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No it never breaks down. Milton Friedman commented some 30 years back to the typical "we should have higher tariffs on steel, because its unfair that the japane

by whb07 9y ago

No it never breaks down. Milton Friedman commented some 30 years back to the typical "we should have higher tariffs on steel, because its unfair that the japanese are subsidizing their exports". His response? "Well that benefits the American consumer tremendously... we are sending them pieces of paper(dollar) and we are getting hard goods in return at a significant discount". If you think in in the absolute terms, wouldn't you want to trade a silly paper for steeel/cars/whatever? Also, where does the Chinese go with these dollars? Definitely not the Chinese store, they take Yuan. How about Japan? Nope, they take Yen. So...who takes dollars? At some point they have to come back and spend it either directly(investing/purchasing american goods) or indirectly(trading dollars -> random currency) which then leads the other party holding dollars to go out and buy American goods.

dahdum 9y ago
It breaks down when near monopoly is established, which is often the goal of these government subsidization programs. Whether that is acceptable depends on your opinion on global interdependence and national security. If the USA is dependent on Chinese and Russian steel to survive, it’s that much harder to defend against provocation. See EU and Russian gas for a great example.
- whb07 9y ago
  ooh way late response! That is actually the opposite. Friedman also addressed that point. The case you are presenting is essentially "we shouldn't rely on foreign XYZ too much, we should have our own manufacturing". Well sure we should have our own if its able to compete freely. But its never been the case that if we go to war with China, the Japanese/India/whomever couldn't start producing more steel and selling it to us. Sure it might be slightly more expensive but it wouldn't paint the picture that you are proposing. If anything MORE producers of steel would pop up willing to sell at a higher price. Crazy theres this thing called supply/demand. As for the EU/Russian gas example, Russia isn't the biggest producer of gas in the world. According to wiki[0] its the U.S, there are other non-Russian actors in the top 10 list who I'm sure would be willing to provide gas at a higher price. As to why you mentioned EU/Russia is that Russia so happens to have a nice giant pipeline ready to provide gas into the EU. Well...last I checked there were millions of barrels of oil being shipped globally by ship. Would you have to pay a bit more for energy ? Sure. Is national security critically dependent on Russia ? No, because I guarantee you if Germany started paying $200/barrel of oil(or natural gas/whatever) all the oil ships around the world would reorient themselves to deliver to Germany. Crazy world called supply/demand. You now have near infinite suppliers. [0]https://en.wikipedia.org/wiki/List_of_countries_by_natural_gas_production https://en.wikipedia.org/wiki/List_of_countries_by_natural_g...
  - dahdum 9y ago
    Given time industry would adapt, but the impact can be devastating in the short term. EU gas dependence was and still is a big factor in the annexation of Crimea and politics across the region. The BBC reports that this dependence is still growing, further tying the hands of the EU against Russian aggression. Now if Russia itself was just another western style free market democracy, dependence wouldn’t be such a national security risk.

by whb07 9y ago

dahdum 9y ago

It breaks down when near monopoly is established, which is often the goal of these government subsidization programs. Whether that is acceptable depends on your opinion on global interdependence and national security. If the USA is dependent on Chinese and Russian steel to survive, it’s that much harder to defend against provocation. See EU and Russian gas for a great example.

whb07 9y ago
ooh way late response! That is actually the opposite. Friedman also addressed that point. The case you are presenting is essentially "we shouldn't rely on foreign XYZ too much, we should have our own manufacturing". Well sure we should have our own if its able to compete freely. But its never been the case that if we go to war with China, the Japanese/India/whomever couldn't start producing more steel and selling it to us. Sure it might be slightly more expensive but it wouldn't paint the picture that you are proposing. If anything MORE producers of steel would pop up willing to sell at a higher price. Crazy theres this thing called supply/demand. As for the EU/Russian gas example, Russia isn't the biggest producer of gas in the world. According to wiki[0] its the U.S, there are other non-Russian actors in the top 10 list who I'm sure would be willing to provide gas at a higher price. As to why you mentioned EU/Russia is that Russia so happens to have a nice giant pipeline ready to provide gas into the EU. Well...last I checked there were millions of barrels of oil being shipped globally by ship. Would you have to pay a bit more for energy ? Sure. Is national security critically dependent on Russia ? No, because I guarantee you if Germany started paying $200/barrel of oil(or natural gas/whatever) all the oil ships around the world would reorient themselves to deliver to Germany. Crazy world called supply/demand. You now have near infinite suppliers. [0]https://en.wikipedia.org/wiki/List_of_countries_by_natural_gas_production https://en.wikipedia.org/wiki/List_of_countries_by_natural_g...
- dahdum 9y ago
  Given time industry would adapt, but the impact can be devastating in the short term. EU gas dependence was and still is a big factor in the annexation of Crimea and politics across the region. The BBC reports that this dependence is still growing, further tying the hands of the EU against Russian aggression. Now if Russia itself was just another western style free market democracy, dependence wouldn’t be such a national security risk.