Chinese Factory Workers Riot.

[madd0ct0r]

isn't the above graph indicating a problem with the definition of poverty in the previous report?

ie, it was set to a certain amount of money ( 1.25 dollar a day?) but hasn't taken into account how much food prices have gone up. Remembering that proportionately the urban poor spend far more on food then the urban rich, an increase in wages and an even bigger increase in food prices would give you Stas's graph.

or is this trivially obvious and I've missed a deeper point?

[Lord Zentei]

Well, no; that's not an inevitable outcome, since you still have comparative advantage in specific fields. Obviously certain sectors of the economy are going to do worse after their rivals gain in power, but that's not something that needs apply to all.

Depends strictly on the resource. If there's just X apples in the garden, and the expansion of gardening is slower than the growth of non-hegemon demand - the hegemon's position will be worse off. Absolutely and without any question. It may be offset by internal distribution corrections inside the hegemonistic nation, but if we're talking about a resource the production of which is not elastic and does not expand as fast as demand, or not at all, that's what will happen. No amount of "comparative advantage" is going to help you convince the other person to start eating 2 apples again instead of the 5 he can now eat.

I don't grant that the "hegemon" somehow works differently from other open economies in a trade environment. This is an anti-Ricardoan argument, and I'm not convinced that it's true. "Growth of demand" doesn't in any way show that they "hegemon" is somehow going to have an economic contraction. You're going to raise prices, sure, but how are you going to show that demand is destined to rise regardless of what happens abroad? And how does undermining foreign economies help in any case, since they're consumers of your own goods as well as their domestic production.

The US uses that amount of energy because their economy is the most developed, not because they are enforcing some kind of hegemonic power abroad. The oil producing countries simply sell off their oil to whoever is willing to pay for it, be it the US, China or the EU. In fact their use of military power to maintain their interests abroad have cost them vast resources for relatively little gain, especially since the end of the Cold War. Consider the wars in Iraq and Afghanistan: IIRC the opportunity cost for these endeavours has been a staggering three trillion dollars! And has the gas price been reduced? No, and if it had, then China would have benefited too without having to lift a finger. That's hardly beneficial to the US economy.

But I was expressing hegemony exactly in terms of buying power. The richest customer is the hegemon. He outcompetes others. But when others start outcompeting him, what then? See above. This is not a question of military power. It is only tangentially related to military power, though that's one of the ways of achieving hegemony.

Well sorry, I though that you were speaking of "hegemony" achieved by undermining foreign economies and the context of that discussion included military causes of such. Attempts to do so are expensive and counter-productive, yes? Regardless, see above.

The wars in Iraq, Afghanistan, etc. were clearly counterbeneficial to the US economy. The price of oil rose and additionally lots of funding was misallocated to warmaking. However, not all imperialistic wars are automatically counterbeneficial for the hegemon's entire economy. The British conquest of some colonial territories brought clear economic benefits to Britain. France's construction of the Suez Canal brought lots of benefits to Europe's advanced nations, clearly executed via imperialism. World War II and the consequences thereof were very beneficial to the entire economy of the USA - though clearly counterbeneficial to the entire world economy.

World War 2 may have been beneficial to the US, but if so, only because of increased demand for domestic production, not because of the destruction of foreign economies. As for colonialism: obviously you can enrich yourself by stealing things, but that doesn't mean that the destruction of a foreign economy in and of itself grants you benefits.

Free trade and wealth creation does not lead to a hegemony, but creates opportunities for the participants. Observe the recent UN report on their Millennium Development Goals

The UN is useful, but their rosy-eyed reports are not really all that convincing. Reduction of extreme poverty levels is bullshit, anyway (especially with the current crisis). FAO World Malnourishment numbers:
http://typo3.fao.org/fileadmin/template ... g_1_en.jpg
"Reduced levels of extreme poverty" seem to have been unable to substantially reduce malnourishment. Ergo, that's simply not too important a reduction. Especially as the World Bank had to revise their extreme poverty line, putting more people in it. UN self-praise can go and fuck itself.

LOL! The thing is, they were setting out to prove the exact opposite of what their report showed. Wealth re-distribution was supposed to have been vindicated by that report. And even though malnourishment is still rampant, the problem is that benefits are still granted by wealth production, not redistribution.

*thinking* If the above is a tad too radically hostile to the UN report, I'll elaborate a bit. The UN report had nothing to do with the claim I made. The claim was that economies can be forced into primitive, low-cost labour producing a single good position in the world economy, and that is not beneficial for their populations. The claim did not center on large economies with diverse industries and a vast population, like China. It was specifically considering "banana republics" and smaller nations suffering from resource needle problems - for which the problem is that the world market demand for their labour is very specific and causes primitivization and degradation. And the benefits arising from that for hegemonistic nations. And to be even more precise - self-glorifying UN reports are absolutely not what I expect to be shown in a serious discussion. I've read quite a few papers on poverty and socio-economic effects of trade liberalization (like this one, for example) - what they have shown is that the results are extremely condition-dependent, country-dependent and ambigious, and TL does not automatically result in decreased poverty (no matter how much the advocates would love it to be so).

So where I seriously raise a Ricardian paradox issue with particular nations and the beneficial consequences of degradation for current hegemon(s) (not for the world economy at large), you reply to me with UN feelgood blabbering? I expected something better than that, and something more relevant to the point.

OK, well I misunderstood your initial point. But regarding the paper, while it's true that trade has mixed results in combating poverty in specific sectors of newly liberalized economies, what needs to be shown is that these economies would have fared better had they remained non-liberalized AND you need to control for basic welfare (which I mentioned earlier as a necessity). In any case the paper you link to seems to support my view, namely that growth helps poverty alleviation and liberalization helps growth (although granted, not unconditionally), so I'm still not entirely sure whether I understand your position.

[K. A. Pital]

I don't grant that the "hegemon" somehow works differently from other open economies in a trade environment. This is an anti-Ricardoan argument, and I'm not convinced that it's true. "Growth of demand" doesn't in any way show that they "hegemon" is somehow going to have an economic contraction. You're going to raise prices, sure, but how are you going to show that demand is destined to rise regardless of what happens abroad? And how does undermining foreign economies help in any case, since they're consumers of your own goods as well as their domestic production.

Growth of demand for raw resources elsewhere means redistribution in effect. That's how relative buying power works. The price of the good rises in an absolute and also in a relative dimension, making the hegemon a little poorer - relative to his competitor and, if they both compete for the same non-expandable or slowly expanding resource/good, poorer in an absolute sense as well. It does not mean the hegemon must have an economic contraction (although it can follow, if the hegemon's growth is not robust in face of price hikes - see 1973 oil crisis, 2008 and 2011 oil price spikes). I'm not sure what you are asking me to demonstrate? There's nothing anti-Ricardian if we are talking about resources which do not experience an expansion of production at the same rate as demand is growing. In an absolute sense, anyone getting richer in this closed system means everyone else (which includes the hegemon) are getting poorer. Once again, this holds true if the expansion of production is slower than the growth of demand. And of course, if you somehow injure or otherwise damage your competitor's industries that are the source of growing demand, you can temporarily enjoy the benefits of such action (reduced prices for the resources or goods in competition) - effectively, introduce a temporary monopsony or an oligopsony (a less radical option most commonly present in the world). Economics is fundamentally operating under the premise of a closed system with limited resources. The only way rising prosperity of one of the oligopsony members will not make other buyers poorer is when production is expanded to accustom for it; if that cannot happen or happens to be too slow, changes to the proportional buying power of the market actors will impact those whose buying power decreases adversely. Same phenomena as outpricing, really, a phenomena that practically exists - no matter what the theoretics might say.

Well sorry, I though that you were speaking of "hegemony" achieved by undermining foreign economies and the context of that discussion included military causes of such. Attempts to do so are expensive and counter-productive, yes? Regardless, see above.

Attempts to undermine foreign economies can literally cost you nothing (if the other actors do all the undermining themselves - World War II, collapse of the USSR). Undermining is counter-productive only if the undermined economy is at all necessary as a major buyer for your goods and services and thus undermining will hurt you. If the majority of your goods and services are consumed domestically or in other nations than the one you're going to ruin, there is nothing counter-productive as far as your nation is concerned. For example, the poverty and collapse of almost all industries in a Central Asian nation, Venezuela, or any Middle Eastern nation would be absolutely irrelevant and often even beneficial to the US and many advanced nations. They exchange goods primarily between themselves or consume domestically; Central Asia, Venezuela, Middle East only matter as cheap oil sources. And cheaper raw resources mean less costs for a whole variety of industries, meaning cheaper goods, cheaper transport and in the end, a higher standard of living in the developed nations.

World War 2 may have been beneficial to the US, but if so, only because of increased demand for domestic production, not because of the destruction of foreign economies.

In an intertemporal dimension it mattered a lot; the USA primarily relied on domestic demand. Exports and imports in the World War II and post-war period were insignificant.

Quite obviously the destruction of foreign competitors was beneficial to the USA - there was virtually no competition neither in production nor in demand. Absense of competition itself was beneficial, since U.S. goods had no competition domestically. No problem of Japanese or German cars being chosen over US cars - US industry enjoyed a monopolistic position. If we for a moment imagine that foreign economies and industries are not destroyed, their potential existence as producers and buyers would be detrimental to U.S. economy of the 1940s - their alternative existence as producers means competition for U.S. goods in both domestic and foreign markets. Since the US did not rely on imports heavily at the time, their existence as potential buyers and resource consumers would at first be irrelevant and not become detrimental until they start actively buying U.S. resources or resources which the US could alternatively buy, using its oligopsony leader position.

As for colonialism: obviously you can enrich yourself by stealing things, but that doesn't mean that the destruction of a foreign economy in and of itself grants you benefits.

Depends on what sort of relations you have with this economy. If it is not a consumer of your goods but supplies you with some export item, you can destroy and pauperize it and get only benefits out of it. If this economy is a consumer of goods that you would want to consume but cannot, due to this economy's effective, money-backed demand for them - their destruction will likewise be beneficial. The price of whatever you wanted to buy will drop, and you will be able to enjoy whatever you wanted to buy as if that other guy never existed in the first place. There's a lot of ways the destruction of an economy can benefit the entirety of your economy - or a great part of it, anyway.

LOL! The thing is, they were setting out to prove the exact opposite of what their report showed. Wealth re-distribution was supposed to have been vindicated by that report. And even though malnourishment is still rampant, the problem is that benefits are still granted by wealth production, not redistribution.

Malnourishment is not just "rampant", it is not "still rampant", it is actively growing in the 2005-2010 period. Wealth creation is important - that was not in dispute indeed. Part of the problem is the utter ignorance of other factors in this system. China and India are responsible for most of the MDG reductions - simply because they have huge populations and diverse industries. But what of Latin America and Africa? Their MDG progress has been pathetic. And their economies, as if by incident, are not diverse - they are the mentioned "single good" economies, often bare resource producers. They can be actively buying foreign goods as well; it does not help since they aren't producing anything that would be worthwhile in creating a diverse industrialized economy in their own territories. Central Asia has actually worsened during MDG evaluation period:

Most of the MDG success is related to China running ahead of schedule. And China is just one, albeit a very large, nation. It has a lot of population and any progress it makes will impact the world indicators simply for that reason alone.

I never spoke in favor of aid, by the way. That is an absolutely irrelevant tangent. The question is the world diversification of labour and the fact that some parts of the world are relegated to being effectively neocolonies. There is no benefit to be reaped from wealthier populations or more advanced industries therein, because that would drive up the price of the goods they are supplying to the world market - goods, the cheap price of which is beneficial to buying advanced economies and which raises the life standard of these economies.

OK, well I misunderstood your initial point. But regarding the paper, while it's true that trade has mixed results in combating poverty in specific sectors of newly liberalized economies, what needs to be shown is that these economies would have fared better had they remained non-liberalized AND you need to control for basic welfare (which I mentioned earlier as a necessity). In any case the paper you link to seems to support my view, namely that growth helps poverty alleviation and liberalization helps growth (although granted, not unconditionally), so I'm still not entirely sure whether I understand your position.

I'm not sure that my core argument has been that these economies would fare better if remaining non-liberalized - that depends entirely on the policies they take, resources and industries they have - which is simply an unknown factor. My claim was that poverty can be beneficial for the hegemon if this poverty contributes to an increased life standard in the hegemon's nation. For example, let's assume we have Eurasia, Oceania and Eastasia trading between each other. Eurasia's 90% of exports go to Oceania, and vice-versa, and domestic demand in both nations is also robust. Eastasia, on the other hand, has lots of oil wells and no industry to speak of - oil is the one and only export. Since the population of Eastasia is poor, the price of Eastasian manhours is cheap; and so is the price of Eastasian oil. Neither Oceania nor Eurasia would benefit from Eastasia suddenly reducing oil exports and increasing domestic oil demand. Both benefit from Eastasia remaining poor until kingdom come, because imported oil is cheap and this makes lots of consumer goods cheaper - in manufacture, transport, etc. What if Eastasia starts producing stuff - so far bad stuff, only for internal consumption - but which takes up oil? The counterbeneficial effect is evident - oil becomes more expensive for our major players. Eastasia becomes a bit better off (it has some domestic industry now), but Oceania and Eurasia are both worse off, if Eastasia cannot increase oil production to cover additional own domestic demand. For the sake of the model's simplicity, we assume that neither Oceania nor Eurasia have any oil.

[Lord Zentei]

Growth of demand for raw resources elsewhere means redistribution in effect. That's how relative buying power works. The price of the good rises in an absolute and also in a relative dimension, making the hegemon a little poorer - relative to his competitor and, if they both compete for the same non-expandable or slowly expanding resource/good, poorer in an absolute sense as well. It does not mean the hegemon must have an economic contraction (although it can follow, if the hegemon's growth is not robust in face of price hikes - see 1973 oil crisis, 2008 and 2011 oil price spikes). I'm not sure what you are asking me to demonstrate? There's nothing anti-Ricardian if we are talking about resources which do not experience an expansion of production at the same rate as demand is growing. In an absolute sense, anyone getting richer in this closed system means everyone else (which includes the hegemon) are getting poorer. Once again, this holds true if the expansion of production is slower than the growth of demand. And of course, if you somehow injure or otherwise damage your competitor's industries that are the source of growing demand, you can temporarily enjoy the benefits of such action (reduced prices for the resources or goods in competition) - effectively, introduce a temporary monopsony or an oligopsony (a less radical option most commonly present in the world). Economics is fundamentally operating under the premise of a closed system with limited resources. The only way rising prosperity of one of the oligopsony members will not make other buyers poorer is when production is expanded to accustom for it; if that cannot happen or happens to be too slow, changes to the proportional buying power of the market actors will impact those whose buying power decreases adversely. Same phenomena as outpricing, really, a phenomena that practically exists - no matter what the theoretics might say.

If you're not claiming that the hegemon must have an economic contraction, then they're not becoming poorer in an absolute sense (besides which, the damage caused by the oil crises you cite were to some extent self-inflicted). More to the point, as you say yourself: the benefits gained by sabotaging your rivals is temporary.

