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Those fixed-wealth fallacies die slowly

This recent posting of mine here referred to the wonders of global divisions of labour and the consequent availability of cheap goods and services that would have once been luxuries. The posting quoted an example about something as simple and evocative as exports of flowers (aaahhhhh) but of course it applies to anything: computer software, underwear, books, automobile components and furniture.

The ensuing comments were interesting (one of the reasons I like blogs with comment threads is that they give me ideas to write about). One argument, which I have heard several times, went something like this: globalisation and free trade is obviously grand in many ways and gives us all manner of goods unknown to our ancestors. However, the people who do best out of this tend to be smart people who can handle the rapid pace of change that globalisation brings. But not-so-smart folk, who are used to manual labour but not much up to anything else, will end up on the scrapheap. This is a bad thing as it erodes the social fabric, destroys established communities (such as Yorkshire mining villages, etc), and in particular, means that the sort of folk – mostly men – who used to expend their energy and pride on producing ships and material goods lose purpose in life, turn to crime, etc, etc. If they get jobs at all they tend to be worse-paid, “McJobs” which are demeaning to perform. Conclusion: globalisation has big losers as well as winners.

Superficially, this sort of argument carries a certain amount of force, but only lasts until one realises that this sort of line could be used not just to stop cheap imports from China and inflows of Polish construction site workers, but could, for example, be used to ban people in California from importing stuff from neighbouring Nevada, or ban a guy living in Paris from moving to Bordeaux because he is “stealing” a job from people who live in the French coastal town. In other words, when one realises that national borders are lines on a map, the perversity of protectionist economic arguments is manifest. Taken to its logical extreme, I am “taking” jobs from people in East London because I work in Canary Wharf but live in London’s central area of Pimlico.

The other sort of problem here is that it reminds me of how people still view work that involves physical objects, such as manufacturing, as being in some way more “real” than service-based jobs. It demonstrates the lingering Marxian view that wealth is not wealth unless you can drop it onto your foot. It is a view that also, I think, reflects a highly gloomy, if not disdainful, view of one’s fellows. Despite the difficulties involved and the wrench of closures of factories, millions of jobs have been created in countries like the United States that have replaced the old jobs, and many of those jobs are not the supposedly-terrible “McJobs” but jobs that have long-term career prospects. (Although folk that poke fun at “McJobs” tend to ignore several things, such as that such jobs are good entry-level jobs and people then move on to something else).

Here is an admirable debunking of the idea that free trade encourages a “race to the bottom” in terms of incomes. Another admirable paper by the late Murray Rothbard here.

Readers may wonder why I am bothering to write about this, given that protectionism is pretty discredited (I have yet to meet anyone who, when sober, takes Lou Dobbs seriously). But the easy charms of protection continue to seduce lawmakers and even quite intelligent interloctors on blog comment threads. Like ivy threatening to throttle a young plant, protectionism needs to be ruthlessly cut back by argument, over and over again.

55 comments to Those fixed-wealth fallacies die slowly

  • Ivan

    Johnathan Pearce:

    One argument, which I have heard several times, went something like this: globalisation and free trade is obviously grand in many ways and gives us all manner of goods unknown to our ancestors. However, the people who do best out of this tend to be smart people who can handle the rapid pace of change that globalisation brings. But not-so-smart folk, who are used to manual labour but not much up to anything else, will end up on the scrapheap. [...] If they get jobs at all they tend to be worse-paid, “McJobs” which are demeaning to perform. Conclusion: globalisation has big losers as well as winners.

    In principle, I am a strong proponent of both free trade and free migration of people. However, if we’re going to play Devil’s advocate, I think it’s possible to come up with a much better argument against free trade. So I will try to present an argument that, I believe, incorporates more or less all leftist objections to free trade and immigration that make any sense to me. Again, please note that I am in the Devil’s advocate mode here!

    The argument would go roughly along these lines. In a wealthy country, real wages are high because of the high marginal productivity of labor, and this productivity is high because there is abundant capital around to work with. Now, for a given level of capital stock and natural resources existing in a country, there is obviously a certain level of population for which the overall standard of living will be the highest (it is of course a highly non-trivial question which measure we use for this “standard of living,” but the argument is essentially the same for any reasonable measure). It is obvious that such an optimal level exists because of what happens at the extremes. If there was only one man left in the whole country, he obviously wouldn’t be able to produce the stuff necessary for living a wealthy life. On the other hand, suddenly increasing the population beyond a certain limit would obviously result in falling wages (they have to fall if the supply of labor significantly increases, ceteris paribus) and increased costs of living (for example, if the whole country gets much more crowded, it will obviously become far more expensive to afford accommodation of the same quality).

    Now, if a group of rich countries and a group of much poorer countries start practicing free trade and/or free immigration, the resulting migration of people and capital will have an effect similar to a sudden increase in population in the rich countries, in the sense of reducing the capital stock available per capita and possibly putting a strain on the available resources (most notably the habitable land). The existing capital stock is of course not a constant quantity, but in the short run, the most noticeable effect will be the moving of many capital assets into the poorer countries to take advantage of the lower wages there. There will certainly be a large influx of immigrants into the rich countries. According to the above argument, this can result in a significant reduction in the standard of living for the inhabitants of rich countries.

    Note that this argument is immune to the objection “why shouldn’t we then abolish free trade and movement of people even inside each country?” The reason is that it says nothing about free trade and migration between countries of similar levels of development, but only between rich and poor countries. Indeed, I’ve never seen an argument against free trade and migration between rich countries that wasn’t either senseless garbage or a piece of shameless special-interest propaganda.

    Of course, there are many possible replies to such an argument. One can, for example, claim that the described effects exist only in the short run; in the long run, everyone gets richer. This is most likely true, but this “short run” can still last long enough to screw up the lives of many people quite badly. Alternatively, one can claim that even in the short run, the benefits of free trade outweigh the costs for everyone — but empirically, this doesn’t seem to be the case, since there are obviously people who lose pretty badly. Similarly, it seems empirically false to me that the rich countries have population levels below the optimum determined by their current stock of capital and natural resources. (I don’t treat the stock of natural resources, except habitable land, as fixed, since new technologies are rapidly turning yesterday’s useless stuff into valuable resources.)

    So, at the bottom line, why am I still in favor of free trade and migration? The reason is that although they can indeed have negative effects — at least in the short run — the government’s cure can be only worse than the disease, just as with most other things the government does. Protectionism will quickly become a mere tool of filling the pockets of well-entrenched special interests at the detriment of everyone else, and the current way in which most Western countries handle immigration… don’t even get me started on that. To sum it up, this is one of those issues where the results of laissez-faire will be far from perfection — except in the very long run — but yielding to the usual temptation to have the government “fix” the problem will have far worse consequences.

  • Similarly, it seems empirically false to me that the rich countries have population levels below the optimum determined by their current stock of capital and natural resources.

    Why?

  • pete

    Many things that are getting cheaper are luxuries. Food is a big exception to that at the moment, althougth good food is becoming expensive. Most of the things that are getting more expensive are necessities – housing is the best example, and so is healthcare. NHS dentistry has all but vanished and other NHS care is becoming increasingly dodgy. Education too is becoming more expensive, as people decide to go private or move to richer areas to enable access to the remaining quality in the council school system.

  • Highly skilled manual/technical/industrial jobs actually have an advantage–you can’t offshore repair of diesel agricultural/construction/industrial equipment/medium and heavy trucks, for example. (I use diesel tech as an example because I live in coal country and it’s a big deal here, keeping the machinery running. Also, my nephew in farm country is going in to ag diesel tech for his training.) Physically not possible to schlep a huge piece of machinery elsewhere affordably for repair; production is offline too long, for one thing.

    Our instructors of technical/skilled trades programs of nonoffshorable work are selling their programs with this fact. A lot of business management, accounting, software, science, and engineering are being offshored and the provision of health care is too–electronically (radiologist readings) and physically (medical travel).

    Low-skilled manual laborers may have it rough, but trust me, they are coming back for better training. A lot of the high tech manufacturing is moving back to the US because the Mexicans can’t do it, they just don’t have the skills and the education to adjust. Our robotics, automation, CNC programs are very popular and these graduates start at a salary that took me YEARS to get to.

    Skills, baby! It’s all about skills. Ya gotta have skills.

  • Ivan,

    “it seems empirically false to me that the rich countries have population levels below the optimum determined by their current stock of capital and natural resources.”

    As far as I am aware, a country’s population normally changes much more slowly than its capital stock. Natural resources, other than land in a narrow sense and some immobile resources, are often traded internationally so it should usually be their worldwide availability that matters. So shouldn’t the population determine the optimum capital stock, rather than the other way round?
    An argument purely based on differences in capital endowments won’t go very far. According to the reasoning in the ‘devil’s’ argument above, capital labour ratios should rapidly change to become identical between different countries –in reality they differ between countries as well as between industries.
    Empirical studies on growth which focus on capital endowments tend to find that you need to include at least education (human capital) to get satisfactory results. Trade studies based on factor endowments have for some time focussed on skilled and unskilled labour rather than capital versus labour. I think there was a debate on this in the 1980s and 1990s and in so far as there was a consensus on the issue it seemed to point towards technological change rather than trade as the main cause of rising wage differences between skilled and unskilled workers.

