In bed with Big Business?
#2
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"Big Businesses" have represented the most significant driving force in the growth of the US economy and the rapid pace of technological development since the mid 19th century.
The railroads, the steel industry, telegraph and telephone, the automobile, medical technology, satellite communications, modern computing, air travel, wireless communication...
Being "big" is not prima facie evidence of being "wrong" or "evil" when considered holistically. I'm sure that Carnegie was a corrupt and evil *******, but as a society, we are better for having had him.
The railroads, the steel industry, telegraph and telephone, the automobile, medical technology, satellite communications, modern computing, air travel, wireless communication...
Being "big" is not prima facie evidence of being "wrong" or "evil" when considered holistically. I'm sure that Carnegie was a corrupt and evil *******, but as a society, we are better for having had him.
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I think the question becomes, how many of those successes were driven by (mostly) free market forces and how many were government sponsored or government partnered enterprises?
I don't know the answer to that.
#6
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Many of these industries- the railroads, telegraph and telephone, wireless telephony, etc- can exist at scale only if they are granted rights of way, access to electromagnetic spectrum, and similar exclusive privilege to otherwise "public" spaces and resources.
Some- the phone company, commercial air carriers, etc- enjoyed their greatest profitability and largest expansion (= job creation and tax revenue) when they operated under strict regulatory sanction by the federal government which served to protect them from competition and existed in a state of monopoly or oligopoly.
At the same time, market forces are not without effect. While corporate profitability and employee wages have fallen sharply at AT&T, the major airlines, etc., they have responded to their new environment in a way that has allowed most of them to continue operating, and the result has generally been increased competition and lower service costs (although the cost of air travel is arguably sneaking back up as the industry as a whole seems to be uniformly adopting the practice of charging added fees for everything from checked baggage to printing your boarding pass for you to allowing you to take a ****.)
#8
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The Truth About the "Robber Barons"
http://mises.org/daily/2317
http://mises.org/daily/2317
In the mousetrap industry, for instance, you can be a market entrepreneur by making better mousetraps and thereby convincing consumers to buy more of your mousetraps and less of your competitors', or you can lobby Congress to prohibit the importation of all foreign-made mousetraps. In the former situation the consumer voluntarily hands over his money for the superior mousetrap; in the latter case the consumer, not given anything (better) in return, pays more for existing mousetraps just because the import quota has reduced supply and therefore driven up prices.
Obviously, the average direct cost (to the consumer) of mousetraps will fall if we import mousetraps from countries with significantly lower employee wages and standards of living from our own. One direct effect of this will of course be decreased employment and lower wages for those involved in domestic mousetrap manufacturing, along with greater employment opportunities and increased income for those involved in mousetrap manufacturing abroad.
One indirect effect of this will be, over time, a tendency for wealth (as measured by the total quantity of cash, gold, or other negotiable instruments held) to decrease in the importing nation and to increase in the exporting nation, relative to what it would have been had this specific set of transactions not occurred. If the total value of goods and serviced imported into Country A from Country B exceeds the value of goods and services exported from Country A into Country B, then over time, Country A will tend to become poor and Country B will tend to become rich.
In my own humble opinion, it is the most fundamental, underlying economic duty of the Federal government to protect and increase the wealth of the US, not to be philanthropic towards other nations.
From a practical standpoint, I have seen the consequences of limiting (either by proscription or by the levying of large duties) the importation of goods into a country. They are positive.
Germany is the best example I can think of. If you go to a German Media-Markt (like our Best Buy) to purchase a dishwasher or a refrigerator, guess where most of them are manufactured? Germany. If you go to OBI (Home Depot) to buy a cheap socket-wrench set or even a bag of screws or bolts, guess where those are made? Germany. Has this made Germany (or the individual Germans) poor or unhappy? Quite to the contrary- their economy is quite rich and their people seem quite happy about the state of their domestic fiscal policy.
#9
Being pro free market isn't the same as being pro big business.
Being against Corporatism (big biz in bed with gov't) doesn't mean being commie.
Leftists assume that the corporatism and corruption they see is what the free market is, and wrongly conclude that "more regulation" or "socialism" is the solution to the evil.
Corporatism is against free market principles. In a free market, gov't doesn't give favors to any businesses. Gov't regulation is almost always influenced by the biggest players, to the detriment of smaller competitors. This is how we get screwed by big biz.
