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Thursday, June 30, 2005

Diagram

Some readers seem to have missed my point about the trend to move stuff offshore. Yes, I understand that capitalism is all about exploitation of resources - and the last cheap resource left is third world labor. But it is really good for us?


Imports subtract from the GDP equation. So what happens if the exporters decide to suddenly jack up prices without warning? Will salries in the USA instantly rise to match the increase in prices? And if this happens, will that not trigger run away inflation? And if wages do not match sudden jumps in price from forigen suppliers, who will buy all the consumer goods needed to keep the bull market full of....uhhhh...bull?

And what happens if the next war between the east and west is not fought with bombs? What if the next war is fought along economic lines? Who can hold out longer, the USA or China? And say we just nuke em. Is that really a good idea if we depend on their factories for all out stuff?

All these are questions that economic theory does not really take into consideration, because the theory assumes that everyone just wants to make a whole lot of money. Right now that is what China is doing. But sooner or later they might want power to match that wealth. And who will they take on? Not Scotland. Not The Netherlands. Not France. They will lock horns with the USA. There is no economic theory that takes into account an irrational power grab. but knowing human nature, is it unreasonable to think that such a power move might happen?

These are just some concerns I have. People are too busy doing the rat race thing to get out of the hamster running wheel and look around. Or maybe they just do not want to think about it.

59 Comments:

Blogger AP3 said...

It is scary to think about.

The disparity in wealth between the haves (USA) and the have-nots is so great that I fear a revolt/revolution is inevitable. It's unbelievable how much we have (in terms of material wealth) in the USA compared to just about everyone else.

21:31  
Blogger jevanking™ said...

First of all, I wasn't saying that you had not taken an Econ class. I just was repeating in nicer terms what the gentleman who commented before me wrote.

That said, I still have a few comments.

1) Exporters are not going to "jack up" the prices. One of the reasons it is so cheap and will continue to be so and that is the reason that many of these countries have a competitive advantage against us. If they raised prices, there would be someone cheaper willing to do the work. Guaranteed. You can always say what if.

2) Let's look at how things "used to be." You used to be able to get a pretty damn good job and not even have a high school diploma. That was way back when. However, this has always been happening as thc suggested. He said his Levi's were made in Guatemala. During that time period until today people have had to get more training if they didn't want to work fast food (i.e. trade school, college, etc.). This is the same transition we are going into now. You almost have to have a skill in my generation to get a job that doesn't require physical labor or mindless work. I'm not saying that you have to have a college degree. You need a skill--we are just so advanced now with technology and such that more jobs than ever require either experience, education or some sort of training. You have to look at it that way.

I'm not saying that outsourcing isn't going to hurt people right now. I am sure that there are friends of my friends that have lost a job due to this surge in sending jobs out of the country, but future generations will be better prepared--trust me. I heard it growing up--"You can't do anything at all without a High School Diploma." I only know one person that doesn't have one and he is struggling. It will just take time for everything to adjust. I hope you were not offended by my comments.

Just remember that this is my opinion and you have your own. Take it for what it is worth.

01:29  
Blogger The Lazy Iguana said...

Ahh, but it takes a long time to build factories! You can not just wave a magic wand and create steel mills and factories out of a few magic beans.

This is where economic theory crumbles, like Newton's Gravity in the sub-atomic world.

Competitive Advantage assumes a few things, the most important being that no nation WANTS to use their exports as a weapon. Seriously, if China decided to jack up all their prices tomorrow, what would we do? Import more from France? Import more from Spain?

No, we would just see the President on TV saying some trash about "consequences" while the price of almost everything in stores goes up. but we NEED THEIR STUFF, so we would not risk a war. We would pay them, and our GDP would go down while theirs went up. The economic world war will have begun.

And maybe, some other nation would build hundreds of factories to make up the difference, but it would take at least 10 years.

01:48  
Blogger Saur♥Kraut said...

I'm with Lazy Iguana on this one.

07:44  
Blogger Fred said...

Where's Econo Girl when you need her?

To get a preview of the China power grab, look at what's happening to Unocal. Chevron made a bid to buy the company, and now the Chinese government-owned company CNOOC has made a hostile takeover bid.

The U.S. government has the right to block the deal. Stay tuned.

Here's a link worth reading:
http://www.marketwatch.com/news/story.asp?guid=%7BBB3DBC06-BAD6-465B-A09D-4ECEC785B116%7D&siteid=google

09:17  
Blogger Econo-Girl said...

Wow! So much informed discussion, my head is spinning!

Both the Lazy Iguana and Jevanking(TM) have very valid points.

If China suddenly jacked up prices, production would go to other countries and the US could get their goods there.

Having said that, maybe the same thing that caused China to do that is affecting the other cheap producers in the region. It could be as simple as amassing China's ONE BILLION SOLDIERS on their border with the offending country. It would be quite a disincentive to crossing China in the price-fixing war.

And would they necessarily want to? They could OPEC us. Remember in the '70's when OPEC all got together and jacked up the price of oil? South East Asia could do the same thing.

Lazy Iguana has a great point about economic theory not taking into account the silliness of nations.

Attacking the US Navy at Pearl Harbour was a horrible miscalculation on the part of the Japanese. But they did it anyway. If they had just asked three hookers on the street what they thought, even they could have told the Japanese what reaction to expect.

The Seven Days War was a totally stupid idea. EVERYONE knew that the Israelis would kick ass. But they attacked anyway.

History is full of foolishness and pride.

14:51  
Blogger The Lazy Iguana said...

But how long would it take to move production to another nation? It would not happen overnight.

China has built thousands of factories, that use hundreds of thousands of workers. It would be years before any other nation, or even group of nations, could fill in the gap.

Meanwhile, we would be forced to pay the Chinese whatever they are demanding. What other choice would we have? Stop over consuming?

14:59  
Blogger jevanking™ said...

From my comments:

"It will just take time for everything to adjust."

I NEVER said it would happen overnight :). I think it's awesome that we can have this type of discussion and not be disrespectful to each other. This is why I read your blog, I know even if I disagree with you, that you will come right back with another counterpoint, but I will rest my case on this one. I think Econo-girl is right. We have presented both sides of an argument and I will have to say that I'm impressed at your arguments. I agree with some and disagree with others, but I just want you to know that I DID say that it would take time and never did I assume that these kinds of things could happen overnight. Have a great day.

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