A sign of just how shakey this "recovery" is ...

[WhipperSnapper]

Youre right. A modern failure of extreme protectionism is the USSR. Up until the mid 80's, the soviets forbid ANY money leaving the country. That meant investment, trading, or anything. The ruble therefore was an internal currency only, and not traded on forex. And of course the entire banking system was managed by Gosbank, the state bank. Also, the USSR priced consumer goods not by supply and demand, but typically below market value artificially, which created massive shortages as a result. Another problem the soviets had was too many jobs and not enough workers. It was the government that set growth goals, and just kept building factories to make...stuff. This created a phenomenon called shirking...where workers would show up late, take 4 hour lunches and drink, and maybe come back for another few hours. It was allowed to continue because a half assed worker is better than no worker, and if an employer fired him/her, he may not get a replacement due to labor shortages.

Protectionism isnt really a successful model.

Protectionism isn't a good model or Soviet Communism isn't a good model?

What if you had Protectionism combined with internal Capitalism? According to capitalist theory, as far as I know, if every other nation in the world suddenly disappeared, you could have a fruitful and prosperous nation if you had capitalism--people would have an incentive to produce wealth and to trade it--they just wouldn't have any other nations or people outside of the nation to trade with, but so what?

In your example above of alleged failed protectionism, I think you are blaming protectionism for the problems of Soviet communism.

Instead, why not look at the quality of life people have in Japan? See:

Japan's Phoney Slump
America's Postindustrial Nightmare?

Why not look at how China's mercantilist policies are benefiting China?

 

[blackangst1]

Protectionism isn't a good model or Soviet Communism isn't a good model?

What if you had Protectionism combined with internal Capitalism? According to capitalist theory, as far as I know, if every other nation in the world suddenly disappeared, you could have a fruitful and prosperous nation if you had capitalism--people would have an incentive to produce wealth and to trade it--they just wouldn't have any other nations or people outside of the nation to trade with, but so what?

What you are describing is protectionism.

In your example above of alleged failed protectionism, I think you are blaming protectionism for the problems of Soviet communism.

Instead, why not look at the quality of life people have in Japan? See:

Japan's Phoney Slump
America's Postindustrial Nightmare?

Why not look at how China's mercantilist policies are benefiting China?

Neither China nor Japan are protectionists. Not anymore. To a small degree, yes, but certainly not the extent the USSR was. Not only are their currencies pegged to ours, and their currency traded on the international market, but their products are marketed globally as well.

 

[Jhhnn]

What you are describing is protectionism.



Neither China nor Japan are protectionists. Not anymore. To a small degree, yes, but certainly not the extent the USSR was. Not only are their currencies pegged to ours, and their currency traded on the international market, but their products are marketed globally as well.

Huh? Japan is notoriously protectionist wrt foreign products being sold in Japan... the rest of it really isn't even applicable to the idea of protectionism...

 

[Zebo]

What you are describing is protectionism.



Neither China nor Japan are protectionists. Not anymore. To a small degree, yes, but certainly not the extent the USSR was. Not only are their currencies pegged to ours, and their currency traded on the international market, but their products are marketed globally as well.

Japanese are cultural protectionists. They are smart and understand it's better to "buy local" because the guy they buy from will have money to buy a good or service they offer. Americans, by going solely on price, are playing one move chess on a three move board and are getting clobbered because of it.

 

[BigDH01]

Neither China nor Japan are protectionists. Not anymore. To a small degree, yes, but certainly not the extent the USSR was. Not only are their currencies pegged to ours, and their currency traded on the international market, but their products are marketed globally as well.

Pegging a currency is not a small degree of protectionism. It basically ensures we can't compete with them while killing their domestic consumption. It's certainly not free or fair trade.

 

[blackangst1]

Pegging a currency is not a small degree of protectionism. It basically ensures we can't compete with them while killing their domestic consumption. It's certainly not free or fair trade.

