold for this standard. Only one such country in this sample has currently satisfied the threshold–Costa Rica. The others are between 9 (Brazil) and more than 1000 (Honduras) years from doing so.

You can access these findings through the new version of the paper available here. It may take a minute to load, as the new tables are quite large.

Posted by Peter T. Leeson on May 14, 2006 at 01:03 PM | Permalink | TrackBack

If my thinking is erroneous, I would be pleased if you could point me in the right direction.

Thank You~

cynical May 15, 2006 at 3:28 am

M E Hoffer

When someone says, “we” trade, it assumes things and implies others that are simply not true. I comletely understand your sentiment, M E Hoffer, but there are ramifications of using the word “we”. It assumes that all Americans trade ‘in block’ with other “Name your foreign Country”‘ers. This implies that all Americans are in agreement about every trade/exchange made OR they have to be in agreement.

The only question concerning labor conditions that really makes sense is the question over slave labor. I am against that. Everyone I know is against that. Apparently it is expensive to keep slaves, too. I just don’t see how that type of business practice would be successful, given the universal disdain for the practice. As for non-slave labor, people have different opinions… and for good reasons.

Mark E Hoffer May 15, 2006 at 7:31 am

cynical,

I understand your point about the use of “we”, I was trying to illuminate the actions of “more than a single individual”/ “anyone”.

The other problem that crops up, in this “trade” discussion, is that the bureauacracy that “represents” the U.S. is forever crafting incentive distorting and sovereignty subsuming treaties that treat us as a ‘bloc’.

For myself, again: Trade Rules! We just don’t need trade rules.

And, to my Q, above, When I/we trade based on financial price signals alone, do I/we not invite other Economic perturbations along with the goods themselves? Such as, the conditions under which the goods were made? Cyn, you mentioned physical “slavery” of the workforce as objectionable. Wouldn’t serious environmental degradation be equally, or more so? These, and others, Economic costs are the types of things that often do not show up in the, many, financial price signals that I’m questioning.

jeffrey May 15, 2006 at 7:54 am

The post to which you link does not seem to be making the point you want it to make; instead, it is arguing that these poor countries are too poor to afford domestic regulation. It is a rather ingenious argument that takes it for granted that economic restrictions, such as child labor laws, are either superflous or harmful but never a benefit. I don’t see how that affects the decision to trade or not. These poor countries can only become more development by integrating more fully into the worldwide division of labor, and their low-priced labor makes it possible to free up resources at home for other and more profitable types of investment and also makes less expensive consumer goods available to US consumers. It’s a win-win situation.

Curt Howland May 15, 2006 at 9:49 am

Indeed it is only through trade that sufficient resources (capital) are accumulated, sufficient efficiency reached, to make “low-wage manual labor” unattractive to the individuals.

To wit: If you have nothing, anything is an improvement. But the improvement gained by my son laboring at 8 years old is so small compared to what I work for that it is not worth while having him work. It is more efficient for him to spend his time learning (as opposed to “schooling” in the government day prisons) so that when he does decide to trade his labors they will be more valuable due to his education.

That is why taxation, regulation, restrictions on trade, and every other coercive intervention causes problems for the most economically disadvantaged: It lowers the available capital that would otherwise allow people in general to improve their situation.

It is illuminating to realize that in every one of these so-called “poor” countries, there is an entire robber-baron class of people who are astoundingly wealthy compared to their countrymen. However, Bill Gates eats the same pop-tarts I do. Funny how that works.

M E Hoffer May 15, 2006 at 12:10 pm

OK, one more rip at it…

jeffrey, I do understand that the article, that I posted to illuminate the disparities among regions, does not, de facto, support, per se, the POV I’m expressing.

My Q, to clarify, does not lead one to a trade/no trade trade-off. Note above, I am decidedly Not against trade. Rather it questions the soundness of relying, solely, on financial price signals emanating from the marketplace, as it is currently constructed, to guide one’s purchasing decisions( no matter the origin of the goods ).

If the above attempt to clarify still leaves the waters muddied…

Let’s start w/ an easier one: Is there a difference between Financial Cost and Economic Cost?

Paul Edwards May 15, 2006 at 12:34 pm

ME,

Perhaps if you could provide an example, it would help. But let me take swack at it anyways. I presume you are talking about personal voluntary choices as opposed to searching for valid situations where coercion might be justified in making someone’s decision for him.

In the former case, there must be hundreds of reasons why price would not and could not be the ultimate deciding factor for a buying decision. I know of cases where i myself have not bought something, not because it wasn’t a great deal (given historical prices), but because i had no use for it, and had no easy way to get it to someone who did. Price is just an important factor in buying decisions, but of course is not the single ultimate factor.

But if we’re talking about coercion, then the answer is so much simpler: none is ever valid; there are no situations where coercion is justified ethically. And from an economic perspective, since two out of two market participants are known to suffer from the interference, it necessarily must result in a net economic social loss.

iceberg May 15, 2006 at 1:31 pm

“Price is just an important factor in buying decisions, but of course is not the single ultimate factor”

Of course not. It’s not just price, but the total “psychic” cost associated with your final choice.

