Arnold Kling  

Debating Trade

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Angry Bear reports that some bloggers on the left have been having a debate on whether or not free trade is a good thing. In my view, those who think "not" are doomed to intellectual failure.

One of the good guys is Alan Blinder. I think that elsewhere Blinder has been quoted to the effect that if you are going to get bent out of shape about people saving time and money by having accountants in India do their taxes, then you might as well get bent out of shape about people saving time and money by using software to do their taxes.


Progressives should welcome freer trade because it's so much better than the alternative. Protection serves to entrench entrenched interest groups. We're supposed to be against that. Protectionism also amounts to legalized pickpocketing of the consumer, including those who can least afford it...

With sufficiently rigorous (and ridiculous) policies, the U.S. could have preserved the industrial structure of the 1950s...GM and US Steel would be bigger companies today, while Microsoft and eBay would be based in some other countries...It has long been a mystery to economists why so many people view creative destruction that stems from technology as okay, while similar creative destruction that stems from international trade is something to be opposed.


I believe that the solution to this mystery is ingrained tribalism and xenophobia. Economists view trade as an efficient production technique. Thus, Blinder equates outsourcing to India with outsourcing to software. Everyone else views trade as tribal war, in which "we" have to be on guard, because "they" are the enemy.


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CATEGORIES: International Trade



COMMENTS (36 to date)
ziel writes:

...why so many people view creative destruction that stems from technology as okay, while similar creative destruction that stems from international trade is something to be opposed.
For the very simple reason that most people view economic progress as being represented by less people performing mundane tasks rather than more. If you eliminate 2 bookkeepers by automating their work, that's tough on the bookkeepers, but progress for society. If you eliminate the 2 bookkeepers by hiring 4 (or 2, for that matter) bookkeepers who work much cheaper, that's not progress - and certainly not creative destruction (Schumpeter must be spinning!) - it's a feat of labor-market arbitrage.

Matt McIntosh writes:

Oh the irony. Ziel proves Arnold's point by utterly failing to take into his moral calculus the question of what those four new book-keepers would have been doing had they not been hired as book-keepers.

RP writes:

You can descend 100 floors in an elevator without harm, or you jump out a top floor window.

Zeil is saying velocity and acceleration curves matter because too much can be deadly, while Matt is saying that the only concern is that we all achieve the same altitude (apparently without concern for velocity or acceleration) on the presumption that everyone will still be intact as long as we get to the destination.

I think Matt is out of touch with reality.
Nice try Ziel, but they aren't listening.

Bruno Freitas writes:

Once you leave the US-Euro-Japan based study, and deepen into the mysterious books which explain third-world history and economical growth -- please be my guest by actually living in a third-world country State -- you'll recogn that in a semi-State, where education, health care, politics, the judicial aparatus, patriotism, and many other national elements are in crisis or has never been developed, -- free-trade (being a short-termed opening procedure or long-termed)will create pretty much the opposite effect: it actually serves to entrench entrenched interest groups!

Be my guest to check Argentina's economic situation right now. Around 80% of the companies here are foreign. And we're talking about a country which in the 30's was right on the "rich country" / "almost rich country" mark. In South America, Argentina, during Menem's presidency, was IMF's (and other free-trade pushers') little golden locks girl. It opened itself completely, embracing the free-trade flag. Tss.

Argentina welcomed a devastating action upon its economy. While Chile, Brazil, China, and other less-liberal countries praised its underdeveloped (but nevertheless unwrecken) production status, proving that: free-trade, with no knowledge on the country's history and / or social & econ situation (as IMF has pushed in the last two decades) is bs.

Pure bs.

And its very appealing to be standing in high grounds pointing out that free-trade is a tautological plus.

jaimito writes:

First I would like to learn what is a "tautological plus".

Secondly, free trade is excellent for those enjoying a competitive advantage. It is terrifying for those who can't do anything as well as others.

New economic activities and organisations should be protected and nurtured, but at certain point they have to be thrown out of the nest and forced to fly alone. Argentina's industry was protected for too long, and it perished when confronted by rougher rivals.

BTW blaming the IMF may be done once, but not forever. WE in 1975 blamed the IMF and Krieger Vasena, in 2005 it cannot be done credibly. And now we know for certain that Krieger Vasena was a thief and it was not the IMF that forced him to steal. Names always change, Argentina never.

John Brothers writes:

RP, Ziel and Bruno.

