Both in geo-politics and climate....the only constant is change itself....

I do not think it's a good thing that hundreds of millions of people are working at essentially slave wages to build gadgets, bobbles, & trinkets for others on the planet.

However, if those wages were to increase substantially in the coming years and if the totalitarian communist government in China were to evolve into a democracy, would such competition for America then be a bad thing?

It's impossible to predict history while in the midst of it, but what I suspect is happening with America is the same thing that has happened to all great societies throughout history: they become a victim of their own success, too many take that success for granted, and a permanent decline sets in. The fact that Barack Obama has a good chance, let alone any chance, of winning reelection confirms America's road to destruction.

One of the biggest complaints of Chinese manufactured goods is shoddy quality.

The Chinese are only producing for demand.....

The demand is for a product at a price. The quality of the product is predictable.

I ponder the impact of China shifting to quality goods much like Japan in the 50-60s.....and suspect China is pondering that as well.

I recall the 50s when cheap stuff was marked "Made in W. Germany" or "Made in Japan"...didn't that change. I suspect China will follow that pattern.

Some body, somewhere will always produce the cheap stuff....

Robert, this same "slave wages" accusation was done to Vietnam a while ago complaining about Nike's factory there. The answer back from Vietnam was if Nike paid their employees US wages it would destroy the Vietnamese economy as few in the whole country would make that kind of money. The result would be loss of industry and jobs for Vietnam as why build their shoes there and ship them here when the wage costs were the same.

Funny that the Davos elites should be "rethinking capitalism", as indicated in the article. Are they rethinking that, instead of siphoning off the productive capital from societies in order to fund bureaucratic salaries and money-pit social programs, capital should once again be reinvested into productive activities?

Personally, I think the U.S. should give capitalism another try, since it was abandoned as an economy model after the roaring successes of the Calvin Coolidge administration a hundred years or so ago. My understanding is that truly capitalistic economies, such as Hong Kong and Singapore, have been stunning successes that perhaps we should try to emulate.

Sorry, but Rachman's article is drivel. If economics worked on a zero-sum basis, we would still be living in caves, wearing ratty furs.

Rachman ignores two key factors. The first is human creativity. This is one of the biggest factors that increases human productivity. The second factor that he ignores is the nature of Europe's problems. The EU is not hitting the wall because of some supposed failure of capitalism. It's hitting the wall because, despite the prosperity of the '80s and '90s, they were spending money much faster than it came in.

The angst over capitalism is misplaced. Europe should be concerned about their excessive amount of debt which is acting as a huge anchor dragging them down.

Then there's the stuff about the US. This article assumes that what is good for China is bad for the US, and vice versa. More nonsense, because it conflates two things: economic prosperity and relative military power balances. It is an absurdity to suppose that over the long run, a nation of 350 millio people can indefinitely restrain or blockade a nation of 1.5 billion people. Both nations can rise in relative economic strength and prosperity but China is inenvitably going to rise to a level of approaching the wealth and prosperity per capita of the G8 mations.

The more important question is what is China going to do with its rising economic and industrial strength. Some nations like Germany handled their rise to pre-eminence very badly after German unification in the 19th C through a series of wars for territorial expansion. There are no signs that China has any such intentions. Indeed even a cursory examination of China's history shows that it has had little interest in military territorial expansion in at least 1500 years.

He's wrong about multi-lateralism as well. The EU isn't failing because of the EU. It's failing because its members are BROKE. Doha isn't failing because of the supposed failures of free trade. It's failing because WTO members refuse to open their borders to free trade in agriculture, and Canada is an important backslider here.

Kyoto wasn't saved at Durban; Kyoto was buried at Copenhagen. And it failed not primarily because of the difficulty of international agreements but because the project ultimately offers huge costs for no discernable benefits.

Asia has been coming into its own after centuries of being dominated and ruthlessly exploited by the European colonial powers. What they practiced in Asia was not capitalism but colonial mercantilism. And as a good leftist Euro, Rachman is getting all angst about it.

Next thing you know, he'll be quoting the Kaiser's "Yellow Peril".

I ponder the impact of China shifting to quality goods much like Japan in the 50-60s.....and suspect China is pondering that as well.
~sasquatch

You suspect wrong.
Apart from being Asian, Japan and China are not similar.
Unlike Japan which made shoddy goods from scratch and had to develop the technology to make better products, China is given the technology and the specifications to make first rate products and do so...on the first production run.
Then the Chinese purposely commit the fraud now known as Product Fade where they make the 2nd, 3rd, and 4th production runs progressively shoddier to rip off the Brand which gave them the technology, the customers who trust the Brand, and the retail outlet who order large consignments of the product based on the quality of the first production run, while the Chinese make a larger and larger profit from the shoddiness.
Latter when the western Brand cancels production altogether, the Chinese continue to make cheap, often purposely dangerous, knockoffs of the products westerners gave them the technology to make.

The ChiComs laugh at suckers who think they are like the Japanese.

Dave, I don't disagree with what you're saying. However, the whole thrust of my earlier comment was to say this: "Is it a bad thing for America to have competition?" I added the preamble to establish some sort of equal playing field, that's all.

Sorry, that should be Quality Fade not Product Fade @ 1:38 PM.

Quick link to Paul Midler interview about Chinese production practices.

There are lots of places still remaining for cheap labour, even if China became some democratic capitalist free market with a well paid middle class.

Today Japan now outsources much of their products to the Philippines, Vietnam, Malaysia, etcetera.
There will be many poor slave labour markets to exploit for many decades to come.

The way to protect our interests, now that we have sold off all of our technologies and patents so that these people could move out of the feudal ages is to end globalization and again rebuild our economies from within. That will never happen now of course, but that is why we are doomed to a darker economic future and could quite possibly find our grandchildren as the latest third world slave market for some other foreign economy in the future.