TGGP May 15, 2006 at 2:57 pm

It was stated that coercion is never justified. Isn’t the usual line that the initiation of force is what is wrong and to coerce the initial coercer to cease his/her/its/their coercion is justified? Or is it not referred to as “coercion” if it is justified?

cynical May 15, 2006 at 4:59 pm

M E Hoffer,

I don’t think ‘environmental damage’ is as objectionable as literal human slavery. Human slavery changes the successful framework of liberalism – just as socialism, fascism, and interventionism change the successful framework of liberalism. Environmental damage does not.

Liberalism is a framework that allows humans to better themselves without making other humans worse off (in the literal sense — such as by making them slaves or stealing from them). Socialism, fascism, and interventionism all change the framework — indeed, to varying degrees, they make humans slaves again.

Environmental damage, I believe, is only properly defined within the framework of liberalism and can only be properly solved (if and when it is a problem) through the framework of liberalism. (Note that I am not saying anyone should or should not purchase any product from any company. That is a person’s choice within the liberal framework.) At any rate, my point is that governmental interference with trade amongst *individuals* is not going to make things better… it just destroys the liberal framework. One could even make the claim that a lot of interventions (and nationalist policies in general) have resulted in the very “bad things” in which the government now pretends to care about (by further interferring with our lives, of course).

Paul Edwards May 15, 2006 at 6:16 pm

Hi TGGP,

Good question. One thing I found handy was to get straight in detail what some seemingly similar terms really mean and how they are distinct:

Force, and violence: Not necessarily bad, when not initiated; when used defensively.

Initiation of (or convincing threat of)

Force
Violence

This is also known as aggression, coercion, or compulsion.

This is necessarily bad, criminal and unjustified because it is a contradiction to the peaceful and conflict free presuppositions implicit in the act of argumentation and justification. Criminals are aggressive. States are also aggressive but also like to pretend that their aggression is for the common good.

Everyone is justified to use proportionate violence or force to defend one’s property, but no one, including an agent of the state, is justified in aggressing. That’s the libertarian non-aggression axiom.

M E Hoffer May 15, 2006 at 6:56 pm

Ok, further clarification: I am not, to the best of my knowledge, a Statist, in any way, shape, or form. Further, I am not asking the questions, above, to then spring an: Aha!~ Now we Need State regulations to… Ok? none of that stuff.

Let’s say: there are two competing goods that can act as complete substitutes for one another. These goods are equivalents in all regards, except:

Variation A) Price: Good Y: U$D 1 Good Z: U$D 1.10

Which does one choose? Simple right?

Variation B) Price and origin: Good Y: U$D 1, manufactured 1/2 way around the world Good Z: U$D 1, manufactured in your home town

Which does one choose? Why?

This may seem remedial, but there are many factors, that are Economic costs, that are not necessarily reflected in Financial price signals.

My aim here is to try to illuminate this point(for the Individual). I think the two variations, above, should lead one to the many potential permutations that can be imagined. If not, I’ll gladly add more. So, to my Q’s above……

Peter May 15, 2006 at 8:32 pm

Assuming the two goods are on the same shelf, next to each other: Case A) the $1 one; Case B) whichever I happen to be standing on front of, or whichever has the more attractive packaging :)

If they’re not on the same shelf, then in both cases: whichever happens to be more convenient to get at. (I’m not going to drive to a more distant shop, or even walk to a different aisle, to save $0.10, etc.)

cynical May 16, 2006 at 12:25 am

M E Hoffer,

I am sorry if I was not explicit enough. I was trying to say that individuals are well aware of the “nature” of the products they purchase and do take it into account.

If enough people were unaware about the “nature” of some product, I’m sure a competitor would choose to advertise the “moral superiority” of his policies or the way his product is produced.

It is my sense that people generally agree with the policies of sellers or the “nature” of the products they purchase. For example, I see activist groups always trying to tell me that Wal-Mart is horrible to labor, bad for small businesses, etc. etc. Everyone has heard this argument, yet Wal-Mart thrives. I think if Wal-Mart actually did cause some sort of “social harm”, people would boycott their stores.

M E Hoffer May 16, 2006 at 4:45 am

Cyn,

I hear you, but I’m not so sure. It very well may be that a large majority of this site’s readers are, in fact, well aware. That wouldn’t be too surprising, though I know that I’ve casually pointed out, to many, that Foster’s, the “Australian” beer, that’s available in the U.S., is brewed in Canada. The question: “What’s “Australian” for BS ?” , is always met with a smile breaking through the previous mask of perplexity. I was just in a sporting goods store, a couple of days ago, asking if they had shoes “not” made in China. The answer, from each and every of the staff?? “I don’t know” / “I’ve never checked” / “Does it matter?” — by that time a couple other customers wandered over to see “what was up” : their response?, “like wow, I never knew” “no wonder I can’t find a job.” “when did this happen?”

