Better Understanding Trade; How Surpluses and Deficits affect National Budgets and Economies

Discussion in 'The Thinking Cap' started by The_Phalanx, Nov 15, 2016.

  1. ABDeL

    ABDeL Global Moderator Global Moderator DiploGuard Our Creator

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    If you remember the child labor discussion, I explicitly gave evidence which showed that it was the ability of parents to earn an income which didn't require their children to work as the main reason why child labor became less common which led to its eventual demise and banning. If government stepped in to solve the problem without that trend already happening, you'd have the case of children entering a black market as they are currently doing in several developing countries.

    But yeah, back to our discussion on trade.
     
  2. Feanor

    Feanor Member Liaison Officer Global Moderator Diplulzer

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    Protectionism is the writing of laws in such a way that companies producing in America will have an advantage in the US market over companies producing outside of America, thus it will make sense for more companies to produce in America.

    This only worked as long as technology didn't spread to the third world. There are objective reasons for why this simply can not work. You can never pay US worker little enough, and a Chinese worker on an assembly line will produce just as much as an American one. But even if an American worker produces 10 times as much, the Chinese worker can be paid so little that the difference still leaves China ahead.

    Can you elaborate on this?

    No it doesn't. It's cheaper to ship fish from Scotland to be processed in China and then back to Scotland to be sold. If you want the US to compete with Malaysia for manufacturing jobs, you will have to reduce the quality of life of American workers to a comparable level. So yes. In principle you are correct. If you pay US workers 10 cents an hour they will certainly be competitive in the global economy but that is not at all desirable. Again you're thinking of the global economy and the optimal outcome economically in that context. But the result would be a gigantic drop in quality of life for American workers. And, again, objective factors relating to climate and geography still make it cheaper to manufacture in tropical conditions in a country situated along a major shipping lane. At that point you're looking at the difference between shipping costs and climate factors.
     
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