Tariffs: The Smoot-Hawley Fairy Tale

[waltc]

Wow, great Free Trade/Neoliberal economic talking points. Too bad you're 20 years too late at spewing it. You ought to be working for CATO or some other group of rich people who want to become even richer.

They'll love your ruthlessness and amorality.

But you know whats funny? During the '50s, '60s and '70s when American practiced protectionism we became a economic, industrial and technological powerhouse where companies paid a good wage and many families were able to live off a single income unlike today.

And we did it all without Free Trade and people like you Kyle who would like to see Americans working for 50 cents a hour like Chinese workers.

Lastly, your contempt for American workers and this nation is simply astonishing despite your attempts to whitewash it.

It really shows you to be nothing but a economic terrorist and a threat to this country(like all your ilk) who is bent on trying to justify and promote a horrific and anti-worker anti-Democratic economic doctrine that has done nothing but impoverish workers both here and abroad and enrich a handful of business owners and henchmen.

[Kyle]

Jul 12, 2010 13:07:14 GMT -6 @waltc said:

They'll love your ruthlessness and amorality.

Yes, I am so very ruthless for wanting our nation, and others, to prosper.

But you know whats funny? During the '50s, '60s and '70s when American practiced protectionism we became a economic, industrial and technological powerhouse where companies paid a good wage and many families were able to live off a single income unlike today.

Companies pay a good wage today. During the 1950s, we had an advantage in that pretty much every other industrialized economy was rebuilding after having been bombed to smithereens during World War II. Wages were also higher because the birth rate during the Great Depression dropped off, thus the supply of workers was less than it otherwise would have been to meet the demand.

Once the 1960s arrived, the U.S. economy began to stall, and the 1970s were wracked with high inflation and high unemployment, plus because American companies had been lacking foreign competitors for so long, they began to get slaughtered when foreign competition finally arrived. The reason they were being slaughtered was because the products from said competition were far better. The American people should not have been forced to buy the inferior-quality domestic products. When the 1980s rolled around, American companies underwent a revolution and emerged far more efficient, productive, and powerful.

Families and people during these times (5s, 60s, 70s) lived more frugally and saved more, and were able to live off a single income. Today, people spend a lot more than they save and use debt too much.

And we did it all without Free Trade and people like you Kyle who would like to see Americans working for 50 cents a hour like Chinese workers.

Free trade existed then, just to a lesser degree. Furthermore, as I have explained, free trade is a form of efficiency. You talk of us developing into a "technological powerhouse" during the 1950s, what do you think that entails? Improved efficiencies. What do you think efficiencies entail? Jobs lost in certain industries, but huge economic gains so that more jobs are created elsewhere. Free trade is no different. It is a form of efficiency. Of course, if that efficiency gain is in machines, you are apparently okay with it. If that efficiency gain is in foreign labor (much of which is not slave labor, you villainize it.

You want Americans to work for fifty cents per hour, kill free trade. There will be far less demand for goods and services, and thus a lot of jobs will get destroyed.

Lastly, your contempt for American workers and this nation is simply astonishing despite your attempts to whitewash it.

Actually, I have great pride in my country and its workers, and you need to get over yourself. Your ideology does not give you any monopoly on patriotism. What you are is simply someone who likes to demogogue anyone who disagrees with you. If someone does not agree with you, then they are "evil," an "economic terrorist," a "traitor," etc...

It really shows you to be nothing but a economic terrorist and a threat to this country(like all your ilk) who is bent on trying to justify and promote a horrific and anti-worker anti-Democratic economic doctrine that has done nothing but impoverish workers both here and abroad and enrich a handful of business owners and henchmen.

There is absolutely nothing whatsoever to support the above, plus all evidence proves to the contrary. The very existence of countries such as Japan, Taiwan, South Korea, Great Britain, etc...show this. Without free trade, most all nations would be completely impoverished as their populations are too small to create any form of economic development that can be sustained by that population alone. Most also lack the resources to be able to produce everything, instead being good at only a limited number of things (which they trade with other countries that are not particularly good at those things). Furthermore, without trade, there would be zero demand for the production of goods and services.

I suppose being for technological advancement is also "anti-worker" then.

[fredorbob]

Jul 12, 2010 17:56:32 GMT -6 @Kyle said:

Yes, I am so very ruthless for wanting our nation, and others, to prosper.

Woe to those who call evil good
and good evil,
who put darkness for light
and light for darkness,
who put bitter for sweet
and sweet for bitter.

[judes]

Wow Kyle, do you really believe the stuff you are saying? Just look around at what has been happening the last twenty or so years culminating now in a full blown depression. All has occurred under globalization, free trade, deregulation and union dismantling. The others have done a good job countering much of the nonsense you claimed, and I don't have time for a point by point with you, but wanted to hit on a couple things you keep saying that are just plain wrong and I can't let go.

There is no greater detriment to a society or economy than a huge disparity in wealth. Nothing else matters, rich and poor are completely relative terms and are only measured by the difference between them, not the nominal value. If you have a handful of extremely wealthy individuals separated by a huge gap from the majority in wealth and income, that means by absolute logic and definition, that the majority of the remaining people must be relatively poor. It matters a great deal this gap, and that you can't see this shows me you lack the ability to use sound reasoning in your thought process.

Now, as for you continually saying wages have not gone down, you seem to be using a measure that accounts for all workers including the handful that have been growing exceedingly wealthy, like the outsourcing CEO's whose pay and bonuses have skyrocketed from the bad economic policies of the last few decades, namely free trade, and have seen the income gap rise in their favor as mentioned above. Including them into the measure or mean greatly distorts the picture and skews the mean. Also the chart you linked to includes "benefits" in the wage, which is highly subjective in terms of "real" compensation and in light of the manipulated and sneaky way inflation or cpi is concocted. And no matter how much "value" someone arbitrarily assigns to these benefits, I can not spend them.

For the majority of workers, middle class and lower levels wages have stagnated over the last decade. Here is a chart that breaks it down and shows the picture of just what is happening and what the others have been saying. The top 5% or so have been getting richer, exceedingly so which skews the average, while every one else has been getting poorer. It can be no other way, wealth is relative and in that light absolutely is a zero sum game. We can not all be rich, think about it, if every person on earth had exactly $20 million dollars, would we all be rich?? It is precisely this distorted accumulation of income at the pointy top that leads to bubbles, mal-investments and asset price increases like housing and oil as all this wealth looks for returns in an economy where the volume of money has generally ceased up due to it being hoarded in the hands of a few. And no, the majority of middle class and lower income workers are not heavily invested in the stock market and do not benefit from these distortions. Can't look for it now but I remember reading something like 85 or so percent of stock market and equity is held by the top 10% of wealth holders. Here's a chart to ponder I don't have time to re break it all down.

sociology.ucsc.edu/whorulesamerica/power/wealth.html

www.epi.org/publications/entry/bp195/
This chart ends at 2007, and though I've seen one before I can't find a more recent one, but it gets worse up to 2010. Ravi Batra does an excellent job of presenting the real wage case in his book "Greenspans Fraud" I highly recommend it.

The other thing you keep saying that makes no logical sense what so ever is that trade creates wealth. How in the heck can that make any rational sense at all? Just by the definition of the word it should be clear to anyone that it does not. Trade is trade, that is all. It creates nothing, it is the exchange of already created wealth, period, nothing is created through trade. Just think about it. If no wealth was ever created again, and we just continued to trade the existing wealth, all we are doing is shifting the wealth around not adding anything new to the system. Wealth is essentially created through three means, manufacturing, mining and farming all of which require labor and other resources to turn it into something of higher value than it's original form. It is bringing into existence more wealth than existed before. If I dig up a chunk of gold and sell it for $1000 dollars wealth was created. A thousand dollars more in wealth now exists in the economic system. I have the fiat in exchange, but the person who traded his fiat still has the piece of gold valued at the same price. Now if we keep trading the same piece of gold back and forth no new net wealth will have been created. But if I keep digging it up, I am adding wealth to the system.

There are so many basic flaws in your logic it is not of much use to debate this beyond here if these simple concepts are not understood by you.

[waltc]

Free trade existed then, just to a lesser degree. Furthermore, as I have explained, free trade is a form of efficiency. You talk of us developing into a "technological powerhouse" during the 1950s, what do you think that entails? Improved efficiencies. What do you think efficiencies entail? Jobs lost in certain industries, but huge economic gains so that more jobs are created elsewhere. Free trade is no different. It is a form of efficiency. Of course, if that efficiency gain is in machines, you are apparently okay with it. If that efficiency gain is in foreign labor (much of which is not slave labor, you villainize it.

Not Free Trade in the form you promote where we sent entire industries to Asia. As for the rest it's a straw man argument.


Actually, I have great pride in my country and its workers, and you need to get over yourself. Your ideology does not give you any monopoly on patriotism...

Well you could have fooled me because you want to make American workers work for much less and continue to support the stripping away of industries and jobs to foreign countries that you like more than the U.S.

You also make excuses for the rampant deindustrialization and job loss that has occurred ever since NAFTA and subsequent trade agreements were signed.

And none of this can be swept away because you say so or that someone is paying you money to post here.

Furthermore you are the man( or woman) who wants to get rid of the minimum wage, thinks we need to compete wage wise with China and that $18 a hour is too much for Americans.

BTW working full time at $18 hour doesn't even make you middle class and in many urban areas you barely afford a decent apartment and have a little money left over.

So please don't give me no nonsense on how that's a high wage.

No it's all of this together that makes you a economic terrorist. Not because I disagree with you. But simply because you promote a toxic agenda that is killing the economic and personal health of working class Americans.

[judes]

Oh yes, good points Walt, you made me realize I needed to add one more point to the other myth Kyle keeps spouting that we are still a technological manufacturing base. I am probably one of the few manufacturing engineers left in this country that works in a plant in the US that builds circuit boards still. And just as I have seen all our other advanced manufacturing products and equipment be bundled up and shipped out of the country, the last few remaining circuit board lines are ready to follow in there place to Mexico soon. I have seen it, I have lived it for over the last twenty years, I've watched my own manufacturing facility shrink from 20,000 employees to less than 200 in the last 25 or so years. Mark my words anything that can (which is pretty much everything) will and is being outsourced. It will not stop until we are a third world banana republic making slave wages tantamount to the third world despotic countries "free traitors" would have us "compete" with using our own equipment and intellectual property being shipped across the world. Oh and yes most engineering and research centers are relocating out of country as well now, following the manufacturing base.

[Kyle]

Jul 13, 2010 12:18:29 GMT -6 judes said:

Wow Kyle, do you really believe the stuff you are saying? Just look around at what has been happening the last twenty or so years culminating now in a full blown depression.

This is not a depression, it's a recession. A depression would be with unemployment at levels beyond 15% or so and soup lines. Regardless though, what caused this recession was the housing bubble and the credit crunch. Free trade had little to do with it.

All has occurred under globalization, free trade, deregulation and union dismantling.

