Gus Van Horn blog Posted January 7 Report Share Posted January 7 Over at Capitalism Magazine, economist Donald Boudreaux argues that "Tariffs Don't Save Industries," and takes Oren Cass to task over recent arguments to the contrary.The entire thing is worth a read, but one point is worthy of noting on its own:Part of Cass's skepticism of financial markets is rooted in the superstition that there's something uniquely important in actually making things -- that is, in producing physical outputs as opposed to producing services such as financing. But if it weren't for financiers and the markets in which they operate, too few resources would be directed into building, maintaining, and modernizing those particular factories and mills that are most productive.Cass's notion seems to be that if we shrink the number of workers and resources employed in finance, these would be used to strengthen manufacturing. This notion, though, is akin to assuming that manufacturing would also be strengthened if we shrink the number of workers and resources employed in transportation -- unaware that delivery vehicles and the many services that keep them moving are a necessary complement to manufacturing. Just as manufacturing would shrink if there were fewer transportation services to support it, manufacturing would shrink if there were fewer financial services to support it.In short, Cass is inconsistent to allege both that the US industrial base is too small and that financial markets are too large. The industrial base is capital, and therefore an extensive and efficient industrial base requires an extensive and efficient capital -- i.e., financial -- market to create and support it. [bold added]I love the labeling of today's en vogue obsession with physical plants a superstition, because -- outside of some special cases (which Boudreaux acknowledges in passing) -- that's exactly what it is. But that's just the icing on the cake here. As Boudreaux indicates, our industrial capacity is at an all-time high, so even the concrete facts on the ground that allegedly motivate today's ignoramus Republicans contradict them. (Apparently, many are also ignorant of such things as division of labor, opportunity costs, and even that, amazingly, unused factories -- or (gasp!) parts of factories -- quickly get repurposed for more productive uses in a free economy.)I recommend the whole thing, and -- if there is such a thing as a Republican who won't just babble Fake news! or a Democrat who won't simply dismiss it as Propaganda! -- passing it along to one of them.Lord knows, the need for knowledge has not disappeared simply because so many spurn it now.-- CAVLink to Original Jon Letendre 1 Quote Link to comment Share on other sites More sharing options...
necrovore Posted January 7 Report Share Posted January 7 (edited) Rampant money-printing has corrupted the finance industry; money-printing makes it look like a lot of assets are profitable to hold when they're really just holding steady or even in decline (they look profitable if their decline is less than that of the currency itself). People can use leverage to make even more profit just from inflation. Physical products and manufacturing are like a "gold standard" in that you can't just "print" them as easily as money. Edited January 7 by necrovore Quote Link to comment Share on other sites More sharing options...
DavidOdden Posted January 7 Report Share Posted January 7 There is an analogous problem in education. Teaching and education does not generate a tangible physical good. Knowledge (which is not a physical good) can be counterfeit or real, it can be “printed” with much greater ease than money can be printed. You can say that it is not “real” knowledge, just as you can say that money not printed to represent physical production is not “real” money, but the two kinds of money are utterly indistinguishable. Actual counterfeit money can be detected though it is getting harder to detect, and harder to produce counterfeit money that passes superficial detection. Reality-detection when it comes to knowledge and education is almost impossible, until you subject the claim to the train-in-tunnel test. Fake knowledge is more of a problem, by orders of magnitude. How is it even possible to manufacture a car that runs on batteries, and sell it for around $50,000? Quote Link to comment Share on other sites More sharing options...
necrovore Posted January 7 Report Share Posted January 7 (edited) I don't think the case for free trade is as clear-cut as they say. Except if both countries are free. Then free trade is okay. But what if they're not? Ayn Rand wrote that whenever two people (or groups) with different basic principles collaborate, it's the more evil or irrational one who wins. Free trade advocates usually say the opposite, that free trade would give freer countries advantages over less free countries because the free countries would attract all the talent and capital, etc., and also that this would create incentives for our own country to become more free. In practice this has not borne out, because governments engage in tax and regulatory "harmonization" so that there is no way for capital or talent to escape. (Remember when Biden was going around getting a bunch of countries to agree on a minimum 20% corporate tax, because "tax havens" are unfair?) So it becomes that taxes and regulations cross borders, and we find ourselves subject to taxes and regulations we can't vote to change. Often finance is viewed as the "bad guy" because a lot of this "harmonization" is done under the auspices of banks and especially central banks, which are highly regulated. The real problem isn't finance at all, it's government control of finance. Also, contrary to the 20% corporate tax example above, a lot of this harmonization happens behind the scenes. The reason we don't trade with Cuba is because we'd end up subsidizing a Communist regime and participating in the persecution of the people in Cuba. It would be even worse if we attempted to engage in "harmonization" with such a regime. Unfortunately the same principle does not seem to be applied to other Communist regimes such as China -- or the EU (which is looking more and more Communist lately). And on the other hand if we were to trade with a country that was more free than we are, the trade would tend to subsidize the evils in our own country while also making their country less free. Neither result would be in our best interests (or theirs). One would think that if there were any Objectivists trapped in Cuba, they would not want the US to engage in trade with the Communist regime there. I suppose it's hard to figure out the meaning of "groups with different basic principles" when we have a mixed economy which seems to pride itself on not having any principles. But one advantage of not having free trade is that we don't have to subsidize the mistakes of other nations, and we don't get to count on subsidies from other nations for our government's mistakes. If we also guarantee that our government is accountable for its mistakes, then the government has more of an incentive not to make them. Edited January 7 by necrovore Quote Link to comment Share on other sites More sharing options...
DavidOdden Posted January 8 Report Share Posted January 8 Applied consistently, prohibition of imports from less-free nations would effectively prevent all imports to the US, which may be Trump’s plan. The distinction between “prohibited” and “prohibitive” is spurious. There have been flippant proposals to legalize all drugs or other vices and then “tax the hell out of it” – like Norwegian alcohol taxes. Gasoline taxes in the US (and Norway only way more so) are generally punitive, being a method to “prohibit” driving without actually outlawing internal combustion engines. Raising taxes on imported goods is one way to make sure that no other country has an “advantage” over the US, thus protecting the US from outsiders. Existing US and EU law already incorporates a restriction on “un-free trade”, where goods imported to the US or the EU at an actually unfair price owing to government subsidy are subject to a tariff, and this is one of the few legitimate uses of import tariffs. The reason why we don’t trade with Cuba is mainly political inertia and the fact that Cuba used to be an existential threat to US security (you remember the Cuban missile crisis, I assume). The majority of US trade sanctions are directed at specific evil persons and not the entire nation, for example there is a list of individuals in Somalia who have aided terrorist organization or who have engaged in acts of violence against civilians; restrictions on imports from Sudan are aimed now at the military overthrow of the government, again not “any trade with Sudan”. Sure, France is less free that the US because it represses “hate speech”, but penalizing Americans for the sake of the speech interests of the French is quite literally self-sacrificial. EC 1 Quote Link to comment Share on other sites More sharing options...
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