Cafe Hayek - Latest Comments in Facts Vs. Faith

Re: Facts Vs. Faith

Sudha Shenoy — Thu, 26 Apr 2007 02:33:54 -0000

"..the chinese make machine tools, instruments and much of the stuff that we used to make here."

1. Some 146 countries & regions around the world make machine tools besides the US & China. In 2005, Chinese exports of machine tools came to 0.11% of their total exports. In that year, the largest producers of machine tools were: Germany, Japan, the US, Taiwan.

2. In 2005, some 40% of Chinese exports consisted of clothing, fabrics, accessories, footwear, household goods, furniture, clocks & watches, office machines, nails, bolts, pliers, screwdrivers,etc, headgear, cosmetics, medicines, etc.

The remaining 60% consisted of (eg) dataprocessing equipment, phone parts & accessories, parts & accessories for office machines, an enormous range of parts for other machinery, simple electrical apparatus, miscellaneous base-metal manufactures, simple chemicals, acids, & dyes, & the like.

Re: Facts Vs. Faith

Sugar Cookie — Tue, 24 Apr 2007 16:26:22 -0000

With all this talk of running out of resources, I'm curious if anyone can give an example of a resource that's actually run out.

I'm not trying to be facetious. I am genuinely interested in learning if the planet has actually ever run out of this mineral or that gas.

I'm also keen to learn if humans have exhausted a resource, have we ever been unable to find an adequate substitute or alternative?

Finally, Adrian, you lost me in responding to my question about UN sanctions. Could you try to explain again? I think you're making a distinction between sustainability and protectionism. Is that correct? If so, who or what defines sustainability? I've never found a clear definition.

Re: Facts Vs. Faith

Sam Grove — Tue, 24 Apr 2007 10:21:27 -0000

"If we paid a more equitable price for some of our consumption such that those third world countries could invest in good planet husbandry while growing their economy by producing necessities as opposed to trivialities (McDonalds Kids meal toys come to mind)."

Once upon a time, it was Japan that made those trivialities. As Japan developed and grew economically, they became too expensive a source for cheap plastic goods, but it was a means for the to get from then to now. There may be a reason a developing economy has to go through such a phase in the industrial world.

Re: Facts Vs. Faith

Adrian Smith — Tue, 24 Apr 2007 06:12:04 -0000

Well that succeeded in stirring up the debate. (Sorry another long post coming up.)

Lets set the record straight.

1) I care very much about increased living standards, improved health and a growth in the third world. As one of you pointed out it's a question of how we get there.

2) I was not trying to demean the Chinese or anyone else, merely pointing out that the facts are what they are. There is large amounts pollution in China in particular.

3) At no point did I advocate for a "Managed" economy (by which I presume you are refering to the communist efforts). One could argue that intervention by the Fed is also a managed economy.

4) Sudha, I beg to differ, the chinese make machine tools, instruments and much of the stuff that we used to make here.

5) However, you make a good point and I apologise to the chinese. My assertion was not intended as a slight, simply a reflection of known environmental conditions and the state of their environmental record to date. The Chinese government however has repeatedly said that it will not slow down economic growth in order to reduce global pollution.

6) I have a great deal of respect for the chinese having traveled numerous times to the far east so please let's keep this civil.

7) The growth in wages in China is undeniable I won't argue that fact, the question simply put is can the planet sustain a world with the American lifestyle of consumerism.

8) I want us to run out of third world countries but preferably by not entering the "First World" mirroring the mistakes we've made or getting there by a similar route.

I agree that finally, wealthy economies are better stewards of the environment. The cynic in me might argue that's because we exported all the messy polluting stuff abroad, but I'll be more charitable.

8) Ben, well said. I'm sure we all share similar goals in terms of trying to improve everyone's lot and I agree that there is a third option. I wasn't suggesting that there were only two, just trying to illustrate that "wealth" is relative - it's also a function of personal utility. One man's paradise is another man's hell.

Basically I'm anti-consumerism when it comes at the expense of the environment and takes advantage of the underdeveloped countries. If we paid a more equitable price for some of our consumption such that those third world countries could invest in good planet husbandry while growing their economy by producing necessities as opposed to trivialities (McDonalds Kids meal toys come to mind). Then I think we'd be on the right track.

