A World Of Free Movement Would Be $78 Trillion Richer

[managing]

Aren't you just looking at one side of the equation though? You can easily *see* the people who get laid off when, for example, the USA military is largely demobilized following WWII. There was a whole school of doom and gloom thought that if the government didn't do something to prevent the largest re-influx of working age men into the economy we would have massive unemployment. What happened? The government slashed spending across the board, and the post-WWII economy had the strongest private growth of any period in USA history...

So when you see people get displaced, and think "we need to do something about that," what I see is the person getting displaced or never getting an opportunity they *would have gotten* because of the resources you took to help the first person being displaced. Does that make sense? Those resources come from somewhere, namely the economy at large, and they would be doing something else if they weren't redistributed. The people being displaced may well be better off and sooner if not for the state shuffling the deck furniture around during a large change.

The problem is that it takes a scientific imagination to *see* that effect, whereas the guy losing his job takes no understanding to see, it's right in your face. They are both equally real, however.

P.S - it's actually mildly insulting to assume that I don't care about people, as you do, because I have a different opinion on how people are best helped. Not that I'm an overly sensitive loser who gets upset at things like that on the internet, but you might want to consider why you thought that in the first place, that "economic theory doesn't care about individuals as you do." Is it not instead that you *only* care about the individuals you can easily perceive, and not the ones being equally affected by things that you don't perceive?

First, let me say I wasn't saying that about you at all. I have no reason to believe you don't care about people. . I am just saying that theories that say people who are displaced (and other "ill" effects) will find other opportunities, while often accurate (especially given time) don't account for the pain and suffering that happens in the short term, nor those who are ill equipped to deal with the fallout. I really did mean, although kind of an (intentionally) awkward statement, that the "theory" doesn't care.

"The problem is that it takes a scientific imagination to *see* that effect, whereas the guy losing his job takes no understanding to see, it's right in your face. They are both equally real, however."

I agree with this wholly. And yes, change will immediately benefit some, and later benefit others, while some fall through the cracks. All I am trying to argue for is a humane awareness of the impact on lives. Its really applicable to the here and now, regardless of whether or not we move intentionally toward a future of decreased barriers to freedom or not.

 

[Queequeg]

To make the rich richer, the powerful more so, and to keep the poor poor.

Adam Smith famously recommended that the newly formed USA should take advantage of its comparative advantage as a producer of primary resources and not invest in industrialization. But the founding fathers, being neither traitors nor idiots ignored him, put up trade barriers and an industrial policy. The result was the strongest, richests and most industrialized nation on Earth.

Free trade, though that is a misnomer, is supported by the powerful because under free trade they are mobile but the labour is not. So they can play different nations and populations against each other, and enrich themselves while impoverishing the population. They use lies, specious studies, the lie that "free trade has lifted hundreds of millions out of poverty" (no, that was China, and they never had free trade), and the lie that free trade made the world rich, even though Swiss are the only case this is true with and the Golden Age of Capitalism was characterized by capital controls, managed trade, stringent financial regulation etc.

Exactly, Free Trade is a sham and has always been a sham. It does not benefit both countries as we have been conditioned to believe. David Ricardo, it's most famous apologists was an employee of the East India Company and subject of the British Empire. He was trying to justify the forcing open of new markets that the dreaded East India Company could exploit. His ideas didn't really work then as you mentioned and they certainly don't work now as more and more of his assumptions of Comparative Advantage are violated. The most important of which are full employment, no capital or labor flows and a balance of trade. None of these are true today.

Today's Free trade is based on absolute advantage and not comparative advantage. It does not benefit both countries and is far from balanced. The majority of the gains from trade goes to the countries with the lowest labor costs and most lax regulations while the losing side just gets a bigger and bigger trade deficit. Of course this trade deficit must eventually be paid off by the transfer of capital assets from the losing side to the winning side. In summary we get cheap socks and the Chinese end up with half of Manhattan and a growing list of former US owned companies.

Here is one of the few economists who recognizes the fraud taking place.

 

[Mato]

The industrial revolution was not caused by a sudden influx of low skilled labor so you are still arguing by an incorrect analogy.

That's exactly what caused the industrial revolution actually. Look up the enclosure movement. Between 1800 and 1860 London went from a million people to three million people, almost all of them forced off their ancestral farm lands.

Every place on Earth was making textiles in the 19th century, it's no coincidence that the one place that had a huge stream of cheap labor crammed into the most densely populated city on Earth is the place that started the revolution.

 

[Kyle M]

I agree with this wholly. And yes, change will immediately benefit some, and later benefit others, while some fall through the cracks. All I am trying to argue for is a humane awareness of the impact on lives. Its really applicable to the here and now, regardless of whether or not we move intentionally toward a future of decreased barriers to freedom or not.

