I don't think that is a note or objection to List. Or at least I don't see how it is. The point isn't about whether other countries should be kept poor, it's that a nation shouldn't sacrifice productive power because someone else can currently make something cheaper.

The whole thing is framing the difference between wealth and the power to produce wealth. Cheap imports that destroy industrial capabilities and therefore future wealth, technology, military power, and ultimately independent are short term gain for long term loss. List's premise is that the basis of national greatness is the ability to manufacture, and the model should be importing foreign raw material and exporting manufactured goods. So the question isn't about whether a richer world is good, its about whether we are developing productive power through our trade policy.

The point of "selling them the stuff we make" is the crux - what great stuff we make? If you spend 50 years saying "free market and buy from whoever is cheapest" you can't get to "then we will sell our high value manufactured goods".

I'm not sure I get what you're saying, so forgive me if this is off...but it kind of sounds like you're suggesting "we should buy from the world's cheapest producers, because trade makes everyone richer, but when the rest of the world is richer, they'll buy the things we can no longer make."

We should be making rocket ships, satellites, and companies that organize cheap labor to make shoes. We should not be making shoes. Other countries should make shoes, to sell shoes to us and to other countries, and then they can use the money that they make from making shoes to buy our data pumped to them by our satellites, and also take their money so that we can design better rocket ships for more satellites.

What we shouldn't do is give away all of the ways to organize labor to make cheap shoes, or the technology to make rocket ships or satellites. We should keep that for ourselves.

Those are the extremes. The issue is that when we also outsource all of the manufacturing of all of the parts that go into making rocketships, and teach other countries how to do it, we get a whole class of dumbasses that only know how to play call of duty, smoke weed, and argue about whether or not its cool for guys to grow boobs.

The concept of comparative advantage is great when any small basket of products are isolated. The problem is that if you apply it too broadly, you hollow out your industrial base.

Im just saying that both Smith and List are correct.

Zobel said:

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The whole thing is framing the difference between wealth and the power to produce wealth. Cheap imports that destroy industrial capabilities and therefore future wealth, technology, military power, and ultimately independent are short term gain for long term loss. List's premise is that the basis of national greatness is the ability to manufacture, and the model should be importing foreign raw material and exporting manufactured goods. So the question isn't about whether a richer world is good, its about whether we are developing productive power through our trade policy.

---

I think you may be more Listian than Smith, but you're so used to thinking in Smith terms that you can't help but fall back on it.

The important point is when you say "we should not be making shoes."

Why not? Because we can buy them cheaper somewhere else? Because we can make GDP go up more by not buying them? This is Smith/Ricardo talking. List says you can't decide based on either of those things, they're the wrong reason. GDP go up is not the same as national power.

You can't even look at it as apparent product sophistication. You have to evaluate it in terms of productive power that the industry sustains. Shoes, sure, but what goes into a shoe? Polymers, textiles, dyes, molding, machine tool making, tool making, and all of these things may enable other important industries. The economy isn't like a selection board where you get to cleanly pick "rockets" while outsourcing "shoes".

But you know this because you say - outsource shoes, keep rockets - but you immediately hedge - not the components of the rockets, not the know-how to organize production, don't hollow out the workforce that knows how to make things. Why, if GDP go up? If you can get them cheaper?

Smith says - what should we make given present comparative advantage? But List says - what productive system or capacity do we need to have to enable new comparative advantages, keep our power and independence, and retain capabilities to make advanced goods in the futures?

A better way to get rockets isn't to say make rockets, its to ask what industrial ecosystem produces a nation capable of producing rockets? You can't say rockets or shoes. Shoes might be part of it, because it might support a necessary shared space.

I don't think it's quite right to say they're both right - I think it's cleaner to say Smith is only correct within a boundary condition that List describes. Once you have those sets, and where trade doesn't undermine capabilities, then specialization and comparative advantage and free trade make everyone richer. But the math on any particular product doesn't tell you what productive capabilities your country needs.

The interesting thing is your last two paragraphs are basically "comparative advantage is great provided national productive power takes advantage over current comparative advantage." Or, in other words -> that's List.

