miércoles, 7 de enero de 2009

The balanced trade part

I happen to be under the tutelage of one of the founders of the balanced trade movement. As such I feel that I should at least mention it once on this blog.

While my professor works out all of the intellectual kinks of the system, I wanted to address the more common sense part of the problem. Now there are generally considered to be two philosophies of international trade: free trade and protectionism. However, my professor points out that there are actually four. Free trade (U.S.), Protectionism (Argentina, I think), Mercantilism (China), and Balanced trade (which no country has yet been smart enough to adopt). Now, free trade is just if you leave everything alone, everything is just handy dandy. I think the law of entropy can speak for itself. Protectionism is a proven failure and in all reality is not even protectionism, it's political favoritism. Mercantilism purposely creates imbalances in trade, which do help the exporting country, but this system is absolutely doomed to failure in the long run.

Now balanced trade I think is most easily understood with an analogy to the microeconomic level. A household cannot continually but well above it's means, or eventually the creditors will come around. If income signfinies exports and expenditures imports, these two must eventually equal out. While a suplus of income would not be necessarily bad, it's sort of pointless if there are expenditures to match in some way (say putting in savings account, investmnet, rennovations, what have you). similarly a country cannot continually receive from the world more than it gives out. Now I realize that Warren Buffet's importation certificates plan seems like a weird thing for a Distributist, but personally I believe that if there in one instance of govenrment intervention which can help right now, it is importation certificates, not stimulus packages or whatever else the Bush/Obama people can dream up. Furthermore, the government has regulartory power over the economy, and this would be regulation, and the government also wouldn't be able to decide what is imported or not (like tariffs do). All it does is ensure that we have an exchange with the world, and that we're aren't getting stuffed like some spoiled child until we burst.

And of course, Shakespeare put the whole point into 1 line of blank verse
"Neither a lender nor a borrower be"

6 comentarios:

Old Fashioned Liberal dijo...

excuse me for asking, but why is protectionism doomed to failure? Buchanan seems to think it is a very good system.

Lo siento, pero por que razon es protectionism una sistema muy mal?
Buchanan piensa que es muy bien.

don pedro dijo...

well, there are literally thousands of arguments against protectionism (just as there are for it) but historically it has never worked. Not that it means that it couldn't, but it's track record is worse than socialism's.

My personal argument (personal as in I've never heard anyone else use it) is that it redistributes wealth from the poor to the rich. The people who really pay for tariffs and other forms of protectionism are the consumers who know have less disposable income whereas the produces of that good are better off. This inequality depresses real wages, decreases efficiency, and also causes a net lose from society than without tariffs. It's sort of a complicated matter, so if you're interested in reading more about it, a quick internet search should yield some juicy bits. =)

(or you could start reading my prof's blog "Trade and Taxes" and be lost for a few months and then all of a sudden get it =)

Old Fashioned Liberal dijo...

I suppose that argument works when one cannot obtain a certain good from inside their nation. But what about when a good can be obtained from inside a nation? Does it not make sense to put a tariff upon imports of it?

As for the success factor, I believe there was a time when citizens of the United States payed no federal taxes because the federal government got all the money it needed from tariffs.

don pedro dijo...

well, for a quick introduction into the fierce debate about protectism, just read the arguments for and against sectons here - http://en.wikipedia.org/wiki/Protectionism

then if you have specific questions I'll see what I can do, and I'll make them into posts! =)

Old Fashioned Liberal dijo...

Okay, that article on Wikipedia convinced me that balanced trade might be better for economics than protectionism (I don't know how to get around the fact that tariffs are a better form of government revenue than taxes), but not that protectionism is doomed to failure, or that it is not better than the free-market system. I think that protectionism would be a vast improvement over what the US is using now.

don pedro dijo...

well, tariffs raise the cost to the consumer, so does it really help anything as far as taxes are concerned. True, you aren't directly paying the tax, but are still paying it. Also, tariffs tend to be very politically motivated. I'm thinking a consumption tax is the way to go; however, the Distributist review just posted something on taxation. I have yet to analyze it, but I'll get around to it, eventually...