6 ms·

Or... you could institute tariffs to protect local industry and let Capital do whatever. Ricardo is a shaggy dog story they tell ideologues with linear regressi

Or... you could institute tariffs to protect local industry and let Capital do whatever. Ricardo is a shaggy dog story they tell ideologues with linear regression models (aka macroeconomists), not a suicide pact for workers rights.

deleted 6y ago
[deleted]
samirillian 6y ago
I think if Syriza had been willing or able to prevent capital flight when elected, then they wouldn't have capitulated to Germany's demands. Not sure how tariffs fix a problem like that.
- cblconfederate 6y ago
  They imposed capital controls while capitulating to german demands.
- ClumsyPilot 6y ago
  Greece is very difficult case that is not 'normal' - a tiny economy, tiny population, part of a huge union with no border controls and does not even control it's currency. I feel the Euro was the worst mistake of the EU, once you've given up currency you a basically not a government but an oversized city councill. Control over currncy is the most important government lever.
andrewjl 6y ago
In practice this has not worked (Argentina) just as often as it did (China). Ricardo's theory is generally sound, but leaves out intangibles which don't necessarily come for free.
- scottlocklin 6y ago
  It's almost hysterically funny how wrong Ricardo's theory is; even in the example he used of Portugal and the UK. Great job destroying Portuguese industry at the behest of UK capital though. As Joan Robinson put it “but in real life Portugal was dependent on British naval support, and it was for this reason that she was obliged to accept conditions of trade which wiped out her production of textiles and inhibited industrial development so as to make her more dependent than ever”. She further notes that: “What Ricardo was really concerned about was to abolish the Corn Laws so as to lower the real cost of wage goods and raise the rate of profit... When accumulation is brought into the story, it is evident that Portugal is not going to benefit from free trade. Investment in expanding manufactures leads to technical advance, learning by doing, specialisation of industries and accelerating accumulation, while investment in wine runs up a blind alley into stagnation” “Ricardo took the example of trade between England and Portugal. He argued that England, by allowing imports of wine from Portugal, would expand the production and export of cloth to pay for it. Ricardo, of course, was thinking of the English side of the exchange but the analysis is perfectly symmetrical; it implies that Portugal will gain from specialising on wine and importing cloth. In reality, the imposition of free trade on Portugal killed off a promising textile industry and left her with a slow-growing export market for wine, while for England, exports of cotton cloth led to accumulation, mechanisation and the whole spiralling growth of industrial revolution” As I've always said, this sort of economics is linear regression in service of the ruling class rather than anything resembling science.
  - andrewjl 6y ago
    Your example is entirely about intangibles. Industrial development and associated intellectual capital is literally a textbook example. Portugal could have chosen to subsidize industrial development in some other way or for some other sector. That they didn't do so is in no way an indictment of Ricardo's theory. Why didn't they invest in some other industry? Why was a complex historical situation reduced to a bifurcated choice between making cloth or making wine, as if there were no other alternatives? Why didn't the author you quote explore this? Is it because it's not applicable or is it because the above passage was written to justify the a priori conclusion that Ricardo's theory was harmful? Knowing the Marxian[1] bent of the quoted author I know which way I'm leaning. [1] https://en.wikipedia.org/wiki/Joan_Robinson https://en.wikipedia.org/wiki/Joan_Robinson > In 1942, Robinson's An Essay on Marxian Economics famously concentrated on Karl Marx as an economist, helping to revive the debate on this aspect of his legacy.