We gave it away. China, India, Japan were nothing without our technologies to begin with, their cities today and the “modern” lifestyles they live are mimics and western facades.

banana >

If you think China's so great and here so bad, why the hell are you living here and not in China?

I'm sure they'd love to have you since you love them so much.

BTW, do you speak Chinese?

"The way to protect our interests...is to end globalization and again rebuild our economies from within."

Mercantilism was known and shown to be a huge failure 200 years ago. It's as outdated today as alchemy or astrology. What you end up with is a state of increasing impoverishment or lack of growth relative to those nations which do engage in free and unfettered trade. And in the short and long run this means capital leaves your country to go elsewhere to more rewarding investments elsewhere. Available capital in your barricaded system shrinks, leaving you progressively worse off over time.

You also don't seem to understand that the very basis of creating wealth in an economy means trading with rich customers, not poor ones. As your barricaded economy becomes progressively poorer in relative terms, fewer and fewer will buy your products because you won't buy anything from them.

Now this isn't just empty talk. The US tried this in the early 1930s with the Smoot-Hawley tariff act, and it was an absolute disaster.

"China, India, Japan were nothing without our technologies to begin with..."

Drivel. An astonishing amount of our modern technologies lie in basic engineering first discovered and applied by the Chinese centuries and millennia ago. Do you want a list? Japan had a vastly superior firearms industry in the 17th century compared to anything in Europe at the time.

What they didn't have was capitalism and a free trading philosophy. And what nations rose to dominance in Asia? England and the Netherlands which did have both of those things.

So why, Knight, are you advocating an economic policy that has failed EVERY time in history where it's been applied?

Drivel. "Zero-sum" = flat-Earth.

cgh nails it. I couldn't agree more, and couldn't have said it nearly as well.

"Respected economists like Paul Krugman and Fred Bergsten have argued that imposing tariffs would be a legitimate U.S. response to Chinese currency policies."

Krugman is respected?

Ha Ha Ha
HA HA HA HA HA

That is quite true about Chinese 'quality fade'.

This is a cultural practice for the Chinese that goes back centuries, and is considered the 'normal' way to do profitable business.

I do not think it's a good thing that hundreds of millions of people are working at essentially slave wages to build gadgets, bobbles, & trinkets for others on the planet.

True, but that's only happening because people buy the crap. I'm very selective about what I buy. I only buy good quality items, and only Chinese when nothing else is available. As a result I have some good quality Chinese stuff, but not much. When it comes to buying Chinese Caveat Emptor is the rule.

Not only are the Chinese scary, the author also believes in AGW .......down twinkles.

Cgh >

Small disclaimer - Although not clearly written, I did not advocate a “no trade policy”, most certainly not with abundant natural resources.

So ok let’s go with your proposal. What was it again, I didn’t see your solution to our current economic woes, or are you simply advocating the globalization course that we are currently on?

“An astonishing amount of our modern technologies lie in basic engineering first discovered and applied by the Chinese centuries and millennia ago. Do you want a list?” cgh.

Sure, would be interesting to see. Maybe you’re right and modern China might be enjoying their space program, cars, cell phones, high-rise buildings, computers etcetera without us by now. Unfortunately most of these great Chinese technologies haven’t made if far from the western looking major cities, but that’s a minor the point.

“So why, Knight, are you advocating an economic policy that has failed EVERY time in history where it's been applied?” cgh

I’m not sure exactly what you think I’m trying to advocate? The US and Canada did very well before globalization and the farming out of technologies and industries, as did most other western European countries, Australia, Japan after the war with US rebuilding etcetera. Helping to Prop up China and India as world superpowers is counterproductive to our own economies, why you would think otherwise is beyond me.

"I do not think it's a good thing that hundreds of millions of people are working at essentially slave wages to build gadgets, bobbles, & trinkets for others on the planet." - Robert W (Vancouver)

Would you be happier if they were still starving and making a fraction of "slave wages" while trying to grow rice from a 1/4 acre pond fertilized with human feces?

What cgh said well.

Anyone who wants to know what happens when you do as this pseudo-economist advocates, it's called Argentina.

My objection is the prison slave labor. Many of these people are in extremely poor health with a variety of transmittable diseases, and they're the ones making the cheapest products like chopsticks and ladies undergarments.

I don't have a problem with the children of peasants who work in factories making the better quality items. They live in barracks/dormitories eat in company cafeterias, send half their wages home to support their parents, and the other half is saved for their advanced education. These people are improving their lives and it's encouraging. That's why I don't object to buying the good quality Chinese products.

Would you be happier if they were still starving and making a fraction of "slave wages" while trying to grow rice from a 1/4 acre pond fertilized with human feces?

I'm happy not enabling their system at all.

The author is an idiot.

From the article: "The European Union is an organization built around a win-win economic logic. Europe's founding fathers believed that the nations of Europe could put centuries of conflict behind them by concentrating on mutually beneficial economic cooperation."

Europe's "founding fathers" were big government socialists, and Europe is falling apart now because they've "run out of other people's money" and hit the wall of compounding interest on debt.

China in popular belief is the Next Big Thing, but IMHO as just another guy in the diner, China is a freakin' huge cheap labor/cheap goods/real estate investment bubble that's going to pop soon.

They don't consume what they make, we do. We are cutting back, so their market is about to take the kicking of the century. Market dries up, KABOOM goes the delicate balance that keeps the Communists in power despite the will of the people. Result, war and famine, possible side order of pestilence if another bird flu mutates during the famine part.

JMO, of course.

"Rachman ignores two key factors. The first is human creativity."
Posted by: cgh at January 27, 2012 1:37 PM

Don't think he's ignored it; he just doesn't see it very much in our western culture anymore. It's gone to the same eternal resting place as curiosity and critical thought.

Replaced of course by less demanding things: the 24/7 consumption of drivel from 3-inch screens.

