A conversation with a liberal

So, the other day I had a conversation with an apparent liberal on the Sodahead website.(You can read it here.)  The original question was if Obama was trying to starve us.  The question was posed because of the recent aid pledge to Jordan by Obama, including 50,000 metric tons of wheat.  All the while, the Army Corps of Engineers are flooding prime farmland to alleviate the pressure from the Mississippi flooding.  I believe they started that practice in Missouri earlier.  I was bored so I thought I’d pop by and see if I could get into a good discussion.  Now, the Sodahead site isn’t known for its cerebral content, I now know why………

Joe:  I linked this because its fairly lengthy, but the it was a c&p about the wages of the average Chinese worker and how it would be impossible to compete against them.  And here was his concluding statement. “There is a wide variation of pay among industries: textile industry workers averaged about 40 cents per hour (7,268 yuan per year), and garment workers outside of the cities “are paid less than that,” according to Banister
YOU CAN NOT COMPETE WITH CHINA…UNLESS YOU LIVE LIKE THE CHINESE PEOPLE LIVE”

Me:  Joe, to a point, that’s true and I agree. So, now, put on your thinking cap and figure out what must be done in order for the  U.S. people to maintain and grow our standard of living. (Note: I’m not even addressing the obvious market manipulation keeping the Yuan value down.) This nation has to become more self-reliant. In other words we need more of our own energy and it needs to be cheap. We need to produce our own steel again. We need to make sure our food is cheap and plentiful.
We have to remove the barriers in place that prevent industries from running here. That means, first, the EPA needs to get out of the way. We need to quit worrying about fictional problems such a climate change and little fish. Its going to come down to you or the fish and believe it or not, as irritating as you are, I pick you over the fish. We need to fire up as many coal plants as we possibly can. We need as many hydro-electric dams as we can build. We need nuclear plants. We need the steel mills to fire back up. We need the idiotic, self defeating trade unions to get the heck out of the way. We need to quit burning our food in our fuel tanks. (Food is still one of this nation’s greatest assets and we need to ensure that it remains that way.) we need to drill as much oil as we can suck out of the ground and increase our damned refining capacity, and lastly we need to quit pretending we can have free and fair trade with every 2nd and 3rd world nation. We can’t. (and that’s where your offering comes in.)
Joe, if we don’t do these things, then every state in the union will be forced to make the same choices Arizona is faced with. Worse, so will the federal government. There simply is no money left. We’re going to have to do the things our fathers did. Earn it.

Update!  I’ve been playing with the settings on this blog, I’m trying to get it to where once approved for comments, they will simply be posted here, so I don’t have to baby sit everything stated.  Bear with me.  Thanks.

Joe:  PLEASE..If you well not work for the same wages as the Chinese people you can not compete with the Chinese people..VERY SIMPLE you need no charts or graphs.

Me:  Joe, remember when I asked you to stay coherent?(This was a reference to a prior, related, but not pertinent part of our conversation.) If we do the things I listed above, we don’t have to compete with them. We’ll have all the things we need right here. Perhaps I wasn’t explicit enough, though I thought I was clear, we need to add some protectionism for the U.S. industry. (That was the “free and fair trade” stuff.)

Joe:  NO sorry ..You are 100% wrong.. It is very simple.. The jobs go where the wages are lowest. IT IS THAT SIMPLE..

Me:  lol, no, they don’t have to. I’ll explain. As you pointed out, China still doesn’t pay well, so they’re not yet a consumer market. What does it mean to corner a market in China if the people have no disposable income? In the U.S. still, there is great wealth to be had if you can get a significant market share of just about anything. But China still wants to manufacture and sell to us, right? This is where the protectionism comes in.
Let’s say, we have a plant open in the U.S. making widgets and they can sell the widgets for $10 a piece and still make a profit. But, China makes them and even after transport costs can sell the here for $5 a piece. Obviously, the plant in the U.S. would close w/o some protection. Simply add a $5 tariff on all widgets coming in from abroad. Now, each widget costs $10 a piece.(Remember this explanation, there’ll be some humor later.) You see how that works?                                                                                                      Now, we’d expect the Chinese to be a bit miffed if we were to do this and they’d retaliate. This is why it is important to have all the resources necessary here in the States. It doesn’t work if we’re reliant upon some other nation for a necessary resource, such as REE(rare earth elements), necessary for the production of all sorts of gizmos such as cell phones, computer parts etc…. Which, we have an abundance of, and we used to have the world’s largest producer in cali, but the mine isn’t functioning right now.
This is how the people of this nation can continue and improve their standard of living. Like I said, we need to rescind NAFTA and other agreements and pull out of the WTO, but it can be done. It has been done before.

Joe:  So you say charge everyonre in the United states 50% more..So for say a 500 dollar TV the cost would rise to 1000 dollars..Are we going to manufacture TVs in the USA again?? I don’t think so. but if we did what would we pay the workers ???