Correlation is not causation. Sort of like the point of this thread, that Smoot-Hawley, while correlated with the Great Depression, did not necessarilly cause the Great Depression.

The others have done a good job countering much of the nonsense you claimed, and I don't have time for a point by point with you, but wanted to hit on a couple things you keep saying that are just plain wrong and I can't let go.

There is no greater detriment to a society or economy than a huge disparity in wealth. Nothing else matters, rich and poor are completely relative terms and are only measured by the difference between them, not the nominal value. If you have a handful of extremely wealthy individuals separated by a huge gap from the majority in wealth and income, that means by absolute logic and definition, that the majority of the remaining people must be relatively poor.

This is simply not true. The economy is not a zero-sum game. There is not some fixed pie of wealth, where in order for one person to get wealthier, another must become poorer. There are more wealthy individuals now than ever before. Each one of them got wealthy in the first place by providing products and services that people were willing to buy, and in the process, they created jobs and wealth.

On the contrary, what more and more wealthy people in a free-market economy means is that the majority of the remaining people must be experiencing an increasing standard of living. Which they are. People today have a far greater standard of living than people in the year 1900.

You also are making the big mistake (as I'll explain more below) of acting as if "the rich" and "the poor" are classes, as opposed to income brackets, which massive numbers of people continually pass in and out of.

It matters a great deal this gap, and that you can't see this shows me you lack the ability to use sound reasoning in your thought process.

That's because you are assuming the pie is fixed. If the pie is fixed, then yes, for one guy to get richer, another must get poorer, and that is bad.

But the pie isn't fixed. It is yourself who is not using sound reasoning here.

Now, as for you continually saying wages have not gone down, you seem to be using a measure that accounts for all workers including the handful that have been growing exceedingly wealthy, like the outsourcing CEO's whose pay and bonuses have skyrocketed from the bad economic policies of the last few decades, namely free trade, and have seen the income gap rise in their favor as mentioned above.

A prosperous free economy will always have an income gap, because only a few people are going to be willing to put in the work to create the businesses that generate such massive amounts of wealth.

But those businesses also create all the great products and services that advance society.

Including them into the measure or mean greatly distorts the picture and skews the mean.

Including them does not distort the mean. It doesn't occur to you that statisticians take into account things like that when calculating per capita incomes?

Also the chart you linked to includes "benefits" in the wage, which is highly subjective in terms of "real" compensation and in light of the manipulated and sneaky way inflation or cpi is concocted. And no matter how much "value" someone arbitrarily assigns to these benefits, I can not spend them.

Wages are only a part of compensation, which includes many benefits as you mention. And while real wages have shown some stagnation and even decline (more on this in a bit), total compensation has continued increasing.

You say you cannot spend benefits, but if you did not get good benefits, you would have to spend a substantial portion of your wage on the things provided by the benefits.

I agree benefits can be more subjective (nothing like cold cash), BUT, this would be a case of companies and how they compensate workers, not of free trade or economic stagnation. Increasing compensation with a larger chunk paid in benefits is a different issue, dealing with how money is paid out.

But even the stagnation and decline in real wages is very questionable. Real wages are calculated by taking the money wages and adjusting for changes in the Consumer Price Index. The problem is that the CPI has until recently been rather inaccurate, overstating inflation by a percentage point or two. Overstating inflation thus underestimates the real income of the average American by a significant amount over the years.

For the majority of workers, middle class and lower levels wages have stagnated over the last decade.

See my above post, but also per captia incomes have consistently increased.

Here is a chart that breaks it down and shows the picture of just what is happening and what the others have been saying. The top 5% or so have been getting richer, exceedingly so which skews the average, while every one else has been getting poorer. It can be no other way, wealth is relative and in that light absolutely is a zero sum game.

No, it is not a zero-sum game. If it was zero-sum, there would be no economic growth whatsoever. BTW, the top 5% are mostly not rich; income of about $150,000 puts you in the top 5%.

A point you are also missing regarding the "distribution" of income is that the total national income continues to grow. One group earning a smaller percentage of total national income does not mean that they are "getting poorer" or "earning less." Keep in mind that more wealth was created over the last thirty years than in the previous two-hundred. A lot of that was from entrepreneurs creating businesses, and becoming wealthy in the process. This increases the total national income and will change the income percentage statistics.

You also are acting as if different income brackets represent literal different classes of people, as if people in the bottom earning 20% remain that way their entire lives and people in the highest-earning 5% were born there and remain there. Neither is true.

Most people who start out in the bottom-earning 20% when young, move up in terms of income through their careers, so that by the time they are in their 40s and 50s, they are in their peak-earning years, and now in a higher income bracket.

When trying to determine whether income inequality is increasing or decreasing, you cannot just compare the incomes of say the "bottom 20%" with the "top 20%." We're talking flesh-and-blood human beings here, so you cannot just consider those in given income brackets in a given year; you must consider the vast majority of people constantly moving into and out of those income brackets over the years.

When a large degree of people in the bottom income brackets in the 1970s were in higher income brackets by the 1990s, you cannot determine the degree of income inequality between people by looking at inequality between income brackets.

You have to look at real per capita incomes, which consistently have been increasing.

Also, most rich people in America are self-made, not born into it. Inherited wealth is a small portion of the wealth in this country.

We can not all be rich, think about it, if every person on earth had exactly $20 million dollars, would we all be rich??

Yes, we are all rich, in fact. Compared to most people on this planet, even poorer Americans are rich. The average American today enjoys a standard of living so incredibly high by global, and historical, standards that it is almost crazy to think about.

It is precisely this distorted accumulation of income at the pointy top that leads to bubbles, mal-investments and asset price increases like housing and oil as all this wealth looks for returns in an economy where the volume of money has generally ceased up due to it being hoarded in the hands of a few.

How do wealthy people create a housing bubble? The housing bubble was created by excessive demand amongst the middle-class for housing, not the rich.

Regarding wealth, it is not "hoarded" in the hands of a few. Only a few people in society take the risks and work hard enough to generate massive amounts of wealth in the first place. Most that do generate a lot to charity and invest it in the economy.

In a free, market economy, you will always have a high degree of wealth concentrated at the top because of this. If you try to create an equality of outcome, where everyone has an equal amount of wealth, that is statism, as the government is going to by force go and take away people's hard-earned money.

This thus disincentivizes any and all wealth creation (why work hard when the government will take it all away?).

And of course, remember that income brackets do not equal different classes of people.

And no, the majority of middle class and lower income workers are not heavily invested in the stock market and do not benefit from these distortions. Can't look for it now but I remember reading something like 85 or so percent of stock market and equity is held by the top 10% of wealth holders.

Anyone with a pension or mutual fund, is invested in the stock market.

Here's a chart to ponder I don't have time to re break it all down.

sociology.ucsc.edu/whorulesamerica/power/wealth.html

www.epi.org/publications/entry/bp195/
This chart ends at 2007, and though I've seen one before I can't find a more recent one, but it gets worse up to 2010. Ravi Batra does an excellent job of presenting the real wage case in his book "Greenspans Fraud" I highly recommend it.

Will check the book, however see above on real wages.

The other thing you keep saying that makes no logical sense what so ever is that trade creates wealth. How in the heck can that make any rational sense at all? Just by the definition of the word it should be clear to anyone that it does not. Trade is trade, that is all. It creates nothing, it is the exchange of already created wealth, period, nothing is created through trade. Just think about it. If no wealth was ever created again, and we just continued to trade the existing wealth, all we are doing is shifting the wealth around not adding anything new to the system.

Of course the physical process of trade itself doesn't create wealth, but it is trade that leads to wealth creation. No one creates anything if there is no trade. If a small country like South Korea cannot trade, it cannot create wealth because it will have no one to trade the goods and services it creates with. And without access to global trade, it will be limited to creating only a very limited amount of goods and services because there will be only a small amount of people to trade. When a country like SK can trade with the globe, it can produce massive amounts of goods and services to trade, and hence can buy massive amounts of things; it has created massive wealth and can create a very high standard of living for everyone.

Wealth is essentially created through three means, manufacturing, mining and farming all of which require labor and other resources to turn it into something of higher value than it's original form.

In addition to the above, services also create wealth. People trade services too. BTW, what do you think happens to manufacturing and farming and mining without free trade? The United States then has to produce far less of everything because it cannot trade it with anyone else. What do you think that leads to? Job destruction. Far less wealth creation (the economy is not going to create massive amounts of goods and services with no one to trade with).

There are so many basic flaws in your logic it is not of much use to debate this beyond here if these simple concepts are not understood by you.

They are understood perfectly, I would say it is yourself who has the misunderstanding on these issues.

[huck]

Jul 13, 2010 12:18:29 GMT -6 judes said:

The other thing you keep saying that makes no logical sense what so ever is that trade creates wealth. ... Wealth is essentially created through three means, manufacturing, mining and farming all of which require labor and other resources to turn it into something of higher value than it's original form. ... Now if we keep trading the same piece of gold back and forth no new net wealth will have been created.

Ok, ive questioned to myself how he could think trade creates wealth. And i can understand how someone washing my dishes for pay does not create wealth, only moves it.

But i am confused some about an area between manufacturing and service, such as certain forms of engineering and design, like computer programming (which happens to pay my bills).

I take "nothing" and turn it into something valuable, that is often sold to or rented by others, a working program. This is not machining a bolt, nor is it cleaning a house. and i cant put my finger on if it is wealth producing or just trade.

In your case, does the person that designed the board produce any wealth? or is it only the act of etching them and inserting the parts?

[Kyle]

Jul 13, 2010 12:21:40 GMT -6 @waltc said:

Not Free Trade in the form you promote where we sent entire industries to Asia. As for the rest it's a straw man argument.

Industries do not get "sent" to Asia, certain industries that countries in Asia can do better in, can cause lost jobs in America if it cannot do as good in them, BUT, this allows the U.S. to focus on the areas it is much better in and create more jobs by producing more and better things.

Which do you want, America half-assing (for lack of a better term) two industries, or let Asians handle one industry that they are very good at, and we do another industry that we are very good at (and then trade, so Asians get a very good product and Americans get a very good product)? No country can do ALL industries very good, due to scarce resources, population, geography, etc...

Well you could have fooled me because you want to make American workers work for much less and continue to support the stripping away of industries and jobs to foreign countries that you like more than the U.S.

I support Americans being able to earn more and I support the development of industries and the creation of jobs in our economy.

Again, trade is a form of efficiency and increasing efficiency almost always creates economic gains that surpass any lost jobs. I could easily take your quote and modify it:

"You continue to support the stripping away of industries and jobs to machines and technology that you like more than workers."

Machines and technology are efficiency creators as well, but they can take jobs and knock out whole industries in the process. For example, the Internet gave a significant hard knock to a few industries that people began to bypass altogether as they could do for free on the Internet what they previously had to pay someone for.

Modern farming technology allows people to grow lots more food using a lot less labor than before. Also modern manufacturing technology.