The idea that people get paid the wage they deserve for the work they do if not part of the "noble" class is very recent. People forget the great struggle of the 30s & the Unions. People used to work in mines 18 hours a day for a pittance.
As for slave labor its always been with us. Think Sugar plantations to Irish farms. To even indigenous populations in America with Canada as well in sweat shops. The middle class is very recent. Started by the Krupp family in Germany, & Henry Ford in America. It was a device to control worker improvement plus away to have them buy their own products. Thus keeping most of the capital Housing became cheap by affordable loans to employees by the companies living in the same area. Specialization with an ever increasing bureaucracy continued this trend. Most societies have 3 classes. The poor. The merchant, than the Rich.
With the latter despising the mercantile one.
In North America this was an easy transition because of its egalitarian predisposition. Which is now disappearing under an assault from a new form of social tyranny called "certification" by Universities or colleges that now are more or less political entities. Unless you own apiece of paper, your considered less than those who don't causing social division.

Of course their where exceptions for social climbing, but without money or sponsorship into medicine, or Legal institutions by the moneyed class. You got no where. This was less prevalent in North America but just less so. Watch movies from even the thirties. Marrying outside ones social status was almost a sin.
Now the Middle class is being used to subsidize the poor as a voting block ,for the Patrician class. As well sensitized the infrastructure or legacy projects. Which is shrinking this group every year.

The fact is their has "NEVER" been a time in History when there has not been labor slavery.

Global trade, aka 'managed trade', will end the same way as the Euro zone.

The only question is how far we allow it to drag us down.

PS I meant also that technological innovation has also increased the middle class through specialization. That has now been neutered by over regulation, environmental rules. The fact that Monolithic Welfare Corporate crony-ism has no real sponsorship programs. Like the old Gilded age where individuals where the Kings of production.
As well as the stasis our society has reached by excluding exploration of space or newer Technology.

This was meant to read: As well support the infrastructure or legacy projects. My spell checker needs a tune up.

Knight, what you are advocating is this:

"The way to protect our interests...is to end globalization and again rebuild our economies from within."

The end of globalization means raising trade barriers by things like raising tariffs. This always fails, as I noted above.

"The US and Canada did very well before globalization and the farming out of technologies and industries, as did most other western European countries,"

Yes, and we were following a policy similar to that of China today. We weren't giving out free labour the way China is, we were giving away free land. And with the economic advantages of a young, growing labour force, we stole a lot of Europe's heavy industry from it, particularly in things like steel and textiles.

And all of these economies boomed after 1945, in large part to the collapse of pre-war trade barriers. And we benefit hugely from trade with China and India today. They supply the labour intensive products today that would otherwise be more expensive if we made them ourselves.

So you ask what I'm recommending? Very simple. Understand that our current situation has nothing to do with trade imbalances and everything to do with our governments spending money like drunken sailors. We alone created the fiscal shambles we're in through far too many entitlement programs we can't afford and by not balancing the government books over a full business cycle.

So, we got ourselves into this mess and raising trade barriers will only make things worse. We get out of it in one of two ways. 1. Devalue our currency, which effectively means defaulting on our debts by turning our currency into worthless monopoly money. 2. Introducing sufficiently severe fiscal discipline to return to budget surpluses and start paying down debt.

Guess which one the current Canadian government likes and is actively pursuing?

Guess which one the USA has been practicing for the past 10 years? That's right, the US has been following a policy since at least the Clinton administration of trying to export deflation to the rest of the world by devaluing their dollar. It hasn't worked very well, has it?

Phantom, remember that along with all these exports China's internal economy is growing hugely. Increasingly China and India are demanding more and more of the goods they themselves are producing. Export and price pressure from China and India are and will continue to shrink over time with the rising size and prosperity of their own middle class.

That's why this bit,
"We are cutting back, so their market is about to take the kicking of the century."
is incorrect. Their own internal demand is massive, so that instead of growing at 10% annually with 7% inflation, they'll grow at 5-6% with about a 3% inflation.

John Chittick, well said. Asian wages may be very low by our standards, but they are much, much better than they would be otherwise. And by the possibility of bringing in income, serious social failures like infanticide, particularly among girls, are greatly reduced. What China and India are doing is experiencing and enormous surge in demand for unskilled labour. It's the same transition process Europe went through in the early 19th C.

Industrialization was the great solution to the problem of chronic rural unemployment.

It is reasonable to say that China, India and Brazil are the world's great poverty reduction programs. Everything else is a hill of beans compared with the economic progress taking place there.

Fiddle, try to grow up. In some ways they find our system as repellent as we do theirs. You also need to recognize that trading with China and India is in OUR best interest, not just theirs.

Jamie McMaster, I agree. He's ignored it because he doesn't see it happening. And it's not happening because of the dead hand of bureaucracy and regulation dragging it down.

Instead of whingeing on about the failure of multilateralism what he really should be doing is lamenting the disintegration of things like work ethic and the spiralling impact of the burden of excessive government.

In the end it's all about free will. We freely choose to, as you so accurately put it, "consume drivel from 3-inch screens."

It's then the height of hypocrisy to imagine as Rachman does that China and India are somehow responsible for OUR mismanagement of OUR own affairs.

Fiddle, try to grow up. In some ways they find our system as repellent as we do theirs. You also need to recognize that trading with China and India is in OUR best interest, not just theirs.

I really could care less what they find 'repellent'.

Fair trade, and managed trade, are two different things. China is a lawless country. So are the Japs. True competition is not allowed. Dealing with the lawless just means you will be fleeced. Or poisoned...whichever comes first.

Anyway, the whole philosophy behind global trade, as practiced, is to put a chicken in every pot. That's always been the socialist utopia.

The philosophy isn't to create wealth, the philosophy is to divide the existing wealth.

Math is hard for socialists like cgh.

And it's (creativity) not happening because of the dead hand of bureaucracy and regulation dragging it down.

Instead of whingeing on about the failure of multilateralism what he really should be doing is lamenting the disintegration of things like work ethic and the spiralling impact of the burden of excessive government.

