Third Party & Independents: Archives

I am not an economists either, but i will try to respond to you as directly as I can:

Question #1: “If you don’t make anything and you don’t service anything how am I supposed to avoid become a starving homeless derelict.”

This one is not that difficult. Throughout our history of every developing nation, they have sent centain jobs to other nations as their economies have evolved. America has ton that a LOT in this century, and the increases in life-expancy, standard of living, real wages have gone through the roof (i suggest you read: “The progress paradox” by Gregg Easterbook to see what has happend to american standard of living during this century)

Question #2: If china uses poverty stricken peasants (with dollar a day wage) and political prisoners to manufacture the goods (then denies them basic human rights) how can I possibly compete?

This is indeed a hard question- but I do not believe those people are truely competing with you anyway. Those jobs are low-level in terms of the economic development of a nation, so if they did nto go to china, they would just go to taiwan (where the slave labor isnt really an issue). what we need to do is preasure china to change its ways- thats why an organizations such as the WTO is so important and needs to be expanded.

Question #3: If china dumps raw sewage and toxic waste into their rivers, how am I supposed to compete fairly (with out killing my self).

economic regulations are not always so costly to companies- often companies involvate and do not lose any productive or costs from abiding by environmenta laws. american business compete all the time with countries with less environmental standards. This is a tough question for when that is not the case, i will admit.

Question #4: If china keeps their currency artificially pegged low (relative to the dollar) won’t their products always be cheaper?

I do not really see what China’s currency has to do with it. perhaps someone with an econ major can explain this, but it seems like what they SAY their currency is has nothing to do with how much americans would pay for their goods (because of the conversion rate). I know that wanst clear, but it makes sense i believe..

Question#5: If productivity keeps increasing and you need fewer and fewer people to supply the goods to the rest of us what can the rest of us do but become wards of the state.

This one is not difficult. If productive continues to increase, then people can do OTHER things. there is not a finite number of things that the world needs, so once they are made, its game over. Just look at the world 100 or 200 years ago, and think of how much more prosperous it is now, with massive gains in efficiency. with more efficiency, you will have a higher standard of living, more goods for EACH person ect. no need to worry about this.

I hope that answers some of your worries.

Ok, I don’t have an econ major, but my parents both happen to be economists.( though thats a piece of pointless information, since its not like i asked them anyway. d’oh)
They way I understand it, is that basically, the Chinese govt. either projected a false GDP or lied about the current GDP.
So thats basically like bragging that you have more money than you actually do. It would not affect the prices or the economy in any way.So you wouldn’t actually be paying any more.

Hello Misha. I appreciate your reply.

I usually like to let my writing “age” so I can proof it but here goes anyway.

I actually kind of agree with some of your answers. (The only answer to question #1 is to create new industries) But I will concentrate on the ones I disagree with.

Question #4: the currency question.
My understanding of currency valuation goes like this. In an international free market if you constantly buy stuff but never sell anything then the amount of your currency outside your country increases and the value (of a dollar) gets less. Just as the current US trade deficit is causing (in my opinion) the dollar to fall against all major currencies making US goods less expensive. Conversely a trade surplus will make the dollar more valuable.

China refuses to participate in this system for reason of internal politics (they have major problems with their banking system). The value of their currency to a dollar is set by the government and never changes (I forget the current exchange rate). This means Chinese good will always remain cheap.

Question#5: Your reply makes the assumption that there will be some thing to do. I do not consider working at burger world as “something to do”. As automation and productivity increases something has got to give.

I think what I was driving at in my original post is that we may be entering into a new era were the rules and assumptions of the last century could break down. Many natural events have exception or inflection points were past behavior becomes invalid. Water can freeze or turn to steam at certain temperatures and pressures and human life can then no longer exist.

well Bob- i am man enough to admit I do not understand the currency thing. it seems to me that if a good or labor is going to cost X dollars to a company, it would cost that no matter what the currency in the other country was. Maybe I just dont understand currencies.. .can someone with an econ degree help? (my friend who has an econ degree is traveling in India right now or I would call him to ask to figure this out)

As for the second point, I guess we shall see.. I have a strong belief in human ingenuity and progress that has been backed up with overwhelming evidence over the last couple of centuries. Perhaps it is wrong, but if it is, free trade is the least of our problems….

While I lay claim to no formal schooling as an economist, I have lived long enough to understand real-world economics; i.e. rules outside of the hallowed hypothesis ridden halls of academia. So here goes:

“Question #1: If you don’t make anything and you don’t service anything how am I supposed to avoid become a starving homeless derelict.”