IOW, globalism via Bretton Woods has ultimately screwed us. It was great in the short-term (the last 85 years) because it lifted all boats like Buster said. However, over time it makes you extremely vulnerable with the perfect examples here being pharma and raw materials where we are now totally dependent on China. The world went all-in on country level specialization without thinking through the long-term impacts of sacrificing critical functions to countries with fly by night allegiances to each other. It's frankly stupid and naive in hindsight to give up ownership of critical sectors of our economy that impact the well-being and existence of our society, but we did.

I'm not wholly castigating globalism either, but it's been a mostly unconstrained movement since WWII taken to the extremes and now we are seeing the negative outcomes from that.

And this quote is prescient because it's essentially the exact thought many of us on here now proscribe to. It's essentially the thought process that is driving such pushback against Indian H1Bs, as an example.

Quote:

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A nation should not import labor merely because foreign labor is cheaper than developing its own people. Foreign labor is only desirable when it adds capability the nation lacks; it is undesirable where it substitutes for the wage, training, and capital investment signals through which domestic productive capacity would otherwise develop.

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We need the same guest worker program like they have in Saudi Arabia.

You can come in, work in your specialized field, get paid in your home country's wages, and are forced to leave the country for 6 weeks every year, with no path to permanent residency and if you have a kid while you're here, that child does not get citizenship and you can't buy property.

The means of production stays here.

The leadership and management remains American unless there is some specialized skill that Americans lack.

If you attempt by decree and subsidy to manufacture everything from start to finish locally despite the comparative advantage, many of your products willl be so costly as to still be unobtainable because at some level there will be no demand at the minimum possible price compared to alternatives. No demand due to high cost from relative inefficiency is a terrible way to make lives and economies "better". A my anagedarjey with any philosophy will underperform due to its inability to posesss and process all the information that all the individuals involved in an economy possess


Consider also that much of our production now is not simple material or physical items, but rather intellectual or virtual outputs which have a very real eorld use and value. Or services for things that people want done. These are more advanced and specialized and varied production that doesn't require a conventional factory.

Also keep in mind automation and AI are threatening in combination to upend much of this at an incredible rate. Production of many things is becoming incredibly inexpensive and narrow margin at high volumes with heavy automation. It won't supper many jobs, but will make products extremely low cost and widely available.

That is central planning, and isn't List's position. Nobody is advocating for complete domestic production of every item. But there is a wide gulf between that and exclusively following *present* comparative advantage (ie price).

The difference is at a national level whether current prices should be allowed to determine the future industrial structure of a nation. Smith says yes, or doesn't seem to really consider the question.

List says no, because temporary inefficiency can be worth it when it develops productive powers or preserves strategically important capabilities.

You don't need a central planner to know that having, say, steelmaking, machine tools, semiconductors, or turbine manufacturing is nationally more important than maximizing today's consumer surplus. If you agree that we should have some ensured domestic industries, you've already taken concession against Smith's free trade absolutism. The question is how do you do that in a productive way.

The real problem with the absence of this national policy framework is pointed out by List - when he talks about the collapse of the Hanseatic league. "Mere private industry when left to follow its own course does not always promote the prosperity and power of nations. In their exclusive effort to gain material wealth these cities had utterly neglected the promotion of their political interests," and unwittingly "increase[d] the industry, wealth, and power of their enemies."

Might as well be talking about the US and China.

Two other factors that speaking in strictly economic terms leave out are:

• Environmental Regulations/Standards
• Working Conditions

I've worked on-site at customers in the USA, Colombia, Europe, Asia and Australia.

Many of the multi-national companies have offices in these lower cost countries that are far superior to the working conditions that are provided to American workers.

Well, maybe they get free food in the Bay Area. And they did have free soft drinks everyday and free beer on Thursday afternoons when I worked at Microsoft in Redmond for a month.

But, as soon as you leave the campus, you're back to the 3rd world. Especially in a place like India.

Admittedly when I worked for a major US company, much of my time in each country was limited to the corporate office which was in the nice part of town - e.g. Gangnam, Seoul, South Korea, or Collins Street, Melbourne.

So the working conditions for a multi-national were great. But if you were working for a company like Foxconn, in Shenzen, they probably weren't so great.
https://en.wikipedia.org/wiki/Foxconn_suicides

The biggest environmental disparity that I remember seeing besides the area next to our office in Bangalore, was next to the airport in Mumbai. There are literal shanty town slums on the other side of the fence that you see if look out the airplane window on takeoff. It's disgusting.