First, I'd like to know why it is that y'all seem to think there's some "correct" level of growth. Is there a "correct" level of black-white marriages? If 10% of all marriages were "mixed-race" would that represent the "correct" number, and further mixed-race marriages should be prevented and/or disincentived? What about gay marriages? What's the appropriate and correct rate at which gay people get married? What's the "correct" way to perform oral sex?

I'm sure you find such metrics appalling. So do I. I find your "correct way to outsource" appalling. I find your "outsourcing too fast" metric appalling. I find Bruno's "It's more important that a large corporation be controlled than it is to give poor foreigners jobs" concept to be morally repulsive. "Sure, it's ok that those young women were forced to prostitute themselves to make ends meet. The important thing is, this corporation didn't make as much money."

Mike writes:

Bruno,

No question that the IMF is not perfect. Many of this page's readers I am sure will agree that "the IMF model" is not even a free-trade model. So, before we all get enraged about Argentina and other similar countries, ask ourselves these questions:

1. What do economists mean when they use the term "free trade"?

2. Since empirically it has yet to be shown that countries are hurt from trading, and since the theoretical concept seems so rock solid, why are we not asking the question, "what else can be going on that explains Argentina's failures despite the fact that it has opened itself up to trade?"

I'll bet that many opponents of trade cannot even answer #1. Many opponents of trade refuse to try to answer #2.

And one piece of nitpicking - someone above mentioned that,

"Secondly, free trade is excellent for those enjoying a competitive advantage. It is terrifying for those who can't do anything as well as others."

Trade is based on comparative advantage - even if one country has a competitive advantage (read: absolute) advantage in producing everything, in relative terms it is theoretically impossible to be better at everything. For example, my wife can fold $10 worth of laundry an hour at home and can earn $60 an hour at her job. I can fold only $3 worth of laundry per hour and earn $10 per hour at my job. She is clearly better than I am at everything. However, if she stays home, for every dollar of laundry she gets folded, she loses $6 of wages while for me, for every dollar of laundry I fold, I lose only $3.33 in wages. Therefore, our family is better off by me specializing in laundry folding and her going to work - and then trading.

Cheers,
Mike

ziel writes:

Matt Macintosh: What "moral calculus"? I observed that labor-market arbitrage should not be confused with "creative destruction" and that most people don't find firing one set of people just to hire a cheaper set as "progress." You make a good point that one needs to take into account what the cheaper workers were doing before, but then you also need to take into account what the displaced workers are now doing, don't you.
Let me be perfectly clear about one thing - I am an American, and consider myself a patriot. I am therefore concerned about how free-trade affects my fellow Americans. It's a complicated issue with no easy answers, but that's my concern - period. I expect those of you from other countries to feel the same way towards your countrymen.
If you're an American and you don't feel this way, that's fine - but you should be honest about it. If you're an American and you are for free trade, are you for it because you feel that it's best for America? If so, you can't be using arguments that refer to the overall benefit for all participants - it's irrelevant how it benefits non-Americans. If you're just for free trade period, then fine, but be honest about it.
John Brothers: I have no idea what you're talking about, but I vaguely sense that all you're trying to say is that you're a libertarian - that's a perfectly valid viewpoint - it's too bad you find the viewpoints of others who don't share your (extreme minority) philosophy "repulsive."

jaimito writes:

Mike,

You missed a wonderful opportunity to save broadband. Adam, the first man, already knew all about comparative advantage, and so does everyone after him. Therefore, I stand by my comment:

"Free trade is excellent for those enjoying a competitive advantage. It is terrifying for those who can't do anything as well as others."

I imagine that you too would be terrified if someone told you that in the new distribution of labor you lost your job as economist and you have been reassigned to folding laundry. You will be paid by piece, so a man with your folding abilities may in the end make more money than any economist.

Mike writes:

jaimito, I do not understand your vitriol. I was only pointing out that to those that may not grasp economics as well as you do, the statement you made is actually incorrect. You might have said something to the effect of - "trade is terrifying to those for whom terms of trade are turning against" - as you indicate in your economist example.

Now, I believe your recent comments also introduce another bit of economic illiteracy into the fray:

"I imagine that you too would be terrified if someone told you that in the new distribution of labor you lost your job as economist and you have been reassigned to folding laundry. You will be paid by piece, so a man with your folding abilities may in the end make more money than any economist."