(The sequence of the conversation gets a bit muddled here, mostly because of Sodahead’s format, and my posting additional thoughts on the same response from Joe, but I’ll reconstruct the best I can.)

Me:  Wages would necessarily increase. But, yes, why not? Zenith made a good TV. Or, we could wallow in self-defeatism, and cheerily hand off our economic strength to China. The point is, we need a livable wage. McJobs don’t cut it. More, as the unemployed and McJobs continue to increase, there are less and less people able to fill the tax roles. This equals less revenue for our state and federal governments. We have the fewer and fewer supporting the more and more, and at some point, we’ll simply not have that ability any longer. Its time to quit playing around. Quit dreaming about a service based economy and start producing things with intrinsic value again.

Me:  And, yes, but at least 100% of the $1000 stay here. As opposed to exporting the $500.

Me:  I should also explain that this would engage some other dynamics, such as strengthening the dollar, so prices wouldn’t necessarily raise congruent with the tariffs, but rather the value would. The dollar is weak right now because of the debt and the trade imbalance. If we take the steps I proposed, then the trade imbalance would improve significantly and because of the increase of domestic activity, the tax rolls would increase allowing us to pay down some of the debt.
Further, that $1000 that stays here, in part goes to pay the worker, who then uses his money to do the same thing. Which leads to more domestic activity and more tax revenue without have to raise the tax burden on anyone. But, like I said, this only works if we have the necessary resources engaged. We have the natural resources….for the most part, we’d probably still have to import oil, only not near as much. The down side would be everybody would be pissed at us, but they pretty much already are, only their making a killing off of us while they bitch about us.

Joe:  Wait why did Zenith leave the United states?? I tought[sic] Republicans said high taxes & wages.. Wages & taxes well never be lower in the USA then they are in China.

Me:  Uhmm, taxes are lower here. China’s economy is still communist, but I expect things will change there pretty soon.
And repubs, in as far as my memory can take me are never for higher taxes,(well, they are politicians so you can only trust them so far) although Bush I did raise them in response to dems basically forcing him to sign a budget after a govt shutdown. And, Zenith didn’t as much leave as they were bought out and moved.

Joe:  Really So everything would cost at least 50% more ?? So will the wages in the USA go up 50%.. What about real estate?? Homes would cost 50% more and would everything else, NO YOU HAVE A VERY STUPID IDEA.

Me:  Joe, I only used the $5/$10 for illustrative purposes. It wouldn’t be like that in all cases. In fact, in many cases, we wouldn’t have to tariff products because of the cost of shipping would exceed the cost of the product. Usually heavier items cost much more to ship, so its cheaper simply to produce them closer to where you want to sell them. And there other considerations. For instance, I work in the utility business. There are a few meter manufacturers. One company, Itron, makes meters here in the states….. Georgia I think. Landis&Gyre make theirs in Reynoso, Mexico….. right across the border. The meters are almost identical in functionality, and, their prices are almost identical. Why its this way, I can only speculate that the owners are taking a larger profit share, but I don’t know that. Still, in that particular case, no tariff would need be placed because the U.S. company and the workers and compete head to head with the other company.
Joe, I’ve enjoyed our little exchange. I know I’ve probably introduced some foreign concepts to you so I’ll let you stew on them for a while. If you’ve any questions, I’d be happy to answer them. Also, while I don’t agree that the idea is stupid, I can’t take credit for it being mine. This has been a common practice in days gone by. Its been successful in some cases disastrous in others. But mostly because the execution of the policy was poorly thought out. But, it would work here in the U.S., because we have the materials necessary. We just need the industries fired back up.

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So there it is.  I need to note, the conversation will look different when you go to the link, Sodahead gives you the ability to edit your comments after you post.  Joe has done this, but not to the point where the gist of the conversation is ruined.  This was a strange conversation in that industrializing and protectionism seemed a foreign concept, not only to Joe, but others. I couldn’t help notice that no one jumped in, neither pro nor con.   A word about protectionism:  I have a particular reflex against it.  It goes against my grain.  However, given the wages of nations such as China, and our experience with NAFTA and the like, its becoming quite obvious that the U.S. industry will not succeed in an open market/open trade scenario.  Sure we can do better with enforcement of our agreements, but the bottom line is, all things being equal, we’ll lose because of the wages.  True, there are many other factors going into the success of industry and wages are usually a small percentage of a company’s budget, but it is the most controllable.

But, because this seemed a foreign concept to these people, I thought there could be some benefit to having a post about this and having a discussion about some of the issues brought up.  I think, after some refinement, there would be an economic platform that we could advocate.  At any rate, any thoughts and/or concerns are encouraged to be voiced.  Flames will have an unhappy ending.

James

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