Trump and the Rise of the Unprotected

[seer]

US Drug policy gave power to cartels who effectively took over Mexico. Mexicans flee to the US because of the poor quality of life there. If those cartels didn't exist, then the quality of life in Mexico would rise and there would be no incentive to illegally immigrate.

Do you mean in the sense of the war on drugs - which both political parties have supported?

[lilpixieofterror]

US Drug policy gave power to cartels who effectively took over Mexico. Mexicans flee to the US because of the poor quality of life there. If those cartels didn't exist, then the quality of life in Mexico would rise and there would be no incentive to illegally immigrate.

I suggest you take a quick glance and Mexican history before you make such allegations. Mexico has been plagued by wars and civil disputes long before the drug war of the 1970's, so trying to blame their instability upon the drug wars isn't really fair at all.

[Psychic Missile]

Do you mean in the sense of the war on drugs - which both political parties have supported?

Yes, although drug legalization is a socially liberal policy and Republicans have been at the forefront of continuing the war in recent history.

[Psychic Missile]

I suggest you take a quick glance and Mexican history before you make such allegations. Mexico has been plagued by wars and civil disputes long before the drug war of the 1970's, so trying to blame their instability upon the drug wars isn't really fair at all.

You're talking about something that last happened 60 years ago vs something that's happening right now. I'm being very fair.

[seer]

Yes, although drug legalization is a socially liberal policy and Republicans have been at the forefront of continuing the war in recent history.

Really? What leading Democrats are advocating the legalization of drugs like cocaine and heroin? And since a good percentage of the reefer is already being grown in the US that no longer plays in.

[Psychic Missile]

Really? What leading Democrats are advocating the legalization of drugs like cocaine and heroin? And since a good percentage of the reefer is already being grown in the US that no longer plays in.

Generally the legalization of harder drugs is Libertarian territory.

[seer]

Generally the legalization of harder drugs is Libertarian territory.

Well then you can't just blame the Republicans.

[Joel]

The state thing is nonsense Joel. In the US we are live under the same federal regulatory rules for the most part.

States have widely varying regulations too. Varying taxation, minimum wage. Lots of things. And what I said was still the case for 100 years prior to the beginnings of a federal regulatory state, and would be true today without it. If regulations are the problem, that's an argument against the regulations, not international trade.

How do I compete with with a Chinese or Vietnamese worker where they have few regulations and make $10 a day? I can't - our manufacturing base is being decimated. I guess we could all work at MacDonalds. It's simple, I would rather pay a few more dollas for my shirt if it keeps my neighbor working.

No, everyone always has a comparative advantage.

No, Trump.

Same as Bernie's.

Tell me Joel why don't we have a net trade gain instead of deficit?

As I explained, those terms are misleading at best. Trade balance in either direction is not bad or good. A trade deficit is not "losing". It can be due to Americans profiting. And a balance in the other direction is not gaining. It can be due to suffering loss.

A trade 'deficit' with China can be caused by Chinese investment in the U.S., spurring economic growth. Similarly it can be caused by Chinese purchases of Treasury securities. (I.e., the U.S. continually "borrowing from China".) If you want to stop the latter, then reduce or end the federal deficit spending.

[seer]

States have widely varying regulations too. Varying taxation, minimum wage. Lots of things. And what I said was still the case for 100 years prior to the beginnings of a federal regulatory state, and would be true today without it. If regulations are the problem, that's an argument against the regulations, not international trade.

No, everyone always has a comparative advantage.

Tell me Joel, how do I compete with a man who makes the same product and gets $10 a day? What can I make that he can't? Sure we could get rid of safety and environmental regulation but then we would be living in a more dangerous sewer. And how do I compete with my Latino neighbors who live 15 to an apartment and work for less than minimum?

[lilpixieofterror]

You're talking about something that last happened 60 years ago vs something that's happening right now. I'm being very fair.

No you're not because history matters. Mexico has dealt with internal corruption for decades and internal corruption is the cause of much of their current problems. While some of the blame sure sits at the feet of the US government; much of it also rest on the Mexican government too.

[lilpixieofterror]

Really? What leading Democrats are advocating the legalization of drugs like cocaine and heroin? And since a good percentage of the reefer is already being grown in the US that no longer plays in.

