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On March 04 2009 03:07 Cambium wrote:Show nested quote +On March 03 2009 14:17 Jibba wrote:
What if your foreign competitor actually produces everything in a free trade zone in your country and because of economies of scale (competitor is bigger, bigger = cheaper) can sell at lower prices? If a US company sets up a T-shirt shop in a South American country with heavy free trade policies, how much of the profits are actually being invested back into the country?
If US company sets up a T-shirt shop in an SA country, the shop itself is helping the SA country. It's a capital inflow (credit) for that country and it generates employment opportunities. US benefits by collecting interest and/or dividends. This is how both countries mutually benefit from each other. It's impossible to produce "everything" and sell at a cheaper price than domestic price indefinitely (like you suggested) because it would drive down the worth of the currency of the importing country, which in turn, will lower import. This is how it works: 1. Import rises dramatically because everything is produced overseas because it is cheaper 2. Demand for currency rises (importing more), and demand for local currency lowers (there's more of it in the currency market) 3. Currency of exporting country rises (since there is a higher demand for it, since we've increased import from that country, i.e. increased its export) and currency of the importing country depreciates 4. Everything costs more to import purely due to the appreciation and depreciation of currencies 5. Import is forced to decrease
First off Jibba, sorry for not being able to address your post entirely. I'm trying to pry myself away from TL so I can get a paper done.
People who argue that sweat shops are exploitative rarely consider the alternative: Lack of jobs. Demand for labor will eventually improve real wages over time. This creates savings, which generates domestic investment. More importantly, these foreign shops fuel domestic industries as well. For one, companies rarely incorporate in another country and build their own factories, run by managers from home. More often, that work is contracted out to local industry. This facilitates the export of technology and the growth of domestic suppliers that are not directly dependent on the foreign company.
Attempting to implement "fair trade" measures largely undermine the main incentive for these companies to build "outsource" in the first place. China is far from economically liberal, for example. It ranks 132 on HF's index of economic freedom, but cheap labor costs and an undervalued currency override the cost of government interference. Labor is often the most expensive input in any industry.
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Portugal2394 Posts
On March 04 2009 04:19 cUrsOr wrote:You're right about the capitals. You're right about the questions. I get most of my information about the world from The Nation magazine, and I see peoples reactions to these policies. I see the revolts and read lots about organized labor. What amazes me the most, is that, I'm being very presumptuous here, in a tread with people that all make less than 100K a year- I'm facing arguments that have been devised by the richest people in the world. They all support that private ownership, and free trade are the best models for- everything. Like I said, it would probaby be easier just to go directly to the www.imf.org
*^&%^%^#@$$%^
Every single person with minimal knowledge of economics in this thread is arguing for free trade. These ideas weren't devised by the richest people in the world, the fundamental model was developed by David Ricardo, some 200 years ago. Look up Comparative Advantage on wikipedia.
They have been further developed by academics, and the vast majority of academic economists agree that free trade is good. Unfortunately, there is a huge divide in opinion between people with a good understanding of economics and those who don't on this. Krugman, who is a liberal and nobel prize winner for his work on international trade, has even wrote extensively about why comparative advantage is so difficult to understand, even to intellectuals.
http://hei.unige.ch/~baldwin/ComparativeAdvantageMyths/RicardoDifficultIdea.htm
Furthermore, you're setting this as a conflict of interests between the rich/wealthy/imf/nafta people and the common good. The powerful vs the people. This is bullshit, and couldn't be further from the truth. The inverse relation is true. In reality, protectionism benefits the few against the many. Free trade benefits everyone by allowing the people access to cheaper goods and making economies more efficient and therefore wealthier. Protectionism only benefits the protected industries at the expense of much higher possible benefits to the whole society.
Like ahrara said, you're deeply ignorant about this. Now you can either read up and try to understand the subject better or remain ignorant, but if you choose the latter please spare us. Thanks.