In the end it's all about free will. We freely choose to, as you so accurately put it, "consume drivel from 3-inch screens."

It's then the height of hypocrisy to imagine as Rachman does that China and India are somehow responsible for OUR mismanagement of OUR own affairs.

Posted by: cgh at January 27, 2012 5:09 PM

Damned right! Bureaucracy and regulation are killing (have killed?) us on the international stage.

Pity that the average North American knows more about Paris Hilton and UF champs (not necessarily mutually exclusive) than anything that really matters - like the crippling cost of counter-productive regulations and the attendant enforcers.

I wish I could share a bit of your optimism that the remnants of creativity might turn things around - but I'm afraid the awakening, if it ever happens, will come not a little late, but far too late.

Anybody else catch this right near the end. In my mind, any credibility he had with me was finished when he wrote these sentences.

"It is a similar picture in other areas where there were once high hopes for multilateral cooperation. The world climate talks were saved from complete disaster in Durban, South Africa, at the end of 2011 -- but few believe that the vague and vestigial agreement reached there will have any real impact on the global problem."

Robert @ 2:00 "Is it a bad thing for America to have competition?" No it is not a bad thing. All one has to do is look at how the vehicle industry evolved since the Japanese vehicle passed the American vehicles in quality. The US has had to play catchup.

cgh, you are right by saying the following: "Understand that our current situation has nothing to do with trade imbalances and everything to do with our governments spending money like drunken sailors. We alone created the fiscal shambles we're in through far too many entitlement programs we can't afford and by not balancing the government books over a full business cycle."

This is the crux of the current debt difficulties.

North of 60, I do not mind quality Chinese products. Tens of millions of Chinese families have gone from hand to mouth existence to middle class by their standards in the last 20 years. The increase in canola sales to China for use as a cooking oil are an indication of this.

Sooner or later somebody is going to have to find the cojones to take China to court for its technology theft, copyright violations, currency manipulation, etc., and blatant disregard of international trade law.

Countries take one another to international court all the time for violations, and the rulings are respected. So why has China gotten a free pass so far?

The Communist Chinese didn't get wealthy because they were "smarter" or better economists than everyone else. They got filthy rich because they are greedy lying cheats and thieves.

No reflection on the common Chinese workers who are exploited by the regime's dictators under practically slave labour conditions and are prohibited from unionizing -- Communist Chinese "capitalism" is nothing more than neo-fascism: a collection of State-controlled corporate monopolies. It is not a free market system in the Western liberal democratic understanding of the term.

cgh >

I can agree with some of your statements and not others.

Agreed with government overspending and “Introducing sufficiently severe fiscal discipline to return to budget surpluses and start paying down debt.”

To say that we don’t need to increase tariffs, along with deregulations etcetera to bring back a manufacturing base and get out of a service economy, not so much. Of course allot of people like serving others it seems, then you have the right attitude about it.

Also we do not need India or China any more than we have needed them over the last several hundred years. They are simply global natural resource competitors to us who are growing beyond our ability to compete with them peacefully. Unless you believe that the universal love of man will make the Chinese wake up one morning and want to share with us as equally as you wish to share with them.

Tens of millions of Chinese families have gone from hand to mouth existence to middle class by their standards in the last 20 years.

Yeah, we're saving the world, one Chinaman at a time. Soon be a chicken in every pot.

The division of labour is a wonderful thing. Socialists are good with division, not so good with multiplying.

Selling our birthright for a mess of pottage, like Esau. Worked for the Russian Federation...for about 70 years.

To say that we don’t need to increase tariffs, along with deregulations etcetera to bring back a manufacturing base and get out of a service economy, not so much. Of course allot of people like serving others it seems, then you have the right attitude about it.

Yes, only an idiot socialist could believe we can service each other indefinitely without ever making new. Without our natural resources (birthright) we'd be like Cuba with that philosophy. Eventually descending to servicing '57 Chevys.

Jamie, creativity will always turn things around, but who says it will be us that are the creative ones? Odds are on the side of India and China, because there's a lot more of them, and they're producing hundreds of thousands of scientists and engineers every year to our few thousands. And you're right about Paris Hilton et.al. What the average North American pays attention to is vomit-inducing.

Napoleon said it best: God is on the side of the big battalions.

Knight, since Canada produces natural resources, this is all good news for us. And Ken Kulak is dead on about the value of Japanese competition in the auto market forcing lower prices and higher quality on moribund Detroit big four (now big three).

That's why we need competition, Knight. Ken nailed it by saying that it forces us to get better and better at what we do. No coasting.

Then there's this utter drivel from fiddle.

"Anyway, the whole philosophy behind global trade, as practiced, is to put a chicken in every pot. That's always been the socialist utopia."

You really don't understand what trade is all about, do you, let alone complicated concepts like simple arithmetic?

If I have a market of one million people and I'm the only supplier, I have at most one million customers. If through international trade I can have access to 1 billion customers, I can grow my business enormously, but only if I'm good enough to compete. This forces me to improve my costs or my product rather than just making the same old schlock for a captive market.

What international trade does is ruthlessly eliminate the weak and unfit and inefficient producers and strenthen those which are the best, either because of price or because of quality, or both.

Are you scared, much?

This is as anti-socialist as it gets. Socialism is all about restricting choice, which curiously is the same place you're at. It would seem that not only do you not understand arithmetic, you don't even understand which political camp you're sitting in.

What international trade does is ruthlessly eliminate the weak and unfit and inefficient producers and strenthen those which are the best, either because of price or because of quality, or both.

Sooo, how do you explain the crap coming from China?

cgh:

You are quite correct, my friend, no matter what the petty carpers say.

Just this week, researchers in Toronto introduced a new type of non-invasive test that identifies hundreds of diseases early and quickly. It will be a few years before it goes into production, but just imagine the health care savings of being able to detect cancers in Stage 1, for example, instead of Stage 3. People will deal with their diseases quicker and more easily, health care costs (and thus strain on gov't finance) will decrease, and even the stress on friends and loved ones will be diminish. That's a whole lot of "win-win-win" from just a single advance.

