Trade War brewing? :-O

trader556 · Nov 22, 2003

Quote from harrytrader:

Georges Orwell's 1984 http://www.online-literature.com/vi...17?term=warfare

" From the moment when the machine first made its appearance it was clear to all thinking people that the need for human drudgery, and therefore to a great extent for human inequality, had disappeared. If the machine were used deliberately for that end, hunger, overwork, dirt, illiteracy, and disease could be eliminated within a few generations. And in fact, without being used for any such purpose, but by a sort of automatic process -- by producing wealth which it was sometimes impossible not to distribute -- the machine did raise the living standards of the average human being very greatly over a period of about fifty years at the end of the nineteenth and the beginning of the twentieth centuries.

But it was also clear that an all-round increase in wealth threatened the destruction -- indeed, in some sense was the destruction -- of a hierarchical society. In a world in which everyone worked short hours, had enough to eat, lived in a house with a bathroom and a refrigerator, and possessed a motor-car or even an aeroplane, the most obvious and perhaps the most important form of inequality would already have disappeared. If it once became general, wealth would confer no distinction. It was possible, no doubt, to imagine a society in which wealth, in the sense of personal possessions and luxuries, should be evenly distributed, while power remained in the hands of a small privileged caste. But in practice such a society could not long remain stable. For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realize that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance. To return to the agricultural past, as some thinkers about the beginning of the twentieth century dreamed of doing, was not a practicable solution. It conflicted with the tendency towards mechanization which had become quasi-instinctive throughout almost the whole world, and moreover, any country which remained industrially backward was helpless in a military sense and was bound to be dominated, directly or indirectly, by its more advanced rivals.

Nor was it a satisfactory solution to keep the masses in poverty by restricting the output of goods. This happened to a great extent during the final phase of capitalism, roughly between 1920 and 1940. The economy of many countries was allowed to stagnate, land went out of cultivation, capital equipment was not added to, great blocks of the population were prevented from working and kept half alive by State charity. But this, too, entailed military weakness, and since the privations it inflicted were obviously unnecessary, it made opposition inevitable. The problem was how to keep the wheels of industry turning without increasing the real wealth of the world. Goods must be produced, but they must not be distributed. And in practice the only way of achieving this was by continuous warfare. "
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great excerpt. The last paragraph, definitely the last sentence, speaks volumes. War is one of the best if not the best business, for the arm chair generals and controlling elite that is...hehe

harrytrader, can you repost the full "Georges Orwell's 1984" url?, this comes up as unknown page.

Good posts/references, keep them coming. Now if we could understand your charts........ hehehe

chasinfla · Nov 22, 2003

it is tempting to read Orwell and interpret present circumstances as validating his views.

it is also a fallacy to conclude that, because Orwell's theories might be correct, that the present conditions are identical, or that there is no such thing as a 'just war.'

Orwell has a definite viewpoint -- a cynical one -- which coincides with reality in varying degrees at various times, but can't be relied upon to be infallible.

theories about human behavior, like trading systems, are at least one dimension short of getting the whole picture.

unfortunately, we tend to forget (or abandon) our responsibility in shaping our government and thus, the course of history, as well.

trader556 · Nov 22, 2003

Quote from chasinfla:

unfortunately, we tend to forget (or abandon) our responsibility in shaping our government and thus, the course of history, as well.
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Well said.

I don't remember the author, but the quote rings true:

-a society of sheep, breeds a government of wolves-

darkhorse · Nov 22, 2003

Quote from chasinfla:

unfortunately, we tend to forget (or abandon) our responsibility in shaping our government and thus, the course of history, as well.
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yep- abandon wisdom and you eventually abandon prosperity as well. funny how intangibles like ethics, morality and duty are at the heart of almost every issue- and perhaps more tangible than the issues themselves.

lundy · Nov 22, 2003

High end technology isn't a basic necessity. Clothing, farms, food, and building materials are basic necessities. As more of our basic necessities come from outside the US, our military must grow proportionately.

If ever we were threatened by a more powerful military, this upside down pyramid we are standing on and building would collapse.

It's bound to happen. And when it does happen, a one world government will emerge to make sure all the countries cooperate. Globablization/freetrade will result in a one world government.

It will be painful on the way, but a one world government won't be that bad if we get there bofore we all nuke eachother when Americas upside down pyramid collapses.