On March 04 2009 03:39 Boblion wrote:Show nested quote +On March 04 2009 02:30 warding wrote:
- The fact that Asian tigers were protective of their industry and later enjoyed phenomenal growth does not lead to the conclusion that protectionism was essencial to their success. Likewise, China is still protective of its industries, but one can't conclude that protectionism is helping their growth. At the same time all these countries were enjoying a greater openness to the world economy, and I would point that as the desive factor to their growth.
Dude it is well known that protectionism and a strong state are really important for developing countries. Seriously make a comparison between African and Asian countries ... Ok you can argue thats also linked to corruption problems or wars but still... When a country has no natural competitive advantages ( hi Japan ) he has to create his own. Thus the need for a big state and protectionism to help the growing industries.
It's not 'well known' that protectionism is important for developing countries.
I don't know what you mean by 'strong state'. I would agree that a country needs the right institutions, in particular to ensure functioning property rights.
L, who is your post directed at?
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cursor: I will take back everything I have ever said about you and kiss your feet if you can articulate how comparative advantage works. You don't even have to believe it. Wouldn't you agree that at a minimum you should understand someone else's beliefs before presuming to critique it?
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L, who is your post directed at? Its not directed at anyone in particular, its more of a reflection upon the nature and structure of the dialogue going on in this thread.
The link in that post is one written in the exact style I'm critiquing, so I don't think I'm far off to assume its a problem here.
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On March 04 2009 05:00 warding wrote:
It's not 'well known' that protectionism is important for developing countries.
So how you create a competitive advantage for a country with no natural advantage ( no oil, no high level education etc ... ) ?
Only sweat shops ?
It wouldn't even work if there are no transport infrastructures ...
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On March 04 2009 05:36 Boblion wrote:Show nested quote +On March 04 2009 05:00 warding wrote:
It's not 'well known' that protectionism is important for developing countries.
So how you create a competitive advantage for a country with no natural advantage ( no oil, no high level education etc ... ) ? Only sweat shops ? It wouldn't even work if there are no transport infrastructures ...
How is "high level education" a natural advantage?
A country can create dynamic comparative advantage with reasonable ease. Good examples of these are India (IIT) and China (mfg) for the past twenty years.
What's your definition of a "sweatshop"? A place where people make less than American minimum wage?
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On March 04 2009 05:36 Boblion wrote:Show nested quote +On March 04 2009 05:00 warding wrote:
It's not 'well known' that protectionism is important for developing countries.
So how you create a competitive advantage for a country with no natural advantage ( no oil, no high level education etc ... ) ? Only sweat shops ? It wouldn't even work if there are no transport infrastructures ...
"Sweat shops" is kind of a pejorative, but yes, countries without abundant natural resources or a highly skilled workforce tend to have cheap labor. They can leverage that advantage to attract low-skill manufacturing jobs (textiles, etc).
If the opportunity warrants it, private investors (and the government if it knows what it's doing) will build the infrastructure as needed.
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On March 04 2009 05:41 Cambium wrote:Show nested quote +On March 04 2009 05:36 Boblion wrote:On March 04 2009 05:00 warding wrote:
It's not 'well known' that protectionism is important for developing countries.
So how you create a competitive advantage for a country with no natural advantage ( no oil, no high level education etc ... ) ? Only sweat shops ? It wouldn't even work if there are no transport infrastructures ... How is "high level education" a natural advantage? A country can create dynamic comparative advantage with reasonable ease. Good examples of these are India (IIT) and China (mfg) for the past twenty years. What's your definition of a "sweatshop"? A place where people make less than American minimum wage?
China, India and Korea aren't good enough examples of high level education being a "natural" advantage? :p
Jokes aside, I think Boblion is pointing at a very specific period of time for the advantage built up to kick in. However, that's really a moot point, such period is time is weathered, there is no real way to soften the blow without aid being provided. However, I would have to agree with him that during that period of time, Protectionism is a valuable tool to keep capital contained within the country to maximize the effects of foreign investment/aid/lending, assuming that's what he is talking about.
