Global capital is the tail that wags the U.S. economic dog
carnegieendowment.org
carnegieendowment.org
That's a result of political choices made in many jurisdictions, it's not a law of nature. The EU made a very conscious decision to tie free movement of labor to free movement of capital within its operating zone (probably the only such economic agreement of its kind).
The choices that the US has made are entirely favorable to capital, and entirely disfavorable to all non-professional labor. The only upside I can see (and I'm not alone in this) is cheap consumer goods that have obscured the true cost and depth of wage stagnation over 35 years.
Or is your point that only some stuff is cheaper, but the total standard of living supportable by average wages has nevertheless dropped?
Wage in currency is a lot simpler. The only real manipulation possibility is currency value and some minor tinkering in the definitions.
[1] For example a major criticisms of the euro-zone inflation index is that it excludes housing cost: https://en.wikipedia.org/wiki/Harmonised_Index_of_Consumer_P...
There used to be "white-collar cost of living comparisons", maybe there still is. The headline in the newspaper would be "Copenhagen most expensive city in the world" or somesuch. The major reason for that was that hiring a full-time nanny to look after your children was expensive in Copenhagen, and a full-time nanny was included because that was considered necessary for white-collar professionals in some of the cities om the survey, and for fairness it was included everywhere. But in Copenhagen, there are excellent creches and kindergartens. Only a kook hires a nanny, so those attempts at fair comparisons compared kooky behaviour in Copenhagen with sensible behaviour in, say, Pune or Bangalore, and found that being a kook in Copenhagen is expensive.
But how can you do it better? How can you compute the cost of living (which is tightly connected to purchasing power) so well that you can compare year-over-year and capture 2% changes reliably? If the city provides more/better creches, should you start counting 19.2% of the cost of a nanny instead of 19.4%?
People don't need a car where I live. I know areas nearby where a family like mine would have at least one, perhaps two cars. Cars are cheaper there (renting off-street parking space costs a fortune here) but how would you factor the cost of a car into purchasing power and compare fairly? If the city builds new metro rail, how do you change the weight of the family's first car in your calculation, and the cost of the second car?
This is difficult stuff.
https://www.cbpp.org/blog/census-renters-incomes-still-laggi...
But hey! US$200 4k TVs! Portable handheld computing devices with access to a good chunk of human knowledge (and humanity) ! No problem!
That would be deflation, but we've actually had inflation over the past decades. We can ofcourse discuss how wrll we are measuring it, but generally speaking some life necessities like housing have skyrocketed in price.
It definitely makes it more difficult, but a lot of it is a "law of nature" because moving is expensive, time consuming, risky, and you give up your local connections. There's a reason for the metaphor "putting down roots."
But it ignores the extent to which we've deliberately worked very hard to make capital mobile. As noted elsewhere in the thread, feudal societies used to see most wealth accumulated in the form of real estate, which is more or less the definition of immobile capital. We've built huge and complex social institutions around making capital mobile, and even allowed them to suck up a rather notable percentage of GDP.
Imagine what a world would look like that put as much effort into the free movement of labor. And note: not all capital is internationally mobile, and in the same spirit, nobody would sensibly suggest that all labor would or should become mobile. There's plenty of room and benefits for investing both close to home (which is all part of "putting down roots"). It's a question of balance between local, regional, national and global for both capital and labor mobility.
how is this any different for the US?
I'm pretty certain Floridians don't need a work visa if they choose to go and work in California?
The US has essentially never existed in this form. From the moment of its founding, it has been a federal, democratic republic.
Before the EEC/EU, investing across Europe was much more difficult, and labor migration was limited to "high skilled" workers. There have never been any such limitations in the US.
this isn't true at all, what about the first US constitution: The Articles of Confederation?
Article II stated that the States are sovereign (bar delegated powers), and Article IV established freedom of movement and freedom of capital
essentially the same structure as the current EU (with many of the same flaws)
The EEC/EU was preceded by nations, continues to feature nations (1) and still has no actual federal structure (though quite a lot of Europeans wish it had more, and quite a lot of other Europeans wish it had less).
(1) consider how easy it was for even the Schengen zone nations to close their borders and think about how difficult it would be for a state to do the same.