Being against Corporatism (big biz in bed with gov't) doesn't mean being commie.
Leftists assume that the corporatism and corruption they see is what the free market is, and wrongly conclude that "more regulation" or "socialism" is the solution to the evil.
Corporatism is against free market principles. In a free market, gov't doesn't give favors to any businesses. Gov't regulation is almost always influenced by the biggest players, to the detriment of smaller competitors. This is how we get screwed by big biz.
Last edited by JasonC SBB; 06-28-2011 at 11:41 PM.
#10
One indirect effect of this will be, over time, a tendency for wealth (as measured by the total quantity of cash, gold, or other negotiable instruments held) to decrease in the importing nation and to increase in the exporting nation, relative to what it would have been had this specific set of transactions not occurred. If the total value of goods and serviced imported into Country A from Country B exceeds the value of goods and services exported from Country A into Country B, then over time, Country A will tend to become poor and Country B will tend to become rich.
Additionally, those who used to make mousetraps in Country A will find different things to make. If these have more value than mousetraps, Country A will become wealthier than Country B.
If Country B subsidizes its mousetrap exporters, they are essentially taxing their people and giving the money to the mousetrap makers. Their citizenry will be poorer for it.
The better measure of wealth is how much people can consume (assuming it's not done with increasing debt). Who's wealthier, us with an average of what, 0.8 cars per person, or the Chinese who have 0.02 but "have lots of manufacturing jobs"?
Trade is good. If I'm better at designing power supplies than you, and you are better at designing transmitters, we trade.
Trade is so important that tariffs between States are prohibited. Why suddenly, might tariffs on foreign made goods be a good thing? Buy local? Hey, we should then only buy within our States! Within our cities! Our streets! Our families!
#12
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Originally Posted by Joe Perez
One indirect effect of this will be, over time, a tendency for wealth (as measured by the total quantity of cash, gold, or other negotiable instruments held) to decrease in the importing nation and to increase in the exporting nation, relative to what it would have been had this specific set of transactions not occurred. If the total value of goods and serviced imported into Country A from Country B exceeds the value of goods and services exported from Country A into Country B, then over time, Country A will tend to become poor and Country B will tend to become rich.
Think about what you said, that "Country A's currency will devalue relative to Country B's currency." Now think about what I said, that "over time, Country A will tend to become poor and Country B will tend to become rich."
Assuming a "global economy" (eg: one where many different nations with many different currencies buy and sell in a common marketplace), devaluing the currency of Country A relative to Country B means that Country A has become poorer and Country B has become richer.
Additionally, those who used to make mousetraps in Country A will find different things to make. If these have more value than mousetraps, Country A will become wealthier than Country B.
It is an unrealistically utopian view to expect that displaced domestic manufacturers will find other things to manufacture when the trend as a whole is to outsource all manufacturing to whatever shore provides the lowest total cost (to the shareholders of the company) of production.
If Country B subsidizes its mousetrap exporters, they are essentially taxing their people and giving the money to the mousetrap makers. Their citizenry will be poorer for it.
This is precisely what the US did in the early 20th century, and it worked.
The better measure of wealth is how much people can consume (assuming it's not done with increasing debt). Who's wealthier, us with an average of what, 0.8 cars per person, or the Chinese who have 0.02 but "have lots of manufacturing jobs"?
The consumption power of the average US household skyrocketed during the period of time in which the US rose up as a dominant producer first of durable goods (cars, machinery, etc) and then later of technology products. Once this period of expansion in manufacturing dominance leveled off, so did the rate of growth of consumption power.
Japan experienced the same effect in the mid to late 20th century, going from a mostly agrarian and largely impoverished nation to, well, Japan.
It is now China's turn. I would expect that in 50 years' time, the consumption power of the average Chinese household will have risen by a far greater amount than the consumption power of the average US household. It is doubtful that they will achieve parity within such a short space of time (particularly given the massive number of Chinese households outside of the major metropolitan areas which exist in absolute poverty), however the trend is towards accelerated growth.
Trade is so important that tariffs between States are prohibited. Why suddenly, might tariffs on foreign made goods be a good thing?
I'm going to repeat that last sentence in a different font, just in case you're skimming, as I know that this post has gotten rather long:
The Federal Government is responsible for protecting the economic welfare of the different States. It is not responsible for protecting the economic welfare of different countries.