Answer 1: you cannot. The American standard of living was predicated first on cheap slave labor, then on manufacturing, then on white collar service sector jobs. We have now entered the 44th straight month of manufacturing job loss, and white collar outsourcing is continuing apace. If Mr. Freidman and Misha have their way, soon we will have nothing, but empty pockets and empty homes to offer in trade. Ask the Hawaiians (whose economy is by-and-large blue color service) about being priced, and taxed out of the home market by the Japanese.

Question #2: If china uses poverty stricken peasants (with dollar a day wage) and political prisoners to manufacture the goods (then denies them basic human rights) how can I possibly compete?

Answer 2: you cannot. Think about this: the Chinese population is so large, that they can replace every able bodied worker in the U.S. at least six times. There is no recourse but through multi-lateral cooperation with the rest of the world, and or through the U.N. World Bank, and WTO, to force the Chinese and other countries with cheap abundant labor forces (India) to improve worker conditions. We cannot allow other countries to raise their standard of living at our expense; we lose!

Question #3: If china dumps raw sewage and toxic waste into their rivers, how am I supposed to compete fairly (with out killing my self).

Answer 3: you can’t. Again the U.N., World Bank, and WTO have to take a stance against this sort of reckless disregard for the environment and life. And the United States has to stop holding itself outside agreements meant to help us all in the name of capitalism. Every member of the WTO should be held to the same environmental standard as a price of membership. Those in violation would be fined or sanctioned. China’s relentless lobbing to become part of the organization throughout the nineties is testament to the power and prestige of the body.

Question #4: If china keeps their currency artificially pegged low (relative to the dollar) won’t their products always be cheaper?

Answer 4: Yes. And while the U.S. has been after China for years to allow their currency to float free on the currency market, the Chinese have resisted knowing full well the implications of such a move. Because the immature state of the Chinese banking industry, the Chinese currency if allowed to free float would most likely plummet in value, putting into play to possibility of a banking failure. Inflation would also be a worry, and with it possible unemployment. Again the WTO should step in am compel the Chinese to float their currency; indeed it should have been a condition of their acceptance into the organization. I am so tired of everything I lay my hands on theses days, having Made in China stamped on the underside. Remind you of any other Asian country in the later sixties, early seventies?

Question#5: If productivity keeps increasing and you need fewer and fewer people to supply the goods to the rest of us what can the rest of us do but become wards of the state.

Answer 5: nothing but become wards of the state! If everyone else make what the world needs…see me Feature Article for a worse case scenario.

So if the WTO forces countries to have humane labor laws and good internal environmental policies, does that make the WTO an anti-free-trade organization?

-Cf

“humane labor standards” by what measure? any government-imposed labor standards are anti-free trade, but if a government outlaws labor unions and actually uses force to make people work jobs they do not want to, then the WTO stepping in would be pro-free trade. basically the question is “who is using force?” if the government is using force to impose labor standards on companies, it is anti free trade, if it is using force to impose poor labor conditions on workers, it is anti-free trade, if it is simply letting workers organize if they want, companies hire who they want, and enforcing employment contracts, then it is pro-free trade.

As for the environment- the problem is the validity of the enviromental law in question. if the law is designed to protect third parties who are harmed by externalities from the business, then thats fine- but if is just trying to preserve some endangered species or whatever, that would be anti-free trade…

hope that answers some quesitons.

I have some insight into this line of thinking with regard to pegging currencies. Number one, it is not simply a matter of saying your currency is worth such and such amount visa vie the dollar. If they did that the economy would fall apart because their currency would be based on nothing. Our currency is based on the strength of our economy (it used to be based on gold). What the Chinese do is this: the government buys Yuan (the Chinese currency) to keep it propped up. What this creates is a balance of payments problem where the government is subsidizing imports and then when it comes to exports just about all of the manufacturing is done in special capitalist zones that are do not have the tight controls like the rest of the country, there foreigners buy Chinese goods in dollars. What does this mean? Well it means that china buys things it needs for manufacturing at a discount because their gov artificially props up the Yuan, which basically means there is a subsidy for their manufacturing sector. Remember that the Chinese are not insular, much of their manufacturing involves taking partially finished goods and finishing them. So they import raw materials and partially finished goods at a relative discount then export them for foreign currency.
You may believe that this is a problem for Americans, but more broadly it hurts the Chinese most as you have poor farmers in the country side subsidizing the rich manufacturers in the cities. In the US you have the reverse as we subsidize out Agricultural sectors, which is part of the reason our food is so darn cheap, and maybe why we are so darn fat, but that is another conversation.

Miguel A. Teixeira

Is there ever a time when free trade is a bad idea? Yes, when we make concrete predictions based on the ideal ever really existing. Like Plato’s concept of the Ideal ‘tree’ or ‘sunset’, free trade is a concept that does not ever really exist in the real world.

Try to separate governments from trade and tell them they must not interfere is like telling a child in working in a candy store they must not eat the candy. Fat chance.