Barack Obama, the President-elect of the United States has been labelled by some as a protectionist. The Doha round of the World Trade Organisation has been a knockout defeat. The Nobel prize for economics was awarded to Paul Krugman for his efforts in understanding modern trade. Am I just making random comments?
The benefits of trade is not very difficult to understand. People in the West love coffee and coffee grows well in the tropical East. People in the West have (or had) a lot of money, and people in the East like investment funds. Mutual benefit from products or services most efficiently produced and most appreciatively consumed lead to a better outcome for all.
Paul Krugman’s not insignificant award sought to explain a deficiency in this basic system. The anomaly was that at times patterns of trade did not follow this logic. The explanatory framework devised by Krugman sought to take into account the benefits of specialisation and market leadership, rather than simple comparative advantage. Simply by making a start, a person or organisation can develop skills and economies of scale that allow them to be and remain competitive. Hence a smart coffee farmer from the West may be able to keep out Vietnamese competitors if this person started out and grew in size before the Asian became dominant.
Another aspect that complicates the trade situation is based on size and diversity. The more diverse a region the less is the need to rely on products or services from another region. Also, the larger the region (for example the European Union) the greater the possibility for diversity - generally speaking. The more a country or group of countries can meet its wants and needs from within, the less the advantage of trade imports. Most countries or regions throughout the world can meet not only the basic needs of life, but also most of the subtle and nuanced desires of even the most fickle consumers without sourcing externally.
Due to diversity, whether from nature or human endeavour, the law of diminishing returns comes into play with trade. International trade can be immensely stimulating when diversity is restricted – say at the end of World War II. However if a country has reasonable basic resources, and is reasonably engaged in use of resources and human capital, the advantages can soon become disadvantages.
The failure of the Doha round of the WTO is precisely because the leaders of countries have seen that what was a blessing has now become a curse. In a way this is self-fulfilling. The benefits of trade lead to an abundance that created sufficient diversity within countries. With this newfound diversity the country is therefore more adept at meeting its peoples needs, and hence is less reliant on trade.
The United States and other Western nations promulgated trade. They are however now the victims of trade – from China for example. To be of worth trade needs to be mutually beneficial. For a long time this has not been the case in the US’s relationship with China. The fact that the US has been one of the blockers for the Doha round shows some intelligence. The fact the Barack Obama is a protectionist shows a little more intelligence.
The word protectionist has some sort of false derogatory theme attached to it by the benefits of free trade. If the disadvantages far outweigh the advantages in certain trades, then to take a protectionist stand is literally to protect – sounds pretty sensible to me.
Broken and shattered Western countries, as well as international organisations, increasingly look to countries like China (with its trillions of dollars in foreign exchange reserves). Some countries need to realize that the advantages of trade are not intrinsic - just like the advantages of an unregulated financial system are not inherent.
Finally on trade, from Paul Krugman we have that just because one country efficiently produces a product or service, there is not necessarily any reason to label that product or service as a necessary import by any other country. Car manufacturing in countries like Australia and the US is in a moribund state. However better performing Japanese manufacturers do not have intrinsic competitive advantage. From this it can be seen that increasing protection and decreasing trade keeps alive the inherent creative urge that drives a country. At the right time, protectionism actually encourages optimism and keeps alive the possibility of prosperity. Prosperity is what free trade is supposed to be all about. It is also what protectionism is about.
Another key concept of the contemporary world is that of democracy. Like trade, democracy is not intrinsically good.
When the majority of a population has ill-will in mind they then vote into power a leader that will fulfil their negative intentions. An example of this mechanism is found in your average failed marriage. Happiness finds the happy and misery attracts the miserable. If I am just managing to keep a lid on a sea of negative emotions I might like to avoid them by getting married. Like attracts like. My partner will be of the same ilk, and we will spray each other joyously with our wounds.
Hitler was democratically elected by a Germany full of little Hitler’s. Ah yes we elect a leader to fulfil our dreams. Just look at the last democratic election in the Palestinian Territories. Hamas was branded by the West as a veil for violence. Hamas shortly afterwards showed their true colours in a wave of violence and brutality. Hence they now run the Gaza Strip.
Admittedly the situation is not so simple. An obvious issue that is raised is based on innocence. For example some people repeatedly marry and divorce only for money. Is not the victim innocent? Hamas ran a very sophisticated mainstream political campaign. Was not the electorate deceived by the violent gang that Hamas afterwards revealed itself to be?
A partial answer to deception is truth by transparency. If a person or organisation has unethical, illegal, or violent intentions, then a system that reveals that this is the case is paramount; hence the importance of a free press and open access to information about the workings of any governing body.
If a couple are fighting before they get married and then they fight after they get married and then they get divorced, they may (like many) be surprised at the outcome. We so often hide from the obvious out of emotionally based blindness and compulsion. However at least the divorced couple can see that there was nothing sinister or criminal about the failed marriage. No deception took place. The truth was not hidden, rather people were hiding from the truth.
In order to avoid the harming of innocents, whether they be romantics looking for love or a country looking for a leader, it is important that fact be separated from fiction.
The benefits of trade is not very difficult to understand. People in the West love coffee and coffee grows well in the tropical East. People in the West have (or had) a lot of money, and people in the East like investment funds. Mutual benefit from products or services most efficiently produced and most appreciatively consumed lead to a better outcome for all.