I feel that simply allowing open trade (with laws - that are often ignored)we encourage often through ignorance, the wrong things. There are plenty of get rich quick people out there who will take advantage if we let them. The sneaker example was intended to be illustrative of that point also. It is a denegration of our values and of the opportunism of OUR companies that set up operations like that. This had nothing to do with the residents of those countries. The problem is that in places like Cambodia where they are trying to do things the right way in industries like textiles, WE set up competition in other parts of the world and competing solely on price, they struggle (because doing it right is more expensive - see that cost model again). As I said before it's hegemony.

Re: Facts Vs. Faith

Sudha Shenoy — Mon, 23 Apr 2007 22:52:56 -0000

Some more quotes:

"the failure of the developing nations to actually invest in health and safety."

"It's cheaper to take advantage of the poor..."; " moving our capital off shore and putting it in the hands of the third world..."; "billions of...$3200 flat screen TVs"; "moving manufacturing in particular overseas..."

----------------

1. See above on life expectancy in China.

2. So the Chinese are incapable of building up their own capital? It must all come from America? See above: the capital comes from Hong Kong, Taiwan, SEAsian Chinese, & also Japan.

3. The bulk (bulk) of Chinese exports consist of cheap consumer goods: clothing, footwear, household textiles, scissors, staplers, baby powder, travel goods, etc, etc. Those luxury TVs are produced in Japan (an LDC of course) & parts of SEAsia.

Re: Facts Vs. Faith

Sudha Shenoy — Mon, 23 Apr 2007 22:32:24 -0000

"It's easy for the chinese to keep costs down, pollute their rivers and cities and kill of millions because, like the slave owners throughout the centuries or the serf's and barons of the middle ages, people are disposable and as long as a few can harness the many then that will always be the case."

"Giving you cheap sneakers maybe the best outcome for you, as long as you forget to remember the child laboring in a sulphurous atmosphere with a life expectancy of half yours. But he's not on your doorstep so why worry."

-----------------

Factories in China employ adults (adults) at wages they had never dreamt of. These factories are _new_ -- built recently, with the latest machinery. The investments came from Hong Kong, Taiwan, & the overseas Chinese in SEAsia.

Life expectancy has more than doubled (from 32 to 73 years)between c. 1950 & c. 2006. Infant mortality has fallen 92% (fromm 300 to 23 per 1,000) over approx. the same period. Living standards have risen beyond anyone's dream.

In the light of the above facts, what do we make of the the two paras quoted? To a foreigner, they are patronising & demeaning; "Of course those Chinese could never make anything of themselves."

Re: Facts Vs. Faith

ben — Mon, 23 Apr 2007 18:52:57 -0000

Steve, you do have to question the motives of anyone who a) wants to raise low work standards for workers in developing countries through regulation and b) suggests (I think) the west is better off when developing countries stay poor. I sometimes wonder if protectionists feign concern in saying (a) knowing this will lead to (b).

Re: Facts Vs. Faith

steve — Mon, 23 Apr 2007 18:24:07 -0000

Ben,

I don't think Adrian cares about the loss of life that has resulted from varioius attempts at planned economies. In fact, it would "reduce demand" and ensure that "we don't run out of third world countries."

Re: Facts Vs. Faith

ben — Mon, 23 Apr 2007 17:00:28 -0000

Adrian Smith

Take a reality check.

1. The alternative to protectionism is not anarchy. Trade and capitalism requires laws which need to be enforced. That is not anarchy.

2. Wealthy countries take better care of the environment. Air and water has become much cleaner now that western societies are wealthy enough to start caring about those ideals. So the $10 billion example of yours ignores a third possibility of riches and a clean environment.

3. The death of millions of Chinese was associated with the suppression of market forces. Massive losses of life in that country have not occurred since the arrival of capitalism.

4. Differences in labor standards have to be considered in light of local circumstances. As abhorrent as some standards are, it is no help to force them up if that a) forces workers into worse conditions, and b) delays or prevents the nation's development that permanently raise living and working standards.