I don't remember claiming otherwise
> If you're a historical revisionist, you could make the claim that the separate colonies constituted separate nations before the AoC, but I wouldn't agree with you
I didn't claim this either
my only point was EU is not unique, it's a confederation and there have been many throughout history, several with freedom of movement and capital, including the rather well known United States (post-AoC but pre-federalisation)
you may disagree, but that would be historical revisionism
I hate to quote Wikipedia, but:
Little changed politically once the Articles of Confederation went into effect, as ratification did little more than legalize what the Continental Congress had been doing. That body was renamed the Congress of the Confederation; but most Americans continued to call it the Continental Congress, since its organization remained the same
So basically we're disagreeing over whether or not a 12 (or 8) year period between 1777 (or arguably, 1781) and 1789 represents a confederation in which the concepts of free movement of labor and capital existed in a way at least somewhat analogous to the way they do in the EEC/EU.
I'd say they do not. Given that Wealth of Nations was only published in 1776, I'm not even sure that these concepts existed clearly in the minds of most of the people it would have to existed in in order for the post-AoC-pre-federal USA to be usefully said to be anything like the EU.
so you're disagreeing that the following sentence establishes freedom of movement and capital?
> the free inhabitants of each of these states, paupers, vagabonds and fugitives from Justice excepted, shall be entitled to all privileges and immunities of free citizens in the several states; and the people of each state shall have free ingress and regress to and from any other state, and shall enjoy therein all the privileges of trade and commerce, subject to the same duties, impositions and restrictions as the inhabitants thereof respectively
ok
if the AoC did nothing more than codifying what was already the case when the land was just a bunch of GB colonies, I don't see how the AoC can be seen as analogous to the EU, which started from a set of distinct nations. it seems that all you're saying is that "within the colonies, there was free movement of labor and capital, and that continued after the revolution". that doesn't seem even remotely suprising - they were all colonies of a single nation.
we haven't mentioned the currency side of things - when the EEC/EU began, there wasn't even a common currency in use.
If it doesn't let me paint a picture. CEO comes in and checks their email. There's an email from his development team lead. "Dear CEO, The team and I had a discussion and and we no longer have confidence in your ability to usher this project to a successful outcome and have decided to work for company X in country Y. We have ceased development for your project at 8:17am and will be working for X as of 8:18am.
On the whole, these legal protections strongly advantage capital vs. labor, though California residents might benefit from their state’s hostility to non-compete clauses.
Those are empty threats if the team is not from the CEO's litigious country.
While this could have some downside re compensation, I look forward to employers smoothing the on/off-boarding process. Nothing is more frustrating than engaging with incompetent coworkers who are only around because it is too hard to find a replacement.
For example, you can relatively easily buy citizenship in the US, canada, most of europe, etc if you have enough capital. But if you are a person or worker, you have to jump through a lot more hoops to get citizenship in another country.
The world is capital-centric rather than people or labor centric.
Good luck crossing without documents
There is, however, a very loud minority of people whose business revolves around actively violating US financial laws, who run into problems when they provide their services to the US market.
Like imagine someone forced you to tale out a loan at gunpoint - that wouldn't fly
Edit: If conspiratorial stuff like this is the entirety of your media diet, you're going to have a hopelessly warped view of reality.
To say, as you’ve done down thread, that this is mere fiction I think is wrong. It sounds more to me like a viewpoint you’re unfamiliar with. Here is more reading on the topic:
http://thirdworldtraveler.com/Globalization/Brief_Hx_StrucAd...
More often than not, those who subscribe to these conspiratorial views of "big evil Capitalism coming to get you" become blinded to actual solutions and end up perpetuating the very problems they purport to wish to solve.
[1] https://en.wikipedia.org/wiki/The_Corporation_(2003_film)
there is no need for deliberate conspiracy, because of bad incentives, immanent to the structure of our current systems.
Of course that does not necessarilily exclude deliberate gaming of the system.
Perhaps the so-called "critics" of corporate greed are really just telling on themselves...
How do you feel about The State as an institution?
It's very hard to discuss the State without referencing Hobbes, Locke, Montesquieu, etc. Over the past century min-anarchism (of which I at least consider anarcho-capitalism to be a variant of) in general has not offered anything convincing to solve the issues they raised. I'm not optimistic it will do so in the next century either. I'm open to having my mind changed though.
How does one assure security with a minimal "night watchman" State? Note that security does not just mean physical security, but also an intangible feeling of safety in the sense that one can go outside without fear of anything untoward happening to them. And I'm well familiar with Ben Franklin's aphorism. Nevertheless it is a real issue and one that the U.S. Constitution solved reasonably well.