  • Ivan

    Andy Wood:

    [Quoting me:] Similarly, it seems empirically false to me that the rich countries have population levels below the optimum determined by their current stock of capital and natural resources.

    Why?

    Well, I certainly don’t have any positive proof of the claim (which is not even stated in a form that allows accurate quantification). This is why I wrote “seems.”

    The reason for my impression is that occasionally, we can see the examples of countries or regions that experience sudden boom that results in a significant shortage of labor. In such situations, wages tend to go up significantly, even for the lowest-skilled workers, and the unemployment falls down to minuscule levels (2-3% is apparently the floor due to the frictional unemployment). Since such situations are exceptions rather than the rule, one can conclude that from the point of view of a person who lives from selling labor, the “problem” is not that the supply of labor is too low to allow efficient division of labor, but rather that it’s so high that the market clearing price is rather low.

    Furthermore, the standard libertarian argument against the policies that increase the price of labor is that while they make those who have a job better off, they condemnt the others to unemployment by artificially preventing the supply-demand equilibrium. But this indicates that if the suppy of labor were lower, so that this surplus of workers condemned to unemployment at the higher price woud be non-existent, the workers as a whole would indeed be better off. Otherwise, such measures would force the overwhelming majority of workers to join the informal sector, i.e. the black market for labor (as indeed occasionally happens when these policies are pushed to extravagant levels relative to the developmental level of the country).

    Again, please don’t interpret my arguments as a call for the government to introduce some measures to “fix” the situation. I’m merely pondering the possibility that some of the standard leftist arguments might have some validity (even if they have, that is still far from a practical justification for the policies they advocate).

  • veryretired

    The faults of protectionism, as with any political controls on peoples’ economic decision making, are its smallness, arrogance, and violence to free choice.

    We live in a global society. This is very, very new in human affairs. The idea that we must shelter types of work, work products, and financial systems is born of a world, and world view, in which everything is local, known, and, seemingly, controllable.

    To attempt to apply that provincial, static, paralyzed view of life and economic activity to the incomprehensible dynamics of a global marketplace is the same small mentality that tried to stop anyone else from having looms, as the English once did, or silkworms, as the Chinese once did, or any number of other equally lunatic examples of people attempting to legislate a stoppage of time.

    One of the significant reasons why human progress was so slow and painful for so many millenia was the predominence of this type of small mentality, in which even small changes and improvements were actively discouraged, if not banned, in the name of tradition and stability.

    Arrogance lives in the educated, clueless man who absolutely knows how things should be, how they should be controlled and designed to make everything perfect, who should decide, and who should shut up and do as they are told.

    And violence, not only to free choice, but literally to those who would dare to demand it, is the only method the above planner can, and will, ever use to enforce his vision. Why bother with persuasion when a gun to the head is so much quicker, and so much more effective in silencing any dissenting ideas.

    It doesn’t really matter if someone can find some case here, or example there, in which some people were discomfited by a change in the economics of their situation, while others were rewarded. No matter what the specifics, that is the story of all economic developments and progress throughout the centuries.

    Stasis is death. It is no accident that the very people who call for stopping any movement they don’t approve of, economic or otherwise, so often cause the stoppage of so many lives they don’t approve of either.

    Tamerlane’s mountain of skulls has been dwarfed many times over by the victims of the “scientific planners”. Life cannot be planned, controlled, molded, or kept in case, like a hothouse flower.

    Life, and that’s all “the economy” is—people living, is its own justification. Life must be lived.

  • dolt

    “Brink Lindsey is an adjunct scholar at the Cato Institute and an international trade attorney in Washington, D.C.”

    Gee, a lawyer. Any chance of free trade and open markets in lawyers anytime soon ?

  • Johnathan Pearce

    Most of the things that are getting more expensive are necessities – housing is the best example, and so is healthcare. NHS dentistry has all but vanished and other NHS care is becoming increasingly dodgy. Education too is becoming more expensive, as people decide to go private or move to richer areas to enable access to the remaining quality in the council school system.

    And the reason for this is, yes – you guessed it – regulation and planning! The NHS, which hoovers up vast amounts of money, for often little commensurate gain, is forcing many people to pay twice for health care: once through tax, and a private layer on top. The obvious solution is to privatise the health system, encourage competition and hence reduce price of said health care.

    Housing is broadly the same. The current planning system adds a considerable amount to the average cost of homes, although the current availability of cheap credit – thanks to the Bank of England – has also inflated house prices.

  • Jim

    As pointed-out, luxuries are becoming cheap, necessities aren’t. Necessities like, say, food – can I “do more with less” and make more sandwiches with less bread?

    I can make more heat with less heating oil, by installing a new ultra-efficient oil furnace. Priced one of those recently?

    Cost-of-living is an index widely ignored by the anti-protectionists, I find. I make more in a day than Chinese assembly line workers make in a month – WOW! Is this to suggest, that at month-end I should have an oodle or two of money lying-around to splurge on all these cheap luxury goods flooding the market? Painful experience suggests otherwise.

    Chinese assembly line workers earn less than I pay in mortgage, or in insurance. They earn less than I pay in any one of numerous taxes – AND they save 40% of their wage, to boot! I am making more than anyone of my name in this country, has ever made: why do I have so little to show for it? And why, often well before the next installment is due, is there none left?

    So after over half a century charting my lumpy progress through the reef-strewn waters of the “wide Accountant-Sea”, I am a failure because I can’t “do more with less”? Well, here at the dawn of global free trade, I sincerely invite the anti-protectionists to demonstrate to me their great success at doing more with less money.

    Come on, guys – put your money where your mouth is! Show us how you in New York and London can thrive on a Chinese assembly line worker’s wage – and don’t forget to save 40%…

  • Jim

    As pointed-out, luxuries are becoming cheap, necessities aren’t. Necessities like, say, food – can I “do more with less” and make more sandwiches with less bread?

    I can make more heat with less heating oil, by installing a new ultra-efficient oil furnace. Priced one of those recently?

    Cost-of-living is an index widely ignored by the anti-protectionists, I find. I make more in a day than Chinese assembly line workers make in a month – WOW! Is this to suggest, that at month-end I should have an oodle or two of money lying-around to splurge on all these cheap luxury goods flooding the market? Painful experience suggests otherwise.

    Chinese assembly line workers earn less than I pay in mortgage, or in insurance. They earn less than I pay in any one of numerous taxes – AND they save 40% of their wage, to boot! I am making more than anyone of my name in this country, has ever made: why do I have so little to show for it? And why, often well before the next installment is due, is there none left?

    So after over half a century charting my lumpy progress through the reef-strewn waters of the “wide Accountant-Sea”, I am a failure because I can’t “do more with less”? Well, here at the dawn of global free trade, I sincerely invite the anti-protectionists to demonstrate to me their great success at doing more with less money.

    Come on, guys – put your money where your mouth is! Show us how you in New York and London can thrive on a Chinese assembly line worker’s wage – and don’t forget to save 40%…

  • Johnathan Pearce

    Jim, I guess you need to take into account the rather massive difference between the cost of living in central London and say, Shanghai. In the latter, the cost of a meal is still way below that of central London, so although wages in China are still a fraction of those here, the money goes further. And so on.

    I am not sure what the rest of your comments mean, or what their “point” is. If you are railing against taxes and regulations, well, welcome aboard. If you are trying to claim that free trade worsens some of the costs that you complain about, well, that would be tosh. If you are saying that certain costs, like land, have risen relative to to what they were before, then explain to us why that is and what the solutions might be.

  • Ivan wrote:

    suddenly increasing the population beyond a certain limit would obviously result in falling wages

    Isn’t this the lump of labour fallacy? Increasing the population increases the demand for labour, as well as the supply.

    I don’t quite understand Jim’s comments, either. It’s possible he’s confusing money with wealth.

    Almost but not quite off topic: Paul Graham writes a good essay about why income inequality is a good thing, and talks about the difference between money and wealth while he’s at it.

  • Jim,

    Cost-of-living is an index widely ignored by the anti-protectionists, I find.

    You need to adjust your findings. Cost of living indices are routinely used in purchasing power parity adjustments. They are ignored by less well informed discussants on both sides of the divide; others tend to use them where they matter.
    You will find for example that service sector prices differ greatly across developed and developing countries. There are many reasons for this and excessive regulation in developed countries is likely to be one of them.

    Show us how you in New York and London can thrive on a Chinese assembly line worker’s wage – and don’t forget to save 40%.