It is easy to label your opponents as uncaring, but actually they agree with your ideals and disagree only with the way to achieve them. Try to keep that in mind.

If you are suggesting in saying "Fewer third world nations comes at a cost" that it is in our interests to keep developing countries poor then I question your morality.

Re: Facts Vs. Faith

Sam Grove — Mon, 23 Apr 2007 16:49:07 -0000

It's sad how the results of political control of economies are interpreted as failure of markets.

Re: Facts Vs. Faith

ben — Mon, 23 Apr 2007 16:45:15 -0000

David Graf

The industrial revolution was a giant step forward, but many people paid a high price and did not see the benefit in their lifetime. Child labor was common as was the maiming or deaths of those kids working in the factories. Surely, you're not saying that was a good thing? Why not, then, do what we can to minimize the harm done to people by economic dislocation?

This is a different position to what you started with. You started out saying trade costs more than it is worth. Now you seem to be saying trade is good overall but has costs which policymakers should attempt to minimize.

If I have read that right, it is a more sensible position in that it recognises the very large benefits of trade. In principle, part of the surplus created by trade could be shared with those bearing costs and everybody wins.

Re: Facts Vs. Faith

Adrian Smith — Mon, 23 Apr 2007 12:27:36 -0000

Let's be clear, I'm not in favor of all out protectionism, neither am I in favor of anarchy.

Balance is required in all things. Allowing unregulated market forces without complete acconting for the costs leaves us with an imperfect model. The consequences of that imperfect model are all around us.

It's easy for the chinese to keep costs down, pollute their rivers and cities and kill of millions because, like the slave owners throughout the centuries or the serf's and barons of the middle ages, people are disposable and as long as a few can harness the many then that will always be the case.

The balance comes with limited intervention to try to allow for the imperfections in our accounting and cost models. Will we always get it right? No, will the market always get it right and pain free? No. So the question is simply which way gets us to the best outcome for all concerned.

Giving you cheap sneakers maybe the best outcome for you, as long as you forget to remember the child laboring in a sulphurous atmosphere with a life expectancy of half yours. But he's not on your doorstep so why worry.

That's the part that I find objectionable in the free trade equation. It isn't free, it's hegemony, and it's fascile and morally bankrupt. We pass laws to stop child labor, we pass environmental standards, we try to make sure that everyone in our "developed" society is taken care of to a greater or lesser degree. But we turn a blind eye or claim it's growth pains when the third world countries do everything we outlawed.

Re: Facts Vs. Faith

Adrian Smith — Mon, 23 Apr 2007 11:57:24 -0000

Sugarcookie,

I'm glad that you put it like that. I hadn't realised that running out of homeless people qualified on the same scale as running out of say oil, or clean water, or edible fish. Maybe we should keep the homeless in reserve and hunt them instead.

However you miss my point. I wasn't worried about running out of Capital. I was concerned that moving manufacturing in particular overseas and expanding the global economy would eventually mean that the basic consumable resources would be scarce. Because the demand would rise in the host countries commensurate with the salaries. Meaning ultimately less of everything to go around. Take a look at Hardwoods, copper, cement to name a few commodities already feeling the pinch because of global expansion.

Fewer third world nations comes at a cost. Be careful what you wish for.

As for the UN comment that's just a case of conventional wisdom and flawed long term thinking. Just because it's worked when consumption was relatively modest and limited to a fraction of the world's population doesn't mean that expanding the same policies to billions instead of millions of people will continue to work or be sustainable. Blindly assuming that it will in the face of the changes we see is irrational. It will however make the few world leaders popular with their constitutents... the owners and exploiters of the global capital (in the short term).

So if you want to ensure that oil runs out faster, that CO2 increases, that the oceans get overfished, that we divert food stuffs to energy so that people can starve so others can go on watching TV then we should continue on the same path.

Instead of marketing consumerism we should market sustainability. It may not make so many people wealthy, but it might give my great grand kids a world they can live in as opposed to one that's all used up.

Finally, wealth is relative. Who is richer, the man with $10Bn and a polluted landscape, poisonous air, no clean water and a manufactured biosphere, or the man with a clean environment, steady food suppplies, clean water and fewer "things" and a lot less money.

