Will MOAB Trigger Protectionism? | 83 comments (83 topical, editorial, 0 hidden)

Re: Precisely ... the diary makes an excellent (4.00 / 2)

I view protectionism as the refusal to buy another country's products (or placing restrictions on their purchase), the reason typically being to protect domestic assets (although it can be punitive as well). I don't see why this shouldn't apply to financial instruments as well as goods and raw materials.

by rifek on Mon Jan 12th, 2009 at 07:34:33 PM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 8)

Because financial instruments are not products, they are financial instruments.

This is part of the neoliberal agenda, to smuggle in freedom for corporations to shift wealth across national borders under the idea that it is "freeing up financial services" and so is part of a free trade in goods and services agenda.

A similar tactic, though different in detail, is treating the ever-expanding restriction on rights to information copying and sharing as "promoting trade in intellectual property", as if the makers of Mickey Mouse cartoons before WWII are gaining encouragement to their creative activity by the Disney Corporation retaining perpetual copyright via repeated extension.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jan 12th, 2009 at 08:34:41 PM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 3)

You're accusing me of pushing a neoliberal agenda that treats labor as if it were as mobile as capital? You don't know the positions I've been taking since the beginning of Ronnie Raygun's Reign of Terror.

by rifek on Mon Jan 12th, 2009 at 11:31:48 PM EST
[ Parent ]

Not you ... the concept of ... (4.00 / 2)

... treating financial instruments as if they were produced goods and services.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jan 12th, 2009 at 11:45:22 PM EST
[ Parent ]

Re: Not you ... the concept of ... (4.00 / 3)

Thanks for clarifying that. I've been arguing for over a quarter-century now (The years creep up on you.) that treating labor as if it were as mobile as capital (such as Raygun's "Vote with your feet" remark) was a scam to impoverish everyone outside the capital class. Free flow of capital was instituted anyway, and now the system is addicted to it. What I'm saying here is that the international capital spigot will get choked off, it will be choked off for protectionist reasons, and it will have protectionist effects. Consequently, if it waddles like a duck....

by rifek on Tue Jan 13th, 2009 at 08:13:15 AM EST
[ Parent ]

Re: Not you ... the concept of ... (4.00 / 2)

You'll find little disagreement here on those thing you have been arguing for a quarter century...

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Tue Jan 13th, 2009 at 10:27:03 AM EST
[ Parent ]

If by 'protectionist effects' you mean it ... (none / 1)

... will undermine the strength of transnational corporations, yes.

If by protectionist effects, you mean it will eliminate opportunities to trade in finished goods and services, I don't see how that follows.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jan 13th, 2009 at 12:19:17 PM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 3)

That's an excessively broad definition. Protectionism of necessity involves protecting some domestic industry. But there are plenty of import restrictions - on both financial products and stuff - that are justified on grounds that have nothing to do with protecting domestic interests.

A blanket ban on GMO crops, for instance, would be protectionism under your definition. But clearly, that conclusion is absurd - a blanket ban on GMO crops is an agricultural and environmental policy; the fact that it is applied to foreign farmers as well as your own country's does not magically turn it into a protectionist measure.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jan 12th, 2009 at 08:40:49 PM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 3)

A blanket ban on GMO crops because domestic agriculture can not compete against them (cost, aesthetics, lack of technology, whatever) would be protectionist. A blanket ban for safety and health reasons would not (although safety and health a often trotted out to mask protectionism). Either way, simply labeling it "agricultural policy" does not make a distinction. Much (most?) agricultural policy is protectionist.

More to the point, I didn't say what you say I said. If a country blocks another from obtaining capital from within its jurisdiction so that it can preserve that capital for domestic use, how is that not protectionist?

by rifek on Mon Jan 12th, 2009 at 11:47:48 PM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 2)

For the same reason that preventing the Calabrian mafia from setting up shop in your jurisdiction would not be protectionism. That also deprives a foreign company from doing business on your turf. The foreign company in question happens, however, to be a kind of company that you don't want on your turf, and have quite legitimate reasons to not want on your turf.

It only becomes protectionism when you are shielding a genuinely inefficient industry - i.e. an industry that has no hope of ever being competitive on the merits - from foreign competition. Using barriers to trade to enforce certain standards is not protectionism - domestic industry is not given an advantage, it's merely protected from being put at an unfair disadvantage.

Finally, the financial system is not an industry in the conventional sense of the term - it is so tightly bound to the political process that it makes more sense to treat is as a utility than an industry. So the logic that applies to the financial sector is not the logic that applies to steel or ball bearings or wine - the closest analogy is the logic that applies to railroads and water supply.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jan 13th, 2009 at 05:02:40 AM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 2)

As nearly as I can tell, the neolibs (neocons here, Chicago School) have advocated free flow of capital on efficiency grounds.

Let's get this out of the realm of health and crime for a second. Farawaystan is swimming in cash from the gas reserves it's sitting on. Beyond that it doesn't have much of an economy traditional agriculture, mostly herding. The US has regularly milked this cash cow to finance its deficits. Neolibs would argue that this is a correct result because it is more efficient for Farawaystan to invest in the US than at home (Let's set aside for the time being the obvious bias for developed markets. It isn't as though I were advocating that position.).

Now the people of Farawaystan decide they want to keep more of their money at home for domestic projects (Pick any element of the Farawaystan economy, and you'll find it at a competitive disadvantage because of inadequate education, transportation, communication, etc. Even the gas industry fears that, if there were a decrease in demand, Farawaystan's fields would be the first ones shut down.). So they cut back the amount that can be loaned to the US.

The US now can't sell as much of its product (Treasury securities) as it could, so capital in the US decreases as surely as it would if we were talking about manufactured goods. As the capital shrinks, the plants start cutting back just as surely as if Farawaystan had slapped a tariff on US products, because none of the plants operates on current accounts. Then there will be the inevitable noise in the media and Congress for retaliation against Farawaystan, just as though it had imposed a tariff or embargo. As I have said elsewhere, if it quacks like a duck....

Concerning your last paragraph, you've raised a couple of points that don't apply very well in the US. The financial industry is very political, but all industry is very political here. Charles Wilson, then president of General Motors, once said that what was good for GM was good for the US. While the auto industry may not have that kind of pull any more, the defense industry (which is ubiquitous here) doesn't even have to ask; it has the government on a leash. As for utilities and railroads, they're largely private industries here.

Returning to the main point, I think the restriction of capital flows to the US will be imposed at least in part for protectionist reasons (It will be couched in health, safety, and national security terms, but all protectionist policies are.), will trigger protectionist reactions, and will cause protectionist results. If for whatever reason you don't like "protectionist", then it must be viewed as "quasi-protectionist".

by rifek on Tue Jan 13th, 2009 at 09:58:59 AM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (none / 1)

"it has the government on a leash"

Understatement of the year.

by asdf on Tue Jan 13th, 2009 at 10:01:19 AM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 2)

"Choke chain"?

by rifek on Tue Jan 13th, 2009 at 10:07:04 AM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 3)

But selling Treasuries isn't "selling a product" - it's signing an I.O.U. And in a world with completely rigid capital controls (probably not desirable, but useful as an example), Farawaystan wouldn't be sitting on a vault full of cash. It would be sitting on a pile of stuff - because if capital can't move from one country to another, you'd have to eventually buy stuff with your export earnings.

Of course, from the US point of view, balanced trade would be a disaster, because it would mean having to pay in real stuff - ball bearings, rubber, steel, integrated circuits - instead of just blithely issuing I.O.U.s. But that doesn't make it "protectionist."

OTOH, it's entirely possible that I simply don't get it - I find the whole monetary system pretty confusing, which is why I like to think of the economy in terms of stuff getting produced, moved around and used.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jan 13th, 2009 at 11:25:22 AM EST
[ Parent ]

Maybe on Wall Street it would be ... (4.00 / 3)

... not in Northeast Ohio. Having to pay for imports with stuff made in the US would be a win/win, with both new work for domestic markets and new work for markets overseas due to the exporters exchange rate.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jan 13th, 2009 at 02:39:45 PM EST
[ Parent ]

This is the neoliberal theory ... (4.00 / 4)

... that is, the loanable funds fallacy:

The US now can't sell as much of its product (Treasury securities) as it could, so capital in the US decreases as surely as it would if we were talking about manufactured goods. As the capital shrinks, the plants start cutting back just as surely as if Farawaystan had slapped a tariff on US products, because none of the plants operates on current accounts.

It conflates plant and equipment (a.k.a. "real capital") ... productive capacity ... with financial obligations. But financial capital is not like plant and equipment in being technically necessary for production, rather it is part of the institutional system for determining control of production.

Its very convenient for the interests of transnational corporations to conflate financial capital with plant and equipment as if the former was part of the requisite resources for production, rather than being part of the current rules of the game for who gets to say how resources are deployed.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jan 13th, 2009 at 12:29:12 PM EST
[ Parent ]

Re: This is the neoliberal theory ... (4.00 / 4)

People confuse wealth and the measurement of wealth all the time. The neo-libs, with their Positivist bias, have risen this to a Fine Art.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Jan 13th, 2009 at 01:14:56 PM EST
[ Parent ]

That's why Ive stopped using ... (4.00 / 4)

... "real capital" and "financial capital" in class altogether, and just say plant and equipment versus financial assets.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jan 13th, 2009 at 05:41:00 PM EST
[ Parent ]

A blanket ban on GMOs (4.00 / 3)

because you cannot control their spread into other crops (which is what happens each time) is health and safety policy, not protectionnism.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Jan 13th, 2009 at 05:34:56 AM EST
[ Parent ]

Re: A blanket ban on GMOs (4.00 / 2)

What would happen to the Eurozone if Italy instituted capital controls?

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Tue Jan 13th, 2009 at 05:46:02 AM EST
[ Parent ]

What would happen to the US if Ohio ... (4.00 / 2)

... instituted capital controls?

The appropriate boundary for capital controls is not somewhere inside the domestic zone for a currency. When y'all decided to go for a common currency, you kind of limited your freedom of action in terms of independent monetary policy actions of all sorts below the Eurozone level.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jan 13th, 2009 at 05:43:49 PM EST
[ Parent ]

Re: What would happen to the US if Ohio ... (none / 1)

That was sort of my point, but Jerome kept pretending Italy could institute capital controls if they had the political will...

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Tue Jan 13th, 2009 at 05:45:49 PM EST
[ Parent ]

Yes, but it would be sufficient political will ... (4.00 / 2)

... to re-institute the Lira, and I doubt that is going to happen.

Capital controls at the boundary of the Eurozone would be hard enough ... but when bona-fide domestic Euro credit money can be created in Frankfort and spent in Florence, its hard to impose effective capital controls.

It might be an "Italian Euro" that the monetary authorities in Italy work hard to maintain at parity with the real Euro, but capital controls in the sense of the kind of controls imposed by Malaysian after the Asian Financial Crisis, or in the sense of the capital controls in force today in China ... is at its heart controlling foreign exchange transactions. If I borrow Euros in Germany and spend them in Italy, that's not a foreign exchange transaction. If Italy imposes the regulatory framework that makes it work like one, its de facto left the Eurozone.

Inside an Economic Union it would be hard enough ... the narrowest "straightforward" boundary for Italian capital controls is the European Union.

In a conventional Free Trade Area, it would be fairly straightforward, but of course the US "FTA"s are conventional Free Trade Areas in name only ... they are mostly agreements on eliminating capital controls in return for trade access to the US market, though dressed up as bilateral removal of capital controls and bilateral trade access. So capital controls in the US context would basically be reneging on the FTAs. But since most of them are not passed as Treaties in any event, there's the institutional freedom to renege on them if we want to.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jan 13th, 2009 at 06:00:31 PM EST
[ Parent ]

Re: Yes, but it would be sufficient political will (4.00 / 4)

Interestingly I read today that one reason why the Italian financial community has been less hurt by the global fuck-ups, is poor English skills ;-)

You can't be me, I'm taken

by Sven Triloqvist on Tue Jan 13th, 2009 at 06:03:58 PM EST
[ Parent ]

I wonder how that works ... (4.00 / 2)

... "I'm sorry, I don't understand, could you explain that in Italian?" "Sorry, I still don't understand, it sounds like you are telling me I am first in line to pick which line I stand at the end of, I do not see why I should buy that tiered CDO you are selling. I will jus' wait an' see."

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jan 13th, 2009 at 06:10:15 PM EST
[ Parent ]

Re: I wonder how that works ... (4.00 / 2)

Precisely. 'Ignorance is bliss' personified...

You can't be me, I'm taken

by Sven Triloqvist on Tue Jan 13th, 2009 at 06:12:43 PM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 2)

Why would protecting domestic assets necessarily be bad? I don't think a country should allow the strip mining of its assets and the impoverishment of its population by capitulating unconditionally to 'market forces'. If not protectionism, what other weapon do we have against 'unfair competition' from areas with lower production costs due to their failure to implement to proper environmental and labour regulation? Do we really want to participate in a race to the bottom?

by someone (s0me1smail(a)gmail(d)com) on Tue Jan 13th, 2009 at 04:03:27 AM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (none / 1)

You'll get no argument from me. I've always opposed sacrificing at the altar of efficiency, especially since efficiency and the rules creating it always seem to favor the haves over the have nots, a bit of reality the Austrians/Chicagoans studiously gloss.

by rifek on Tue Jan 13th, 2009 at 10:05:55 AM EST
[ Parent ]

Re: Precisely ... the diary makes an excellent (4.00 / 4)

The further bit of slight-of-hand in the efficiency argument is that rarely is it declared what it is the efficiency of. I.e. which parameter is being optimized? Efficiency on its own can hardly be considered an unquestionable good. After all, the Nazis where quite efficient with their gas chambers, optimising the number of people killed per unit time.

by someone (s0me1smail(a)gmail(d)com) on Tue Jan 13th, 2009 at 11:06:30 AM EST
[ Parent ]

But its more than just sacrificing at an altar ... (4.00 / 2)

... of efficiency, its sacrificing to a false idol of efficiency ... a partial, static, efficiency, ignoring externalized costs and ignoring dynamic efficiency gains.

Following the static efficiency argument, Japan would never have invested in steel making and shipbuilding after the end of WWII, but if they had not, they would have sacrificed dynamic efficiency gains far in excess of the static efficiency gains that they did sacrifice, so in terms of "efficiency", what was claimed by most of their US advisers to be the inefficient choice (Deming gets an honourable mention here, he just wanted to make efficiently whatever it was decided should be made) turned out to be the efficient one.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jan 13th, 2009 at 05:48:03 PM EST
[ Parent ]

Re: But its more than just sacrificing at an altar (4.00 / 2)

And we see yet another reason not to confuse science with social studies. There is scientific efficiency, which is a useful and quantifiable measure of an element of the operation of a physical system, and there is economic efficiency, which typically is a faux-scientific political construct arbitrarily defined by those with the power to do so.

by rifek on Tue Jan 13th, 2009 at 08:31:34 PM EST
[ Parent ]

Re: But its more than just sacrificing at an altar (4.00 / 3)

Economic efficiency is both easy to define and identify in a clear, unambiguous way and easy to use to generate simple, formal, tractable models.

Its just that the term economic efficiency in the former and the latter mean different things. The problem is that once you go to the trouble of actually specifying your economic terms in ways that can be clearly and unambiguously identified, you can no longer hide from the fact that any simple, formal, tractable model of economic development is intrinsically and radically incomplete.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jan 13th, 2009 at 10:15:39 PM EST
[ Parent ]

Re: But its more than just sacrificing at an altar (4.00 / 3)

And the model, to be manageable, must be simplified to a point far beyond mere Goedelian incompleteness and on to a point where the model becomes irrelevant and even nonsensical. There are simply too many vectors that can barely be identified, let alone measured or controlled for. Such exercises do show us, though, in stark fashion the firmness of the foundations of Logical Positivism and its "informed actor" and his "enlightened self-interest."

by rifek on Tue Jan 13th, 2009 at 11:23:23 PM EST
[ Parent ]

Veblen once remarked on the ... (none / 1)

... remarkable similarity between the supposedly Universal Homo Economicus and the particular habits of thought of upper middle class English merchants of the 1800's.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Jan 14th, 2009 at 12:55:38 AM EST
[ Parent ]

Re: Veblen once remarked on the ... (4.00 / 3)

And J K Galbraith makes the same point in the New Industrial State when he mocks (the then young) Milton Friedman and his ilk as hopeless romantic throwbacks to the petty merchant and manufacturer economy of the time of Adam Smith.

I suppose Miltie had the last laugh over Galbraith, unfortunately for all of us.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Wed Jan 14th, 2009 at 04:11:55 AM EST
[ Parent ]

Re: Veblen once remarked on the ... (4.00 / 2)

He had a laugh over John Kenneth, but not, it may be be, the last one.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Jan 14th, 2009 at 06:53:41 AM EST
[ Parent ]

Re: Veblen once remarked on the ... (none / 1)

Well, they're both dead now.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Wed Jan 14th, 2009 at 06:54:46 AM EST
[ Parent ]

Re: Veblen once remarked on the ... (4.00 / 2)

But madmen in power listening to voices in the wind are as often as not listening to the voice of a long dead economist.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Jan 14th, 2009 at 01:38:54 PM EST
[ Parent ]

Re: Veblen once remarked on the ... (none / 1)

We're still around to laugh, although rather bitterly...

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Jan 14th, 2009 at 04:02:21 PM EST
[ Parent ]

Will MOAB Trigger Protectionism? | 83 comments (83 topical, 0 editorial, 0 hidden)

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