    I don’t know what you define as ‘thriving’. I also don’t know if you have been to China recently. I went about two years back and visited a number of middle class families. This was in an area where temperatures drop to -10 centigrade and lower and I haven’t seen anyone who had a heater at home. People generally live in pretty crowded conditions and many still rely on bicycles.
    In other words, many things you and I take for granted will still be considered luxuries in many parts of the world. If you were to live like a Chinese assembly line worker, maybe you would have some money left over to save –and that is even after accounting for the fact that you are referring to some of the most expensive city locations and after allowing for another factor you mentioned in passing: tax! I know that’s a very short word, but you will find it has a big impact on your net pay.

  • Rob,
    No, this isn’t the lump of labour fallacy; so long as a constant capital stock and competitive markets are explicitly assumed: a rise in the labour supply –other things being equal- would then increase the labour to capital ratio and, given diminishing marginal returns to labour, would also depress the competitive wage.

  • Johnathan Pearce

    so long as a constant capital stock and competitive markets are explicitly assumed: a rise in the labour supply –other things being equal- would then increase the labour to capital ratio and, given diminishing marginal returns to labour, would also depress the competitive wage.

    Well, labour is part of the capital stock, no? I mean human capital, as well as the physical sort. So if you increase the number of plumbers, doctors, farmers, software writers etc working in an economy, you also increase the capital supply of skills, aptitudes, habits, etc. That is also capital. In an information economy, this has become more explicitly the case. So if you have more motivated and skillful workers, you increase your capital.

  • Well, I had the impression that Ivan was arguing from a simple homogenous capital vs homogenous labour scenario. Once you interpret capital as a combination of human capital and physical capital then of course the labour to capital ratio can remain constant if changes in both variables exactly offset each other. (Mainstream economists often do things the other way round by the way, i.e. they look at the capital to effective labour ratio where labour is modelled as being made more effective through human capital.)
    The main problem I see with Ivan’s argument is that the population and wages are seen as highly flexible while capital is assumed to be fixed. I am not sure what the available evidence is on all this, but I have the impression that wages in many developed countries tend to adjust via real wage changes which in a low inflation environment can take time. I am not at all sure that people generally move more readily between countries and industries than capital.

  • Jim

    Jim replies: you didn’t grasp my point? I was too subtle? I’m rarely accused of that!!! Permit me to restate.

    I beg of you, view “cost of living” not as a statistic – I refer you to Sir Josiah Stamp’s comment on statistics – but as the iron box we each live in. Obviously you can’t live on a Chinese worker’s wage in New York or London (or here), just as there’s no point making more sandwiches with less bread when one’s caloric intake is the issue, rather than how many more slimmer sandwiches one eats.

    Those “luxuries” to the Chinese worker, are how I live; and looking around, how everybody else here lives. I wouldn’t call it ‘the lap of luxury’, no matter how much a Chinese worker would demur, but it is how I’ve lived all my life; and just so you know, it gets a lot colder than -10 here. My living costs are astronomical compared to Chinese workers’ – and once they get my job and I’m forced to settle for a “McJob” somewhere, the fraction of my current salary it pays, won’t come close to keeping body and soul together.

    This is the plight of the cost-of-living-dispossessed that the anti-protectionists appear to so readily scorn; fortunately, the politicians occasionally listen to us.

    So admittedly, if I no longer have running water I don’t need heat; if I must walk due to lack of alternatives I don’t need a car or gasoline; if owning my own house is a preposterous fantasy and I’m renting 100 square feet (and delighted to have that much), I can stop paying mortgage; if my sole worldly possessions are a rice pot, a low table and three (NO MORE!!!) rice bowls, insurance is unnecessary, and if the government agrees to take far, far less tax from my writhing hide, I could probably thrive on a Chinese worker’s wage – and could compete on equal terms with ANY worker in the world, no matter how wretchedly he’s paid. But I feel that this continent’s working man would feel less resistance to the process if led-from-the-front by all the intelligentsia who think it a good idea.

    In other words – you first, please.

  • “you first” indeed. Heh.

  • Jim, you are the one who wanted to know under what circumstances it might be possible to live with a Chinese worker’s wage in an expensive location. I gave you some information outlining the conditions under which I assume this might just be possible, highlighting that people in China tend to live much more spartan lives in a lower cost location. I was not urging you to actually try it and –quite frankly- I don’t think it’s a good idea either.
    As for the rest of your reply, this at best tells me that you are very angry about your current situation. Whatever the reasons for this, and with all due respect for your views, I just don’t see the basis for a rational discussion here.

  • dolt

    Kraut – you’re a bit touchy, aren’t you ?

    I think Jim’s right.

    Here we have a lawyer, a member of a trade whose members insist on cartel pricing arrangements to prevent them being exposed to market forces, advocating globalised outsourcing for the rest of us !

    And it seems always thus. If it’s not pampered lawyers or politicians with their noses in the public trough, it’s usually someone otherwise insulated from the realities of working for a living.

    So, after you chaps, into the breach !

  • Johnathan Pearce

    Jim, sorry, I still don’t really see where your sentences are leading to: what are you arguing for? Are you pro-tariffs, do you want to cut/raise taxes, change certain rules?

    I am afraid Rantinkraut (that’s a great tag, by the way), has put it better than me. I see no basis for debating with you, Jim, unless you clarify your arguments.

  • Midwesterner

    Perhaps Jim (and I) would be satisfied if the regulatory structure with free trade partners was equally free.

    I cannot compete with companies and workers who do not have to comply with the same laws I do. OSHA, EEOC, FICA, NLRB, and an infinite alphabet soup of state, local and federal regulatory busybodies control my cost of doing business in ways that most off shore competitors outside of the first world can not begin to fathom.

    “Free trade” is not free trade if the regulatory environment is asymetrical.

  • guy herbert

    What veryretired said, except:

    We live in a global society. This is very, very new in human affairs.

    Nope. Globalised governance and the capacity of states to shut down trade directly, and with that intention, are actually new. Global trade is very old. Trade policy is the relatively new thing.

    States were formerly leaky things, and for most of history tariffs and monopoly protections were forms of direct rent-seeking: gouging obvious, customary (hence ‘customs’), targets on behalf of rulers and their favourites. Some states – the ‘failed states,’ and the mineral-rich ones that are regarded as non-failed as a courtesy to their rulers’ entourages’ appetite for luxury goods – still work like that. In the others we should look at ‘trade policy’ as an outgrowth of bureaucratic border control, justified by luxuriant varieties of neo-mercantilism and growth theory, but really the branch of public choice that describes the self-promotion and regulatory capture of port officials.

  • Econ-Scott

    Whatever the outcome constant retraining is essential for everyone and readjustment of “Career and Retirement” expectations, age 60-65 retirements are a thing of the past.

    Most will have to work, even if part time, for pay, their whole lives. Little old guys at the corner Ace Hardware Store will be you in a couple of decades. Their widows as cashiers at McDonalds for their last years. It’s already happening and those will be the coveted jobs in the future by the elderly.

    The world is changing rapidly.

    True the top 3% of the worldwide pyramid will be able to slow down after say age 65-70 and jump off the work wagon.

    The top 15% “could” do it if they had disciplined savings ethics and purposely held down their standard of living to do it.

    The rest will eat their savings in the frequent, say every 5 or 6 year interval, “Between Jobs” and never really save.

    They will be fortunate to survive their old age without terror.

    In the U.S. it is possible to live on $25,000 a year for a family of four. Many immigrant Mexican families do it in America, legally or illegally, working jobs previously done by skilled construction workers who previously made twice that, and new wage immigrantss living in conditions previously reserved for sweatshop immigrants in the 1900s turn of the Century NY Garment District. Wage earners History repeat. And these are skilled jobs.

    Western Countries have yet to take up the debate, let alone decide, whether they want to preserve their national identity, values, religion, and culture.

    Mass immigration of poor from south asian countries buys votes in Britain, Belguim, France and Sweden.
    But at a price. France is spending 100 to 200 torched cars and 15 policemen, a night .

    Many of those immigrants are carrying their culture and Islamic faith with them, and they don’t want any of yours.

    Don’t even talk about assimilation. Britain has a Big problem. http://littlegreenfootballs.com/weblog/lgf-search.php?searchWith=lgf&searchWhat=entries&searchTime=0&searchString=Britain+has+a+&doSearch=search

    France’s Social Contract is unraveling rapidly and Britain’s is only 15 years behind them. Your muslim populations will outpopulate you and outvote you. Get used to the idea of Sharia law and the Crescent flag flying over Parliament and the Supreme Court of Judicature. It will make it easier for you later. Got High Taxes now ? Wait till you also have to pay the Jizza dhimmi tax.

    My family (in the U.S.) has sent it’s sons to die in two wars in Britain & France … in two wars. They are burried here http://www.abmc.gov/cemeteries/cemeteries/lo.php

    Next time will only be if we see a clear threat to our homeland. And if we do and have to occupy at the end, I for one will push for a complete reorganization of British Government (Like a written Constitution with a second and fourteenth amendment), economic and immigration policy.

