Arguing domestic production versus import/exports

Economics Economics Questions
1

The other night I found myself discussing politics with an acquaintance, that is, a friend of a friend. The conversation went from his lack of faith in the Ron Paul philosophy to his partial Obama support with a passive comment of “he’s not so bad”. We spoke on the 99% issue and he agreed with the “soak the rich” philosophy I argued the immorality and economic repercussion side. The end of the discussion had to do with domestic production versus overseas production.

Now I admit his argument wasn’t that great but I have come across it several times recently and would like some tips on covering it better.

The conversation was something like:

Acquaintance: “These rich businessmen should produce here in America and provide jobs here… if they did that I would say we don’t need to give them a tax increase, but they are feeding off the poor who provides them their riches.”

Me: “You can’t demonize a businessman for doing business overseas. Why are they overseas? Our regulatory and tax codes are more cumbersome here which reduces profits for them. So instead of increasing taxes how about we improve our climate for producers? Also you made the comment that the poor provide the rich with their riches but you fail to mention how the rich provide the poor with a product. These business aren’t stealing from them, keep in mind that these products would be more expensive for you and I if it were made here currently.”

Acquaintance: “So these people are greedy is what you’re saying? Why don’t they take care of the people who made them rich by producing here at home, even if it costs them more?”

Me: “Because they are in business to make money, not to provide charity. You need to understand that just because we send production overseas doesn’t necessarily mean that we have overall job loss, perhaps in that market maybe.”

Acquaintance: “How so?” (Condescendingly)

Me: “Well if our production goes overseas we must import to buy those products right? In trade we try to match our imports as evenly as we can with our exports. What are exports? Things we produce here domestically. So if we send production for an item overseas then our imports increase, when our imports increase we try to increase our exports. Domestic production rises.”

I ended the discussion by agreeing in part that domestic production is preferable but that importing and exporting is valuable as well. It didn’t seem to resonate well with him, he just got quite.

How would you have argued it? How far off-base was I or where could I improve the discussion.

Thank You!

2

It’s hard to argue with people who don’t take knowledge as a hobby, always. You did a pretty good job.

If businesses started hiring people here, let’s see what happens: do they pay standard american wages for the job? If yes then that will be tough, if no then who will take the jobs? and everyone will bitch at them. Union’s and minimum wage will make it hard to get cheap labor. Granting the former the costs they pay in wages and regulations will make their products absurdly expensive compared to the Chinese or X cheap producer. They then will have trouble selling expensive products. They will then start to lose money from this high-cost low-revenue model of American business reserved for he who is not smiled upon by the corporatist gods. He will then go bust or smarten up and outsource some of his workforce. Can your friend not see that you can’t force businesses to do something? That you can only make it more attractive for them to do something? If you can force them to do something, then that is not capitalism.

Greed in business means survival. To not expand is to die. This isn’t a problem as long as that expansion comes for the benefit of the consumer and not to the detriment of the taxpayer and citizen.

As for the second part, countries specialize in different industries. Steel used to be America’s big export. Germans do cars. Chinese do consumer goods and iPads and what not. Now we do drugs, guns, and technology. It’s best to let the specialized countries provide cheap quality goods and find an industry which best suits one’s geopolitical and market situation. Why try to do cars when Japanese make cheap sturdy ones and Germans make good luxury ones? The results are foreseeable. That’s the beauty of trade, everyone can get the cheapest stuff.

We do need to produce but that doesn’t come from central planning. It comes from making business easier and letting the market grow from the bottom up. Do you think this was too filled with austro-jargon to be understandable to a typical newswatching citizen? Do I sound like a ‘paulite’? Genuine questions btw…

3

These rich businessmen should produce here in America and provide jobs here… if they did that I would say we don’t need to give them a tax increase, but they are feeding off the poor who provides them their riches.”

Why America? You live in America, a country which enjoys its standard of living for the common man based upon greed and trade based upon the WHOLE WORLD. If it was just the United States on earth you’d see pleanty of jobs but your standard of living would be terrible. So what about the poor abroad who provide them with their riches? They also aren’t feeding off the poor any more than the poor are feeding of of them. They are snakes feeding off of each other’s tails if you want to keep off of the “feeding analogy”

“You can’t demonize a businessman for doing business overseas. Why are they overseas? Our regulatory and tax codes are more cumbersome here which reduces profits for them. So instead of increasing taxes how about we improve our climate for producers? Also you made the comment that the poor provide the rich with their riches but you fail to mention how the rich provide the poor with a product. These business aren’t stealing from them, keep in mind that these products would be more expensive for you and I if it were made here currently.”

