Lies About Trade

Townhall.com ^ | March 14, 2018 | John Stossel

[trebb]

Not only that, the meme of steel not being critical is all wrong - if we could have controlled steel being used in Germany, then Essen would not be known as the city that armed Germany....

[econjack]

If that were the case, why can’t they import food? The people are starving.

[Alberta's Child]

They have the capacity to produce more food than they need. It’s government control of the economy that discourages businesses and individuals from engaging in any productive agricultural activity.

[econjack]

Capacity and production are two different things. The gov’t has so badly managed the economy that they cannot buy any production inputs outside their own boarders, including fertilizers, seeds, even gasoline is in short supply in a country flooded with oil. The reason is because they cannot buy replacement parts for the industries they nationalized. They, too, thought trade deficits meant nothing because of their oil reserves. They ignored the fact that you need to be able to get the oil out of the ground.

[DannyTN]

"Genuine free trade will be a recipe for wonderful economic growth."

In theory, genuine free trade would increase overall world output. But the theory doesn't guarantee every country would benefit from that increase in output. In fact countries like ours would likely suffer.

Jobs would move to countries that have excess labor. Wages would start to equalize between nations. US wages would fall while China wages would rise.

Think about that. US wages would fall until they are no better than the rest of the world.

[CutePuppy]

So American workers should continue getting kicked in the ass, because they cannot survive on slave wages?

What you have is a long period of Joseph Shumpeter's "creative destruction" due to technology and productivity improvements, which led to general improvements in quality of life in the US. Some industries (e.g., horse buggies and buggy whips a century ago) are dying or shrinking due to technological advances and/or poor government policies (like minimum wage and odious regulations) that increase the cost of goods or services to the point where they become uncompetitive (i.e., "pricing themselves out of the market") relative either to other producers of same / similar goods or other industries which can produce alternative options (such as 3D printing/cutting or "additive"/"subtractive" manufacturing) which has little or nothing to do with country's overall trade deficit or surplus. Composition of trade deficit / surplus may be of interest — is it raw materials for production, finished goods, services etc.

We usually don't complain about importing oil when its price is low... unless we happen to work in the oil industry. And so on...

With the official unemployment around 4% and severe labor shortages in moderately skilled positions it's difficult to argue that workers have to "survive on slave wages" but some industries can be doing better or worse for reasons specified above.

Here's the typical headlines you see today:

The Great Labor Crunch - B (sub), by Avi Salzman, 2018 March 09

From The Great Labor Crunch - B (sub), by Mary Childs, 2018 March 10:

When 'Charlotte' started at the BMW auto factory in Spartanburg, S.C., five years ago, she stood out. ..... Charlotte — so named by a human co-worker — is among 60 lightweight "collaborative robots," or cobots, among the 2,000 robots employed by the German car maker at the factory.

Charlotte and her cohorts aren't supplanting their flesh-and-blood co-workers. They're generating demand for humans to program and maintain them, among other things. BMW is ramping up training programs for new technicians and engineers to keep the robots functional. Last year, the plant added 1,000 workers, for a total of 10,000.

AUTOMATION is revolutionizing manufacturing, trucking, retail sales, food services, and medicine, among other industries. ..... < snip >

A century and a half ago, 50% of the U.S. labor force worked in agriculture. Even as agriculture shifted to less than 2% of the labor force, the total pool of workers boomed, filling jobs in technology, manufacturing, and services.

In the U.S. 50 - 60 years ago computers were very expensive and human labor very cheap; now computers and computing power is very cheap and human labor is very expensive.

Most of what you see in some industries has more to do with that fact and poor government policies misallocating fiscal and human capital than it is with trade deficit. But don't expect some politicians to acknowledge that rather than exploiting it to get elected.

[Alberta's Child]

Excellent post. It's important for all of to remember that in any policy decision, the underlying objective is absolutely critical.

What is the underlying objective here? Is it to employ as many Americans as possible? Is it to maximize the productivity of our industries? Is it to maximize our standard of living? Whether a particular policy (a steel tariff, for example) is a "good" idea or a "bad" idea really depends on which goal you're pursuing.