    Your chances to experiment with your Culture, governments and religion … are all used up.

    We’re not likely coming back to save you again.

  • Econ-Scott

    Midwesterner:

    The largest producer of Steam Locomotive Engines in the World which tend to burn high sulfur coal ?

    China

    Try that in California, or New York or Chicago.

    Assymetrical regulation and a race for raw material resources worldwide is going to make for an “Interesting future” — the Dafur and southern Sudan genocide, … paid for with petrodollars arms and a pipeline built by China for the oil.

    Speaking of the future, or “Futures”, what do I advise my kids to do for career, Finance, portfolio management, or be a pit bull, and descend into the commodities pits.

  • Jim

    A lawyer, he said. I believe that lawyers (like unions) are an evil, but a necessary evil: a significant part of the checks and balances that keep our world on its feet, moving forward and off each other’s throat – and if the choice for settling neighbourly disputes is either guns or lawyers, the lawyers have my nod!

    To sustain (or possibly kindle) the debate, I suggest for the Libertarians on the board, that black is not white, and the world is neither – and that protectionism is also a necessary evil. The point I am trying to make is that great dislocation frequently attends the big rebalances to populations in the First World, when trade from the Third World puts them out of work; and that suggesting we humans can routinely ‘rise from the ashes, acquire new skills and profit even more from our new situations’ is a trifle naive, perhaps even arrogantly so. Sometimes, a little protectionism can be a good thing indeed.

    An example. Canada’s Annapolis Valley is one of North America’s most fertile apple growing regions. Apple growing is not a cheap enterprise, considering the equipment, facilities and especially the acreage the farmer needs – acreage which is normally zoned “agricultural” and which he can’t sell for any other usage, so he’s shackled to the land, frequently by a hefty mortgage.

    At the moment, you can have a crate of Chinese apples delivered on the wharf at Halifax for less money than a farmer 60 miles away can grow them. What’s the farmer to do? He can’t compete against this; he can’t NOT pay his mortgage or the bank will foreclose and he’ll lose everything; he can’t NOT pay his taxes (’nuff said!); he can’t even sell-off his land because the neighbouring farmers are all in the same economic boat and he’s not allowed to sell to anybody else. He’s in a cleft stick, and with bills raining down and hungry kids at the table he has no money or time to acquire new skills. His only option is to default, lose it all and end-up on welfare (which is something else the Chinese worker doesn’t receive, so he doesn’t pay toward).

    And to make a go of the apple business in the first place, our farmer had to pay far more than the Chinese farmer for everything, especially hired help, and pass endless stringent niggly regulations, zoning by-laws, safety codes, equipment codes, chemical codes, pesticide-use codes &c that the Chinese government – let-alone the Chinese workers – never heard-of; all of which explains why Chinese apples are cheap enough to ship halfway around the world in the first place.

    So again, the world is neither black nor white – and occasionally a bit of protectionism is called for. Disagree with me as you will – I’m indebted to you for your opinion, and retain my own. Incidentally, could somebody delete my extra post above? My ‘net has been in a bad mood today. Thanks!

  • Johnathan Pearce

    France’s Social Contract is unraveling rapidly and Britain’s is only 15 years behind them. Your muslim populations will outpopulate you and outvote you. Get used to the idea of Sharia law and the Crescent flag flying over Parliament and the Supreme Court of Judicature. It will make it easier for you later. Got High Taxes now ? Wait till you also have to pay the Jizza dhimmi tax.

    Maybe. I suspect you are American. It has been fashionable for a certain sort of U.S. commentator to almost wax lyrical about the coming Muslim totalitarian state in Europe, but I have my doubts it will get that far. One reason for skepticism is that projections about population trends are notoriously unreliable. So I would tread warily.

    Jim writes:

    The point I am trying to make is that great dislocation frequently attends the big rebalances to populations in the First World, when trade from the Third World puts them out of work; and that suggesting we humans can routinely ‘rise from the ashes, acquire new skills and profit even more from our new situations’ is a trifle naive, perhaps even arrogantly so. Sometimes, a little protectionism can be a good thing indeed

    .

    I fail to see how it is “arrogant” to suppose that humans have a tremendous capacity to find new ways of working and to adapt. Optimistic might be a better word.

    “a little protectionism”…..ahh. How “little” should that be? Should a tariff on imports from China or wherever be 5 percent, or 10, or 15? I see no coherent defence of the idea that “cheap” imports should be stopped.

    You’re arguments still, at base, depends on the fixed wealth fallacy. It is a stubborn belief, clearly. There are powerful reasons for why people fear and hate change. The demonisation of foreigners, or fear that thousands of say, Polish builders will steal “our jobs” is just the latest example of this, but similar things were said about waves and waves of immigrants in the past, and each time the arguments of the protectionists were proven wrong.

    And to make a go of the apple business in the first place, our farmer had to pay far more than the Chinese farmer for everything, especially hired help, and pass endless stringent niggly regulations, zoning by-laws, safety codes, equipment codes, chemical codes, pesticide-use codes &c that the Chinese government – let-alone the Chinese workers – never heard-of; all of which explains why Chinese apples are cheap enough to ship halfway around the world in the first place.

    A perfect example, in fact, of why globalisation is one of the few restraints on dumb laws and regulations that people try to impose. Take taxes: I have no doubt that taxes on people and firms would be much higher now were it not for the fact that politicians know that people will, and do, take their money out of the country to avoid taxes. So globalisation has helped to drive taxes down. Similarly, globalisation can act as a brake on stupid laws. Example, the current Sarbanes-Oxley law is driving many businesses out of the US and encouraging them to list here in Britain and elsewhere. Result: there is now growing pressure in the US to change the law.

    Ultimately, the argument about free trade boils down to this: I want to buy or sell goods to and from whomever I want, subject only to the laws against fraud and theft. What Jim and others are trying to do is get in my way by praying in aid the idea that somewhow, I owe X or Y my business instead of someone else.

    I am not convinced, Jim. You are welcome to come to this message board and try to defend mercantilist, zero-sum economics, but be warned: there are a lot of people who are even smarter than me who are going to give you hell! Be sure to wear lots of intellectual body armour.

    Sorry about the double-post. Don’t worry about it, the system sometimes trips us up.

    brgds

  • Sam

    Most regulations are superfluous IMO and, in a particular country, only serve to protect the larger more established companies over new, smaller companies. It should be of no surprise that govts receive political contributions or other perks from these larger companies in return.

    The trouble is that govts tend to only have powers within their countries boundaries, which is a problem (for them) if eg chinese companies wish to sell cheap goods and are less affected by the many regulations, described above.

    IMO the solution is to remove the regulations, not to retaliate by putting up protectionist barriers. In a round about way this seems to be what Jim is arguing for, although I’m not completely sure…

    Please let’s not try and fix a problem created by govt by using a govt “solution”.

  • eoin

    “, but similar things were said about waves and waves of immigrants in the past, and each time the arguments of the protectionists were proven wrong.”

    Mass immigration reduces wages, relative to what they otherwise would have been, and pushes up prices of pretty much everything due to the effect on land prices feeding through ( via rent) to high street prices. And rent, and housing too, of course. The only time this has not been true is in 18th- 19th century America which was empty ( it is is still rather empty by historical standards) but it is true everywhere else. Large increases in population reduce wages. england 1750-1840. Or Ireland, pre famine. ( Ireland post-Famine was materially per-capita much better off). Moderate immigration can be a benefit, but only if the immigrants are chosen for their intelligence, or entrepenurial talents. And none of this, of course, is to deal with the “externalities” – the human cost of competing cultures, or larger distances to work, or compeition for scare government resources, or overpriced houses. If a working class man – say a shop assistant – can afford a cheap ( relative to salary) house in London in 1960, and a middle class couple cannot afford the same house in 2006 then their lifes are materially worse, and they are – to all intents and purposes more immiserated than the shopkeeper in 1960 – and this is not unrelated to migration pressures.

    Nor is there any point in pretending that your libertarian State exists when it doesn’t ( thank god), the fact of the social welfare state is that it takes a salary of 27K sterling before a citizen begins to pay for himself over his lifetime – and most immigrants do not earn near that, and are thus a cost to the workers they are competing with for jobs in a process which materially reduces real disposable income- we should jump for joy.

    The empirical evidence for this is clear – during the relatively protectionist 1945-1970 period US real wages rose at 3% a year, in the marvellous globalised boom of the last 5 years – which had as high actual GDP growth as any equivalent period of the 60’s – they stagnated. Note: During a Boom.

    Such is the difference between economic growth caused by per-capita growth, and economic growth predicated on more people working. The latter type of growth is of little use to existing workers, and probably to their disadvantage ( if we include the externalities.)

    Given the trend in wages one waits in trepidation for the recession.

    People will vote for their own economic interests eventually, so welcome your new protectionist overlords, my earnest libertarian friends, but enjoy the trashbin of history.