No one assigns me to jobs. There is no master making up the "distribution of labor" as you say. These are emergent phenomenon and until people can appreciate the complexities of that, we will continue to see vitriol thrown across these message boards and bad policies continue to be proposed and enforced.

And, if the world happens to evolve into a place where laundry folders get paid more than economists, I would have a choice to make. Why is this terrifying? I worked hard in school so that I would have the ability to adapt to changes - not so I could enjoy a cushy life. Further, even though I have only a small understanding of global economics, this understanding has led to me to continue to build up skills that I think will be in demand in the future - just in case terms of trade turn against me.


Finally, as is usually the case on these boards, you chose not to respond to dispassionate, reasonable questions. I raised two and your comments do nothing to advance the discussion here. Why not?

Oh yeah, and why do you assume I am an economist? You use the term as if it's a dirty word. Once again, this does not add much to an otherwise important discussion.

Lord writes:

The advantage of innovation is far more productive than the advantage of trade. Perhaps those four new bookkeepers would have been learning something more productive. If the point is to provide poor foreigners jobs, then perhaps they should go back to pen and paper.

Is there a "correct" level of growth? Actually yes. Trade does not occur by itself but within the context of a political system and both must progress together or the result can be worse than no progress. It can lead to corruption, tyranny, and enslavement, and bring about it's own end.

Matt McIntosh writes:

Ziel, first of all I find your naked nativism to be morally repugnant. To suggest that people should somehow be worth less because they don't have a little piece of paper saying they're a member of your club is completely arbitrary. If you live in, say, Illinois, should the wellbeing of people in Califormnia mean less to you? If not, why not? Not replace "California" with "Canada" and answer the same question. Then replace it with "India" or "Mexico" and answer it again. The onus is on you to explain any inconsistencies in your answers.

Second of all, if you don't think that the division of labour benefits Americans then you need to go back and take an econ course. More efficient production means lower prices, which is good for consumers, and everyone is a consumer. The fact that these benefits are spread out widely and not very salient while the pain that a few people feel from getting laid off is concentrated and visible doesn't make them any less real and important.

Tom West writes:

The fact that these benefits are spread out widely and not very salient while the pain that a few people feel from getting laid off is concentrated and visible doesn't make them any less real and important.

Quite the contrary. If *everyone* is enjoying those benefits, then the whole status/happiness gained by the extra consumption is pretty zero*, while the loss of status/unhappiness from being laid off is non-zero, to say the least.

* = At least until the citizenry starts comparing their wealth to countries that have growth maximization strategies.

ziel writes:

Matt - Let's try a little twist on your formulation: I find your naked familialism to be morally repugnant. To suggest that people should somehow be worth less because they don't have some bits of genetic material saying they're a member of your family is completely arbitrary. What you find repugnant is in fact the modal sentiment in the world - people feel greater devotion to members of their own family than others and to members of their own nation than to others. There's not a politician in the nation who wouldn't be thrown out of office if he ever publicly stated that the welfare of Americans should be no higher priority than the welfare of other peoples.
As to your second point, I don't know whether free-trade is better for America or not - I've spent most of my life believing in free trade, but I'm not sure it's working right now - though I have no alternative to suggest. But I do know that the economics I learned was about comparative advantage - what we're witnessing now is absolute advantage - i.e., labor market arbitrage - so the pedantic basis for free trade no longer applies.

Mike writes:

Hi Zeal,

Could you explain what you mean when you say:

But I do know that the economics I learned was about comparative advantage - what we're witnessing now is absolute advantage - i.e., labor market arbitrage - so the pedantic basis for free trade no longer applies.

There is no such thing as a country having a "comparative advantage in cheap labor" for example. You can only have a comparative advantage in the production of some good or service. Because countries have an absolute advantage in "cheap labor" as you intimate, does not mean that the simple economics does not apply.

International trade is driven by the relative (real) INTERNAL costs of producing various goods and services. If China say has an absolute advantage in low wage labor, say that it's wages are 20% of American wages in every sector, why can't it undersell American products in every product line? Simply put, China cannot produce everything. When a worker in China makes a microprocessor, she must not be producing financial services. Why is this so problematic for folks to understand?

Finally, if we want to be assured of remaining a high wage country (or employee), we simply must remain more productive in the jobs we do want to do relative to the jobs we don't want to do, than our international counterparts.

RP writes:

John Brothers: I don't. I presumed it was obvious, but from your comments, apparently not, so I'll state it explicitly: we all need to get to the same altitude.