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On March 04 2009 05:41 Cambium wrote:Show nested quote +On March 04 2009 05:36 Boblion wrote:On March 04 2009 05:00 warding wrote:
It's not 'well known' that protectionism is important for developing countries.
So how you create a competitive advantage for a country with no natural advantage ( no oil, no high level education etc ... ) ? Only sweat shops ? It wouldn't even work if there are no transport infrastructures ... How is "high level education" a natural advantage? A country can create dynamic comparative advantage with reasonable ease. Good examples of these are India (ITT) and China (mfg) for the past twenty years. What's your definition of a "sweatshop"? A place where people make less than American minimum wage?
When i mean natural adavantage, i mean when the "experience" begins :o
China and India aren't exactly the by the book exemples of free-trade that give economists a boner.
Although this Wiki link is really critical of the license Raj and history shows that India's economy produced its best results in the 90's with a bit more free-trade friendly laws, you can argue that some of the Indian firms were helped by this tariff barriers before being competitive enough to be export their products with success.
http://en.wikipedia.org/wiki/License_Raj
Japan is still the best example imo.
However, i don't argue for a complete protectionism. I just wanted to say that some of its aspects are needed for a growing country.
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ill try to use only 1 question here.
A country with laws that enslave workers, has a competative advantage over a counry that has laws protecting workers. Laws that protect workers and therfore increase costs, make a country less attractive, to say Coke. This is called a competative dissadvantage then?
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On March 04 2009 06:01 cUrsOr wrote:
ill try to use only 1 question here.
A country with laws that enslave workers, has a competative advantage over a counry that has laws protecting workers. Laws that protect workers and therfore increase costs, make a country less attractive, to say Coke. This is called a competative dissadvantage then?
Don't even complicate it by bringing up labor issues, please just start by assuming that the countries are perfectly free. Before you even understand the economic principle you seem to be distorting it by your other beliefs.
I mean, even if typically comparative advantage can be described in terms of wage(labor hours for production), that description is just fulled of your own biases.
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On March 04 2009 06:01 cUrsOr wrote:
ill try to use only 1 question here.
A country with laws that enslave workers, has a competative advantage over a counry that has laws protecting workers. Laws that protect workers and therfore increase costs, make a country less attractive, to say Coke. This is called a competative dissadvantage then?
hahahahahahaha
I have no idea what that gibberish is supposed to mean but it was hilarious.
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On March 04 2009 06:01 cUrsOr wrote:
ill try to use only 1 question here.
A country with laws that enslave workers, has a competative advantage over a counry that has laws protecting workers. Laws that protect workers and therfore increase costs, make a country less attractive, to say Coke. This is called a competative dissadvantage then?
Please read...
http://en.wikipedia.org/wiki/Comparative_advantage
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On March 04 2009 06:04 ahrara_ wrote:Show nested quote +On March 04 2009 06:01 cUrsOr wrote:
ill try to use only 1 question here.
A country with laws that enslave workers, has a competative advantage over a counry that has laws protecting workers. Laws that protect workers and therfore increase costs, make a country less attractive, to say Coke. This is called a competative dissadvantage then? hahahahahahaha I have no idea what that gibberish is supposed to mean but it was hilarious.
LoL, that was exactly what I was thinking. I was so speechless... LOL!
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On March 04 2009 05:00 warding wrote:
Every single person with minimal knowledge of economics in this thread is arguing for free trade.
They have been further developed by academics, and the vast majority of academic economists agree that free trade is good.
and the problem certainly isnt, that everyone arguing for Free Trade is obviously in some sort of higher education economic classes in developed nations, that teach about how the world exists as an economic system. whatever creates more wealth, is better.
i guess i have to take your word for the "vast majority of economists."
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On March 04 2009 05:43 i_heart_nukes wrote:Show nested quote +On March 04 2009 05:36 Boblion wrote:On March 04 2009 05:00 warding wrote:
It's not 'well known' that protectionism is important for developing countries.