Saying Smith is wrong is like saying Newton is wrong by taking a snapshot of someone mid step. It doesn't work if you stop there, but it's a process that is constantly changing.

Another analogy is competition between sports clubs. What is good for a single club in order to win is not the same thing as having a league of clubs who play the best overall level of that sport. It may mean that a single club doesn't win, but they are overall a much better club in the long run, with other benefits that come along with it.

I think setting them up as opposition is a false binary. List doesn't say Smith is wrong, list says it's kind of odd that Smith doesn't see that his position is a kind of special solution vs a general one. It's like blinders - England wanted free trade in that day because it hugely benefited them, but they build their industry by intentional protectionism.

It's just a different view of the same thing. Protectionism to build an industry is a strategy that benefits a country in a specific way, but it harms that country in a general way (opportunity costs) as well as the competing countries. That in itself has risks just as much as the opposite, but in general, protectionism leads to lower overall efficiency of a market. One of the risks of protectionism are building a market internally that globally don't make sense long term and are unsustainable as opposed to building natural specialization that does work long term.

Again, just a risk/reward calculation. It just depends on the context. If your interest is what is best for an individual country in the short term, protectionism makes sense, but long term, that same country is more than likely better off in the very long term without it (something about boats and rising tides, etc.).

Zobel said:

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I think you may be more Listian than Smith, but you're so used to thinking in Smith terms that you can't help but fall back on it.

The important point is when you say "we should not be making shoes."

Why not? Because we can buy them cheaper somewhere else? Because we can make GDP go up more by not buying them? This is Smith/Ricardo talking. List says you can't decide based on either of those things, they're the wrong reason. GDP go up is not the same as national power.

You can't even look at it as apparent product sophistication. You have to evaluate it in terms of productive power that the industry sustains. Shoes, sure, but what goes into a shoe? Polymers, textiles, dyes, molding, machine tool making, tool making, and all of these things may enable other important industries. The economy isn't like a selection board where you get to cleanly pick "rockets" while outsourcing "shoes".

But you know this because you say - outsource shoes, keep rockets - but you immediately hedge - not the components of the rockets, not the know-how to organize production, don't hollow out the workforce that knows how to make things. Why, if GDP go up? If you can get them cheaper?

Smith says - what should we make given present comparative advantage? But List says - what productive system or capacity do we need to have to enable new comparative advantages, keep our power and independence, and retain capabilities to make advanced goods in the futures?

A better way to get rockets isn't to say make rockets, its to ask what industrial ecosystem produces a nation capable of producing rockets? You can't say rockets or shoes. Shoes might be part of it, because it might support a necessary shared space.

I don't think it's quite right to say they're both right - I think it's cleaner to say Smith is only correct within a boundary condition that List describes. Once you have those sets, and where trade doesn't undermine capabilities, then specialization and comparative advantage and free trade make everyone richer. But the math on any particular product doesn't tell you what productive capabilities your country needs.

The interesting thing is your last two paragraphs are basically "comparative advantage is great provided national productive power takes advantage over current comparative advantage." Or, in other words -> that's List.

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You are right that I lean more towards List.

I guess the question is, how difficult is it to build the industrial power to make:
* Shoes
* Rocket components
* Rockets
* Stable orbit data providing satellites that work

The right line to draw on what all to make is somewhere in there depending on the level of scarcity. But, you can spin up a shoe factory in months, not decades. On the flip side, paying people to stay home and smoke weed while we buy slave labor shoes made in China is stupid, stupid, stupid.

I revert to the best saying in Economics: all models are wrong, some are useful. Both Smith and List as discussed here are useful.

I like your sports analogy so let's use it.

If you've got the most dominant team of all time - say, the 1995 Cornhuskers - you take all comers. In fact you advocate for open competition, you want in every tournament (doesn't make sense for football but let's roll with it) to maximize your winnings.

If you're a peewee team of 8th graders, you don't want to compete with the '95 Cornhuskers. It would be phenomenally stupid to do that. But maybe, if you train and set up a smaller league of 8th graders, then expand to high school, then DII then maybe, someday, you can compete with the big dogs.