Yes, that is where charity is helpful.

 

[Kyle M]

Exactly, Free Trade is a sham and has always been a sham. It does not benefit both countries as we have been conditioned to believe. David Ricardo, it's most famous apologists was an employee of the East India Company and subject of the British Empire. He was trying to justify the forcing open of new markets that the dreaded East India Company could exploit. His ideas didn't really work then as you mentioned and they certainly don't work now as more and more of his assumptions of Comparative Advantage are violated. The most important of which are full employment, no capital or labor flows and a balance of trade. None of these are true today.

Today's Free trade is based on absolute advantage and not comparative advantage. It does not benefit both countries and is far from balanced. The majority of the gains from trade goes to the countries with the lowest labor costs and most lax regulations while the losing side just gets a bigger and bigger trade deficit. Of course this trade deficit must eventually be paid off by the transfer of capital assets from the losing side to the winning side. In summary we get cheap socks and the Chinese end up with half of Manhattan and a growing list of former US owned companies.

Here is one of the few economists who recognizes the fraud taking place.

You're confusing wages with productivity. In Henry Ford's heyday, he produced the highest quality cars, at the lowest cost, while paying the highest wages in industry to his factory workers. How is that possible in your paradigm?

In mine, it's possible through greater capital allocation, each worker had more valuable and technological capital as his disposal, so his marginal product of labor was higher, hence he could command higher wages for that labor. The same higher marginal product allowed the end product to be less expensive than if it was produced in a lower marginal product way, such as hand-building an automobile. The people you are quoting do not take capital theory into account at all, only wages, and assume production is the same regardless of techniques and inputs.

If that were true, you could personally make yourself richer by hand making all of your clothes, rather than buying clothes produced on capital equipment from someone else.

 

[Queequeg]

That's exactly what caused the industrial revolution actually. Look up the enclosure movement. Between 1800 and 1860 London went from a million people to three million people, almost all of them forced off their ancestral farm lands.

Every place on Earth was making textiles in the 19th century, it's no coincidence that the one place that had a huge stream of cheap labor crammed into the most densely populated city on Earth is the place that started the revolution.

I doubt that you could find any historian that claims that the cheap influx of labor was the primary cause of the Industrial Revolution. Cheap and abundant labor obviously was useful to factory owners but it was not the proximate cause. Many times in history has there been an abundance of cheap unskilled labor flooding the cities but they never had any direct and lasting impact on industry until the technology was ready to utilize them. Beijing China had a population of over a million people far earlier than England but never managed to industrialize.

The Industrial Revolution's primary cause was the rapid advancement in technologies in steam power, textile manufacturing, metallurgy, chemistry, agriculture, lighting etc. It was these technologies and the factory jobs they provided that first drew the millions of people to the cities and then gave them a way to stay there without starving to death.

 

[Queequeg]

You're confusing wages with productivity. In Henry Ford's heyday, he produced the highest quality cars, at the lowest cost, while paying the highest wages in industry to his factory workers. How is that possible in your paradigm?

In mine, it's possible through greater capital allocation, each worker had more valuable and technological capital as his disposal, so his marginal product of labor was higher, hence he could command higher wages for that labor. The same higher marginal product allowed the end product to be less expensive than if it was produced in a lower marginal product way, such as hand-building an automobile. The people you are quoting do not take capital theory into account at all, only wages, and assume production is the same regardless of techniques and inputs.

If that were true, you could personally make yourself richer by hand making all of your clothes, rather than buying clothes produced on capital equipment from someone else.

Could you be the one who is confused? The point you are trying to make doesn't have anything to do with what I was saying. My post was about the deceptive use of Ricardo's theory of Comparative Advantage to claim that Free Trade always benefits both countries in the exchange. A company's decisions about its capital vs labor mix has little to do with that. Also I never mentioned wages but labor costs, which when used to compare costs of production across borders includes both direct wages and relative productivity.

 

[bdawg]

Could you be the one who is confused? The point you are trying to make doesn't have anything to do with what I was saying. My post was about the deceptive use of Ricardo's theory of Comparative Advantage to claim that Free Trade always benefits both countries in the exchange. A company's decisions about its capital vs labor mix has little to do with that. Also I never mentioned wages but labor costs, which when used to compare costs of production across borders includes both direct wages and relative productivity.