    - scottlocklin 6y ago
      It's Retardo Ricardo's example; not mine. Why is his imbecile example greeted with gaping credulity when it is so obviously false? There is nothing intangible about the example if you live in Portugal. Nice ad hominem BTW; about right for a "Hayakan."
      - andrewjl 6y ago
        Saying the Ricardo's theory is generally sound when taking into account intangibles is not gaping credulity. You seem to mistake that for unqualified support of what he wrote. You then deployed a quote by a scholar with an obvious axe to grind, confusing the discussion still further. All to distract from a banal, unalloyed statement that trade can be positive-sum and hey maybe we should think about how to encourage more of that, with Ricardo providing excellent scaffolding to build upon. To drill into the details further, Ricardo's combined idea of trade, specialization, and economies of scale does not mean that some countries must specialize in high-tech "good" industries and others must stick to commoditized, negative-externality-filled "bad" industries. His work didn't address that distinction at all, which is its limitation. Reading that into what he wrote is zero sum thinking. Countries can develop a basket of industries to specialize in, and if they plan carefully, can strategically do so to develop a stronger economy. It doesn't require state planning and contrary to Marxian economics, doesn't require state involvement period. If everyone were to do this, the whole global economy would be better off. That this doesn't happen is due a complex confluence of social, political, and economic issues, not a capitalist conspiracy. Intangible also doesn't mean what you think it means, it's things that are invisible and hard to quantify, which is exactly what the byproducts of a booming hi-tech (cloth, at that time) sector would be. It's true that Ricardo's framework did not take that into account and it's true that negative byproducts of those decisions exist today. This is exactly what my own criticism of Ricardo's ideas is, that they're a good start but not sufficient for the contemporary world. All these facts do not excuse intellectual dishonesty in throwing out what he says wholesale. P.s. And If one wanted replace Ricardo wholesale, one would have to propose a better scaffolding that accounts for economic phenomena we see in the real world. Marxism ain't it.
JavaBatman 6y ago
That's what the rich countries did to get rich. Germany, Japan, Korea, Taiwan, China, and the US. The US was the most protectionist country in the world from 1814 - 1914. Alexander Hamilton's "American System" (tariffs, national banks, infrastructure investment) was basically national policy for 100 years until the US got rich enough to compete with the other great powers and then adopted free trade. It inspired Friedrich List and Germany, which inspired Japan, which inspired Korea, which inspired Deng Xiaoping and China.
- fuzzfactor 6y ago
  >The US was the most protectionist country in the world from 1814 - 1914. This was a time when the US government was gradually becoming more globalized by transitioning its funding from tariffs over to income tax instead. Once you get rich enough on your own, then it seems like you should be able to afford all kinds of cheap stuff from all kinds of less prosperous places. But if not reduced and replaced by something else, the tariffs could be more than the cost of the cargo. By shifting the financial support of Washington's efforts from those having the wherewithal to move things around the globe back then, over to ordinary working people today, it has enabled global merchants to bring more cheaper stuff every decade and more people are getting by with a less worthy dollar than ever before. Speaking of less prosperous places Haiti is just one where wealth has been systematically removed more thoroughly these same centuries, and it can be considered _almost_ as an island over the long term. On the other half of the island in the Dominican Republic, wealth has been less thoroughly removed by corresponding global efforts over the same period, so fortunately they are not as non-prosperous today.
