5 ms·

> The difference is, it wouldn't be okay if all our domestic steel production went overseas. I think I know the rationale behind this statement, but I'm always

by bitops 13y ago

> The difference is, it wouldn't be okay if all our domestic steel production went overseas. I think I know the rationale behind this statement, but I'm always curious as to why we hold on to these beliefs. If we let industries move around based on true competitiveness, stripped of subsidies and other anticompetitive practices, we might find that to be a force for good. That said, I've come to believe that this is most likely a minority view. Everyone believes in free markets until it starts affecting their bottom line.

Guvante 13y ago
Think about it like this, lets say we let people make Steel wherever they want and everyone starts making it in China, causing the local production to grind to a halt due to being unable to compete. Now a year later, China decides it doesn't want to export to us anymore and bans exports of Steel to the US, now we are screwed for at least 6 months, since we don't have the ability to create the product anymore. The difference with sugar is we do have an alternative available (corn syrup) so the loss wouldn't be as big.
- ztoy 13y ago
  There are three good solutions: 1. Maintain a 6 months (or whatever time is necessary to restart production) stockpile 2. Have a highly credible policy that, if any foreign country actively opposes free trade of anything important, an ICBM loaded with a nuclear warhead is launched on their main government building or biggest city 3. Change things so that there is no advantage to producing abroad, if possible (e.g. allow unlimited immigration, remove taxation, remove minimum wages, remove regulations, etc.)
  - Dylan16807 13y ago
    Surely you're joking about 2/3 of those being remotely close to good ideas. And you made an account just to post this??
  - smsm42 13y ago
    There's always advantage to producing abroad, no country can be optimal producer of everything, due to varied geography, natural resources and cultures.
- ztoy 13y ago
  There are three good solutions: 1. Maintain a 6 months (or whatever time is necessary to restart production) stockpile 2. Have a highly credible policy that, if any foreign country actively opposes free trade of anything important, an ICBM loaded with a nuclear warhead is launched on their main government building or biggest city 3. Change things so that there is no advantage to producing abroad, if possible (e.g. allow unlimited immigration, remove taxation, remove minimum wages, remove regulations, etc.)
- glenra 13y ago
  > now we are screwed for at least 6 months, since we don't have the ability to create the product anymore. So stockpile it. Just buy 6-month's supply of cheap foreign steel and store it in a warehouse somewhere. Now if things turn south we just draw down the "strategic steel reserve" for a while - we have 6 months to either reclaim our prior ability or find another trading partner willing to sell to us.
  - rayiner 13y ago
    It takes a lot more than 6 months to rebuild war-making capability. It's not just the physical production that moves off-shore, it's the know-how and expertise. As we saw with the computer industry, it's not just production that moves off-shore. Eventually, so does much of the design capability. Thought experiment: if the key to saving our civilization was on the moon, how long would it take us to redevelop the technology and infrastructure to get back there?
    - glenra 13y ago
      So store 12 month's supply, Or 18 or 24 months. And buy options to buy from a few other countries that we can exercise if need be.
      - rayiner 13y ago
        So what happens when you have a years long war? You can't rebuild a steel production industry from scratch while also fighting a war. More important than that, you can't keep the expertise in a stockpile. If we let e.g. shipbuilding go overseas, it could be a decade before we could gather together the expertise again to build a nuclear powered aircraft carrier, even if we had a stockpile of steel.
        glenra 13y ago