  • Midwesterner

    A perfect example, in fact, of why globalisation is one of the few restraints on dumb laws and regulations that people try to impose.

    Johnathan, from an observer’s viewpoint, watching mice in a maze sort of perspective, what you say is correct. But as long is you and other libertarian spokespersons insist on dispatching the apple farmers, etc to die on the front lines of the war on bad regulations, libertarian ideals will continue to be a hypothetical solution without any serious support.

    Don’t forget, people are not just losing jobs because they aren’t learning new skills. They are losing the combined savings of multiple generations invested in small businesses that have been in effect, confiscated from them by asymmetrical trade.

    The cannon fodder is rejecting your battle plan.

  • Econ-Scott

    Maybe. I suspect you are American. It has been fashionable for a certain sort of U.S. commentator to almost wax lyrical about the coming Muslim totalitarian state in Europe, but I have my doubts it will get that far. One reason for skepticism is that projections about population trends are notoriously unreliable. So I would tread warily.

    By the time you have the proof it would be too late then wouldn’t it ?

    Those waxing lyrical are U.K. citizens and “commentator”s Mark Steyn, and Theodore Dalrymple.

    Doubts or not, you might start considering Paris burning a bit more seriously. You won’t be far behind.

    Your immigrant muslims are having 4+ children per couple, not to mention the importation of nieces nephews and cousins. They don’t seem really happy with U.K. culture and laws.

    You are correct that population trends can change and quickly,

    … drop me a line when the traditional native, U.K. population tries to catch up to 4, 5 or 6 children born to each of the intact U.K. marriages, and infuses them with philosophy and ethics of Karl Popper(Link), Hayek(Link), Milton Freedman(Link), and C.S. Lewis.

    I think this is your future at least for Birmingham, and vast parts of London… the future of U.K. Muslim Child Abuse(Link)

  • Paul Marks

    The idea that wages and conditions can be “protected” in the long term by import taxes and other restrictions on trade is nonsense. Even the short term a tax for one industry (say steel) will hit other industries (for example cars). And the harm will be much greater than any “good” that is done.

    In the long run even the industry the protection will be hurt by the “protection” as it will distract attention from what needs to be done. Namely the reduction or total elimination of taxes (all taxes, such as corporation tax, need to come down but such things as capital gains tax and inheritance tax must be got rid of at once), the reduction of government spending (i.e. an end to the Welfare State) and the elimination of regulations – especially pro union laws (an employer must be allowed to fire someone who joins a union – otherwise the employer does not really control his own place of business).

    People who do not agree with the above are not serious about saving manufacturing – no matter how serious they think they are.

    Wages in Britain were the highest in Europe at exactly the time when British manufacturing was the most advanced in the world. Nor was it high wages as such that undermined British manufacturing – it was pro union laws (especially the 1906 Act – although this built on the 1875 Act) and government taxes, spending, inflation, and regulations generally.

    Almost needless to say any enterprise in any nation could export goods to Britain without tax or other restriction – and this did not lead to harm either (quite the opposite).

    To return to trade “protection” the real danger is how many peope believe in it.

    One can always get the elite to support any bit of statism – even “economists” of the Paul Krugman sort.

    But to get working men to support statism causes more harm – especially the sort of working men that, say, James Webb attracts. Let us be blunt – free market people can not win elections in the United States without “Redneck” support and “Rednecks” are exactly the people that James Webb is aiming at.

    The line is “you admire my fighting in Vietnam, you like my books, and you feel kinship with my own Redneck background – therefore support me”.

    And he and others will lead them on the path of economic popularism. Trade “protection” and demands for “economic justice” at home.

    It is all bullshit, and worse than bullshit (because it diverts attention from doing anything real about manufacturing) – but it sounds like an easy solution (we can keep our unions, and our welfare state and still have manufacturing industry – we have just got to keep out Chinese goods) and with a macho man in the lead it may come to pass.

    It will have the same effect as the great import tax increase under President Hoover.

  • Johnathan Pearce

    Eoin writes a long post arguing for fixed-wealth economics. Pretty much most of it is rubbish, but lest this person gets the impression that he/she is right because I have not responded, let me dispel that impression. Here goes:

    Mass immigration reduces wages, relative to what they otherwise would have been, and pushes up prices of pretty much everything due to the effect on land prices feeding through ( via rent) to high street prices.

    So presumably, the way to raise wages is to cut the working-age population, perhaps. That way, if we killed off three-quarters of the UK workforce, we’d be a lot richer, right?

    The obvious mistake made in this sort of reasoning is, as I have said in an earlier comment on this board, that capital is fixed. Well, in the short-run, there is a fixed amount, but labour is itself a form of capital. People accumulate skills and habits that increase the sum total of the wealth available in an economy. That even applies to those benighted souls who might not meet Eoin’s criteria.

    . Large increases in population reduce wages. england 1750-1840.

    Wages certainly stagnated immediately after 1815, as a big influx of sailors and soldiers back into the UK population suddenly increased the supply of people looking for work in things like farming. Over the entire period, however, what is evident is that the rapidly-industrialising UK economy was able to absorb a vast and unprecedented increase in population without the sort of famines that used to be the way in which such increases came to a halt. One of the reasons that population rose so fast was because living standards were rising, rather than because people suddenly discovered the joys of sex.

    Moderate immigration can be a benefit, but only if the immigrants are chosen for their intelligence, or entrepenurial talents.

    define “moderate”

    And none of this, of course, is to deal with the “externalities” – the human cost of competing cultures, or larger distances to work, or compeition for scare government resources, or overpriced houses. If a working class man – say a shop assistant – can afford a cheap ( relative to salary) house in London in 1960, and a middle class couple cannot afford the same house in 2006 then their lifes are materially worse, and they are – to all intents and purposes more immiserated than the shopkeeper in 1960 – and this is not unrelated to migration pressures

    This is more an issue of rising population issues per se, rather than immigration. (Let’s leave the issue of culture to one side). Yes, housing can become more expensive – I know, I live in central London – as demand rises. What is also true however is that most countries operate various forms of planning restrictions that have seriously restricted new building, which adds to the issue of cost. I do not dismiss your point, but I point out that the fault is often with government, not the market.

    Anyway, even if house prices do rise in a market over the long run for structural reasons, then people will adjust, by moving away from big towns, etc. As birthrates fall throughout the world – and they generally are – so the demand in the long run will wane. There are of course cyclical issues that tend to cloud the picture somewhat.

    Nor is there any point in pretending that your libertarian State exists when it doesn’t ( thank god), the fact of the social welfare state is that it takes a salary of 27K sterling before a citizen begins to pay for himself over his lifetime – and most immigrants do not earn near that, and are thus a cost to the workers they are competing with for jobs in a process which materially reduces real disposable income- we should jump for joy.

    Huh? You clearly are pleased that the libertarian vision of minimal government does not exist – I presume you are a sort of big government protectionist – but you then go on to complain about the amount of money the state takes from us to pay for welfare. Well, what is your point? We live in the world that we do, sure. I am arguing to change that. What are you arguing for other than to preserve the status quo?

    The empirical evidence for this is clear – during the relatively protectionist 1945-1970 period US real wages rose at 3% a year, in the marvellous globalised boom of the last 5 years – which had as high actual GDP growth as any equivalent period of the 60’s – they stagnated. Note: During a Boom.

    It is true the US did boom during the post-war years, although there was a gradual weakening of some tariffs during that period, by the way. Cheap oil, the natural upswing in growth from the devastation of WW2, played a part. American business was in some ways less regulated and plagued by litigation than it is now.

    Wage growth was strong during the 1990s, when we had the NAFTA free trade changes, government budget surpluses and the dotcom changes. Hardly protectionist. More recently, growth has risen but not at 1990 levels, and companies have still been repairing balance sheets, so wage growth has been slow, but it has started to improve more recently.

    Such is the difference between economic growth caused by per-capita growth, and economic growth predicated on more people working. The latter type of growth is of little use to existing workers, and probably to their disadvantage ( if we include the externalities.)

    Again, the lump of labour fallacy, which you seem so fond of. Yes, in the very short-run, a surge of new workers can hit the wage rates of existing workers, but as skill levels accumulate, so the overall level goes up. You have not proved to me that the influx of new labour in places around the world permanently reduces wages overall.

    People will vote for their own economic interests eventually, so welcome your new protectionist overlords, my earnest libertarian friends, but enjoy the trashbin of history.

    Given the appalling effects of protectionism, such as the Smoot-Hawley tariffs that turned the 1929 Wall Street Crash into a global depression, the trashbin is an unlikely destination for those who support open markets, limited government and low taxes.

    brgds

  • Jim

    No argument from me, too much protectionism is a “bad thing”. I continue to posit that not enough protectionism is likewise a bad thing, and I note that it’s easier though less authoritative, to scorn protectionism when you aren’t in danger of being outsourced yourself. Those whose heads are on the block, see it differently: and too often they suffer severely at the hands of foreign workers who, since they are subject to none of our safety, pension, cost of living and social welfare standards (and the mandatory fees appending thereto), can work far more cheaply and amount to “unfair competition” (an oxymoronic term to pure libertarians; sorry).