Well, that is certainly a very good point.

edit: although I agree with your point, I need to do some more reading. It has always been my understanding that typically protectionist countries rely mostly on tariffs, embargoes, and trade quotas for their first lines of defense.

 

[Budarow]

The "recovery" is nothing more than a shift of debt from the private sector to the public sector (the last ~15 months of securitorized loans were guananteed by the U.S. government) with "give aways" to promote "buying" of stuff/services (e.g., cash for clunkers, cash for caulkers, cash for appliances, etc.) and welfare payouts (99 weeks of unemployment, education grants, cash to the states to shore up medicad, etc.). I read a while back that the U.S. government "gave away, guaranteed, or lent out a total of ~$12-$14 trillion). A lot of the above programs were also done in other countries. The world's governments couldn't do anything else.

However, the above didn't fix the "debt Issue" and actually only made it worse. Some people paid down debt (me for 1) but not enough to make a dent.

Now the U.S. real estate market is going to tank again due to the "shadow" inventory of homes about to be foreclosed on (~4.6 million homes with payments >90 days late or in foreclosure, 7.1 million homes >30 days late or in foreclosure plus the 480,000 homes currently owned by banks to include Freddie and Fanny). That's anywhere from 8-11 years worth of new home construction (at the current rate of ~650,000/year).

Seems to me the people in the EU would cut back BIG TIME on spending and start saving to weather the "austerity" measures which will be coming soon. Since 11% of our exports go to EU and 18% of China's exports go there to, it will be a blow to our economies.

I could very well be wrong, but the recent "quakes" in the U.S. stock market don't seem to be a short lived event like a temporary "correction" followed by the continuation of the March 2009 bull market.

I guess we'll see soon enough. Supposedly, the loan guarantees of the U.S. govenment will mostly end by July 31, 2010. If the public sector does not pick up the pace, the recovery will be in trouble.

 

[BigDH01]

Well, that is certainly a very good point.

edit: although I agree with your point, I need to do some more reading. It has always been my understanding that typically protectionist countries rely mostly on tariffs, embargoes, and trade quotas for their first lines of defense.

Fixing their currency at an artificially low rate imposes a tariff on all goods we export. Why try to write tariffs one at a time when you can manipulate your currency and get them all?

 

[Jhhnn]

While China's currency peg may well be damaging this nation's financial health, it's been highly beneficial to american businesses investing in China. Investment dollars go a lot further that way- chinese assets and goods are a bargain, also fetch really good margins in the world market, generating better profits.

Like I said earlier, what's been happening has been happening because it benefits the financial elite. Cheap goods in the US and greater development in China are merely side effects rather than some sort of actual goal on their part. When the enormous mountain of debt created to sustain that collapses, it'll look bad on paper, for awhile, but they'll basically own the US govt and will be the only people who have liquidity, too. Credit Rules on the way up, but Cash is King in a debt/ deflation scenario. We're already there, with massive infusions of liquidity being furnished by the Fed and Treasury being the only things slowing it down...

 

[blackangst1]

Fixing their currency at an artificially low rate imposes a tariff on all goods we export. Why try to write tariffs one at a time when you can manipulate your currency and get them all?

But, those that peg their currency to ours cannot do so without affecting ours, and those attached to it. USSR was able to do what they wanted, because the ruple was not traded.

Now, this may be getting a little offtrack, but I see China detaching the yuan from the dollar in the next 10 years, which will be great for them. It will no doubt appreciate, thus giving the Chinese more buying power, creating more wealth within China. China and India are really the next financial pwoerhouses, in the next 20-50 years. They have growing technology, a strong manufacturing base, AND the luxury of having some of the brightest rising stars in medicine and energy. China, for example, is the largest consumer of solar energy, AND the largest producer of solar products. Look up Poly Energy and Suntech Power.

But Im getting oftrack.

 

[tiresmokindad]

Well the market is down 200 in the first 15 min and the goverment thinks we out of this recession and happy days are here ppffftttt.

Oh well I agree. I think we must celebrate that happy days!