Smith sitting in England was the '95 Huskers. But England in the 1500s was the peewee team. How did they get from one place to another? *Not* by free trade competition against the Hanseatic league, but by closing off their markets until their domestic industry could compete.

It manifestly did not harm England to do this. It was way better for them to do this. So this idea of "harm" is kind of like saying when you work out, it hurts, so you shouldn't work out. But everyone should be strong and compete! You have to take the larger view.

List writes that England borrowed from the Continent skill in special branches of industry that aligned with their domestic capability (wool, for example), planted them in English soil, and then protected them with customs. Once they got one branch of industry, they protected it and grew it. He says that in any nation already advanced in agriculture and civilization, by means of moderate protection, infant industries can by practice, experience, and internal competition get ability equal to foreign competitors. His comment to Smith is - before we talk about theoretical systems, we should look at the history of what actually happened.

If the US had practiced free trade in the 1800s we'd never have developed domestic industries, because we flat-out couldn't compete with England. But we did, and then we did.

England came to industrial power by following a simple rule - import raw goods, export finished product. They knew this, it was policy - "it is evident that nothing so much contributes to promote the public well-being as the exportation of manufactured goods and the importation of foreign raw material." - George I to Parliament in 1721.

The early Americans knew this too. George Washington gave his inaugural address in a suit of home manufactured cloth, and a New York paper said he did this "in order in the simple and impressive manner so peculiar to this great man, to give all his successors in office and to all future legislators a memorable lesson upon the way in which the welfare of this country is to be promoted."

Reminds me of the joke "this all works very well in practice, but how does it work out in theory?".

And it's not like this is ancient medieval stuff. Look at Asia! Look at what Japan, S Korea, China have done in the past 50 years.

The point List makes isn't anticompetitive. He actually specifically says if you don't compete, you get rolled in the long run. But you have to get to where you're competitive before you open your markets, otherwise your local industries get wiped out.

Overbelief in Smith's theory has caused us to give power and means of wealth to our enemies using List's practice.

Phatbob said:

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It's just a different view of the same thing. Protectionism to build an industry is a strategy that benefits a country in a specific way, but it harms that country in a general way (opportunity costs) as well as the competing countries. That in itself has risks just as much as the opposite, but in general, protectionism leads to lower overall efficiency of a market. One of the risks of protectionism are building a market internally that globally don't make sense long term and are unsustainable as opposed to building natural specialization that does work long term.

Again, just a risk/reward calculation. It just depends on the context. If your interest is what is best for an individual country in the short term, protectionism makes sense, but long term, that same country is more than likely better off in the very long term without it (something about boats and rising tides, etc.).

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I think that context is key though. The free trade era of globalism assumed / assumes that everyone is going to largely play nice with one another and that it was ok to outsource pretty much anything that could be in the pursuit of pricing/costs. A directionally positive Prisoner's Dilemma, if you will.

Well, now we find ourselves beholden to our largest adversary for several key critical manufacturing sectors. Not great, Bob.

There are a handful of key manufacturing needs that we have to own in order to not be vulnerable as a country...better pricing be damned.

other than some notion of cheap goods - which is something - is it good that the US basically makes no clothes or shoes for itself?

is there really a comparative advantage in manufacturing of clothes and shoes? or it is just labor arbitrage?*

when did the US suddenly lose an actual comparative advantage in shoes? we deindustrialized in clothes and shoes in the 80s, and now we have basically total import reliance.

did that improve our productive capacity, industry, and wealth? i don't really see how. i also don't see how not making shoes made us better at making rockets.

*edit to add: what i mean by labor arbitrage, is the advantage inherent? like the countries that make shoes, do they have some structural resource reason that they can make shoes better? are their people better at shoemaking? or did we allow a temporary cost differential to become a permanent industrial advantage? so now we don't make shoes, china etc used a temporary lower labor price to develop trained labor, tooling, factories, process knowledge, scale (ie List's productive powers) to create a durable advantage -- to our detriment!

meanwhile we lost basically our entire apparel and footwear industry. all of those jobs, gone, poof, down like 90% from their peak. those people didn't go build rockets, they're the ones smoking weed.

Good thread!

One thing that I think has changed conditions significantly is the shift of the consumption of goods going from need based items to comfort, entertainment and social class signaling.

With that has come the business of creating demand. Why is it every 2 years there is a new must have water bottle! It is a water bottle! The whole fast fashion industry.