        I don't think you understood what I meant by "buy options". So let's flesh that out a little. Suppose steel costs $2/unit from a US firm, but costs $1/unit on the world market. We can go to companies in various other countries and pay some nominal fee (say, $50k/year) to buy an OPTION to buy their future steel output, not at the current price, but at twice the world price. So in the best case scenario there's no war, the steel company gets paid a nominal fee for an annual option that never gets exercised, and the US military saves far more by buying low cost steel through the years than the cost of the options. But if there ever is a war, we execute the option and get to buy (on 6 month's notice) that factory's full capacity at a 100% markup, crowding out whoever else they would otherwise have sold that steel to at a much lower price. So in wartime we pay foreign companies exactly what we would have had to pay a US firm - twice the world market rate - without first having to wait to build any US factories! The foreign firm just has to allow for this in their contracts - that they reserve the right to cut off any buyer (paying a suitable penalty fee) with 6 month's notice. Now our stored 6-month supply is exactly enough to tide us over until options can reasonably be exercised (and penalty fees paid) that provide us with substitute sources. We sign those sort of contracts with firms in a variety of countries in a variety of geographic locations. Unless our primary low-cost supplier gets mad at us and ALL those "safety" countries also get mad at us at the same time, we have an adequate safety margin. All our steel - heck, all our ships - gets made for HALF the current cost until such time as there actually IS a war with our main supplier, whereupon it all gets made for exactly the price it would have cost to make domestically, had we kept that industry around.
- thisrod 13y ago
  Now a year later, China decides it doesn't want to export to us anymore and bans exports of Steel to the US You mean they might do what Australia did to Japan in 1938, and the US copied in 1940? If it comes to that, we'll all have bigger problems.
adventured 13y ago
If you have an interest in self-defense, it's a good idea to retain a meaningful industrial base (eg domestic steel manufacturing). There are numerous other strategic economic reasons also.
- glenra 13y ago
  > it's a good idea to retain a meaningful industrial base (eg domestic steel manufacturing). Whenever we "protect" one industry, that has negative downstream effects on all our other industries that depend on it. In the case of steel, the fact that we protected steel manufacturers made our own auto manufacturers much less internationally competitive than they would otherwise have been, because US automakers were paying twice as much for their steel as companies in Japan and Taiwan were paying for theirs. Similarly, the US nearly killed Apple Computer at one point when it tried to "protect" the domestic semiconductor industry, making locally-assembled macs artificially more expensive than foreign-assembled clones due to the artificially-inflated price of imported DRAM chips. The best way to "retain a meaningful industrial base" is let our companies compete on the world market.
rayiner 13y ago
The "free" market, at least as we understand it, depends on a fiction: interactions between people happen in terms of transactions in private property according to enforced contracts. Neoclassical economics doesn't really consider what an efficient economy looks like when "killing someone and taking their stuff" is a valid action within the system. We can get away with this inside a country, because governments monopolize the use of force, and so you can talk about "free" markets in terms of interactions between people in terms of market transactions, without factoring into the equation the possibility of use of force. But as between countries, that fiction fails. Countries are in the state of nature. In that state, force is as valid an interaction as trade. Any discussion of the interactions between countries, therefore, must consider how force affects any trade dynamic between the countries. So why do we keep a domestic steel and arms industry, even though it might be more efficient in terms of global GDP to let some other country manufacture those things? Because it's a huge disadvantage in terms of waging war to have your arms manufacturing done by some other country. We would have a hard time bombing China if our bomber aircraft were manufactured there...
- glenra 13y ago
  > We would have a hard time bombing China if our bomber aircraft were manufactured there... You say that like it would a bad thing if we "had a hard time" bombing specific other countries. :-)
  - rayiner 13y ago
    As an American, yes, I think it would be. I like the current status quo, where we consume 10x as many resources per capita as the Chinese. Eliminating the ability to bomb specific other countries would curtail our ability to maintain that margin.
    - glenra 13y ago
      Um, we can consume 10x as much per capita as the Chinese because we produce 10x as much per capita as the Chinese. And we could produce (and hence, consume) even more if we wasted less effort on making war and propping up inefficient old industries.

