What is "Free Trade?" It's more than what you think.

[Musburger1]

You need to become familiar with the relatively recent concept of capital mobility. This article is an excellent primer.

http://oftwominds.bmobilized.com/?t...twominds.com/blogmay16/globalization5-16.html

 

[huisache]

no it isn't; it is a mishmash of warmed over marxism with a battalion of straw men and metaphoric slight of hand.

 

[Musburger1]

Explain. Do you not understand the dynamic aspect of international capital flow, something that really didn't exist at the time of Marx with the exception of colonialism?

 

[huisache]

that's a rather large exception, no? Like all over the world?
Improvements in the art and science of naval travel in the 15th century allowed the movement of capital into new colonies, countries and ports all over the Atlantic and even into China and India in succeeding centuries and the creation of duplicate capitalist posts all over the world. This is nothing new, except apparently to the blogpreneur from Hawaii. He shines an old apple and pronounces it something new. It isn't.

His only reference is to David Ricardo-----he and his adherents, then and now, and his opponents have been battling over this ground for centuries.

See Lenin's Imperialism, the Last Stage of Capitalism for a full blast of the commie version and read Joseph Schumpeter for a more modern American discussion. Or better yet, read Thomas McCraw's book on Schumpeter, Creative Destruction, which is thorough and much better based in business and economic thought than this bombast from Hawaii. McCraw taught at UT for a while in the 70s before becoming historian in residence at the Harvard business school.
There is a great line in the Communist Manifesto where Marx and Engel are rhapsodizing about the glories of capitalism and its boom and bust cycles: they say "all that is solid melts into air." As good a description of boom and bust and the dangers of capital movement as you will ever see encapsulated. And the reason they thought something more stable and just should be found. Haven't yet, but it doesn't stop some utopian idiots from trying.

 

[Musburger1]

Creative destruction infers elimination of the obsolete which is then replaced with new jobs accompanying the improved efficiency. As a result there is economic growth, higher wages, and improved living standards.

One of the things pointed out into the piece is that the new technologies are replacing the obsolete - just as before - but instead of creating new "jobs" they have only eliminated costs (on the net). Wages are not increasing, but instead they have decreased; partly due to off shoring and partly due to automation and the acceleration of robots. As wages fall for the masses, so does demand, which means GDP (growth) slows. So the productivity gains flow to the owners of capital, but under the capitalist system, the only mechanism left to sustain demand in the absence of falling wages is subsidies (government debt in the form of welfare). How long is that sustainable?

 

[Musburger1]

See this link for addition thoughts from Bill Gross and a financial analyst.
http://www.firstrebuttal.com/bill-gross-may-investment-letter-the-scariest-thing-ive-read-in-years/

The points we are arguing about boil down to whether or not the current iteration of "free trade" which encompasses both capital mobility (off shoring industry) and automation (robotics as a replacement of human labor) will have the similar results as in prior economic shifts. In other words, will creative destruction result in higher incomes, economic growth, and better living standards.

I believe it cannot in the current architecture, because demand is created by either income or debt. The income (wages) is falling for the majority of the population and debt expansion without income expansion is not sustainable.

 

[huisache]

creative destruction does not by necessity infer anything of the sort and that is just one example of extrapolations which abound in that handicapped blog post by the fellow from Hawaii.

See the enclosure movement for an example of an event in economic history that involved a lot more than the simple tit for tat that his and your examples suggest. I guess all those brit farmers could still be eking out meager livings and half starving on the commons were it not for the wealthier and more efficient ones but.............

creative destruction is creative but it is also usually pretty destructive and simple quid pro quos are not guaranteed or inferred.

 

[Musburger1]

creative destruction does not by necessity infer anything of the sort and that is just one example of extrapolations which abound in that handicapped blog post by the fellow from Hawaii.​

I didn't understand your last post. What are you talking about?

 

[huisache]

google enclosure movement; it is a significant event in western history and business history and is illustrative of why the fellow in Hawaii is lacking in historical perspective.

 

[Musburger1]

Well that was an interesting side trek. So the enclosure movement was a process used to run the peasants off the land, driving them to the city factories as the industrial revolution took off. Which is an interesting historical event, but I don't see how its relevant to the topic. Let me lay out as plainly as I can where I see the economic system in the US going, and the questions I have.

1. The combination of off shoring and automation brings production costs down and lowers wages and benefits, sometimes eliminating them altogether. Agree or disagree.

2. As production costs are reduced and innovations improve, prices should fall (for example computers and high def TV sets). Agree or disagree.

3. If wages and income fall, demand will also fall, unless prices fall commensurate with the loss of income. Agree or disagree.

4. If demand falls, due to falling income, demand can be created by financialization (taking out loans to pay for items) or through government subsidies such as food stamps, Section 8 housing, disability, payments, etc. Increasing debt and/or subsidies isn't sustainable over a long term basis. Agree or disagree.

5. Tax revenue, usually collected through either sales tax or the income tax falls if prices and wages fall. When tax revenue falls, debt obligations (road repairs, school bonds, etc.) have increased risk of default. Agree or disagree.