Quote from darkhorse:

Interesting points AAA, have to strongly disagree with your conclusion here though.

The problem with "negotiating access on a bilateral basis" is that the silent majority will always be trumped by the vocal minority when it comes to trade. Those who benefit most from free trade have no lobbying groups or war chests, whereas those who benefit from protectionism are extremely vocal, organized and well financed. In a situation like this, politicians can't be trusted because bad influence squeezes out good . If you refuse to pander to the vocal minority and refuse to stack the deck, your opponent will- and take your seat at the next election. Removing corruption starts with defeating temptation- by fair means at the ballot box, of course.

In terms of the plight of steel workers who have lost their jobs, I agree that it's callous to say 'let them eat cake' and ignore the problem. However a more important question to ask, in my opinion, is what good does protectionism do, and does it actually do anything to solve the problem? Does it stem the tide, or does it only cause more harm than good in the long run?

Countries at the top of the economic food chain have to 'step up' in a microevolution sense- they have no choice. Fighting this is like trying to fight a glacier. We can either maintain our high standard of living by moving up the ladder, or we can distribute our gains to other developed countries who catch up to us and are thus able to compete with us, forcing us to tighten our belts and give up our profligate ways. There's no other option, and the future holds a bit of ladder climbing AND belt tightening for the developed world.

I also think there's something morally wrong with the notion that Americans deserve to keep their job by fair means or foul simply because of geographical boundary lines. The flip side of not beleiving in handouts is not believing in holding others down, either- even if they are of a different nationality. If someone in another country is willing to do the same job for less pay, what moral right do I have to call that unfair? Not hiring someone because of their skin color is racist; why is it so different to discriminate based on nationality? Obviously there are exceptions: slave labor, child labor and forced labor cannot be condoned. But between free economies, there is something inherently amiss in restricting competition on nationalistic grounds.

I also disagree that global trade leads to global government. If anything true global trade will ultimately lead to less government because technology is a decentralizing force that lowers communication barriers and decreases economy of scale.

I also disagree because there is a significant difference between positive and negative rights, and the right to free trade is the latter. A positive right is something akin to an entitlement, such as a right to a free education. A negative right is akin to freedom from restriction or harm, such as the right to assembly (or the right to conduct business with your neighbor).

The government bestows positive rights, but enforces negative rights. Positive rights lead to expansion of government because a) they require ever greater resources to maintain and b) they fuel an entitlement mentality. Negative rights generally do NOT lead to expansion of government because a) the pool of negative rights is limited and defined, and b) as technology and efficiency increases the government is able to better to carry out non-entitlement functions with proportionately smaller resources. (The military
is an exception- the cost of protecting our freedom and security has increased dramatically- but all else being equal it's the exception that proves the rule).

The key distinction here is that free trade issues are ultimately about negative rights: the right to trade with one's neighbor unfettered by artificial competition and unrestricted by handicaps. For free trade to flourish, the government doesn't have to get bigger: it just has to get out of the way as much as possible while still maintaining a basic rule of law framework that allows unfamiliar parties to trust each other. Think about how much more careful you would be in your regular business routines if you knew there was no recourse for theft or damages. Traders certainly wouldn't be sending hundreds of thousands of dollars to brokerages they've never set foot in, that's for sure. The same thing applies on a larger scale: while there's no need for a world government (and there will never be one), there is a need to create a mutually respected rule of law framework.
With this understanding in mind, there's really not much danger of free trade organizations morphing into a monsters unless a shift is made from negative to positive rights. And that's not going to happen because the stronger capitalism gets, the more free capitalism becomes.

Last but not least, I don't think the US would get along very well without trade- in fact I think the US would be screwed without trade. Right now we are utterly dependent on foreign direct investment to keep the engine humming. And even if we weren't dependent on FDI, our prospects for prosperity would be far reduced without trade. When we outsource stuff like basketballs and gameboys, we are able to spend more time developing higher level technology, which we then turn around and sell to the rest of the world. Without the ability to outsource globally and also sell our wares globally, America wouldn't be anywhere near the powerhouse it is now. And the more we expose ourselves to free trade, the more we benefit as a country. Yes it's painful to see those manufacturing jobs go, but it's going to happen sooner or later anyway- and we see the benefit come right back to us in the form of cheaper consumer goods and more cost efficient consumables.