Besides which, this business of greater buying power being so crucial flies in the face of the fact that small, low-population countries being perfectly capable of being prosperous and rich.

Attempts to undermine foreign economies can literally cost you nothing (if the other actors do all the undermining themselves - World War II, collapse of the USSR). Undermining is counter-productive only if the undermined economy is at all necessary as a major buyer for your goods and services and thus undermining will hurt you. If the majority of your goods and services are consumed domestically or in other nations than the one you're going to ruin, there is nothing counter-productive as far as your nation is concerned. For example, the poverty and collapse of almost all industries in a Central Asian nation, Venezuela, or any Middle Eastern nation would be absolutely irrelevant and often even beneficial to the US and many advanced nations. They exchange goods primarily between themselves or consume domestically; Central Asia, Venezuela, Middle East only matter as cheap oil sources. And cheaper raw resources mean less costs for a whole variety of industries, meaning cheaper goods, cheaper transport and in the end, a higher standard of living in the developed nations.

Nothing counter-productive - except for lost opportunity. And opportunity costs are the only meaningful measure of costs. Your example of collapse in Venezuela harming only its neighbors is an excellent argument for more internationalization of trade, not less.

In an intertemporal dimension it mattered a lot; the USA primarily relied on domestic demand. Exports and imports in the World War II and post-war period were insignificant.
http://www.econdataus.com/tragdp05.gif
Quite obviously the destruction of foreign competitors was beneficial to the USA - there was virtually no competition neither in production nor in demand. Absense of competition itself was beneficial, since U.S. goods had no competition domestically. No problem of Japanese or German cars being chosen over US cars - US industry enjoyed a monopolistic position. If we for a moment imagine that foreign economies and industries are not destroyed, their potential existence as producers and buyers would be detrimental to U.S. economy of the 1940s - their alternative existence as producers means competition for U.S. goods in both domestic and foreign markets. Since the US did not rely on imports heavily at the time, their existence as potential buyers and resource consumers would at first be irrelevant and not become detrimental until they start actively buying U.S. resources or resources which the US could alternatively buy, using its oligopsony leader position.

Yes: they relied on internal consumption in no small part because the third world was incapable of purchasing their goods. Later, they relied on production for their goods abroad, but the producer-countries remained poor, so they couldn't return the consumption. And this leads to a goods deficit. In other words, once they move out of a wartime economy, they can't maintain demand, precisely because the rest of the world is poor, not in spite of it.

Depends on what sort of relations you have with this economy. If it is not a consumer of your goods but supplies you with some export item, you can destroy and pauperize it and get only benefits out of it. If this economy is a consumer of goods that you would want to consume but cannot, due to this economy's effective, money-backed demand for them - their destruction will likewise be beneficial. The price of whatever you wanted to buy will drop, and you will be able to enjoy whatever you wanted to buy as if that other guy never existed in the first place. There's a lot of ways the destruction of an economy can benefit the entirety of your economy - or a great part of it, anyway.

Again: except for lost opportunities, and it's only "beneficial" in the short run. Businessmen who want to make more money (and is there any other kind?) might just as easily see the poor country as a place for investment, which incidentally leads to diversification.

Malnourishment is not just "rampant", it is not "still rampant", it is actively growing in the 2005-2010 period. Wealth creation is important - that was not in dispute indeed. Part of the problem is the utter ignorance of other factors in this system. China and India are responsible for most of the MDG reductions - simply because they have huge populations and diverse industries. But what of Latin America and Africa? Their MDG progress has been pathetic. And their economies, as if by incident, are not diverse - they are the mentioned "single good" economies, often bare resource producers. They can be actively buying foreign goods as well; it does not help since they aren't producing anything that would be worthwhile in creating a diverse industrialized economy in their own territories. Central Asia has actually worsened during MDG evaluation period:
http://upload.wikimedia.org/wikipedia/c ... d_2005.png
Most of the MDG success is related to China running ahead of schedule. And China is just one, albeit a very large, nation. It has a lot of population and any progress it makes will impact the world indicators simply for that reason alone.

Heh, isn't that's the very report that I cited earlier, which you called "UN feelgood blabbering", yes?

But since we agree that wealth creation is important, then that's good. Here's another thing we agree on: diversification is important. I haven't disputed that; the only criterion I require is that it isn't diversification which is uncompetitive, otherwise it's a waste of capital resources to initiate it. Neither do I dispute that there's rampant malnourishment in the third world - I said "still" because in spite of it all, I'm tentatively optimistic that Latin America and Africa are capable of emulating the successes of East Asia, particularly when the success of their model is made evident.

I never spoke in favor of aid, by the way. That is an absolutely irrelevant tangent. The question is the world diversification of labour and the fact that some parts of the world are relegated to being effectively neocolonies. There is no benefit to be reaped from wealthier populations or more advanced industries therein, because that would drive up the price of the goods they are supplying to the world market - goods, the cheap price of which is beneficial to buying advanced economies and which raises the life standard of these economies.

The issue of aid is relevant, since aid can undermine the natural development of local economies, and it is the primary counter-model for development in the third world as opposed to liberalization and free investment. If you question liberalization and are not talking about aid, then what are you proposing?

And the idea that there's no benefit from diversifying economies in the developing world is highly suspect. While it is clearly beneficial to prevent diversification for those businesses who make money purchasing and selling the goods that are produced there, it is not so beneficial for others, not only because it means that these countries will purchase fewer goods that are produced in the first world country, but because of the industries that are not developed in the developing country won't be in a position to provide services or revenues from the first world country's investment there (even if they do compete for resources). I think we've both heard plenty of rants about declining exports and bad trade balances in the West to be aware of this. So, once again: good for specific sectors does not mean not good for the aggregate. Those sectors which benefit are simply capable of making more noise than the others.

I'm not sure that my core argument has been that these economies would fare better if remaining non-liberalized - that depends entirely on the policies they take, resources and industries they have - which is simply an unknown factor. My claim was that poverty can be beneficial for the hegemon if this poverty contributes to an increased life standard in the hegemon's nation. For example, let's assume we have Eurasia, Oceania and Eastasia trading between each other. Eurasia's 90% of exports go to Oceania, and vice-versa, and domestic demand in both nations is also robust. Eastasia, on the other hand, has lots of oil wells and no industry to speak of - oil is the one and only export. Since the population of Eastasia is poor, the price of Eastasian manhours is cheap; and so is the price of Eastasian oil. Neither Oceania nor Eurasia would benefit from Eastasia suddenly reducing oil exports and increasing domestic oil demand. Both benefit from Eastasia remaining poor until kingdom come, because imported oil is cheap and this makes lots of consumer goods cheaper - in manufacture, transport, etc. What if Eastasia starts producing stuff - so far bad stuff, only for internal consumption - but which takes up oil? The counterbeneficial effect is evident - oil becomes more expensive for our major players. Eastasia becomes a bit better off (it has some domestic industry now), but Oceania and Eurasia are both worse off, if Eastasia cannot increase oil production to cover additional own domestic demand. For the sake of the model's simplicity, we assume that neither Oceania nor Eurasia have any oil.

If so, it's clearly only in the short term, as long as Oceania and Eurasia don't import, and more to the point, as long as they don't export to the growing Eastasia. You're fixating on the developing world as suppliers, not consumers that can provide jobs for the Oceanians and Eurasians.

Here's an analogy which illustrates the point I am making with all of this: would Moscow oblast have become richer or poorer if the rest of Russia had never advanced economically beyond the Tzarist age?

[K. A. Pital]

If you're not claiming that the hegemon must have an economic contraction, then they're not becoming poorer in an absolute sense (besides which, the damage caused by the oil crises you cite were to some extent self-inflicted). More to the point, as you say yourself: the benefits gained by sabotaging your rivals is temporary. Besides which, this business of greater buying power being so crucial flies in the face of the fact that small, low-population countries being perfectly capable of being prosperous and rich.

It is possible to have economic growth and at the same time become poorer in an absolute sense. There is no contradiction. If growth is slower than that of your competitor, and you're competing for the same share of a finite pie, you become poorer despite both of you having growth. Pauperization can be expressed in rising prices - inflation. If it is outstripping growth, you're de-facto becoming poorer.

Nothing counter-productive - except for lost opportunity. And opportunity costs are the only meaningful measure of costs. Your example of collapse in Venezuela harming only its neighbors is an excellent argument for more internationalization of trade, not less.

Um... yes. Lost opportunities. Which are detrimental to your economy. Make Turkmenistanis have higher wages - make their oil more expensive. Net gain for them, sure, but a net loss for you - Turkmenistan is not one of your importers. It can become one, but the gains from opportunity have yet to be realized (and quite possibly might take years and even decades - that is if you even want to penetrate their market at all), while damage will be immediate.

Yes: they relied on internal consumption in no small part because the third world was incapable of purchasing their goods. Later, they relied on production for their goods abroad, but the producer-countries remained poor, so they couldn't return the consumption. And this leads to a goods deficit. In other words, once they move out of a wartime economy, they can't maintain demand, precisely because the rest of the world is poor, not in spite of it.

Indeed. But if the rest of the world becomes wealthier and yet does not start buying their products en masse, the deficit will not go away at all. And it will be exacerbated by the problem with the rest of the world eating up more resources and yet not buying your non-competitive goods. Not because they're too bad; but simply because they will start saturating the market with their own goods. At which point your economic base will start contracting and yes, that would mark an economic downturn.

Again: except for lost opportunities, and it's only "beneficial" in the short run. Businessmen who want to make more money (and is there any other kind?) might just as easily see the poor country as a place for investment, which incidentally leads to diversification.

If they invest in other sectors than the one most profitable and necessary on the world market. If they invest only in that, the banana republic will break record banana yields, but that's it.

Heh, isn't that's the very report that I cited earlier, which you called "UN feelgood blabbering", yes? But since we agree that wealth creation is important, then that's good. Here's another thing we agree on: diversification is important. I haven't disputed that; the only criterion I require is that it isn't diversification which is uncompetitive, otherwise it's a waste of capital resources to initiate it. Neither do I dispute that there's rampant malnourishment in the third world - I said "still" because in spite of it all, I'm tentatively optimistic that Latin America and Africa are capable of emulating the successes of East Asia, particularly when the success of their model is made evident.

Competitiveness is relative. Banana production in a banana republic is automatically 100% or even 1000% more competitive and more profitable than, say, creating advanced ships or something like that. At start, venture industries are not competitive.

The issue of aid is relevant, since aid can undermine the natural development of local economies, and it is the primary counter-model for development in the third world as opposed to liberalization and free investment. If you question liberalization and are not talking about aid, then what are you proposing?

Aid in other forms - industrialization-related, primarily. For example, ordering some high-tech goods from the place and giving them relevant assembly lines and training. And, of course, directed state investment. Investing only in what's hot today is not a sound practice.

So, once again: good for specific sectors does not mean not good for the aggregate. Those sectors which benefit are simply capable of making more noise than the others.

Or more and more immediate profit. Which is a relevant decision-making factor. No one would want to invest and wait for 30-50 years (when he dies) until Turkmeni engineers start making iPads. There's China already. Turkmenis and Kazakhs can pump oil - good enough for 'em.

If so, it's clearly only in the short term, as long as Oceania and Eurasia don't import, and more to the point, as long as they don't export to the growing Eastasia. You're fixating on the developing world as suppliers, not consumers that can provide jobs for the Oceanians and Eurasians. Here's an analogy which illustrates the point I am making with all of this: would Moscow oblast have become richer or poorer if the rest of Russia had never advanced economically beyond the Tzarist age?

Hahaha. If Moscow remained relatively much richer than the regions and there are no other factors, sure. I'm not fixating on Eastasia as producers; but what if they happen to be producers but not consumers? Plenty of nations are there in the world just to supply cheap shit for wealthy ones; they are not even a flicker for exports, and most exports circulate between weathier nations. Yes, they are foregoing possible future opportunities for all - the sake of preventing immediate damage to themselves. Which was my point all along.

[Teebs]

It is possible to have economic growth and at the same time become poorer in an absolute sense. There is no contradiction. If growth is slower than that of your competitor, and you're competing for the same share of a finite pie, you become poorer despite both of you having growth. Pauperization can be expressed in rising prices - inflation. If it is outstripping growth, you're de-facto becoming poorer.

The general debate is not one that I want to leap into, but I am pretty sure any reputable source of GDP growth statistics will express it in real terms not nominal ones. In other words, with inflation taken into account.

[Lord Zentei]

If you're not claiming that the hegemon must have an economic contraction, then they're not becoming poorer in an absolute sense (besides which, the damage caused by the oil crises you cite were to some extent self-inflicted). More to the point, as you say yourself: the benefits gained by sabotaging your rivals is temporary. Besides which, this business of greater buying power being so crucial flies in the face of the fact that small, low-population countries being perfectly capable of being prosperous and rich.

It is possible to have economic growth and at the same time become poorer in an absolute sense. There is no contradiction. If growth is slower than that of your competitor, and you're competing for the same share of a finite pie, you become poorer despite both of you having growth. Pauperization can be expressed in rising prices - inflation. If it is outstripping growth, you're de-facto becoming poorer.

Lolwut? Growth is measured in dollars of a given year, and that includes inflation. You might have a point if you were to say "poverty can increase in certain sectors of society".

Nothing counter-productive - except for lost opportunity. And opportunity costs are the only meaningful measure of costs. Your example of collapse in Venezuela harming only its neighbors is an excellent argument for more internationalization of trade, not less.

Um... yes. Lost opportunities. Which are detrimental to your economy. Make Turkmenistanis have higher wages - make their oil more expensive. Net gain for them, sure, but a net loss for you - Turkmenistan is not one of your importers. It can become one, but the gains from opportunity have yet to be realized (and quite possibly might take years and even decades - that is if you even want to penetrate their market at all), while damage will be immediate.

That's why you invest in Turkmenistan. On that note, I don't see the US becoming poorer on account of the rise of East Asia. Less powerful in a relative sense, sure, but not poorer in an absolute sense.

Yes: they relied on internal consumption in no small part because the third world was incapable of purchasing their goods. Later, they relied on production for their goods abroad, but the producer-countries remained poor, so they couldn't return the consumption. And this leads to a goods deficit. In other words, once they move out of a wartime economy, they can't maintain demand, precisely because the rest of the world is poor, not in spite of it.

Indeed. But if the rest of the world becomes wealthier and yet does not start buying their products en masse, the deficit will not go away at all. And it will be exacerbated by the problem with the rest of the world eating up more resources and yet not buying your non-competitive goods. Not because they're too bad; but simply because they will start saturating the market with their own goods. At which point your economic base will start contracting and yes, that would mark an economic downturn.

That doesn't seem to be the case, seeing as China is becoming an economic powerhouse, and the US sees its vested interests in making it its #1 trading partner, xenophobic nonsense from the Republicans to the contrary. Even if they have to start competing for resources, the rise in supply of goods from rival industries will lower prices for American consumers.