Paul Krugman’s not insignificant award sought to explain a deficiency in this basic system. The anomaly was that at times patterns of trade did not follow this logic. The explanatory framework devised by Krugman sought to take into account the benefits of specialisation and market leadership, rather than simple comparative advantage. Simply by making a start, a person or organisation can develop skills and economies of scale that allow them to be and remain competitive. Hence a smart coffee farmer from the West may be able to keep out Vietnamese competitors if this person started out and grew in size before the Asian became dominant.
Another aspect that complicates the trade situation is based on size and diversity. The more diverse a region the less is the need to rely on products or services from another region. Also, the larger the region (for example the European Union) the greater the possibility for diversity - generally speaking. The more a country or group of countries can meet its wants and needs from within, the less the advantage of trade imports. Most countries or regions throughout the world can meet not only the basic needs of life, but also most of the subtle and nuanced desires of even the most fickle consumers without sourcing externally.
Due to diversity, whether from nature or human endeavour, the law of diminishing returns comes into play with trade. International trade can be immensely stimulating when diversity is restricted – say at the end of World War II. However if a country has reasonable basic resources, and is reasonably engaged in use of resources and human capital, the advantages can soon become disadvantages.
The failure of the Doha round of the WTO is precisely because the leaders of countries have seen that what was a blessing has now become a curse. In a way this is self-fulfilling. The benefits of trade lead to an abundance that created sufficient diversity within countries. With this newfound diversity the country is therefore more adept at meeting its peoples needs, and hence is less reliant on trade.
The United States and other Western nations promulgated trade. They are however now the victims of trade – from China for example. To be of worth trade needs to be mutually beneficial. For a long time this has not been the case in the US’s relationship with China. The fact that the US has been one of the blockers for the Doha round shows some intelligence. The fact the Barack Obama is a protectionist shows a little more intelligence.
The word protectionist has some sort of false derogatory theme attached to it by the benefits of free trade. If the disadvantages far outweigh the advantages in certain trades, then to take a protectionist stand is literally to protect – sounds pretty sensible to me.
Broken and shattered Western countries, as well as international organisations, increasingly look to countries like China (with its trillions of dollars in foreign exchange reserves). Some countries need to realize that the advantages of trade are not intrinsic - just like the advantages of an unregulated financial system are not inherent.
Finally on trade, from Paul Krugman we have that just because one country efficiently produces a product or service, there is not necessarily any reason to label that product or service as a necessary import by any other country. Car manufacturing in countries like Australia and the US is in a moribund state. However better performing Japanese manufacturers do not have intrinsic competitive advantage. From this it can be seen that increasing protection and decreasing trade keeps alive the inherent creative urge that drives a country. At the right time, protectionism actually encourages optimism and keeps alive the possibility of prosperity. Prosperity is what free trade is supposed to be all about. It is also what protectionism is about.
Another key concept of the contemporary world is that of democracy. Like trade, democracy is not intrinsically good.
When the majority of a population has ill-will in mind they then vote into power a leader that will fulfil their negative intentions. An example of this mechanism is found in your average failed marriage. Happiness finds the happy and misery attracts the miserable. If I am just managing to keep a lid on a sea of negative emotions I might like to avoid them by getting married. Like attracts like. My partner will be of the same ilk, and we will spray each other joyously with our wounds.
Hitler was democratically elected by a Germany full of little Hitler’s. Ah yes we elect a leader to fulfil our dreams. Just look at the last democratic election in the Palestinian Territories. Hamas was branded by the West as a veil for violence. Hamas shortly afterwards showed their true colours in a wave of violence and brutality. Hence they now run the Gaza Strip.
Admittedly the situation is not so simple. An obvious issue that is raised is based on innocence. For example some people repeatedly marry and divorce only for money. Is not the victim innocent? Hamas ran a very sophisticated mainstream political campaign. Was not the electorate deceived by the violent gang that Hamas afterwards revealed itself to be?
A partial answer to deception is truth by transparency. If a person or organisation has unethical, illegal, or violent intentions, then a system that reveals that this is the case is paramount; hence the importance of a free press and open access to information about the workings of any governing body.
If a couple are fighting before they get married and then they fight after they get married and then they get divorced, they may (like many) be surprised at the outcome. We so often hide from the obvious out of emotionally based blindness and compulsion. However at least the divorced couple can see that there was nothing sinister or criminal about the failed marriage. No deception took place. The truth was not hidden, rather people were hiding from the truth.
In order to avoid the harming of innocents, whether they be romantics looking for love or a country looking for a leader, it is important that fact be separated from fiction.
The healthy functioning of the concept of democracy is predicated by two factors. Firstly, the general population needs to be sane. Secondly, people with vast power are vulnerable to going insane. Hence the average sane person can see when a politician is a megalomaniac (for example Robert Mugabe of shattered Zimbabwe). Democracy would have been a great institution in the time of Stalin in the Soviet Union, or Mao in China, or the Khmere Rouge in Cambodia. It was not however helpful in the time of Hitler’s Germany. This theme points to the importance of multi-lateral relations between countries to keep in check any rogue country (or countries) – whether it (they) be democratic or not.
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