So how would List's economic takes change in this different economic world? I think he would begin asking the question, does it make sense to mass import anything? Is America's society better off with cheaper shoes, clothes and plastic crap?

We have clothing that is made here but what is naturally left is high-end, high-quality stuff that's expensive. My wife really only wears one brand now and it's not cheap. It's also high quality and lasts forever. I would much rather her buy fewer, more expensive high-quality items vs cheap China crap that has to constantly be replaced.

I try to do the same, but I also buy very little in clothing these days. If I buy something, it's outdoor gear/clothing.

Zobel said:

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other than some notion of cheap goods - which is something - is it good that the US basically makes no clothes or shoes for itself?

is there really a comparative advantage in manufacturing of clothes and shoes? or it is just labor arbitrage?*

when did the US suddenly lose an actual comparative advantage in shoes? we deindustrialized in clothes and shoes in the 80s, and now we have basically total import reliance.

did that improve our productive capacity, industry, and wealth? i don't really see how. i also don't see how not making shoes made us better at making rockets.

*edit to add: what i mean by labor arbitrage, is the advantage inherent? like the countries that make shoes, do they have some structural resource reason that they can make shoes better? are their people better at shoemaking? or did we allow a temporary cost differential to become a permanent industrial advantage? so now we don't make shoes, china etc used a temporary lower labor price to develop trained labor, tooling, factories, process knowledge, scale (ie List's productive powers) to create a durable advantage -- to our detriment!

meanwhile we lost basically our entire apparel and footwear industry. all of those jobs, gone, poof, down like 90% from their peak. those people didn't go build rockets, they're the ones smoking weed.

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You and I are generally in agreement.

But, just because we don't make textiles, that doesn't mean we have lost our capabilities to make textiles.

I can spin up a factory making shoes in Mississippi, Cambodia, Columbia, Vietnam in less than 9 months.

The real problem is that the market price for a shoe making job is very close to the amount of money a person can get for no work in the US through transfer payments. The solution to that problem is not to try and bring back shoe jobs, the solution is to reduce the transfer payments, and sanction or tariff countries that use slave labor to make shoes.

We are only talking about shoes because that is the left-edge example. Simple, labor intensive, easy to spin up. The issue is that we are outsourcing things WAY to the right of shoes. Networking switches and chip manufacturing, for example.

There is no reason at all why the US should be so dependent on TSMC. That is a problem. Shoes? Not so much.

Quote:

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I can spin up a factory making shoes in Mississippi, Cambodia, Columbia, Vietnam in less than 9 months.

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I dont believe you.

And if you mean, a factory that is globally competitive at making shoes, it becomes even more clearly incorrect.

And if you mean, the productive network necessary to feed a factory making shoes, you begin to see the problem.


But, this still is generally beside the point. You're talking price, I'm talking power.

Does it make the US more powerful to have to buy shoes? You'll probably agree it makes the US more powerful to make semiconductors, switches, and rockets. What's the difference? Individual chips are way cheaper than a pair of shoes.

Global apparel market is ~$1.75T, shoes are around $500b.

Semiconductors are ~$800b and network switches are ~$55b.

Why do you prefer one to the other?

Because it takes magnitudes more capital and intellectual property to be competitive at making semiconductors compared to sneakers.

If push came to shove, and we HAD to buy shoes made in the USA, I could make you a factory that cranks out New Balance quality sneakers in the USA for $100 a pop in 9 months. Not as much profit in that as Nike, and no Nike marketing budget, but we can make shoes quickly if we need to.

Semiconductors? Rockets? Satellites? Different story.

For List, it's more about CAN WE than it is about SHOULD WE.

Zobel said:

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Quote:

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I can spin up a factory making shoes in Mississippi, Cambodia, Columbia, Vietnam in less than 9 months.

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I dont believe you.

And if you mean, a factory that is globally competitive at making shoes, it becomes even more clearly incorrect.

And if you mean, the productive network necessary to feed a factory making shoes, you begin to see the problem.


But, this still is generally beside the point. You're talking price, I'm talking power.

Does it make the US more powerful to have to buy shoes? You'll probably agree it makes the US more powerful to make semiconductors, switches, and rockets. What's the difference? Individual chips are way cheaper than a pair of shoes.