    The rub as always, is to accurately define “how much”, which is very poorly done by representative governments whose members must regularly seek re-election. Welfare-State horror stories abound, from defunct-but-still-subsidised consortia, to the Great Depression, to payments for NOT growing crops, to coastal communities of career welfare cases who angrily insist they’re still “fishermen” although the fish are long-gone (north of here, it’s even better: they work the twenty weeks they require for Unemployment Insurance and then sell their job to the highest bidder).

    But that’s why I am not wholly against protectionism: we pay taxes our whole lives, and it’s nice to see some of it coming back, and some attention being paid to our unfortunates. And I admit I can offer no solution for the “how much” test, but I insist that it SHOULD be made, rather than dismissed out-of-hand because protectionism is a “bad thing”.

    It’s an ancient conflict of social evolution; “laissez-faire capitalism” versus the “cradle-to-grave socialist welfare net”. There’s nothing I can say about laissez-faire capitalism that Karl Marx didn’t say better, but we all witnessed how well his ideas work in practice!

    I stress, black is not white, and the world is neither – 80% income tax is as pernicious as children working down mineshafts. The pendulum swings regularly back and forth between the two camps, and always goes too far in one direction before it starts to return. Eventually the pendulum will settle-down and stop, and when it does, it’ll be likely be somewhere in the middle rather than cocked triumphantly to one side or the other.

    And I fully recognise and endorse the human species’s ability to rise phoenix-like from the ashes; what better man to illustrate this than a Dundee weaver forced-out by the mills, who rose to be knighted and acclaimed as one of England’s most renowned bards? – I refer of course, to the immortal poet and tragedian William MacGonigall! (Are you sure that protectionism is entirely bad? ;))

  • veryretired

    These arguments in favor of protectionist legislation make two fundamental errors in conception, regardless of any fragmentary stats the proponents can find to justify it.

    First, the underlying assumption of the entire argument is that protectionist laws and tariffs actually work in a positive way to accomplish what they claim they will accomplish.

    But any historical analysis of protectionist examples in history will clearly show that, in fact, the very best possible result is only a slowing of the process that occurs relentlessly, regardless of any legislation.

    At the turn of the 20th century, app. 65% to 70% of the population of the US was rural, and most had some connection with agriculture. My own family fits this profile in my grandparents and great-grandparents generations.

    Repeatedly throughout the course of the century, politicians promised, and enacted, an endless list of protectionist legislation to save farmers and preserve the family farm.

    The current population figure for agriculture is around 2%, and a very large percentage of all farms are corporate, not family. A century of legislation was completely useless, indeed, the regulations warped the market and there is a case that they, in fact, increased the decline instead of preventing it.

    The same case can be made in the steel industry in the US, and, even more so, any number of protected industries in other countries whose net result is that the people of the country pay an enormous premium for the benefit of a few protected workers—Japan’s cost of living is the perfect example—or endure an economic negative when an obsolete and non-competetive industry is kept alive in the face of more efficient competition.

    Many of the disruptions now being endured by the long suffering people in former socialist economies is the realization that the huge, protected industries that used to employ thousands are utterly incapable of producing a product or service which is competetive when the market opens.

    Had there not been the protectionist laws in the first place, these entities would have had to improve and adapt in a natural process, instead of suddenly folding when the walls protecting them fell down.

    And that point leads to the second fallacy upon which the protection argument is based—that pandering, politically motivated vote buying is somehow acceptable when a whole bunch of people are clamoring for it.

    People have, for untold millenia, believed in witches, black magic, and various forms of evil spells and curses. Today, in many cultures, not always primitive, any number of beliefs regarding astrology, spiritualism, alternative health cures, witchcraft, and many other fables based on nothing more than the conviction of the believers are extant.

    Believing that a witch has cursed you, and given you boils, does not make it so, and doesn’t justify some politicians passing a law restricting the alleged witch in order to give you relief from something that only exists in your head to begin with.

    So it is with the plaintive demand that certain groups of workers, investors, and economic entities be protected from competition from a more cost effective and efficient competitor just because the “other” is an evil foreigner who isn’t playing fair.

    All around the world, this situation exists. In every case, the losers are the other members of the economic system, who must subsidize a losing proposition for the sake of some mythical “need” which outweighs all other, rational, considerations, and exclude from their options any number of significantly better options in the form of cheaper, better goods and services.

    In the long run, none of these pointless attempts to prevent reality from impinging on the desires of the unrealistic will succeed, and the resulting pain and hardship will be worse for all concerned than any inconvenience that would have naturally occurred if the protection had not been there in the first place.

    The various factors that contribute to economic prosperity and progress are very well known, and have been written about and analyzed for decades.

    But those who believe that wishing can make it so will continue to demand snake oil instead of rationality, and will get snake bit instead of prosperity every time.

    Reality will not be denied. This is a lesson that must repeatedly be learned, usually the hard way, by every generation that demands a political solution to an economic situation.

  • Johnathan Pearce

    No argument from me, too much protectionism is a “bad thing”. I continue to posit that not enough protectionism is likewise a bad thing, and I note that it’s easier though less authoritative, to scorn protectionism when you aren’t in danger of being outsourced yourself.

    Jim, your arguments are becoming so incoherent that I am afraid I cannot be bothered to respond. What is “not enough protectionism”?

    Veryretiremed has more or less covered much of the ground. Sorry, but I suggest you go and read some economics, and I am not being patronising, but seriously, do so. Your arguments have scattered all over the place, and yet I enjoy debating with people but cannot do so if we cannot get certain issues straight.

    It’s an ancient conflict of social evolution; “laissez-faire capitalism” versus the “cradle-to-grave socialist welfare net”. There’s nothing I can say about laissez-faire capitalism that Karl Marx didn’t say better, but we all witnessed how well his ideas work in practice!

    Marx’s ideas were a disaster and they were identified as being wrong in theory from the start. It was not just a fact that his ideas were put into practice wrongly. The problems with Marxism are integral to the ideas, not some unfortunate extra. In particular, his view of the world is wrong because he completey misunderstood economic value through his wrong-headed if superficially plausible labour theory. He failed to grasp the importance of prices as signals to producers and consumers. Hence the disasters of economic misallocation in places like Russia, and the consequent famines, etc.

  • dolt

    Johnathon

    I disagree. Jim has hit the nail on the head.

    It’s all very well saying that “some” workers need to have their jobs outsourced (or in-sourced), and that may well be fantastic for society as a whole, for all I know.

    The thing is, it only seems to be the folk who aren’t in danger that really want this to happen. What motivates them I don’t know, but I suppose then they will have more buying power for themselves when prices come down.

    Now, some evidence that the outsourcing argument is so good would be when-

    Libertarian lawyers call for an end to monopoly practice in the legal trade (down with their Law Society)

    Libertarian doctors call for an end to the monopoly practice in the medicine trade (No BMA)

    Retired libertarians call for the outsourcing of pension fund management, similarly outsourcing and insourcing of elderly care services.

    Free-trade loving City types call for free trade in financial services – direct access to the commodities, stock and insurance markets for all , no more special pleading for London against New York. London shares to be trade-able anywhere, by anyone etc. (Down with tyranny of the middle-men)

    I’m sure many people would be less sceptical if that happens.

  • Jim

    Simple. You know what you know: I know what I see. I’m familiar with economic theory, and it all makes sense to me – but it leaves a lot of victims in its wake. And the neglected victims of the Industrial Revolution, were who inspired Marx in the first place.

    People are dispossessed by unrestricted global trade. They cannot afford to compete with people who are paid a small fraction of what they are, and they can’t live where they are on a small enough salary to enable them to compete. AND, their government can’t support their society on the paltry amount of taxes it’ll get from them, if it did.

    I am not calling for unlimited protectionism and the stifling of free trade: I am instead, pointing-out that intelligent use of short-term protectionism can ease the transition of displaced work forces. And that intellectuals who dogmatically declare themselves “white” and any-and-all protectionism “black”, are ideologically suspect at best, themselves detached from workplace realities at worst.

    Please don’t bother to post this. I have clearly not informed you, and you will clearly not convince me – debate stalled, so why flog a dead horse? Thanks.

  • Johnathan Pearce

    The thing is, it only seems to be the folk who aren’t in danger that really want this to happen. What motivates them I don’t know, but I suppose then they will have more buying power for themselves when prices come down.

    Attacking people for their motives rarely works for me, I am afraid. Turn the argument the other way: in the United States, when Bush imposed steel tariffs, the industries that need cheap steel saw their margins contract, and laid off staff. So that was an example of protectionism putting people out of a job. Well done, mercantilists.