So how you create a competitive advantage for a country with no natural advantage ( no oil, no high level education etc ... ) ? Only sweat shops ? It wouldn't even work if there are no transport infrastructures ... "Sweat shops" is kind of a pejorative, but yes, countries without abundant natural resources or a highly skilled workforce tend to have cheap labor. They can leverage that advantage to attract low-skill manufacturing jobs (textiles, etc). If the opportunity warrants it, private investors (and the government if it knows what it's doing) will build the infrastructure as needed.
I think that sweat shops will last forever so 
Private investors won't come and say '"I'm gonna build an university, an hi-tech research centre, a bank and an airport "
Those things are really profitable for a country and its people ( higher profit margins :p ) whereas the profits made by sweat shops will mostly benefits the foreign firms. Of course the workers of the sweat shop will get paid but on the long term the state should definitly helps its growing industries. Especially if it is clearly evident that with of productivity/tech progress those industries will be competitive enough to flood the foreign countries markets. That the very strategy of Japan and the tigers/dragons.
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On March 04 2009 06:06 Cambium wrote:Show nested quote +On March 04 2009 06:04 ahrara_ wrote:On March 04 2009 06:01 cUrsOr wrote:
ill try to use only 1 question here.
A country with laws that enslave workers, has a competative advantage over a counry that has laws protecting workers. Laws that protect workers and therfore increase costs, make a country less attractive, to say Coke. This is called a competative dissadvantage then? hahahahahahaha I have no idea what that gibberish is supposed to mean but it was hilarious. LoL, that was exactly what I was thinking. I was so speechless... LOL!
I was thinking that he was using enslavement to indicate nearly no wage and protection to point to high real wage, in that case he kind of gets the idea assuming equal production time on a certain good...
On March 04 2009 06:07 Boblion wrote:Show nested quote +On March 04 2009 05:43 i_heart_nukes wrote:On March 04 2009 05:36 Boblion wrote:On March 04 2009 05:00 warding wrote:
It's not 'well known' that protectionism is important for developing countries.
So how you create a competitive advantage for a country with no natural advantage ( no oil, no high level education etc ... ) ? Only sweat shops ? It wouldn't even work if there are no transport infrastructures ... "Sweat shops" is kind of a pejorative, but yes, countries without abundant natural resources or a highly skilled workforce tend to have cheap labor. They can leverage that advantage to attract low-skill manufacturing jobs (textiles, etc). If the opportunity warrants it, private investors (and the government if it knows what it's doing) will build the infrastructure as needed. I think that sweat shops will last forever so Private investors won't come and say '"I'm gonna build an university, an hi-tech research centre, a bank and an airport " Those things are really profitable for a country and its people ( higher profit margins :p ) whereas the profits made by sweat shops will mostly benefits the foreign firms. Of course the workers of the sweat shop will get paid but on the long term the state should definitly helps his growing industries. Especially if it is clearly evident that with of productivity/tech progress those industries will be competitive enough to flood the foreign countries markets.
But that is why entities like IMF and development banks exist, as well as foreign aid. Such infrastructure really falls under Government expenditure, and are appropriately spent from the funds given to the government to build them. People don't start from needing to resort to sweat shops to a state that justifies the presence of universities, research centers and all, they progress to a state where such investments are viable.
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i did read the wiki. so then the differances between laws of countries that can produce things, is absolute advantage?
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On March 04 2009 06:07 cUrsOr wrote:Show nested quote +On March 04 2009 05:00 warding wrote:
Every single person with minimal knowledge of economics in this thread is arguing for free trade.
They have been further developed by academics, and the vast majority of academic economists agree that free trade is good. and the problem certainly isnt, that everyone arguing for Free Trade is obviously in some sort of higher education economic classes in developed nations, that teach about how the world exists as an economic system. whatever creates more wealth, is better. i guess i have to take your word for the "vast majority of economists."
Look, here's the absolute gist of it.
Free trade benefits (exceptions do occur) both parties. Even if you are some small country in South America, why would you trade in the first place if it provides you absolutely no benefits?
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because they have a comparative advantage making all Oil rather than everything they need.
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EPT