Again: except for lost opportunities, and it's only "beneficial" in the short run. Businessmen who want to make more money (and is there any other kind?) might just as easily see the poor country as a place for investment, which incidentally leads to diversification.

If they invest in other sectors than the one most profitable and necessary on the world market. If they invest only in that, the banana republic will break record banana yields, but that's it.

The number of goods exceeds the number of countries. Hence there's comparative advantage in more than one good per country.

Heh, isn't that's the very report that I cited earlier, which you called "UN feelgood blabbering", yes? But since we agree that wealth creation is important, then that's good. Here's another thing we agree on: diversification is important. I haven't disputed that; the only criterion I require is that it isn't diversification which is uncompetitive, otherwise it's a waste of capital resources to initiate it. Neither do I dispute that there's rampant malnourishment in the third world - I said "still" because in spite of it all, I'm tentatively optimistic that Latin America and Africa are capable of emulating the successes of East Asia, particularly when the success of their model is made evident.

Competitiveness is relative. Banana production in a banana republic is automatically 100% or even 1000% more competitive and more profitable than, say, creating advanced ships or something like that. At start, venture industries are not competitive.

That's short-term thinking again.

The issue of aid is relevant, since aid can undermine the natural development of local economies, and it is the primary counter-model for development in the third world as opposed to liberalization and free investment. If you question liberalization and are not talking about aid, then what are you proposing?

Aid in other forms - industrialization-related, primarily. For example, ordering some high-tech goods from the place and giving them relevant assembly lines and training. And, of course, directed state investment. Investing only in what's hot today is not a sound practice.

So - foreign investment. Long term investment becomes attractive if you have political stability and rule of law. I'm a bit skeptical of state sponsored investment as a means of gaining long-term profitability. This is especially true if foreign countries are supposed to foot the bill - why should they cough up the cash? This model faces your own objections far more than what I'm suggesting vis-a-vis buildup in the developing nation being against the interest of the "hegemon".

So, once again: good for specific sectors does not mean not good for the aggregate. Those sectors which benefit are simply capable of making more noise than the others.

Or more and more immediate profit. Which is a relevant decision-making factor. No one would want to invest and wait for 30-50 years (when he dies) until Turkmeni engineers start making iPads. There's China already. Turkmenis and Kazakhs can pump oil - good enough for 'em.

You make incremental progress, you don't immediately plan for multiple decades. You do this when you need to open new markets and new production when the oil pumping has maxed out. And besides, China managed to get where it is today by going the route of being the low-wage manufacturing center for the world. They're now in second-world rank. So why should this process not be possible for the next set of countries to go for the low-wage manufacturing route? That's why increased pressure for higher wages in China is a positive thing for developing nations who have seen less investment until now - at least for those who have managed to maintain rule of law.

If so, it's clearly only in the short term, as long as Oceania and Eurasia don't import, and more to the point, as long as they don't export to the growing Eastasia. You're fixating on the developing world as suppliers, not consumers that can provide jobs for the Oceanians and Eurasians. Here's an analogy which illustrates the point I am making with all of this: would Moscow oblast have become richer or poorer if the rest of Russia had never advanced economically beyond the Tzarist age?

Hahaha. If Moscow remained relatively much richer than the regions and there are no other factors, sure. I'm not fixating on Eastasia as producers; but what if they happen to be producers but not consumers? Plenty of nations are there in the world just to supply cheap shit for wealthy ones; they are not even a flicker for exports, and most exports circulate between weathier nations. Yes, they are foregoing possible future opportunities for all - the sake of preventing immediate damage to themselves. Which was my point all along.

Ah, OK - so you're focusing on the short term, and assuming that international capitalism is destined to do the same, correct? That's a point where we disagree. It may take quite a while, but the example of Eastasia - I mean East Asia - shows that such fears are not warranted. And you get to maintain profitability each step along the way.

I'm not even so sure that the short term losses will be a powerful enough disincentive for development provided that you have enough opportunistic investors who want to break into new markets (and if they don't exist, to create them). That means that you don't get to have vested interest groups gaining too much power in the developed nations who can create artificial barriers to such investment by various means, whether heavy-handed or subtle. But that's not what I'm advocating: such a situation isn't liberalized capitalism, but corporatism (as for the East India Tea company in the British Empire). In THAT situation, you have a point - except then, development in the colonies is bad principally for the corporate oligarchs, which is NOT the same thing as bad for the "hegemon" nation in general (at least when they break free from oligarch control). Hence my emphasis on "specific sectors in the economy".

[K. A. Pital]

Lolwut? Growth is measured in dollars of a given year, and that includes inflation. You might have a point if you were to say "poverty can increase in certain sectors of society".

Yep, my bad here, inflation is factored in the growth, but not in the distribution. Which is bad for the entire society (bar a small percentage of it). A good example is the US after the 1970s:

Incomes of all but the highest percentiles start growing much slower and almost enter a halt. In some other nations, there might even be an observable decline in incomes of the majority of the population. When applied on a transnational scale, you can have the same picture - some nations getting all the cream from the growth, while others effectively standing still or moving at turtle pace. Effectively, inflation of prices of cheap consumer goods, energy prices can make most of the society poorer despite formal growth being registered, because these people spend disporportionate amounts of income on foods, clothes, energy. Allocation of production to military industry can also create formal GDP growth but the society may not benefit from it and experience actual income declines and losses. There are many ways how formal growth may not correspond with actual benefits for the whole society. Yes, most of them are internal allocation issues. There can also be FDI allocation issues - for example, 100% of FDI goes to a nation's oil sector. The oil sector provides production growth and even GDP growth, but actual income growth in the nation would be constrained by the size of personnel occupied in the oil sector - which can be rather small.

Not to mention that making formal transactions with money is enough to make the GDP grow, while any non-monetary and non-market activity is extremely hard to evaluate in the GDP. The GDP can be caused to grow by introducing more commercial transactions into areas that were formerly serviced by hard to evaluate non-market mechanisms. This may not constitute actual growth of welfare, life level and quality of life.

That's why you invest in Turkmenistan. On that note, I don't see the US becoming poorer on account of the rise of East Asia. Less powerful in a relative sense, sure, but not poorer in an absolute sense.

Absolute poverty can come in time, if U.S. exports to East Asia keep contracting while East Asian goods keep becoming more expensive. It is just too huge a projection to make without considering all the factors. But even now as Chinese goods start getting more expensive, the buying power of First World customers is falling. True, they can turn to alternatives once the price reaches a certain level, but that does not mean the goods become any cheaper. They don't. The price has risen and now a greater share of income must be devoted to these goods. That's like if prices for everything stay static but food or clothes price rises. If such an event occurs, the population gets poorer in entirety - you agree?

That doesn't seem to be the case, seeing as China is becoming an economic powerhouse, and the US sees its vested interests in making it its #1 trading partner, xenophobic nonsense from the Republicans to the contrary. Even if they have to start competing for resources, the rise in supply of goods from rival industries will lower prices for American consumers.

Um... rise in supply from rival industries? China's economic powerhouse position allows it to raise prices for its goods - which impacts the buying power of those who buy these goods, and these are usually the working class and poor, rich folks don't buy Chinese CMGs. They are no longer as cheap. Most U.S. citizens have their incomes staying flat or having very slow growth - only the upper 5-10% enjoy outstripping income growth.

The number of goods exceeds the number of countries. Hence there's comparative advantage in more than one good per country.

Any example one might find is going to be imperfect anyway. The imperfection, however, underscores the point. It does not matter if some nation's export is 90% oil and 10% wool. We can, for the sake of the model, treat it as a single-good producer.

That's short-term thinking again.

Typical for capitalism. Money is time. Time can be evaluated. If the returns come too late, alternative paths of investment will be chosen simply because time itself is a cost. By the majority of investors, once again - exceptions only underscore the general trend. 90% will invest in oil, 10% will invest in iPads. In a while, of course, iPad production might pick up (unless more competitive in short term rivals kill it), but that would occur slower than in an alternative scenario where more capitalists would be willing to forego short-term profits in favor of long-term returns. Which natural for the system.

So - foreign investment. Long term investment becomes attractive if you have political stability and rule of law. I'm a bit skeptical of state sponsored investment as a means of gaining long-term profitability. This is especially true if foreign countries are supposed to foot the bill - why should they cough up the cash? This model faces your own objections far more than what I'm suggesting vis-a-vis buildup in the developing nation being against the interest of the "hegemon".

The investment in e.g. Japanese and Korean reconstructure was directed by political reasons as much as by economic ones. Long-term investment depends on more than political stability and rule of law. "Rule of law" may be dictatorial, but it has to be openly favoring foreign capitalists. Then everything's cool. Political stability alone means not much par se (Turkmenistan was and remains rather stable, as far as post-Soviet nations do - certainly more stable than Ukraine, but it is a poor one-good exporter nonetheless, with the rest of industry degrading and becoming more primitive). Larger geopolitics and mere geographical location can mean more than decades of stability.

So why should this process not be possible for the next set of countries to go for the low-wage manufacturing route? That's why increased pressure for higher wages in China is a positive thing for developing nations who have seen less investment until now - at least for those who have managed to maintain rule of law.

I'm not saying this is impossible for the next set of countries. I am questioning the ability to continue to outsource dirty and cheap industries to other nations. In a while their citizens will demand rights and higher standard of living - like they do in China. Which will run into the interests of profit-hungry people who invested there for the sake of greater profits and cheaper labour, not for the sake of making these people more well-off. Yes, if China demands it, some will just fly off to cheaper and poorer territories. But what if people there start to riot? There'll be no more places to run to. End of line.

Ah, OK - so you're focusing on the short term, and assuming that international capitalism is destined to do the same, correct? That's a point where we disagree. It may take quite a while, but the example of Eastasia - I mean East Asia - shows that such fears are not warranted. And you get to maintain profitability each step along the way.

Why are the fears not warranted, if most investors prefer short-term return to long-term return and that is a fully natural and reasonable behaviour? I agree with you on "specific sectors", but a "specific sector" can be as large as an entire nation. If we move to transnational scale and consider that some nations specialize in one area and others in yet another area, it is fairly natural that "benefit to a specific sector" might be a "benefit to a specific nation". For example, if programmers become more expensive on the overall, a nation whose primary export is 100% programming will become much wealthier. The entire nation.

[Lord Zentei]

Yep, my bad here, inflation is factored in the growth, but not in the distribution. Which is bad for the entire society (bar a small percentage of it). A good example is the US after the 1970s:
http://upload.wikimedia.org/wikipedia/c ... 07.svg.png
Incomes of all but the highest percentiles start growing much slower and almost enter a halt. In some other nations, there might even be an observable decline in incomes of the majority of the population. When applied on a transnational scale, you can have the same picture - some nations getting all the cream from the growth, while others effectively standing still or moving at turtle pace.

Growth is slowing in the rich nations, not in those developing nations which have embraced a pro-business model combined with effective rule of law. It's stagnant in those developing nations which have become playgrounds for tinpot dictators, economic isolationists and shills for transnational special interest groups. In other words, it's the domestic social and economic model employed that counts as well as trade and liberalization. And I'm aware of the growing disparity in the US. That's what happens when you get corporatism instead of an actual free market: oligarchs have the run of the capital and the middle class gets taxed into extinction.

Effectively, inflation of prices of cheap consumer goods, energy prices can make most of the society poorer despite formal growth being registered, because these people spend disporportionate amounts of income on foods, clothes, energy.

Well, again not so much, since inflation is usually measured according to a breadbasket of commonly used goods. At least that's the case over here. Hence the CPI - Consumer Price Index. As opposed to the MICPI - Military-Industrial Complex Price Index. Yes, I know there's no such thing as the MICPI, it's a joke, damnit. But considering the money spent on it, there probably should be. Hey, I just invented a new economic term, woo hoo.

Allocation of production to military industry can also create formal GDP growth but the society may not benefit from it and experience actual income declines and losses. There are many ways how formal growth may not correspond with actual benefits for the whole society. Yes, most of them are internal allocation issues. There can also be FDI allocation issues - for example, 100% of FDI goes to a nation's oil sector. The oil sector provides production growth and even GDP growth, but actual income growth in the nation would be constrained by the size of personnel occupied in the oil sector - which can be rather small.


Not to mention that making formal transactions with money is enough to make the GDP grow, while any non-monetary and non-market activity is extremely hard to evaluate in the GDP. The GDP can be caused to grow by introducing more commercial transactions into areas that were formerly serviced by hard to evaluate non-market mechanisms. This may not constitute actual growth of welfare, life level and quality of life.

Not all growth translates equally well into welfare for the average person, that's true. And of course non-market transactions need to be taken into account when measuring growth - though hard I don't think it's impossible to do. Still, GDP is among the most useful yardsticks available to us.

Absolute poverty can come in time, if U.S. exports to East Asia keep contracting while East Asian goods keep becoming more expensive. It is just too huge a projection to make without considering all the factors. But even now as Chinese goods start getting more expensive, the buying power of First World customers is falling. True, they can turn to alternatives once the price reaches a certain level, but that does not mean the goods become any cheaper. They don't. The price has risen and now a greater share of income must be devoted to these goods. That's like if prices for everything stay static but food or clothes price rises. If such an event occurs, the population gets poorer in entirety - you agree?

Depends on a number of factors - whether the East Asians start purchasing more US goods and whether other nations can replace China as a source for cheap goods. Also, it depends on the extent to which the US is truly dependent on China - even though it has the "preferred trading partner" status, it still accounts for only about 20% of US imports, which in turn is about 2-3% of US GDP (I can't remember the exact figure; Canada is still trading more with the US). A whole lot more of the trade goes to and from other countries in the OECD, especially when you add their totals, and they provide earnings to the US too. Greater trade with a developed China would increase such earnings too - so no, I can't say that I agree. Naturally it's possible for a country to get poorer if they trade with someone whose income is increasing, but only if they remain inflexible in their policies.

Um... rise in supply from rival industries? China's economic powerhouse position allows it to raise prices for its goods - which impacts the buying power of those who buy these goods, and these are usually the working class and poor, rich folks don't buy Chinese CMGs. They are no longer as cheap. Most U.S. citizens have their incomes staying flat or having very slow growth - only the upper 5-10% enjoy outstripping income growth.

The US is a place where the middle class pays most of the taxes, so I'm not so sure that's a valid counterpoint to liberalization per se. Trade provides opportunities, domestic policies decide whether that does the nation any good. Moreover, China won't be able to raise prices if their prospective customers can't afford to buy their stuff.

Any example one might find is going to be imperfect anyway. The imperfection, however, underscores the point. It does not matter if some nation's export is 90% oil and 10% wool. We can, for the sake of the model, treat it as a single-good producer.


Typical for capitalism. Money is time. Time can be evaluated. If the returns come too late, alternative paths of investment will be chosen simply because time itself is a cost. By the majority of investors, once again - exceptions only underscore the general trend. 90% will invest in oil, 10% will invest in iPads. In a while, of course, iPad production might pick up (unless more competitive in short term rivals kill it), but that would occur slower than in an alternative scenario where more capitalists would be willing to forego short-term profits in favor of long-term returns. Which natural for the system.