Trade is a means to an end, not the end itself.

Re: Facts Vs. Faith

Sam Grove — Mon, 23 Apr 2007 11:32:15 -0000

An observation:

People have the feeling that government doesn't cost them anything and when they do think about the cost of government, they only think it costs them what they pay in taxes.

In fact, most of the cost of government is hidden from those who do not have adequate comprehension of the functioning of the market, and futher, how the successful attempts of various special interests to control the market through the political process distorts the functioning of the market to the detriment of everyone, especially the poor.

You want a government to protect you from market change?

Hah!

Who do you think will be most successful at influencing the political process?

Yourself? Double hah!

Politicians know where the money is and they know how to con you into giving them your support. And you get to pay for the whole mess.

Re: Facts Vs. Faith

Sam Grove — Mon, 23 Apr 2007 10:53:19 -0000

"Maybe, I'm more inclined to believe that history shows us that greed or religion foment hostility."

I think it more correct to say that trade restrictions increase hostility. Often trade restrictions are a result of existing hostility.

Re: Facts Vs. Faith

Sugar Cookie — Mon, 23 Apr 2007 10:49:30 -0000

Adrian,

You said, "What benefit we do provide by moving our capital off shore and putting it in the hands of the third world will eventually come back to haunt us in the form of scarcity."

I applied the same logic to a few other policies (which, from the tone of your comments, I suspect you support):

1. What use do we provide people by volunteering to help homeless people find homes? Eventually, scarcity will ensue. We'll run out of homeless people.

2. We definitely shouldn't reduce carbon emissions because sooner or later there won't be any carbon to reduce.

I suppose I see many outcomes of free trade worse than fewer third world nations. Fewer people living in third world conditions. Perhaps protectionists see it differently. Am I just a bleeding heart libertarian?

One final thought, if protectionism is economically the optimal policy, why does the UN restrict a disobedient nation's trade as punishment? Why do countries at war seek to disrupt their enemy's trade and commerce? If protectionism were the panacea, shouldn't sanctions enrich rather than impoverish?

Re: Facts Vs. Faith

Adrian Smith — Mon, 23 Apr 2007 09:45:53 -0000

Sam,

Maybe, I'm more inclined to believe that history shows us that greed or religion foment hostility. In the coming years the wars will be fought either over oil, water or food, not trade barriers.

Re: Facts Vs. Faith

Sam Grove — Mon, 23 Apr 2007 08:12:34 -0000

Time will tell.

In fact, time has told us already.

Trade restrictions foment hostility.

Hostility leads to war.

War impoverises everyone.

Re: Facts Vs. Faith

Adrian Smith — Mon, 23 Apr 2007 06:44:25 -0000

Reading the posts it seems to me that there are a lot of blind faithers out there and the arguments are all too simplistic.

Some of the major reasons that "global free" trade works in the current environment is because of the massive advances in transportation technology and the failure of the developing nations to actually invest in health and safety. All of the "free traders" out there are simply imperialists in new clothes.

It's cheaper to take advantage of the poor than it is to use our own resources and skills to grow our society and pay the proper economic cost. What benefit we do provide by moving our capital off shore and putting it in the hands of the third world will eventually come back to haunt us in the form of scarcity. All those billions of people wanting $3200 flat screen TVs.

The net effect is that we use more and more of the planets limited resources fuelling a consumer based economy and in doing so we see the effects in global warming, deforestation, oceanic pollution and fish stock depletion.

Personally I would much prefer to see people with real jobs helping provide for what we need locally rather than sitting in front of computer screens doing pretend work, like all of those folk in the health insurance industry, or the professional gamblers who spend all day trading stocks.

I'm reminded of the cycles of history when Boom turned to Bust because the people enjoying the Boom never bothered to look at history or look beyond the ends of their avaricious noses.

Moving skills and knowledge off shore will simply mean that when the transportation boom supported by fosil fuel runs out, the pain at home will be greater as we will no longer have the infrastructure or skills to support the lifestyle we've become accustomed to.