But notice no one screams about jobs being destroyed and industries stripped away due to machinery and technological advancements.

You also make excuses for the rampant deindustrialization and job loss that has occurred ever since NAFTA and subsequent trade agreements were signed.

I do not make any "excuses" because neither of the above has occurred. The fact is that there has not been any rampant job loss (disregarding the recession) or deindustrialization. There has been rampant job creation.

And none of this can be swept away because you say so or that someone is paying you money to post here.

No one is paying me money.

Furthermore you are the man( or woman) who wants to get rid of the minimum wage,

You understand supply and demand, right? You raise a price on something, people and businesses buy less. Like if the cost of gas goes up very high, you will drive less and maybe trade in the SUV for a more fuel-efficient car. That is why many environmentalists support a high fuel tax. To get people to buy less gas.

Workers may be people, but they are subject to the SAME laws of supply and demand. Wages are the price of workers to a business. If you artificially increase this price, you are going to force businesses to "buy" (i.e. hire) fewer workers.

Again, there is a reason why giant corporations like Wal-Mart support a higher minimum wage. Because they can absorb it. Most small businesses can't and either have to raise prices or fire people or something.

Small business is the economic engine of America, not Big Business. A high minimum wage will hurt small businesses. Since the minimum wage was passed, we saw a drastic increase in the teenage unemployment rate (because teenagers make up a lot of minimum wage workers). We also see higher unemployment in the inner cities from it as well.

thinks we need to compete wage wise with China and that $18 a hour is too much for Americans.

I never said either of the above.

BTW working full time at $18 hour doesn't even make you middle class and in many urban areas you barely afford a decent apartment and have a little money left over.

Yes.

So please don't give me no nonsense on how that's a high wage.

Never said $18 an hour is a high wage.

No it's all of this together that makes you a economic terrorist. Not because I disagree with you. But simply because you promote a toxic agenda that is killing the economic and personal health of working class Americans.

The agenda is only toxic if you hold a variety of misconceptions about how the economy works.

[Kyle]

Jul 13, 2010 12:31:03 GMT -6 judes said:

Oh yes, good points Walt, you made me realize I needed to add one more point to the other myth Kyle keeps spouting that we are still a technological manufacturing base.

We are. That is a fact. And we aren't "still" "a" technological manufacturing base, we are the technological manufacturing base.

I am probably one of the few manufacturing engineers left in this country that works in a plant in the US that builds circuit boards still. And just as I have seen all our other advanced manufacturing products and equipment be bundled up and shipped out of the country, the last few remaining circuit board lines are ready to follow in there place to Mexico soon. I have seen it, I have lived it for over the last twenty years,

What that means is that circuit boards can be manufactured more efficiently in other countries than in America.

I've watched my own manufacturing facility shrink from 20,000 employees to less than 200 in the last 25 or so years.

Again, a decline in manufacturing employment is not a decline in manufacturing. Manufacturing employment is far lower overall than it used to be, that is because of our manufacturing base being so technologically advanced now. It is far more automated and needs far fewer human workers.

Mark my words anything that can (which is pretty much everything) will and is being outsourced. It will not stop until we are a third world banana republic making slave wages tantamount to the third world despotic countries "free traitors" would have us "compete" with using our own equipment and intellectual property being shipped across the world. Oh and yes most engineering and research centers are relocating out of country as well now, following the manufacturing base.

Simply not true and again based on the zero-sum fallacy. And the whole "slave wages-despotic countries" bit is a strawman. You are talking about a limited number of countries.

You completely ignore all of the good countries that could not thrive without free trade and whose citizens would end up back into squalid poverty if trade was cut off.

BTW, third world countries, if you haven't noticed, are countries that produce virtually nothing, neither in the form of goods nor services, because they do not trade (so little production takes place). The United States produces more than any other nation on Earth. We export a load and import a lot (which allows all those smaller countries to be wealthy as we buy their stuff; this then allows them to buy our stuff as well, which makes us wealthier).

And BTW, free trade also helps our manufacturing base be more efficient, because it allows us to concentrate on the things we are the best at. If we try to concentrate on all the things we are not as good at, that then also takes away from the things we are good at, and thus we end up producing overall inferior versions of everything. We produce a LOT though, but a lot has been outsourced to other countries that can do those things better. We then trade and it benefits everyone.

And you just wait until if China develops into a stronger economic powerhouse and that massive population of theirs starts buying lots more stuff, America's economy is going to be able to go into overdrive producing stuff to supply all those customers.

Do you think American businesses benefit from having just 320 million Americans to make goods and services for, or 320 million Americans plus the rest of the globe? Obviously the rest of the globe, who then buy a lot of stuff from us as well, as they too produce stuff that we buy from them, stuff many of them can produce better than us.

[Kyle]

Jul 13, 2010 15:03:38 GMT -6 huck said:

Ok, ive questioned to myself how he could think trade creates wealth. And i can understand how someone washing my dishes for pay does not create wealth, only moves it.

Actually, someone washing your dishes does create wealth, because they are providing you a service, and that service is a form of wealth. They are trading you their service of washing dishes for money.

Yes one person offering a measly dishwashing service is a tiny speck in the overall production of goods and services in the economy, but it is still a service. They have generated something to trade with you for money.

But i am confused some about an area between manufacturing and service, such as certain forms of engineering and design, like computer programming (which happens to pay my bills).

I take "nothing" and turn it into something valuable, that is often sold to or rented by others, a working program. This is not machining a bolt, nor is it cleaning a house. and i cant put my finger on if it is wealth producing or just trade.

Yes, it is producing wealth. You create a program and you have created a product. This product is something you, or your company, can then trade.

In your case, does the person that designed the board produce any wealth? or is it only the act of etching them and inserting the parts?

The person that designs the board is providing a valuable service, one that takes great skill. Their service is something they can trade. So yes, it is wealth.

[unlawflcombatnt]

Jul 13, 2010 15:27:45 GMT -6 @Kyle said:

What that means is that circuit boards can be manufactured more efficiently in other countries than in America.

This one short statement exemplifies the illogical arguments made by free traders.

The circuit board manufacturing is NOT being moved to another country becuase it's more "efficient." It's being moved there because it is cheaper. In fact, it's usually far less "efficient" to manufacture it elsewhere. But the lower wages by the less-efficient workers offset the production costs that would have otherwise been increased by the inefficiency.

This is essentially de-evolution. Instead of having more productive but higher paid workers produce it, the jobs are given to less productive & lower paid workers. The production time of the product is actually increased, but the cost goes down due to the lower hourly wages.

This is not "progress." This is going backward.

[judes]

This is not a depression, it's a recession. A depression would be with unemployment at levels beyond 15% or so and soup lines. Regardless though, what caused this recession was the housing bubble and the credit crunch. Free trade had little to do with it.

I love how you just make up definitions to suit your agenda, lol, considering most economists can not even agree on a definitive description of what defines a depression, I am glad someone knows for sure. So let's use your definition of 15% unemployment and soup lines. Haaha. Take a gander at the BLS U6 unemployment rate for last month which is approaching 17%. Even this measure is manipulated as stated by ULC by throwing people out of the labor force and basically erasing them from the population. As for the soup lines most accounts have food banks at unsurpassed usage and the increase in safety nets since the depression has replaced the soup lines with a record high percentage of people now getting food stamps.

You also are making the big mistake (as I'll explain more below) of acting as if "the rich" and "the poor" are classes, as opposed to income brackets, which massive numbers of people continually pass in and out of.

Again you are just making stuff up that is simply not true. Did you read any of the information in the last two links I posted? Obviously you did not. But economic mobility is another well held myth in this country and the latest studies have shown a scant 6% of the children born into the bottom socioeconomic quintile have moved on to the top quintile over the last generation. The fact is several countries enjoy a much greater degree of economic mobility than the US, such as Canada, France, Germany and most Scandinavian countries. Here is an eye opening link you should review before just making things up:
www.economicmobility.org/assets/pdfs/EMP_American_Dream.pdf

That's because you are assuming the pie is fixed. If the pie is fixed, then yes, for one guy to get richer, another must get poorer, and that is bad.

The pie is fixed in relative terms, you need to understand the difference between relative value and absolute value. (read the study I posted above for help).

A prosperous free economy will always have an income gap, because only a few people are going to be willing to put in the work to create the businesses that generate such massive amounts of wealth.

History (and common sense) has shown economies flourish when the gap is not as great, the gap now for the first time is greater than that before the great depression, the wealth is being hoarded by a smaller share of the population, it is unsustainable and it will correct through policy or force but can not continue.

Including them does not distort the mean. It doesn't occur to you that statisticians take into account things like that when calculating per capita incomes?

Now you are just being ridiculous. Per capita simply means per person. Income or compensation per capita as you posted it included all brackets of income thus the very top percent who have seen compensation explode as being averaged into the data, so yes the highly uneven distribution of compensation at the top skews the average for the entire population as touted by you. Per capita means per person, it does the opposite of what I posted which is to separate the average by percentiles of population. Statistics can be used to show a whole lot of things, so it helps to understand what is actually being measured.

Wages are only a part of compensation, which includes many benefits as you mention. And while real wages have shown some stagnation and even decline (more on this in a bit), total compensation has continued increasing.

What, are you back pedaling here now?! After your persistent claim that wages have not stagnated you now concede the point. "Benefits" are arbitrary and meaningless when thrown into the mix, all relevant statistics show income and wages declining for the majority of the population and the number of people with these so called "benefits" has greatly declined as well.

But even the stagnation and decline in real wages is very questionable. Real wages are calculated by taking the money wages and adjusting for changes in the Consumer Price Index. The problem is that the CPI has until recently been rather inaccurate, overstating inflation by a percentage point or two. Overstating inflation thus underestimates the real income of the average American by a significant amount over the years.

Oh so the government has been overstating inflation. Funny most say the opposite, since it is to the governments benefit to keep inflation at a minimum since social security and other benefits are tied to the inflation rate. I wonder why they even bother to go through the trouble of the complex computations of hedonics calculations, like substituting ground beef for steak in the cpi measure to keep things in check and inflation low by insisting they are both beef so it matters not. I think you are the first person I have encountered to ever claim the government has been artificially inflating the inflation index. lol.

You also are acting as if different income brackets represent literal different classes of people, as if people in the bottom earning 20% remain that way their entire lives and people in the highest-earning 5% were born there and remain there. Neither is true.

Most people who start out in the bottom-earning 20% when young, move up in terms of income through their careers, so that by the time they are in their 40s and 50s, they are in their peak-earning years, and now in a higher income bracket.

I am not the one who set the definition for economic classes, but you are being disingenuous by redefining it for some unknown reason that only makes you look more like a troll. Look at the study on economic mobility I posted above to learn the truth. and the previous two links as well. You continually making up numbers and repeating them makes them no more true than the first time you said it.

When trying to determine whether income inequality is increasing or decreasing, you cannot just compare the incomes of say the "bottom 20%" with the "top 20%." We're talking flesh-and-blood human beings here, so you cannot just consider those in given income brackets in a given year; you must consider the vast majority of people constantly moving into and out of those income brackets over the years.