For me, the above, happens all the time. Check out Chevrolet’s Equinox, engine made in China, transmission made in Japan, assembled in USA. The salesman have been trained with a whole schtick fobbing off the import of the imported pieces…something tells me my experiences cannot be too unique…

cyn, when you go to WMT, how happy do people seem to be there??

gene berman May 16, 2006 at 10:58 am

“If my thinking is erroneous, I would be pleased if you could point me in the right direction.”
M. E. Hoffer

Mr. Hoffer:

Everybody on here, with varying degrees of skill, has tried to accomodate your wish. But they don’t seem to have succeeded.

Let me begin anew. I’ll use little, common words and no complicated sentences or phrases. Are we ready?

You came here. “Here” is “mises.org”

Mises wrote books mostly about economics. Here are titles of some: “HUMAN ACTION,” “THEORY AND HISTORY,” “THE THEORY OF MONEY AND CREDIT,” “ON THE MANIPULATION OF MONEY AND CREDIT,” “CRITIQUE OF INTERVENTIONISM,” “BUREAUCRACY,” “EPISTEMOLOGICAL PROBLEMS OF ECONOMIC SCIENCE.”

There are more–listed on this site. All are free to anyone to download and read. Have you read even a single one? Reading and understanding even a single one of these would make each of your arguments unneccesary.

I won’t deny that Mises is “hard.” It took me the better part of 10 years to get through my head. But there is an easier way to at least get an idea of what economics is about.

You could read Hazlitt’s “ECONOMICS IN ONE LESSON,” meant for average laymen. Have you?

Or, at elementary-school level, there’s Leonard Read’s “I, Pencil,” a true masterpiece of expository (sorry about the big word–I slipped up) writing.

And now to point you in the right direction.

Quit your job and find honest work. What you do now serves only elite strata in some places in their effort to control (retard) development in other places seen as inimical to the interests they represent. If you’d like to protest my rather harsh judgement–feel free (but only after having read and digested at least one of the above-cited works).

M E Hoffer May 16, 2006 at 11:53 am

Mr. Berman,

You have made some conclusions, posted below, that I find puzzling. Would you please state your premises?

Conclusion 1: “Reading and understanding even a single one of these would make each of your arguments unneccesary.”

Conclusion 2: “What you do now serves only elite strata in some places in their effort to control (retard) development in other places seen as inimical to the interests they represent.”

For your edification, though you may be dismayed in its hearing, I have, in fact, read and otherwise been exposed to Mises’ fine work.

How(?)- my effort, to illuminate the rather serious, in my view, shortcomings of the current financial price signaling mechanism that is relied on for so many of our Economic choices, disturbs you or the teachings of Mises/the “Austrians” is beyond, I’m sure you’ve guessed, the ability of my weak mind to know.

I’d be very appreciative if you would be so kind to 1) state the premises to your conclusions, and 2)answer my question.

cynical May 16, 2006 at 4:04 pm

M E Hoffer,

Please recall all the examples that you cited. I think the reason very few people seem to know very much about the things you cited is because most people just don’t care very much about those things. And when I say they don’t care, I mean they just don’t think those type of things matter – i.e., there is nothing truly “wrong” about those things. The things you mentioned are like my Wal-Mart example… some people make a big stink about things, the vast majority haven’t been convinced. (I do know a decent amount of people who protest Wal-Mart… but there are more who feel that the protesters’ allegations are silly.)

M E Hoffer May 16, 2006 at 4:37 pm

cyn,

Beer, Shoes, Cars… I might be hopelessly out-of-touch, or on an expedition that would do ol’ Don proud, but what then are things of interest?

As far as WMT goes: I’d chalk up their traffic to the people’s acquiescence in the face of the pincers of high, and going higher, gov’t taxation and the USFedRes’ continuous debasement of the currency. That they become complicit in importing more gov’t & taxes & further currency debasement, along with the goods that they purchase seems to be a moot point in the face of the moo-ing.

Any further pointers would be appreciated.

cynical May 16, 2006 at 8:39 pm

M E Hoffer,

I didn’t mean to say “beer, shoes, cars,…” are unimportant. Of course, they are (to varying degrees to different people at different times), but I didn’t believe that concerned us here.

I was speaking to the idea (which I thought you were pointing to) that the shoes were made *in China*, the beer *in Canada*, the transmission made *in Japan*, etc. The fact that these things were made by a foreign citizen (or that Wal-Mart doesn’t pay like engineering or stockbroking) just doesn’t seem to matter to most people. People appear to judge these things to be noncontroversial.

Laurence Vance November 13, 2006 at 4:44 pm

Bush said today (Nov. 13, 2006) that Iran needs “economic isolation.” That is exactly what many conservatives want in the USA–no trade, everything made in American no matter what the cost.

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