PM likes to ignore things, such as the fact that the war on drugs didn't start with Nixon, but goes back decades later all the way back to 1914 and with laws passed long before Nixon was in politics. Uniform State Narcotic Drug Act for example, was signed into law in the mid 1930's when FDR (a democrat, I might add) was in office. Trying to lay the problems at the feet of the republicans and ignoring major democrat roles is ignorance at best and downright dishonesty at worst. The blame lays just as much at the feet of democrats as it does at republicans.

[Joel]

Tell me Joel, how do I compete with a man who makes the same product and gets $10 a day? What can I make that he can't? Sure we could get rid of safety and environmental regulation but then we would be living in a more dangerous sewer. And how do I compete with my Latino neighbors who live 15 to an apartment and work for less than minimum?

I don't know anything about your specific situation, so I can only speak in general.

First, with all the immigration and outsourcing, it is the case that over 96% of workers in the U.S. make more than minimum wage. And most of those making minimum wage or below are young people (under 25). Teenagers especially. So over 96% of workers manage to engage in the market you describe, and make more than minimum wage. (and, as we saw, those incomes have been rising over the past 45 years, other than perhaps downturns in recent recessions) So there clearly is a flaw in the logic of your worries.


Secondly what is that flaw?

First is that most of these workers aren't directly competing with all other workers. Humans are different. They have different skills, different desires, etc. So it's not the case that humans are necessarily interchangeable. And different lines of work are different (work making a shirt is different than work constructing a building) so they have different values on the market, and any given person is not equally good at all of them.

Second, primarily we are talking about low-skilled workers (comparable to teenagers). Thus it is still possible to start at such low rungs on the ladder, and thus work upwards, gaining skills and differentiating yourself, until you are no longer competing with low-skilled workers.

Thirdly, there is the law of comparative advantage. Even if one person is better at every thing than a second person (e.g. more efficient, lower cost), the second person will have a comparative advantage at something (something for which his opportunity cost is less), and thus both persons will gain by trading with one another (including indirectly in the market). The same is true of any two groups of people. Or a person and a group. etc.

That's the beauty of trade. Both sides gain. Free markets within the U.S. is what made Americans prosperous. Extending free markets increases those gains further, for both parties.

Note that (as I was indicating before) immigration outsourcing etc are self-limiting. The more outsourcing, the more foreign wages are driven up, and the less gain there is to be had by outsourcing (the profit tends toward zero). With free markets (including free mobility of people and goods/capital), prices for things tend to become equal. So the price differentials you are worrying about would tend to disappear. And because of the gains of free markets, those incomes also tend to rise.

[seer]

I don't know anything about your specific situation, so I can only speak in general.

First, with all the immigration and outsourcing, it is the case that over 96% of workers in the U.S. make more than minimum wage. And most of those making minimum wage or below are young people (under 25). Teenagers especially. So over 96% of workers manage to engage in the market you describe, and make more than minimum wage. (and, as we saw, those incomes have been rising over the past 45 years, other than perhaps downturns in recent recessions) So there clearly is a flaw in the logic of your worries.


Secondly what is that flaw?

First is that most of these workers aren't directly competing with all other workers. Humans are different. They have different skills, different desires, etc. So it's not the case that humans are necessarily interchangeable. And different lines of work are different (work making a shirt is different than work constructing a building) so they have different values on the market, and any given person is not equally good at all of them.

Second, primarily we are talking about low-skilled workers (comparable to teenagers). Thus it is still possible to start at such low rungs on the ladder, and thus work upwards, gaining skills and differentiating yourself, until you are no longer competing with low-skilled workers.

Thirdly, there is the law of comparative advantage. Even if one person is better at every thing than a second person (e.g. more efficient, lower cost), the second person will have a comparative advantage at something (something for which his opportunity cost is less), and thus both persons will gain by trading with one another (including indirectly in the market). The same is true of any two groups of people. Or a person and a group. etc.

That's the beauty of trade. Both sides gain. Free markets within the U.S. is what made Americans prosperous. Extending free markets increases those gains further, for both parties.

Note that (as I was indicating before) immigration outsourcing etc are self-limiting. The more outsourcing, the more foreign wages are driven up, and the less gain there is to be had by outsourcing (the profit tends toward zero). With free markets (including free mobility of people and goods/capital), prices for things tend to become equal. So the price differentials you are worrying about would tend to disappear. And because of the gains of free markets, those incomes also tend to rise.