Ummm dude, what do you think income inequality metrics do??!! They are for the express purpose of measuring the distribution of income and what percent of a population holds what percent of the income and wealth. I do not make these measures up, they have been used by economists forever, there are several measures used, but their sole purpose is for measuring the statistical distribution, which is what you are saying I shouldn't do. All measures of income inequality by definition do not care of assigning labels or the identification of who holds the wealth but how it is distributed at any instant in time.

"For example, in an economy composed of two people, Mr. Smith and Mrs. Jones, where one of them has 60% of the income and the other 40%, the inequality metric should be the same whether it is Mr. Smith or Mrs. Jones who has the 40% share. This property distinguishes the concept of inequality from that of fairness where who owns a particular level of income and how it has been acquired is of central importance. An inequality metric is a statement simply about how income is distributed, not about who the particular people in the economy are or what kind of income they "deserve"."

You have to look at real per capita incomes, which consistently have been increasing.

No they haven't all the facts refute this blatant lie you keep regurgitating.

Also, most rich people in America are self-made, not born into it. Inherited wealth is a small portion of the wealth in this country.

See study posted above, not true.

Yes, we are all rich, in fact. Compared to most people on this planet, even poorer Americans are rich. The average American today enjoys a standard of living so incredibly high by global, and historical, standards that it is almost crazy to think about.

Wow, you completely contradict yourself over and over again. You say we are all rich if we all had exactly $20 million in wealth, are you sure we aren't all equally poor? So you claim rich and poor are not relative terms so we can all be rich, yet even your unconscious mind knows better, even if you are not fully aware, as is apparent by your use of the words "compared to most" show. A measure of rich and poor is relative and meaningful only to how it is distributed.

How do wealthy people create a housing bubble? The housing bubble was created by excessive demand amongst the middle-class for housing, not the rich.

By creating financial weapons of mass destruction such as cdo's and credit default swaps to run up asset prices and then cash in on them when they imploded through credit default swaps, among other ways. Because they had a boatload of money to lend and were looking to profit off of it regardless who they lent it too.

Look at all the mergers and acquisitions that took place over the last decade, no real wealth was created in the majority of these acquisitions the companies were mostly loaded up with debt, gutted and then sold to the next sucker for more money, creating no wealth in the process merely shifting it around until it could no longer be sustained. Made possible by cheap and available credit, which was also sold to the next sucker in line.

Regarding wealth, it is not "hoarded" in the hands of a few. Only a few people in society take the risks and work hard enough to generate massive amounts of wealth in the first place. Most that do generate a lot to charity and invest it in the economy.

It is being hoarded into fewer and fewer hands, that is exactly what the indexes that measure the inequality in income and wealth have consistently shown to be happening. And it is bs to claim that only those that take risks and work hard are rewarded. Wealth and power beget wealth and power, there are a few examples of hard work being rewarded, but it is far and few between in this era. What risk did the wallstreet and financial elite take as they are being bailed out to the tune of some 23 trillion in tax payer handouts and government backed subsidies as their schemes all began to implode on them??

In a free, market economy, you will always have a high degree of wealth concentrated at the top because of this. If you try to create an equality of outcome, where everyone has an equal amount of wealth, that is statism, as the government is going to by force go and take away people's hard-earned money.

This thus disincentivizes any and all wealth creation (why work hard when the government will take it all away?).

Where did I say I want all incomes to be equal?? I want exactly what you say you believe is to be happening but isn't. I wish for hard work and risk taking to be fairly rewarded, but this will not occur in a corrupt government as we have tended towards where lobbyists can buy any measure they deem necessary to protect their own interests. This has only been worsened by outsourcing and the pitting of labor against slave wages in other countries where workers are given the choice of starving or slaving away for their corporate masters with no labor protections what so ever, this on top of currency manipulation put the power and control squarely into the hands of those with the wealth and power and has left labor and thus wage financed demand in poor health.

And of course, remember that income brackets do not equal different classes of people.

Says you and nobody else.

Anyone with a pension or mutual fund, is invested in the stock market.

This means nothing, it is like saying anyone who invests in the stock market invests in the stock market. You clearly did not read the link I posted earlier which shows about 82% of stocks and mutual funds are owned by the top 10% of households. And very few people have pensions anymore as they are being eroded by the minute. And for the majority of workers pensions are largely terminated in corporate bankruptcies even as the top executives lavish pensions remain in place through what is known as supplemental executive retirement plans.

Will check the book, however see above on real wages.

Please do!

O

f course the physical process of trade itself doesn't create wealth, but it is trade that leads to wealth creation.

What more back pedaling??

No one creates anything if there is no trade.

Wrong, human nature is to create what is necessary for ones survival. Some form of wealth will be created for this purpose alone, even if done by and for oneself just for survival purposes. In fact, I feel we are on a course that would make people better off surviving on their own taking their chances in the jungle or tribes, than living in squalor and the impoverished inhumane conditions of workers (slaves) like those in the North Korean industrial park for example.

If a small country like South Korea cannot trade, it cannot create wealth because it will have no one to trade the goods and services it creates with. And without access to global trade, it will be limited to creating only a very limited amount of goods and services because there will be only a small amount of people to trade. When a country like SK can trade with the globe, it can produce massive amounts of goods and services to trade, and hence can buy massive amounts of things; it has created massive wealth and can create a very high standard of living for everyone.



In addition to the above, services also create wealth. People trade services too. BTW, what do you think happens to manufacturing and farming and mining without free trade? The United States then has to produce far less of everything because it cannot trade it with anyone else. What do you think that leads to? Job destruction. Far less wealth creation (the economy is not going to create massive amounts of goods and services with no one to trade with).

This just doesn't make any sense at all. Trade creates no wealth, you admitted so yourself, and a country can always trade within it's own boundaries if there is no economic advantage to trade with other countries, the US would be much better off economically making things for ourselves and putting tariffs on imports right now, as we are going deeper and deeper into the red trading our debt for cheaply made foreign goods.

And trade does not create efficiencies either. The efficient utilization of resources such as material, labor and capital and eliminating waste is what creates efficiencies. Paying slaves to do the work once done by higher paid Americans does not make the utilization of said resources needed to do so more efficient.

I have told you before, and I have witnessed first hand, the exact same equipment and processes once in use in this country are being dismantled and moved to other countries, exact same methods employed (actually taking more workers in most cases) and equipment to do the exact same thing moved to another country does not constitute an improvement in efficiency or productivity. In fact the lower wages leads to a disincentive for corporations to employ productivity or efficiency improvement techniques. And in every case I have been involved with American engineers are retained for a time and forced to continually train and fix the problems of the new "cheaper" foreign labor their jobs are being outsourced to, hows that for efficiency?

[judes]

Jul 13, 2010 15:03:38 GMT -6 huck said:

Jul 13, 2010 12:18:29 GMT -6 judes said:

The other thing you keep saying that makes no logical sense what so ever is that trade creates wealth. ... Wealth is essentially created through three means, manufacturing, mining and farming all of which require labor and other resources to turn it into something of higher value than it's original form. ... Now if we keep trading the same piece of gold back and forth no new net wealth will have been created.

Ok, ive questioned to myself how he could think trade creates wealth. And i can understand how someone washing my dishes for pay does not create wealth, only moves it.

But i am confused some about an area between manufacturing and service, such as certain forms of engineering and design, like computer programming (which happens to pay my bills).

I take "nothing" and turn it into something valuable, that is often sold to or rented by others, a working program. This is not machining a bolt, nor is it cleaning a house. and i cant put my finger on if it is wealth producing or just trade.

In your case, does the person that designed the board produce any wealth? or is it only the act of etching them and inserting the parts?

Hi Huck, I missed this earlier. Yes wealth has varying uses and meanings and can be hard to define so should be clarified in it's use. I suppose some might even consider well being as a form of wealth in spite of the fact it can not be traded. I think services such as you described contribute directly towards the creation of wealth and are an essential part of the manufacturing process which clearly by all definitions does produce wealth.

In the context Kyle keeps using it, wealth is clearly not created by trading even if it is only services that are traded, if one considers the service to create wealth, it still does not follow that the act of trade is responsible for said creation of wealth. It defies the meaning of trade on it's very definition.

Here is one description I found for what determines what is wealth, but I am sure you can find other varying degrees of this. But services that contribute to manufacturing do contribute to the wealth created just as the labor to transform the actual material in my opinion any way. Hope this helps.

Requisites of Wealth:
For anything to be considered wealth it must possess the following requisites:
1. Material - it must be made out of matter. It must have material existence. Immaterial things such as intelligence, skill, knowledge, understanding, wisdom, health, beauty, strength, personality, character, etc. have no material existence and therefore cannot be considered wealth. Rather,, these things are human qualities to be desired of anyone and therefore, must properly be considered as attributes of labor.
2. Produced by human labor - the material thing must have been change in size or form or chemical composition and/or a combination thereof, through the agency of human labor, or transportation thereof from its original site and condition when originally supplied by nature. Anything which exists in its original form as originally supplied by nature, un-worked and untouched by human hands is not wealth in the political economic sense of the term. The trees and the game in the forest, the wild fowls of the air, the wild beast and the wild cattle of the land, the schools of fish swimming in the waters, the un-mined minerals and precious metals in the ground, not the result of human labor and freely supplied by nature, properly belong to the economic term land.
3. Satisfies human desires - These material things produced by human labor, must have the capacity to gratify human wants and desires. Waste products resulting from productive processes, unwanted by anyone cannot be considered wealth, being unwanted, it does not satisfy human desires. Anything unfit for human use or consumption is not wealth.
4. Value-in-exchange - It must possess the quality or power to bring something equally of esteem or worth through exchange, transfer or trade. Anything which cannot be exchange or traded for something of value cannot be considered as wealth in political economy.

Services Defined:
Services are human exertion directly applied to the satisfaction of human desires without the intermediary of wealth. Although wealth and services are both products of human labor, both have exchange values and both satisfy human desires, services have no material existence and therefore cannot be considered wealth and must be treated as a separate term to avoid confusion.

So even if one does hold the opinion that services are a form of wealth, just the act of trading those services, is not what creates them, it is labor and materials that went into them that created them not the act of trade in itself.

[unlawflcombatnt]

Jul 13, 2010 20:13:18 GMT -6 judes said:

Jul 13, 2010 15:03:38 GMT -6 huck said:

Ok, ive questioned to myself how he could think trade creates wealth. And i can understand how someone washing my dishes for pay does not create wealth, only moves it.

But i am confused some about an area between manufacturing and service, such as certain forms of engineering and design, like computer programming (which happens to pay my bills).

I take "nothing" and turn it into something valuable, that is often sold to or rented by others, a working program. This is not machining a bolt, nor is it cleaning a house. and i cant put my finger on if it is wealth producing or just trade.

In your case, does the person that designed the board produce any wealth? or is it only the act of etching them and inserting the parts?

