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RE: avoiding protectionism - 6/10/2009 1:27:11 AM

Termyn8or

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USING fast response

Good points one and all. They stand well om their own so no specific responses are needed. However I think this a good time to bring up something which I have touched upon before, but seems to fit the thread.

INSTITUTIONALIZED GREED :

Who runs these companies ? Well obviously there is a board of directors, a chairman, any number of vicepresidents or department heads involved. What is their job ? Wouldn't you agree that their job description would include operating in the best interest of the company ? I don't think we need any cites or quotes to prove that point.

A competent CEO is charged with making decisions, and also acquiring the information with which to make valid, that is - correct decisions. Decisions that are in the best interest of the company. It now become necessary to define the best interests of the company, and that, I believe, is where the root of the problem lies.

Now the best interest of any entity is of course at least partially dependant upon it's environment. What is the company's environment, and what forms that environment ? First of all the venue, and I mean that in a wider scope than just the geographical area. I mean what portion of the producing (hopefully) economy does it "occupy" ? Building jets is different than building DVD players. However it seems each can be profitable. Overall even if they are right next door to each other they occupy different venues, and operate in different environments.

To truly define this one needs to cut even to deeper roots. For those largely uninformed about what goes on in the boardroom, I think it best to actually define what is good for ANY company. Whether you manufacture Tickle Me Elmos or ICBMs, there are still certain constants. They do vary somewhat when companies operate at different volumes, but those differences can be cut through as well. In fact going to a larger scale of operations simply has a similar effect as turning some of the cards in your hand into trump cards, or wild cards. But concentrating on the constants is necessary for full understanding of the point.

First and foremost is the workers. When does it become cheaper to specially educate people across the sea to do a job than it does to save all that shipping and just manufacture it at the point of sale ? A few good translators setting up some classes on how to build plasma TVs, or fighting the sense of entitlement found in many Western workers ? Tis a shame but true, in general we are not doing so well in that area.

Another important thing is stability. Stability can only be achieved in today's market by being competitive. Making alot of money gives you plenty of room for negotiation, and you can be fairly sure to move product even in an unfriendly market.

Easily liquefiable assets. This used to include land, but of course the environment (in this context) has changed. But it can be machinery, even leases on machinery and structures, these are all tools.

Responsible use of debt. That means not using debt to get through the thin times, but for further expansion. To grow.

Debt is actually the stock market, although in that market people can just decide not to loan you the money anymore, so you must support the stock values as well as the P/E ratio. If not you might find yourself in a pickle with a half built plant to make your new widget, but everybody pulled out.

So these capitains of industry are given sweet stock options to encourage them because they then have a vested interest in the success of the company.

They are also under a legal and binding contract to do what will make the most profit for the company. Part of the major problem is those quarterly reports. Thinking short term as people do (including VOTING stockholders) makes it imperative that they pull in every last dime they can, ALMOST at any cost. The line for these people is drawn precisely where it affects PR negatively. And believe it or not, just how much ?

First of all if you get to the scale of operation where you can keep it out of the papers when you move the plants to foreign countries, that is a big plus, so expansion is always on the plus side. This would be considered a responsible use of credit.

Consider yourself the CEO of a fairly large corporation. It's not like Milburn Drysdale on Beverly Hillbillies. If your marketing head, PR director, chief of manufacturing and all the bean conters say "We can make $XXX million more a year by making our tennis shoes in Malasia, you don't have much of a choice. To do otherwise you would be in breach of contract and that is very bad. In some cases that can take your golden parachute away. So what do you do ?

Your choices are to acquiesce and move the plant, keep your job and lifestyle, or get blacklisted and start looking for venture capital, which will be hard to find. That is if you got something good to even use the venture capital on, which won't be easy if you choose not to "cheat" like everyone else. The environment has made you a loser in such a situation. Would YOU do it ?

But then that brings up the question - what can we do ?

Well we spoke with the loudest voice possible when we bought the Sanyo instead of the RCA, the Toyota instead of the Chevy. Back when there was a reason to buy domestic goods. Back when domestic goods of this nature EXISTED. Perhaps it is the only way now.

In Rhi's rant thread, I have to disagree with one over there, ANYONE you pay is a hired hand. Ulimately the money comes from the consumer. I'll do plaster and lath rather than put Chinese drywall in my house. I'll die before I take a Chinese drug, but then I am so against drugs already it really doesn't matter. I had to buy some compuiter equipment recently, and I had no choice, I know it's mostly from China, so this is not easy.

If we could just live without certain things, we would be alot better off. All we have cared about for the last three decades is having a few more bucks in change. What did you expect them to do ? Perhaps a bit of patriotism would have went a longer way than any protectionism ever could.

I do not support this outsourcing in an way, I am just trying to put it into something sensible = that is - WHY it happened. There is plenty of blame to go around.

T

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RE: avoiding protectionism - 6/10/2009 2:41:22 PM

Daddystouch

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A common misconception is that countries like Britain and the United States no longer make stuff. In truth, Britain (I've not seen the data for the USA but I'd be astounded if it were not true across the pond also) makes more manufactured goods than at any previous time in history. The difference is two-fold. First, employment in manufacturing is lower than in the past because it is now largely mechanised (employment overall is historically high - people are employed elsewhere in the economy, not unemployed). Secondly, the proportion of GDP accounted for by the production of manufactured goods has fallen - not because we're making less, but because the pie has got so much bigger. The smaller slice of the bigger pie is still bigger than the original slice of the smaller pie. Most of the growth in the pie, however, is from sectors other than manufacturing - namely services and creative industries.

