The ideology of "Free trade" is Killing America's Economy

That it could or likely would be costly seems like an obvious side effect. We're forgoing the benefits of competition to reap those of scaling, but it's basically an investment; sacrificing benefits now for stability in the future. We could argue if it's still a good idea, but not whether it's costly.

Just to be rhetorical. This seems to be based on the idea that this young economy has no comparative advantages, that in every instance, in each industry some foreign competitor with economies of time and scale could and would swoop in, undermine regional growth for the sake of short run profits. What prevents another competitor from doing the same but offering higher wages, better working conditions and perhaps even as reinvesting in the local economy.

 

Costly for consumers on the back end, tax payers on the front end. Consider government funding for, and tarriffs on, solar panels. Not an infant industry.

How does an infant industry afford lobbying? Probably why government subsidized the Volt, but not Tesla.

I don't know anyone in government with the foresight to identify industries with enough future value for the country to justify protecting until "maturity"? (also who determine when maturity is reached). Politicians are motivated by being re-elected, unless that future value occurs by the next election cycle (or the value is obvious), their support of funding would be used against them.

 

Now we're not talking about the same thing, you're talking about a mature economy protecting a single industry (special interest). What the infant industry hypothesis deals with are economies that are not mature and shelter some of their industries from international competition.

The only cost to taxpayers would be in lack of diversity in products or products that lack modern innovations. Taxpayers aren't really on the hook for anything in this scenario.

Can we spare the political ax grinding? We're not talking about a particular company, but allowing markets to develop that are able to compete within the global economy.

No one does because they don't exist. As I said, that it's costly isn't really up for debate. The better question is: "Is it still worth it?" and to answer that you'd need to know a lot more about the circumstances.

Mistakes will be made, lots of them likely. Most innovation suffers from the same problem, but that's not enough to know whether it's still a bad idea.

 

We're talking the same thing, my comments are inter-related. Infant industries can't afford lobbyist and if they did, politicians couldn't identify the winners.

It is a lot easier for a politician to get government funding (with tax payer dollars) for a company than to protect it by tarriff (or regulation).

No political ax grinding, infant industry founders (a viable electric car, Tesla) can't afford the lobbyist, GM can.

As far as the circumstances, what I am describing is the two factors that prevent government from picking winners. Thus, not only do I not think it is worth it, I don't see any way to improve the situation.

Even great ideas, before their time, fail. How many tablets came and went before the iPad created the market?

 

We most certainly are not. Your talking about trade policies for a mature economy. I'm talking about a fledgling nation protecting itself from MNC's that would otherwise (due to economies of scale and time) price local industries out of the market. You on the other hand seem hell bent on spewing some anti-government dogma.

Sadly we agree on a great deal but your too wrapped up in scoring political points and hating on government to advance your knowledge.

Uhh.. Are you just putting words on the screen or trying to say something? I can't tell, looks a lot more like you intent on parroting some political dogma than anything else.

Just another advert for the fact you haven't a clue what you're talking about. Save the government = bad, market = good foolishness for some other sub forum.

This has nothing to do with the current US auto-industry.

As far as the circumstances, what I am describing is the two factors that prevent government from picking winners. Thus, not only do I not think it is worth it, I don't see any way to improve the situation.

Even great ideas, before their time, fail. How many tablets came and went before the iPad created the market?[/QUOTE]

 

Its not a sacrifice unless you can show that the firms would have grown no matter what (then we have to focus on the opportunity costs and lost potential in other uses of industrial policy)

There is always a comparative advantage. It can just be damaging (such as the over-reliance on the primary sector). Outsourcing can certainly be used to improve local wages and create development opportunity. It doesn't, however, engineer economic development.

 

No different than the converse question where you have to prove that protection will lead to greater growth than what would otherwise have occurred.

Seems to me that the economy that arises organically would be preferable to the engineered solution.

 

[/QUOTE]Hating government, or recognizing politicians motivations and capabilities? (Have you listened to Russ's interviews with Bruce Bueno de Mesquita?)

 

There's a time and place to bring up the many issues with the public sector. This however, is not one.

Let's try to disambiguate. Do you think a nation... such as Ghana or another up and coming nation, can compete with foreign competitors in markets that have long existed? Or, do you believe that there are certain circumstances where a young nation should protect it's industries from competition to give them the opportunity to flourish?

They did 4. Is there one in particular you're referencing?

 

The 'choice' is stark: develop or do not develop. We can't play utopia and suggest all development policy will be successful. However, sitting on one's hands isn't an option!

And if we could rely on creating more fine-tuned comparative advantage to ensure development I'd agree with you. We can't

 

Does evidence support this level of contrast? Or does and has development occurred in absence of said policies?

Of course not, but we also should be cautious not to assume that we have the answer either and that potential "solutions" may be more harmful than sitting on one's hands.

