Rampant protectionism


As expected, heart
it took only a few days to receive a reply to my letter to the paper defending Che Guevara’s legacy. It had the typical arguments: Cuba is a democracy, find Chávez is great, ask
Cuban doctors are saving the world, etc. Ah, and I should know my history. I replied the following:

Duncan Meerdig (Letters, June 17) defends the legacy of Ernesto Guevara. He states that I should know my history. I think it is funny when armchair revolutionaries discuss life (particularly my life) in such abstract terms.

I was born in Latin America, and lived in three of its countries for twenty nine years. I had the ‘luck’ of living under right wing and left wing tyrannies: despite of claimed ideological differences they are two sides of the same coin. My family suffered exile, I have friends who were tortured and killed: all in the name of ‘the revolution’. Dissent and independent thinking was crushed, university lecturers dismissed, imprisoned and some times killed (and Che is used as a symbol of a university, what an irony).

The actions of this ‘Latin American hero’, followers and imitators have costed millions of displaced lives, thousands of deaths and the destruction of the economies of many countries. These countries include Cuba under Castro and Venezuela under Chávez. Venezuela is an interesting case, where the proportion of people under the line of poverty has increased despite rising oil (its main export) prices.

Mr Meerdig’s democracy has managed to have the same leader for 46 years. Little surprise when people have elections with a single party to choose from. Fidel Castro is head of state, head of government, first secretary of the communist party, commander in chief of the armed forces and member of the National Assembly of People’s Power; the ultimate approach to democracy.

Guevara started the ‘tradition’ of imprisoning dissidents and other ‘deviants’, including homosexuals, practitioners of minor religions and rebels. This practice would be later extended by the Cuban government to HIV AIDS victims and mental health patients. Guevara signed thousands of execution orders while being in a position of power.

Luckily, people in Latin America now know better and in many countries we have a resurgence of democracy, despite of Che Guevara’s heroic influence.

I have been very quiet lately, cure
cialis mostly due to spending my web time updating some of the information contained in the wiki side of this site. In addition, last Saturday my laptop started playing tricks and by Monday I was greeted with the ominous signs of total hard drive failure. I mean missing os kernel, a grinding noise when trying to access the disk and total loss of the files.

The good thing is that a month ago I decided to spend AUD41 buying Handy Backup and I had daily backups of most of my things (excluding pictures and music, which are just too big) to the network. The good thing is that this software allows me to encrypt the backups so I can keep them in ‘public’ parts of the network without people having a look at my private documents.

At the end of the accident I only lost one day of changes to some documents and my web bookmarks (the latter hardly really valuable), but that was due to the network being down at the end of Friday. Unfortunately, we do not have whole machine images working, so I will need to wait until Thursday to get my laptop back and then probably spend a couple of days installing software, rather than restoring an image.

I will get back to writing here sooner than later.

I have written before about protectionism in Tasmania, cialis 40mg
but never at such a large scale. McDonalds had the chutzpa of choosing different sources of potatoes (New Zealand to be exact) and it is like they are a bunch of criminals.

Vegetable growers in Australia are saying that is unAustralian to eat foreign grown vegetables. They do not seem to realise the consequences of following that logic. Agricultural products is one of the main exports of Australia, remedy so if other countries decide to ban foreign produce, malady what is going to be the market for Australian products?

Some potato growers want people to boycott McDonalds, which then would sell less french fries, requiring less potatoes, reducing even more the need for Tasmanian farmers. Brilliant!

In addition, what are the consequences of people choosing to buy local—and more expensive—products over imports? People spend more of their income in food, leaving less for other things and affecting other industries. A clear explanation can be found in these posts on protectionism and offshoring by the Angry Economist.

I also find this quote from Making Economic Sense by Murray Rothbard quite a good explanation:

Myth 10: Imports from countries where labor is cheap cause unemployment in the United States.

One of the many problems with this doctrine is that it ignores the question: why are wages low in a foreign country and high in the United States? It starts with these wage rates as ultimate givens, and doesn’t pursue the question why they are what they are. Basically, they are high in the United States because labor productivity is high—because workers here are aided by large amounts of technologically advanced capital equipment. Wage rates are low in many foreign countries because capital equipment is small and technologically primitive. Unaided by much capital, worker productivity is far lower than in the United States. Wage rates in every country are determined by the productivity of the workers in that country. Hence, high wages in the United States are not a standing threat to American prosperity; they are the result of that prosperity.

But what of certain industries in the U.S. that complain loudly and chronically about the “unfair” competition of products from low-wage countries? Here, we must realize that wages in each country are interconnected from one industry and occupation and region to another. All workers compete with each other, and if wages in industry A are far lower than in other industries, workers—spearheaded by young workers starting their careers—would leave or refuse to enter industry A and move to other firms or industries where the wage rate is higher. [p. 29]

Wages in the complaining industries, then, are high because they have been bid high by all industries in the United States. If the steel or textile industries in the United States find it difficult to compete with their counterparts abroad, it is not because foreign firms are paying low wages, but because other American industries have bid up American wage rates to such a high level that steel and textile cannot afford to pay. In short, what’s really happening is that steel, textile, and other such firms are using labor inefficiently as compared to other American industries. Tariffs or import quotas to keep inefficient firms or industries in operation hurt everyone, in every country, who is not in that industry. They injure all American consumers by keeping up prices, keeping down quality and competition, and distorting production. A tariff or an import quota is equivalent to chopping up a railroad or destroying an airline for its point is to make international transportation artificially expensive.

Tariffs and import quotas also injure other, efficient American industries by tying up resources that would otherwise move to more efficient uses. And, in the long run, the tariffs and quotas, like any sort of monopoly privilege conferred by government, are no bonanza even for the firms being protected and subsidized. For, as we have seen in the cases of railroads and airlines, industries enjoying government monopoly (whether through tariffs or regulation) eventually become so inefficient that they lose money anyway, and can only call for more and more bailouts, for a perpetual expanding privileged shelter from free competition.

Filed in economics, miscellanea, tasmania

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