I'm well past 40 and see only a limited and scary future in outsourcing. What I do see is an overstretched global infrastructure and a lot of old folk who are going to be dependent upon a few young Americans leveraging the poor of the world to keep us fed and warm. I just hope they can do it before the poor catch on and decide to serve themselves first.

Re: Facts Vs. Faith

Isaac Crawford — Mon, 23 Apr 2007 05:44:22 -0000

"I suspect that people also have an interest in having jobs which provide them with the money to buy goods. I completely disagree with you over the idea that nations do not have their own self-interest. We're not just a collection of individuals, but we form groups of which the highest level is known as a nation. Accordingly, nations should have an interest in preserving their existence and in enhancing their power. I'm wondering how we can think that a nation can do well in the long-terms if the majority of jobs are in the service sector."

I would like to meet three people that have EXACTLY the same thoughts on every aspect of American policy. Nations do not "have" anything other than a government. People are the ones that have ideas, worries, things, etc. False aggregation is a very dangerous thing. A "nation" does not "act" like a very large, very powerful person. Any pattern you may see is only that, a pattern, but it is illusory, there is nothing there. You wonder how a""nation" can prosper with most jobs in the service sector. Well, first off, nations don't prosper (can you imagine the US taking a vacation or retiring?), people do. Why wouldn't people prosper when everyone is working in the service sector? Wouldn't it be great if no one was needed to make anything? Maybe we could have machines do it for us... It would be incredible! The only way people will not prosper when everyone is in a service job is if they are not allowed to. As long as jobs are not protected and people are free to buy what they want, we will continue to progress. If the government steps in, it will hamper progress and make us pay more than the should for services and products, in other words, we'd be poorer.

Isaac

Re: Facts Vs. Faith

Russell Nelson — Mon, 23 Apr 2007 05:37:03 -0000

David, vigorous reassertion of an undefended claim is not argumentation. It is evidence of blind faith. The fact is that free trade helps consumers at a higher rate than it hurts producers, and a nation's borders have nothing to do with this process.

Re: Facts Vs. Faith

Ray — Mon, 23 Apr 2007 04:23:24 -0000

Thanks David Graf

Re: Facts Vs. Faith

David P. Graf — Mon, 23 Apr 2007 04:08:14 -0000

Russell,

I suspect that people also have an interest in having jobs which provide them with the money to buy goods. I completely disagree with you over the idea that nations do not have their own self-interest. We're not just a collection of individuals, but we form groups of which the highest level is known as a nation. Accordingly, nations should have an interest in preserving their existence and in enhancing their power. I'm wondering how we can think that a nation can do well in the long-terms if the majority of jobs are in the service sector.

Re: Facts Vs. Faith

David P. Graf — Mon, 23 Apr 2007 03:59:57 -0000

Ben,

As someone who has a long love of history, I recognize that economic progress is not always a smooth process. Sometimes, the human cost is far higher than it has to be. The industrial revolution was a giant step forward, but many people paid a high price and did not see the benefit in their lifetime. Child labor was common as was the maiming or deaths of those kids working in the factories. Surely, you're not saying that was a good thing? Why not, then, do what we can to minimize the harm done to people by economic dislocation?

Re: Facts Vs. Faith

David P. Graf — Mon, 23 Apr 2007 03:44:01 -0000

Bartman,

I did not want the government to step in and "protect" my job. However, if the government encourages companies to send jobs overseas, then I think it also has an obligation to do more by those who pay the price.

Regarding tenure, I went to a private university where tenure did not exist. I thought that was a good thing since it encouraged the faculty to not rest on their laurels. Considering that tenure, however, is almost the equivalent of lifetime employment, I do wonder why those who espouse "economic freedom" would support it. Many people work harder and longer at lower paying jobs and yet I doubt that many economists would encourage "tenure" for them. And, I'm surprised by your comments about how low-paying tenured positions are today. Things have certainly changed from my days!

Regarding your "precarious" position in the middle-east, I've had friends who've worked there for years and were willing to put up with a lot because of the generous salaries and benefits and other perks. Is that the case with you? If not, then I honestly salute you as someone willing to live according to his/her convictions. That was something I saw too little of during my time in academia.