If the price (to the consumer) is the same for a mousetrap made domestically in Country A as it is for one imported from Country B (and the quality of the two mousetraps is considered to be equal, or perhaps even higher for domestically-made mousetraps which, as a matter of generalization I think is a fair thing to assume), then on the whole, consumers will tend to purchase domestically-made mousetraps. As a result, more workers will be employed in Country A and fewer in Country B. More money will remain within Country A. And, wrapping up to where you started in the first paragraph, Country A's currency will not become devalued, with the result that Country A will remain "wealthy."I'm telling you, Jason, I am not making this **** up. There are examples of it everywhere. It is necessary only to look at the real world of the past century, rather than some assortment of alarmist / extremist blogs.
#13
These two statements are not contradictory. In fact, you and I are making the same observation from two points of view.
Think about what you said, that "Country A's currency will devalue relative to Country B's currency." Now think about what I said, that "over time, Country A will tend to become poor and Country B will tend to become rich."
Assuming a "global economy" (eg: one where many different nations with many different currencies buy and sell in a common marketplace), devaluing the currency of Country A relative to Country B means that Country A has become poorer and Country B has become richer. There are many wealthy countries with very little manufacturing (or oil). Lichtenstein, New Zealand, off the top of my head. Their standard of living isn't dropping just because China is increasing its manufacturing base.
Think about what you said, that "Country A's currency will devalue relative to Country B's currency." Now think about what I said, that "over time, Country A will tend to become poor and Country B will tend to become rich."
Assuming a "global economy" (eg: one where many different nations with many different currencies buy and sell in a common marketplace), devaluing the currency of Country A relative to Country B means that Country A has become poorer and Country B has become richer. There are many wealthy countries with very little manufacturing (or oil). Lichtenstein, New Zealand, off the top of my head. Their standard of living isn't dropping just because China is increasing its manufacturing base.
... until it is decided to outsource the production of Different Things to Country C. At which point the displaced manufacturers of Different Things will (one hopes) begin manufacturing Yet Other Things Entirely, until it is decided to outsource those things to Country D.
It is an unrealistically utopian view to expect that displaced domestic manufacturers will find other things to manufacture when the trend as a whole is to outsource all manufacturing to whatever shore provides the lowest total cost (to the shareholders of the company) of production.
It is an unrealistically utopian view to expect that displaced domestic manufacturers will find other things to manufacture when the trend as a whole is to outsource all manufacturing to whatever shore provides the lowest total cost (to the shareholders of the company) of production.
Think of this. In My Village, some folks may be good at making Shoes. Then the Next Village starts making Shoes that are better and cheaper. Customers take their money to Next Village, and Shoe makers at My Village close shop and have to figure out something else to make, perhaps Bags.
I don't think anyone would suggest that a tariff between My Village and Next Village is a good thing for My Village and Next Village. Now, why should it be different between My Village and Next Country, just because there is an imaginary line between them called the International Border?
Ultimately wealth comes from productivity. Productivity is improved by specialization and division of labor. The poorer countries' lot are improving by leaps and bounds because their productivity (which was very low in the beginning), is improving quickly.
This is true, and it is also indicative of the reality of the way the world works. A drug dealer sacrifices some short-term margin by giving away samples of their product for free or at a reduced cost, with the expectation that once they have established a loyal customer base, they will raise the price of their goods. In the same way, many Asian and South American governments choose to subsidize energy and production costs in the short term in order to grow the size of their economy and manufacturing base, with the expectation that this will lead them to become a dominant producer of goods in the future.
It is now China's turn. I would expect that in 50 years' time, the consumption power of the average Chinese household will have risen by a far greater amount than the consumption power of the average US household.
BTW China is now in a massive bubble.
Because the Federal Government is responsible for protecting the economic welfare of the different States. It is not responsible for protecting the economic welfare of different countries.
I'm telling you, Jason, I am not making this **** up. There are examples of it everywhere. It is necessary only to look at the real world of the past century,
ECONOMICS IN ONE LESSON
http://www.fee.org/library/books/eco...in-one-lesson/
The lesson is that one needs to look at not just the "seen" but also "the unseen". Takes but a bit of practice.
#14
Empty Chinese cities and malls.
Because stupid bureaucrats obsessed with GDP numbers printed money to build buildings with no consumer demand. Its like the gov't spending money to build Yugos which nobody will buy. Big GDP, wasted productivity.
All credit-fueled bubbles crash and burn. Coupled with the mechanics of debt-fiat money creation, this is the cause of the boom-bust cycle.
