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Comment by monero-xmr | Hacker News Reader

I am a free trader in principle. However you have a country (China) with an authoritarian government that makes favored industries subsidized.

Of course the standard economic argument is that China using its GDP to make goods cheaper for our own citizens to purchase is better for us - they are subsidizing our economy. However it ignores the strategic disadvantage by our country losing its manufacturing capabilities.

The graphs may show economic advantage. It’s hard to quantify the long term strategic and militaristic disadvantage to not being able to make anything yourself if a world war occurs.

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> However you have a country (China) with an authoritarian government that makes favored industries subsidized.

This is overlooking the forest for one tree. The thing is, mean chinese manufacturing wages are $25k/year (purchasing parity adjusted! $15k unadjusted) for a 49h week.

That is the reason that so much manufacturing/industry has shifted there, not some nebulous "Chinese government subsidies" (not saying those are not a thing, just that they don't really matter all that much).

> It’s hard to quantify the long term strategic and militaristic disadvantage to not being able to make anything yourself if a world war occurs.

Certainly. But forcing low-skill industry to stay at a relevant size in a high-wage country is expensive business (compare agriculture, which is subsidized basically for exactly this reason) and not straightforward (see Jones act).

Presenting tariffs as a viable alternative to taxation is just beyond ridicule, but that has not stopped people so far either...

They could move to Bangladesh or Africa and pay $3k / year. They aren't. China has many advantages beyond cheap wages.

Absolutely. You do need a minimum baseline for infrastructure, government stability and workforce.

Most of Africa is just starting to slowly get there, Bangladesh is already very relevant for textile production.

I would expect the same basic trend to repeat that we saw with electronics manufacturing in 90s Japan: First cheap products move (very wage sensitive), then the local sector expands, wages rise with the whole local industry moving up the value chain, then at some point local wages become high enough for the whole process to repeat with the next low-wage country...

I think trying to block this trend off with tariffs is a futile waste of taxpayer money which american consumers are gonna pay for.

Spending tax money to keep some degree of self-sufficiency in critical industries (like with agriculture) can be a solid idea if done sparingly and cleverly, but that is not how the current US admin has approached this...

Salaries are just a small part of the reason industry works in China.

The bigger picture is that China invests in the development of an industrial chain. This has many aspects: infrastructure, education, training, housing, and of course tax incentives. The USA decided to stop investing in practically all of these. Even scientific research, the last area in which the US used to lead, is now in jeopardy from both sides: competition from China and internal cuts.

I'll concede that having a solid baseline of infrastructure, (political) stability and a motivated/educated workforce is necessary, and China did well in building this up.

But I strongly disagree with your conclusion.

Lets assume that the US did all of those perfectly:

- Brilliantly educated workers with the perfect ratio of industry specific knowledge/experience

- Cheap housing near industry hubs built by the state

- The best and cheapest to use ports, roads and railway networks on the planet

- No tax on manufacturing workers income

Some of those are ludicrous/unrealistic for the US to provide.

But even if you managed to do all this-- that still does not make US manufacturing industry competitive. Because those US workers will still want a locally competitive wage instead of <10$/hour.

The reason the US is not competitive is exactly because it doesn't spend the money needed for that. China did it. To be more concrete, if the government spends money to build housing, workers don't need to pay so much to have a home. If the gov spends money on public transportation, workers don't need to buy expensive cars just to get to the job. If it spends money on free health care, then workers don't need to pay for expensive insurance. If the US spent money on (near) free higher education, workers wouldn't need to pay high costs on student loans. These are all items that make the US uncompetitive with other nations.

> The reason the US is not competitive is exactly because it doesn't spend the money needed for that.

You are making some kind of logical jump here that I can not follow. I just listed basically the absolute best that the US could have ever done-- but even in that absolute dream scenario (tax free income for manufactoring workers? I mean in what world do you see something like that ever actually happening?), the US is still not competitive in a direct comparison, because US workers have just no reason to work manufacturing for 10€/hour (when they make ~30/hour right now).

You can stack all the incentives you want-- the gap in wages/standards is so large that apart from straight up paying the difference (in either tariffs or subsidies, and that is a lot of money), you are not going to make US manufacturing competitive in a head-on comparison.

What you forget is that is exactly these inefficiencies that inflate US salaries. You need to make more money just to survive in most US cities, which forces companies to increase salaries.

> What you forget is that is exactly these inefficiencies that inflate US salaries. You need to make more money just to survive in most US cities, which forces companies to increase salaries.

I think you are reversing cause and effect here. Wages are not rising because things are expensive-- things instead become expensive because people are "rich" and can afford them.

I suspect (not an accusation!) that you would intrinsically like to see the US run healthcare and education in a government controlled way, at-cost, instead of allowing excessive private profits there (which I think is a good idea!).

But advocating for such changes in the name of making US manufacturing competitive is dishonest in my opinion, because I absolutely do not see those shrinking the wage-gulf sufficiently for US factories to compete head-on with China.

Furthermore, I don't even think you want to be competitive with China in this regard. Having a significant percentage of Americans working in/for factories to produce simple goods for 10$/hour strikes me as a step back, even if you would bundle this with a bunch of positive progressive improvements.

>However you have a country (China) with an authoritarian government that makes favored industries subsidized.

If things keep going the way they are going, that could describe the US just as well in a few short years.

https://en.wikipedia.org/wiki/United_Fruit_Company

"The company responded by intensively lobbying the U.S. government to intervene and mounting a misinformation campaign to portray the Guatemalan government as communist.[18] In 1954, the U.S. Central Intelligence Agency armed, funded, and trained a military force that deposed the democratically elected government of Guatemala and installed a pro-business military dictatorship.[19]"

This is not a one-time aberration.

> If things keep going the way they are going, that could describe the US just as well in a few short years.

Why do you think so?

> The graphs may show economic advantage. It’s hard to quantify the long term strategic and militaristic disadvantage to not being able to make anything yourself if a world war occurs.

Is the United States at risk of not being able to make anything ourselves? We have the second largest manufacturing output in the world.

https://en.wikipedia.org/wiki/Manufacturing#List_of_countrie...

"I am a free trader in principle. However you have a country (China)"

just think of china as another trader with more capital than you and pull yowrself up by your bootstraps.

The US subsidizes a hell of a lot themselves already.

Sour grapes. Most economists were just happy with this situation until recently. What I mean is, the current situation arises by the desire of Western businesses of getting hid of productive investments and concentrating only on capital investments. It has nothing to do with trading with an authoritarian government or not, which almost everyone believed was Ok until recently.

Pricing in externalities (such as national defense impact) is a basic function of economic policy.

I searched 'economics 101 strategic industries' and found this[1] within 30s which includes an overview of 'national self-sufficiency'. It presents the standard argument, including the parts you claim the standard argument ignores.

I personally favor decentralized planning over markets, but I find it unnecessary to slander economics.

1: https://www.adamsmith.org/economics-101

What about Canada? We have even higher tarrifs than China and in the last 100 years are the USA's closest ally.

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