The point is that they have the opportunity to diversify.

Naturally there are nations reliant on a single good, and the economy in these countries is only as stable as that good. I should know - mine was almost entirely dependent on a single sector (fishing) for a long time. Now we have manufactured products, software and tourism to add to this. The point is that single good economies - even very small ones - are perfectly capable of diversification.

The only alternative scenario to liberalization would presumably be intensive government investments. That has it's own problems, since governments are not bound by the requirements of profitability, and they tend to be hijacked by special interest groups who may restrict trade to protect themselves. Same as corporatism, only with less profitability.

The investment in e.g. Japanese and Korean reconstructure was directed by political reasons as much as by economic ones. Long-term investment depends on more than political stability and rule of law. "Rule of law" may be dictatorial, but it has to be openly favoring foreign capitalists. Then everything's cool. Political stability alone means not much par se (Turkmenistan was and remains rather stable, as far as post-Soviet nations do - certainly more stable than Ukraine, but it is a poor one-good exporter nonetheless, with the rest of industry degrading and becoming more primitive). Larger geopolitics and mere geographical location can mean more than decades of stability.

I'm not sure whether you're making a counter-point or agreeing with me on some level, since I have repeatedly said that rule of law is vital (and I've mentioned domestic policies too, BTW). Though political stability is to be preferred, don't you think?

I'm not saying this is impossible for the next set of countries. I am questioning the ability to continue to outsource dirty and cheap industries to other nations. In a while their citizens will demand rights and higher standard of living - like they do in China. Which will run into the interests of profit-hungry people who invested there for the sake of greater profits and cheaper labour, not for the sake of making these people more well-off. Yes, if China demands it, some will just fly off to cheaper and poorer territories. But what if people there start to riot? There'll be no more places to run to. End of line.

If they start to riot, then they will forfeit the gains China has made in recent years. China is starting to assert itself precisely because of their growing economic importance. Economic power translates to political power, agreed? Isolationism is not the way to go, and you have to start somewhere. As for wanting to make those people well off - trade requires no benevolence, that's why you can convince people to do it. Obviously the people who make the goods aren't doing it to make poor Americans happy with their widescreen TV sets.

In time, there will be no more poor areas to go to for outsourcing, at least not in the way we're used to. What then? Well, then great: we've equalized the world nations in spite of ourselves.

Why are the fears not warranted, if most investors prefer short-term return to long-term return and that is a fully natural and reasonable behaviour? I agree with you on "specific sectors", but a "specific sector" can be as large as an entire nation. If we move to transnational scale and consider that some nations specialize in one area and others in yet another area, it is fairly natural that "benefit to a specific sector" might be a "benefit to a specific nation". For example, if programmers become more expensive on the overall, a nation whose primary export is 100% programming will become much wealthier. The entire nation.

[/quote]

See previous point on the number of goods where comparative advantage is held by a nation. While it's true that most investors prefer short term gains, it's not true that all do so; and there's a graduated scale of time-frames for returns for different sectors of production. The job of the government is to provide conditions and incentives beneficial to medium-term and long-term investments. But for that, you must have stability and rule of law.

[K. A. Pital]

It's stagnant in those developing nations which have become playgrounds for tinpot dictators, economic isolationists and shills for transnational special interest groups. In other words, it's the domestic social and economic model employed that counts as well as trade and liberalization. And I'm aware of the growing disparity in the US. That's what happens when you get corporatism instead of an actual free market: oligarchs have the run of the capital and the middle class gets taxed into extinction.

But funnily enough, the US was the most business-friendly First World nation. And let's not forget that Chile's Pinochetian years were marked by worse economic growth than the average in Latin America. Quite surprising for such a "business-friendly", even if dictatorial, regime.

Well, again not so much, since inflation is usually measured according to a breadbasket of commonly used goods. At least that's the case over here. Hence the CPI - Consumer Price Index. As opposed to the MICPI - Military-Industrial Complex Price Index. Yes, I know there's no such thing as the MICPI, it's a joke, damnit. But considering the money spent on it, there probably should be. Hey, I just invented a new economic term, woo hoo.

Hahah. I love MICPI. It sounds like AMRAAM or something, an acronym the military would actually use. And yes, if inflation is measured with inclusion or exclusion of certain goods, that can make it more adequate. However, one needs to be careful when designing the system. You can carefully manipulate such numbers as Core CPI, throwing out food inflation, and use it in mass-media to create an illusion of low inflation. That's what some all dishonest crooked leaders here try to do all the time.

Not all growth translates equally well into welfare for the average person, that's true. And of course non-market transactions need to be taken into account when measuring growth - though hard I don't think it's impossible to do. Still, GDP is among the most useful yardsticks available to us.

I know. But even World Bank statisticians get a bit offset when they try to evaluate the volume of non-commodity agriculture in, say, Kenya. That's... hard to do. No market - no transactions - in theory, no value. There are approximations, but they are often imprecise and wrong. Not to say the GDP is totally useless, but growth may not be what it seems. I've seen a lot of such examples in places here and there.

Depends on a number of factors - whether the East Asians start purchasing more US goods and whether other nations can replace China as a source for cheap goods. Also, it depends on the extent to which the US is truly dependent on China - even though it has the "preferred trading partner" status, it still accounts for only about 20% of US imports, which in turn is about 2-3% of US GDP (I can't remember the exact figure; Canada is still trading more with the US). A whole lot more of the trade goes to and from other countries in the OECD, especially when you add their totals, and they provide earnings to the US too. Greater trade with a developed China would increase such earnings too - so no, I can't say that I agree. Naturally it's possible for a country to get poorer if they trade with someone whose income is increasing, but only if they remain inflexible in their policies.

By remaining inflexible you mean they don't start outsourcing dirty industries to yet other nations with lower labour costs or, alternatively, create something of greater value to expand their contracting economic/income base. What if they can't? What if they have depleted their own reserves of growth? Too bad for them, then. And yes, I know this depends on a great variety of factors. My model is simplistic, only to prove that such a situation is technically possible due to buying power shifts alone.

The US is a place where the middle class pays most of the taxes, so I'm not so sure that's a valid counterpoint to liberalization per se. Trade provides opportunities, domestic policies decide whether that does the nation any good. Moreover, China won't be able to raise prices if their prospective customers can't afford to buy their stuff.

Prospective customers can try to afford stuff by buying it in credit. And then defaulting. You can use credit to create a massive lag. In case of say, sovereign default (worst case scenario) the lag between debt accumulation and default can be decades. Alternatively, China just shifts to their domestic market as incomes grow, and U.S. citizens are no longer able to outprice the Chinese as much as they'd love to. Exports will contract again, if Chinese domestic demand can give more robust and better growth.

The point is that single good economies - even very small ones - are perfectly capable of diversification.

Only if there are sufficient incentives for diversification or if the government mandates diversification and pursues it as a policy. Investment in that single good actually creates a negative feedback loop - since Sector A is the most developed in the nation, most investment goes to Sector A. In other words, diversification becomes harder because of market mechanisms in action. That's like a Ponzi scheme a bit. Everybody invests into a fraud because others do. Eventually, when the fraud is discovered, the whole thing collapses. End of story for those who didn't have diversification priorities set in action.

The only alternative scenario to liberalization would presumably be intensive government investments. That has it's own problems, since governments are not bound by the requirements of profitability, and they tend to be hijacked by special interest groups who may restrict trade to protect themselves. Same as corporatism, only with less profitability.

It has problems, but also creates opportunities. Profitability demands and short-term return demands can kill a sector which can otherwise develop and become post-facto profitable. E.g. the Russian space industry right now is profitable. However, if we were thinking in terms of profitability of foreign investment in SPACE INDUSTRY in a backwards semi-industrialized nation which Russia was, it's space indstry would now look like Brazil's.

I'm not sure whether you're making a counter-point or agreeing with me on some level, since I have repeatedly said that rule of law is vital (and I've mentioned domestic policies too, BTW). Though political stability is to be preferred, don't you think?

I am agreeing on some levels and raising a counterpoint to other nuances. For example, Korea's and Japan's geopolitical status as Cold War US strongholds in Asia did more for their economies than their precise trade policies. Japan has been caught with theft of US technology in the 50s to the 80s, but their status was too important to center on that. And their allied status also made economic destruction of these nations a no-no policy, you don't want to ruin your allies' industrial potential. Same with, say, some finance or goods transit territories. They can get rich simply via geographic location. No matter the policies. The transit route supplies the wealth, and without it the nation or territory would far much, much worse even if they liberalized to hell and back.

If they start to riot, then they will forfeit the gains China has made in recent years. China is starting to assert itself precisely because of their growing economic importance. Economic power translates to political power, agreed? Isolationism is not the way to go, and you have to start somewhere. As for wanting to make those people well off - trade requires no benevolence, that's why you can convince people to do it. Obviously the people who make the goods aren't doing it to make poor Americans happy with their widescreen TV sets. In time, there will be no more poor areas to go to for outsourcing, at least not in the way we're used to. What then? Well, then great: we've equalized the world nations in spite of ourselves.

Heh. Alternatively, when such problems start occuring, the developed world can facilitate imperialistic conflicts - more smart than the Iraq one - for economic reasons.

The job of the government is to provide conditions and incentives beneficial to medium-term and long-term investments. But for that, you must have stability and rule of law.

Or just be conveniently located. Shake hands with George W. Bush and lick the boots of the developed nations (even if they have done you wrong). That can compensate for the lack of either stability or rule of law quite well. *laughs* So there's more to this than just "everyone has opportunities". Some have more opportunities, and not because they've been better than others.

For example, Iran - a modernized nation with a low-Second World life standard - is constantly reviled and sanctioned. Turkey, where honor killings run rampant and dozens of thousands died in their oppression of the Kurds (one of the reasons to go after "Saddam", as U.S. folks been telling me), is a good NATO member and thus... regardless if their actual record wasn't much better than Iran, they're a priority investment. Iran is not. And if Turkey is a bad example, Saudi Arabia's a good one. They uphold the same Sharia law as Iran, but their geopolitical allegiance is enough to make U.S. dollars flow to them, and not to Iran.

[Lord Zentei]

But funnily enough, the US was the most business-friendly First World nation. And let's not forget that Chile's Pinochetian years were marked by worse economic growth than the average in Latin America. Quite surprising for such a "business-friendly", even if dictatorial, regime.

While he was business-friendly, I wouldn't exactly call Pinochet pro-rule-of-law, would you? Nonetheless, Chile was the first Latin American country to join the OECD, and is still among the continent's highest performers. As for the US - it's not a developing country, it's a developed country and therefore doesn't benefit from the catch-up effect like East Asia and Chile used to. But it also has higher growth rate than comparably well-developed Europe.

Hahah. I love MICPI. It sounds like AMRAAM or something, an acronym the military would actually use. And yes, if inflation is measured with inclusion or exclusion of certain goods, that can make it more adequate. However, one needs to be careful when designing the system. You can carefully manipulate such numbers as Core CPI, throwing out food inflation, and use it in mass-media to create an illusion of low inflation. That's what some all dishonest crooked leaders here try to do all the time.

Ah, so "over here" is much like "elsewhere". Politicians are dishonest by trade. They need to be kept under watch 24/7.

I know. But even World Bank statisticians get a bit offset when they try to evaluate the volume of non-commodity agriculture in, say, Kenya. That's... hard to do. No market - no transactions - in theory, no value. There are approximations, but they are often imprecise and wrong. Not to say the GDP is totally useless, but growth may not be what it seems. I've seen a lot of such examples in places here and there.

OK, that's fair enough.

By remaining inflexible you mean they don't start outsourcing dirty industries to yet other nations with lower labour costs or, alternatively, create something of greater value to expand their contracting economic/income base. What if they can't? What if they have depleted their own reserves of growth? Too bad for them, then. And yes, I know this depends on a great variety of factors. My model is simplistic, only to prove that such a situation is technically possible due to buying power shifts alone.

Ah, technically possible. Perhaps. But I don't know that it is realistic, given proper domestic policies, especially if there are enough open markets for them to expand into. Such inability would be far more likely to stem from bad domestic policy or international markets becoming more restrictive (which can happen for the sake of protectionism, but protectionism invites reprisals, and to that, see previous point).

Prospective customers can try to afford stuff by buying it in credit. And then defaulting. You can use credit to create a massive lag. In case of say, sovereign default (worst case scenario) the lag between debt accumulation and default can be decades. Alternatively, China just shifts to their domestic market as incomes grow, and U.S. citizens are no longer able to outprice the Chinese as much as they'd love to. Exports will contract again, if Chinese domestic demand can give more robust and better growth.

The over-reliance on purchases through credit fall under "bad domestic policy"

Only if there are sufficient incentives for diversification or if the government mandates diversification and pursues it as a policy. Investment in that single good actually creates a negative feedback loop - since Sector A is the most developed in the nation, most investment goes to Sector A. In other words, diversification becomes harder because of market mechanisms in action. That's like a Ponzi scheme a bit. Everybody invests into a fraud because others do. Eventually, when the fraud is discovered, the whole thing collapses. End of story for those who didn't have diversification priorities set in action.

It's the government's job to create conditions amenable to prosperity (though in my view, mandating it from on high isn't as desirable as doing it for-profit since that way you're not sure to know whether your investment was worth it). I'm not sure about the negative feedback loop model, though. The development in that one good will reach a point of diminishing returns, since there's a limit to how much a given resource can be developed at a given price, given other factors being constant. As for fraud - obviously that can screw a country over pretty badly. But fraud is... well, fraud.

It has problems, but also creates opportunities. Profitability demands and short-term return demands can kill a sector which can otherwise develop and become post-facto profitable. E.g. the Russian space industry right now is profitable. However, if we were thinking in terms of profitability of foreign investment in SPACE INDUSTRY in a backwards semi-industrialized nation which Russia was, it's space indstry would now look like Brazil's.

Yes, it would. Though what other investments would have taken place in Russia instead, given more short-term and mid-term goals? Would the money spent there have created industries more profitable today? And while the space industry is certainly one of Russia's great successes, many of the investments that were mandated by the Soviets weren't as successful. Centralized planning can be very effective in focusing resources on specific goals, but it's long term profitability is also pretty hit and miss.

I am agreeing on some levels and raising a counterpoint to other nuances. For example, Korea's and Japan's geopolitical status as Cold War US strongholds in Asia did more for their economies than their precise trade policies. Japan has been caught with theft of US technology in the 50s to the 80s, but their status was too important to center on that. And their allied status also made economic destruction of these nations a no-no policy, you don't want to ruin your allies' industrial potential. Same with, say, some finance or goods transit territories. They can get rich simply via geographic location. No matter the policies. The transit route supplies the wealth, and without it the nation or territory would far much, much worse even if they liberalized to hell and back.

Yes, naturally geopolitical alliances are important too. Economic arguments are always cetera paribus.

Heh. Alternatively, when such problems start occuring, the developed world can facilitate imperialistic conflicts - more smart than the Iraq one - for economic reasons.