 

[BigDH01]

But, those that peg their currency to ours cannot do so without affecting ours, and those attached to it. USSR was able to do what they wanted, because the ruple was not traded.

The Chinese can still do what they want because the advantage comes from comparative value. As long as the Chinese yuan is comparatively undervalued to the USD, we're going to get destroyed. It not only affects our relationship with China, it gives them a comparative advantage when selling a product to any country. Their goods will always seem cheaper next to our's.

They are following much the same pattern as the Asian Tigers. They discourage domestic consumption and build an export-driven economy. Our economy could handle this when the labor pools of these populations were relatively low. We're getting our lunch handed to us when the offender has a labor pool measured in the hundreds of millions.

I'd rather not wait until the Chinese have decided they've taken sufficient production from us. I'd rather we start putting tariffs on their goods now in proportion to the effect of their currency fixing. It's going to result in inflation here and a real reduction in our quality of life (if you measure this by purchasing power). However, in the longer term it will mean our production can compete. The quality of life hit is coming no matter what, I'd rather take it now than later.

 

[soccerballtux]

Heh. offshoring unbalances both trade and income distribution in this country, quite intentionally. Whatever benefits the financial elite is what's been done.

Within our mixed economy model, regular Americans need regular jobs, jobs that pay well enough to support the price of real estate, consumer goods, food, healthcare, you name it. Manufacturing furnished those jobs, and furnished trade goods to balance things on a monetary, fiscal, and international level. Manufacturing jobs also furnished American workers with a sense of self discipline and self respect, too. They made things that mattered.

When private industry fails to provide jobs with decent pay rates, pay rates that will support the general economy, the tendency for govt to try to cover the gap is obviously quite strong, and is what's been done. The problem with that is that instead of taxing the financial elite sufficiently to pay for it, we've borrowed from them instead, creating huge debt maintenance issues, as well, public and private.

I realize that'll set the usual rightwingers to foaming at the mouth, which is what they do best, anyway. I'm sure we'll get the usual lament about how people at the top are getting taxed to death, yada, yada, yada, when that's demonstrably not true at all.

Prior to Reaganomics, the policies of the New Deal maintained a certain balance. Having lost that, it seems only reasonable that if we want to regain that balance, then we'll need to employ those methods to do it, and probably some remedial ones for a time. Which, of course, is exactly what we're not doing.

What we are doing is waltzing into a fiscal and financial trap that benefits only the very few at the top and their offshore partners, a trap that may ultimately force us into a low yield form of socialism- low yield for the vast majority, that is...

We're staring down the wrong end of the gunbarrel at trickledown economics, and few have the sense to even realize it...

yes and no, if we let things operate as they should (banks fail, forced to liquidate overpriced assets) then these trade imbalances would not be such a problem. You can't really fight against offshoring things that are far more expensive to do over here. If you do the companies that you try to protect will figure out the consumer doesn't have a choice but to buy crap and you get economic stagnation from lack of competition just like happened in India after Ghandi's principles were legislated.

Liberals foam at the mouth just as much too...especially over those republicans.
I think the problem is deeper than you make it. Because of mechanized production and offshored production, we shifted a lot of jobs over to unimportant things like "marketing" and "business" when we have to be employing a lot more engineers and designers to produce new things. The things you produce should be able to sell themselves based on the need-- a company should see their business model and say "hey, we need a product that does xyz, lets search for it, oh there's one let's buy it" instead of me as a designer employing hundreds of marketers to fly around the country and convince people that their company needs product xyz.

Manufacturing is a dead horse, nobody here would make McDonalds widgets anyways. The jobs where we actually produced something have moved on to things that require a college education. It's typical that the manufacturing crowd wouldn't understand this need to be re-educated...seeing as they weren't educated in the first place.

If we taxed the financial elite to pay for it, there are other economies where their money can get better return and won't be taxed away. They're free to just move it wherever they please. They're the most mobile class of all of us. And if their money leaves, how are new companies supposed to get loans to start producing new products? We don't want to be like the UK where no new companies have actually made it in like 50 years.