People who talk about "zero sum" are implicitly accepting a closed system. That can only be true for the short term. Newt may be a moonbat, but on a limbic level, I understand his desire for a moon base. Today's generation is the first one without a real frontier - we have, thanks to jets and Nets, conquered all the earthly frontiers of time and space. Today, literally, the sky is the limit. I have no idea of what we'll find or how it will pay off, anymore than Columbus could have when he first sighted America, but I think the concept of a boundary to be pushed back is essential to the human spirit. Once we're able to take a permanent step off this planet, the idea of "zero sum" will seem as ridiculous as that of a flat earth.

cgh
"There are no signs that China has any such intentions. Indeed even a cursory examination of China's history shows that it has had little interest in military territorial expansion in at least 1500 years."

Exhibit #1 that you have been a victim of leftist indocrination....and a lack of meaningful history in your education.

The prime irony of the latter 20th century was the Soviet and PRC theme of accusing western nations of being imperialist, colonialist....

The inconvenient truth was that the USSR and PRC were the last remaining imperial, colonial empires.....

Now the PRC remains the sole surviving imperial, colonial empire. The current PRC expended by conquest/reconquest of Tibet and the western provinces during the '50s....even to encroachment on India. Basicaly everything west of 100E....about half the current landmass of China is chinese colonial conquest.....inhabited by non Han minorities with steady increasing government sponsored Han chinese settlers.

Your comment conveniently ignores the relatively recent medieval Chinese empire, the various "hordes" which dominated asia and extended into Poland, the Dalmatian coast, Persia and India...at various times for various durations.

Currently the obvious direction for Chinese territorial expansion is north into resource rich, thinly populated Siberia....a situation which the Russians have been very wary of (perhaps paranoid) for over half a century.....

Test

cgh, superb posts.

Just a couple quick observations.
Nations don't trade with nations.
People from one nation trade with people from another nation. All (all!) government interventions help some interest(s) at the expense of overall prosperity.

I believe von Mises would say that no voluntary exchange could be zero sum.

In every (every) single exchange both parties gain. The exchanged goods are not equal in value. Value being subjective, both parties feel that the acquired good is more valuable than the forgone good. Otherwise the exchange would not take place.

Autarky (self sufficiency) is the route to relative impoverishment. Remember this when you hear talk about "energy self-sufficiency".

Imagine how desperate you would be if you had to be self sufficient in shelter, food and clothing. It's no different when it comes to the global division of labour.

Trade with China should carry a heavy tariff because of China's massive theft of western technology, and the many instances of western firms surrendering their technology to China so that they - some day - will be granted access to the chance of a lifetime - to sell to hundreds of millions of impoverished people. The Chinese are simultaneously building a military to dominate Asia and aiding enemies such as Iran.

Republican admins ( Bush and Bush ) have ignored the threat of China; Congress ignores it because it pads US corporate bottom lines.

Democrats love trade with China because the Chinese buy US government debt with the dollars, keeping the spend and elect cycle going.

The Chinese will do this indefinitely, because exchanging US dollars acquired in trade for US bonds - priced in dollars - keeps the dollars from flooding into the dollars for yuan market, which would massively increase the value of the yuan and making their goods far more costly in America. A simple swap of US dollars for US dollar denominated financial assets keeps the dollars out of the forex market for yuan and guarentees their will be no massive appreciation of the yuan/depreciation of the value of the dollar driving up the dollar cost of Chinese goods.

This probably won't stop until the Chinese conquer Taiwan.

It's no different when it comes to the global division of labour.

There ya go with the division, again. Like a good socialist...

Math is hard...

Your model would have to eventually involve aliens, otherwise we would face impoverishment.

Everything cgh and MND said. All excellent posts.

@Fiddle: please stop your posts are embarrassing to read. We don't need 'aliens' just reproduction.

I'm sorry I embarrassed you concerning your nonsensical little model.

You may now go stand in the corner with the AGW proponents. Another group who believes in transfer of wealth to anywhere that has less than us.

Or, go be a servant in the service industry...

MND, yes to every word. It is indeed individual entities which engage in trade. Governments are important because trade has to go through the portals of state import and export controls. Governments cannot speed it up, but they can greatly slow it down, as some misguided souls here seem to want to do. What is absolutely certain is that the fewer constraints there are on that flow, the greater will be the total wealth generated by the exchange.

Your comments about self sufficiency are absolutely correct. Why should I, say, drill my own oil with an extraction cost of $200/barrel when I can get it from a friendly neighbour for $80/barrel. All I'm doing is impoverishing myself. That's an extra $120/barrel which can be devoted to other things I need to do.

Kevin, amen to every word. I too agree with Newt's vision of space. We are always at our best when we're looking at a big new project that opens new frontiers and captures the imagination. If we want it badly enough, we find a way. My quibble is that I'm not sure Newt's being honest here, given his history.

But leave that bit of carping from me aside, we both agree that innovation is and always has been the great producer of new wealth and opportunities. The US really needs a big, new positive ambition, which it hasn't had in many decades. Something that both left and right can agree is a good thing to do on its own merits.

As for Sasquatch, SmallC and fiddle, it's blindingly apparent that none of them understand what socialism is, anything about Chinese history, or how economic systems work. To listen to fiddle, the fact that I may happen to be a blacksmith and you a cooper makes us socialists because of our division of labour into specialties.

I don't think I've ever heard such neolithic nonsense in all my life. Even the Green slime occasionally make more sense than this. And I never thought supposed rightwingers would ever make me write that. Which just goes to show that the right wing also has its loose wingnuts.

And all this talk about theft. As you're aware there's a very large and longstanding debate among libertarians as to the degree to which patent and copyright protection promote or hinder economic growth and prosperity. Essentially both are systems promoting monopolies which most economists abhor. All I can say is the jury is still out among economic theorists here, but it's worth at least keeping a half-open mind on the topic.