Agree with the general gist of your argument in this thread, that free trade has a lot of losers. But disagree with your extreme position (guessing you're a Trump voter)

A local example of protectionism is the automotive industry in Australia which was heavily subsidised and protected from foreign competition and ultimately left to die after years of losses. The losers, taxpayers & consumers, far outnumbered the winners: blue collar workforce employed by the industry. Your essential argument is that we should intentionally misallocate resources to less productive segments to favour the native population ie nativism, but I have a strong feeling you're not referring to Native Americans...

Also Mises institute.. lolll wasn't QE meant to put us into a deep recession with hyperinflation by now?

 

[lvysaur]

Ted Kaczynski right again

My only qualm is that this pattern has been going steadily in one direction for the last ~15,000 years, so why should it stop now? The rich must open borders to benefit themselves at the expense of the lower 90% of the population. It is natural law.

 

[bdawg]

Kind of like what happened when 90% of the farm workers in the early 19th century got put out of work and from then on standards of living and wealth were so much less for them, right?

LOLL dont forget the poor Luddites in England 'The group was protesting the use of machinery in a "fraudulent and deceitful manner""

 

[managing]

Ted Kaczynski right again

My only qualm is that this pattern has been going steadily in one direction for the last ~15,000 years, so why should it stop now? The rich must open borders to benefit themselves at the expense of the lower 90% of the population. It is natural law.

Do you believe that oligarchs are more effectively able to exploit with open borders than in a protectionist scheme?

 

[Kyle M]

Could you be the one who is confused? The point you are trying to make doesn't have anything to do with what I was saying. My post was about the deceptive use of Ricardo's theory of Comparative Advantage to claim that Free Trade always benefits both countries in the exchange. A company's decisions about its capital vs labor mix has little to do with that. Also I never mentioned wages but labor costs, which when used to compare costs of production across borders includes both direct wages and relative productivity.

I am not using Ricardo's Comparative Advantage, that argument was superseded by the ability for labor and (most importantly) capital to move. Ricardo used as a premise for his theorizing on free trade that capital was basically fixed.

If you think Ricardo's Comparative Advantage, from 200+ years ago, is the best case for free trade that exists in economics today, that is all but confirmation of your lack of economic education. There's no nicer way to say that.

 

[Kyle M]

Also Mises institute.. lolll wasn't QE meant to put us into a deep recession with hyperinflation by now?

What do you think stock/bond/property prices are if not the result of hyperinflation? Inflation is an increase in the money supply by the way, and increased prices are the result not the definition of inflation. Because the manner in which liquidity has been injected into the system, stock, bond, and high-end real estate prices (amongst other things that bankers and hedge fund managers invest in) have absorbed the liquidity and reflect it in sky-high valuations that have nothing to do with earnings or the future ability of the borrowers (for most sovereign, municipal, and corporate bonds) to pay them back. The hyperinflation produced by QE has chased these assets into the stratosphere.

Now, if that liquidity had instead been injected into the economy through, say, food stamps, you would have seen a huge increase in the prices of food that is covered by the food stamp programs.

Does that make sense?

P.S. - that is not to say that some Austrian and fellow traveler economists didn't make predictions about the CPI that didn't come true, only that they themselves didn't understand the extent to which the liquidity was corralled in the investment class and wasn't leaking out very quickly into the general economy. Also, the CPI and other such measurements are routinely tweaked, and when they are the result is a lower number. If the CPI was calculated with the same method that was used in the 1970s, the inflation number would be high single or low double digits during the QE period. Shadowstats and Zerohedge have information on this if you're interested.

 

[Queequeg]

Agree with the general gist of your argument in this thread, that free trade has a lot of losers. But disagree with your extreme position (guessing you're a Trump voter)

A local example of protectionism is the automotive industry in Australia which was heavily subsidised and protected from foreign competition and ultimately left to die after years of losses. The losers, taxpayers & consumers, far outnumbered the winners: blue collar workforce employed by the industry. Your essential argument is that we should intentionally misallocate resources to less productive segments to favour the native population ie nativism, but I have a strong feeling you're not referring to Native Americans...

Also Mises institute.. lolll wasn't QE meant to put us into a deep recession with hyperinflation by now?

Actually I was an anyone but Hillary voter but Trump was not my first second or third choice.

There are lots of examples where local industries fail so one example doesn't really mean that much. Look at our own billion dollar boondoggle Obama wasted on solar panel companies. However a country needs to produce something of value if it wants to improve its citizen's quality of life. A service economy alone wont cut it for long. Australia is lucky it has a lot of mineral resources but even with this it would be better off trying to add as much value to the exports and not just sell raw materials. If you run a trade deficit for long enough, your trading partners will eventually own you.

Promoting your own manufacturing is not a misallocation of resources per se. Many countries have successfully done just that and eventually they have become world class producers in the field. The benefits from manufacturing are enormous to a country and are worth the risk of it not working out IMO.