Of course, that leads to a less ideal outcome for the developed countries than if the riots hadn't taken place. But inciting overthrow of government is neo-colonialism, not free trade. The point stands though, that the developing nation is better off (at least in the long term) with trade than without, given sound domestic policies, if the developed nations aren't being assholes.

Or just be conveniently located. Shake hands with George W. Bush and lick the boots of the developed nations (even if they have done you wrong). That can compensate for the lack of either stability or rule of law quite well. *laughs* So there's more to this than just "everyone has opportunities". Some have more opportunities, and not because they've been better than others.

For example, Iran - a modernized nation with a low-Second World life standard - is constantly reviled and sanctioned. Turkey, where honor killings run rampant and dozens of thousands died in their oppression of the Kurds (one of the reasons to go after "Saddam", as U.S. folks been telling me), is a good NATO member and thus... regardless if their actual record wasn't much better than Iran, they're a priority investment. Iran is not.

I guess that technically, you can view geography as a natural resource of sorts. I don't know about GWB's hand, though.

Again, geopolitics counts for a lot, I agree. But see two points above this one.

[K. A. Pital]

While he was business-friendly, I wouldn't exactly call Pinochet pro-rule-of-law, would you? Nonetheless, Chile was the first Latin American country to join the OECD, and is still among the continent's highest performers. As for the US - it's not a developing country, it's a developed country and therefore doesn't benefit from the catch-up effect like East Asia and Chile used to. But it also has higher growth rate than comparably well-developed Europe.

Why isn't Pinochet "pro-rule-of-law"? Rule of law, in classic bourgeois/liberal theories, only relates to the existence and protection of private property rights. Pinochet was certainly more protective of private property as an institution than others. If this:

The average growth in GDP was 1.5% per year between 1974 and 1982, which was lower than the average Latin American growth rate of 4.3% and lower than the 4.5% of Chile in the 1960's. Between 1970 and 1980, per capita GDP grew by only 8%, while for Latin America as a whole, it increased by 40% and for the years 1980 and 1982 per capita GDP fell by 12.9 percent, compared to a fall of 4.3 percent for Latin America as a whole. In 1982, after 7 years of free market capitalism, Chile faced yet another economic crisis which, in terms of unemployment and falling GDP was even greater than that experienced during the terrible shock treatment of 1975. Real wages dropped sharply, falling in 1983 to 14 percent below what they had been in 1970. Bankruptcies skyrocketed, as did foreign debt. By the end of 1986 Gross Domestic Product per capita barely equalled that of 1970. Between 1970 and 1989, Chile total GDP grew by a lackluster 1.8 to 2.0% a year, slower than most Latin American countries. The high growth, in other words, was a product of the deep recessions that the regime created

...is true as far as numbers go, then certainly this does not prove the benefits of liberalization on a practical basis. As for America's higher growth rates than Europe, I thought you agreed with me that for the 1970-2007 period income growth was almost flat for the majority of people - those below the 80-90th percentile, at least. Which means business-friendly policies created faster growth than in Europe which, however, did not benefit the majority of the population, since their incomes stood flat or increased insignificantly.

Ah, technically possible. Perhaps. But I don't know that it is realistic, given proper domestic policies, especially if there are enough open markets for them to expand into. Such inability would be far more likely to stem from bad domestic policy or international markets becoming more restrictive (which can happen for the sake of protectionism, but protectionism invites reprisals, and to that, see previous point).

Open markets to expand into also depend on many conditions. For example, labour costs in advanced economies are high. The only reason why people buy their products is because other nations don't yet have the industrial capacity to make these products. What if China gets the capability to create advanced technology at a lower cost of labour? No amount of "penetrating" will be able to overcome a natural cost barrier - similar products from developed nations will be more expensive and that's it.

The over-reliance on purchases through credit fall under "bad domestic policy"

That means for the last 20 years (and some say, for the last 30 years even) domestic policies have been bad in the developed nations. Having exhausted natural reserves for growth of the life standard, they turned to credit-reliant consumption. This expanded consumption on a fundamentally unsustainable basis and caused a massive collapse which we're still reaping consequences of. As the policies introduced in the USA were afterwards accepted internationally and were part of the accepted theory of further development of capitalism, I would not say they were simply isolated "bad domestic policy".

It's the government's job to create conditions amenable to prosperity (though in my view, mandating it from on high isn't as desirable as doing it for-profit since that way you're not sure to know whether your investment was worth it). I'm not sure about the negative feedback loop model, though. The development in that one good will reach a point of diminishing returns, since there's a limit to how much a given resource can be developed at a given price, given other factors being constant. As for fraud - obviously that can screw a country over pretty badly. But fraud is... well, fraud.

Development of a good can cause diminishing returns, but you can try to postpone this point. One way is to keep labour costs low (say, rely on corrupt Kazakhstani government to murder and imprison trade union activists). This can work for years. Sometimes even decades. Enough to reap good profits, even if soaked in blood. Fraud is only discovered post-facto, usually it looks as a legitimate risky investment for the entire fraud period or like, 90% of it.

Yes, it would. Though what other investments would have taken place in Russia instead, given more short-term and mid-term goals? Would the money spent there have created industries more profitable today? And while the space industry is certainly one of Russia's great successes, many of the investments that were mandated by the Soviets weren't as successful. Centralized planning can be very effective in focusing resources on specific goals, but it's long term profitability is also pretty hit and miss.

Part of the problem was that central planning was operating in isolation. I am supporting more flexible central planning in non-autarkian conditions. So that nascent industries can be protected, but they do have competition from foreign goods nonetheless. This would make long-term viability less of a hit and miss. However, what one can't deny is that many nations which had more open trade conditions from the onset of the XX century failed to develop any high-tech, advanced industries whatsoever. So that would indicate private investment is no less a hit and miss thing.

Of course, that leads to a less ideal outcome for the developed countries than if the riots hadn't taken place. But inciting overthrow of government is neo-colonialism, not free trade. The point stands though, that the developing nation is better off (at least in the long term) with trade than without, given sound domestic policies, if the developed nations aren't being assholes.

I agree. However, I was never advocating autarky. But liberalized trade usually also includes the abolition of internal controls and selective protection barriers, which are part of the internal policymaking. So this is not as clear-cut. Liberalization will inevitably impact domestic policies, and not always in a positive fashion.

I guess that technically, you can view geography as a natural resource of sorts.

Well, hence the existence of economic geography as a discipline. GWB's hand can be a resource. Or Nixon's hand for that matter. Or Churchill's. Even Hitler's hand can be a useful, if non-natural, resource.

[Lord Zentei]

Hey, sorry about the tardiness; I had quite a bit to do and plain forgot about responding (well *ahem* actually procastination is mainly to blame)

Why isn't Pinochet "pro-rule-of-law"? Rule of law, in classic bourgeois/liberal theories, only relates to the existence and protection of private property rights. Pinochet was certainly more protective of private property as an institution than others.

No, I wouldn't say that. That's an oversimplification. In so far as economics is concerned, then yes, they're crucial, but they're not the only thing that's important. Or more accurately, every person is considered to be his own property, and if you don't get proper redress of grievances for example, then your property rights are being violated. Ditto if you're made to breathe polluted air without compensation, etc. It's not just about objects and money. Moreover, since innovation and advertisement both require communication, you can't undermine freedom of speech, etc. More examples can be cited, but you get the idea. The approach of the liberal theories is primarily to define these things in terms of property rights, rather than from a social perspective, due to the utility of the economic models already crafted.

If this:

The average growth in GDP was 1.5% per year between 1974 and 1982, which was lower than the average Latin American growth rate of 4.3% and lower than the 4.5% of Chile in the 1960's. Between 1970 and 1980, per capita GDP grew by only 8%, while for Latin America as a whole, it increased by 40% and for the years 1980 and 1982 per capita GDP fell by 12.9 percent, compared to a fall of 4.3 percent for Latin America as a whole. In 1982, after 7 years of free market capitalism, Chile faced yet another economic crisis which, in terms of unemployment and falling GDP was even greater than that experienced during the terrible shock treatment of 1975. Real wages dropped sharply, falling in 1983 to 14 percent below what they had been in 1970. Bankruptcies skyrocketed, as did foreign debt. By the end of 1986 Gross Domestic Product per capita barely equalled that of 1970. Between 1970 and 1989, Chile total GDP grew by a lackluster 1.8 to 2.0% a year, slower than most Latin American countries. The high growth, in other words, was a product of the deep recessions that the regime created

...is true as far as numbers go, then certainly this does not prove the benefits of liberalization on a practical basis. As for America's higher growth rates than Europe, I thought you agreed with me that for the 1970-2007 period income growth was almost flat for the majority of people - those below the 80-90th percentile, at least. Which means business-friendly policies created faster growth than in Europe which, however, did not benefit the majority of the population, since their incomes stood flat or increased insignificantly.

Um, Chile has been the leading economy in Latin America for some time now, only recently has Brazil been growing faster. They're not about to join the OECD due simply to being well connected.

Ah, technically possible. Perhaps. But I don't know that it is realistic, given proper domestic policies, especially if there are enough open markets for them to expand into. Such inability would be far more likely to stem from bad domestic policy or international markets becoming more restrictive (which can happen for the sake of protectionism, but protectionism invites reprisals, and to that, see previous point).

Open markets to expand into also depend on many conditions. For example, labour costs in advanced economies are high. The only reason why people buy their products is because other nations don't yet have the industrial capacity to make these products. What if China gets the capability to create advanced technology at a lower cost of labour? No amount of "penetrating" will be able to overcome a natural cost barrier - similar products from developed nations will be more expensive and that's it.

If they gain the ability to create advanced technology, then they will charge more for it, since they want profits too. There's a reason why labour costs in the US are high, an this is pretty much it. Moreover we can again rely on Ricardo; the Chinese won't gain such an advantage in all fields that American workers will be left with nothing to do.

That means for the last 20 years (and some say, for the last 30 years even) domestic policies have been bad in the developed nations. Having exhausted natural reserves for growth of the life standard, they turned to credit-reliant consumption. This expanded consumption on a fundamentally unsustainable basis and caused a massive collapse which we're still reaping consequences of. As the policies introduced in the USA were afterwards accepted internationally and were part of the accepted theory of further development of capitalism, I would not say they were simply isolated "bad domestic policy".

Over-reliance on credit in the developed nations aren't examples of good domestic policy, that's true. However, not all cases are equally bad, and not everyone can get away with as much bad behavior simply because they don't have the leeway to do so. I don't think this is too much of a stretch.

It's the government's job to create conditions amenable to prosperity (though in my view, mandating it from on high isn't as desirable as doing it for-profit since that way you're not sure to know whether your investment was worth it). I'm not sure about the negative feedback loop model, though. The development in that one good will reach a point of diminishing returns, since there's a limit to how much a given resource can be developed at a given price, given other factors being constant. As for fraud - obviously that can screw a country over pretty badly. But fraud is... well, fraud.

Development of a good can cause diminishing returns, but you can try to postpone this point. One way is to keep labour costs low (say, rely on corrupt Kazakhstani government to murder and imprison trade union activists). This can work for years. Sometimes even decades. Enough to reap good profits, even if soaked in blood. Fraud is only discovered post-facto, usually it looks as a legitimate risky investment for the entire fraud period or like, 90% of it.

OK, but then you have a de-facto colonial system, and not a liberalized system at all. That's hardly a valid counterpoint to the model.

Yes, it would. Though what other investments would have taken place in Russia instead, given more short-term and mid-term goals? Would the money spent there have created industries more profitable today? And while the space industry is certainly one of Russia's great successes, many of the investments that were mandated by the Soviets weren't as successful. Centralized planning can be very effective in focusing resources on specific goals, but it's long term profitability is also pretty hit and miss.

Part of the problem was that central planning was operating in isolation. I am supporting more flexible central planning in non-autarkian conditions. So that nascent industries can be protected, but they do have competition from foreign goods nonetheless. This would make long-term viability less of a hit and miss. However, what one can't deny is that many nations which had more open trade conditions from the onset of the XX century failed to develop any high-tech, advanced industries whatsoever. So that would indicate private investment is no less a hit and miss thing.

Perhaps, though I'd say that corruption is largely to blame in both cases. The central planning approach may prove rather difficult if you're attempting to do it in tandem with other central planners in XYZ other countries. If each country is centrally planned, and they're not autarkists, then in effect, the gestalt world economy isn't centrally planned at all, but becomes an emergent system of autonomous actors, as would be the case in a liberalized economy. Except the actors are less flexible than they otherwise would be. I'm also suspicious of the idea that central planners can respond not only in an accountable manner, but also in a profitable and innovative manner across each sector simultaneously; hence the benefit of independent units that are allowed to operate - and fail - separately.

Of course, that leads to a less ideal outcome for the developed countries than if the riots hadn't taken place. But inciting overthrow of government is neo-colonialism, not free trade. The point stands though, that the developing nation is better off (at least in the long term) with trade than without, given sound domestic policies, if the developed nations aren't being assholes.

I agree. However, I was never advocating autarky. But liberalized trade usually also includes the abolition of internal controls and selective protection barriers, which are part of the internal policymaking. So this is not as clear-cut. Liberalization will inevitably impact domestic policies, and not always in a positive fashion.

Selective protection barriers are not liberalization in any sense, except in the rhetoric of pro-corporate propaganda. Proper liberalization is made equally for all sectors of the economy. As for "controls", that depends on whether you're talking about the ability of people to hold each other accountable, or whether you're talking about political control of the economy. The former is appropriate and necessary, and part and parcel of proper liberalized economies, the latter certainly isn't. The main bone of contention is whether you need a powerful supervisory bureaucracy to ensure accountability.

I guess that technically, you can view geography as a natural resource of sorts.

Well, hence the existence of economic geography as a discipline. GWB's hand can be a resource. Or Nixon's hand for that matter. Or Churchill's. Even Hitler's hand can be a useful, if non-natural, resource.

Hands are hardly natural resources. Human resources, perhaps.

[K. A. Pital]

Hey, sorry about the tardiness; I had quite a bit to do and plain forgot about responding (well *ahem* actually procastination is mainly to blame)

Heh, worry not.

No, I wouldn't say that. That's an oversimplification. In so far as economics is concerned, then yes, they're crucial, but they're not the only thing that's important. Or more accurately, every person is considered to be his own property, and if you don't get proper redress of grievances for example, then your property rights are being violated. Ditto if you're made to breathe polluted air without compensation, etc. It's not just about objects and money. Moreover, since innovation and advertisement both require communication, you can't undermine freedom of speech, etc. More examples can be cited, but you get the idea. The approach of the liberal theories is primarily to define these things in terms of property rights, rather than from a social perspective, due to the utility of the economic models already crafted.

Yeah, I know. But there's no property right of a person to a government. Democracy isn't thus included in the externalities you listed. Yes, "getting proper redress of grievances" can implicate democracy, but does not necessitate it. After all, dictatorships can have feedback mechanisms installed as well.

Um, Chile has been the leading economy in Latin America for some time now, only recently has Brazil been growing faster. They're not about to join the OECD due simply to being well connected.