Tax codes and regulations are just part of it, and I would say not the major part either, it has a lot to do with wage discrepencies and lower land prices in other countries. With this being said you did the tactful, is somewhat misleading thing. You didn’t fully emphasize the negative impacts of tariffs, however. Ask him why every city in America doesn’t just erect tariffs? You literally lower your standard of living and theirs through protectionist policies and a lack of trade.

Acquaintance: “So these people are greedy is what you’re saying? Why don’t they take care of the people who made them rich by producing here at home, even if it costs them more?”

See above. Also, you say that the businesses are greedy, and yet the people who are recieving jobs abroad are far less off than most Americans are. The middle class worker who moves from a normal job to a worse job is unlikely to see more than a 10,000 dollar a year decrease in his pay, and that’s very dramatic. That is more than most people around the world make in a year. You’re a cold, heartless, nationalistic, bastard.

Me: “Because they are in business to make money, not to provide charity. You need to understand that just because we send production overseas doesn’t necessarily mean that we have overall job loss, perhaps in that market maybe.”

A more imporant thing to focus on than job loss is overall standards of living which are decreased. People are always better off for free trade in the long run.
“How so?”

Decreased costs increase in unused resources both of which lead to an increase in production possibilities and shifting the total amount of product that can be consumed by American citizens. That money spent on things that were once local is now going abroad, they will in turn demand things from Americans, meanwhile people spend less on that product, so they have more money to buy more things. Everyone wins in the long run.

Me: “Well if our production goes overseas we must import to buy those products right? In trade we try to match our imports as evenly as we can with our exports. What are exports? Things we produce here domestically. So if we send production for an item overseas then our imports increase, when our imports increase we try to increase our exports. Domestic production rises.”

That isn’t explained very well. Exports increase because of an increase in demand from somewhere outside of the nation. Remember that countries are arbitrary. Products sold from people in France to people in the United States are exports in the same way that products made in New York and sold to people in New Hampshire are exports. No one “tries to increase their exports”, it merely happens as a result of demand arising from a different area. If this is all that happened then Americans would be neither better off or worse off, it is the decrease in costs which is the reason for a movement of business overseas which leads to an increase in the standard of living.

4

Thanks for your insight guys.

I do need to study more before I can provide a satisfactory response. Although, as I stated before the arguer was very ignorant on… well pretty much everything political.

I am starting to read Hayek’s The Road To Serfdom tonight

5

Road to serfdom is a good book, it won’t do a huge much to help you for arguments like this, however.

I would certainly suggest economics in one lesson which is a good starter and then from there you’re probably going to have some murky reading. A good supplement to economics in one lesson is “Time will run back” by the same author.

If you have any more economics questions then you can PM me and I’d be more than happy to help.

6

Sorry if this has already been said, but the people in the US have a greater natural entitlement to a job than the starving people of Asia or Africa? Huh, and I thought liberals wanted to help the poor (not the pseudo-poor)

7

I’ve read Economics In One Lesson, that’s where I got the base of my argument from, Hazlitt is amazing. I definitely intend to read more.

8

Seems to be the American mentality. We have an army of Christians who are anti-Abortionists but cheer dropping bombs on innocent people, collateral damage of a just war they call it. It makes me sick how racist people can be, it is racism too.

9

What constitutes domestic production vs. foreign production is purely arbitrary in the economic sense of the terms. What, government arbitrary borders somehow change the nature of things? What if NY and Buffalo were part of Canada? would everything produced in those States now be considered foreign? Why? How would that change things given you had a free market?

If your friend lives n NJ but something is produced in NY, why is that still considered “domestic” for him and not foreign? If he lives in Paramus, NJ, and something is produced 10 miles away in Englewood NJ, why isn’t that considered foreign production? Really, I can reduce this problem to street, house and invidual, and it can be shown that anything not produced by the same ndividual is somehow foreign production.

The point is this. Rather then try so hard to prove why there is no harm in imports, outsourcing, etc.. the burden of proof should be on the other side to show why a “Chineese” worker producing and exchaning with an “American” is not simply a Robert exchanging with a Tom except his name is not Tom but maybe Lee.