And no I am not a Nativist, which at least in the US means I support only native born Americans and not naturalized or legal immigrants. I am for everyone living in the US because I believe in the values this country once stood for. I also am rooting for the other democracies in the world such as Australia. Dictatorships like China and Russia don't get as much sympathy though I do care about their people. Sometimes the best thing for those countries is for their economies to fail so the people could take back their power. The West's help in building up China without demanding political change is already looking like a big mistake.

 

[Queequeg]

I am not using Ricardo's Comparative Advantage, that argument was superseded by the ability for labor and (most importantly) capital to move. Ricardo used as a premise for his theorizing on free trade that capital was basically fixed.

If you think Ricardo's Comparative Advantage, from 200+ years ago, is the best case for free trade that exists in economics today, that is all but confirmation of your lack of economic education. There's no nicer way to say that.

Thank you for basically repeating what I was saying about the misuse of Ricardo. Your continued misunderstanding of that point betrays more than a lack of an 'economic education." With that I think I am done discussing economics with you. Its obvious to everyone on this thread, except for you, that you don't have any idea what you are talking about. Continually insulting other people who disagree with you instead of making an intelligent argument doesn't exactly make up for that. I also assure you that my economic education is far more extensive than what you have managed to cobble together from the internet. As another posters has said, "Mises Institute, loll."

 

[Kyle M]

Thank you for basically repeating what I was saying about the misuse of Ricardo. Your continued misunderstanding of that point betrays more than a lack of an 'economic education." With that I think I am done discussing economics with you. Its obvious to everyone on this thread, except for you, that you don't have any idea what you are talking about. Continually insulting other people who disagree with you instead of making an intelligent argument doesn't exactly make up for that. I also assure you that my economic education is far more extensive than what you have managed to cobble together from the internet. As another posters has said, "Mises Institute, loll."

So what is your point? As in, how have you shown that an influx of workers per se causes a decrease in the standard of living of native workers?

P.S. - I think the problem is that you take the notion that Ricardo's assumptions have been destroyed, therefore the case for free trade has been destroyed. I'm saying that the case for free trade has been made in light of other assumptions, and better then Ricardo made it in the first place. He didn't come up with comparative advantage any way, the French Tradition had it before him, he just popularized it for English speakers and was an important part of enacting actual political policy change like the anti-Corn Law movement.

 

[lvysaur]

Do you believe that oligarchs are more effectively able to exploit with open borders than in a protectionist scheme?

That's up to them to decide, as I've never been an oligarch. However, I do think they profit off of it immensely, both financially and socially. The finance part is obvious, the social part will be xenophobic backlash and increase in crime due to unemployment.

The xenophobia primes the base population for right-wing policies, which are a way for elites to give the commoners "something for nothing". In other words, you don't have to actually improve society, you just have to convince the masses you'll lessen the presence of the foreign invaders.

The increased crime creates free prison labor.

They can just hire some fall-guys to institute the unpopular open border policies in the first place, and all is well.

 

[managing]

That's up to them to decide, as I've never been an oligarch. However, I do think they profit off of it immensely, both financially and socially. The finance part is obvious, the social part will be xenophobic backlash. This primes the actual base population for right-wing policies, which are basically a way for elites to give the commoners "something for nothing".

They can just hire a fall-guy to institute the unpopular open border policies in the first place.

I agree with this.

I basically think they will fleece everybody and create an artificial "us" and "them" in order to distract from what is really going on. They will do this with open borders, or not. And the only way to stop it is to take it head on. Changes in economic policy, labor policy, immigration policy etc, will not magically enable or disable it.

Not suggesting you are saying otherwise, just expanding the thought . . .

 

[Mato]

I doubt that you could find any historian that claims that the cheap influx of labor was the primary cause of the Industrial Revolution.

I doubt you could find many historians today who agree with you.

Seriously, I'm not trying to ruffle your feathers, but you're about 30 years behind current mainstream thoughts on the processes involved in the Industrial Revolution. Again....every place on Earth had approximately the same technology at the same time, and China was much further along on some of the key technologies. The tech was necessary to the industrial revolution, but it wasn't the cause otherwise it would have started in Hangzhou in 1200. The cause was a massive unemployed work force in London ready to utilize said technology.

I don't want to debate you, I'd rather you read for yourself and find out. Go to the wikipedia page on "industrial revolution" and read up on the causes, and the enclosure movement. Start there. It's all listed front and center. You can use it as a jumping off point to learn more about enclosure, London of the 19th century, and I guess economics in general.

 

[AJC]

What's with the lolling at the Mises Institute? Genuine question as I am interested in beginning to examine some of their work.