Edit: Also I find it hard to take seriously anybody that references "neoliberal policies" as that article does. What does that even mean? Free markets? Property rights? Movement of capital? All those things are ingredients to prosperity, in my view. Often "neoliberal" ends up just being those parts of capitalism that one doesn't like. And of course everyone has their own subset. Mass confusion, non-stop arguments over I'm not sure what exactly ensue.
You could just look it up.
"Capitalism when it does something I don't like" isn't a definition. If you want to criticize laissez-faire capitalism then use the proper term for it, not some squishy, mysterious neologism. Unfortunately when that happens, this becomes a discussion on comparative political economy. Those these critics tend to lose on the merits. Hence they insist on the mystification.
If you read it, you might stop criticising other people for things you don't know. You will also find out that neoliberal policies have delivered quite poor ecobomic results conpared to kenzian and shumpeterian alternatives
[1] https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit...
and
[2] https://en.wikipedia.org/wiki/The_Shock_Doctrine
too?
"This man is a frothing conspiracy theorist, a vainglorious peddler of nonsense, and yet his book, Confessions of an Economic Hit Man, is a runaway bestseller." [1]
"Although the accuracy of the content has been questioned, the book did well in terms of sales, placing on the best-seller lists of both the New York Times and Amazon." [2]
Who needs evidence and reasoning when vacuous, fact-lite writing makes for great sales!
> https://en.wikipedia.org/wiki/The_Shock_Doctrine
"Klein is not an academic and cannot be judged as one. There are many places in her book where she oversimplifies." [3]
"Klein isn’t an economist but a journalist" [3]
Stiglitz (cited by the author herself!) states that Shock Doctrine contains no understanding of actual economics. I'm sure the spy thriller narrative makes up for it though.
"Friedman and the other shock therapists were also guilty of oversimplification, basing their belief in the perfection of market economies on models that assumed perfect information, perfect competition, perfect risk markets." [3]
Ah when you've nowhere else to turn, let's do some what-about-ism. We cannot back up our arguments, but the other side cannot either! It's rich to accuse Friedman of oversimplifying when his own writing shows otherwise. He is against precisely what he is being accused of supporting. Never let the facts get in the way of a good story!
"I do not believe it’s proper to put the situation in terms of industrialist versus government. On the contrary, one of the reasons why I am in favor of less government is because when you have more government industrialists take it over, the two together form a coalition against the ordinary worker and the ordinary consumer. I think business is a wonderful institution provided it has to face competition in the marketplace and it can’t get away with something except by producing a better product at a lower cost; and that’s why I don’t want government to step in and help the business community." [4][5]
It helps to read multiple perspectives on an issue as complex as economics and development. It may not provide the easy answers we crave but it does act as an immunizer to shallow, doctrinaire thinking displayed in these "works".
I'll forgive the downvotes if you'll read a book by Friedman (or Hayek or any economist with whom you disagree) for every one you've read that's critical of him. Then make up your own mind. We might still not be in agreement, but at least we can have a factual discussion.
[1] Sebastian Mallaby https://www.washingtonpost.com/wp-dyn/content/article/2006/0...
[2] https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit...
[3] https://tsd.naomiklein.org/shock-doctrine/reviews/bleakonomi...
[4] Milton Friedman: Free to Choose
[5] https://www.cato.org/sites/cato.org/files/pubs/pdf/bp102.pdf
How did you find the time to view the clip thoroughly enough to dismiss it so nonchalantly?
Putting the topic on its head, he is still widely respected in academia by amongst others, IIRC, Chomsky
If that's what you enjoy watching, that's cool man, but just keep in mind it's fiction and is of very little practical use besides entertainment value. Definitely don't try to build a political movement based on it! Unless you want it to fail. Repeatedly.
The majority of economies in this situation are facing demographic challenges and the prospect of large population declines, which would (correctly) preclude investors from funding new production capacity.
At least we recently voted pro-immigration, or more properly anti-anti-immigration, which should help a little on the demographic front.
Why?
Good government is the anomaly.
I'm going to go out on a limb here, and say that this is because of the ridiculous state of derivatives in modern stock markets.
