I, Pencil

[Kevin]

What an interesting read! I find it to be quite an incomplete presentation, but still... well done! I'm glad to have read it.

For, if one is aware that these know-hows will naturally, yes, automatically, arrange themselves into creative and productive patterns in response to human necessity and demand— that is, in the absence of governmental or any other coercive master-minding—then one will possess an absolutely essential ingredient for freedom: a faith in free people. Freedom is impossible without this faith.
Let's say there is agreement that the quoted snippet is an accurate portrait of the world as it is today. Of course, government is the prime target of the piece but what do you think "or any other coercive master-minding" could reasonably refer to? The phrase reminds me of "the pursuit of happiness" in its specificity. Are the people free when their shops are shut down due to Wal*Mart moving in? Does big business not "master-mind" the economy? I would argue it does so to a higher degree than the government... but is there an argument against their being a coercive element? And how is this outlook to be implemented? Was Glass-Steagall, so despised by the Democrat and Republican party, the case of coercive master-minding these opposing parties claimed it to be? Did it turn out to be a good thing to integrate commercial banking and gambling?

It's one thing to say that the government shouldn't be making pencils and another to say it's good thing that only ACME is making pencils. Since I'm feeling goofy, I'll say that only the middle finger of the invisible hand is left in its upright position. The others have been tied down for a long time now. Freedom... just another word for nothing left to do.The tract is an exercise in faith alright, but one of the fantasy of the free market. People are free! They're free to live in squalor and to work for low pay because after all, so-and-so in some underdeveloped country is only too happy to work for half the pay. Unless you can argue that there is actually a free market, or explain what these other coercive master-minders are who need to be neutralized you don't have have much of an argument - except in regard to being a matter of faith. And that's fine enough but nothing really to write home about!

I'm wondering how much of a varied opinion you get when this is presented in your class. hrm... I can't recall now if you said you it in class or if it was just a piece you liked. Well, if applicable, how uniform is its acceptance?

[Dexter]

Are the people free when their shops are shut down due to Wal*Mart moving in? Does big business not "master-mind" the economy? I would argue it does so to a higher degree than the government

So if someone provides a good that is better and/or cheaper than someone else, and people voluntarily decide to purchase it, what do you propose as an alternative to competition and having some people go out of business? You can prop them up, but someone has to bear the cost, and consumers lose. There are a lot of myths surrounding WalMart, as if there are all these great middle class jobs at Mom and Pop stores, and then they disappear to be replaced by subsistence wages. Why is it a tragedy that cashiers can't support a family with a middle class lifestyle? That has never been the case.

WalMart is coercive precisely when it uses the government to gain special privileges, but then the coercion really comes from government. And other special interests get laws passed at the expense of consumers.

[Kevin]

So if someone provides a good that is better and/or cheaper than someone else, and people voluntarily decide to purchase it, what do you propose as an alternative to competition and having some people go out of business?

Thank you, Dexter. But c'mon man, I am so curious to hear what your students make of I, Pencil. Let's keep it simple and say it is cheaper but not better. It seems to me you're suggesting that if WalMart was banned competition would cease; however, even a brief peek shows that competition did actually exist prior to the emergence of WalMart with their plastic objects obtained from Asian slave-wagers.

You can prop them up, but someone has to bear the cost, and consumers lose.

Well then consider ceasing to be a consumer! But really (since I know that's out of the question,) do "consumers" have it so much better now than before the box stores made it to the center stage? Is the middle class so much better off now than it was oh... forty years ago? I just don't see this wonderful economic environment that you have been describing. I see the opposite actually where wealth has become more concentrated as your consumers have realized the great savings brought to them by the likes of WalMart.

There are a lot of myths surrounding WalMart,

Indeed! Take a look at WalMarts advertising budget! Just a few weeks ago I heard yet another British Petroleum ad about how great a job they're doing cleaning up that spill baby spill fiasco in the Gulf. A lot of myths... certainly.

as if there are all these great middle class jobs at Mom and Pop stores, and then they disappear to be replaced by subsistence wages. Why is it a tragedy that cashiers can't support a family with a middle class lifestyle? That has never been the case.

It's always been a tragedy, as far as I'm concerned. I mean yea, prior to this experience with capitalism we had feudalism and we're certainly better off now than then. hooray for capitalism since it has actually exceeded the lowest possible floor.

WalMart is coercive precisely when it uses the government to gain special privileges, but then the coercion really comes from government. And other special interests get laws passed at the expense of consumers.

So is predatory procing something that should be considered a viable management tool? I'm guessing here that you think it is. If so, what about the flip side - Is the government coercive when it doesn't allow individuals or companies the freedom to produce products due to matters of copyright? Well anyway, I think it's not so much the special privileges you are suggesting that are in excess (though of course they are, and form the most blatant of abuses) but the standard privileges that most need to be taken away from the WalMarts. The reason for this is that they have sold out the country. Hey Dexter, this land is your land!