The difficulty lies in getting from where we are now, to the desired goal, without ending up with protectionism, a depression, or another world war.
It's easy to say "US losers" should just lump it,
but it's also foolish to think "losers" will be good sports and commit hari-kari in the name of globalism. If "losers" are made quickly enough, they might become a significant voting block, and then very bad things will start to happen. Why is it that folks cannot acknowledge (or even recognize) that enough "losers" can spoil the
best laid plans, for *everyone*?

daveg writes:

Ziel, first of all I find your naked nativism to be morally repugnant. To suggest that people should somehow be worth less because they don't have a little piece of paper saying they're a member of your club is completely arbitrary. If you live in, say, Illinois, should the wellbeing of people in Califormnia mean less to you? If not, why not? Not replace "California" with "Canada" and answer the same question. Then replace it with "India" or "Mexico" and answer it again. The onus is on you to explain any inconsistencies in your answers.

You have a poor understanding of the history of the development of the nation state. The nation state was developed in order to overcome the natural instincts of tribalism.

You attempts to eliminate the nation state will just bring us back to tribalism.

daveg writes:

The reason why I care if my fellow american has a job more than someone from Canada or India is that I, as a fellow American, am responsible at least in part for his well being. If he is poor my tax dollars will go to keep him fed and clothed, at least to some minimal degree. Additionally, there are health care costs and services such as education and school costs.

Also, if things go really bad for my fellow american he or she may turn to crime and inflict that crime on me or my family.

So, there are some very good reasons to care more about american workers than foreign workers, don't you think?

daveg writes:

Matt McIntosh writes:

Ziel, first of all I find your naked nativism to be morally repugnant. To suggest that people should somehow be worth less because they don't have a little piece of paper saying they're a member of your club is completely arbitrary. If you live in, say, Illinois, should the wellbeing of people in Califormnia mean less to you?

Matt, did you spend any money on your daughter or son in the last month? If you did I am outraged that you would spend such funds on your kids when other kids in the world could have enjoyed that money as much as, or even more, than yours.

Your selfish and tribalisic decision to spend money on your kids, and not kids in Canada or India, indicates you much be some sort of racist xenophobe. Please seek profession help and do not darken the doorstep of this blog with your hateful conduct.

Tom West writes:

Simply put, China cannot produce everything. When a worker in China makes a microprocessor, she must not be producing financial services. Why is this so problematic for folks to understand?

Because it doesn't make sense. China is certainly productive enough to fulfil all of its domestic needs *and* all of the USA's domestic needs. Why do American employees have to fit into the equation at all? (Except for those jobs that cannot be outsourced and thus are not a subject for trade.)

Of course, eventually Americans have to have something of worth offer the Chinese in exchange for their goods. Happily for the USA, it appears the Chinese are willing to accept IOU's, even when it appears that the US is prepared to prevent the exchange of IOUs into assets.

ziel writes:

Mike, good points. Some comments:
why can't [China] undersell American products in every product line? Simply put, China cannot produce everything.
Except that they have four times as many people, so they could very well at some point produce everything that we want to produce.
Finally, if we want to be assured of remaining a high wage country (or employee), we simply must remain more productive in the jobs we do want to do relative to the jobs we don't want to do, than our international counterparts.
I agree, but how are we going to do that? Market incentives for our young people to go into engineering are disappearing every day. We haven't added a new manufacturing job to our economy in over half a decade. And our trade deficit just keeps growing. I just don't think we can blithely say that free trade is for the best - something's amiss here, and I have a hard time believing that more and more free trade agreements are the answer.

brian writes:

Yes, clearly an unemployed countryman is much more expensive to me than an unemployed foreigner.

Now, you can argue against international borders, but until that changes I have a vested interest in keeping US citizens employed even at the expense of others.

Bruno Freitas writes:

Gimme a break on comparative advantages. What would have been of the US, if Hamilton didnt push subsides to all those ship productions in Massashusetts that later on allowed trade with primary agricultural exportation countries?

The same comparative advantage employed by a Matheu (wrong spelling though), which read Ricardo, sailed to Portugal and explained that his fleet would blast the city of Porto if they did not trade wine for textile products.

Did England have a comparative advantage in textiles? Yes, but only after it annihilated India's production (after learing a lot of Indian textile production techniques), and only after it developed some technical enhancements thru labor division and machines.

So what's comparative advantage? Is it not an excuse for developed markets to stop less developed markets to persue innovations?