If the derivatives market didn't provide an infinite soak for excess capital, then that money would be forced to go find something "real" to invest in, and the economic theory TFA talks about might work (money should flow from advanced, low growth, economies, to less developed, higher growth opportunity, markets).
Derivatives are transaction between to parties like any other. One side pays money the other takes money for making certain bet.
The problems I'm aware of with derivaties is that it makes easier for companies to hide their speculative bets off the balance sheet, and it exaggerates overleveraged long-term bets. But it's hardly a root of all evil.
Derivatives remove the supply limits. Because, as you say, essentially derivatives are all about making bets rather than actually buying anything. If you want to bet a bajillion dollars in a derivative, the only thing limiting you is how many people want to bet against you. I get that this is similar to conventional supply/demand, but it's not the same.
The reason it's not the same is because there's no link to the actual production (aka what TFA is talking about) of the thing. You can make a bet that pork belly prices will go up or down regardless of how many actual pork bellies are being made. So capital flows get detached from actual production, which is where we came in.
And yes, I get that buying a stock is "making a bet" that the stock or share is going to increase in price. But that's only if you're speculating on the price. There are people (or at least there used to be) who buy a stock because they want the dividend. Or, perish the though, because they actually want the pork belly to make bacon with.
If people are crazy-buying TSLA stock, TSLA can issue more stock. If people are piling crazily into corporate treasuries and the yields are going down, corporations will issue more debt (and e.g. buy back more of their own stocks). When people were pilling up into a housing bubble in 2005, the builders were creating mc mansions like crazy as well.
All the financial assets are prone to systemic over leveraging, and fiat money central bank induced bubble is affecting absolutely every asset: housing, debt (private & public), equity, derivatives. Different things explode at the time, and central banks need to run to the rescue by blowing the bubble even bigger.
If it weren't for fiat money bubble, derivatives would be mostly rational markets as well.
As someone who doesn't really understand finance and economics, this is really interesting to me. Doesn't this suggest though that those derivatives markets are really inefficient? ie for them to really appeal to capital that isn't merely hedging, doesn't this mean that they would have to be materially different than their underlying contracts?
In the simplest terms, a derivative is a security that is derived from some other underlying asset. Typically, they are contracts -- contracts that can be bought and sold on financial markets. For example, a call options contract says "the holder may, at his option, purchase 100 shares of ABC at $250/share on or before 15-Dec-2020". And on the other side, the writer of that contract is obligated to fulfill it if the holder exercises it (but most options contracts expire unexercised).
What many articles for the public would say is "that derivative is $25,000 in size!" Except that the contract may be trading at around $0.50/share (or $50). And then they'll multiply it out across all derivatives... thus leading to surprising "conclusions" like "the derivatives market for X is 10 times larger than X itself!" Which is sorta true if you squint hard enough, but mostly not true in terms of all other financial metrics.
To circle back, while it is true that there is a huge amount of what many would term "excess capital" sloshing around, I don't think the derivatives market "provide[s] an infinite soak" for it. In reality, a large chunk of it goes into low-risk fixed income instruments such as US Treasuries, other sovereign debt, and AAA-rated corporate bonds.
Where I think the problem is, is the disconnect between actual supply/demand of the thing and the gambling about whether the price is going to go up or down. For example, as you say, most option contracts expire unexercised. In the context of TFA, where we're talking about where investment money can go, buying an options contract with no intention of ever actually exercising the option is effectively a complete waste of investment opportunity (compared with, say, building infrastructure in Africa).
My point of view is that the derivatives markets in developed economies allows such pointless investments (aka gambling). If there wasn't a derivatives market, this money would be forced to go find something else to invest in. That might be government bonds as you say. Or it might be African infrastructure.
1. Poor integration between government and money.
2. Poor integration between different governments.
My impression is that many people are opposed to both of those things on the basis that governments have historically been horrible in many ways.
Probably will just get buried, but I would like to suggest that we don't have an alternative.
Unless, maybe, you want to create something high-tech that can replace government. Which I think would really be a new form of government.
It almost seems like we are moving towards one bad version of that. Look at the power of companies like Google or Amazon etc or the ability of Uber to successfully ignore laws. I guess this is another instance of #1.
I feel like somehow you need fair, functioning governments with control over money that work together globally. A new type of high-tech money integrated with a new type of high-tech government might be possible and if so maybe it could solve those problems.
Or you need a totally new paradigm where somehow the omnipotent mega-corporations (including the banks) start looking out for the interests of the people. That doesn't seem workable given the motivations and structure of corporations.