esoterica 6y ago
Do you think the economies of the various US states would improve if we instituted tariffs and restricted the flow of trade between states? If you agree that tariffs between states would be a disaster for the economy then why do you think tariffs between countries would magically help industry?
- blululu 6y ago
  This is a false equivalence. The obvious difference is that states are bound by a shared legal, financial and political system. The externalities are internalized.
  - andrewjl 6y ago
    I don't think it's necessarily false equivalence to say that if you assume a group of states can be bound in the same [legal, financial and political] ways that a single state is. I get that it's a near-identical variant of the argument you're making, but you have an unstated assumption that effective supra-national political (or otherwise) systems cannot exist. The Five Eyes is an example to the contrary. ASEAN is another in a more economic vein. These examples shown it's possible to achieve a balance between respecting national sovereignty and avoiding inter-state armed conflict. We could probably use more of them these days, global trends notwithstanding.
- thatcat 6y ago
  You can’t just say tariffs in general bc certain tariffs may be beneficial while others are not when viewed individually in the context of each state. CA imposing water intensive agriculture based tariffs on exports would be a reasonable choice for example, while a tech tariff would not.
- ClumsyPilot 6y ago
  Thats like saying: "separating violent criminals from general population is bad just like separating kids from parents is harmfull."
thunderchief1 6y ago
Pettis thinks tariffs imposed by America are a finger in the dike at best and highly distortionary at worst. Pettis's basic thesis is that there is a global savings glut driven by wealth inequality (Rich people save and invest; poor people spend andconsume). The USD is the global reserve currency because America is the safest investment in the world; and America is the safest investment in the world because the USD is the global reserve currency. An excess of savings from China and Germany ends up flooding into America, whatever the latest news on negative interest rates. Capital flows are not determined by the search for highest return as in econ textbooks but by searching for security and often by attempting to build currency reserves. America's trade deficit is driven by capital inflows (mainly European and Chinese savings), unlike the typically assumed situation where capital flows respond to trade. Thus, tariffs=attacking the symptoms not the disease. The goal of a tariff is to force up domestic savings by raising import prices. Domestic savings in America are being crowded out by capital inflows, so the result would just be increased debt or unemployment.
- scottlocklin 6y ago
  This is a reasonably good argument (upvoted), but I don't agree with it. Tariffs are absolutely not to force up domestic savings; it is to prevent the looting of your industrial base. Saying otherwise is the sheerest ideological nonsense. If the US had 1000% tariffs on, say, greetings cards, it would do jack shit for savings: but all the greetings cards in the US would be made in the US. Rich and poor have nothing to do with why there is an excess of savings from China and Germany: the average Americano is richer than the average from either country. The trade deficits, of course, are the real reason. You have trade deficits in part because of low labor costs overseas, and you have lower labor costs overseas, in part, because both China and Germany engage in currency manipulations which keep the labor costs low. The correct response, again, is tariffs. I want the US to look more like Switzerland (in every way) and less like Argentina in 1900 (aka rich country on its way down the toilet from bad policy). Some people's opinions differ apparently! Great handle, BTW. One of my favorite planes.