    You try so hard to justify imposing barriers between the ability of people to buy from whom they want, sell to whom they want, work for whom they want, and employ whom they want. It all boils down to a desire to use the powers of the state to protect what you regard as a benign status quo.

    Robert Lefever is a libertarian doctor (Google him up).
    The Big Bang changes in the City came about because free marketeers in the City were lobbying for them. Etc.

    Jim writes:

    People are dispossessed by unrestricted global trade. They cannot afford to compete with people who are paid a small fraction of what they are, and they can’t live where they are on a small enough salary to enable them to compete. AND, their government can’t support their society on the paltry amount of taxes it’ll get from them, if it did.

    “Dispossessed” implies that people are robbed of something that is rightfully theirs. So if I choose to give my business to someone who charges me $5 for underwear rather than pay $10 to a protected textile worker, how exactly am I “dispossessing” the latter? What prior claiim does that person have on my income? (Answer – none). Every time you discriminate over buying a cheap or expensive item, you are effectively voting over a person’s livelihood.

    If Chinese workers can produce X for half of what it costs in Britain, say, then it means consumers have more to spend on other things, creating jobs elsewhere. The purpose of production is to produce things that people want, not just to keep people in a job for its own sake.

    Frederick Bastiat, the great French economics writer, wrote a parody of mercantilist opinions, in which candle-makers asked for tariff to be imposed on sunlight for putting them out of work.

  • dolt

    Jonathon

    I have never said a word about defending tariffs or restrictive practices. I just want to be outsourced at the same time as you, or after.

    The stockmarket Big Bang changes you mention were about making trading easier for the existing players in the market, not about making it more open to the public.

    I’m reminded of this quote – taken out of context, of course.
    “A and B determine to be teetotalers, which is often a wise determination, and sometimes a necessary one. If A and B are moved by considerations which seem to them good, that is enough. But A and B put their heads together to get a law passed which shall force C to be a teetotaler for the sake of D, who is in danger of drinking too much. There is no pressure on A and B. They are having their own way, and they like it. There is rarely any pressure on D. He does not like it, and evades it. The pressure all comes on C. The question then arises, Who is C? He is the man who wants alcoholic liquors for any honest purpose whatsoever, who would use his liberty without abusing it, who would occasion no public question, and trouble nobody at all. He is the Forgotten Man again, and as soon as he is drawn from his obscurity we see that he is just what each one of us ought to be.”
    – William Sumner

    So, after you Johnathon. Fair’s fair, after all.

  • Johnathan Pearce

    I have never said a word about defending tariffs or restrictive practices. I just want to be outsourced at the same time as you, or after.

    Your argument was a personal, snide one: to the effect that people who, in your opinion, are safe from change, are the only ones arguing for things like free trade. Well, it is not very surprising that most people favour restrictions on competition. They are often frightened, or made frightened by inane arguments against “unfair” competition. I am sure most doctors, lawyers, steelworkers, etc, favour their industries being protected, and oppose outsourcing.

    My argument is not that people don’t try to protect their short-run interests. My argument is to try to show the logical folly of protectionism in all its forms. So speculating about when I am going to be outsourced is frankly not going to persuade me that my views are wrong. If my job gets outsourced, I will get another one. In fact I have prepared myself for that possibility, as all people should. But unlike protectionist rabble-rousers in Congress or wherever, I don’t get paranoid about it.

    Protectionists also, in my experience, tend to ignore the millions of people who’s livelihoods are made more difficult by tariffs: the manufacturers whose prices are inflated by steel tariffs; the builders who are similarly affected by timber restrictions, or the poor who pay more for their clothing by restrictions on Chinese goods, etc.

  • dolt

    Yes, there is much to be said for your line of reasoning.
    (But I reject your unfair comment about my remarks ).

    I think the trouble is that the masters in this topic are long dead, but we have no better guides available just now.

    Stay with me for a minute – suppose specialization occurs in an extreme form through global outsourcing. I suppose UK would then be doing the one thing it does best, whatever that is (Not being funny, I don’t know what UK does best).

    All other goods and services are supplied by foreign imports. It occurs to me that would not be in the national interest, since UK would be very vulnerable to changes in technology or something else wiping out need for the product, or labour. Then UK would be destitute overnight.

    Now before you say that vital manufaturing would be retained in UK – it’s worth remembering that we have already shut down our ordnance factories and arms manufacture to the point where it’s all shipped in from abroad and our troops don’t even have proper bullets that can be relied on to work. (Apparently cheap foreign garbage is better than UK stuff).

    So, there has to be some control over outsourcing – that’s obvious. But where and how much ?

    Another phenomenon is market distortions within the UK – where people, not goods, are imported from abroad to displace UK workers in un-protected trades.
    They can work for less since they have no familiy with them to support or other infrastructure to pay for bar food and accomodation.

    Clearly that is wrong – if you think UK society is worth preserving.

    Can I ask a personal question ? How have you managed to prepare for outsourcing yourself ? I know many people with dependents are finding it very difficult to step out of work and retrain. I’d sincerely like your insights on that, if you can .

  • Johnathan Pearce

    It occurs to me that would not be in the national interest, since UK would be very vulnerable to changes in technology or something else wiping out need for the product, or labour. Then UK would be destitute overnight.

    Given the UK is the fourth or fifth-largest economy in the world right now (depending on how that is measured), that is an unlikely prospect. There is too much diversity of economic activity here. The law of comparative advantage is highly unlikely to put us in the extreme case of only being able to do one thing better than anyone else.

    In a knowledge-based economy rather than a purely physical-goods one, that is even more so. One might argue, for instance, that Hong Kong is incredibly vulnerable as it is a small place with scant natural resources, tends to focus on a few areas of business and yet for some reason it is also remarkably resilient.

    Now before you say that vital manufaturing would be retained in UK – it’s worth remembering that we have already shut down our ordnance factories and arms manufacture to the point where it’s all shipped in from abroad and our troops don’t even have proper bullets that can be relied on to work. (Apparently cheap foreign garbage is better than UK stuff).

    I happen to think that defence is a core responsibility of the state (I am not an anarchist). So we do need the capacity to arm ourselves, and have the confidence that such capacity is not thousands of miles away. No debate there.

    Can I ask a personal question ? How have you managed to prepare for outsourcing yourself ? I know many people with dependents are finding it very difficult to step out of work and retrain. I’d sincerely like your insights on that, if you can .

    I have looked at other job opportunities in my sector (media/finance), kept in regular contact with recruiters; made sure that I grab every in-house work course I can do to improve my CV. My wife and I have set aside a fairly decent chunk of cash (god knows how we managed it) as a buffer for when or if we have to change jobs. We also work in very different fields, which is a sort of diversifying strategy.

    Other advice: don’t try to stray too far from what you do now unless you have the time and the money to learn a whole new bunch of skills. Look at doing some courses. Think about doing some manual skilled work that is hard to outsource, like electrics, plumbing, building. This may not provide you with a long-term option but it could help pay the bills.

    Go and see a career adviser and get your CV on the list of several agencies that you trust. Network like hell and gently hint that you are in the market.

    I think I should write a separate post on this.

  • Paul Marks

    Citing Karl Marx on “capitalism” is like citing Adolf Hitler on “Jews” (not that the Jewish origins of Karl Marx prevented him from writing a lot of antisemitic stuff of course).

    As for the “victims of the industrial revolution” the bad things of the late 18th century and early 19th century were the French wars (and all the taxes and other such that went with them) not people building factories. See T.S. Ashton’s “The Industrial Revolution” (published almost 60 years ago, but it still does not seem to have sunk in).

    Indeed without the industrial revolution an expanding population would have pushed into far worse standards of life.

    For a country that did not really have an industrial revolution at the time one need only look over to Ireland – look what happened there when the blight hit (a similar situation occured in the 1730’s, but the simple books only remember the 1840’s).

    The preindustrial happy world is a myth.

    As for unions and the growth of government being what causes progress – simply not true, indeed the reveres of the truth. Living standards are far lower than they would have been without these factors.

    Take a simple thought experiment. Think back to 1906 – would living standards (overall – not just for a few or for a few years) higher or lower if industry had been controlled by unions or if taxes and regulations were the same as they are now?

    If someone says “higher” or “the same” it is pointless even talking to them further.

    An industry may withstand unionization for a few years (or even decades), but if the unions get a grip (i.e. one can not, by law, fire someone for being a union AND the full W.H. Hutt “Strike Threat System” comes into effect) then that industry is going into decline (and it is not the fault of low paid people overseas).

    Ditto – a developed economy (for a time) may withstand a level of taxes and regulations that would have caused mass starvation in 1906. But people will still be much poorer than they otherwise would have been.

    Economic growth (based on new technology and, more basically, of the building up of capital over time) can still raise living standards in spite of government growth – but not as high (or as securely) as would have done without it.

    As for lawyers.

    Like unions – I am not in favour of banning lawyers.