Because stupid bureaucrats obsessed with GDP numbers printed money to build buildings with no consumer demand. Its like the gov't spending money to build Yugos which nobody will buy. Big GDP, wasted productivity.
All credit-fueled bubbles crash and burn. Coupled with the mechanics of debt-fiat money creation, this is the cause of the boom-bust cycle.
#15
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And this is relevant to the thread in what way?
EDIT: Sorry, thought that was your entire response to the last message. Disregard this while I digest your previous post.
#19
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IF Joe becomes president, will he fund MT.net?
How high has the funding skyrocketed? Government cash infusions to the radical Chicano organization, known as the National Council of La Raza (NCLR), almost tripled the year Muņoz joined the White House, from $4.1 million to $11 million!
Will he re-innovate Amtrak? Will he give more cash to already incredibly wealthy corporations that have no problems making it on their own? Will he lift the ****** censor?
A Judicial Watch investigation reveals that federal funding for a Mexican La Raza group that for years has raked in millions of taxpayer dollars has skyrocketed since one of its former top officials (Cecelia Muņoz) got a job in the Obama White House. [Muņoz currently serves as Obama’s Director of Intergovernmental Affairs.]
Will he re-innovate Amtrak? Will he give more cash to already incredibly wealthy corporations that have no problems making it on their own? Will he lift the ****** censor?
#20
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I agree that almost all things are more nuanced than most taglines and soundbites would indicate.
I wonder, if you adjust for purchasing power parity, if that is accurate. For example, if my USD has decreased in value by 20% but the things I am buying have decreased in price by 30%, am I (or is the country I live in) poorer?
This should make sense when you are talking about relative change. Consider energy use as a measure of standard of living. Americans averaged something like 25 barrels of oil per year (per capita) over the past decade. The trend was relatively flat, with a drop-off the last couple of years to about 22 b/y.
The Chinese, over that same time, saw an increase of almost 67%. That means they went from ~1.5 b/y to ~2.5 b/y per capita. That's a tremendous rate of change, but it seems less significant on an absolute basis (per capita, not in aggregate).
And, along the lines of the emerging middle class and long term trends, as we have seen this and last year: eventually, wages rise in those low-wage countries for semi-skilled labor. The manufacturing then gets moved to the next low-wage country (e.g. Vietnam from China). Eventually, the cost-benefit analysis to outsourcing certain jobs may swing back to making domestic labor more viable.
Heck, if you want to talk long-term trends as it relates to the global economy... In the 1700s, China and India would have accounted for something on the order of 70% of world GDP. By the 1950s that had shrunk to less than 10% when the US had grown to almost 40%... while having only about 4% of the world population.
What we may be seeing is an acceleration of global rebalancing due to the spread of technology and more economies moving to market-biased models.
Think about what you said, that "Country A's currency will devalue relative to Country B's currency." Now think about what I said, that "over time, Country A will tend to become poor and Country B will tend to become rich."
Assuming a "global economy" (eg: one where many different nations with many different currencies buy and sell in a common marketplace), devaluing the currency of Country A relative to Country B means that Country A has become poorer and Country B has become richer.
Assuming a "global economy" (eg: one where many different nations with many different currencies buy and sell in a common marketplace), devaluing the currency of Country A relative to Country B means that Country A has become poorer and Country B has become richer.
The Chinese, over that same time, saw an increase of almost 67%. That means they went from ~1.5 b/y to ~2.5 b/y per capita. That's a tremendous rate of change, but it seems less significant on an absolute basis (per capita, not in aggregate).
And, along the lines of the emerging middle class and long term trends, as we have seen this and last year: eventually, wages rise in those low-wage countries for semi-skilled labor. The manufacturing then gets moved to the next low-wage country (e.g. Vietnam from China). Eventually, the cost-benefit analysis to outsourcing certain jobs may swing back to making domestic labor more viable.
Heck, if you want to talk long-term trends as it relates to the global economy... In the 1700s, China and India would have accounted for something on the order of 70% of world GDP. By the 1950s that had shrunk to less than 10% when the US had grown to almost 40%... while having only about 4% of the world population.
What we may be seeing is an acceleration of global rebalancing due to the spread of technology and more economies moving to market-biased models.
Last edited by Scrappy Jack; 06-29-2011 at 11:07 AM. Reason: Corrected a tense