[OFB Cafe] lightening

[saki]

Peter Hollings wrote:
> Hi, Terence, no offense intended. Wish I could share your optimism about 
> the economy.  Take a look at http://www.lewrockwell.com/orig9/quinn5.html .
> 
> Comparative advantage is a useful concept when considering things like 
> resource costs, but aren't we really dealing here with labor cost 
> arbitrage? And what about the transitional costs that comparative 
> advantage ignores? Have the gains from cheap Chinese imports at Wallmart 
> exceeded the costs of lost jobs and have the winners compensated the 
> losers? It seems to me that if we cannot produce something that others 
> want to buy and if we continue to run a trade deficit then we will 
> ultimately have to sell off our hard assets to foreigners.
> 

I don't deny that there will be winners and losers in the to-ing and 
fro-ing of the global market, but you have had over fifty years of 
growth and well-being in which the cost of labour has risen well beyond 
that of the emerging economies (as Europe has also found). And the 
winners will not compensate the losers- did we ever do that?

I was also using "comparative advantage" in an holistic way -resource 
costs, labour, transport and Government-imposed costs, as I think labour 
costs are only part of the story. In this country a vast percentage of 
"profit" in personal wages and company earnings are taken by the 
Government, and so cannot be reinvested in research, new investment etc..

Finding other sources of profit and new industries is what the developed 
world has been good at, and may well continue to be. There will 
adjustments made in comparative wealth, obviously, and I think in the 
short/medium term the developed economies will suffer, but Western 
Europe and the US still hold a vast amount of the world's wealth.

As for the cheapness of clothes in Walmart and the loss of jobs in the 
US clothing industry, who makes the comparison linking the two when 
shopping for a bargain? (and do you actually have a local choice of 
buying American any more? Except perhaps at the top end of the market?).

I think that perhaps there will be a levelling of income a standards of 
living in the future as the emergent economies come closer to ours, and 
are in turn pushed by other just emerging economies.

This may mean a relative diminution in our standard of living, but it 
will still be a lot higher than in most of the world, I would think.

Comments?

Terence