And what's the main barrier on comparative advantages? Is it not expendures on research and studies? Like the US Government gives to Ivy League universities?

Isnt there a lack of that in less developed countries? Sure there is. The IMF and the Washington Consensus guys think the countries shouldnt spend money on education. At all.

Now what kind of fubar idea is that?
Let 'em all be dumb? Is that a long-term plan?

I'm not saying free-trade isnt good.
It is.

But at some level. And at some speed.
Take Mexico as an example.
Im just sorry they got an all-original Texan as a president. Its not the fact that they participate in NAFTA that their economy will get more efficient. The problems with mexican efficiency are deeper than anyone who never read mexican history may see.

So dont push comparative advantages on me saying its the real thing. Because if you do that, you should spend more time reading US's history.

And dont go far enough as Zinn or Vidal.
There's no need. Just check on Hamilton's doings.

US was priving itself from free-trade and persuing economic policies since the late 1700s. And obviously still is. Subsidies is a part of that.

In: cotton, orange, corn, steel, airplanes, soy, guns and ammo, etc...

Scott writes:

Putting aside the discussion on whether or not people should be responsible for the social well being of a fellow country man is there really any net gain by having a higher paying job kept within a country at a higher cost?

For example, assume an American needs $20,000 to live a basic subsistence life. Further assume he produces 10,000 units of a good at a value of $4 per unit (thereby earning $40,000). The American therefore has a net gain of $20,000.

Now assume a developing country worker can produce the same number of units at a price of $1 per unit, or $10,000. Consumers in the U.S. are now saving $30,000. If those consumer feel bad for the now unemployed worker they can give him the $20,000 needed for a subsistence level of living and they'll still have $10,000 in excess value.

So, the question then becomes is it better for that 1 American to earn $20,000 above subsistence level at the expense of his fellow Americans or to have the $10,000 of excess value split amongst all consumers while at the same time ensuring that all Americans have a subsistence level of living.

dsquared writes:

In my view, those who think "not" are doomed to intellectual failure.

Indeed they are, and the only surprise is that it hasn't happened sooner. I think it must be because their intellectual opposition has repeatedly tried to pretend that arguments for "free trade" can be used as arguments for a particular trade liberalisation proposal, which is rather like having a fleet of battleships and using them to fight a war against Switzerland.

brian writes:

Putting aside the discussion on whether or not people should be responsible for the social well being of a fellow country man is there really any net gain by having a higher paying job kept within a country at a higher cost?

But you can't put it aside. It is a political reality that must be dealt with.

Free trade might make sense in a world where we allowed our neighbor to live at level that is comparable to those in China or India, right next to big McMansions. But that is not reality.

Scott writes:

But even if we do live in a world where we only care about our fellow citizens, do we owe them a gauranteed lifestyle level above subsistence? In my example above you can still have free trade and assure that your now unemployed neighbour is provided with the basic necessities of life. But to restrict free trade just because your neighbour is now not as well off as before is basically a transfer of wealth from consumers who are forced to pay higher prices to the American worker. Of course, if the developing country worker charged more or the American worker reduced his profit the situation would change, but that is a matter of price levels not trade restrictions.

daveg writes:

But even if we do live in a world where we only care about our fellow citizens, do we owe them a gauranteed lifestyle level above subsistence?

Well, that's were politics comes in. You may say I don't "owe" my fellow countryman a living, but fact is he can vote in such a way that I do in fact owe him a living. FDR started that and the trend has only increased over the last 60 years.

Economists think money. They forget about power, which is not always the same thing.

I also not that a subsistence living in the US is still a substantial sum. And it is a lifestyle that is beyond the best expectations of the majority of the rest of the world.

scott writes:

It's not a question about forgetting about power, it's about debating whether or not free trade is beneficial in and of itself. Obviously a majority of people can vote to not allow free trade but that doesn't make free trade bad. To use an (extreme) example, if a majority of vote to kill an innocent person that doesn't make murder morally OK. That's one of the dangers of democracy (or mob rule) and that's why rights have to be enshrined in the constitution to protect the minority from the whims of the majority.

I have nothing against an anti-free trader who only wants to trade within his country, if that's what he wants to do, that's his choice. But why should he have the right to dictate who I may trade with? Just because I support free trade doesn't mean I want to force everyone to trade internationally. It just means each person should be allowed to decide who to trade with whether it's my neighbour across the street or someone on the other side of the globe.