deleted 6y ago

[deleted]

samirillian 6y ago

I think if Syriza had been willing or able to prevent capital flight when elected, then they wouldn't have capitulated to Germany's demands. Not sure how tariffs fix a problem like that.

cblconfederate 6y ago
They imposed capital controls while capitulating to german demands.
ClumsyPilot 6y ago
Greece is very difficult case that is not 'normal' - a tiny economy, tiny population, part of a huge union with no border controls and does not even control it's currency. I feel the Euro was the worst mistake of the EU, once you've given up currency you a basically not a government but an oversized city councill. Control over currncy is the most important government lever.

andrewjl 6y ago

In practice this has not worked (Argentina) just as often as it did (China). Ricardo's theory is generally sound, but leaves out intangibles which don't necessarily come for free.

scottlocklin 6y ago
It's almost hysterically funny how wrong Ricardo's theory is; even in the example he used of Portugal and the UK. Great job destroying Portuguese industry at the behest of UK capital though. As Joan Robinson put it “but in real life Portugal was dependent on British naval support, and it was for this reason that she was obliged to accept conditions of trade which wiped out her production of textiles and inhibited industrial development so as to make her more dependent than ever”. She further notes that: “What Ricardo was really concerned about was to abolish the Corn Laws so as to lower the real cost of wage goods and raise the rate of profit... When accumulation is brought into the story, it is evident that Portugal is not going to benefit from free trade. Investment in expanding manufactures leads to technical advance, learning by doing, specialisation of industries and accelerating accumulation, while investment in wine runs up a blind alley into stagnation” “Ricardo took the example of trade between England and Portugal. He argued that England, by allowing imports of wine from Portugal, would expand the production and export of cloth to pay for it. Ricardo, of course, was thinking of the English side of the exchange but the analysis is perfectly symmetrical; it implies that Portugal will gain from specialising on wine and importing cloth. In reality, the imposition of free trade on Portugal killed off a promising textile industry and left her with a slow-growing export market for wine, while for England, exports of cotton cloth led to accumulation, mechanisation and the whole spiralling growth of industrial revolution” As I've always said, this sort of economics is linear regression in service of the ruling class rather than anything resembling science.
- andrewjl 6y ago
  Your example is entirely about intangibles. Industrial development and associated intellectual capital is literally a textbook example. Portugal could have chosen to subsidize industrial development in some other way or for some other sector. That they didn't do so is in no way an indictment of Ricardo's theory. Why didn't they invest in some other industry? Why was a complex historical situation reduced to a bifurcated choice between making cloth or making wine, as if there were no other alternatives? Why didn't the author you quote explore this? Is it because it's not applicable or is it because the above passage was written to justify the a priori conclusion that Ricardo's theory was harmful? Knowing the Marxian[1] bent of the quoted author I know which way I'm leaning. [1] https://en.wikipedia.org/wiki/Joan_Robinson https://en.wikipedia.org/wiki/Joan_Robinson > In 1942, Robinson's An Essay on Marxian Economics famously concentrated on Karl Marx as an economist, helping to revive the debate on this aspect of his legacy.
  - scottlocklin 6y ago
    It's Retardo Ricardo's example; not mine. Why is his imbecile example greeted with gaping credulity when it is so obviously false? There is nothing intangible about the example if you live in Portugal. Nice ad hominem BTW; about right for a "Hayakan."
    - andrewjl 6y ago
      Saying the Ricardo's theory is generally sound when taking into account intangibles is not gaping credulity. You seem to mistake that for unqualified support of what he wrote. You then deployed a quote by a scholar with an obvious axe to grind, confusing the discussion still further. All to distract from a banal, unalloyed statement that trade can be positive-sum and hey maybe we should think about how to encourage more of that, with Ricardo providing excellent scaffolding to build upon. To drill into the details further, Ricardo's combined idea of trade, specialization, and economies of scale does not mean that some countries must specialize in high-tech "good" industries and others must stick to commoditized, negative-externality-filled "bad" industries. His work didn't address that distinction at all, which is its limitation. Reading that into what he wrote is zero sum thinking. Countries can develop a basket of industries to specialize in, and if they plan carefully, can strategically do so to develop a stronger economy. It doesn't require state planning and contrary to Marxian economics, doesn't require state involvement period. If everyone were to do this, the whole global economy would be better off. That this doesn't happen is due a complex confluence of social, political, and economic issues, not a capitalist conspiracy. Intangible also doesn't mean what you think it means, it's things that are invisible and hard to quantify, which is exactly what the byproducts of a booming hi-tech (cloth, at that time) sector would be. It's true that Ricardo's framework did not take that into account and it's true that negative byproducts of those decisions exist today. This is exactly what my own criticism of Ricardo's ideas is, that they're a good start but not sufficient for the contemporary world. All these facts do not excuse intellectual dishonesty in throwing out what he says wholesale. P.s. And If one wanted replace Ricardo wholesale, one would have to propose a better scaffolding that accounts for economic phenomena we see in the real world. Marxism ain't it.

JavaBatman 6y ago

That's what the rich countries did to get rich. Germany, Japan, Korea, Taiwan, China, and the US. The US was the most protectionist country in the world from 1814 - 1914. Alexander Hamilton's "American System" (tariffs, national banks, infrastructure investment) was basically national policy for 100 years until the US got rich enough to compete with the other great powers and then adopted free trade. It inspired Friedrich List and Germany, which inspired Japan, which inspired Korea, which inspired Deng Xiaoping and China.