I'd say that the engineering "service" definitely does create wealth, because it is a prerequisite to producing a product that has more value. A computer with well-engineered parts has more value than one with poorly engineered parts. The improvement in value of the computer results in an increase in the wealth of the owner of the computer. Here the engineers themselves are creating the additional value and wealth, even if not directly manufacturing the good.

But in contrast, a dishwasher (or a doctor, for that matter), is not creating any wealth. The buyer of their service is exchanging some of their wealth for the provided service. Though the service may have significant value to the purchaser, it is not creating wealth.

Services are not without value, nor without necessity. But unless they somehow enhance the production of wealth (like engineering), they don't actually create wealth.

[fredorbob]

Jul 13, 2010 15:33:15 GMT -6 @Kyle said:

Jul 13, 2010 15:03:38 GMT -6 huck said:

Ok, ive questioned to myself how he could think trade creates wealth. And i can understand how someone washing my dishes for pay does not create wealth, only moves it.

Actually, someone washing your dishes does create wealth, because they are providing you a service, and that service is a form of wealth. They are trading you their service of washing dishes for money.

Yes one person offering a measly dishwashing service is a tiny speck in the overall production of goods and services in the economy, but it is still a service. They have generated something to trade with you for money.



Yes, it is producing wealth. You create a program and you have created a product. This product is something you, or your company, can then trade.

In your case, does the person that designed the board produce any wealth? or is it only the act of etching them and inserting the parts?

The person that designs the board is providing a valuable service, one that takes great skill. Their service is something they can trade. So yes, it is wealth.

Nope nope nope nope aaaaand nope.

Everyone in the world cannot be in service. We all cannot be lawyers and sue each other, or doctors and over-charge each other. Dishwashing is a service job and leeches off of manufacturing.

No manufacturing jobs=no service jobs.

[fredorbob]

Jul 13, 2010 15:07:55 GMT -6 @Kyle said:

Industries do not get "sent" to Asia, certain industries that countries in Asia can do better in, can cause lost jobs in America if it cannot do as good in them, BUT, this allows the U.S. to focus on the areas it is much better in and create more jobs by producing more and better things.

"Besides, if we would employ our slaves in the coarser processes of the mechanic arts and manufactures, such as brick making, getting and hewing timber for ships and houses, iron mining and smelting, coal mining, grading railroads and plank roads, in the manufacture of cotton, tobacco, &c., we would find a vent in new employments for their increase, more humane and more profitable than the vent afforded by new states and territories. The nice and finishing processes of manufactures and mechanics should be reserved for the whites..."

Negro Slavery, Sociology for the South, or the Failure of Free Society

www.yale.edu/glc/archive/1057.htm

Which do you want, America half-assing (for lack of a better term) two industries, or let Asians handle one industry that they are very good at, and we do another industry that we are very good at (and then trade, so Asians get a very good product and Americans get a very good product)? No country can do ALL industries very good, due to scarce resources, population, geography, etc...

"The products of the industry of those States are in general similar to those of the civilized world, and are little demanded in their markets. By exchanging them for ours, which are everywhere sought for, the people of these States are enabled to acquire all the products of art and industry, all that contributes to convenience or luxury, or gratifies the taste of the intellect, which the rest of the world can supply."

An Excerpt from "Slavery in the Light of Social Ethics," by Chancelor Harper, printed in Cotton is King, and Pro-Slavry Arguments: Comprising the Writings of Hammond, Harper, Christy, Stringfellow, Hodge, Bledsoe, and Cartwright, on This Important Subject, E.N. Elliott, ed. (Augusta, GA: Pritchard, Abbott & Loomis, 1860):

www1.assumption.edu/users/lknoles/douglassproslaveryargs.html

I support Americans being able to earn more and I support the development of industries and the creation of jobs in our economy.

Again, trade is a form of efficiency and increasing efficiency almost always creates economic gains that surpass any lost jobs. I could easily take your quote and modify it:

“If the Confederacy fails, there should be written on its tombstone: Died of a Theory.” Jefferson Davis.
.
.
.
.
.
..
.
.
.

Ecclesiastes 1

The words of the Teacher, son of David, king in Jerusalem:

2 "Meaningless! Meaningless!"
says the Teacher.
"Utterly meaningless!
Everything is meaningless."

3 What does man gain from all his labor
at which he toils under the sun?

4 Generations come and generations go,
but the earth remains forever.

5 The sun rises and the sun sets,
and hurries back to where it rises.

6 The wind blows to the south
and turns to the north;
round and round it goes,
ever returning on its course.

7 All streams flow into the sea,
yet the sea is never full.
To the place the streams come from,
there they return again.

8 All things are wearisome,
more than one can say.
The eye never has enough of seeing,
nor the ear its fill of hearing.

9 What has been will be again,
what has been done will be done again;
there is nothing new under the sun.

10 Is there anything of which one can say,
"Look! This is something new"?
It was here already, long ago;
it was here before our time.

11 There is no remembrance of men of old,
and even those who are yet to come
will not be remembered
by those who follow.

[Kyle]

Jul 13, 2010 19:05:51 GMT -6 judes said:

I love how you just make up definitions to suit your agenda, lol, considering most economists can not even agree on a definitive description of what defines a depression, I am glad someone knows for sure.

I am well aware of that. They actually have trouble specifically defining a recession as well. Nonetheless, I would not consider this any "depression." So why do you state so matter-of-factly that it is a depression?

So let's use your definition of 15% unemployment and soup lines. Haaha. Take a gander at the BLS U6 unemployment rate for last month which is approaching 17%. Even this measure is manipulated as stated by ULC by throwing people out of the labor force and basically erasing them from the population. As for the soup lines most accounts have food banks at unsurpassed usage and the increase in safety nets since the depression has replaced the soup lines with a record high percentage of people now getting food stamps.

This is a good point, although I was not going by the U6 unemployment rate. The standard unemployment rate by the BLS is currently running at 9.3%.

Again you are just making stuff up that is simply not true. Did you read any of the information in the last two links I posted?

Yes.

Obviously you did not. But economic mobility is another well held myth in this country and the latest studies have shown a scant 6% of the children born into the bottom socioeconomic quintile have moved on to the top quintile over the last generation.

So what? A few things:

1) You're again treating income brackets as if they are fixed classes. A child can be born into a lower-quintile, by the time they enter the workforce, their parents will likely be in a higher quintile, meanwhile they themselves will likely start out in a lower quintile until they work themselves up.

2) The top quintile represents the highest-earners in society. Of course only a fraction of people from each quintile make it all the way to the top.

3) The odds or probabilities of something happening are no measure of whether or not opportunity exists. The odds that a child born into poverty will become rich are not indicative of the opportunities our society has.

The fact is several countries enjoy a much greater degree of economic mobility than the US, such as Canada, France, Germany and most Scandinavian countries. Here is an eye opening link you should review before just making things up:
www.economicmobility.org/assets/pdfs/EMP_American_Dream.pdf

The link is wrong.

You've also got it backwards. The United States has the most ability to move up (or down) income quintiles due to our lower taxes and freer economy. There is nothing in this nation to stop anyone from working hard and moving up in income. Where this tends to occur less so are in European countries.

Most Scandinavian countries and nations like France have a very large social welfare state, due to very high taxes, and much more redistribution of wealth. This disincentivizes wealth creation and also disincentivizes moving up the economic ladder (why work when you get all your money taken away). In fact, hard work in these nations is often looked down upon.

One also has to look at what is meant by economic mobility. A lot of the literature on economic mobility ignores that different individuals and groups have different skills, desires, dreams, attitudes, work ethics, luck, etc...if there is less upward movement today than in the past, that is no indication that barriers of some kind in society are responsible (and the U.S. has among the fewest barriers).

The pie is fixed in relative terms, you need to understand the difference between relative value and absolute value. (read the study I posted above for help).

I have read the link. But the pie is not fixed. There is not any fixed amount of wealth in society. Free-market capitalist economies create wealth.

History (and common sense) has shown economies flourish when the gap is not as great,

Neither history nor common sense shows this. In fact, it is the opposite that occurs. Any nation that seeks to create an equality of outcome is going to disincentivize economic growth and hence job creation.

the gap now for the first time is greater than that before the great depression, the wealth is being hoarded by a smaller share of the population, it is unsustainable and it will correct through policy or force but can not continue.

Again, the wealth is not being "hoarded" by any smaller share of the population. There is not a fixed amount of wealth that everyone must share. If the wealth was being hoarded and the pie fixed, Americans would have a lower standard of living now than in 1900.

Wealth is created, and BTW government has no right to tax people's wealth.

Now you are just being ridiculous.

You think it odd to assume a statistician will take what you are saying into account. Statistics as a profession exists for a reason.

Per capita simply means per person. Income or compensation per capita as you posted it included all brackets of income thus the very top percent who have seen compensation explode as being averaged into the data, so yes the highly uneven distribution of compensation at the top skews the average for the entire population as touted by you. Per capita means per person, it does the opposite of what I posted which is to separate the average by percentiles of population. Statistics can be used to show a whole lot of things, so it helps to understand what is actually being measured.

Yes, but statistics is not going to just average in the highest incomes into all other incomes like that. It would be too easy to skew the data.

Russia has a lot of super-rich, you don't see them having any high per capita income though. Their per capita income is about $15,000 right now.

What, are you back pedaling here now?! After your persistent claim that wages have not stagnated you now concede the point.

I said incomes have not declined. Wages are a different matter, although whether or not they've declined is questionable as well.

"Benefits" are arbitrary and meaningless when thrown into the mix, all relevant statistics show income and wages declining for the majority of the population and the number of people with these so called "benefits" has greatly declined as well.

Statistics do not show incomes per capita declining for the population. And benefits are not as arbitrary as you like to make out, if that was the case ,the public unions would not constantly lobby to rob the public treasury for higher and higher benefits.

Oh so the government has been overstating inflation. Funny most say the opposite, since it is to the governments benefit to keep inflation at a minimum since social security and other benefits are tied to the inflation rate. I wonder why they even bother to go through the trouble of the complex computations of hedonics calculations, like substituting ground beef for steak in the cpi measure to keep things in check and inflation low by insisting they are both beef so it matters not. I think you are the first person I have encountered to ever claim the government has been artificially inflating the inflation index. lol.

Nope, the CPI in fact has been updated in how it computes inflation to try and correct for this, hwoever there are people who debate whether or not it was overstating inflation. But that was a belief many held. Some make the claim as you do that it understates it.

I am not the one who set the definition for economic classes, but you are being disingenuous by redefining it for some unknown reason that only makes you look more like a troll. Look at the study on economic mobility I posted above to learn the truth. and the previous two links as well. You continually making up numbers and repeating them makes them no more true than the first time you said it.

Pointing out that statistical income brackets are not income classes is not being disingenious. Income brackets are just that, income brackets. They ignore the fact that people move into and out of income brackets constantly.

People obsessed with income classes always treat people in income brackets as if they are fixed classes permanently stuck in those brackets.

