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Okay, but if local goods can't be produced at a price that is commensurately low, then the fledgingly country's wage earners have their purchasing power reduced

Okay, but if local goods can't be produced at a price that is commensurately low, then the fledgingly country's wage earners have their purchasing power reduced, with less discretionary income to further their own educational and business pursuits. I think this thesis you are referring to takes for granted that the tariffs are going to be responsibly used by the governing class setting them to invest in the long term prospects of their people and not siphoned off into corrupt ends. That's a pretty tall assumption.

m12k 6y ago
Correct, the lower priced international goods help give the population of developing countries more purchasing power with their low wages, but at the cost of those wages never going up significantly. They get stuck in a local optimum - and unfortunately, yes, in order to escape from one of those, the first steps will always be toward something less optimal.
pydry 6y ago
>if local goods can't be produced at a price that is commensurately low, then the fledgingly country's wage earners have their purchasing power reduced If the industry they work in can't compete their entire income is reduced to zero. That can knock out related industries as well and ultimately leave the country exposed to currency collapse and hyperinflation as the exporting countries decide that this country has nothing it really wants any more while they still desperately need imports. This happened to Venezuela (after local industrialists declared war on Chavez in 2002 he effectively set out to destroy them) and Zimbabwe (when Muagabe dispossessed farmers from their land, rendering it unproductive). The US is also exposed to this risk. It's steadily but very slowly losing hi tech manufacturing capabilities - something that takes decades to get back once lost (due to the network effect and loss of skills).
- tshaddox 6y ago
  > If the industry they work in can't compete their entire income is reduced to zero. But I thought we're talking about a time period before that industry even exists.
  - imtringued 6y ago
    They still have a very important cocoa industry that employs people. If they cease trade and the chocolate industry does not grow quickly enough then some of those farmers will quit.
SyzygistSix 6y ago
This isn't exactly the issue with the cacao production industry. Like coffee, I believe the industries that are able to produce higher quality beans with more equitable and fair labor practices are doing better than the countries that continue producing cheap cacao. Something that I am under the impression is less supported by European chocolate producers. My source is my time as a chocolate maker in the US.

m12k 6y ago

Correct, the lower priced international goods help give the population of developing countries more purchasing power with their low wages, but at the cost of those wages never going up significantly. They get stuck in a local optimum - and unfortunately, yes, in order to escape from one of those, the first steps will always be toward something less optimal.

pydry 6y ago

>if local goods can't be produced at a price that is commensurately low, then the fledgingly country's wage earners have their purchasing power reduced If the industry they work in can't compete their entire income is reduced to zero. That can knock out related industries as well and ultimately leave the country exposed to currency collapse and hyperinflation as the exporting countries decide that this country has nothing it really wants any more while they still desperately need imports. This happened to Venezuela (after local industrialists declared war on Chavez in 2002 he effectively set out to destroy them) and Zimbabwe (when Muagabe dispossessed farmers from their land, rendering it unproductive). The US is also exposed to this risk. It's steadily but very slowly losing hi tech manufacturing capabilities - something that takes decades to get back once lost (due to the network effect and loss of skills).

tshaddox 6y ago
> If the industry they work in can't compete their entire income is reduced to zero. But I thought we're talking about a time period before that industry even exists.
- imtringued 6y ago
  They still have a very important cocoa industry that employs people. If they cease trade and the chocolate industry does not grow quickly enough then some of those farmers will quit.

SyzygistSix 6y ago

This isn't exactly the issue with the cacao production industry. Like coffee, I believe the industries that are able to produce higher quality beans with more equitable and fair labor practices are doing better than the countries that continue producing cheap cacao. Something that I am under the impression is less supported by European chocolate producers. My source is my time as a chocolate maker in the US.