The point I'm trying to make is this: there is no solution. The jobs moved on and you can't move them back to manufacturing. It just won't work-- not that it's not feasible to try, but that if you do it won't work economically. The jobs moved onto better things that require an education and more brainpower. But we don't need as many of those jobs as we needed of the manufacturing jobs. Go read Player Piano, that's exactly what's happening.

 

[werepossum]

Heh. offshoring unbalances both trade and income distribution in this country, quite intentionally. Whatever benefits the financial elite is what's been done.

Within our mixed economy model, regular Americans need regular jobs, jobs that pay well enough to support the price of real estate, consumer goods, food, healthcare, you name it. Manufacturing furnished those jobs, and furnished trade goods to balance things on a monetary, fiscal, and international level. Manufacturing jobs also furnished American workers with a sense of self discipline and self respect, too. They made things that mattered.

When private industry fails to provide jobs with decent pay rates, pay rates that will support the general economy, the tendency for govt to try to cover the gap is obviously quite strong, and is what's been done. The problem with that is that instead of taxing the financial elite sufficiently to pay for it, we've borrowed from them instead, creating huge debt maintenance issues, as well, public and private.

I realize that'll set the usual rightwingers to foaming at the mouth, which is what they do best, anyway. I'm sure we'll get the usual lament about how people at the top are getting taxed to death, yada, yada, yada, when that's demonstrably not true at all.

Prior to Reaganomics, the policies of the New Deal maintained a certain balance. Having lost that, it seems only reasonable that if we want to regain that balance, then we'll need to employ those methods to do it, and probably some remedial ones for a time. Which, of course, is exactly what we're not doing.

What we are doing is waltzing into a fiscal and financial trap that benefits only the very few at the top and their offshore partners, a trap that may ultimately force us into a low yield form of socialism- low yield for the vast majority, that is...

We're staring down the wrong end of the gunbarrel at trickledown economics, and few have the sense to even realize it...

Taxing more to support those without decent jobs just builds welfare states, the kind that are currently collapsing in Europe. Government, producing nothing of wealth but only re-distributing what the private sector makes, cannot take the place of the wealth-producing private sector.

 

[blackangst1]

The Chinese can still do what they want because the advantage comes from comparative value. As long as the Chinese yuan is comparatively undervalued to the USD, we're going to get destroyed. It not only affects our relationship with China, it gives them a comparative advantage when selling a product to any country. Their goods will always seem cheaper next to our's.

They are following much the same pattern as the Asian Tigers. They discourage domestic consumption and build an export-driven economy. Our economy could handle this when the labor pools of these populations were relatively low. We're getting our lunch handed to us when the offender has a labor pool measured in the hundreds of millions.

I'd rather not wait until the Chinese have decided they've taken sufficient production from us. I'd rather we start putting tariffs on their goods now in proportion to the effect of their currency fixing. It's going to result in inflation here and a real reduction in our quality of life (if you measure this by purchasing power). However, in the longer term it will mean our production can compete. The quality of life hit is coming no matter what, I'd rather take it now than later.

The problem is, we dont HAVE production. And much of the production we DO have is foreign. Take Kia for example. Have you seen their latest commercials? With the kid, in a Rockwell-like setting, riding his bike through the wherehouse? They portray "built in America", but its meaningless when profits go overseas. Its an illusion. And its not just federal government to blame. I mean, when you have a company like Toyota, or Honda, and they purchase cheap land in Louisiana or Kentucky, and proclaim "we'll employ 3000 people! And give them benefits!", of course they'll bite. And thats a state decision.

IMHO, the future for America is NOT production. It is technology, energy, and medicine. This is not the industrial age anymore, and those who cling to the glory of factories are living 50 years in the past. Meanwhile, countries like China and India are not only picking up production, but also dipping into the future - energy and medicine.