The interests of the people were not the primary consideration, nor whether they were capable of purchasing their freedom or not.
This was a time when the US government was gradually becoming more globalized by transitioning its funding from tariffs over to income tax instead.
Once you get rich enough on your own, then it seems like you should be able to afford all kinds of cheap stuff from all kinds of less prosperous places.
But if not reduced and replaced by something else, the tariffs could be more than the cost of the cargo.
By shifting the financial support of Washington's efforts from those having the wherewithal to move things around the globe back then, over to ordinary working people today, it has enabled global merchants to bring more cheaper stuff every decade and more people are getting by with a less worthy dollar than ever before.
Speaking of less prosperous places Haiti is just one where wealth has been systematically removed more thoroughly these same centuries, and it can be considered _almost_ as an island over the long term.
On the other half of the island in the Dominican Republic, wealth has been less thoroughly removed by corresponding global efforts over the same period, so fortunately they are not as non-prosperous today.
Thus, tariffs=attacking the symptoms not the disease. The goal of a tariff is to force up domestic savings by raising import prices. Domestic savings in America are being crowded out by capital inflows, so the result would just be increased debt or unemployment.
Rich and poor have nothing to do with why there is an excess of savings from China and Germany: the average Americano is richer than the average from either country. The trade deficits, of course, are the real reason. You have trade deficits in part because of low labor costs overseas, and you have lower labor costs overseas, in part, because both China and Germany engage in currency manipulations which keep the labor costs low. The correct response, again, is tariffs.
I want the US to look more like Switzerland (in every way) and less like Argentina in 1900 (aka rich country on its way down the toilet from bad policy). Some people's opinions differ apparently!
Great handle, BTW. One of my favorite planes.
I feel the Euro was the worst mistake of the EU, once you've given up currency you a basically not a government but an oversized city councill. Control over currncy is the most important government lever.
Ricardo's theory is generally sound, but leaves out intangibles which don't necessarily come for free.
As Joan Robinson put it
“but in real life Portugal was dependent on British naval support, and it was for this reason that she was obliged to accept conditions of trade which wiped out her production of textiles and inhibited industrial development so as to make her more dependent than ever”. She further notes that: “What Ricardo was really concerned about was to abolish the Corn Laws so as to lower the real cost of wage goods and raise the rate of profit... When accumulation is brought into the story, it is evident that Portugal is not going to benefit from free trade. Investment in expanding manufactures leads to technical advance, learning by doing, specialisation of industries and accelerating accumulation, while investment in wine runs up a blind alley into stagnation”
“Ricardo took the example of trade between England and Portugal. He argued that England, by allowing imports of wine from Portugal, would expand the production and export of cloth to pay for it. Ricardo, of course, was thinking of the English side of the exchange but the analysis is perfectly symmetrical; it implies that Portugal will gain from specialising on wine and importing cloth. In reality, the imposition of free trade on Portugal killed off a promising textile industry and left her with a slow-growing export market for wine, while for England, exports of cotton cloth led to accumulation, mechanisation and the whole spiralling growth of industrial revolution”
As I've always said, this sort of economics is linear regression in service of the ruling class rather than anything resembling science.
[1] https://en.wikipedia.org/wiki/Joan_Robinson
> In 1942, Robinson's An Essay on Marxian Economics famously concentrated on Karl Marx as an economist, helping to revive the debate on this aspect of his legacy.
There is nothing intangible about the example if you live in Portugal.
Nice ad hominem BTW; about right for a "Hayakan."
All to distract from a banal, unalloyed statement that trade can be positive-sum and hey maybe we should think about how to encourage more of that, with Ricardo providing excellent scaffolding to build upon.
To drill into the details further, Ricardo's combined idea of trade, specialization, and economies of scale does not mean that some countries must specialize in high-tech "good" industries and others must stick to commoditized, negative-externality-filled "bad" industries. His work didn't address that distinction at all, which is its limitation. Reading that into what he wrote is zero sum thinking. Countries can develop a basket of industries to specialize in, and if they plan carefully, can strategically do so to develop a stronger economy. It doesn't require state planning and contrary to Marxian economics, doesn't require state involvement period. If everyone were to do this, the whole global economy would be better off. That this doesn't happen is due a complex confluence of social, political, and economic issues, not a capitalist conspiracy.