Global apparel market is ~$1.75T, shoes are around $500b.

Semiconductors are ~$800b and network switches are ~$55b.

Why do you prefer one to the other?

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The answer to this should be obvious...

I'm really enjoying this convo so please don't take any of this as combative, but I don't think that is List's point at all. That's Smith talking.

I think there is a big difference between productive power and latent technical feasibility. "I can do it in 9 months" doesn't mean "America has the productive power of a shoe industry". Those are very different things! Being able to build a plant isn't the equivalent to the supplier network, equipment, skilled labor, experience, scale etc etc etc that make an industry productive and competitive. The feasibility to reconstruct a single piece of that on demand for some amount of money isn't the same thing as *having it*.

You're making an arbitrary distinction of high ip / high capex = worth retaining and low ip / low capex = safe to lose, but you aren't connecting that to why that framing matters. List doesn't say "can we" or make that analysis, List asks - does the industry contribute to national power, independence, and self-sustainment? Semiconductors are high, yes! But that doesn't mean shoes are not.

I think you have List backwards. It's not can we but should we, where the way to decide if we should is "does it make us more powerful?" The entire book is an argument against free trade because you can't reacquire it on demand - industrial development is cumulative and path dependent. He actually writes about the English crushing French industry through free trade, and the French government learned "it is much easier to ruin flourishing manufactories in a few years than to revive ruined manufactories in a whole generation."

You say you can build a factory - sure. But what about the textiles, rubber, foam, injection molding equipment, tooing, sewing, engineers, operators? And all the stuff that is required to make those, and on and on back? If all that is imported to your 9 month build factory all you're showing is that the US can assemble shoes using someone else's productive system. In other words, that the US doesn't have the productive power of a footwear industry. Because we don't. It's gone, we gave it away for short term profit.

You say you're pro-List but this is just Smith talking, that resources flow to higher productivity activities. Great in theory - in practice, do they? Did the resources "freed up" from our apparel and shoemaking industry (or machine tool, or tool and die, or steel, or automobile, or or or) flow to rocketry and semiconductors? The labor pool that was making clothes in Brooklyn, are they semiconductor or rocket engineers now? No - because capital and labor don't just migrate up the value chain, and certainly not on demand.

You're trying to turn List into "Ricardo but protect the important stuff" but that's the whole point of List - the important stuff is not the products themselves, or the GDP line go up, but the development of national productive power.

Please answer it for me then, because I do not think it is obvious at all.

Zobel said:

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Please answer it for me then, because I do not think it is obvious at all.

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Buster already partially answered it right above my last post.

If we were forced to start making shoes because the rest of the sweat shop world decided to black ball us, we easily could.

If we were forced to figure out how to source, mine, refine, and productize raw materials for a host of critical products needed to make things run, we would be up **** creek if China decided to blackball us. Obviously, there is a ton of symbiosis between us and China that would make it almost equally punishing to them if they decided to do that.

However, relinquishing critical sectors to other countries and having no control over your fate whatsoever with those sectors deemed critical is suicide and making yourself unnecessarily vulnerable. So, I'm looking at this first and foremost from a practical, prioritization standpoint, and then I think your arguments are relevant after you establish what is critical for life and sustenance.

Examples: food, energy, and raw materials for pharma/critical industry are mission critical sectors that any country who isn't poorly run and who has the means to own it...should. Relinquishing ownership of these areas when you don't have to is monumentally stupid over the long-term.

I would describe your framework as something like "strategic resilience". Like, which sectors would hurt us bad if they got cut off? In that regard, yes - I agree. But I don't think that is List's point.

He asks something like, "In the long run, which production/policy makes the nation richer, more capable, more technologically advanced, and more powerful?" Your question is a lot narrower - his point is that manufacturing develops power, not because those goods need to be had in an embargo situation (tho that is its own type of value).

There's probably a lot of overlap on that venn diagram, but they aren't the same thing. Because we (I include myself in this) grew up taught Smith culturally as fact, we think Smith + strategic durability.

But "we could do it if necessary" is describing like emergency substitution, but doesn't prove that surrendering that industry for short term cheaper shoes made the US stronger.