This again all sounds good, but I know what I see. First there is no way I can compete with a worker who is getting $10 working in a factory that has near zero regulations to deal with. I know what I see - and I'm in electronic manufacturing and we are getting killed by cheap imports that are being dumped on the market - often they are selling them for less than they cost to produce to run our companies out of business. I also know that most constructions jobs in my area are being filled by illegals who will work next to nothing. These are facts. Listen, if we were as prosperous as you suggest Trump would not be doing as good as he is. Lastly, countries like Japan and China more often than not put trade barriers on our products - american beef in Japan is one example, or pork imports China. Trump is not against trade - he just thinks we are getting a raw deal. And what is wrong with trying to make them more fair?

[Joel]

This again all sounds good, but I know what I see. First there is no way I can compete with a worker who is getting $10 working in a factory that has near zero regulations to deal with. I know what I see - and I'm in electronic manufacturing and we are getting killed by cheap imports that are being dumped on the market - often they are selling them for less than they cost to produce to run our companies out of business. I also know that most constructions jobs in my area are being filled by illegals who will work next to nothing. These are facts. Listen, if we were as prosperous as you suggest Trump would not be doing as good as he is. Lastly, countries like Japan and China more often than not put trade barriers on our products - american beef in Japan is one example, or pork imports China. Trump is not against trade - he just thinks we are getting a raw deal. And what is wrong with trying to make them more fair?

I'm not disputing what you see. I'm differing in how it should be interpreted. You are seeing particular effects of trade and comparative advantage in particular industries, and not signs of economy-wide disaster (but rather the opposite).

Let's imagine things went to the furthest extreme in the direction you fear: Suppose that not only are foreigners and immigrants able to produce goods cheaply, they are able to produce and give away unlimited goods (including services) for free, thus putting all Americans out of work due to the 'competition'. Is that a bad thing? No, it means that nobody needs to work. Everybody can just sit back and enjoy all the goods they want for free.

Now lets take it back a bit from that extreme. Suppose that these goods aren't free but have some small price (think a fraction of a penny), thus still supposedly putting all Americans out of work. So now is it a disaster, because all Americans are out of work because of the competing super-cheap goods, but also nobody can afford the super cheap goods because now they have a nonzero price but everyone is out of work? No, that's self-contradictory, like the joke that nobody drives in New York because the traffic is too bad. If nobody can afford them, then nobody buys/imports them, in which case they are not competing with domestic goods, thus contradicting the original assumption.

Take another step. You might say, suppose that it doesn't put everyone out of work, just most people. A few people may have jobs, and some rich people may have income, and they buy these cheap goods. But that doesn't resolve the contradiction. By assumption, this small number of people aren't buying/importing in order to resell to the majority, because (by assumption) the majority cannot afford them. So this minority is buying only for their own consumption, and thus not buying very much. So the influx of such goods is only small and would not be much competition, and there would be nothing to stop the majority from resuming production for themselves (as they did before the existence of the foreign goods). The reasoning is the same as you increase the numbers of the employed. The foreign goods would be competition only among the employed.

Also the very assumption that America is flooded with a greater abundance of goods, making those goods more affordable, means that America is richer than before, having a greater abundance of real wealth (goods). It's a positive-sum game.

So what happens instead (instead of the contradiction)? Only certain foreign goods out-compete domestic goods. (Those for which foreign production has a comparative advantage--i.e. for which the opportunity cost is lower.) But there must exist other goods for which domestic production has a comparative advantage (lower opportunity cost).

So if you see particular examples where foreigners/immigrants are out-competing domestic product (e.g. construction or electronics manufacturing), the reasonable conclusion is that it seems that (at least for the moment) those are industries in which the foreign production has a comparative advantage. And if so, the solution is to switch to a different industry, in which domestic production has the comparative advantage. That is specialization and trade, the end result of which is that both parties are better off than they would be otherwise.


As for regulations, it's crazy to think it's a lack of regulation in the foreign countries. In general people in poor countries are poor because their government greatly oppresses the markets--because they lack free markets, not because they are unregulated. They work for low wages because they have low opportunity cost (little or no other opportunities). If there is any unfair-ness it's that we are in a much freer-market country. Trade barriers imposed by other countries hurt both their people and hurt us because it denies us opportunities for trade. But what are you going to do about it. Adding additional trade barriers of our own would only make us even worse off. If anything, the U.S. should make things better by getting rid of existing U.S. barriers (e.g. high tariffs on sugar).