Intangible also doesn't mean what you think it means, it's things that are invisible and hard to quantify, which is exactly what the byproducts of a booming hi-tech (cloth, at that time) sector would be. It's true that Ricardo's framework did not take that into account and it's true that negative byproducts of those decisions exist today. This is exactly what my own criticism of Ricardo's ideas is, that they're a good start but not sufficient for the contemporary world. All these facts do not excuse intellectual dishonesty in throwing out what he says wholesale.
P.s. And If one wanted replace Ricardo wholesale, one would have to propose a better scaffolding that accounts for economic phenomena we see in the real world. Marxism ain't it.
We can dismiss Ricardo's moronic ideology looking strictly at tangibles: Portugal remained a primitive shit-hole with an underdeveloped economy at the barrel of a gun. Ricardo simply provided the justification. As I said, that kind of economics is simply ideology at the service of the ruling class, with linear regression. Or in Retardo's day; without linear regression.
FWIIW Retardo's law doesn't work, by his own admission, where there is free flow of capital. It also doesn't work when you can't easily move resources to other ventures; something trivially obvious to all but the most fanatical of ideologues looking at, say, the industrial midwest of the US -Gary Indiana if you need a specific example. It also is a statement about national wealth, which means very little if all the benefits accrue to, say, 1-2 people (aka the Waltons or Oligarch Bezos, if you need specific examples). It also assumes technological development doesn't exist (otherwise you should invest in protectionism and technology to make your production more efficient; duh). Oh yeah, and mathematically the examples don't work with 3 of anything.
Must be real easy not having to deal with any thinkers because you disagree with their politics. I wonder how you get away with using Reed-Solomon codes or Kolomogorov anything: invented by commies.
If you agree that tariffs between states would be a disaster for the economy then why do you think tariffs between countries would magically help industry?
I get that it's a near-identical variant of the argument you're making, but you have an unstated assumption that effective supra-national political (or otherwise) systems cannot exist. The Five Eyes is an example to the contrary. ASEAN is another in a more economic vein. These examples shown it's possible to achieve a balance between respecting national sovereignty and avoiding inter-state armed conflict. We could probably use more of them these days, global trends notwithstanding.
"separating violent criminals from general population is bad just like separating kids from parents is harmfull."
See:
https://phenomenalworld.org/reviews/trade-wars
https://phenomenalworld.org/interviews/trade-wars-are-class-...
Phenomenal World is also a fantastic publication, and I highly recommend it in general.
[1] http://www.perseus.tufts.edu/hopper/text?doc=Perseus:text:20...
But what's the evidence or case that this applies to free movement of capital?
The question is, can it be undone at a reasonable cost.
We can and should change the fact that people can move
money around in the blink of an eye. Only then can we
rebalance trade in a way that is optimal for the global economy.
The fact that one can "move capital" to other countries at all is not some law of nature, but a deliberate political choice. Had the choice been made in some other direction (such as taxing currency conversions), a totally different pathway would emerge. The fact that one choice appears to involve "removing" constraints and the other appears to involve "adding" constraints makes it appear as though one of them is somehow closer to the natural order or things. But the very existence of money at all is not part of the natural order of things, and the preference for choices that avoid constraints just favors the status quo over change.
+1 agree this is a massively important distinction in a fiat currency world. Money was property when it was Gold (+gold backed). Now it's more social than that.
Unfortunately it seems people are up/down voting me, presumably, on what they think is true and where they think I land on the choice set proposed (Social good vs freedom)
Gold does not have much practical use for most of the things that people do in life, but a reality-based consensus that it is relatively rare and a human-psychology driven fascination with shiny and malleable materials has led us to agree to place value in it.
Even that took some effort, such as when gold-centric cultures and silver-centric cultures encountered each other.
Just take a look at a map of ship traffic. https://www.visualcapitalist.com/visualizing-every-ship-real...
Its so cheap, it makes possible to catch salmon in Alaska, process it in China and sell it back in Alaska.
But its a singular failure point. If at any point war or pandemic disrupts this traffic, millions of people will die of hunger.
Cities like Dubai and Honolulu don't have any hope of feeding their million strong populations with their local farming and natural resources. Its either impossible, or they have totally abandoned their food production capability for cheaper shipped produce.
I would move to Hawaii, but the probability of all out cannibalism in a war situation is real threat there.
