Free Trade and the Steel Industry
Dr. Milton Friedman gives a concise and lucid argument for international free trade at Utah State University in 1978.
A common belief is that big companies will sell below cost to drive out their competitors and then raise their prices. This is a fallacy and there are few professional economists who believe otherwise. Historian Thomas E. Woods offers a simple explanation in this video:
For an example of the steel industry’s anti-free enterprise rhetoric listen to Dan DiMicco, CEO of Nucor, one of the largest steel producers in the United States, during this interview with Lesley Stahl of ’60 minutes’. In this example, just as Dr. Friedman professed, Nucor benefits at the expense of Caterpillar which relies not only on steel, but exports as well.
Even though this video focuses on the steel industry, it applies to all others as well. Did you know that American consumers pay, on average, twice the world price for sugar? Once again, special interests benefit at the expense of everyone else. From economist Dr. Mark J. Perry’s blog:
http://mjperry.blogspot.com/2009/08/big-sugars-sickeningly-sweet-deal.html
http://mjperry.blogspot.com/2010/01/sugar-tariffs-cost-americans-25-billion.html
http://mjperry.blogspot.com/2010/02/few-days-ago-i-posted-about-tariffs.html
http://mjperry.blogspot.com/2010/02/blog-post.html
This video is an excerpt from Milton Friedman Speaks: Lecture 02, “Myths That Conceal Reality”
http://www.ideachannel.com/index.php?cPath=124_132_165
Duration : 0:6:3
Dude was a …
Dude was a genius man… kung-fu master of economics… Pity the fool that dares put emotional wining over economic drive and virtue.
Second, in 1959 the …
Second, in 1959 the percent of gross value added to U.S. GDP by nonfinancial corporate businesses was about 53 percent; in 1980 it was about 55 percent; today its about 50 percent hardly evidence that the financial sector is growing cancerously and destroying or crowding-out Americans capacity to produce non-financial outputs.*
First, the real …
First, the real value of U.S. manufacturing output today is four times what it was during the alleged golden years of American manufacturing might, the 1950s, and more than twice what it was in 1980.
While I am less …
While I am less familiar with Faber than Schiff, it seems clear that he was engaging in hyperbole. It seems likely that either he has not taken into account thos “insourced” factories or is taking some perspective on the issue that we do not immediately see.
And never apologize for lack of experience so long as you are willing to ask the questions. The problem is always those who never bother to ask the questions and assume they have knowledge anyway.
Strange. Faber went …
Strange. Faber went to such extremes as to say that the US now only produces prostitutes and beer. But maybe he means US firms have diminished while not mentioning how manufacturing has gone up because of foreign firms’ factories are built in the United States. Is that a fair assessment to say? I don’t live in the US so pardon my lack of personal experience.
They are, I believe …
They are, I believe, speaking in relative terms. While US industrial output has continued to grow, the US economy has experienced more of a shift to services than have other countries, so manufacturing represents a smaller percentage of the economy. Still, other countries have also been shifting to more services (largely in proportion to their level of prosperity). Even China has significantly increased the percentage of their economy devoted to services.
Well, if this is …
Well, if this is true then why do you think Schiff and Faber emphatically state that US manufacturing has gone down?
If you go google ” …
If you go google “US manufacturing output graph” and choose the selection (usually in the top three) for the St. Louis Fed, you’ll find the graph showing how (except, of course, in times of recession like now) the rise in manufacturing output remains unabated.
I also tend to be less concerned (not to say UNconcerned) than they are with personal savings levels, which I find to be symptomatic of public (largely monetary) policies rather than a separate problem unto itself.
Hey Fletch, has the …
Hey Fletch, has the US manufacturing industry really downsized or grown in the past decade? I see you take the opposite position to Marc Faber and Peter Schiff on this issue. You have argued that free trade has created more jobs than lost(which I agree with) but you also said that manufacturing has grown in a rebuttal to the socialist’s claim that free trade has de-industrialized America. What is it really? Any sources?
Henry Hazlet’s …
Henry Hazlet’s Economics in One Lesson eloquently tells us to look at the long term effects, not just the short term effects of a law, tarrif, tax or other action. Politicians only look at how it will immediately impact ONE particular group, usually a special interest group, without examining what the consequences, sideeffects, or long term effects on other groups of people.
@FletchforFreedom …
@FletchforFreedom
well said, there is no such thing as trickle down, the workers get paid first then it trickles to the employer if he makes a profit
google
Thomas Sowell The “Trickle Down” Economics Straw Man
Again, it has …
Again, it has nothing to do with whether the money ULTIMATELY ends up in CEO bonuses or small businesses or factories or apple sales. The assertion to the contrary is the one that is economically unsound. Nor is there any “trickling down” that has any impact on the issue. All that matters is the size of the money supply (as affected by the methods discussed) relative to the goods available … and NOTHING else.
That’s simple economic fact.
@ Plutonwolf
” …
@ Plutonwolf
“debate club tactics”
What do you really expect in the Comments section of You Tube?
Ask them: “When did you stop beating your partner?” or the other classic: “Why didn’t you help the tortoise?”
Not much sense expecting anything intelligent for the Comments section, if we had something better to do, we would be doing that instead.
lol
At present, because …
At present, because of the massive level of uncertainty created by the federal government, lenders are building reserves rather than lending (much to the complaint of Obama and Congress who cannot grasp the problem) and borrowers are reluctant to engage in entrepreneurial activities that require additional loanable funds so the mechanism of money expansion is temporarily forestalled.
Once this relucatnce ends hyperinflation must ensue unless a contractionary policy is pursued.
Financing the debt …
Financing the debt that Obama is running up increases the money supply but the major means of credit expansion (that feuled the crisis in the first place) is the Fed discount rate being reduced (to below 1% in 2003-4 and to 0%-0.25% now). This mechanism increases loanable funds in the fractional reserve system and creates inflation. The ONLY thing that prevents this is if the reduced interest rates do not result in additional lending.
(cont.)
No, I am stating …
No, I am stating that your take is wrong because it is contrary to the fundamentals of economics (I’ve been an economist for 25 years). Inflation is ONLY a monetary phenomenon. It results ONLY from expansion of the money supply and the money supply is ONLY expanded by printing money, issuing government debt or central bank credit expansion through artificial reduction of interest rates by the Fed.
(cont.)
Wrong again.
Can be …
Wrong again.
Can be reasonably expected to eventually show a rise in prices. But only when that money permeates throughout an economic system.
Your are being intellectually dishonest. You think you can declare my assertion wrong simply by pronouncing it so.
Follow the MONEY! It isn’t going anywhere. HOW could it put pressure on prices to rise when it hasn’t entered the economy at large yet?
I’m not confusing …
I’m not confusing the issues at all. Inflation is the expansion of the money supply relative to the amount of goods available in the marketplace that RESULTS in an increase in the overall price level. Bailouts do not directly ibncreasethe money supply. The government’s means of FINANCING them does. The issuance of government debt and the expansion of loanable funds by the Fed cause inflation. Your assessment of a lack of inflation due to who got bailouts is economically unsound.
Are you purposely …
Are you purposely confusing the two issues?
Why are you speaking of prices with justifications for not making loans?
Money hasn’t entered the markets of small business or consumer level loans. Those excessively large bailout funds went to the largest commercial banks, not the one on the corner near where most people live.
That is why we don’t see hyperinflation yet. All that bailout money went for a few Bank CEO bonuses and large players to swallow up smaller players instead of trickling down.
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