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Which works fine until they own a monopoly to a business with high cost of entry and decide to raise prices again. Things like this are rarely simple.

by mrkstu 8y ago

drak0n1c 8y ago
Precisely, if your subsidized monopoly can afford to take the hit for a decade or two - the international competition starts dying, their facilities and towns shutter, and locally accumulated institutional knowledge and its transfer disappears. African agriculture and industry suffered similarly in the 20th century due to decades of ham-fisted global charity (essentially subsidized commodity dumping). There are complex consequences, and the rebound when opportunities re-emerge isn't anywhere as rapid as the fall.
- roenxi 8y ago
  Maybe, but that involves burning a lot of resources in a sort of crazy hope that nobody is going to try and compete when you start making money again. Africa is an interesting case in point - I don't know very much about the average case, but I remember Zimbabwe gutted themselves, going from the Bread Basket of Africa to famine in a very short period of time with no particular effort from outside forces. There is a strong case the Africa's economic problems are more attributable to their struggles to organise politically rather than charity and dumping from external economies (which probably hasn't helped or hindered in the big picture). Maybe we can peg the organisational issues on foreign countries; but it is going to be more complicated than that. Take China. Their protectionist policies probably have an impact, but most of their advantage is they are organised, politically stable, willing to work more for less pay and have a culture that believes in investment and education. Without government handicaps like Maoist Communism, that is a very formidable set of attributes in a competitor.
zeroname 8y ago
That's basically the fallacy of predatory pricing. It doesn't work. Sure, you can raise prices after killing the competition, but only so far as to not revive the competition. Your price ends up as the fair market price. Cost of entry is irrelevant here, it's a cost like any other.
- vertex-four 8y ago
  Sure, except that reviving the competition costs money in its own right many times - it's usually not a Bitcoin miner that can be turned off when it's unprofitable and turned on again with the flick of a switch when it becomes profitable to run. So your price ends up at fair market price... when averaged over many decades, maybe, but likely not for long at any particular point in time. And in the meantime workers get screwed over as industries and skillsets lose economic value.
  - zeroname 8y ago
    First of all, where's the evidence of these supposed high-entry monopolies? Seems more like a thought experiment to me. Secondly, you're only looking at the negative consequences for some workers. You're not looking at the benefit to all workers, who pay lower prices as result of cheaper labor from abroad. Suppose workers had been guaranteed their jobs for life because of protectionist policies. This is called mercantilism. Everybody pays more for everyone else's labor and nobody can benefit from comparative advantage. As a result, everyone is poorer. This has been known for centuries and it has been accepted by economists across the political spectrum. Yet politically, protectionism never ceases to lose appeal.
    - kuschku 8y ago
      Have you tried producing and assembling electronics in the west? You don't have shops to buy parts anymore, you don't have assembly lines anymore, you don't have people trained in this anymore. If China decided tomorrow to increase the costs of the electronics they export, you'd have to accept that. Apple tried their best to move even some assembly back to the US, and couldn't even get the simplest custom screws made in the amounts they need. Only a single small company still had the tech to make them, and they couldn't produce enough, fast enough. It's not just a single monopoly, the problem is that entire industries are gone, and it'd take decades to train workers and regain the institutional knowledge. And this is just one example. And your argument has one more flaw: free trade reduces costs of products, and wages. But it won't affect cost of housing (except over a timespan of decades due to cheaper labor and materials, but it still won't solve cost of land). Nor will it affect cost of utilities. In our household, we're now spending 71% of our budget on rent and utilities. Under more protectionist policies, I might pay 20% more for products, but I'd also be making 20% more wages — and as result, I'd be better off (in fact, my disposable income after rent, utilities and food would almost triple)

Which works fine until they own a monopoly to a business with high cost of entry and decide to raise prices again. Things like this are rarely simple.

by mrkstu 8y ago

Which works fine until they own a monopoly to a business with high cost of entry and decide to raise prices again. Things like this are rarely simple.

drak0n1c 8y ago

Precisely, if your subsidized monopoly can afford to take the hit for a decade or two - the international competition starts dying, their facilities and towns shutter, and locally accumulated institutional knowledge and its transfer disappears. African agriculture and industry suffered similarly in the 20th century due to decades of ham-fisted global charity (essentially subsidized commodity dumping). There are complex consequences, and the rebound when opportunities re-emerge isn't anywhere as rapid as the fall.

roenxi 8y ago
Maybe, but that involves burning a lot of resources in a sort of crazy hope that nobody is going to try and compete when you start making money again. Africa is an interesting case in point - I don't know very much about the average case, but I remember Zimbabwe gutted themselves, going from the Bread Basket of Africa to famine in a very short period of time with no particular effort from outside forces. There is a strong case the Africa's economic problems are more attributable to their struggles to organise politically rather than charity and dumping from external economies (which probably hasn't helped or hindered in the big picture). Maybe we can peg the organisational issues on foreign countries; but it is going to be more complicated than that. Take China. Their protectionist policies probably have an impact, but most of their advantage is they are organised, politically stable, willing to work more for less pay and have a culture that believes in investment and education. Without government handicaps like Maoist Communism, that is a very formidable set of attributes in a competitor.

zeroname 8y ago

That's basically the fallacy of predatory pricing. It doesn't work. Sure, you can raise prices after killing the competition, but only so far as to not revive the competition. Your price ends up as the fair market price. Cost of entry is irrelevant here, it's a cost like any other.

vertex-four 8y ago
Sure, except that reviving the competition costs money in its own right many times - it's usually not a Bitcoin miner that can be turned off when it's unprofitable and turned on again with the flick of a switch when it becomes profitable to run. So your price ends up at fair market price... when averaged over many decades, maybe, but likely not for long at any particular point in time. And in the meantime workers get screwed over as industries and skillsets lose economic value.
- zeroname 8y ago
  First of all, where's the evidence of these supposed high-entry monopolies? Seems more like a thought experiment to me. Secondly, you're only looking at the negative consequences for some workers. You're not looking at the benefit to all workers, who pay lower prices as result of cheaper labor from abroad. Suppose workers had been guaranteed their jobs for life because of protectionist policies. This is called mercantilism. Everybody pays more for everyone else's labor and nobody can benefit from comparative advantage. As a result, everyone is poorer. This has been known for centuries and it has been accepted by economists across the political spectrum. Yet politically, protectionism never ceases to lose appeal.
  - kuschku 8y ago
    Have you tried producing and assembling electronics in the west? You don't have shops to buy parts anymore, you don't have assembly lines anymore, you don't have people trained in this anymore. If China decided tomorrow to increase the costs of the electronics they export, you'd have to accept that. Apple tried their best to move even some assembly back to the US, and couldn't even get the simplest custom screws made in the amounts they need. Only a single small company still had the tech to make them, and they couldn't produce enough, fast enough. It's not just a single monopoly, the problem is that entire industries are gone, and it'd take decades to train workers and regain the institutional knowledge. And this is just one example. And your argument has one more flaw: free trade reduces costs of products, and wages. But it won't affect cost of housing (except over a timespan of decades due to cheaper labor and materials, but it still won't solve cost of land). Nor will it affect cost of utilities. In our household, we're now spending 71% of our budget on rent and utilities. Under more protectionist policies, I might pay 20% more for products, but I'd also be making 20% more wages — and as result, I'd be better off (in fact, my disposable income after rent, utilities and food would almost triple)