So get off your capitalism vs marxism high horse and address these specific issues. Explain why they are not issues, and why the real median wages in the US which have begun to fall, and the growing percentage of the population which is not in the workforce, will turn around.

Note: I'm not advocating socialism as the cure all. I don't believe capitalism nor socialism will change the trends which are in progress. The problems may lie with how money is created.

 

[huisache]

.......and then again, maybe they don't.

Most of what you want agree/disagree on I would agree on up to a point but I also think they are mostly beside the point.

I don't feel up to a thirty page treatise on economic history or trying to correct a term paper by the guy in Hawaii whom you seem so enamored with.

Let me leave this conversation with this thought: every once in a while some lefty comes up with an argument about Peak Oil. A lot of what they say is sort of correct at the moment they say it but in the long term it is BS because the petroleum industry keeps coming up with innovations which, when hitched to the price mechanism, makes the Peak Oil theory just so much leftist junk.

I would suggest that rather than me being on a high horse, whatever that may have meant at one time, the Hawaiian blogger is akin to a woman in the cartoons jumping up on a chair upon seeing a mouse. Some body is always afraid of what the consequences of this or that are and try to project their fears in a reasonable fashion. Maybe part right but as Chou en Lai allegedly said when asked what he thought of the French Revolution, "too early to tell; ask me again in a hundred years."

 

[Musburger1]

.......and then again, maybe they don't.

Most of what you want agree/disagree on I would agree on up to a point but I also think they are mostly beside the point.

I don't feel up to a thirty page treatise on economic history or trying to correct a term paper by the guy in Hawaii whom you seem so enamored with.

Let me leave this conversation with this thought: every once in a while some lefty comes up with an argument about Peak Oil. A lot of what they say is sort of correct at the moment they say it but in the long term it is BS because the petroleum industry keeps coming up with innovations which, when hitched to the price mechanism, makes the Peak Oil theory just so much leftist junk.

I would suggest that rather than me being on a high horse, whatever that may have meant at one time, the Hawaiian blogger is akin to a woman in the cartoons jumping up on a chair upon seeing a mouse. Some body is always afraid of what the consequences of this or that are and try to project their fears in a reasonable fashion. Maybe part right but as Chou en Lai allegedly said when asked what he thought of the French Revolution, "too early to tell; ask me again in a hundred years."

Ok. Now I have a better idea, I think, of where you are coming from. Basically your position seems to be that innovation generally leads to progress, and historically ends up providing more people with a better living standard and the world sees an increase of economic growth. And based on that, more than likely this time will prove similar. Am I close?

I don't understand why you are so hostile to Smith, and I'm not sure if you even read the other link that addresses the same issues. Smith does point out some points that are worthy of discussion. That is, technology has been expanding exponentially, but at the same time the living standards of most Americans have fallen (if you factor out the additional personal debt and government subsidies used to finance or pay for their living standards). So while you can say more people have computers, central air, i-phones, and so forth, much of that is possible because they have a negative net worth and/or receive disability payments, EIC, or other government largesse. In other words, the raised living standards are not the result of their contributing to the productivity gains via labor, but rather due to financialization and debt which is unsustainable in the long term.

Below is a chart from the second article to support what I'm talking about. What the chart says is that consumption (purchases) derived from non-wage and non-investment income has risen from about 26% to 36% since 1994. The gist of both articles is that automation appears to be a driver of this trend as is financialization. And the automation phase is only beginning.

But addressing your historical economic trends in America, keep in mind we've seen a see-sawing back in forth over the decades between ownership and labor as to who holds the most power. The US worker suffered through atrocious working conditions for much of the 19th century and very early into the 20th century. There were strikes, violent confrontations, booms, and busts. Eventually labor gained the upper hand and laws were put in place which helped both with work place safety and a more equitable distribution of the profits between management and labor.

Amid the great depression, Roosevelt put in more programs which helped create the middle class and improved living standards for the masses. You can make the argument that these changes (social security, etc.) were unsustainable in the long-term, but the point I'm making is that labor enjoyed a strong bargaining position for several decades.

Beginning in the 80's and accelerating into the 90's, NAFTA and more conservative (corporate friendly) legislation began to tip the scale back in favor of capital holders (corporations). The Citizens United decision has advanced the political power of this group. The surplus of cheap foreign labor has been an inducement for industry to relocate capital, just as in the colonial periods several hundred years ago where British companies set up shop around the world to take advantages of resources and labor.

And now the prospect of robots will do more of the same. Suppose 100,000 big rig drivers are displaced by self-driving trucks. Costs are lowered, but unlike other technical innovations, I don't see how this creates new jobs or new industries. When the steam engine was invented, it replaced obsolete jobs, but in their place was the need to hire people to build railroad, to build way stations/towns along the railroad, and support services for the newly constructed towns. How is any of that going to happen with automated trucks?

The whole process is deflationary, which presents a problem because with declining prices and wages, tax receipts are lower and the massive debt which exists would default.

I may be totally wrong, but that's where logic is leading me.