And yes, you know the old joke about economists. It's the only discipline in which two of them can get consecutive Nobel Prizes for saying exactly the opposite things.

Sorry Fiddle, can't seem to get posted anymore on this thread, no cussing at all but filter blocks.

You can't convince the unconvincible.

My longer posts supporting your own a little are not getting through and small ad hock comments are pointless, another time.

To listen to fiddle, the fact that I may happen to be a blacksmith and you a cooper makes us socialists because of our division of labour into specialties.

Only if the cooper were the communist enemy. Enriching the enemy is treason...

Wow guys this is really cool-fiddle is posting from the 1950s through an internet time warp!

LAS, it's more like the 1950s BC than 1950s AD.

Fiddle >

It’s weird that people can clearly see the poverty, human rights abuses etal in China and still think that somehow sucking up to them is an advantage to us.

I’ve travelled northern China fairly extensively and the poverty is simply third world, no other way to put it. People still live in caves in allot of areas. Somehow all this idealistic greatness that China is supposed to have is a model for us to shoot for is beyond me. Need a kidney? No problem the waitlists are short for the right price.

In reality China was a feudal junkpile begrudgingly comparable to 13th century Europe without the grand cathedrals by the time the Japanese invaded in WW2. Their modern innovation was indeed due to western corporate/ government greed and our failure to protect our own economy in a long term sustainable way. If we didn’t give it to them, they simply stole it. It continues today with corporate and military espionage from high-tech equipment, to knock-offs like Gucci handbags, watches, camera’s, and lead based toothpaste.

Me No Dhimmi >

"Imagine how desperate you would be if you had to be self sufficient in shelter, food and clothing. It's no different when it comes to the global division of labour."

Desperate enough that +300 million American's can't fend for themselves, I guess. That must be why it's such a good thing bringing in the Islamic Middle East, to fill those voids and help us out.

cgh >

"...it's blindingly apparent that none of them understand what socialism is, anything about Chinese history, or how economic systems work."

That’s a fairly broad and presumptuous statement.

Please elaborate as where socialism has worked so well in the past?

What exactly is it about Chinese history that makes it such a great and wonderful friend for us to embrace? Have you been to China? I have, unlike the beautiful National Geographic photos of the simple life; it is a craphole once outside of the major smog choked cities. Many people still live in caves in the parts China I’ve travelled, yet somehow it is this wondrous utopia built by Mao, and the necessary +60 million murders to achieve.

cgh said: "Phantom, remember that along with all these exports China's internal economy is growing hugely."

It is, but there are some very serious internal problems that the Chicom government is trying very hard to not talk about.

We know about the appalling water and air pollution in China. That's a serious problem, because it has huge effects on their ability to feed their own population. How long can they keep doing that before something breaks?

Most of the raw materials they use come from elsewhere. That's a fine balancing act on a scale as large as they are doing it, their only real value added is cheap labor, since materials and shipping costs don't change except upward. How long will it be cheaper for Ikea to make stuff out of imported particle board in China and then ship it back to Europe?

Large numbers of common people in China are investing their savings in real estate. There are cities being built where nobody lives. How long is that going to last?

A large part of the Chinese advantage is lack of regulations. Western companies can quickly build a factory in China that regulators in Western countries will take forever to approve. Example, Intel built their new chip fab in China because there was literally no amount of money in the whole world that could get it built in Silicon Valley. How long will that last, when Western countries are going broke the way they are?

I think the answers to many of these questions is "not long". So I think maybe all these people proclaiming China will take over the world economy are probably massively wrong. China is run by even bigger a-holes than Europe is, and the potential for disaster is IMHO substantial.

But then I'm just a PT, so I could be wrong.

Dealing with the lawless just means you will be fleeced. Or poisoned...whichever comes first.

You have the option of not buying products from the lawless.

You have the option of not eating food from the lawless or any food which might contain products from the lawless.

The Communist Chinese didn't get wealthy because they were "smarter" or better economists than everyone else. They got filthy rich because they are greedy lying cheats and thieves.

The Western Capitalists didn't get wealthy because they were "smarter" or better economists than everyone else. They got filthy rich because they are greedy lying cheats and thieves.

It's not economically feasible to produce some products in North America. The labor and benefits costs in North America are prohibitively expensive and North American environmental regulations which keep our air, water and land from being heavily polluted don't exist in Asia, so nearly all of the electronics, solar panel and wind turbine production is over there where they can pollute and keep their production costs low. The electricity to run their factories comes from dirty coal and the factories dump pollution into the environment. They don't care if some people die from pollution, they've got more people than they need.

cgh -
You make a comment about " military territorial expansion "

That statement, whatever its meaning to you, sidesteps the issue that China under socialism has indeed waged aggressive war: China was in a border war with India a few decades back, and China launched an offensive war against the US in Korea. To this day, it is official policy to seek re-unification with Taiwan using any means necessary, and treats it as its chattel.

China is rapidly building a military that probably has achieved more than parity with the US, the sole counterweight in East Asia to China.

You claim an understanding of economic systems. The question is larger than that: Trade with China is not win-win because one of the side effects of the trade is the arming of China. A simple calculation based on cost of goods is ridiculously narrow-sighted and deeply undercounts the cost of such trade becaust it strengthens a hostile state.

A Ricardian analysis of pecuniary gains from trade is the starting point, not the endpoint of judging the net effect of mass trade with China.

North of 60 >

"The labor and benefits costs in North America are prohibitively expensive.."

There go any union friends you may have had.

I think what cgh and others are trying to convey and convince is that if we wish and support them hard enough, the Chinese will form a utopian socialist government, force a clean up their cultural corruption, the environment, pay high NA union wages and benefits, turn their military into a peace keeping force, trade fairly without a devalued currency or product, and dance merrily hand in hand with us as we explore the stars together.

Heh heh heh.