*shrugs* "Some time" is an incredibly vague descriptor, which can or can not include Pinochet's reign. After all, Pinochet was ousted in 1989 - that's 22 years before now. I was citing figures which primarily concerned the Pinochet period, i.e. 1973-1989. If they are true, Pinochet had a piss poor record.

If they gain the ability to create advanced technology, then they will charge more for it, since they want profits too. There's a reason why labour costs in the US are high, an this is pretty much it. Moreover we can again rely on Ricardo; the Chinese won't gain such an advantage in all fields that American workers will be left with nothing to do.

Nah, not "all". But what if the sectors where a competitive advantage for Americans remain are no longer massive enough (manpower-wise) to keep up the life level? What if the Ricardian advantage base is shrinking? And what if touted new competitively advantageous sectors are bullshit (e.g. distributed risk financial services - something many said is America's area of competitive advantage before the whole thing turned out to be a pathetic bubble big enough to drown the entire 14-trillion economy)?

Over-reliance on credit in the developed nations aren't examples of good domestic policy, that's true. However, not all cases are equally bad, and not everyone can get away with as much bad behavior simply because they don't have the leeway to do so. I don't think this is too much of a stretch.

Yep, not everyone can get away. Some economies are too small and thus their stress capacity is very small as well (see Greece, Spain, Portugal, Italy, Ireland, Iceland, Hungary, Latvia, Argentina, Ukraine, Belorus etc.), they just go fucking bust if they try to play the game. But what does it change? The small actors go bust and larger market actors from uberpower nations (Germany, France, USA) use this moment to capitalize on the crash of smaller economies. There is no fundamental change of attitude. Capitalism's drive to endlessly expand even when material conditions do not allow for any further expansion seems to me the root of this problem. Not particular decisions on part of any single government. That's just the result of the system's behaviour.

OK, but then you have a de-facto colonial system, and not a liberalized system at all. That's hardly a valid counterpoint to the model.

Liberalized trade and liberalized markets do not mean liberalized and well-protected labour rights. It does not mean colonialism, although neo-colonialism is an apt description.

Perhaps, though I'd say that corruption is largely to blame in both cases. The central planning approach may prove rather difficult if you're attempting to do it in tandem with other central planners in XYZ other countries. If each country is centrally planned, and they're not autarkists, then in effect, the gestalt world economy isn't centrally planned at all, but becomes an emergent system of autonomous actors, as would be the case in a liberalized economy. Except the actors are less flexible than they otherwise would be. I'm also suspicious of the idea that central planners can respond not only in an accountable manner, but also in a profitable and innovative manner across each sector simultaneously; hence the benefit of independent units that are allowed to operate - and fail - separately.

Part of the problem is that the iron law of oligarchy operates for all systems, be they centrally planned or relying on the capitalist relations of market trade. Emergent systems can exist without capitalist principles if there's enough underlying support, althogh I might be overtly optimistic about their grand-scale viability (once again, ideological bias - nothing one can do about that). Profitability often does not matter vis-a-vis development. For example, if you unite superprofitable cargo transit with lossy passenger transit under one nation-wide railway system, the system will operate at a profit and yet be able to expand lossy passenger transit to provide better services to the populace. That's just one example. If the passenger cargo line is separate and individual, it will go bankrupt there and then.

Selective protection barriers are not liberalization in any sense, except in the rhetoric of pro-corporate propaganda. Proper liberalization is made equally for all sectors of the economy. As for "controls", that depends on whether you're talking about the ability of people to hold each other accountable, or whether you're talking about political control of the economy. The former is appropriate and necessary, and part and parcel of proper liberalized economies, the latter certainly isn't. The main bone of contention is whether you need a powerful supervisory bureaucracy to ensure accountability.

Part of the problem is that advanced nations and powerful corporations won't yield to abolish internal barriers in their own nations for the sake of some poor third worlders who could outcompete them. The whole situation with perfectly mobile capital and almost perfectly immobile labour (enormous visa barriers between the First and Third World, not to mention relocation expenses being way out of order for 90% of Third Worlders) perpetrates the current absolutely mad income disparity. Perfectly mobile labour would rectify the issue, but it would cause a collapse in the life standard of First World nations. Ergo, unacceptable politically. An absolutely free world market is infeasible precisely because of the system that already exists. Corporatism as you name it is the natural result of market evolution. More powerful agents (megacorps) get power; you can throw the economy backwards by destroying them or trying to curb their power, but eventually they will arise again. Capital concentration and centralization is a natural process. Out of 80-something automobile makers, only 6 mega-corporations survive in Germany. However, it did not lead to worse cars. What it led to is immense concentration of capital and power. Can't work around this.

[Lord Zentei]

No, I wouldn't say that. That's an oversimplification. In so far as economics is concerned, then yes, they're crucial, but they're not the only thing that's important. Or more accurately, every person is considered to be his own property, and if you don't get proper redress of grievances for example, then your property rights are being violated. Ditto if you're made to breathe polluted air without compensation, etc. It's not just about objects and money. Moreover, since innovation and advertisement both require communication, you can't undermine freedom of speech, etc. More examples can be cited, but you get the idea. The approach of the liberal theories is primarily to define these things in terms of property rights, rather than from a social perspective, due to the utility of the economic models already crafted.

Yeah, I know. But there's no property right of a person to a government. Democracy isn't thus included in the externalities you listed. Yes, "getting proper redress of grievances" can implicate democracy, but does not necessitate it. After all, dictatorships can have feedback mechanisms installed as well.

That's true. Democracy is a means to an end, not an end in itself. But I'm not sure what you mean by the bit I underlined.

Um, Chile has been the leading economy in Latin America for some time now, only recently has Brazil been growing faster. They're not about to join the OECD due simply to being well connected.

*shrugs* "Some time" is an incredibly vague descriptor, which can or can not include Pinochet's reign. After all, Pinochet was ousted in 1989 - that's 22 years before now. I was citing figures which primarily concerned the Pinochet period, i.e. 1973-1989. If they are true, Pinochet had a piss poor record.

Again, Pinochet wasn't rule of law. Also, he was an authoritarian. Bad, bad Pinochet.

But here are the figures I found for this:

Code: Select all

                  1973   1974   1975   1976   1977   1978   1979   1980   1981   1982   1983   1984   1985   1986   1987   1988   1989
Chile            -4.94   2.49  -11.36  3.41   8.70   7.46   8.68   8.15   4.74  -10.32 -3.79   7.97   7.12   5.60   6.59   7.31  10.56
South America *   5.47   4.51   1.45   5.46   4.89   4.26   4.05   1.49   2.71  -2.52  -4.32   3.39   2.57   6.36   4.56   3.07  -2.21
* average of continent, apart from Brazil and Argentina, including Chile.

So, the first four years of Pinochet are bad compared with the rest of South America (especially 1975, WTF), but after that Chile consistently outperforms the others by a comfortable margin, with the exception of a slight under-performance in 1986 and that odd and rather nasty dip in 1982. I don't know what happened in that particular year. But by my reckoning, South America averages 2.66% in this period while Chile has an average of 3.88%, even with those two disastrous years 1975 and 1982. I'd also point out that without those, Chile's average would be 5.16%, but that would be cheating.

If they gain the ability to create advanced technology, then they will charge more for it, since they want profits too. There's a reason why labour costs in the US are high, an this is pretty much it. Moreover we can again rely on Ricardo; the Chinese won't gain such an advantage in all fields that American workers will be left with nothing to do.

Nah, not "all". But what if the sectors where a competitive advantage for Americans remain are no longer massive enough (manpower-wise) to keep up the life level? What if the Ricardian advantage base is shrinking? And what if touted new competitively advantageous sectors are bullshit (e.g. distributed risk financial services - something many said is America's area of competitive advantage before the whole thing turned out to be a pathetic bubble big enough to drown the entire 14-trillion economy)?

Well, country #1 has a comparative advantage in product A if and only if country #2 has a comparative advantage in product B, so if product A doesn't produce enough jobs for #1, then the remaining workforce finds jobs in product B - the limits of benefit from trade have been reached in such a case.

Over-reliance on credit in the developed nations aren't examples of good domestic policy, that's true. However, not all cases are equally bad, and not everyone can get away with as much bad behavior simply because they don't have the leeway to do so. I don't think this is too much of a stretch.

Yep, not everyone can get away. Some economies are too small and thus their stress capacity is very small as well (see Greece, Spain, Portugal, Italy, Ireland, Iceland, Hungary, Latvia, Argentina, Ukraine, Belorus etc.), they just go fucking bust if they try to play the game. But what does it change? The small actors go bust and larger market actors from uberpower nations (Germany, France, USA) use this moment to capitalize on the crash of smaller economies. There is no fundamental change of attitude. Capitalism's drive to endlessly expand even when material conditions do not allow for any further expansion seems to me the root of this problem. Not particular decisions on part of any single government. That's just the result of the system's behaviour.

You mean to say that all capitalist systems inevitably go for purchases on bad credit? I don't see that this is inevitable.

OK, but then you have a de-facto colonial system, and not a liberalized system at all. That's hardly a valid counterpoint to the model.

Liberalized trade and liberalized markets do not mean liberalized and well-protected labour rights. It does not mean colonialism, although neo-colonialism is an apt description.

Well no, I have to raise an objection to that: liberalization and neo-colonialism (yes, I meant neo-colonialism, obviously) aren't really the same thing. If people's rights are not protected, then you aren't going by the neo-liberal understanding of "liberalization". Of course, they may (sometimes erroneously) think that certain regimes may be improvements in the situation relative to what preceded them. But ultimately, if people are experiencing a suppression of human rights, then they're not living in a genuine liberalized society. In particular, if their property rights are not being respected, the market economy cannot benefit them as it should. As I noted earlier, neo-liberal theory interprets most social rights, particularly such as freedom of redress of grievances before a court as part and parcel to such rights. After all, if you can reliably and consistently sue the tyrant, that's immediately a game changer. Moreover, the law must obviously be in force for all equally. On a related note, if the government seeks to impose "liberalization" at the point of a gun, that's anti-ethical to the model, since in a free market all transactions are supposed to happen by mutual consent and with any and all being permitted to participate if they want to. At most, the government can order the sale of public funds, and then, it's not a free market if only well connected friends and cronies get to buy the stuff at token prices, like happened in the Soviet breakup, including if said friends and cronies are foreigners (as happens all too often in the third world).

Perhaps, though I'd say that corruption is largely to blame in both cases. The central planning approach may prove rather difficult if you're attempting to do it in tandem with other central planners in XYZ other countries. If each country is centrally planned, and they're not autarkists, then in effect, the gestalt world economy isn't centrally planned at all, but becomes an emergent system of autonomous actors, as would be the case in a liberalized economy. Except the actors are less flexible than they otherwise would be. I'm also suspicious of the idea that central planners can respond not only in an accountable manner, but also in a profitable and innovative manner across each sector simultaneously; hence the benefit of independent units that are allowed to operate - and fail - separately.

Part of the problem is that the iron law of oligarchy operates for all systems, be they centrally planned or relying on the capitalist relations of market trade. Emergent systems can exist without capitalist principles if there's enough underlying support, althogh I might be overtly optimistic about their grand-scale viability (once again, ideological bias - nothing one can do about that). Profitability often does not matter vis-a-vis development. For example, if you unite superprofitable cargo transit with lossy passenger transit under one nation-wide railway system, the system will operate at a profit and yet be able to expand lossy passenger transit to provide better services to the populace. That's just one example. If the passenger cargo line is separate and individual, it will go bankrupt there and then.

Hm, well. I'll have to remain skeptical for now at least. Ideological bias, perhaps. But in my defense, there's the issue of burden of proof.

Small-scale systems of this sort can operate, perhaps, but yeah - scaling issues.

Selective protection barriers are not liberalization in any sense, except in the rhetoric of pro-corporate propaganda. Proper liberalization is made equally for all sectors of the economy. As for "controls", that depends on whether you're talking about the ability of people to hold each other accountable, or whether you're talking about political control of the economy. The former is appropriate and necessary, and part and parcel of proper liberalized economies, the latter certainly isn't. The main bone of contention is whether you need a powerful supervisory bureaucracy to ensure accountability.

Part of the problem is that advanced nations and powerful corporations won't yield to abolish internal barriers in their own nations for the sake of some poor third worlders who could outcompete them. The whole situation with perfectly mobile capital and almost perfectly immobile labour (enormous visa barriers between the First and Third World, not to mention relocation expenses being way out of order for 90% of Third Worlders) perpetrates the current absolutely mad income disparity. Perfectly mobile labour would rectify the issue, but it would cause a collapse in the life standard of First World nations. Ergo, unacceptable politically. An absolutely free world market is infeasible precisely because of the system that already exists. Corporatism as you name it is the natural result of market evolution. More powerful agents (megacorps) get power; you can throw the economy backwards by destroying them or trying to curb their power, but eventually they will arise again. Capital concentration and centralization is a natural process. Out of 80-something automobile makers, only 6 mega-corporations survive in Germany. However, it did not lead to worse cars. What it led to is immense concentration of capital and power. Can't work around this.

Corporatism is not inevitable in my view, though it's true that "capture theory" shows that governments have an unfortunate tendency to be corruptible by special interests (hence the neo-liberal suspicion of them).

However, consider the OP article and the long-term improvement of living conditions in China precisely because of the investment in low-wage industry there by the first-world nations. The "neo-colonial" model as you call it (which is not necessarily the same as corporatism, but a corporatist internationalism will likely lead to it) is inherently unstable - not vis-a-vis global collapse, but vis-a-vis the uniqueness of the economic power of the first world nations. There is nothing that prevents the "colonies" to eventually catch up, other than bad policy-making within, or deliberate decimation of their societies from abroad, the latter of which the first world nations cannot afford to do if they have invested too much there. Consider how the fist world economy would react to a hypothetical civil war in China for example. Needless to say, that would NOT be in their economic interest. Neither can they afford to impose lopsided trade agreements with China, since they would retaliate in kind. As low-wage production shifts elsewhere, the new production-nations will gradually gain such benefits also. I agree it's a long, slow process, but one that I think one can be reasonably optimistic about. Elevation of the economies of the third world is all but a historical inevitability, if you'll pardon the expression. That's assuming they remain liberalized, non-corrupt and possessing an effective rule of law (internal peace, an effective courts system etc.).


EDIT: fixing the code formatting.

[K. A. Pital]

Yeah, I know. But there's no property right of a person to a government. ...

That's true. Democracy is a means to an end, not an end in itself. But I'm not sure what you mean by the bit I underlined.

What I meant to say that you can, if somewhat awkwardly, define right to life, limb in terms of property rights of a person to his own body; you can't define democracy and political rights in general in terms of property rights, however.

So, the first four years of Pinochet are bad compared with the rest of South America (especially 1975, WTF), but after that Chile consistently outperforms the others by a comfortable margin, with the exception of a slight under-performance in 1986 and that odd and rather nasty dip in 1982. I don't know what happened in that particular year. But by my reckoning, South America averages 2.66% in this period while Chile has an average of 3.88%, even with those two disastrous years 1975 and 1982. I'd also point out that without those, Chile's average would be 5.16%, but that would be cheating.

