Lost Or Unrecognized Multi-National Economic Principles And Slavery

Robert L. Kocher ^ | October 27, 2002 | Robert L. Kocher

[primeval patriot]

Sorry to see you're not posting anymore.

I'd never have discovered your writing if not for FR.

I'll have to make do with reading your work on Zola and elsewhere.

Good luck and thanks for the hard work.

[LeGrande]

The first step is to understand the seriousness and inevitability of what is happening on our current course. In 15 years this nation will be a third world country with a collapsed economy at the rate we are going. We are becoming irrelevant.

I will take you up on that prediction. Gloom and doomers are almost always wrong and you are no exception. In 15 years the US will be even more prosperous and wealthy : )

The flaw in your argument is that we aren't indolent slave owners. We are shrewd nasty competitors. We lead the world in new growth areas. We take the best brains from around the world and put them to work creating new industries and products. Our strength isn't in competing in low cost labor and commodities, rather our strength is in creating something from nothing. As long as the Government stays off our backs we will excel.

[Ciexyz]

Most interesting.

[Mortimer Snavely]

Bumping this thread.

[PGalt]

Thanks for the ping.

[A. Pole]

Our strength isn't in competing in low cost labor and commodities, rather our strength is in creating something from nothing.

Whoa, not so fast! Only He can can create something from nothing.

[A. Pole]

Here is my brief history of the unilateral free trade / open borders movement:

• We are not losing manufacturing jobs
• OK, we are losing manufacturing jobs, but they are being replaced by better IT jobs
• The theory of free trade says that workers will be put to use in more advantageous industries, but gov't will have to retrain them. So much for the free market and small government.
• These better jobs pay too much, so we will have to bring in foreigners. Oops, was that out loud? I meant to say that there is a shortage of qualified engineers, which will slow our economic growth.
• Well, maybe there wasn't really a shortage, but we abandoned supply and demand already, and we are going to go ahead and move those jobs offshore with all the corporate home offices.
• Remember that this is all for your benfit, we are doing all this for you so that you can afford to buy lettuce and software with the next jobs of the future, which will not ever come around unless you keep voting Republican.
• We do not have a growing trade deficit, but if we do it doesn't matter.
• OK, we have a growing trade deficit, but it still doesn't matter since we are just giving useless dollars in exchange for goods.
• Maybe the deficit is a problem, but nothing that can not be fixed with a weak dollar.
• OK, China is pegged to our weak dollar, so that won't work, but they are sending over a trade commision to sign some big deals. Move along, the deficit does not matter since me and my grocer have trade deficits too.
• And the final stage is what I heard King Greenspan say yesterday in front of congress - we need to spend more on education to make sure that income is distributed more equally.

Beautiful!

[LeGrande]

What I meant with my "creating something from nothing" comment was that many of the products and services we create and sell didn't even exist not too many years ago. A few examples are computers, software, CNC machines, pharmaceutical drugs, genetically modified plants, etc.

Another problem I have is that I don't think the trade deficit tells the real story. I don't think that it accurately tracks the revenue stream. I ran a company that outsourced labor in China. We shipped parts to China and then imported the finished product into the US. The total price for the exported products was just a few dollars and the imported finished product was quite expensive. It was something like a 10 to 1 ratio.

So essentially we were exporting $1 worth of goods and importing $10 worth of goods for a net trade deficit of $9 for every item we produced, but this is only part of the story.

The truth is that the real cost of the item was in the $3 range and the company kept the extra $7 in this country. So the trade deficit was over estimated by a factor of 350%. But the problem doesn't stop there. Many of the products were sold abroad and those products went straight from China to those other countries and we would pocket $7 for each unit sold. Revenue that is not counted in the trade deficit.

[LeGrande]

* We are not losing manufacturing jobs

We have been losing manufacturing jobs for 150 years, our farming industry used to employ the majority of the population, now it employs a fraction of our population. Every manufacturing sector in our history has lost jobs and every manufacturing sector in the future will lose jobs.

* OK, China is pegged to our weak dollar, so that won't work, but they are sending over a trade commission to sign some big deals. Move along, the deficit does not matter since me and my grocer have trade deficits too.

China's pegging their currency to ours is essentially a subsidy for the dollar. They are trying to get a competitive advantage by propping up the dollar. A better example would be the grocer giving away the groceries for free. It is more detrimental to the grocer than the recipient. The strategy is planned on short term loss and long term benefits. Kind of like Amazons strategy.

Do you think we would be better off if everyone was busy making shirts and shoes? If your initial premise is wrong everything else is flawed too.

[expat_panama]

recovering from my illness.

good to have you back-- thanks for the ping.

[Semaphore Heathcliffe]

waitwaitwait a minute. RLK was banned? Does anybody know when or what thread it was on?

bump for some damned fine ideas.

[harpseal]

I have been ill and not on FR much recently

[Lael]

BTTT!!

[Semaphore Heathcliffe]

welcome back. you made quite a return postings with this article. she's a keeper.

[Ciexyz]

This is an excellent article that's framed in language that even a non-economist can understand!

