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From: berman@psuvax1.UUCP (Piotr Berman)
Newsgroups: net.politics.theory
Subject: Re: Re: Strange Bedfellows: and a new to
Message-ID: <1913@psuvax1.UUCP>
Date: Wed, 4-Dec-85 13:02:47 EST
Article-I.D.: psuvax1.1913
Posted: Wed Dec  4 13:02:47 1985
Date-Received: Tue, 10-Dec-85 01:55:09 EST
References: <11113@ucbvax.UUCP> <28200344@inmet.UUCP>
Organization: Pennsylvania State Univ.
Lines: 110

> 
> >/* Written  3:09 am  Nov 29, 1985 by tedrick@ucbvax in inmet:net.politics.t */
> >/* ---------- "Re: Strange Bedfellows: and a new t" ---------- */
> >>So do any "socialists" out there want to defend shoe quotas against the
> >>libertarians (me included)? If not, perhaps you'd like to give a list of
> >>what current state interventions you oppose also. Then we'd have something
> >>to agree on...
> >
> >I can conceive of a situation where shoe quotas might be desirable.
> >Suppose one country plans to flood the shoe market in the other
> >country with cheaper shoes until all shoe producers in the other
> >country are driven out of business. 
> 
> I'd just like to make a few points that seem to me to be left out of
> many discussions of this sort of question.  Let us call these two
> countries Flood and Drain.  (Flood wishes to flood the shoe market in
> Drain).
> 
> 	1. If Flood subsidizes the Floodian shoemakers, then at least in
> 	the short term (until Flood gives up, or until Drain shoemakers
> 	go under from matching impossible-to-match prices), Flood taxes 
> 	go up ("No such thing as a Free Subsidy").
> 
> 	2. Flood shoemakers are liable to grow steadily less efficient, and
> 	rely more and more on the subsidy.

	May happen, but it does not always happen.
> 
> 	3. In the meantime, Drain citizens are buying shoes at the expense
> 	of Flood taxpayers, meaning that:
> 		a) The cost of living has gone down for Drainians, and
> 		   up for Floodians.
> 		b) Drainian Industry as a whole will experience lower
> 		   labor costs, at the same time as Floodian industry
> 		   is experiencing (because of the tax) higher ones.

		Labor costs in Flood may actually go down, if the tax
		has the form of diminished wages and outlawed free
		collective bargaining (like in South Korea).

> 		c) Labor-intensive Drain exports will go 
> 		   down in price compared to "all-other-things-equal" 
> 		   Flood exports.  

		As pointed above, not true.
> 
> 	4. Flood must offer the low price to all comers; failure to do
> 	   so will result in a boost in the Drain economy (particularly
> 	   shoe-wise) as Drainians buy shoes from Flood outlets and 
> 	   re-sell them to (say) New Yorkers.  This is particularly likely
> 	   to occur to Drainian shoe-marketers.
> 
                Flood may keep prices profitable in the domestic market
		and/or impose import dutes and/or quotas.

> 	5. Assuming an unusual fortitude on the part of the Floodian
> 	   government, and assuming that the Drain shoe industry shuts
> 	   down its (least-efficient first) shoemaking plants, then as
> 	   soon as any sign that the Floodian policy will change, the
> 	   MOST efficient (or most apparently efficient)  Drainian
> 	   operation will re-open.  In the meantime, the Floodian shoe
> 	   industry will probably have become *very* inefficient, as it
> 	   has had no true market feedback for some time.
> 
>               If the subsidy in Flood has the form of low wages, with
		an authoritarian mechanism which keeps them low, there 
		is no strong reason that Flood will ever change its
		policy.

> If Flood is NOT "sponsoring" its shoemakers in this way -- if it simply
> is true that Flood shoemakers fairly put out a cheaper shoe at the same level
> of quality, even after shipping, then surely Drain citizens should have
> the right to buy these?  After all, the Drain citizens shouldn't have to
> subsidize THEIR shoemakers, should they?
> 
> I'm not saying that nobody gets hurt in a trade war of this sort -- the
> Drain shoemakers have had to become shoe-marketers, shoe-repairers,
> makers of specialty or luxury shoes, and in other ways shift themselves
> to somewhat different (and sometimes entirely different) market niches.
> 
                The assumption here is that Drain had an insufficient
		number of marketers, repairers, specialty producers etc.

> I'm just saying that there's a fair amount not obvious (even after all
> this stuff is pointed out) going on here, and missing even one of these
> things could result in a '"stupid"' decision.

                This posting ignores the most frequent "subsidy" which
		is a low wage.  To compete with low wages Drain must
		ultimately to diminish its wages.  But the wealth of
		a nation consists to a large extend of the sum of the
		wages.  Drain may keep shifting its industry to Flood
		until the wages achieve parity.  This however may be
		very bad to the population of Drain (although it may
		be very good for the companies in Drain).  The 
		advantage that the population of Drain may have over
		the population of Flood may consists of much higher
		level of capital per person.  Pure free market would
		change it, by increasing the investments in Flood
		and decreasing them in Drain.  This is a mechanism
		which made the South of USA as "rich" as the North.
		Because of the relative small size of the South in
		relation to the North, and because of the free 
		movement of labor, the bad consequences to the North
		were small, if there were any.  However, if the 
		competition involves countries with populations
		(jointly) larger than the population of USA, the
		picture changes.

		Piotr Berman