fuzzfactor 6y ago
>The US was the most protectionist country in the world from 1814 - 1914. This was a time when the US government was gradually becoming more globalized by transitioning its funding from tariffs over to income tax instead. Once you get rich enough on your own, then it seems like you should be able to afford all kinds of cheap stuff from all kinds of less prosperous places. But if not reduced and replaced by something else, the tariffs could be more than the cost of the cargo. By shifting the financial support of Washington's efforts from those having the wherewithal to move things around the globe back then, over to ordinary working people today, it has enabled global merchants to bring more cheaper stuff every decade and more people are getting by with a less worthy dollar than ever before. Speaking of less prosperous places Haiti is just one where wealth has been systematically removed more thoroughly these same centuries, and it can be considered _almost_ as an island over the long term. On the other half of the island in the Dominican Republic, wealth has been less thoroughly removed by corresponding global efforts over the same period, so fortunately they are not as non-prosperous today.

esoterica 6y ago

Do you think the economies of the various US states would improve if we instituted tariffs and restricted the flow of trade between states? If you agree that tariffs between states would be a disaster for the economy then why do you think tariffs between countries would magically help industry?

blululu 6y ago
This is a false equivalence. The obvious difference is that states are bound by a shared legal, financial and political system. The externalities are internalized.
- andrewjl 6y ago
  I don't think it's necessarily false equivalence to say that if you assume a group of states can be bound in the same [legal, financial and political] ways that a single state is. I get that it's a near-identical variant of the argument you're making, but you have an unstated assumption that effective supra-national political (or otherwise) systems cannot exist. The Five Eyes is an example to the contrary. ASEAN is another in a more economic vein. These examples shown it's possible to achieve a balance between respecting national sovereignty and avoiding inter-state armed conflict. We could probably use more of them these days, global trends notwithstanding.
thatcat 6y ago
You can’t just say tariffs in general bc certain tariffs may be beneficial while others are not when viewed individually in the context of each state. CA imposing water intensive agriculture based tariffs on exports would be a reasonable choice for example, while a tech tariff would not.
ClumsyPilot 6y ago
Thats like saying: "separating violent criminals from general population is bad just like separating kids from parents is harmfull."

thunderchief1 6y ago

Pettis thinks tariffs imposed by America are a finger in the dike at best and highly distortionary at worst. Pettis's basic thesis is that there is a global savings glut driven by wealth inequality (Rich people save and invest; poor people spend andconsume). The USD is the global reserve currency because America is the safest investment in the world; and America is the safest investment in the world because the USD is the global reserve currency. An excess of savings from China and Germany ends up flooding into America, whatever the latest news on negative interest rates. Capital flows are not determined by the search for highest return as in econ textbooks but by searching for security and often by attempting to build currency reserves. America's trade deficit is driven by capital inflows (mainly European and Chinese savings), unlike the typically assumed situation where capital flows respond to trade. Thus, tariffs=attacking the symptoms not the disease. The goal of a tariff is to force up domestic savings by raising import prices. Domestic savings in America are being crowded out by capital inflows, so the result would just be increased debt or unemployment.

scottlocklin 6y ago
This is a reasonably good argument (upvoted), but I don't agree with it. Tariffs are absolutely not to force up domestic savings; it is to prevent the looting of your industrial base. Saying otherwise is the sheerest ideological nonsense. If the US had 1000% tariffs on, say, greetings cards, it would do jack shit for savings: but all the greetings cards in the US would be made in the US. Rich and poor have nothing to do with why there is an excess of savings from China and Germany: the average Americano is richer than the average from either country. The trade deficits, of course, are the real reason. You have trade deficits in part because of low labor costs overseas, and you have lower labor costs overseas, in part, because both China and Germany engage in currency manipulations which keep the labor costs low. The correct response, again, is tariffs. I want the US to look more like Switzerland (in every way) and less like Argentina in 1900 (aka rich country on its way down the toilet from bad policy). Some people's opinions differ apparently! Great handle, BTW. One of my favorite planes.