Before 1991, Cuban agriculture was heavily based on cash crops and relied on subsidized Soviet oil. The collapse had severe effects and caused a famine, made worse by state interference. Despite all this, the ability of the people to quickly adapt away from industrial agriculture to organic and urban farming saved them from mass starvation. It’s an inspiring story of human adaptability through the most difficult of times.
https://curio.ca/en/video/cuba-the-accidental-revolution-sus...
I don't know if this was true in Cuba. But many people in the former soviet union states already relied on growing their own food because of shortages in stores. So basic farming knowledge, and even relying on small farmers was more common. To what degree and how quickly a place like Hawaii would adopt I'm not sure. Many farms in Hawaii are geared to monocrop production, and are large and corporately owned. They would first need to taken over. Also, Hawaii is a paradise. But growing common agricultural crops there is surprisingly difficult.
Gardening in Hawaii, problems in paradise
https://www.youtube.com/watch?v=cQBJiozXwaU
You might enjoy reading about Cannibal Island.
https://www.rferl.org/a/cannibal-island-in-1933-nearly-5-000...
If you are worried about war related cannibalism, you should be far more worried about dying from nuclear annihilation...
I think its a safe bet that people already died because of supply chain disruptions. And this is something as simple to manufacturing as a cloth covering. Imagine a disruption to food supplies.
All it would take is a couple tankers worth of food shipments to be delayed to Oahu, by a month, and people are starving there. Everything is now "held with bubble gum and shoes string", and "just in time delivery" in this economy. There are no large food storage supplies on Oahu that I am aware of.
It’s also in an insanely strategically valuable position.
If shipping between the mainland US and Hawaii has stopped for a month, US aircraft carriers have been sunk. Nuclear weapons have most likely been used.
You’ve absolutely got a point here about the fragility built into the current system, it just doesn’t nearly apply as much to Hawaii due to other factors.
Suppose, magically, the entire US navy was sank overnight. Would you rather loose some random war in a remote place or be "dying from nuclear annihilation"? Even if you were to loose Hawaii, if that worth the nuclear winter?
Secondly - Global trade is fragile - shipping just needs to become unsafe and disrupted. Even some dudes with AKs on a wooden boat managed to take control of oil tankers.
Imagine there were automated kamikadze-bot robo-submarines, shipping could become too dangerous. They could even be useless against military ships, just dangerous to commercial ones and too numerous / stealthy to control.
We've had those for almost a century. They're called "homing torpedoes". :-)
Or SHARK, for Superbly hidden attack robot killer
"Spontane Verdampfung führt zur Entkrampfung!"
or, "Spontaneous evaporation is your salvation!"
Seems like I've tokenized that wrong. cf. https://youtu.be/ZgI4DdINQLQ
(A hegemon who rules the waves may, on occasion, also waive the rules. However, when Britannia had the empire, she was in favour of free trade.)
Resource: rock quarry.
1. Building phase.
Locate, obtain, and add value to the resource.
Rich finds and big accumulation always mean overwhelming leverage can be applied if desired.
Complete the project one brick at a time, that's the purpose of leveraging the resource, and it takes a lot of labor to go along with the resource.
2. Peak Pyramid phase.
The value added by shrewdly combining resources & labor is at a maximum, the landmark nearly-impossible project is complete.
Built to last, it can then be maintained virtually forever with relatively insignificant resource drain compared to when it was being built.
It does best what it was supposed to do. Enjoy the maximally leveraged resource and minimized drain.
3. Crumbling phase.
If labor & resources can not be wisely supplied at the way required for maintenance of such a wonderful structure, it will become less wonderful all on its own.
This can often occur when the whole optimized structure changes hands.
Somebody has to still make decisions long after the unmatched original builders are gone.
Newcomers not there from the start can fail to realize how nearly impossible it was to get built to begin with.
Well built, it may still seem to look like it will last forever anyway.
4. Deconstruction phase.
Changes of priorities in resource & labor allocation, or major fluctuations or trends can result in resources being drawn from a built structure rather than by adding value to raw material.
This is an extremely deleveraging process, more expediently accomplished than the building phase.
Value is lost faster and more irreplaceably than it was originally added.
To the same basic resources.
Often it can be when the responsible parties benefit more from the underlying accumulated resource in place than they do from the continued existence of the structure as a whole. After fully depreciating the unique combination of labor and time that made the structure possible to begin with.