by bitops 13y ago

Guvante 13y ago

Think about it like this, lets say we let people make Steel wherever they want and everyone starts making it in China, causing the local production to grind to a halt due to being unable to compete. Now a year later, China decides it doesn't want to export to us anymore and bans exports of Steel to the US, now we are screwed for at least 6 months, since we don't have the ability to create the product anymore. The difference with sugar is we do have an alternative available (corn syrup) so the loss wouldn't be as big.

ztoy 13y ago
There are three good solutions: 1. Maintain a 6 months (or whatever time is necessary to restart production) stockpile 2. Have a highly credible policy that, if any foreign country actively opposes free trade of anything important, an ICBM loaded with a nuclear warhead is launched on their main government building or biggest city 3. Change things so that there is no advantage to producing abroad, if possible (e.g. allow unlimited immigration, remove taxation, remove minimum wages, remove regulations, etc.)
- Dylan16807 13y ago
  Surely you're joking about 2/3 of those being remotely close to good ideas. And you made an account just to post this??
- smsm42 13y ago
  There's always advantage to producing abroad, no country can be optimal producer of everything, due to varied geography, natural resources and cultures.
ztoy 13y ago
There are three good solutions: 1. Maintain a 6 months (or whatever time is necessary to restart production) stockpile 2. Have a highly credible policy that, if any foreign country actively opposes free trade of anything important, an ICBM loaded with a nuclear warhead is launched on their main government building or biggest city 3. Change things so that there is no advantage to producing abroad, if possible (e.g. allow unlimited immigration, remove taxation, remove minimum wages, remove regulations, etc.)
glenra 13y ago
> now we are screwed for at least 6 months, since we don't have the ability to create the product anymore. So stockpile it. Just buy 6-month's supply of cheap foreign steel and store it in a warehouse somewhere. Now if things turn south we just draw down the "strategic steel reserve" for a while - we have 6 months to either reclaim our prior ability or find another trading partner willing to sell to us.
- rayiner 13y ago
  It takes a lot more than 6 months to rebuild war-making capability. It's not just the physical production that moves off-shore, it's the know-how and expertise. As we saw with the computer industry, it's not just production that moves off-shore. Eventually, so does much of the design capability. Thought experiment: if the key to saving our civilization was on the moon, how long would it take us to redevelop the technology and infrastructure to get back there?
  - glenra 13y ago
    So store 12 month's supply, Or 18 or 24 months. And buy options to buy from a few other countries that we can exercise if need be.
    - rayiner 13y ago
      So what happens when you have a years long war? You can't rebuild a steel production industry from scratch while also fighting a war. More important than that, you can't keep the expertise in a stockpile. If we let e.g. shipbuilding go overseas, it could be a decade before we could gather together the expertise again to build a nuclear powered aircraft carrier, even if we had a stockpile of steel.
      - glenra 13y ago
        I don't think you understood what I meant by "buy options". So let's flesh that out a little. Suppose steel costs $2/unit from a US firm, but costs $1/unit on the world market. We can go to companies in various other countries and pay some nominal fee (say, $50k/year) to buy an OPTION to buy their future steel output, not at the current price, but at twice the world price. So in the best case scenario there's no war, the steel company gets paid a nominal fee for an annual option that never gets exercised, and the US military saves far more by buying low cost steel through the years than the cost of the options. But if there ever is a war, we execute the option and get to buy (on 6 month's notice) that factory's full capacity at a 100% markup, crowding out whoever else they would otherwise have sold that steel to at a much lower price. So in wartime we pay foreign companies exactly what we would have had to pay a US firm - twice the world market rate - without first having to wait to build any US factories! The foreign firm just has to allow for this in their contracts - that they reserve the right to cut off any buyer (paying a suitable penalty fee) with 6 month's notice. Now our stored 6-month supply is exactly enough to tide us over until options can reasonably be exercised (and penalty fees paid) that provide us with substitute sources. We sign those sort of contracts with firms in a variety of countries in a variety of geographic locations. Unless our primary low-cost supplier gets mad at us and ALL those "safety" countries also get mad at us at the same time, we have an adequate safety margin. All our steel - heck, all our ships - gets made for HALF the current cost until such time as there actually IS a war with our main supplier, whereupon it all gets made for exactly the price it would have cost to make domestically, had we kept that industry around.
thisrod 13y ago
Now a year later, China decides it doesn't want to export to us anymore and bans exports of Steel to the US You mean they might do what Australia did to Japan in 1938, and the US copied in 1940? If it comes to that, we'll all have bigger problems.

adventured 13y ago

If you have an interest in self-defense, it's a good idea to retain a meaningful industrial base (eg domestic steel manufacturing). There are numerous other strategic economic reasons also.

glenra 13y ago
> it's a good idea to retain a meaningful industrial base (eg domestic steel manufacturing). Whenever we "protect" one industry, that has negative downstream effects on all our other industries that depend on it. In the case of steel, the fact that we protected steel manufacturers made our own auto manufacturers much less internationally competitive than they would otherwise have been, because US automakers were paying twice as much for their steel as companies in Japan and Taiwan were paying for theirs. Similarly, the US nearly killed Apple Computer at one point when it tried to "protect" the domestic semiconductor industry, making locally-assembled macs artificially more expensive than foreign-assembled clones due to the artificially-inflated price of imported DRAM chips. The best way to "retain a meaningful industrial base" is let our companies compete on the world market.

rayiner 13y ago

The "free" market, at least as we understand it, depends on a fiction: interactions between people happen in terms of transactions in private property according to enforced contracts. Neoclassical economics doesn't really consider what an efficient economy looks like when "killing someone and taking their stuff" is a valid action within the system. We can get away with this inside a country, because governments monopolize the use of force, and so you can talk about "free" markets in terms of interactions between people in terms of market transactions, without factoring into the equation the possibility of use of force. But as between countries, that fiction fails. Countries are in the state of nature. In that state, force is as valid an interaction as trade. Any discussion of the interactions between countries, therefore, must consider how force affects any trade dynamic between the countries. So why do we keep a domestic steel and arms industry, even though it might be more efficient in terms of global GDP to let some other country manufacture those things? Because it's a huge disadvantage in terms of waging war to have your arms manufacturing done by some other country. We would have a hard time bombing China if our bomber aircraft were manufactured there...

glenra 13y ago
> We would have a hard time bombing China if our bomber aircraft were manufactured there... You say that like it would a bad thing if we "had a hard time" bombing specific other countries. :-)
- rayiner 13y ago
  As an American, yes, I think it would be. I like the current status quo, where we consume 10x as many resources per capita as the Chinese. Eliminating the ability to bomb specific other countries would curtail our ability to maintain that margin.
  - glenra 13y ago
    Um, we can consume 10x as much per capita as the Chinese because we produce 10x as much per capita as the Chinese. And we could produce (and hence, consume) even more if we wasted less effort on making war and propping up inefficient old industries.