Yeah, excluding any crisis years from someone's record is cheating. I wonder where the disparity comes from. Perhaps the unequal selection of sample nations? "Latin America" includes much more than just South America - there's Mexico, Cuba, etc. *scratches head and goes to see Maddison's statistics*

Well, country #1 has a comparative advantage in product A if and only if country #2 has a comparative advantage in product B, so if product A doesn't produce enough jobs for #1, then the remaining workforce finds jobs in product B - the limits of benefit from trade have been reached in such a case.

What if country 1 had products A, B, C while country 2 had only D at first, but then learned to make B and C on their own, leaving country 1 with only A?

You mean to say that all capitalist systems inevitably go for purchases on bad credit? I don't see that this is inevitable.

The entire world economy imploded. It does not matter if all or simply the critical majority goes for purchases on bad credit. Advanced economies all did that; this is enough to bring down the entire world economy quite allright. Just as the collapse of the USSR was enough to spell certain doom for any and all planned economy experiments (even if more or less successful, like Yugoslavia) everywhere in the world. If the center collapses, the rest falls like a house of cards.

On a related note, if the government seeks to impose "liberalization" at the point of a gun, that's anti-ethical to the model, since in a free market all transactions are supposed to happen by mutual consent and with any and all being permitted to participate if they want to.

Part of the problem is that this is an idealized model which has never been seen in reality. Liberalization happened at gunpoint and with lots of enforcement. One could say that people were coerced into markets with the use of violence. In fact, any economic order which triumphs over preceding relations (that being feudalism) uses violence to install and establish itself. Liberalization at gunpoint might be anti-ethical to the model, but it is the most common mode of the system's behaviour.

Hm, well. I'll have to remain skeptical for now at least. Ideological bias, perhaps. But in my defense, there's the issue of burden of proof. Small-scale systems of this sort can operate, perhaps, but yeah - scaling issues.

Scaling + material manufacture, so far a huge obstacle. In any case we have yet to produce a system which won't be subject to the oligarchic tendencies. Like I said, the iron law of oligarchy operates in any and all business or political structures that grow large. Unless we are going to simply roll back progress and breakup any large centralized power, be it corporations or governments, we have to find ways of dealing with the problem.

Corporatism is not inevitable in my view, though it's true that "capture theory" shows that governments have an unfortunate tendency to be corruptible by special interests (hence the neo-liberal suspicion of them).

Corporations also conform to the iron law of oligarchy (which is that the top level bureaucracy can act in absolutely hideous ways so as long as it specifically benefits the corporation/organization or them personally). Besides, removing government influence from certain sectors will just leave these sectors or even the entire economy under powerful influence or even collective control by a cabal of large and powerful corporations. Which are a natural result of market development as we have gathered. Often corporations' power and influence does not require special government interference. Sometimes they make good and competitive products (as we know, oligopolistic competition also requires a lot of effort). The car industry centralization proves that oligopolistic concentration into supercorporations does not require special barriers. A monster like Toyota or Volkswagen would arise anyway even without governments. And then it would have the function of government.

There is nothing that prevents the "colonies" to eventually catch up, other than bad policy-making within, or deliberate decimation of their societies from abroad, the latter of which the first world nations cannot afford to do if they have invested too much there. Consider how the fist world economy would react to a hypothetical civil war in China for example. Needless to say, that would NOT be in their economic interest. Neither can they afford to impose lopsided trade agreements with China, since they would retaliate in kind. As low-wage production shifts elsewhere, the new production-nations will gradually gain such benefits also. I agree it's a long, slow process, but one that I think one can be reasonably optimistic about. Elevation of the economies of the third world is all but a historical inevitability, if you'll pardon the expression. That's assuming they remain liberalized, non-corrupt and possessing an effective rule of law (internal peace, an effective courts system etc.).

Elevation of Third World economies via neocolonialist models? Consider Africa. It was colonized in the late XIX-early XX century, and thus had direct contact with the West. Needless to say, Africa's HDI is in an abysmal shape and even now African nation's HDI is declining. Success is condition-specific.

[Lord Zentei]

Yeah, I know. But there's no property right of a person to a government. ...

That's true. Democracy is a means to an end, not an end in itself. But I'm not sure what you mean by the bit I underlined.

What I meant to say that you can, if somewhat awkwardly, define right to life, limb in terms of property rights of a person to his own body; you can't define democracy and political rights in general in terms of property rights, however.

Well, I don't entirely agree there: for one thing, political rights certainly include the right to fair representation in court, and democracy without this is hardly protective of people's political rights. Moreover, one could conceivably define the services provided by membership in a nation in terms of services provided by a company of which each citizen holds one and only one share. After all, in corporations shareholders vote for the board of directors. I'm not necessarily advocating such a scheme in practice, but it is not impossible IMHO to define services provided by government in terms of property rights, and then use said property rights to permit representation by the people. I'll agree that it requires one to jump through more hoops than if it is defined by the traditional humanistic social model though, and is probably a bit less elegant for that reason. Nonetheless.

(Next point snipped, since we seem to be on hold there)

Well, country #1 has a comparative advantage in product A if and only if country #2 has a comparative advantage in product B, so if product A doesn't produce enough jobs for #1, then the remaining workforce finds jobs in product B - the limits of benefit from trade have been reached in such a case.

What if country 1 had products A, B, C while country 2 had only D at first, but then learned to make B and C on their own, leaving country 1 with only A?

If a country gains comparative advantage in one product, it loses comparative advantage in another, by definition. It's comparative advantage that counts, after all, not absolute advantage.

You mean to say that all capitalist systems inevitably go for purchases on bad credit? I don't see that this is inevitable.

The entire world economy imploded. It does not matter if all or simply the critical majority goes for purchases on bad credit. Advanced economies all did that; this is enough to bring down the entire world economy quite allright. Just as the collapse of the USSR was enough to spell certain doom for any and all planned economy experiments (even if more or less successful, like Yugoslavia) everywhere in the world. If the center collapses, the rest falls like a house of cards.

If you're talking about the recent financial crisis, you're making quite an exaggeration. This is nowhere near as bad as the Great Depression, for example. Besides which, I don't see any other viable replacement system that can be implemented.

On a related note, if the government seeks to impose "liberalization" at the point of a gun, that's anti-ethical to the model, since in a free market all transactions are supposed to happen by mutual consent and with any and all being permitted to participate if they want to.

Part of the problem is that this is an idealized model which has never been seen in reality. Liberalization happened at gunpoint and with lots of enforcement. One could say that people were coerced into markets with the use of violence. In fact, any economic order which triumphs over preceding relations (that being feudalism) uses violence to install and establish itself. Liberalization at gunpoint might be anti-ethical to the model, but it is the most common mode of the system's behaviour.

I'm talking more about the population in general, not the tyranny of feudal lords, government bureaucracies and dictators. The point was that Pinochet used force against his political opponents, ostensibly in order to usher in liberalization, "disappearing" people and other such shenanigans.

(Next point was snipped, since we seem to agree in principle )

Corporatism is not inevitable in my view, though it's true that "capture theory" shows that governments have an unfortunate tendency to be corruptible by special interests (hence the neo-liberal suspicion of them).

Corporations also conform to the iron law of oligarchy (which is that the top level bureaucracy can act in absolutely hideous ways so as long as it specifically benefits the corporation/organization or them personally). Besides, removing government influence from certain sectors will just leave these sectors or even the entire economy under powerful influence or even collective control by a cabal of large and powerful corporations. Which are a natural result of market development as we have gathered. Often corporations' power and influence does not require special government interference. Sometimes they make good and competitive products (as we know, oligopolistic competition also requires a lot of effort). The car industry centralization proves that oligopolistic concentration into supercorporations does not require special barriers. A monster like Toyota or Volkswagen would arise anyway even without governments. And then it would have the function of government.

While it's true that world car production is in the hands of about a dozen or so corporations, they're fiercely competitive; such ologopolies are not problematic in my view. The problem arises only when (a) they buy favours from government and (b) when they form cartels, and undermine competition (so as to simulate the benefits of monopoly, divided between them).

As for (a), that can happen in markets with large numbers of players too, provided that they organize themselves politically. As for (b), cartels tend to be unstable as the micro-economic structure of the market doesn't favour them: each member can make more money by betraying the cartel. If that were not the case, then the market is such that it favours a monopolist in any case, and then one producer would eventually eliminate his rivals. Oligopolies do exist in some industries, often where state power over the industries is great, such as in oil production, see point (a). As an aside, if a given market favours an oligopoly over a monopoly, then we can infer that a government monopoly in such an environment would be less than profitable in any case.

There is nothing that prevents the "colonies" to eventually catch up, other than bad policy-making within, or deliberate decimation of their societies from abroad, the latter of which the first world nations cannot afford to do if they have invested too much there. Consider how the fist world economy would react to a hypothetical civil war in China for example. Needless to say, that would NOT be in their economic interest. Neither can they afford to impose lopsided trade agreements with China, since they would retaliate in kind. As low-wage production shifts elsewhere, the new production-nations will gradually gain such benefits also. I agree it's a long, slow process, but one that I think one can be reasonably optimistic about. Elevation of the economies of the third world is all but a historical inevitability, if you'll pardon the expression. That's assuming they remain liberalized, non-corrupt and possessing an effective rule of law (internal peace, an effective courts system etc.).

Elevation of Third World economies via neocolonialist models? Consider Africa. It was colonized in the late XIX-early XX century, and thus had direct contact with the West. Needless to say, Africa's HDI is in an abysmal shape and even now African nation's HDI is declining. Success is condition-specific.

Ahem: I said that their elevation was a historical inevitability, not that this was to be achieved through colonialism or neo-colonialism. The point was that as low-wage production shifts there from China, it will be increasingly difficult to prevent their elevation, even if some people would find it in their interests to do so. Currently, they're little more than natural resource suppliers, and their trade levels are abysmal compared with the rest of the world. More trade and production outsourcing there => more dependency of international community on them => destruction of their economies more destructive to outsiders => more political clout internationally.

[K. A. Pital]

Well, I don't entirely agree there: for one thing, political rights certainly include the right to fair representation in court, and democracy without this is hardly protective of people's political rights. Moreover, one could conceivably define the services provided by membership in a nation in terms of services provided by a company of which each citizen holds one and only one share. After all, in corporations shareholders vote for the board of directors. I'm not necessarily advocating such a scheme in practice, but it is not impossible IMHO to define services provided by government in terms of property rights, and then use said property rights to permit representation by the people. I'll agree that it requires one to jump through more hoops than if it is defined by the traditional humanistic social model though, and is probably a bit less elegant for that reason. Nonetheless.

Yeah, you need to jump over a lot of transitional points. "Fair courts"? Those can exist under a dictatorship. After all, the court is merely a judgement organ, whereas political democracy is situated around the legislative branch and executive branch, not the judicial one. What about "private courts"? Those don't need any sort of political democracy whatsoever to be "fair". Building the entire nation as a corporation where workers are shareholders is a syndicalist idea. I'm often sympathetic to syndicalists, but practice has shown that this type of worker-capitalist "class merging" did not solve the existing contradictions in the system. If people held shares in the government, that wouldn't grant them equal rights, anyway. Majority shareholders would set the path of the corporation/government. Unlike a humanist law-making model, where people get equal rights by fiat via the law, lawmaking in an imaginary corporation-state would not require anyone to have equal rights by definition. Only if majority shareholders so decide.

If a country gains comparative advantage in one product, it loses comparative advantage in another, by definition. It's comparative advantage that counts, after all, not absolute advantage.

Exactly. Which is most often the case. After all, most nations have some weak industries which other nations also have. However, once a weak industry in a Third World nation picks up steam, it no longer requires the products of said industry from the First World. You may hope that the First World will always "invent" new shit to sell, new tricks to sell, new "services" to sell (the last big financial service sector explosion turned out to be full of crap, though), but how valid are the hopes? The First World will run out of stuff it can invent and make for others. Or the amount of said stuff will simply be too small to rely on external demand for support of the economy.

If you're talking about the recent financial crisis, you're making quite an exaggeration. This is nowhere near as bad as the Great Depression, for example. Besides which, I don't see any other viable replacement system that can be implemented.

Me neither, but that doesn't mean people should not work to create a theory on how a new system should behave.

While it's true that world car production is in the hands of about a dozen or so corporations, they're fiercely competitive; such ologopolies are not problematic in my view. The problem arises only when (a) they buy favours from government and (b) when they form cartels, and undermine competition (so as to simulate the benefits of monopoly, divided between them).

Um... So as long as oligopolies are competing (which they always are, and oligopolistic competition is actually not much different from perfect competition in the resulting price), they are "not problematic"? What about the fact that they concentrate wealth and by the same token, power, and then use it to get rid of undesireables? Corporate assassinations, anti-labour violence and violent takeovers don't require corporations to be "uncompetitive". They can make good cars and the resulting price can be optimal. However, they can still be murderous thugs.

Oligopolies do exist in some industries, often where state power over the industries is great, such as in oil production, see point (a). As an aside, if a given market favours an oligopoly over a monopoly, then we can infer that a government monopoly in such an environment would be less than profitable in any case.

Oligopolies exist in a great many industries, actually. Concentration of capital in the recent years has been increasing; I'd even say in the recent decades. Oligopoly doesn't require influence of government often; if the government is weak, the oligopoly will assume some of its functions.

Ahem: I said that their elevation was a historical inevitability, not that this was to be achieved through colonialism or neo-colonialism. The point was that as low-wage production shifts there from China, it will be increasingly difficult to prevent their elevation, even if some people would find it in their interests to do so. Currently, they're little more than natural resource suppliers, and their trade levels are abysmal compared with the rest of the world. More trade and production outsourcing there => more dependency of international community on them => destruction of their economies more destructive to outsiders => more political clout internationally.

Yes, it would be difficult. But more and more outsourcing would indeed mean greater dependency of the First World and its economies on Third World nations. I could easily see First World elites, business and political alike, not being happy about this at all. After all, profit margins will sooner or later start falling even in the most backwards and cut-off nations. What then will they have achieved for the benefit of the First World nations? Nothing, except making the First World irrelevant and only a small fraction in the world economy, since everyone is as rich as them.

[Lord Zentei]

Well, I don't entirely agree there: for one thing, political rights certainly include the right to fair representation in court, and democracy without this is hardly protective of people's political rights. Moreover, one could conceivably define the services provided by membership in a nation in terms of services provided by a company of which each citizen holds one and only one share. After all, in corporations shareholders vote for the board of directors. I'm not necessarily advocating such a scheme in practice, but it is not impossible IMHO to define services provided by government in terms of property rights, and then use said property rights to permit representation by the people. I'll agree that it requires one to jump through more hoops than if it is defined by the traditional humanistic social model though, and is probably a bit less elegant for that reason. Nonetheless.