I think it's also interesting to see that the argument has sort of moved a couple times. At first it was like, well comparative advantage means we shouldn't make shoes. Then it was, we should keep high ip / high tech industry. Now, we should keep industries that make us vulnerable.

The thing is, when you look at it that is precisely List's criticism of free trade, only you're limiting it to a small set of sectors. I think the problem is that the list of industries that losing will lead to vulnerability is *massive* because the industrial ecosystem is all intertwined.

So at this point I think there's agreement that free trade absolutism is wrong, and nobody is arguing whether productive capacity matters. It's about how broad that capacity should be, and what measure to use to value.

In that regard, I say it isn't immediately obvious to me that losing the shoe and apparel industry made the US stronger. I would say it didn't.

I think it is important to acknowledge that some industries are more critical to national security.

In a hierarchy of needs that makes it more critical. Without national security your country is in a real bad spot and other things dont matter.

But lets say we have solved that.

Now we are optimizing not under a need to optimize national security but a desire to optimize society. Is America better off because it buys its shoes and clothes from sweatshops over seas or is it neutral / worse off?

Instinctually I think people say it is better off. The goods are cheaper. Which increases the buying power of Americans. True in phase 1. However now those $s are leaving the country as that phase is played out 100s or 1000s of times. Not to mention the tolerated human abuses. Is America better off now that fewer men have basic carpentry skills, fewer women have basic sewing skills and both men and women have lost considerable cooking skills?

The above situation reminds me of 2 weeks to slow the spread trap. It will always be a problem of ending the lock downs because people will mingle and more people will get sick. That is where we are at as a country. 2 weeks to buy cheap stuff trap.

yes - in other words, what's worth more, the shoes or the ability to make them?

Zobel said:

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yes - in other words, what's worth more, the shoes or the ability to make them?

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Or put another way, does our society undervalue the outsourcing cost beyond the $ cost.

It is that weird problem where if you outsource cooking you miss out on the opportunity to express love by cooking for others? A home cooked meal is more valuable. If you are trading cooking for the ability to watch TV or scroll instagram vs if you are trading cooking so you can go to the gym and workout and be healthier.

So I moved onto book 2 of List (book 1 being history, and book 2 being theory) and he opens that free traders are the original one-world-government globalist progressives.

Quote:

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Quesnay (from who the idea of universal free trade originated) was the first who extended his investigation to the whole human race, without taking into consideration the idea of a nation....his demands being that we must imagine that the merchants of all nations formed one commercial republics....[this is] cosmopolitical economy, i.e. that science which teaches how the entire human race may attain prosperity; in opposition to political economy, or that science which limits its teaching to ... how a given nation can obtain...prosperity, civilization, and power...

Adam Smith* treats his doctrine in a similarly extended sense [of] the idea of the absolute freedom of the commerce of the whole world....He entitles his work "The Nature and Causes of the Wealth of Nations" (i.e. of all nations of the whole human race). He speaks of the various systems of political economy...solely for the purpose of demonstrating their non-efficiency, and of proving that 'political' or national economy must be replaced by 'cosmopolitical or world-wide economy.'Although here adn there he speaks of wars, this occurs only incidentally. The ideal of a perpetual state of peace forms the foundation of all his arguments.

J.B. Say openly demands that we should imagine the existence of a universal republic in order to comprehend the idea of general free trade...says explicitly..."Political economy relates to the interests of all nations, to human society in general."
...
Adam Smith and his followers teach us from this mainly nothing more than what Quesnay and his followers had taught us already..."the well-being of the individual is dependent altogether on the well-being of the whole human race."

The first of the North American advocates of free trade [Thomas Cooper]...denies even the existence of nationality; he calls the nation "a grammatical invention."

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*Adam Smith intended to have dedicated his work to Quesnay

lol

he goes on to say that obviously if there were world peace you'd get more wealth, and probably we're heading that way (whoops, envisions something like the league of nations / UN but missed the world wars) but says "the popular school has assumed as being actually in existence a state of things which has yet to come into existence. It assumes the existence of a universal union and a state of perpetual peace, and deduces therefrom the great benefits of free trade. In this manner it confounds effects with causes."