Ummm dude, what do you think income inequality metrics do??!! They are for the express purpose of measuring the distribution of income and what percent of a population holds what percent of the income and wealth. I do not make these measures up, they have been used by economists forever, there are several measures used, but their sole purpose is for measuring the statistical distribution, which is what you are saying I shouldn't do. All measures of income inequality by definition do not care of assigning labels or the identification of who holds the wealth but how it is distributed at any instant in time.

So?? Not getting your point here. They are still just statistics measuring specific income quintiles, not different classes of people. So what if the bottom-earning 20% make a smaller share of the national income now than thirty years before? They are not a fixed class. Many people who were in the bottom-earning 20% thirty years ago are in the upper brackets now.

No they haven't all the facts refute this blatant lie you keep regurgitating.

Yes it is. Incoems per capita have consistently been increasing.

See study posted above, not true.

The study is wrong. Most wealth and fortunes in America are created, not inherited. Inherited wealth is a small share of the wealthy.

blogs.wsj.com/wealth/2008/01/14/the-decline-of-inherited-money/

Wow, you completely contradict yourself over and over again. You say we are all rich if we all had exactly $20 million in wealth, are you sure we aren't all equally poor? So you claim rich and poor are not relative terms so we can all be rich, yet even your unconscious mind knows better, even if you are not fully aware, as is apparent by your use of the words "compared to most" show. A measure of rich and poor is relative and meaningful only to how it is distributed.

Compared to most of the rest of the world, even people living below the poverty line in the United States are "rich." of course wealth can be relative. A guy with $200 million seems super-rich to most people, but compared to the guy who has $4 billion, he may feel puny.

By creating financial weapons of mass destruction such as cdo's and credit default swaps to run up asset prices and then cash in on them when they imploded through credit default swaps, among other ways.

You're falling prey to conspiracy theories here. First of all, a lot of wealthy people lost money in this crisis. So did a lot of Wall Street. The notion that they all "cashed in" is silly. They created a lot of esoteric and complex financial instruments, which they thought had reduced risk down to virtually nothing.

Ben Bernanke even gave a speech a few years back to Wall Street about how a "new era" had been reached in the capital markets, where the system could allocate risk moe efficiently than ever before.

It blew up in their faces though because of the housing bubble.

Because they had a boatload of money to lend and were looking to profit off of it regardless who they lent it too.

The banking system was perverted initially by Fannie Mae and Freddie Mac (Fannie and Freddie did not cause the crash, but they were some of the principal instigators of the things that led to it). Banks had no incentive to be careful about making loans anymore.

Look at all the mergers and acquisitions that took place over the last decade, no real wealth was created in the majority of these acquisitions the companies were mostly loaded up with debt, gutted and then sold to the next sucker for more money, creating no wealth in the process merely shifting it around until it could no longer be sustained.

Actually, a lot of wealth was created through this. Not always of course, but a more efficient and leaner company is going to generate more wealth and value. A company that is "gutted" is going to be worthless.

Made possible by cheap and available credit, which was also sold to the next sucker in line.

Cheap credit helped fuel much of the boom, yes.

It is being hoarded into fewer and fewer hands, that is exactly what the indexes that measure the inequality in income and wealth have consistently shown to be happening. And it is bs to claim that only those that take risks and work hard are rewarded. Wealth and power beget wealth and power, there are a few examples of hard work being rewarded, but it is far and few between in this era.

Again, the pie is not fixed and income brackets are not classes. The fifty year-old guy earning $200K a year is the same college kid who started off in the bottom quintile back in the 1970s.

The standard of living for the entire population has been consistently increasing for decades, made possible by people who became very wealthy providing products and services to the population. There are more wealthy today than ever before, not fewer, and they only got that way by providing for society.

What risk did the wallstreet and financial elite take as they are being bailed out to the tune of some 23 trillion in tax payer handouts and government backed subsidies as their schemes all began to implode on them??

They were not bailed out for $23 trillion. That's larger than the American economy. And they took an enormous risk initially without realizing it, and it blew up on them, thus leading to the bailouts because the institutions are too large. They need to be broken up so that they cannot get that large again I think.

Where did I say I want all incomes to be equal?? I want exactly what you say you believe is to be happening but isn't. I wish for hard work and risk taking to be fairly rewarded, but this will not occur in a corrupt government as we have tended towards where lobbyists can buy any measure they deem necessary to protect their own interests.

Lobbying is mostly due to too much government intervention into the economy. Washington used to be just a sleepy backwater, and lobbying made little sense, because you spend too much money for no real return. Since government has spread its tentacles so extensively into so many areas of the economy, lobbying has skyrocketed because now it gets results.

The more government seeks to regulate the private sector, the more the private sector will seek to regulate government. That is why you want to strive for light and efficient regulation as much as possible.

This has only been worsened by outsourcing

No it hasn't, no moreso than with machines and technology.

and the pitting of labor against slave wages in other countries where workers are given the choice of starving or slaving away for their corporate masters with no labor protections what so ever, this on top of currency manipulation put the power and control squarely into the hands of those with the wealth and power and has left labor and thus wage financed demand in poor health.

Again, free trade does not equal slave labor. Yes, there are some examples of that, but even then, you have to be careful how you define slave labor. A guy used to getting by on 50 cents a day considers being paid $4 day a BIG improvement, even though that may seem like a 'slave wage" to workers used to $50 an hour.

You also are ignoring all the countries that are able to create massive wealth and a high standard of living for their citizens due to free trade (most of these started off in the beginning with "slave wages" as well).

Says you and nobody else.

You need to check more economists and scholars on this issue. Income brackets are not classes. We do not live in the old socialist British class system.

This means nothing, it is like saying anyone who invests in the stock market invests in the stock market. You clearly did not read the link I posted earlier which shows about 82% of stocks and mutual funds are owned by the top 10% of households. And very few people have pensions anymore as they are being eroded by the minute. And for the majority of workers pensions are largely terminated in corporate bankruptcies even as the top executives lavish pensions remain in place through what is known as supplemental executive retirement plans.

I agree on the pensions and executives pay, they have the system rigged in their favor unfortunately. The system has gotten better than it used to be due to increases in corporate shareholder accountability, but corporate governance remains an issue that needs improvements.

What more back pedaling??

I would have thought you understood what I meant when saying trade creates wealth. You only create wealth to trade, so if you cannot trade, no wealth is created (or a lot less so). Free trade allows for far more wealth creation.

Wrong, human nature is to create what is necessary for ones survival. Some form of wealth will be created for this purpose alone, even if done by and for oneself just for survival purposes. In fact, I feel we are on a course that would make people better off surviving on their own taking their chances in the jungle or tribes, than living in squalor and the impoverished inhumane conditions of workers (slaves) like those in the North Korean industrial park for example.

We are on no such course. We have seen a continued rising increase in the standard of living due to free trade because it allows for far more goods and services to be produced.

If a small country like South Korea cannot trade, it cannot create wealth because it will have no one to trade the goods and services it creates with. And without access to global trade, it will be limited to creating only a very limited amount of goods and services because there will be only a small amount of people to trade. When a country like SK can trade with the globe, it can produce massive amounts of goods and services to trade, and hence can buy massive amounts of things; it has created massive wealth and can create a very high standard of living for everyone.

In addition to the above, services also create wealth. People trade services too. BTW, what do you think happens to manufacturing and farming and mining without free trade? The United States then has to produce far less of everything because it cannot trade it with anyone else. What do you think that leads to? Job destruction. Far less wealth creation (the economy is not going to create massive amounts of goods and services with no one to trade with).

This just doesn't make any sense at all. Trade creates no wealth, you admitted so yourself, and a country can always trade within it's own boundaries if there is no economic advantage to trade with other countries, the US would be much better off economically making things for ourselves and putting tariffs on imports right now, as we are going deeper and deeper into the red trading our debt for cheaply made foreign goods.[/quote]

Did you even read what I wrote? Trade only occurs if one can trade the goods and services they have produced for other goods and services, because no one can produce everything.

And no, a country cannot always trade within its own boundaries. Most countries are too small for this. things like heavy machinery, automobiles, etc...have to be produced in MASSIVE numbers in order to get the economies of scale required in order to be able to sell them at an affordable price.

Most countries have populations too small to allow for any such production. They have to be able to sell the stuff to other countries as well. If they cannot sell it (trade), then they will not produce it. And because they cannot trade, they have no way to produce anything to buy such things from other countries either, so their economy never develops and they remain a third world nation.

So yes, there is HUGE economic advantage to trading with other countries, and for most countries it's vital. Force the British to grow all their own food and watch what happens.

You also ignore that no country cannot produce everything. You and I could both produce chairs and televisions. You might be able to produce either better than me. But you cannot produce both better than me and it makes no sense for us to try this, because then we end up with fewer televisions and chairs and they are of lower quality.

It makes much more sense for you to say focus on televisions and me to focus on chairs and then we trade so that we both end up with quality chairs and televisions and lots of them.

If we were to close off free trade, we would convert back to slave wages all those other first-world countries that trade with us, and we would destroy our own economy in the process.

And trade does not create efficiencies either. The efficient utilization of resources such as material, labor and capital and eliminating waste is what creates efficiencies.

It doesn't occur to you that part of the efficient utilization of resources such as material, labor, and capital and eliminating waste involves allowing countries/people that can do these things better? Again, no country can do everything, even if it can do anything better.

For example, where does it make more sense to grow bananas? Alaska or the tropics? The tropics of course. Could bananas be grown in Alaska? Sure. But would it be an efficient use of capital? No, because you'd need special greenhouses built. In the tropics, nature provides the warmth and sunlight needed, so it's cheaper.

Paying slaves to do the work once done by higher paid Americans does not make the utilization of said resources needed to do so more efficient.

Where lower wages can be paid, it helps with efficiency, just as machiens that allow no wages to be paid on a job that previously required workers increases efficiency.

I have told you before, and I have witnessed first hand, the exact same equipment and processes once in use in this country are being dismantled and moved to other countries, exact same methods employed (actually taking more workers in most cases) and equipment to do the exact same thing moved to another country does not constitute an improvement in efficiency or productivity.

Yes it does, or else it would not be done. Companies are not going to do things more inefficiently.

In fact the lower wages leads to a disincentive for corporations to employ productivity or efficiency improvement techniques. And in every case I have been involved with American engineers are retained for a time and forced to continually train and fix the problems of the new "cheaper" foreign labor their jobs are being outsourced to, hows that for efficiency?

Lower wages are a form of efficiency. Remember though that cost of labor and wages are different.

[Kyle]

Jul 14, 2010 1:09:56 GMT -6 unlawflcombatnt said:

Jul 13, 2010 20:13:18 GMT -6 judes said:

Jul 13, 2010 15:03:38 GMT -6 huck said:

Ok, ive questioned to myself how he could think trade creates wealth.

Without trade, there is no reason to create wealth. Because you cannot trade anyone for anything.