Yeah, you need to jump over a lot of transitional points. "Fair courts"? Those can exist under a dictatorship. After all, the court is merely a judgement organ, whereas political democracy is situated around the legislative branch and executive branch, not the judicial one. What about "private courts"? Those don't need any sort of political democracy whatsoever to be "fair". Building the entire nation as a corporation where workers are shareholders is a syndicalist idea. I'm often sympathetic to syndicalists, but practice has shown that this type of worker-capitalist "class merging" did not solve the existing contradictions in the system. If people held shares in the government, that wouldn't grant them equal rights, anyway. Majority shareholders would set the path of the corporation/government. Unlike a humanist law-making model, where people get equal rights by fiat via the law, lawmaking in an imaginary corporation-state would not require anyone to have equal rights by definition. Only if majority shareholders so decide.

Classically, under both humanism and neo-liberalism, rights are about opportunity and due process, not about equal empowerment. Besides, regardless of shares, any person belongs to himself under neo-liberalism. That entails certain rights and principles; it's quite erroneous to infer that neo-liberal theory would permit the majority to simply vote away the minority's rights (only in the most radical democracies would that be possible).

So, in fact, neo-liberalism involves rights by fiat too. Defining the nation as a company with shares was really just a thought experiment on my part.

If a country gains comparative advantage in one product, it loses comparative advantage in another, by definition. It's comparative advantage that counts, after all, not absolute advantage.

Exactly. Which is most often the case. After all, most nations have some weak industries which other nations also have. However, once a weak industry in a Third World nation picks up steam, it no longer requires the products of said industry from the First World. You may hope that the First World will always "invent" new shit to sell, new tricks to sell, new "services" to sell (the last big financial service sector explosion turned out to be full of crap, though), but how valid are the hopes? The First World will run out of stuff it can invent and make for others. Or the amount of said stuff will simply be too small to rely on external demand for support of the economy.

Nope, sorry, can't accept that scenario. Even if there are no new industries, there are still products that they can sell. If the Third world country gains a comparative advantage in an industry producing product A with respect to a first world country, it inevitably will simultaneously lose comparative advantage in some other product B with respect to that same first word country - this follows from the very nature of comparative advantage. If the third world country could export product B previously, so can the first world country.

While it's true that world car production is in the hands of about a dozen or so corporations, they're fiercely competitive; such ologopolies are not problematic in my view. The problem arises only when (a) they buy favours from government and (b) when they form cartels, and undermine competition (so as to simulate the benefits of monopoly, divided between them).

Um... So as long as oligopolies are competing (which they always are, and oligopolistic competition is actually not much different from perfect competition in the resulting price), they are "not problematic"? What about the fact that they concentrate wealth and by the same token, power, and then use it to get rid of undesireables? Corporate assassinations, anti-labour violence and violent takeovers don't require corporations to be "uncompetitive". They can make good cars and the resulting price can be optimal. However, they can still be murderous thugs.

What does this have to do with oligopolies, specifically? This happens with any kind of society where rule of law breaks down.

Oligopolies do exist in some industries, often where state power over the industries is great, such as in oil production, see point (a). As an aside, if a given market favours an oligopoly over a monopoly, then we can infer that a government monopoly in such an environment would be less than profitable in any case.

Oligopolies exist in a great many industries, actually. Concentration of capital in the recent years has been increasing; I'd even say in the recent decades. Oligopoly doesn't require influence of government often; if the government is weak, the oligopoly will assume some of its functions.

Erm, I meant to say "cartels", there. Oligopolies form where economies of scale favour them; cartels form when government favours them.

Ahem: I said that their elevation was a historical inevitability, not that this was to be achieved through colonialism or neo-colonialism. The point was that as low-wage production shifts there from China, it will be increasingly difficult to prevent their elevation, even if some people would find it in their interests to do so. Currently, they're little more than natural resource suppliers, and their trade levels are abysmal compared with the rest of the world. More trade and production outsourcing there => more dependency of international community on them => destruction of their economies more destructive to outsiders => more political clout internationally.

Yes, it would be difficult. But more and more outsourcing would indeed mean greater dependency of the First World and its economies on Third World nations. I could easily see First World elites, business and political alike, not being happy about this at all. After all, profit margins will sooner or later start falling even in the most backwards and cut-off nations. What then will they have achieved for the benefit of the First World nations? Nothing, except making the First World irrelevant and only a small fraction in the world economy, since everyone is as rich as them.

I daresay that that's hardly something for an internationalist to complain about.

It's only bad from the point of view of the first-world elite if they ignore the opportunities of expanded markets and instead adopt a regionalist perspective. It's only bad from the point of view of the first-world workers if they adopt an ethnocentric perspective and ignore the benefits of trade that they stand to gain as consumers. No doubt there will be people who won't like the elevation of the third world, but that's too bad.

[K. A. Pital]

So, in fact, neo-liberalism involves rights by fiat too. Defining the nation as a company with shares was really just a thought experiment on my part.

Oh, okay.

Nope, sorry, can't accept that scenario. Even if there are no new industries, there are still products that they can sell. If the Third world country gains a comparative advantage in an industry producing product A with respect to a first world country, it inevitably will simultaneously lose comparative advantage in some other product B with respect to that same first word country - this follows from the very nature of comparative advantage. If the third world country could export product B previously, so can the first world country.

So how then can the export base shrink or grow? If your scenario would have been true, there could be no absolute contraction of exports of a nation due to a certain poll of its goods being decisively outcompeted; instead, only the structure of exports would change. However, there are examples of shrinking export base.

What does this have to do with oligopolies, specifically? This happens with any kind of society where rule of law breaks down.

Wealth = power. It does not matter if there is a government (as we figure out, they tend to be corrupted by sufficiently large companies, ergo oligopolies breed corruption in case where government is strong), or if the government is weak or non-present (in this case the oligopolistic agents would just assume some functions of government on themselves, closing deficiencies, and maintain power anyway). In absence of oligopolies, however, market players are too weak to actually corrupt a strong government (obviously a temporary situation before oligopoly forms) or, if the government is not present, too weak to dominate the society with their collective power. That is the point.

Oligopolies are efficient from an economic point of view (just as pension cuts to a level where pensioneers starve may be economically efficient, this would cut slack and increase productivity, heh). They are hideous from a humanist and a moral point of view, and the problem is not an unfair price or economic losses due to oligopoly - in fact I noted that the auto industry or the airplane industry are examples of efficient oligopolies; the problem is non-economic losses and oligopolistic opression.

No doubt there will be people who won't like the elevation of the third world, but that's too bad.

Yeah, not my concern either, it is not as if I'm a big fan of perpetual inequality between First and Third World. It is bad, though, because "people who won't like the elevation of the Third World" carry a lot of weight in the First World.

[Lord Zentei]

Nope, sorry, can't accept that scenario. Even if there are no new industries, there are still products that they can sell. If the Third world country gains a comparative advantage in an industry producing product A with respect to a first world country, it inevitably will simultaneously lose comparative advantage in some other product B with respect to that same first word country - this follows from the very nature of comparative advantage. If the third world country could export product B previously, so can the first world country.

So how then can the export base shrink or grow? If your scenario would have been true, there could be no absolute contraction of exports of a nation due to a certain poll of its goods being decisively outcompeted; instead, only the structure of exports would change. However, there are examples of shrinking export base.

There are examples of such, but usually correlate with special interests gaining too much influence, and/or lack of timely development in new production. While it's true that the model is a long-term trend one, and it takes time for an economy to re-adjust, the progress in the developing country that would require a change is a long-term trend too.

What does this have to do with oligopolies, specifically? This happens with any kind of society where rule of law breaks down.

Wealth = power. It does not matter if there is a government (as we figure out, they tend to be corrupted by sufficiently large companies, ergo oligopolies breed corruption in case where government is strong), or if the government is weak or non-present (in this case the oligopolistic agents would just assume some functions of government on themselves, closing deficiencies, and maintain power anyway). In absence of oligopolies, however, market players are too weak to actually corrupt a strong government (obviously a temporary situation before oligopoly forms) or, if the government is not present, too weak to dominate the society with their collective power. That is the point.

For a counter-example, look to the protection that agriculture receives in France and the US. Small players are perfectly capable of banding together to form powerful lobbying groups.

Oligopolies are efficient from an economic point of view (just as pension cuts to a level where pensioneers starve may be economically efficient, this would cut slack and increase productivity, heh). They are hideous from a humanist and a moral point of view, and the problem is not an unfair price or economic losses due to oligopoly - in fact I noted that the auto industry or the airplane industry are examples of efficient oligopolies; the problem is non-economic losses and oligopolistic opression.

If that's your view, then I daresay were pretty much fucked one way or another. In many industries it's simply not possible to have an efficient economy if you break down oligopolies into smaller units. Economies of scale prevent small producers in such industries from being effective - then you might as well say "we don't want those industries at all". Besides, even if it were possible to make them work, maintaining production in a market that inefficiently wastes resources, and that has an indirect humanistic cost too.

However, in fact I don't think that oligopolies are intrinsically more oppressive than other forms of markets.

No doubt there will be people who won't like the elevation of the third world, but that's too bad.

Yeah, not my concern either, it is not as if I'm a big fan of perpetual inequality between First and Third World. It is bad, though, because "people who won't like the elevation of the Third World" carry a lot of weight in the First World.

Yes, but as long as the internationalist businessmen carry more weight than the isolationist power-brokers, things will remain on the right track. That's at least one good reason for supporting them: they keep potential ethnocentric moves and shakers down by dint of their own vested interests.

[K. A. Pital]

There are examples of such, but usually correlate with special interests gaining too much influence, and/or lack of timely development in new production. While it's true that the model is a long-term trend one, and it takes time for an economy to re-adjust, the progress in the developing country that would require a change is a long-term trend too.

How long-term should be a long-term trend? When will the export base of a nation that has shrunk rise again? How many years or decades can it take? And that presumes some sort of equilibria in CA-intl.trade model, which is not a given at all.

For a counter-example, look to the protection that agriculture receives in France and the US. Small players are perfectly capable of banding together to form powerful lobbying groups.

I must admit this is a good example, though I thought that the small bourgeois / small capitalist "dominance" of France/US agriculture is nothing but a myth - the market is since long an oligopoly with enormous agricorps being the ACTUAL entities that lobby on part of the national agriculture.

If that's your view, then I daresay were pretty much fucked one way or another. In many industries it's simply not possible to have an efficient economy if you break down oligopolies into smaller units. Economies of scale prevent small producers in such industries from being effective - then you might as well say "we don't want those industries at all". Besides, even if it were possible to make them work, maintaining production in a market that inefficiently wastes resources, and that has an indirect humanistic cost too. However, in fact I don't think that oligopolies are intrinsically more oppressive than other forms of markets.

Oligopolies as the economic basis form a corresponding type of power above - oligarchy Which is intrinsically more opressive. And yeah, my view is grim. And since economies of scale and laws of the market mean concentration is inevitable, I'm not going to pretend you can somehow stop this. I thought that socialism might be the solution, but for a very long time, socialism lacked any theorist to give it a serious development impetus and propose a superior economic order (hence my comment about the toothless sick left). So it seems we'll have to work the solution out on the fly. Not the best thing, but...

Yes, but as long as the internationalist businessmen carry more weight than the isolationist power-brokers, things will remain on the right track. That's at least one good reason for supporting them: they keep potential ethnocentric moves and shakers down by dint of their own vested interests.

Heheh. I support globalization, because it gives the possibility of a global change. That's probably a point where we're genuinely united.

[Lord Zentei]

There are examples of such, but usually correlate with special interests gaining too much influence, and/or lack of timely development in new production. While it's true that the model is a long-term trend one, and it takes time for an economy to re-adjust, the progress in the developing country that would require a change is a long-term trend too.

How long-term should be a long-term trend? When will the export base of a nation that has shrunk rise again? How many years or decades can it take? And that presumes some sort of equilibria in CA-intl.trade model, which is not a given at all.

Depends on conditions, though obviously the freer the investment and the less special interests politics that might undermine its effectiveness, the quicker a country will be able to adapt. More to the point: there's little reason to suppose a priori that the developed country will be inherently slower to make adjustments and to revise the direction of its investments than the developing country.

For a counter-example, look to the protection that agriculture receives in France and the US. Small players are perfectly capable of banding together to form powerful lobbying groups.

I must admit this is a good example, though I thought that the small bourgeois / small capitalist "dominance" of France/US agriculture is nothing but a myth - the market is since long an oligopoly with enormous agricorps being the ACTUAL entities that lobby on part of the national agriculture.

The agricultural corporations are certainly growing more powerful, though farmers were well-organized long before then.

If that's your view, then I daresay were pretty much fucked one way or another. In many industries it's simply not possible to have an efficient economy if you break down oligopolies into smaller units. Economies of scale prevent small producers in such industries from being effective - then you might as well say "we don't want those industries at all". Besides, even if it were possible to make them work, maintaining production in a market that inefficiently wastes resources, and that has an indirect humanistic cost too. However, in fact I don't think that oligopolies are intrinsically more oppressive than other forms of markets.

Oligopolies as the economic basis form a corresponding type of power above - oligarchy Which is intrinsically more opressive. And yeah, my view is grim. And since economies of scale and laws of the market mean concentration is inevitable, I'm not going to pretend you can somehow stop this. I thought that socialism might be the solution, but for a very long time, socialism lacked any theorist to give it a serious development impetus and propose a superior economic order (hence my comment about the toothless sick left). So it seems we'll have to work the solution out on the fly. Not the best thing, but...

I don't think that oligopoly necessarily leads to oligarchy - just because you have a few corporations in a position of dominance of a given sector of the economy does not mean that you have a handful of people who do so; moreover even if such a scenario is in place doesn't mean that this will translate to political power as well.

Personally, I'd rather have a model for a replacement system before replacing the current order and then working on the fly - the alternative is to risk losing what semblance of rule of law is in place. And that's assuming that a fundamentally different model can even be made to work at all (given current knowledge and technology, at least). After all, economies of scale are a bitch to get around.

Yes, but as long as the internationalist businessmen carry more weight than the isolationist power-brokers, things will remain on the right track. That's at least one good reason for supporting them: they keep potential ethnocentric moves and shakers down by dint of their own vested interests.

Heheh. I support globalization, because it gives the possibility of a global change. That's probably a point where we're genuinely united.

Yes, probably. The bones of contention seem to be in means, not ends.

[K. A. Pital]

Yeah, which is why I'm still a socialist. If you don't like capitalism but want some solution which doesn't dispense with economies of scale - a solution that would be able to at least last 10 seconds without admitting it has massively inferior productivity due to a lack of economy of sacle - the only such solution is some form of socialism.

[Lord Zentei]

Yeah, which is why I'm still a socialist. If you don't like capitalism but want some solution which doesn't dispense with economies of scale - a solution that would be able to at least last 10 seconds without admitting it has massively inferior productivity due to a lack of economy of sacle - the only such solution is some form of socialism.

Fair enough - though I'd like to point out that an all-powerful state can be at least as repressive as some gang of pissant businessmen.

There's also the problem that economies of scale can also be bad on the other end of the scale, i.e. for a monopolist - even a state monopolist.