The Western Capitalists didn't get wealthy because they were "smarter" or better economists than everyone else. They got filthy rich because they are greedy lying cheats and thieves.

Oh, pish-tosh. Your error is a simple one of logic. You have asserted all western capitalists (S) are rich because they cheat, lie, and steal (P). If you had said SOME S is P, I would agree with you. But it was Western countries who, slowly and fumblingly to be sure, developed democracy. It was Western society that, slowly and fumblingly, developed the scientific method. The Chinese knew about gunpowder, steam, and smelting long before the West, but it was the West that developed engines, steel, and yes, bullets, before and better than anyone else. The Chinese were still treating disease with pins when the West was developing anatomy, surgery, sterilization, etc.

The West got to where it is because we created both a learning system that encouraged innovation, and a government/economic system that rewarded it. Does it have weaknesses? Of course. Has it been misused and abused by criminals, dressed variously in black masks and pinstripes? Of course. IS IT STILL BETTER THAN ANY OTHER SYSTEM CURRENTLY PROPOSED? Hell, yes.

Of course, we don't have capitalism in North America and Western Europe right now. We have cronyism, which is loathsome in every way.

Ron Paul 2012.

I got turned off by the author as soon as he started describing economics as a zero-sum game. Also, his description of the European mega-nanny state as a "win-win" situation is laughable.

cgh - lots of really good points.

The only way we're going to get out of the economic mess that we're in is through economic growth or hyperinflation which will wipe out all savings and just leave people with the material things that they own. Protectionism is a sure way to get into the hyperinflation mode of solving our problems.

Human creativity is one of the solutions, but probably more important is the removal of bureaucratic regulation which has the same effect on the US economy as atherosclerotic plaque in human arteries. Obozo is in the position of someone with a 95% blocked coronary artery who refuses bypass surgery because they want to try "natural" therapies (an analogy to the US governments decision on the Keystone pipeline).

All that China has now is a lot of cheap labor and we have the creative edge. The solution to our economic problems is found not in boycotting Chinese products but starting a ship building program, loading the ships up with our bureaucrats and watermelons and sending them on a one-way trip to China or whatever other country whose economy we want to destabilize. There's a reason that manufacturing is moving overseas and it's insane over-regulation in N. America. That is the primary reason for the decline of the US economy. The other is the insane idea, held by a worrisome fraction of the population, that a degree in feminist poetry (or its equivalent) is of any use whatever.

The way things are going now, China is going to be the predominant country in space soon and the US is going to be a third-world basketcase with occasional power from windmills and a good job, for those lucky enough to get one, will be scraping bird shit off solar panels.

Small C:
"China was in a border war with India a few decades back"

Yes indeed. India started it. But then Nehru was an idiot as we all know.

"China launched an offensive war against the US in Korea."

Yes indeed. And so would the US if the Soviet Union invaded Canada. And it would call it correctly purely defensive in nature.

"...a military that probably has achieved more than parity with the US"

It cannot project power beyond its own immediate region. And its construction plans, particularly naval, show no signs of such. In particular, it hasn't committed to any SSBMs, and those are the things which really count. It has essentially no capability to project power beyond eastern Asia. And its defence expenditures are a fraction of those of the US on a per capita basis.

So why the concern over China's military? It's structured and equipped only for regional defence, not global power projection.

Economic matters are indeed not the only basis for evaluating relations between nations. But there is relatively little evidence to justify paranoia about China's intentions. Post-Mao, it's tolerated an openly hostile government in Vietnam for the past 30 years. For all the sabre-rattling with Taiwan, there's no two countries in the world that have more bilateral agreements betwen them than China and Taiwan.

Fact is, China, like the western world has grown up. It's now recognized that territorial conquest simply doesn't work and doesn't generate any benefits, and that's been the case for at least a century now. The last government leader to make military expansion a winning proposition was Bismarck.

Whatever the Chinese are, they are not stupid.

Loki, your analogy of blocked arteries is true for just about everything with respect to the strangling of creativity and development. The problem that you've correctly identified is that there have been very, very few cases in history were a nation has successfully and signficantly reformed bureaucratic inefficiency. Mostly the only cases where it has occurred has been from the literal extermination of the ruling class.

The only recent example I can think of is revolutionary France. With Napoleon, the country got very efficient but very ruthless government, but I don't think any of us agrees that bonapartism is a solution.

I agree with you that China's principal edge is cheap labour. It's not going to stay that way, given the huge number of highly talented scientists and engineers that are emerging from China's universities and technical colleges. And while China surges ahead, we remain mired in the same ridiculous behaviours that have led us to this pass: useless academic "disciplines", and debt spending on consumables.

I just wish the Cninese were silly enough to accept your suggestion of boatloads of watermelons. But I think they know about Greeks bearing gifts.

KevinB: right in every word. Cronyism is NOT capitalism. It seems more like the favouritism and court politics of 18th C Europe.

Loki, "The solution to our economic problems is found not in boycotting Chinese products but starting a ship building program, loading the ships up with our bureaucrats and watermelons and sending them on a one-way trip to China or whatever other country whose economy we want to destabilize."

That is one of the best ideas I have read in a long time.

My comment:
The Western Capitalists didn't get wealthy because they were "smarter" or better economists than everyone else. They got filthy rich because they are greedy lying cheats and thieves.

is of course pointedly invalid, just like the comment I quoted:

The Communist Chinese didn't get wealthy because they were "smarter" or better economists than everyone else. They got filthy rich because they are greedy lying cheats and thieves.

Both are logically invalid for the same reason:
You have asserted all Communist Chinese (S) are rich because they cheat, lie, and steal (P).

Unfortunately for some it takes intelligence to understand that there is no difference. Idiots who fail to grasp it take quotes out of context to further their agenda.