And i can understand how someone washing my dishes for pay does not create wealth, only moves it.

No it does not. The dishwashing service provided by the person is a thing that the person is trading. Seriously, how hard is this to understand? In order to make money, you must have something to trade, whether a good or a service.

Washing dishes is a service. It is something to trade.

I'd say that the engineering "service" definitely does create wealth, because it is a prerequisite to producing a product that has more value. A computer with well-engineered parts has more value than one with poorly engineered parts. The improvement in value of the computer results in an increase in the wealth of the owner of the computer. Here the engineers themselves are creating the additional value and wealth, even if not directly manufacturing the good.

The engineer service itself is a form of wealth. It's a service that the engineers trade for money. Again, without something to trade, the company isn't going to trade away money for free.

But in contrast, a dishwasher (or a doctor, for that matter), is not creating any wealth. The buyer of their service is exchanging some of their wealth for the provided service.

The service is a form of wealth. That is WHY the buyer exchanges anything in the first place. Because the doctor or dishwasher has something to trade that the buyer wants.

Though the service may have significant value to the purchaser, it is not creating wealth.

The service is wealth.

Services are not without value, nor without necessity. But unless they somehow enhance the production of wealth (like engineering), they don't actually create wealth.

Again, services themselves are wealth. Manufacturing itself is no more a form of wealth creation than services. I do not understand this cult-like belief the protectionists seem to have that manufacturing is the only form of wealth. Just because it is a physical object doesn't give it value.

It also makes no sense to consider manufacturing wealth and then to be against free trade, because without free trade, you cannot manufacture much. You won't have very many people to trade with, and you will not be able to get the economies of scale necessary with most domestic populations to produce expensive things.

You also will have little access to the raw materials you need to do the manufacturing. A great deal of the materials we need for manufacturing things are imported (OIL is a big one).

You manufacture a lot when you have access to a lot of people to trade all the stuff you manufacture with, which you then use to buy all sorts of other stuff to manufacture more and better and produce other things and increase your country's standard of living.

[whoswho]

Yes, but most services are something you can do without, if push comes to shove. If I don't have much income, I'm not going to be paying money to a dog groomer, I'm going to wash Fido myself. The only services I'm going to pay for would be something like automotive repair.

When I lost my job and had minimal income, I did not avail myself of a hairdresser, a laundry, a pet groomer, or even a doctor.

[Kyle]

Jul 13, 2010 17:22:53 GMT -6 unlawflcombatnt said:

This one short statement exemplifies the illogical arguments made by free traders.

They aren't illogical, as I have shown.

The circuit board manufacturing is NOT being moved to another country becuase it's more "efficient." It's being moved there because it is cheaper.

In fact, it's usually far less "efficient" to manufacture it elsewhere. But the lower wages by the less-efficient workers offset the production costs that would have otherwise been increased by the inefficiency.

On this you have a point to a degree, and my initial post was wrongly stated.

But what you're saying seriously depends. Remember, do not confuse wages with labor costs. Foreign workers having lower wages does not mean they have lower labor costs than American workers (precisely because they are not as efficient oftentimes). Oftentimes higher-paid American workers have lower labor costs.

Cost of production is a major factor in producing things and different things influence it. For example, you can produce things with higher-paid labor, but they may be more efficient to the point that they have a lower cost of labor, and if this lowers production costs enough, production will remain in the U.S.

If you can produce things using lower-paid labor, that are less-efficient, but their cost-of-labor is higher, but production costs overall are still lower there, production will move there.

In general however, free trade allows countries to focus on doing the things they are most efficient and best at. Again, remember that even if one country can do anything better doesn't mean it can do everything better.

America could probably produce better everything that China makes, but doing so would mean producing more half-heartedly all the things we currently make. We can do almost anything better perhaps, but not everything.

This is essentially de-evolution. Instead of having more productive but higher paid workers produce it, the jobs are given to less productive & lower paid workers. The production time of the product is actually increased, but the cost goes down due to the lower hourly wages.

This is not "progress." This is going backward.

More productive workers may be higher-paid, but there's also fewer of them. And there will be fewer still with more advanced machinery and technology for those industries. But the jbs are not lost permantently, as new jobs are created constantly by these productivity and efficiency gains. Worker productivity across the country goes up constantly and hence this icnreases wages and creates new jobs.

[Kyle]

Jul 14, 2010 2:15:33 GMT -6 fredorbob said:

Nope nope nope nope aaaaand nope.

Everyone in the world cannot be in service. We all cannot be lawyers and sue each other, or doctors and over-charge each other. Dishwashing is a service job and leeches off of manufacturing.

No it doesn't. Services are one form of wealth, there is goods as well (manufacturing). In fact, much manufacturing couldn't exist without services. Who would maintain the industrial equipment and machines and so forth.

Goods and services tie together nicely. Of course not everyone in the world can be in service. Everyone in the world cannot be in manufacturing either because then there'd be no one to maintain anything or clean anything.

No manufacturing jobs=no service jobs.

No free trade = no manufacturing or services produced.

[Kyle]

Jul 14, 2010 6:52:53 GMT -6 whoswho said:

Yes, but most services are something you can do without, if push comes to shove.

So is most manufacturing.

If I don't have much income, I'm not going to be paying money to a dog groomer, I'm going to wash Fido myself.

It depends. Which costs you more? Washing Fido yourself, which costs you time, or trading some money you have to a dog groomer so that you have additional time to yourself?

The only services I'm going to pay for would be something like automotive repair.

When I lost my job and had minimal income, I did not avail myself of a hairdresser, a laundry, a pet groomer, or even a doctor.

Nor did you consumer electronics, a new car, new clothing, new home, new tools, etc...

[whoswho]

"It depends. Which costs you more? Washing Fido yourself, which costs you time, or trading some money you have to a dog groomer so that you have additional time to yourself?"

Wow.

You haven't spent one single poor day in your life, have you? You really and truly don't understand what poverty really is, do you?

[huck]

Jul 14, 2010 6:44:58 GMT -6 @Kyle said:

The dishwashing service provided by the person is a thing that the person is trading. Seriously, how hard is this to understand? In order to make money, you must have something to trade, whether a good or a service.

Washing dishes is a service. It is something to trade.

Hehe, and now the basic fallacy of his argument is clearly exposed. To him wealth is personal wealth. Yes Services provide wages for the person performing the service, but it has not added at all to the total wealth pool available. All it has done is move said wealth from the creator of the wealth to the pockets of another. Making money, ie accepting a wage, is not wealth creation, I cannot hoard(bank) a service, nor can i trade it to someone else, once performed it is gone.

This is not the first time i have had this argument, mostly with MBA's. They cannot understand anything outside their own circle of self interest and self-desires. So anything that puts money in their pocket creates wealth FOR THEM, but they could care less about other people, so they dont matter. His self-centric bias has been evident from the start, anything that can put money in his pocket creates wealth to him. He cannot see the difference between creating new wealth and and moving it. This is the basis for his "trade creates wealth" statements.

"where did we go wrong"
ars.userfriendly.org/cartoons/?id=20100713

[unlawflcombatnt]

Jul 14, 2010 6:58:43 GMT -6 @Kyle said:

Jul 13, 2010 17:22:53 GMT -6 unlawflcombatnt said:

The circuit board manufacturing is NOT being moved to another country becuase it's more "efficient." It's being moved there because it is cheaper.

In fact, it's usually far less "efficient" to manufacture it elsewhere. But the lower wages by the less-efficient workers offset the production costs that would have otherwise been increased by the inefficiency.

On this you have a point to a degree, and my initial post was wrongly stated.

Thank you.

Jul 14, 2010 6:58:43 GMT -6 @Kyle said:

But what you're saying seriously depends. Remember, do not confuse wages with labor costs. Foreign workers having lower wages does not mean they have lower labor costs than American workers (precisely because they are not as efficient oftentimes). Oftentimes higher-paid American workers have lower labor costs.

Cost of production is a major factor in producing things and different things influence it. For example, you can produce things with higher-paid labor, but they may be more efficient to the point that they have a lower cost of labor, and if this lowers production costs enough, production will remain in the U.S.

Yes, that's what happened until it became easy for productivity-increasing American capital to flow into cheap foreign labor markets. Thanks to American overseas investment, many foreign workers have been made nearly equally productive as American workers, but still produce at a fraction of the cost. It's impossible for American workers to compete with such low-wage workers on the basis of production costs, when American capital equipment investment has made them equally productive.

{It's worth mentioning here that this scenario violates Ricardo's doctrine of Comparative Advantage. His doctrine states that the movement of "production factors" across national borders invalidates the doctrine. Capital is the main "production factor" today, and it's movement to cheap labor markets is the invalidator of Comparative Advantage today. (See the post titled "The Free Traders' Blindspot" )

Ricardo's doctrine hinged upon using only a country's native production factors--those already present in that country--to provide production. In this case, Chinese production could only supplant American production if Chinese workers--using only native Chinese capital--could still produce equivalent goods more cheaply than Americans.}

Jul 14, 2010 6:58:43 GMT -6 @Kyle said:

In general however, free trade allows countries to focus on doing the things they are most efficient and best at.

Again, the problem is that once capital can flow across international borders to make cheaper labor equally productive, then most production jobs will flow out of higher-waged countries and into lower-waged countries due to reduced labor costs. And the primary macroeconomic problem with this is that the higher-waged workers were the 1° consumers of the production, and their loss of employment & income reduces their ability to consume that production, thus reducing worldwide demand for that production--resulting in less total production--and less wealth produced worldwide.

Replacing millions of high-wage workers with low-wage workers reduces aggregate consumer income, aggregate consumer production demand, and---ultimately---aggregate production. 20 million 50¢/hour Chinese workers create far less production demand than 20 million $18/hour American workers.

If production demand collapses, so too will production. And that means the production of wealth. In the long run, replacing higher paid American workers with cheaper foreign workers reduces wealth--both in the US and the world.

Jul 14, 2010 6:58:43 GMT -6 @Kyle said:

Jul 13, 2010 17:22:53 GMT -6 unlawflcombatnt said:

This is essentially de-evolution. Instead of having more productive but higher paid workers produce it, the jobs are given to less productive & lower paid workers. The production time of the product is actually increased, but the cost goes down due to the lower hourly wages.

This is not "progress." This is going backward.

More productive workers may be higher-paid, but there's also fewer of them. And there will be fewer still with more advanced machinery and technology for those industries.

I see your point on this, and many would accept this statement as-is.
However, I'm not one of them.

If those workers truly are higher paid, they'll increase demand for goods via their increased wages & buying power, thus creating additional demand for labor to produce those goods.

As per economic theory, "wants" are unlimited. But those wants only become "demand" when persons have the means to fulfill those wants (i.e., the buying power to convert those wants into demand.) Increasing aggregate income through higher wages increase production demand and results in more employment and goods production.

In this manner, increased productivity could increase wages, by increasing the demand for labor. But if wages are held constant--or at least do not rise commensurate with increased productivity, then a wage-productivity gap emerges. And the result is that production demand does not keep up with the ability to increase production, resulting in less production than would have otherwise occurred.