[Dexter]

Well then consider ceasing to be a consumer!

You are more than welcome to do that of course, better start by logging off and giving up most of your possessions. But most people like consuming more rather than less, which also means more time to do other things. I know the word "consumer" must have negative connotations to you. Who do you think benefits the most from lower prices at Wal-Mart? Poor people. Who do you think benefits from overseas production? The poorest people in the world. You call them slaves, but that's not accurate -- try to save them from these factories and see if they thank you. Yes, it'd be nice if they all earned $10 an hour, but that's not how countries develop. Previously poor Asian countries now are at that level and beyond.

Is the middle class better off than 40 years ago? Some people torture the data to say no, but do you really think the average person would be satisfied with the goods and services available to the average person then? People expect an ever-increasing standard of living, so they forget what they're comparing it to. It is a shame that so many people try to answer this question by reading left-wing commentary instead of looking out the window and knowing some basic facts about the standard of living.

Inequality may have increased, but I'm afraid you are very misinformed about the state of the world over the long-term (I'm assuming you're not basing your conclusion merely on the latest recession).

[Kevin]

You are more than welcome to do that of course, better start by logging off and giving up most of your possessions.

Yes, this is one solution. A bit younger, and I might try it! But here's another one that in a place where military recruitment offices are "career centers" (for heroes,) people are routinely defined as "consumers," and corporations thought of as "people," suits me well. It's the idea that (so to speak) living in the belly of the beast makes for a situation that requires compromises. Dexter, any argument taken to its extreme becomes a ridiculous notion! I'll be keeping my computer as well as the bulk of my possessions. It's the near exact opposite of what you suggest, actually, that is most needed - small actions! As I see it, that's where it's at. It's this american conceit that unless one's actions causes an extreme ripple it's not worth doing that has us over a barrel. Give up most of my possessions? The notion does hold a romantic element for me actually... thinking of Tolstoy now as he tramped off to wherever it was, thoroughly disgusted with the state of things... but I'm not a radical, and so I'll continue making what I reasonably can myself while refraining from financially supporting companies who most closely conform to the state-approved everyday operations, as I view it, of cruelty, domination, and exploitation society needs to function smoothly. And that's at the core... not the economic system. So while I believe that policies generally thought of as socialist, classically defined, would make for less misery than exists under the current dominant umbrella of global capitalism, I'm arguing while convinced it's only a band-aid. People should consider thinking small.

But most people like consuming more rather than less,

This is unarguable.

which also means more time to do other things.

How does a desire to consume more result in more time to do other things?

I know the word "consumer" must have negative connotations to you.

Not exactly. I find it to be a good enough word... it's the classification of a person as "consumer" that chaps my hide as I'd rather be a number, actually. But yes, consumer is an accurate-enough description of most people, since I do believe it defines them as well as any single word... I'm suggesting whittling away at it as being one's dominant characteristic.

Who do you think benefits the most from lower prices at Wal-Mart? Poor people.

Not surprisingly, I'll say it's rich people.

Who do you think benefits from overseas production? The poorest people in the world.

The richest people in the world.

You call them slaves, but that's not accurate

Yes, you are correct. It was hyperbole.

-- try to save them from these factories and see if they thank you.

Whether they'd thank me or not isn't the question. People often act against their own interests without even knowing it... but I do somewhat agree with your basic (and most modest claim) that those working in the factories have their lives improved by doing so. But is this an accurate portrayal of the whole story? As I'm out in Asia trying to rouse the workers into a revolt against the factory owners will you go to Mid-Town Steel in Pensylvania and tell the laborers there how fortunate they are to be losing their jobs since the economy here at home will now be on such a more realistic footing? For that matter, once these workers in Asia start complaining about their low pay and the company threatens to, or does actually, move to say India will you be there to tell them how they're really benefitting from it? What I'm saying is, to present the argument that since it makes the poorest of the poor a little less poor it's OK overall misses the point entirely that it's a scheme to lock out most everyone from being economically middle-class.

Well Dexter, I've enjoyed the discussion but I think it's reached its effective conclusion. Of course, be my guest if you want...

[VMLM]

Your discussion got me thinking about protectionism.
The truth is I've been thinking about it a lot, mostly because I'm from Perú, I guess.
Is there some instances where protectionism makes sense? Can it be a good thing to protect sub-optimal local business against strong external competition?

Listen, I don't think I have any authority on the subject. Heck, I'm just a software engineer who happens to see things around him. I've read very little on the subject and I confess that this is all mostly my own opinion, constructed through conversation, observation, some reading and well... thinking about it real hard.