 

[BigDH01]

The problem is, we dont HAVE production. And much of the production we DO have is foreign. Take Kia for example. Have you seen their latest commercials? With the kid, in a Rockwell-like setting, riding his bike through the wherehouse? They portray "built in America", but its meaningless when profits go overseas. Its an illusion. And its not just federal government to blame. I mean, when you have a company like Toyota, or Honda, and they purchase cheap land in Louisiana or Kentucky, and proclaim "we'll employ 3000 people! And give them benefits!", of course they'll bite. And thats a state decision.

Manufacturing still employs a large part of our workforce.

http://www.bls.gov/news.release/empsit.t14.htm

We can still do well at capital goods and goods requiring skill.

I actually blame the federal government for not doing enough. I don't think it's wrong or protectionist of our government to impose tariffs in proportion to the cost of the currency fixing costs China imposes on us. Doing it now though would only upset people as they paid the real cost of their imported goods.

IMHO, the future for America is NOT production. It is technology, energy, and medicine. This is not the industrial age anymore, and those who cling to the glory of factories are living 50 years in the past. Meanwhile, countries like China and India are not only picking up production, but also dipping into the future - energy and medicine.

Perhaps, but if they follow the Tiger model, they'll start with production as they have been doing and proceed to more advanced sectors. It may have been unskilled factory workers yesterday, but it will be developers, scientists, engineers tomorrow. We've already seen this play out in other nations, and we're doing nothing to at least level the playing field so we can compete.

 

[daishi5]

The Americans would only have to buy American-made goods if the government forced them to do so. Without comparative advantage there is nothing to trade other than capital assets such as business ownership and real estate.

What would happen is that American standards of living--the compensation and purchasing power Americans receive from their labor--would have to equalize with that of India, China, and Mexico. Americans can have their jobs back--all of them--just as soon as they are willing to be cost-competitive with labor in India, China, and Mexico and to live with the (lack of) labor and environmental regulations in those countries.

Comparative advantage is about the benefits of trade. If China is able to produce at such a level that comparative advantage is eliminated, they make themselves poorer by trading with us. If they are poorer for trading with us, they will probably stop trading with us. That means Americans have no choice but to buy American. So that means that American standards of living would be determined entirely by what Americans can make. The very base level of living standards we should see in America is the total output of the American people, if we can't get better than that, we shouldn't trade.

Consider it this way, we have two choices, we can either make everything we use ourselves, or we can trade. We do not have to trade, so if trading makes us poorer we should make everything ourselves. If china trades with us, we have to make something to give back to them in trade. So, if china will sell us something for less than it costs us to make it (in opportunity costs) we are richer. But, we can buy even more chinese stuff if we make more of our own stuff to trade to them. We always have to give them something for trade, and as long as we end up with more total stuff than we would if we made it all ourselves, trade helps us. But, there is no reason for us to ever go below the living standard of everything being made in America.

 

[QuantumPion]

I actually blame the federal government for not doing enough. I don't think it's wrong or protectionist of our government to impose tariffs in proportion to the cost of the currency fixing costs China imposes on us. Doing it now though would only upset people as they paid the real cost of their imported goods.

Just because China wants to punish its own citizens by enacting tarriffs, why should we punish our own citizens by doing the same?

Similarly, it makes me chuckle when Euroweenies complain that our manufacturing is unfairly competitive with theirs because our taxes aren't as high. :\

 

[BigDH01]

Just because China wants to punish its own citizens by enacting tarriffs, why should we punish our own citizens by doing the same?

Punish who? Many of us will take a hit but it will hopefully mean jobs for those people in this country that produce goods and want to sell them to the world (or even other Americans).

It's going to happen inevitably anyway. Eventually, China will revalue the yuan and we'll take a drastic hit. Why not start it slowly now at our discretion?

 

[daishi5]

Punish who? Many of us will take a hit but it will hopefully mean jobs for those people in this country that produce goods and want to sell them to the world (or even other Americans).