Free trade is great, long live free trade

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AAAintheBeltway · Nov 22, 2003

So, from reading Friedman, are we to conclude that the Japanese, Chinese and Europeans are just pitifully uneducated about basic economics? That in seeking unilateral trade advantages at every turn, they are just needlessly inflicting hardships on their populations? Or perhaps that we should be appreciative of the fact that a dollar is worth 1/3 what it used to be against the yen?

Friedman's reputation was made by his constant insistence that monetarism would cure all our ills, kind of like he argues now that free trade will. When it was actually tried, it was a disaster and had to be abandoned immediately. Seems the ivory tower solution doesn't always work that well in real life. And I am distinctly unimpressed by academics who are willing to sacrifice someone else's wealth for their theories.

Even if he's correct, there are other values in life besides economic efficiency. Having some control over your own destiny would seem to rank pretty high to me. When our economy is hostage to the kindness of strangers, we have lost that control. If you doubt that, consider what would happen if the chinese dumped their massive T-bond holdings.

harrytrader · Nov 23, 2003

http://www.online-literature.com/orwell/1984/

What did you mean about my charts ? Read Conan Doyle first and perhaps you will get the spirit to understand them

http://www.online-literature.com/doyle/

"When you have eliminated the impossible, whatever remains, however improbable, must be the truth. It is stupidity rather than courage to refuse to recognize danger when it is close upon you."
--Sir Arthur Conan Doyle (1859-1930), British writer, physician, created Sherlock Holmes

Quote from trader556:

great excerpt. The last paragraph, definitely the last sentence, speaks volumes. War is one of the best if not the best business, for the arm chair generals and controlling elite that is...hehe

harrytrader, can you repost the full "Georges Orwell's 1984" url?, this comes up as unknown page.

Good posts/references, keep them coming. Now if we could understand your charts........ hehehe
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harrytrader · Nov 23, 2003

Don't worry it will happen by will of those who want it happen

"Crashmaker" by Wall Street legend Victor Sperandeo,
A Must-Read Book
http://www.fgmr.com/crashmkr.htm

"They have two strategies. The first is the totalitarian gambit: perverting the Constitution through the Supreme Court's misinterpretations, thereby concentrating powers in the national governmentâ¦[Also] the elitists have turned to a second strategy: transferring America's sovereignty piece by piece through treasonable treaties and other international agreements, to a nascent one-world government they intend to control."

Quote from lundy:

High end technology isn't a basic necessity. Clothing, farms, food, and building materials are basic necessities. As more of our basic necessities come from outside the US, our military must grow proportionately.

If ever we were threatened by a more powerful military, this upside down pyramid we are standing on and building would collapse.

It's bound to happen. And when it does happen, a one world government will emerge to make sure all the countries cooperate. Globablization/freetrade will result in a one world government.

It will be painful on the way, but a one world government won't be that bad if we get there bofore we all nuke eachother when Americas upside down pyramid collapses.

More...

harrytrader · Nov 23, 2003

I am happy that you posted this example, this was exactly the one I wanted to post to pinpoint some points about so called "Free Trade" Agreements. But I will do that another day becuse I'm must quit for now.

Quote from chasinfla:

A benign example: there is a tariff on imported citrus products. brazil's labor is cheaper, they don't have anywhere near the enviro- and other regulatory overhead. The field is tilted in their favor as a result.

Eliminating the tariff is likely to cause a major redistribution of domestic citrus production into the hands of large corporate interests, several of which are foreign (Brazilian, in fact, and French).

Protecting the interests of domestic capital must be considered as a primary duty of any president.

It isn't just a matter of yapping about 'free trade' and 'tariffs suck' and doing without them. It can be said that certain competitor nations have 'negative tariffs' owing to their distortions of the costs of production.

For example is the small businessman who must factor regulatory overhead into his price. He will have competitors who, either by negligence, design, poor capitalization, etc. fail to pay the overhead and therefore can distort the marketplace with artificially low costs. If they are allowed to persist, and the honest players can't continue to compete as a result, the market is left with uncomitted players who are poorly capitalized to begin with, and likely won't be able to make the long haul. This opens the door to foreign competitors.
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harrytrader · Nov 23, 2003

Quote from harrytrader:

I am happy that you posted this example, this was exactly the one I wanted to post to pinpoint some points about so called "Free Trade" Agreements. But I will do that another day becuse I'm must quit for now.

