The first thing to understand about trade is that it is always beneficial for both parties.
Because each side can simply decline a transaction that doesn't help them.
Because each side can simply decline a transaction that doesn't help them.
Good luck when the war starts and you can’t build weapons anymore because your source of strategic ressources are not under your direct control.
There are good reasons modern economists are so critical of Ricardo. You need to take what he wrote with a major grain of sand. The actual situation is a lot more nuanced.
Even in the sort of useless basic neoclassical models there are a million exceptions to this rule like incubation of infant industries, resource extraction, national defense and health, and so on.
And nobody sane even believes that stuff any more. Trade can benefit societies or destroy them. Details matter.
Our services, though immensely useful, are not absolutely necessary for their business to function and frankly are much more of a burden than a benefit for them at this point. Yet they cannot refuse to do business with us, and must pay for services that are unnecessary every month until either this obligation becomes part of what kills them, or their fortunes return to the state they were in a year ago.
I'm sorry, but your belief is simplistic, shallow and naieve to the realities of business and trade as they are actually practiced.
I obviously know little about business and "trade", because this strikes me as odd. I mean, I get that it's contractual, but how could a well-written contract not anticipate a time when doing said business with you would be detrimental to the company forced to pay...
And, long term, such a situation hurts both parties, because if "this obligation becomes part of what kills them", the business on the receiving end also loses a customer.
I'm a bad business man and would probably let them off the hook for a while so they can recover. In my dreamworld this will build significant amounts of longterm goodwill.
Fortunately most managed just fine, however a few of our customers really struggled as they had almost zero income due to the lockdown. These had asked for a pause of the SaaS contract they had with us.
My boss agreed to this, after all these had been good customers for years and if they survived would likely still be.
Of course my boss was in a relatively comfortable position, given that our other customers were doing fine, so we had plenty of income.
Now, if the downturn was more self-inflicted that kinda changes things a bit I guess. Still, we operate in a niche market, so my boss makes a point to keep good relations with our customers as the people tend to shuffle around between the companies in the niche.
I'm confused!
The power imbalance between parties makes "simply declining" as real a possibility as Plato's Forms.
In a perfect world with almost all degrees of freedom removed, yes, you're correct. But the world is not perfect, ensuring a beneficial transaction to both parties for every transaction is simply intractable without infinite time/computational resources to brute force a solution, every time.
To expand on the dogmatic proclamations economists are prone to making, this is why almost all natural and formal scientists have conscious or unconscious disdain for the claim that economics has a claim to the same epistemological rigour as other sciences.
You can't extrapolate results and lemmas from within a domain of discourse to the outside world.
Even the best economic models and the real world are not isometric. Implying that they are has so far resulted in some fantastic and incomprehensibly efficient systems but also an untold amount of human suffering.
Plenty of dictators will happily sell off their country's natural resources to line their own pockets, and the same general principal holds true for many other types of transactions.
If both don't think they'll be better off doing the trade, it won't happen. No one else is materially affected.
You can think of this as how trade creates wealth!
On top of that, when your pool of resources are closer to skim, poor trade decisions result in health-harmful effects, which continue to contribute to poor decision making.
How is that different from when they buy from someone in the same country?
So while a single transaction has occurred, someone loses because of the trade agreement. This is because in a market that’s not theoretical there are actual people losing out. But this is the typical argument against free trade and protectionism - I assume it’s not new?
I’m sympathetic fwiw. But I think maximizing trade is generally good and don’t want to see a reversal. The real issue in my mind is trade allows for environmental, labor, and other regulatory arbitrage. If the benefits in pricing were just market based I’d be down with it no matter the pain. But that’s not really what’s going on. The regulatory arbitrage is a race to the bottom not just in wages or other spaces that in my belief stabilize over time, in irreversible spaces like destruction of the earth.
Not true. There can be winners and losers in 'trading' and usually there are. For example, the native americans and europeans being a prime example.
> Because each side can simply decline a transaction that doesn't help them.
Not if one side is much stronger and liable to invade or punish you. The past 500 years is essentially a story of europeans invading/'exploring' to get better 'trade terms' from natives, africans, indians, chinese, ottomans, japanese, etc.
The biggest winners of trade in the last 500 years were europeans and the biggest losers are everyone else.
“Give me 10 dollars or I stop supporting your industry and threaten famine”
Trade includes leverage and threats