Countries compete on a global scale even though they aren't all at the same level of development. Countries like the US have fantastic industrial infrastructure, strong institutions, true and tested policies, high availability of knowledge and investigation, capital, etc.
All of these things take time to develop, time that a country like Perú doesn't really count on. Our enterprises are forced to compete continuously against better prepared and better funded counterparts. And since we can't compete, we're forced to import. All the while our best and brightest choose to study and work abroad, going where the best opportunities present themselves, instead of working on building the necessary infrastructure here that could make us competitive. Since we import so much technology, all the implied know-how in said technology isn't developed. Not to mention that since the technology is developed somewhere else it isn't necessarily well adapted to our social or political reality, and the costs of implementing and adapting technology which we do not dominate are high.

In order to be truly competitive, Peruvian companies need to build up the necessary infrastructure and knowledge, Peruvian policy needs to have all the bugs ironed out of it, Peruvian society needs to learn and embrace certain values, strong institutions need to develop, we need to understand the technology we use. All of this takes time.

In a way, protection is a highly logical, very human concept. We are all protected throughout the initial stages of our lives. Some of us are lucky enough to be protected long enough to develop the necessary skills to compete and excel in our chosen walks of life, while others are forced to walk the paths set before them by chance. Yet no one would argue that it is "fair" that some kids are forced to dance and sell sweets on the street for money while others learn to read, even if some might excel in spite of their poor beginnings. Think about sports. You wouldn't expect an 11 year-old soccer enthusiast to compete against a professional soccer player.

Doesn't that make sense?

[LevV]

Yes, it makes sense to me.
The free trade supporters don't seem to realize that Britain, the United States and other developed countries got to where they are are with tariffs, subsidies and a wide variety of protective measures. Today they use their influence with the WTO, World Bank and other bodies to maintain their powerful economic positions at the expense of developing countries.
Ha-Joon Chang in his book, "Bad Samaritans: The Myth of Free Trade" covers the points you make with meticulous supporting historical evidence.
Chang is no enemy of capitalism. He simply recognizes bully countries when he sees them and seems to have a solid understanding of what it takes for a developing country to develop and grow in a way that best supports its people.
Chong describes in some detail the protectionist policies that were implemented in his home country of South Korea. Without these policies to protect 'Infant Industries', his country could never have risen to become the economic powerhouse it is today.
By the way, if anyone knows of an article or book that disputes the claims of Ha-Joon Chang, I would like to hear about it.

[Dexter]

Yes, it makes sense to me.
The free trade supporters don't seem to realize that Britain, the United States and other developed countries got to where they are are with tariffs, subsidies and a wide variety of protective measures. Today they use their influence with the WTO, World Bank and other bodies to maintain their powerful economic positions at the expense of developing countries.

Exactly why you need free trade. Tariffs and subsidies are a way for powerful corporate interests to block competition.

Developing countries don't need protection, they are better off when companies do the "evil" outsourcing and hire their workers. That raises wages throughout the country. Every developed country in history has first gone through low-skill industrialization and then moved up the skill ladder while wages and productivity both increase. Every single one.

It's true that the US and other countries had protection, and still does. But why are you defending entrenched interests? It seems odd that the left-wing in particular would be taking that approach. I know they think they are defending labor. It probably seemed like a good idea to freeze farm employment in 1900. That would have resulted in a ridiculously lower standard of living for everyone.

[LevV]

Tariffs and subsidies are a way for powerful corporate interests to block competition.

I'm speaking of the use of tariffs and subsidies by governments to support beginning industries in the home country until that industry can compete equally with competitors on the world stage. How does it make sense to have a beginning industry in a third world country compete equally with a developed industry in a country with a sophisticated work force, solid infrastructure, government subsidized R & D, etc.

But why are you defending entrenched interests?

How am I defending entrenched interests?

[Dexter]

Tariffs and subsidies are a way for powerful corporate interests to block competition.

I'm speaking of the use of tariffs and subsidies by governments to support beginning industries in the home country until that industry can compete equally with competitors on the world stage. How does it make sense to have a beginning industry in a third world country compete equally with a developed industry in a country with a sophisticated work force, solid infrastructure, government subsidized R & D, etc.

But why are you defending entrenched interests?

How am I defending entrenched interests?

I assumed you would be in favor of protecting US firms with tariffs and/or subsidies -- those are the entrenched interests I'm talking about who lobby for trade protection. It would be quite unusual for a critic of free trade to only call for tariffs in poor countries. And in that case, you would be creating future interests in those countries -- firms don't grow up and stop asking for protection. They become special interests. Look at India for example -- protectionism killed their economy as inefficient firms were propped up. They've done better as they've liberalized.

As for the third world countries, they will specialize in low-skill jobs for which they have a comparative advantage until wages rise enough so that those jobs shift to even poorer countries. They are not going to compete with established firms with higher skilled workers, it would not be possible no matter how many tariffs you have.