Wish he'd been around when we let China into the WTO.

so it is kind of interesting. in the end, List is as hopeful for a world federation as the others, but he thinks it will come about politically and then we can reap commercial and human benefits.

it's pretty obvious he was right about national policy bootstrapping nations against more powerful competitors, but wrong about where the process ends. the basic recipe is use the state to build productive capacity, reach parity, then graduate into free trade among mature nations. but that doesn't explain what happened in the 20th century, and aside from wishful thinking about whirled peas there is no obvious reason that competition ever stops. smaller states lose, larger states consolidate into blocs (german states into germany, russian federation, europe into EU)...the system of governance itself is competitive so you have communism vs capitalism vs whatever mix of facism and corporatism is going on in china... but there is no political end to this process. developing national economy is doesn't get to that cosmopolitan end state

thinking about how he missed so badly it seems that multinational corporation was something he could have never imagined. in his world a british company's productive power was basically british productive power. but obviously apple can increase its own value while destroying US productive capacity...

and kinda interesting even when the US "wins" the cold war and makes a near unilateral world, rules based order and so on, that same hegemony manufactured its challenger. we made an open peaceful world partly because we thought we were in a post-national economic rivalry world. china said great, this dramatically lowers the cost of my industrialization. US corporations say great, production is cheaper there. thirty years later, China has built insane productive power and we discover that the world was never post-national.

so contra List the real cycle is not protection > maturity > free trade > federation, but something more like productive power > national power > rivalry > hegemony > diffusion of productive power > new challengers > rivalry again. free trade can obviously be benficial with that...

but we are never going to "graduate" from national economics, because there is no end to politics. tough lesson for us to learn.

Zobel said:

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so it is kind of interesting. in the end, List is as hopeful for a world federation as the others, but he thinks it will come about politically and then we can reap commercial and human benefits.

it's pretty obvious he was right about national policy bootstrapping nations against more powerful competitors, but wrong about where the process ends. the basic recipe is use the state to build productive capacity, reach parity, then graduate into free trade among mature nations. but that doesn't explain what happened in the 20th century, and aside from wishful thinking about whirled peas there is no obvious reason that competition ever stops. smaller states lose, larger states consolidate into blocs (german states into germany, russian federation, europe into EU)...the system of governance itself is competitive so you have communism vs capitalism vs whatever mix of facism and corporatism is going on in china... but there is no political end to this process. developing national economy is doesn't get to that cosmopolitan end state

thinking about how he missed so badly it seems that multinational corporation was something he could have never imagined. in his world a british company's productive power was basically british productive power. but obviously apple can increase its own value while destroying US productive capacity...

and kinda interesting even when the US "wins" the cold war and makes a near unilateral world, rules based order and so on, that same hegemony manufactured its challenger. we made an open peaceful world partly because we thought we were in a post-national economic rivalry world. china said great, this dramatically lowers the cost of my industrialization. US corporations say great, production is cheaper there. thirty years later, China has built insane productive power and we discover that the world was never post-national.

so contra List the real cycle is not protection > maturity > free trade > federation, but something more like productive power > national power > rivalry > hegemony > diffusion of productive power > new challengers > rivalry again. free trade can obviously be benficial with that...

but we are never going to "graduate" from national economics, because there is no end to politics. tough lesson for us to learn.

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Regarding bold:

The first one was in my first post - WWII and Bretton Woods agreement happened. He probably did not foresee such a global war event leading to that kind of outcome.

The second one was in my second post - we assumed everyone was going to play nice and all adhere to the same behavioral standards and social contract which was stupid. Not all cultures and peoples are the same and think the same. There will always be people who take advantage of a system and abuse the hell out of it. So, here we are.

sure but he also missed everything leading up to bretton woods too, which is interesting. he's right on so much of the first principles but it seems like motivated reasoning made him miss consequences.

for example he stresses that smaller nations will lose to larger ones - its why he made it his project for germany to unite. but he misses that it doesn't stop at england and germany, and eventually the US is just plain bigger - scale keeps helping. that points to superpowers, but his whole thing with national economy is that he seems opposed to the idea of a superpower. and so on.

i agree with the wrongheaded thinking about a monocultural world but i think the miss is separate too. its almost as if the US thought everyone would see what we assumed, what was even repeated on the first page here - a rising tide raises all boats. in a post-competitive world that is all very nice, and for a while it seemed like that would work. but china was never post-competitive. the entire arc of the 20th century is almost absurdly Listian, except how it ended.