    But (also like unions) there should be no laws in their favour either.

    If I want to hire a man to represent me in court who is not a member of the “Bar Association” (or whatever lawyers call their guild-union these days) he may have a “fool for a client” but that is my choice.

    The “white collar” unions (lawyers, doctors and other such) are some of the strongest. There is nothing wrong with an association or union – unless it seeks control (i.e. seeks to prevent people choosing nonmembers), by either government regulations or mob violence (“picketing” and other paramilitary tactics).

  • Paul Marks

    Interestingly for the “keep out the goods from lower wage countries” people, the voters of Ecuador seem to think that free trade with the higher wage United States will harm them.

    So trading with people in a lower wage country is harmful, and trading with people in a higher wage country is also harmful.

    Why do the statists not just say “trade is bad” and have done with it.

  • veryretired

    But Paul, they do say just that, repeatedly. There is an entire school, indeed a college of schools, of economic theory which claims that trade for money profit is wrong, corrupt, evil, and brings about the enslavement, dispossession, and victimization of everyone by a few greedy (fill in the blank)s.

    If you’re a marxist, it’s the capitalists; if you’re an anti-semite, it’s the Jews; if you’re a Malaysian, it’s the overseas Chinese; if you’re the Ecuadoreans, apparently, it’s the imperialist US.

    Every victim needs a villain, a protector, and a sure-fire method for solving all those world ending crises lurking around every corner.

    The populists had the all powerful railroads, the anti-trusters had Standard Oil and US Steel, and the anti-globalists have business corporations, esp. those evil American ones.

    When someone seeks power over others through the state, their calling card always says, “I’m from the government, and I’m here to solve all your problems.”

    A lot of people still believe in astrology, too.

  • Jim

    It’s true, I am habitually incoherent – it comes of having only myself to discuss things with. I’ve even coined a term for it: the “I Know What I’m Talking About, Why Doesn’t Anybody Else?” Syndrome (copyright 1997 @ Jim, please remit all user fees – what the hey, it worked for C. Northcote Parkinson…)

    What prior claim does that person have on my income? (Answer – none).

    – Correct, assuming that you have not availed yourself of a paid medical procedure a la NHS or a sea-side hol via the M1, and your ancestors weren’t forcibly converted to German (or far worse) courtesy of the British Army, all the above funded by his taxes too. Buying a $5 pair of jeans is unalienably {sp?} your right, whoever made them; but once he’s unemployed, will the foreign workers who got your $5 pay his welfare? (Answer – of course not: you will. After all, you paid theirs).

    Societies are collectives, and western societies are very coddled (and damnably expensive to live-in, as a result). We live here, they live there – and I note with irony that they are all trying to move here, with very little traffic in the opposite direction (except for deported illegals).

    Tidy theories are both tidy, and theories. To become more than theories, their rubber must meet the road and be shown to work well enough to be accepted as dogma: until then, they are merely plans, and von Moltke pointed-out that no plan survives contact with the enemy. Modern economics is the product of many astute minds over centuries of development, and is far better based on reality than Marxism (or Aryan Supremacy, or Divine-Rule-of-Kings, &c). It has a smaller pyramid of skulls in consequence – but it has one, comprised of the people it callously left behind.

    Balance is required, always. When income tax slides above 110%, the pendulum is nudged to the right a bit: when limousines no longer swerve to avoid beggars, it’s nudged to the left a bit. This periodic left/right rebalancing of society is performed on behalf of who? – in a representative democracy, the voters: and efforts are ongoing to dispossess them.

    {There’s that ‘dispossess’ word again; do we “own” the right to vote, or any of the other liberties granted us under varied-and-sundry constitutions, common laws %c? I note how much western democracies pay to maintain them, and how barren most foreign workers are in this regard.}

    Get off the soapbox Jim, you’re boring us. My personal bottom line – modern economic theory (being based on reality vice somebody’s pet axe) is likely to do a far better job of running the world than what has come before: but if it spares no concern or provision for the unfortunates it leaves behind, it will never be as universally-acclaimed as many intellectuals assume it already is. At the very worst, it could well inspire another Karl Marx and the cycle will start again, producing another pyramid or two.

    Thank you and all, but I’ll continue to buy local (on the few occasions when I can find something local to buy).

  • Societies are collectives

    No, societies are not collectives. Societies are what we call the emergent characteristics caused by the interaction of people who, well, interact with each other… unless those interactions are all mediated politically, in which case we call it a state (i.e. North Korea does not have a civil society, just a state). States are (to varying degrees of intrusiveness) collectives.

  • Johnathan Pearce

    One has to admire Jim’s persistence, but it is no good.

    Correct, assuming that you have not availed yourself of a paid medical procedure a la NHS or a sea-side hol via the M1, and your ancestors weren’t forcibly converted to German (or far worse) courtesy of the British Army, all the above funded by his taxes too. Buying a $5 pair of jeans is unalienably {sp?} your right, whoever made them; but once he’s unemployed, will the foreign workers who got your $5 pay his welfare? (Answer – of course not: you will. After all, you paid theirs).

    What does all this crap about “converted to German” mean, for crissakes?

    Tidy theories are both tidy, and theories. To become more than theories, their rubber must meet the road and be shown to work well enough to be accepted as dogma: until then, they are merely plans, and von Moltke pointed-out that no plan survives contact with the enemy. Modern economics is the product of many astute minds over centuries of development, and is far better based on reality than Marxism (or Aryan Supremacy, or Divine-Rule-of-Kings, &c). It has a smaller pyramid of skulls in consequence – but it has one, comprised of the people it callously left behind.

    Karl Popper once said that without theory, the facts are blind. In an earlier comment, you said we needed a bit of protectionism. I pointed out the folly of trying to fine-tune such things, as have other commenters like Paul Marks and Veryretired. Yes, we are using theories to explain the world and get a handle on it. That is what economics is about.

    {There’s that ‘dispossess’ word again; do we “own” the right to vote, or any of the other liberties granted us under varied-and-sundry constitutions, common laws %c? I note how much western democracies pay to maintain them, and how barren most foreign workers are in this regard.}

    Ahh, it seems we get to the core of what is bugging you, Jim. It is all about those evil immigrants who contribute nothing to their new home, isn’t it? Of course, libertarians like yours truly believe that you can immigration – albeit up to a point – and welfare states, but one cannot have both. I don’t know how long you have read this blog, but you will have seen this point rehearsed many times before.

    My personal bottom line – modern economic theory (being based on reality vice somebody’s pet axe) is likely to do a far better job of running the world than what has come before: but if it spares no concern or provision for the unfortunates it leaves behind, it will never be as universally-acclaimed as many intellectuals assume it already is. At the very worst, it could well inspire another Karl Marx and the cycle will start again, producing another pyramid or two.

    I actually half-agree with some of that. No advocate of red-blooded free enterprise and open markets can or should afford to ignore the transitional costs and hurts of capitalism, and should figure out how to deal with this. What we must not do, however, is to throw the baby of liberty and enterprise out with the bathwater of such costs.

  • RAB

    Johnathan, I think that post you suggested yesterday, in relation to Jim and cv’s would be a very good idea.
    I have kept out of this one, because you, Perry and Veryretired have been doing such a good job in trying to explain diversity and market forces.

  • RAB

    P.S. I think he meant the Anglo Saxons turning up
    for some strange reason!

  • Paul Marks

    The very definition of society (or societas) is that it is NOT a collective (or universitas) – see M.J. Oakeshott (not an economist – I promise) on this (for example in his “On Human Conduct” 1975). There is no such THING (enity) as “society” – civil society is the web of voluntary (civil) interactions between people.

    If Jim wants to “buy local” (for example at farmers’ markets or from local craftsmen) that is fine by me – but that is a bit expensive. I tend to buy factory made stuff myself (my savings are going down quite quick enough without extra expense).

    I suppose the logical end point of buying local would be to grow one’s own food and make one’s own stuff – fair enough if one has the land and skills. However, the end of the division of labour (on an international scale and even more if division of labour on a national scale ended) would not be fewer people being “left behind” -more people would be left behind. In fact vast numbers of people would starve to death.

    As for what veryretired says – yes you are correct (I wish you were not). I do not know what made me forget about the various forms of statist.

  • Jim

    Drop it – dead’un! That hound don’t hunt, and kicking it twice as hard (or from both sides at the same time) won’t make it any more eager to learn. Pure-theorists and pragmatists should not argue; they see things so differently that at times it’s doubtful they speak the same language (and I’ve established, NOBODY understands mine!)

    I’ve lurked here for about a year: I enjoyed this immensely, and will try to mind my own business in future – just PLEASE don’t debate gun control! Please? Thank you very much! Jim+

  • Johnathan Pearce

    RAB, you are too kind. You have interesting and valuable things to say, so say them, old chap.

    Jim, please continue to read us and keep commenting, even if you think we are a bunch of ideologues. You have a point of view, and you are civil.

    Brgds