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Better than your bananas or citrus case

http://www.wave-guide.org/library/rachel-677.html

Rachels' 677
Corporate Rights
vs. Human Need

For many years, the potential market for baby foods and infant formula in the "developed" countries has been shrinking because birth rates have declined. Therefore, to create new demand for their products, baby food corporations have aggressively sought to "open new markets" in the Third World.
A key vehicle for "opening new markets" is advertising intended to convince women that breast-feeding their babies isn't "modern" and bottle feeding is healthier. Of course the premise of such advertising is medically false -- breast-feeding provides superior benefits compared to all synthetic substitutes. (Breast-feeding provides an infant with significant immunity against disease; it creates a strong emotional bond between mother and child; it helps prevent breast cancer in the mother, and more.) Nevertheless, many women are taken in by the false advertising; as a result, according to the United Nations Children's Fund (UNICEF), only 44% of infants in the Third World are breast-fed. (The proportion is even smaller in "developed" countries.)

Chiefly because of this false advertising, according to UNICEF, 1.5 million infants die each year because their mothers unwittingly prepare infant formula with contaminated water, causing fatal diarrhea.

During the 1970s, a world-wide grass-roots campaign focused attention on this problem, boycotting products made by Nestle, a major manufacturer of infant formula.

Partly because of the Nestle boycott, the World Health Organization (WHO) developed and published a Code on Marketing of Breast-Milk Substitutes. The WHO code prohibits words like "humanized breastmilk" and "equivalent to breastmilk." Furthermore, to protect illiterate women from being duped, the WHO code prohibits pictures on labels "that idealize the use of bottle feeding."

In 1983, Guatemala passed a law and regulations incorporating the WHO code. The goal of the Guatemalan government was to encourage new mothers (1) to breast-feed their infants and (2) to fully understand the threats to their babies of using infant formula as a substitute for breast milk. The Guatemalan law prohibited the use of labels that associated infant formula with a healthy, chubby baby; specifically, the law prohibited pictures of idealized babies on packages of baby food intended for children younger than 2 years. Furthermore, the Guatemalan law required labels to carry a statement that breast-feeding is nutritionally superior.

The law also prohibited baby food manufacturers from providing free samples of their products (if a baby starts taking free samples the mother stops lactating, thus converting mother and infant into full-time, paying customers). And finally the law prohibited baby food manufacturers from directly marketing their products to young mothers in the hospital.

The regulations went into effect in 1988 and all domestic and foreign manufacturers of baby foods -- with one notable exception -- came into compliance. Infant deaths attributable to bottle feeding declined, and UNICEF began highlighting Guatemala as a model for what works.

However, the U.S. baby food manufacturer, Gerber (motto: "Babies Are Our Business"), objected to Guatemala's new law. Although the Guatemalan Ministry of Health made numerous attempts to negotiate with Gerber, the company reportedly continued to market its infant formula directly to mothers in the hospital, and continued to give free samples to doctors and day care centers.

Most importantly Gerber refused to remove its trademark picture of a chubby, smiling baby from its product labels, and it refused to add a phrase saying breast milk was superior. In sum, Gerber thumbed its nose at Guatemalan health authorities, who were trying to protect their most vulnerable citizens, infants, against harm.

In November, 1993 -- ten years after Guatemala passed its law, and five years after its regulations went into effect -- Gerber lost its final appeal. A Guatemalan Administrative Tribunal ruled in favor of the Ministry of Health and it looked as though even Gerber would have to comply with the Guatemalan law.

But Gerber opened a new line of attack on Guatemala, arguing that the Guatemalan law was illegal under international statutes because the law was really an "expropriation of Gerber's trademark." This tactic bought Gerber some time while the World Trade Organization was being created. Then in 1995, when the WTO came into being, Gerber dropped its claim about illegal expropriation of its trademark and began threatening to challenge Guatemala before a WTO tribunal.

Within a short time, Guatemala realized it was now up against immense power and the Guatemalan government changed its law to allow Gerber to have its way. Gerber won without ever having to formally request that the U.S. take its case to the WTO. Just a few letters containing the WTO threat were sufficient.

This example illustrates another marvelous feature of the WTO -- the ease with which small, poor countries can be intimidated by transnational corporations into "opening their markets." Under WTO rules, countries must open their markets to foreign corporations and governments cannot establish, as a precondition of doing business, that their domestic laws will be respected. In effect, the WTO has given corporations a powerful new way to challenge the laws of any government (federal, state or municipal).
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