 

The evidence shows that protectionism has gone hand in hand with economic development. The evidence also points to the unbthinable: an increase in absolute poverty in developing country with trade liberalisation imposed.

'Solutions' either work or they don't. Nothing is more harmful than the lack of development.

 

Then how does it explain post-Colonial US and the lack of protectionism that existed in trade between the states? Or does this only apply to trade that is with foreign nations?

If we take it as fact, that larger competitors will eliminate competition ... and then proceed to further depress wages in the area... then I get it. Seems like an unlikely script.

 

Foreign trade is crucial (that ensures the substantial differences in economic design and history). Note that Chang in his 'kicking away the ladder' details the US development in some detail.

Its about skewed trade. Exploitation to the detriment of the home population should be alien to the specialisation process

 

Ahh trade liberalisation, the great "savior" of third world countries.

 

Free trade is only good if both nations have the same amount to offer.

 

Nonsense. Free trade generates gains whether countries are exceedingly different (inter-industry trade through differences in factor proportions) or very much similar (intra-industry trade through the creation of a bigger relatively homogeneous market)

 

You should put more thought into your argument. Especially when debating against a man of Reiver's intelligence. I disagree with almost everything he believes, but his occupation is based around economics and he has a fairly vast verbal arsenal.

 

http://www.econtalk.org/archives/2006/08/the_political_e.html is probably the best at describing politicians motivations. Listen to this first, then see if government in an up and coming country is properly motivated to manage their economy.

First lets assume the citizens of this up and coming country can afford to buy from foreign competitors. If not tarriffs aren't needed.

If the government places a tarriff on all foreign goods, so local businesses can make the same products with a small profit. Who is the winner? Will the countries buying power provide the economy of scale necessary to allow these companies to compete globally? Will the population be better off paying more for products?

Without tarriffs, companies that succeed have found their comparative advantage, at least locally (lower cost of transportation, local natural resourses, etc). These businesses have a shot at competing globally.

Could there be some products where some help could allow a company to grow and become a global competitor, probably. Who would be better at determining that, the government, or investors?


As I said before, my comments against government intervention isn't political, it is economic. The US voters have allowed the government to have the amount of power they have, and the voter has to fix it. That only works with an informed voter.

 

I'll have another listen, I don't recall that one.

I agree for the most part up until this point. Investors can't make policy decisions. I don't think anyone is calling for blanket protection from any foreign competition.

It's not at all how it sounds, and that it gets injected into conversation where often it doesn't belong further reinforces that appearance.

Not allowed, have demanded and continue to do so, while out of the other side of their mouth moaning about the size of government.

I thought this interview with Bryan Caplan did a wonderful job of explaining why voters aren't informed and why it's completely rational for them to remain that way, particularly in presidential elections:

http://www.econtalk.org/archives/2007/06/caplan_on_the_m.html

 

Hope you enjoy it, and find it worth your time.

I tried to keep the conversation simple, to start to see where you wanted to go.

Do you agree that the country must have a source of international currency (exports or aid) to even buy foreign products?

In addition, something like 1 tax payer out of 5 gets a significant amount of money from government. 54 million get SSI, government employees, retired government workers, etc. This directly effects the vote, (unlike sugar / farm / corporate subsidies, which funnels money back to the politicians to use to stay in power).

Do you understand my point that I'm not ranting politically (both parties are guilty). Politicians (and the media) don't realize no one understands the economy enough to control it.

One of the two key benefits of the free market is it is based on millions of small experiements, significanlty less fragile than the governments used of a few, really big experiments. (The other key benefit is the greedy battle each other, and the consumer wins).

The interview with Nasim Taleb describes how to reduce fragility. http://www.econtalk.org/archives/2012/01/taleb_on_antifr.html (another of my favorite)

I listened to this one in the last week or two, and agree.

 

Rubbish! To make that evaluation there would be a need to have complete understanding of the economics involved. Instead there is just specific use of resource that feeds an ideological-led demand. It is very much a non-economic approach

 

Depends on the product, you also don't have to sell it to the people where you make the thing. Simply the act of producing it there puts money in workers pockets that'll they'll then use to buy local products.

It's dependency, and I do agree it's a problem. It's also ironic, those politicians who are the best at "pork" are the most loved by their constituents. Everyone wants everyone else's politician to be a spendthrift, but their own.

I'll stay tuned in. I've seen too often economics being avoided when it infringes on your ideology.

 

Especially, when the money is borrowed from our kids and grandkids.

An example?

 

But Krugman told me that debt doesn't matter as long as it increases more slowly than the tax base! We borrowed it from ourselves too, so it's no biggie. =)

Don't feel like digging through the thread, I'll point it out next time.

It's the general government = bad, with what feels like a lack of understanding for how similar some of their inefficiencies are compared to those that occur within the firm.