Consumer Surplus vs. Producer Surplus
he still stands
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Ha! I just had an epiphany. You know the whole producer vs. consumer surplus that you are taught about in Economics classes? The main argument against tariffs/quotas/barriers to trade is that it puts more emphasis on the producer surplus and less on the consumer surplus -- and that these barriers create something called "dead weight loss" (which noone can actually quantify). On the other side of the coin, if you exist in a free trade market, it gives the consumer more of the surplus and the producer is on the short side of the stick.
But what we don't ever learn in Economics classes is that we are ALL consumers AND producers. Sure, we can have free trade, and use cheap labor around the world so we can buy more -- at a cheaper price -- and therefore have a greater consumer surplus. BUT we also have to have jobs. A smaller producer surplus means less jobs, less income, than what was previously possible when we protected our industry here in the US.
So in the end, yes we have more goods available, at a lower price, but we don't have as much jobs and income to pay for those goods. So we have to have $30k credit cards bills to keep it all afloat. So am I wrong here? When we give more to the consumer we are also fucking ourselves out of jobs and income to buy the cheap shit that keeps our economy afloat? Sounds like a pretty dumb idea to me...
But what we don't ever learn in Economics classes is that we are ALL consumers AND producers. Sure, we can have free trade, and use cheap labor around the world so we can buy more -- at a cheaper price -- and therefore have a greater consumer surplus. BUT we also have to have jobs. A smaller producer surplus means less jobs, less income, than what was previously possible when we protected our industry here in the US.
So in the end, yes we have more goods available, at a lower price, but we don't have as much jobs and income to pay for those goods. So we have to have $30k credit cards bills to keep it all afloat. So am I wrong here? When we give more to the consumer we are also fucking ourselves out of jobs and income to buy the cheap shit that keeps our economy afloat? Sounds like a pretty dumb idea to me...
Everything not forbidden is compulsory and eveything not compulsory is forbidden. You are free... free to do what the government says you can do.
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Market protections are used to protect an industry in a certain area. IE US Steel vs Korean/Japanese Steel or say US cotton vs West African Cotton.
There are areas of particular countries/continents etc where it is far more economically feasable to work in a certain industry. Market protections like tarriffs, price supports are designed to protect industry in a particular area so they may continue to perform that trade even if it is inefficient.
In a system with free trade the jobs (production, farming etc) move to where they are most efficient, so it forces the worker/producer to adapt to the new natural competitive environment. There will be successes and failures in this type of environment but it does work pretty well for the most amount of people. I think anyway. It does take some effort though. The trouble historically starts when companies take a system with competition and try to find ways to supercede the competition, use the governmental sytem to thier advantage and write the risk out of doing business. This is where kickbacks, special interests, bribes, and special tax structuring comes into play. Still like it has been with the US auto industry, if the corporate tax structure is punative the companies will adapt to make it favorable so Chrysler moves it's headquarters to Germany for instance and companies like Toyota, Kia, Nissan etc move factories to the US to save on shipping costs and tarriffs.
Sure you can live on credit but eventually the credit bubble busts (see current housing market) and the economy gets screwed. Then the global pricing structure has to come down to that level or find a new market.
Bottom line. Live well within your means and you'll have less problems.
What protectionism forgets is that labor distribution is not a zero-sum game. Certainly a free market modality will lead to jobs being lost in America and going somewhere else. However, jobs are not part of some static pool. New jobs can and are created every day and new jobs are created as a function of both need and free resources. Free economies that allow jobs to go overseas will see new jobs being created to fill or exceed the gap.
Over time, free markets that shed lower level jobs to other markets will lead to both lower prices (via cheaper labor) and higher wages (via further specialization). Unfortunately, it also leads to situations wherein Joe Schmoe loses his job at a factory, gets hit by a car on the way out, and then dies in a hospital waiting room to the great dismay of television viewers everywhere. Jose Schmoe who actually gets Joe's job and is able to put a roof over his kids' head, however, is never seen.....