It's going to happen inevitably anyway. Eventually, China will revalue the yuan and we'll take a drastic hit. Why not start it slowly now at our discretion?

I can't find any details, but there is a headline up on NPR that makes it seem like China has agreed to start revaluing the yuan slowly.

 

[BigDH01]

I can't find any details, but there is a headline up on NPR that makes it seem like China has agreed to start revaluing the yuan slowly.

http://www.npr.org/templates/story/story.php?storyId=127083081

 

[daishi5]

http://www.npr.org/templates/story/story.php?storyId=127083081

Yeah, at work so I can't go digging for details yet. I think that is what I saw.

 

[Jhhnn]

Taxing more to support those without decent jobs just builds welfare states, the kind that are currently collapsing in Europe. Government, producing nothing of wealth but only re-distributing what the private sector makes, cannot take the place of the wealth-producing private sector.

Nice sloganeering. What the govt can do is compensate for what your vaunted private sector isn't doing- creating decent paying jobs in this country. The only part that's missing is actually paying for it. And it's not like the govt hasn't made huge contributions to society and private industry, either through their own development in nuclear energy, agriculture, space exploration and other realms, but also through subsidies of medical research, education, and the fixed infrastructure daishi5 claims will save us...

When private industry hires more americans and pays 'em enough to support the general economy, govt can butt out, of course... do you see that happening anytime rsn? Hardly. Capitalists are offshoring investment money as fast as they can get their mitts on it...

 

[werepossum]

Nice sloganeering. What the govt can do is compensate for what your vaunted private sector isn't doing- creating decent paying jobs in this country. The only part that's missing is actually paying for it. And it's not like the govt hasn't made huge contributions to society and private industry, either through their own development in nuclear energy, agriculture, space exploration and other realms, but also through subsidies of medical research, education, and the fixed infrastructure daishi5 claims will save us...

When private industry hires more americans and pays 'em enough to support the general economy, govt can butt out, of course... do you see that happening anytime rsn? Hardly. Capitalists are offshoring investment money as fast as they can get their mitts on it...

And communists are turning capitalist as quickly as possible. (Not North Korea, of course - they are still pure, as witnessed by rampant starvation.) It's just amusing that people like you somehow think (sorry, feel) that embracing the policies that the hard core socialists are abandoning will somehow stop outsourcing, when in reality socialist policies merely speed it up.

A society cannot redistribute its way to wealth, it can only redistribute its way to the bottom. Right now Europe is leading, but the USA is giving it the old college try.

 

[BigDH01]

And communists are turning capitalist as quickly as possible. (Not North Korea, of course - they are still pure, as witnessed by rampant starvation.) It's just amusing that people like you somehow think (sorry, feel) that embracing the policies that the hard core socialists are abandoning will somehow stop outsourcing, when in reality socialist policies merely speed it up.

That's funny, because our jobs are being outsourced from our economy (who Heritage ranks as the 8th most free in the world) to the Chinese economy (who Heritage ranks as the 140th most free in the world). We're losing a large portion of our industry to a place where state-owned enterprises account for about 40% of the GDP. Collective ownership of industry is a lot more Socialist (at least as the term Socialism is understood on this board) than sending people welfare checks. I think you just need to re-examine how you define it. There's a difference between bad policy and Socialist policy, they are not necessarily the same thing.

A society cannot redistribute its way to wealth, it can only redistribute its way to the bottom. Right now Europe is leading, but the USA is giving it the old college try.

I don't know why you are so concerned about this.

http://en.wikipedia.org/wiki/List_of_countries_by_income_equality

We have a Gini coefficient of 45, above nearly every other modern nation. Above Singapore, Russia, Japan, Israel, New Zealand, Taiwan, South Korea, Australia, Canada, and, needless to say, nearly every European country. To give you an idea where we stand (by the CIA's numbers), we are sandwiched between Uruguay and Cameroon. So while this might make for good hyperbole, either our nation doesn't have that many redistributive policies in place or they aren't very effective (at least not giving to the lower classes, that is).