Jul 14, 2010 6:58:43 GMT -6 @Kyle said:

But the jobs are not lost permanently, as new jobs are created constantly by these productivity and efficiency gains. Worker productivity across the country goes up constantly and hence this increases wages and creates new jobs.

No. Productivity, in and of itself, does not increase wages. This is a myth that's been bandied about by economists forever. Only increased demand for labor increases wages. Only increased demand for production increases demand for labor. And only increased spending power increases demand for production. And increased aggregate wages are required to increase spending power, and the resultant increase in spending.

If productivity increases, but the wages of those more productivity workers remains constant, then there is NO increase in jobs since there is no increase in spending, production demand, or labor demand.

[Kyle]

Jul 14, 2010 10:49:04 GMT -6 whoswho said:

Wow.

You haven't spent one single poor day in your life, have you? You really and truly don't understand what poverty really is, do you?

On the contrary, I have been very poor for a good portion of my life (as in you have no heat in the winter time and have to dress up in coat inside, and lack of running water at the kitchen sink because of pipe problems inside---type poor).

[Kyle]

Jul 14, 2010 10:55:07 GMT -6 huck said:

Hehe, and now the basic fallacy of his argument is clearly exposed. To him wealth is personal wealth. Yes Services provide wages for the person performing the service, but it has not added at all to the total wealth pool available.

Yes it has. The total wealth of the economy is in how many goods and services it produces. Dishwashing is a service.

All it has done is move said wealth from the creator of the wealth to the pockets of another. Making money, ie accepting a wage, is not wealth creation, I cannot hoard(bank) a service, nor can i trade it to someone else, once performed it is gone.

No it does not move wealth. It is something you can trade. Just because it isn't a physical item does not mean it isn't wealth.

The owner trades money for the service, which is that their dishes get washed. It doesn't matter if you can hoard it or not. It is something that you want that the person can trade you for your own goods or services (which are traded via money).

This is not the first time i have had this argument, mostly with MBA's. They cannot understand anything outside their own circle of self interest and self-desires. So anything that puts money in their pocket creates wealth FOR THEM, but they could care less about other people, so they dont matter. His self-centric bias has been evident from the start, anything that can put money in his pocket creates wealth to him. He cannot see the difference between creating new wealth and and moving it. This is the basis for his "trade creates wealth" statements.

I can see the difference clearly. Manufacturing is not the sole source for creating wealth. Wealth is in goods and services. Either/or.

[Kyle]

Jul 14, 2010 11:37:35 GMT -6 unlawflcombatnt said:

Yes, that's what happened until it became easy for productivity-increasing American capital to flow into cheap foreign labor markets. Thanks to American overseas investment, many foreign workers have been made nearly equally productive as American workers, but still produce at a fraction of the cost. It's impossible for American workers to compete with such low-wage workers on the basis of production costs, when American capital equipment investment has made them equally productive.

For a lot of industries, this may be the case, but you are forgetting that there are a great many industries where this is not the case.

Also remember the following that goes back to a central point of mine: even if somehow China was capable of producing anything with lower costs than America or better quality or whatever (on quality they are very questionable), there is no way they could produce everything cheaper.

Fnally, remember that if Chinese workers get to be equal in producivity with American workers, their wages will not remain lower, they will become equal with Americans (and I know you have a post at the bottom challenging the notion that increased productivity increases wages, I answered it at the bottom).

{It's worth mentioning here that this scenario violates Ricardo's doctrine of Comparative Advantage. His doctrine states that the movement of "production factors" across national borders invalidates the doctrine. Capital is the main "production factor" today, and it's movement to cheap labor markets is the invalidator of Comparative Advantage today. (See the post titled "The Free Traders' Blindspot" )

Ricardo's doctrine hinged upon using only a country's native production factors--those already present in that country--to provide production. In this case, Chinese production could only supplant American production if Chinese workers--using only native Chinese capital--could still produce equivalent goods more cheaply than Americans.}

Comparative advantage, as I described in an earleir post, is one of the primary reasons why free trade works. Because even if one nation can produce things more cheaply than another nation, it cannot produce everything cheaper.

Ricardo himself described this with the example of England and portugal and the production of wine and cloth. it was very difficult to produce wine and moderately difficult to produce cloth. In Portugal, both are easy to produce.

So even though Portugal can do either cheaper, it makes sense for Portugal to produce excess wine and to leave England produce the cloth because this is cheaper than trying to do both themself. This way the Portugese can trade their wine for cloth and the English can trade their cloth for cheap wine.

Again, the problem is that once capital can flow across international borders to make cheaper labor equally productive, then most production jobs will flow out of higher-waged countries and into lower-waged countries due to reduced labor costs.

Why do you think foreign workers have lower wages in the first place? It's because they are not as productive. Productivity is the primary reason why American workers are paid so much. If you increase the productivity of foreign labor, their wages are going to increase as well and they will end up having wages the same as American workers.

And the primary macroeconomic problem with this is that the higher-waged workers were the 1° consumers of the production, and their loss of employment & income reduces their ability to consume that production, thus reducing worldwide demand for that production--resulting in less total production--and less wealth produced worldwide.

Labor costs and wage costs are not the same. Cheaper-priced Chinese labor can have higher labor costs than in America. If that Chinese labor sees the productivity of its workers begin to increase to American levels, then the wages of those workers begins to increase to American levels as well. There will also be fewer and fewer workers in that particular industry.

Also remember comparative advantage - you are assuming that if lower-wage foreign workers have cheaper labor costs across the board, that they can produce everything. That is impossible, the Portugal-English wine-cloth example being a simplified version of this. And because of this, richer countries retain comparative advantage in other areas.

In reality though, the foreigners do not have cheaper labor costs across the board, but even if they did, they cannot produce everything.

All countries have comparative advantages in certain areas.

Replacing millions of high-wage workers with low-wage workers reduces aggregate consumer income, aggregate consumer production demand, and---ultimately---aggregate production. 20 million 50¢/hour Chinese workers create far less production demand than 20 million $18/hour American workers.

Reduced demand will only occur with a fixed number of jobs, which doesn't happen. Again, use the machines and technology example. You could replace all sorts of jobs with machines and technology in manufacturing, and this is exactly what has happened over the years, it is why American manufacturing is so productive but also why employment within American manufacturing has fallen to an all-time low.

But notice all this new technology is not destroying the economy or destroying jobs. No one is proclaiming we need to revert our industry back to 1800s technology to "create" a bunch of new manufacturing jobs to take the place of the current machines that do them.

On the contrary, if we did this, we would destroy the productivity of our manufacturing sector and its workers, this destruction of productivity would then cause wages to plummet, jobs to be destroyed, and then demand would drop.

Also remember that 20 million American workers are not going to be replaced by 20 million Chinese workers, not unless the Chinese were equally as productive as the American workers, in which case their wages would be equal with American workers as well. Thus there'd be no reason to replace the American workers at all, unless some other special factor contributed to lower production costs if Chinese labor is used (say maybe China's landscape allows production to be cheaper or whatnot).

You could have 5 million very productive American workers replaced by 30 million highly unproductive, low-wage Chinese workers, but this only would happen if overall production costs were still lower with the Chinese. The 30 million Chinese could have a higher labor cost than the 5 million Americans. There would need to be something specific that makes production cost less.

If production demand collapses, so too will production.

Infringe on free trade and this will happen, because the rest of the demand from all the countries outside America will be cut off. That cut in demand will reduce production, and will kill jobs. Now imagine a small country like South Korea or Japan being cut off from world demand, or even the United Kingdom. They could never sustain their economies on their domestic populations. Without free trade, they're back to Third World status. The British would starve because they would not be able to grow enough food to sustain themselves. And their population would be too small for any heavy-duty industrial products that need to be produced in large numbers. With world demand, they can produce far more and focus on the things they have a comparative advantage in, and trade those things for food.

It will also result in cuts in all the things the American economy needs to import, further killing jobs. Steel tariffs are a perfect example. They force American industry to rely on American steel. Because the supply is artificially limited, steel costs more for the whole American economy. This helps protect jobs in the American steel industry, but it destroys a lot more jobs in the rest of the economy that have to buy that higher-priced steel.

Because of that higher-priced steel, it means that countries like China and Mexico can likely manufacture things for a lower-production cost than in America simply because in America the steel is higher (say autos). If you enact more protectionism, you just make American goods even less competitive, and thus less able to trade for the things we need that we cannot produce.

And that means the production of wealth. In the long run, replacing higher paid American workers with cheaper foreign workers reduces wealth--both in the US and the world.

It increases wealth in the long-term. There is no reduction in wealth in America because the jobs are not fixed in number.

I see your point on this, and many would accept this statement as-is.
However, I'm not one of them.

If those workers truly are higher paid, they'll increase demand for goods via their increased wages & buying power, thus creating additional demand for labor to produce those goods.

This is what they do.

As per economic theory, "wants" are unlimited. But those wants only become "demand" when persons have the means to fulfill those wants (i.e., the buying power to convert those wants into demand.) Increasing aggregate income through higher wages increase production demand and results in more employment and goods production.

Yes, and increasing productivity increases income.

In this manner, increased productivity could increase wages, by increasing the demand for labor. But if wages are held constant--or at least do not rise commensurate with increased productivity, then a wage-productivity gap emerges. And the result is that production demand does not keep up with the ability to increase production, resulting in less production than would have otherwise occurred.

This generally doesn't happen though. If productivity increases, incomes will increase, because workers are producing more. And because they produce more, they have more to trade, which means higher incomes.

Jul 14, 2010 6:58:43 GMT -6 @Kyle said:

No. Productivity, in and of itself, does not increase wages. This is a myth that's been bandied about by economists forever. Only increased demand for labor increases wages. Only increased demand for production increases demand for labor. And only increased spending power increases demand for production. And increased aggregate wages are required to increase spending power, and the resultant increase in spending.[/qute]

And increased wages result from increased productivity. With increased productivity, a worker produces more. If workers produce more, they essentially have more to trade, which thus means the company must trade them back equally.

If productivity increases, but the wages of those more productivity workers remains constant, then there is NO increase in jobs since there is no increase in spending, production demand, or labor demand.

This generally doesn't happen though, because increased producitivity will increase wages. It might happen if there was something else that offset the increase producivity.

For example, if manufacturing workers have cheap steel that is imported and then they increase their productivity, their wages will increase because they can produce more. But if steel tariffs are enacted that drive up the price of steel because the company can now only get the more expensive domestic steel, then this higher-priced steel can offset the increase in productivity the workers got and thus no wage increase.

[fredorbob]

Jul 14, 2010 6:44:58 GMT -6 @Kyle said:

Without trade, there is no reason to create wealth. Because you cannot trade anyone for anything.

Wrong. Manufacturing (labor) creates wealth, not bankers, stock brokers, and lawyers, they shuffle wealth around that is already created.