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It could be worse, depending on the system with overwhelming leverage you could have a pyramid using resources that are not even there.
Seems a lot faster to build that way, and could get pretty big on faith alone without a firm foundation, but may not stand the test of time.
Would be more subject to collapse from the peak rather than showing early signs of crumbling. No resource recovery could be expected either.
However, the cat's out of the bag. The only historical precedent for limiting capital's ability to flow are periods of societal collapse and feudalization. When capital gets going nothing seems able to stop it (considering that IBM did business with the Nazis, even horrible things like war only seem to slow it down). I think the evidence is strong that capital has never been more powerful relative to the state than at this moment in history (the IRS freely admits it has become too expensive to audit the wealthy[1]). So the idea that we have any advantage over the past in being able to limit it seems ludicrous on its face.
The best (only?) approach is to try to manage the negative externalities that the free flow of capital creates (rapidly accelerating wealth inequality, etc). Personally, I'm on the UBI bandwagon for this reason.
[1] https://www.propublica.org/article/irs-sorry-but-its-just-ea...
The IRS is no longer receiving enough budget from Congress to successfully bring these cases. It's not literally too expensive.
> The best (only?) approach is to try to manage the negative externalities that the free flow of capital creates (rapidly accelerating wealth inequality, etc)
Nonsense. We already have laws on the books that would allow an enthusiastic regulator to break up the power of capital. What you are describing is a continuation of the liberal surrender to big money, with the hope that some kind of socialism takes form to offset it. Following the beaten path is much more likely to succeed.
Why do you think that is? Probably because capital controls Congress pretty effectively (the Senate did vote for this past leveraged corporate bail out 96-4 after all). Anyway, I don't disagree with you that the situation could be remedied, I was pointing to it as evidence that capital is very, very powerful right now.
> Nonsense. We already have laws on the books that would allow an enthusiastic regulator to break up the power of capital. What you are describing is a continuation of the liberal surrender to big money, with the hope that some kind of socialism takes form to offset it.
I'm not arguing that capital's effects on the politics of this country cannot be dampened or curtailed to some degree, I'm arguing against the specific point made in the article that we can find meaningful ways to stop the flow of capital around the world.
> Following the beaten path is much more likely to succeed.
What beaten path? If you're referring to the post-War Great Compression[1], I would argue that that is a historical aberration and certainly not a well-beaten path. I don't see either major political party in this country jumping at the chance to organize a political movement around labour right now, so what political coalition is fighting capital in this country right now? None, as far as I can tell.
Ultimately, the only reason US capital flows elsewhere is because other countries need it and will accept it. If the need for it is cut off, other countries will happily trade in their currencies and US capital stays inside.
What is impossible is being the reserve currency and yet not wanting to be integrated with the world. It will quickly get replaced by anything else, and there are countries competing to replace it now.
https://foreignpolicy.com/2020/08/21/dollar-global-reserve-c...
But wanting and doing are different things.
Part of the dollar's status as a reserve currency is not just what you can buy with dollars (which is a lot more than RMB right now), but the fact that it is backed by a political, economic and military institutional framework which has been by and large consistent for more than 150 years.
Maybe we should hold off on declaring the USD dead till the day China stops throwing random teenagers in black site jails with no access to outside counsel or due process.
https://www.youtube.com/watch?v=G7s3GK9T09c
In short, imagine you wake up tomorrow and find yourself in the 0.001%. Now as yourself, does that 0.001% version of yourself want to live in Hong Kong/Beijing/Taipei or NYC/LA/SF.
Obvious. At least if you want to be able to, you know, talk about stuff openly. And really, really rich people, well they tend to have a lot of opinions...
Certainly we need to protect industries that are vital to national security and that list has increased with the pandemic. Wouldn't put iPhones on that list.
It doesn't need to be internationally competitive in terms of price.
Again, we should optimize our trade advantages, not condemn it. It a case of financial literacy in the political policy and financial press.
https://www.linkedin.com/pulse/changing-world-order-ray-dali...
Losing that status, or changing the institutional structure in ways that undermine it, would cause huge, wrenching changes in the US but might be for the best. But again, the surplus countries really don't want that. For Germany, Japan and China these are actually the best of times - at least economically.
Given the choice, I'd rather not have that for host country my reserve currency. You want your reserve currency as boring as a old brick in a vault.