I'm bumping this article because it's an important read for a time when our trade deficit is hitting record levels. I can understand the mechanics of our marketplace. If our workplaces become so brutal that even those who have jobs are made to feel miserable and are forced out to make room for backstabbers, younger workers and relatives....(don't ask me why I wrote that)....then when those newly unemployed people can't even get a menial white collar job because call centers are outsourced to India....the only alternative is for them to make T-shirts for sale at the local craft fairs. Make soap. Write stories. Work four hours a day at the Dollar Store, or work eight hours between two retail stores because no one is hiring full time so they don't have to pay benefits.

When we get to this point, and when we all know people who are at this point, then we stop spending. I myself am spending sparsely. It's a different ballgame now.

[sixmil]

China's pegging their currency to ours is essentially a subsidy for the dollar. They are trying to get a competitive advantage by propping up the dollar. A better example would be the grocer giving away the groceries for free. It is more detrimental to the grocer than the recipient. The strategy is planned on short term loss and long term benefits. Kind of like Amazons strategy.

Do you think we would be better off if everyone was busy making shirts and shoes? If your initial premise is wrong everything else is flawed too.

Everything is a subsidy with you guys, except of course for unemployment benefits and job training, which subsidize your unilateral free trade ideology. Isn't allowing the importation of foreign workers a subsidy for corporations?

Just the opposite, I see the corporate mentality as short term gain outweighing long term loss. Funny you mention Amazon, one of a thousand companies that survived with such a business model.

I think we would be better off without supposed free traders like yourself telling people what is worth while doing for a living, or what their salary should be. It's amazing you guys get away with calling yourselves believers in the free market. If business wants government to leave them alone, why all the political money and hard core lobbying? It's like a bad French movie - kiss me, I hate you.

[B-Chan]

The Democratic party, which once was the party of labor, has long since been taken over by radicals and become focused upon countercultural issues such as homosexuality and abortion. Its economic views are essentially Marxist or paramarxist that would enjoy seeing the free enterprise economy, and workers along with it, fail, in order to validate their philosophy. The Republican party now lives in another galaxy which occasionally sends bland gutless brainless visitors to this world who are aimlessly unaware of anything. None of this relates to the real economic world. The percentage of voter turnout hovers at all time low levels because there is nobody to vote for who relates to reality.

—RLK

The era of people working at a "job" is over. The "jobs" can all be done more cheaply overseas, or by robots at home. This goes for everyone's job, not just the millwrights and cobblers — anything useful that can be done by an American making $75K per year can be done just as well by a Sudanese or Sri Lankan for $7.5K per year. And it won's matter that we Amercans are brutal, shrewd innovators; we don't have a corner on brutality or shrewdness, and there are innovators in every country.

As I said, the era of the Job is over. People with nothing to sell but their labor are about to find themselves replaced by outsourced foreign labor (manufacturing, extraction, administrative, and white-collar jobs) or by illegally-imported foreigners (menial, low-skill, and direct-service jobs). In a world where human labor is just another commodity, businesses will inevitably move their jobs to the area where the lowest wages prevail — and in a world of five billion Third-Worlders desparate for work, any work, the lowest wages will be very low indeed.

Yet without wage-earners with incomes sufficient to provide for themselves and to buy the products and services produced by this low-wage labor, businesses will have no markets. No workers = no consumers — Catch-22.

What is to be done? Socialism? Doesn't work. Laissez-fare capitalism? Doesn't work either. Frankly, I'm not smart enough to see a way out of this downward spiral. Only this much is certain: Proletarians (people who live off wages) and capitalists (people who live off investment income) cannot survive on their own; if either side ceases to exist, the other will vanish as well.

Thanks to this economic form of Mutual Assured Destruction, the Cold War between Labor and Capital has ended. If there is any hope for a new economic order outside these two defunct superpowers, it will somehow have to come from people who do not rely on wages or income for their livelihoods: individuals and family-owned businesses that produce real, tangible wealth, wealth that can be directly traded for money or goods or services.

One thing is certain: the current global system of commerce is unsustainable.An economy based upon mutual pocket-picking is certain to fail when the last pocket is empty. Under any system of economics, people have to eat, they have to have clothing, and they require shelter — and any nation (yes, I still believe in nations!) that cannot sustain the sort of economy that allows the average citizen to meet the needs of himself and his family is not going to endure.

In the end, since people have to eat, arable land is the only real property, and human creativity the only source of wealth. Those with the ability to command both through the use of force will always survive. Someday, after the Crash of Capitalism has come and gone, whatever is left of our economy will, perhaps, return to the steady state that Europe knew in medieval times: a civilization chiefly of yeoman farmers, each sworn in fealty to a local warlord, who protects them from brigands, other warlords, and each other in exchange for a share of their collective produce, with a class of independent bourgeois craftsmen, merchants, miners, and small manufacturers (organized into guilds for purposes of price-maintenance and managed competition) producing goods and services on a small scale for local consumption.

In the meantime: is there a case for autarky? Maybe the solution to the problems of Free Trade is to stop trading. If the United States has the resources to provide for its own needs, it might be worhwhile to try doing so. Anything, even austerity, is better than the long, dark spiral into Depression. Opinions?

[sixmil]

waitwaitwait a minute. RLK was banned? Does anybody know when or what thread it was on?

bump for some damned fine ideas.

Reports of his disappearance are premature.

[AmericanVictory]

So what do you suggest as an alternative?

[Cacique]

Long but great read ping