One big mistake in thinking about an economy is to regard it as some kind of organic entity that needs to be catered to or cared for. It isn't. An economy is the sum total of all acts of production, trade and consumption performed by individuals. Voluntary trade for mutual benefit is the foundation of capitalism. It's supposed to be a win-win situation, because individuials are free to use their judgment with regard to the relative value to themselves of the items up for trade. The only thing that can foul up the economic works is government intervention that overrides the value judgments of individuals. Taxes, regulations, subsidies and various distortions can prompt individuals to act in a way that wastes and depletes savings rather than building them up. This is the problem. But that ain't "capitalism".

The author makes the same mistake, although he's far from the only one. One sentence of the article reads, "What was good for China would be seen as bad for America. What was good for Germany would be bad for Italy, Spain, and Greece."

Economies are about INDIVIDUALS using their minds. Forget whether something is "good" or "bad" for America, China, Greece, etc. What is good for the INDIVIDUAL is freedom to judge economic values, and to trade based on those judgments.

From the linked article: "At Davos, this year, the mood is more questioning -- with numerous sessions on rethinking capitalism and on the crisis in the eurozone."

The only rethinking of capitalism that needs to be done is in removing the long list of impediments to it.

cgh >

“And while China surges ahead, we remain mired in the same ridiculous behaviours that have led us to this pass:”

Oh no, now you make it seem like a bad thing that China is surging ahead of us. I think you can take solace in the fact that once the brilliant and compassionate Chinese become the global masters they will most definitely have the compassion to pull us up out of the mire we put ourselves in.

After all we would do it for them.

"I agree with you that China's principal edge is cheap labour" - cgh

Stupid us, again we could learn something from that.

cgh @ 9:53 p.m.: "I too agree with Newt's vision of space. We are always at our best when we're looking at a big new project that opens new frontiers and captures the imagination. If we want it badly enough, we find a way."

Nonsense! Who's "we"?

"big new project" = socialism

eh? >

Goodbye, don't let the door hit you on the way out. Write sometime, we'd be interested on how your doing, really.

I'll bet your Chinese lady will be glad to be home.

I'm still waiting for the “Ron Paul 2012” KevinB to explain why Ron Paul suddenly supports cgh in globalization and socialism.

The last time I checked, Ron Paul seemed to support ending big government, securing borders and using tariffs among other things to fund the limited government after eliminating personal income taxes.

http://www.ronpaul.com/on-the-issues/taxes/

Then cgh, jumps on the cheerleader bandwagon “KevinB: right in every word” 12:07am

Talk about a confusing argument.

It's possible to support globalization without supporting socialism. In fact, last time I looked, it's the leftists who are decrying globalization.

From your own link: "To provide funding for the federal government, Ron Paul supports excise taxes, non-protectionist tariffs". Here's a clue: "non-protectionist tariffs" means taxes on imports that are similar to the excise taxes on locally produced goods, not artificial trade barriers, as many people assume they mean.

It's only confusing when you lack basic understanding, conflate things that are not related, attribute to others stances they adamantly haven't taken, and show that you're incapable of interpreting a simple statement correctly. Why don't you run along and discuss things with fiddle? He seems to be on your level.

The US, and especially Canada, need to stop the flow of millions in foreign aid each year to China.

The US gave $12 million in foreign aid to China in 2011. Canada gave $36 million, three times the amount.

This money could be better spent at home. China certainly does not need it.

China is rapidly building a military that probably has achieved more than parity with the US,

WRONG. China has one (1)aircraft carrier. America has multiple aircraft carriers that are all larger and more capable.

"creativity will always turn things around, but who says it will be us that are the creative ones? Odds are on the side of India and China,"
Posted by: cgh at January 27, 2012 6:37 PM

I'd have to bet on India. China's time is winding down. It was creating when it should have been doing some procreating.

Knight, the fact that we are mired has nothing to do with China. It's our own bad choices which put us here. Why do you reject the notion that we ourselves are responsible for what we do?

Read your own words and heed them:
"Idiots who fail to grasp it take quotes out of context to further their agenda."

KevinB>

“Why don't you run along and discuss things with fiddle? He seems to be on your level. “

As opposed to your level on the pom pom squad.

“It's only confusing when you lack basic understanding, conflate things that are not related, attribute to others stances they adamantly haven't taken, and show that you're incapable of interpreting a simple statement correctly.” – KevenB

The best and brightest self analysis I’ve seen you write yet. You’re finally making some progress.

cgh >

cgh #1 - "Read your own words and heed them:
Idiots who fail to grasp it take quotes out of context to further their agenda.""

Please reference where I made this quote.

cgh #2 - "Why do you reject the notion that we ourselves are responsible for what we do?"

“now that we have sold off all of our technologies and patents” – K99 @ 2:06pm
“We gave it away” - K99 @ 2:06pm
“and our failure to protect our own economy in a long term sustainable way” K99 10:18pm

Now go back to cgh #1 and repeat to yourself.

cgh -

"In particular, it hasn't committed to any SSBMs"?

The Chinese SSBMs you claim don't exist are apparently in their 2nd generation of development ( from Jane's Defense):
JL-2 (CSS-NX-5) (China), Offensive weapons
Type
Inter-continental-range, submarine-based, solid-propellant, single warhead ballistic missile....developed as a second-generation Submarine-Launched Ballistic Missile (SLBM) with a longer range than JL-1.

And China's truculent support of Iran does not indicate maturity but rather the attitude: the West and their interests be damned.

By the way, you forgot to excuse the Chinese invasion and ( continued ) subjugation of Tibet.

I don't know why we are so concerned about the Chinese. Everything I bought that was made in China was cheap garbage. They cant even make a hair trimmer that works. Are they not the same people who sold us bad cat food, bad gyprock, etc...everything they make is full of chemicals, etc. I for one will not buy anything, especially food, that was Made in China.

China is a bubble that is going to break in the near future. Wait until their economy goes in the tank and all these people who are working in their big cities demand more from the government....lots of unrest.

Oh by the way did I mention......swine flu, bird flu.......just thinking.