Conservatives, Global Economics and Tariffs
What exactly is (and what should be) our position about the global economics. On one hand, aren't we the champions of Capitalism, Free Enterprise, Free Trade and Market Powers? Just a minute weren't we in the past the champions of Isolationism and Protectionism. The truth is that we are both and we are neither. We are the champions of fair play, alright, but what is fair play really
According to a common myth, conservatives are for the Rich, allegedly we want to keep and widen the economic gap between rich and poor and so on. Now, we know very well that it is not the case; we are for anybody to succeed in what they do according to their abilities (which I will cover in a future entry.) So in light of that let's examine the Global Economics
It is clear that if the price of some resource in a foreign country is by far cheaper then it is here, the consumer of that resource will flock to that foreign country in order to use that resource and lower their own product cost and stays competitive. The two questions that we have to ask are
a. Is that resource really cheaper?
b. Should we at all bother with question #a
If we look at the currency exchange rate then, when a company from India (for example) offers us a skilled IT person for $30 an hour off shore (including all the overhead costs,) while an American worker costs let's say $60 an hour then we must say that the American worker costs us double of the Indian. But if we look at the same question in economical basket terms (i.e. the buying power of the local currency) we may find that the exchange rate of the Dollar to the local currency generates enough Rupees for the Indian to buy similar house, car and other items deemed necessary for the local consumer. It means that the exchange rate is fraudulently held higher then it should to the benefit of those who could take advantage of the situation, in the expense of those who can't. Not exactly a staple of fair game
When the imports that take advantage of such artificial exchange rate are a small fraction of the economics then, we might not want to bother with the issue. We might not even know about it as the importer would probably sell the product only slightly lower then the American product and pocket a VERY handsome profit. When, on the other hand, such imports are of significant percentage of the American economics to the effect that American workers and businesses loose their livelihood en mass than we must take steps to return to fair game. There are two ways to do that
a. We may impose exchange rate adjusted to the economic basket terms
b. We may just force these adjustments by imposing tariffs and do away with the free trade altogether
It is not really important which step we take and in reality we probably do not have to take it altogether. The mere threat that we consider taking such corrective step might shake the Global Economics enough to correct itself
According to a common myth, conservatives are for the Rich, allegedly we want to keep and widen the economic gap between rich and poor and so on. Now, we know very well that it is not the case; we are for anybody to succeed in what they do according to their abilities (which I will cover in a future entry.) So in light of that let's examine the Global Economics
It is clear that if the price of some resource in a foreign country is by far cheaper then it is here, the consumer of that resource will flock to that foreign country in order to use that resource and lower their own product cost and stays competitive. The two questions that we have to ask are
a. Is that resource really cheaper?
b. Should we at all bother with question #a
If we look at the currency exchange rate then, when a company from India (for example) offers us a skilled IT person for $30 an hour off shore (including all the overhead costs,) while an American worker costs let's say $60 an hour then we must say that the American worker costs us double of the Indian. But if we look at the same question in economical basket terms (i.e. the buying power of the local currency) we may find that the exchange rate of the Dollar to the local currency generates enough Rupees for the Indian to buy similar house, car and other items deemed necessary for the local consumer. It means that the exchange rate is fraudulently held higher then it should to the benefit of those who could take advantage of the situation, in the expense of those who can't. Not exactly a staple of fair game
When the imports that take advantage of such artificial exchange rate are a small fraction of the economics then, we might not want to bother with the issue. We might not even know about it as the importer would probably sell the product only slightly lower then the American product and pocket a VERY handsome profit. When, on the other hand, such imports are of significant percentage of the American economics to the effect that American workers and businesses loose their livelihood en mass than we must take steps to return to fair game. There are two ways to do that
a. We may impose exchange rate adjusted to the economic basket terms
b. We may just force these adjustments by imposing tariffs and do away with the free trade altogether
It is not really important which step we take and in reality we probably do not have to take it altogether. The mere threat that we consider taking such corrective step might shake the Global Economics enough to correct itself
תוויות: Global Economics, tariffs
posted by ZA at 12:31 לפנה״צ
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