Mr. Econotarian writes:

Regarding Argentina, it is currently ranked as the 114th in terms of economic freedom.

Keep in mind that IMF/WB policies have historically not been particularly free-market or even free-trade. They have often been highly Keynsian or outright socialist.

Here is a description of Argentinian trade policy, now ranked a 4 out of 5 where 5 is "the worst" in terms of economic freedom by the 2005 Index of Economic Freedom:

As a member of the Southern Cone Common Market (MERCOSUR), Argentina adheres to a common external tariff that ranges from zero to 23 percent. According to the World Bank, Argentina’s weighted average tariff rate in 2002 (the most recent year for which World Bank data are available) was 11.9 percent. Non-tariff barriers include sanitary and phytosanitary rules, antidumping, and quotas. The U.S. Department of Commerce reports that prior government approval is required for specific imports. A “major non-tariff barrier is the automotive industry tariff/quota system.” Customs corruption also acts as a non-tariff barrier.

Compare with Chile, whose trade policy scores a 1 (the best rating):

According to the Santiago Chamber of Commerce, Chile’s weighted average tariff rate in 2003 was 2.9 percent, down from the 6 percent reported in the 2004 Index. As a result, Chile’s trade policy score is 1 point better this year. There are almost no non-tariff barriers.

Chile has had GDP per capita increase of a nominal rate average of 8.8% during 2001-2004.

daveg writes:

I have nothing against an anti-free trader who only wants to trade within his country, if that's what he wants to do, that's his choice. But why should he have the right to dictate who I may trade with? Just because I support free trade doesn't mean I want to force everyone to trade internationally. It just means each person should be allowed to decide who to trade with whether it's my neighbour across the street or someone on the other side of the globe.

The point it you are already required to support your fellow countrymann through a whole host of programs that started with FDR and have expaneded since then. You have to include these costs in any free trade transaction.

As to why you should or should not be forced to trade with others, it is for the same reason you pay taxes, we are forced by government to do lots of things we may or may not want to do. That is the nature of governement.

Scott writes:

daveg,

So, because I'm forced to do one thing that I don't agree with that means I should be forced to do others as well? It's that kind of reasoning that has lead to the current state of the anti-smoking lobby. First it was let's ban it in confined spaces, then public places where kids are, then bars where presumably adults can't decide for themselves what they subject themselves too. Next up is banning it in private homes as it's child abuse. Where does it end? Sure it's only an inch here and and an inch there, but it's adds up and the next thing you know you're a mile away from the starting point. At some point, we have to stop this slippery slope to socialism that we're on.

This isn't a discussion about what's best for the economy, it's a discussion about economic control. I believe in free markets and free trade is a foundation of that. You believe in a government controlled economy. No amount of emperical evidence is going to convince you otherwise. As I showed earlier, it is possible to have free trade and ensure my fellow citizen has a subsistence level of living. So clearly we're not discussing the benefits of free trade, it's who controls the economy.

daveg writes:

The point is that have put forth a very good reason to favor doing business with a fellow countryman than a foreigner.

Not this is just a "factor" in the decision of who to trade with. It does not imply that I always should do business domestically. It is just indended to show that if you don't account for this factor you will reach a poor conclusion regarding how much trade you should have.

save_the_rustbelt writes:

Why is it that tenured professors are always so enthusiastic about destroying other people's jobs?

Is there not a middle ground somewhere here?

Or do economists getsome pleasure from the suffering of those with blue collars?

save_the_rustbelt writes:

And Prof. Kling sees those who do not agree with him as morons and bigots - nice.

daveg writes:

Here is a concrete example of what I am talking about.

Dephi Corp is going bankrupt. GM may not be far behind. Both of these companies have huge pension systems that are guaranteed by the federal government. It other words, they re guaranteed by me.

The result is that, as a taxpayer, I will be responsible for paying that pension if Delphi or GM go BK.

So, I should factor this fixed overhead cost into any buying decision. For example, I can buy a Japanese car with the understanding that I will also pay some additional amount on top of that to pay for the pension of the US auto companies. Or, I can buy a US car and understand that the funds for the pension are included in the price of the car.

It may still make economic sense to buy the Japanese car and then pay the pension out of taxes, but I should as least be aware of that cost.

My point is that there is a difference between foreign goods and domestic goods due to the different geopolitical relationship I have with people from a foreign country.

No racism involved, me amigo.

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