Free Republic
Browse · Search
Religion
Topics · Post Article

To: kenavi
"If we had had tariffs, we could have avoided the Great Depression, and all the many ones that preceded it."

WRONG!

We did have tariffs during those times. Those depressions were caused by the business cycle and being on the gold standard, which caused periodic bouts of deflation which resulted in deflationary depressions.

Going into the Great Depression, imports were only 4% of GNP and exports were 5%. The net change in Imports/Exports during the Great Depression was only 0.2% of GNP.

During the Great Depression we raised Import tariffs up much higher than normal (Smoot Harley) and Smoot Harley was blamed by some for causing the Great Depression. Only two things are wrong with that. We were already in the Depression when Smoot Harley was enacted, and international trade simply wasn't a big enough component of GNP to be the cause.

Now imports are 16% of our economy. And when you consider how large the wage differential is between third world countries such as China and the U.S., you can see that 16% equates to a much larger pre-outsourced piece of the U.S. economy.

Example, if you take products that are 80% labor at $8/hr jobs and outsource them to countries that work for $2/day ($0.25/hr). A $10 product ($2 material + $8 labor) now costs ($2 + $0.25) = $2.25. Then $2.25 of imports was worth $10 in the pre-outsourced American economy.

That outsourcing is good for consumers, but they quickly lose their jobs and cease to be consumers as the economy canibalizes itself.

You will not avoid the business cycle complete no matter what you do, because it's rooted in consumer psychology. However, monetary policy is effective and minimizing it, and thus we've only had recessions not depressions since the Great Depression.

But the current economic crisis is different specifically because of the amount of goods that we have outsourced. Your can see that in the (Imports = 4% of GNP in 1930, vs 16% of GNP now). We've seriously damaged the job base in the U.S. and neither candidate seems to recognize it.

45 posted on 09/06/2012 2:25:36 PM PDT by DannyTN
[ Post Reply | Private Reply | To 34 | View Replies ]


To: DannyTN
Ping your post. "But the current economic crisis is different specifically because of the amount of goods that we have outsourced. Your can see that in the (Imports = 4% of GNP in 1930, vs 16% of GNP now). We've seriously damaged the job base in the U.S. and neither candidate seems to recognize it. "

I'm going to look beyond the big 2. I don't want to waste my vote by giving a mandate to someone who ignores your point.

58 posted on 09/06/2012 3:12:39 PM PDT by ex-snook (without forgiveness there is no Christianity)
[ Post Reply | Private Reply | To 45 | View Replies ]

To: DannyTN
Thanks. I was being facetious in my post, but yours gives me a lot of food for thought.

I'm not sure we can restore the manufacturing base we have lost. But we could do a lot better by reviewing our tax and regulatory policies that cause U.S. based companies to outsource from abroad.
62 posted on 09/06/2012 3:24:52 PM PDT by kenavi (Obama doesn't hate private equity. He wants to be it with our money.)
[ Post Reply | Private Reply | To 45 | View Replies ]

Free Republic
Browse · Search
Religion
Topics · Post Article


FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson