An (Indomitable) Argument for Protectionism

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Seagate Wuxi China Factory Tour

Protectionism helps us at home and our friends abroad

The expired Multi-Fiber Arrangement left thirty million people across the world unemployed.  These workers were unfortunate victims of globalized free trade.  Free trade leads us to believe that goods should always be produced by the firms competing under pure capitalist conditions.  This idea is not wrong; it is only the dangers of free trade should be mitigated in emerging markets around the globe to give them the opportunity to succeed.  Protectionism, the antagonist of free trade, is the solution to best prepare infant industries and emerging economies anywhere in the world; this policy employees more denizens, produces stronger industries, and cultivates stronger markets than free trade ever could.

Inefficiency creates more jobs.  If the entire world can exploit a market then only those countries with the most efficient industries will be able to sell.  Protectionism erects a wall of tariffs that prevents foreign goods from ever contaminating domestic markets by driving prices up to an inclusive level for domestic products.  Under protectionism, small industries gain a foothold, bloom, and employ more denizens in every country across the world.  There are minor concessions; on a global level less of goods are produced and the cost is driven up slightly as well.  These negligible effects diffused throughout the consumer markets means the world to the now employed workers who can support their families.  Protectionism is more humane than free trade.

Stronger industries are built under the shield of protectionism.  Behind a wall of tariffs the United States built mighty firms of  industry that dominated the world for the second half of the twentieth century.  Preceding the Americans, the British had done the same when the pioneered the Industrial Revolution and built an empire upon which the sun never set.  Since the 1970’s China used numerous protectionist policies, notably keeping its currency artificially low.  It is predicted to have the world’s largest GDP by 2020.  Examples of booming economies that got their start in free trade are scare.  Columbus and Admiral Perry opened up trade to the Americas and East Asia respectively.  In both countries widespread exploitation of natives and complete sterilization of domestic industries ensued following the introduction of cheap free trade imports.  Free trade is a tool of the strong to stay in power and collect wealth; for weaker nations and industries free trade is a poison which cripples.

Stronger markets evolve under protectionism.  Protectionist policies protect infant industries and prevent exploitation of weak economies.  In an international market of free trade monopolies are certain to emerge.  Monopolies are established when there is not industrial competition.  This problem hurts everyone.  Consumers suffer from an inferior product; without the Darwinian survival of the fittest threat the producers have no incentive to innovate.  Marginal producers are harmed.  Any attempts to breach the market are squelched under the monopoly.  The monopoly hurts itself through stagnation.  Protectionism is the best means in a globalized economy to give marginal producers and infant industries the time to create a profitable industries despite the monopolies.  Consumers and marginal producers benefit from better products and pay checks while potential monopolies are broken out of self-defeating cycles of stagnation.  Protectionism helps everyone.

Protectionist protects countries.  It harbors citizens and gives them jobs.  It cultivates infant industries under a cocoon of tariffs.  Better products and firms are brought to market thanks to protectionism.  It seems almost silly to even think about introducing globalized free trade to emerging economies; it corrupts infant industries and kills jobs.  If it were not for multinational corporations, who preach fallacious free trade to all for a better profit margin, protectionism would indisputably hold in its rightful place as protector of firms, consumes, and employees.

Case Study: Super Power and Super-City: Part 3 (The Diverse Similarities Between The United States and Singapore)

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How Are The Finances of the United States and Singapore Similar?

Financially these two countries are interconnected in our globalized world.  Here are both countries GDP percentage growths for the last thirty years:

These countries are associated financially.  In 1982, 1991, 2001, and 2009 sharp canyons affect both lines of data.  Each gulf corresponds directly to a specific global recession.  The 1982 dip is backlash from the 1980’s energy crises.  The inflation epidemic of the early 1990’s caused the 1991 recession.  Popping of the internet bubble in 2001 caused a major dip in both countries.  Finally, fallout from the 2008 banking crises is seen in the 2008 and 2009 chasm.

Only in 1998 does Singapore act independently from the United States.  During this year Singapore was negatively influenced by the 1997 Asian Financial Crisis.  Despite being thousands of miles away from this regional problem there is a noticeable stun in America’s economic growth as well.  These several associated data points mean these countries are financially related.

Are Measurements of Human Capital Similar?

Human capital is an abstract term that attempts to quantify the collective value of the education and habits of a citizenship.  One good indicator of this is Internet usage; access to international data and technologies revolutionizes education at home, in schools, and in the workplace.  Below is a comparison between the United States and Singapore numbers of internet users.

The data is skewed left with a steady incremental increase every year until both counties.  At 2002 for the United States and 2004 for Singapore the data levels off and the numbers of new internet users decreases.  The United States pioneered the Internet, so they have more widely spread usage.  However, Singapore follows the United States timeline closely; during most years the numbers of internet users in Singapore is the same percentage of users the United States had two years prior.  Here is the Internet usages growth compared in relation to each other at this staggered relation:

In this examination the positive values represent when Americans gained more internet users than the Singaporean and the negative values represent when the Singaporeans gained more users than the Americans.  The same internet bubble that exploded in the GDP growth percentages can be seen building in both countries.  Between 1998 and 1999 the Americans lose smaller and smaller incriminates as they rapidly proliferate the first internet startups.  Following two years behind, in 2000 and 2001, Singapore establishes record numbers of internet users as the internet bubble balloons over Eastern Asia.  These statistics are all interconnected just as the countries are.

What Lessons can America take from the Singapore?

The primary lesson from this analysis is that we are all connected.  When America triggered a recession by bankrupting Lehmean Brothers in 2008 it triggered a recession that terrorized Singapore.  Likewise, when the 1997 Asian Financial Crisis rocked Singapore America was also negatively affected.  However, this relationship works both ways.  The Internet has brought a new age of prosperity to America and Singapore.  Perhaps their architecture techniques will return to America and allow us to better utilize our own space.  As the world grows more globalized the altruistic options only proliferate.

Thank you for Reading Part 3 of our Case Study of the populstions  Singapore and the United States: Please Read Part 1 and Part 2 for the full perspective.

Sources

“Inflation, Consumer Prices (annual %) | Data | Table.” Data | The World Bank. Web. 31 Oct. 2011. <http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG&gt;.

“List of Recessions in the United States.” Wikipedia, the Free Encyclopedia. Web. 31 Oct. 2011. <http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States&gt;. 

Developing Countries Hoodwinked: Ditch (of) Free Trade

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3rd world work force
While free trade is the optimum interdependence policies of developed countries it does not aid developing nations.

Free trade endeavors to help workers in developing countries; the problem is that it cannot succeed in our cut-throat, capitalist world.  When corporations go into developing countries they are not being philanthropic: they want to make money.  In order to succeed in our globalized world, companies purge themselves of humanity and squeeze every last cent out of their production.  This is not necessarily good or bad, it is just how the world of business works.

Growths of industries in developing countries create working class jobs.  This class of jobs is both rudimentary and menial.  Some examples are textiles, agriculture, and manufactured devices.  They do not build human capital or financial gains; they are effectively powerless to better themselves.  Karl Marx mourns them as: “that class of modern wage labourers who, having no means of production of their own, are reduced to selling their labour power in order to live.”

These laborers in developing countries, who have opened themselves to free trade, are arrested by wage slavery.  Their occupations pay them just enough to live, but not a cent more.  Free trade, cut-throat capitalism, and nations full of alternative workers guarantee that payrolls will be capped at the living wage.  Budding domestic industries, termed infant industries, are unable to thrive because full-fledged foreign competition steamroll over them.  Once infected by free trade developing countries are in an unfavorable position to ever become developed.

Ayn Rand, the most important philosopher on capitalism, believes that free trade is along the optimal path for economics.  However, she also knows that under free trade, “the good of some men takes precedence over the good of others, with those others consigned to the status of sacrificial animals.”  Developed countries are benefited, while developing countries are left by the wayside.

In conclusion, free trade is not the solution for developing nations because it polarizes their populations into numbed working classes, trapped in loops wage slavery and human capital erosion until a new force, perhaps protectionism, stems the drudgery.  If not, developing nations are, “consigned to the status of sacrificial animals.”

Double Dip Rescission Inbound: Dow Falls Below 12,000 and is Declining

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The Dow fell below the 12,000 as nervous investors continued to sell off their stocks. This is the six consecutive day of losses in the stock market, destroying tentative gains made since the recession. The only Fortune 500 companies who successfully made gains were AT&T and Proctor and Gamble. All the other blue chip companies suffered hard losses; the worst was Travelers losing falling 135 points and losing 1.1% of their stock value. Motor company Toyota announced a loss of 1.6 billion in profits, due to the earthquake-tsunami double punch that has crippled the Japanese economy. The S&P and the NASDAQ Composite both fell by roughly 1.1% throughout the course of the day, contributing to their sixth consecutive week of losses. Safer investments, such as US back bonds, surged; driving down the interest rate by 0.04%. The stock market is in the opening stages of a second massive sell off, which will damage the international economy even more than the latest recession.

Why is the Double Dip Recession Happening?

The United States economy needs to get its act together before investors lose their nerve completely and sell everything. The international socioeconomic relies on trust and confidence. As long as everyone can pay of their debts people will gladly invest in any number of derivatives and stocks because it is a profitable thing to do. However, when massive blows to the stock market hammer that confidence consumers quickly stop buying stock, driving down the price. This is bad for the economy because companies rely on selling stocks to the market and their employees to fund their operations. Without the core faith in the stock market investments in new companies grind to a halt. This prevents new companies from entering the market, which further inhibits the economy.

It is a dangerous spiral that quickly stagnates the economy. New businesses cannot form to enter the market and existing companies cannot get the necessary funds to meet market demands. The circular movement of money halts, starving consumers and producers alike. This is the fear of what will happen should this double dip recession ensue; the only issue is that faith in the stock market and investments will be even harder to retrieve because of the recent 2008 recession. The economy could stagnate near indefinitely. One major aspect of this relates to economics, fiat money. The world relies on fluctuating currencies that are valued only compared to each other, they have no value themselves. This is good because it allows for large amounts of money to be utilized.

How Could This Hurt the Economy?

This is potentially disastrous because the money is prone to rapidly inflate and deflate, making counties rich one day and comparatively broke the next. Currencies are traded throughout the international economy, if the American dollar falls do to the currency trading markets driving it down Americans will be hard pressed. They will not be able to pay the mortgage, send their kids to college, or even by grocers if inflation rises too high too quickly. The unstable stock market could toss America into a recession instantly should there be a massive selloff. There is also the threat of a slow transition to a recession; as the American economy is strangled by the reduced investments they produce even less and then there are even fewer investments. This vicious circle is compounded ten times over by the banks leverage working against them, for every dollar they lose in their reserves they lose nine dollars they could invest. The double dip recession would attack America on two fronts, bringing misery to all.

Chinese Five Year Plan of Armament (And An American Plan of Complete Disarmament)

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Beijing has announced increased defense spending by 12.7%, from 532.1 billion Yuan to 601.1 billion Yuan.  This expenditure is valued at roughly $91.5 billion dollars, or roughly 7.2% of their declared national spending in 2011, in the near future many more billions of dollars will be allocated into defense spending.   Most analysts agree that, in addition to the declared spending there are billions of undeclared Yuan being secretly spent by the Chinese government.

Chinese military truck during China's 60th anniversary parade

Chinese military spending is now only outpaced by the runaway American defense budget.  Each year larger and larger Chinese contracts are being given; American defense contractors are beginning to look for sales overseas rather than here at home.  That is something that needs to be prevented to protect the vulnerable American economy.

Why is this Globalization Happening?

As China militarizes the concentrations of weapons and weapon distributors will be exported to Asia.  China has already consumed many industries; most manufacturing products come from China.  This is a result of globalization, a s costs rose for American corporations business leaders were forced to look for economical alternatives.  They discovered that assembly line jobs could be sent anywhere in the world, where they would fulfill the same quotes at a fraction of the price.  Production jobs went overseas.

Now defense contractors appear to be the next to make the push west.  Currently the United States is the world’s leading producer and distributor of weapons.  Without the staples of guns and ammunition the domestic American economy would disintegrate in a matter of days.  It is in the best interests of the America people to deal with this problem before another critical market goes over seas.

How will Defense Spending Affect the United States?

The America economy will indirectly affect the average American in countless minor ways, hindering the average man’s lifestyle.  First, everyone will see a steady rise in the cost of all items.  As the economy of the United States steadily weakens the dollar does as well, causing higher levels of encumbering inflation.  This results in all products costing more, since money is worth less.  Second, America will be slowly pushed out as the leading international nation in foreign affairs.  Without the comparative muscle, many nations will abandon the United States’ protective military umbrella, favoring the Chinese sphere of influence.

America will no longer be the dominant global superpower.  These long term changes will inevitably happen if the economic conditions continue along expected courses.  Pax American is dwindling and will die unless decisive, innovative government action is taken.

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