Perhaps a more dangerous fallacy is the idea that value/wealth is only derived from making stuff i.e. physical objects when in fact wealth can be produced through a wide range of activities. Indeed, non-tangible production is, in general, actually far more efficient than physical production.

< Message edited by Daddystouch -- 6/10/2009 2:47:58 PM >

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RE: avoiding protectionism - 6/10/2009 5:58:47 PM

LookieNoNookie

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quote:

ORIGINAL: LadyEllen

is there a doctor in the house? (of macro-economics)

our leaders tell us that the globalisation process is the way to economic progress for us, whilst protectionism is bad and must be resisted, because it will lead us to economic decline.

1st simple question - why?
2nd simple question - how?

E

Of course, Macro economics is the study of the larger, the whole, whereas Micro economics is, as would seem somewhat obvious, the lesser, the smaller....your economics.

Many would disagree with your premise (and they would be wrong) but to fully grasp things requires that we all give up a few carrots.

Henry Ford once rather astutely said to his accountant "why the hell can't we pay our people enough to afford the products we make?".

A few weeks later he doubled their wages to $5.00 a day, and the average man (they were all men then) could indeed afford Fords products....among many others.

Clinton invoked NAFTA...and a groundswell of anger (largely from Republicans...which I once was) brewed; "But we're sending jobs over there....what about OUR jobs!!!!!?????"

Clinton understood something very clearly...that being that, with the US controlling 25% of the world's GDP and therefore, purchases, he was absolute on the obvious....25% of the worlds' GDP was going to less than 7% of the worlds population.

Every one of those countries had access to TV's, and whether or not our country actually did live like the people on "Dallas", it was beside the point....when you're starving....when you're living on less than 150 dollars US a year, for a time, many will look at those images and wish....dream....desire....but after a time, hunger wins out and with enough bodies....war is inevitable.

At some point the question of "well....we worked for it and they didn't" no longer matters....and frankly, at some point, we as a culture and as citizens of the world have to ask ourselves the obvious as well....

"When are we going to invite the rest of the world into our abundance?"

And Clinton said "how about now?"

Carrots.

There's a whole bunch of folks around the world who'll never see this website. Any website....but certainly, if they saw the net....this...CM...would likely be one they wouldn't go to first.

Food would be a somewhat larger priority for them.

Carrots.

Rock Soup.

Rock Soup is a fabulous story. It's about a village....starving....crops failing left and right, everyone holding on to their own....and a fellow comes into the town square....where there's a large (for lack of a better word) cauldron in the middle of the square.

He starts a fire underneath it, fills it with water...stirs it till it boils...people gather....someone comes up "what are you making?"...."rock soup" he says....."but oh how much better it would be if we had a few carrots....just a few....".

And someone hands him a few.

Plop.

"Mmmmmm" he says..."it would be so much better if we had some beets"....and a few beets arrive....not that many, but just enough....and the odor wafts through the square....people gather....

"If only I had some venison".....and a piece is handed to him, and then another...."ahhhhhh" he says "it's so close.....if I just had some onions...."

And soon the whole town ate and were filled.

"our leaders tell us that the globalisation process is the way to economic progress for us, whilst protectionism is bad and must be resisted, because it will lead us to economic decline.

1st simple question - why?

Because you can't feed the world if they can't feed themselves.

If they can't feed themselves, they'll fight...even if they know they'll die doing so.

2nd simple question - how?"

By giving.

< Message edited by LookieNoNookie -- 6/10/2009 6:41:07 PM >

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RE: avoiding protectionism - 6/10/2009 6:48:20 PM

DedicatedDom40

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quote:

ORIGINAL: Daddystouch

Perhaps a more dangerous fallacy is the idea that value/wealth is only derived from making stuff i.e. physical objects when in fact wealth can be produced through a wide range of activities. Indeed, non-tangible production is, in general, actually far more efficient than physical production.

I think we discovered this with the derivatives debacle, didnt we? After all, why make money by building a factory and hiring workers to make physical products when we can make more money selling 'words on paper' crafted out of thin air, in the form of phony, unregulated, and undercapitalized insurance schemes to protect our mortgage backed securities - to the tune of $500 trillion, or 50 times the value of the entire economic output of the world. And we sure went down that route, and it damn near tanked our entire global financial system. This selling of 'paper' rather than product brought us the closest to financial ruin than we have been in a damn long time. And at 500 trillion, there is no country anywhere on the planet that could bail that insolvency scenario out. Our financial world will have this 'gambling debt' (built by the paper profiteers) around their necks for a long time to come, and the costs of such will eventually get passed on to the customers of these financial institutions, even the customers in good standing.

Just because money CAN be made by walking down that avenue, doesnt mean the behavior is legit and SHOULD be allowed. Thats why we have regulation.

< Message edited by DedicatedDom40 -- 6/10/2009 7:12:35 PM >

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RE: avoiding protectionism - 6/10/2009 9:36:08 PM

Daddystouch

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When I say non-tangible I mean anything that is just that. I didn't say (specifically) selling paper. Movies, marketing, computer programming, research and development, wedding planning, personal training etc ad infinitum.

I'm not sure why you attribute the economic crisis to the selling of insurance. I'd first point out that insurance is not inherently undercapitalized - if you don't like 'bad' insurance there is no reason why 'good' insurance cannot be sold. Neither good nor bad insurance are physical products, but they (or at least good insurance) are wealth producing.

But in any case insurance, even bad insurance, is not to blame for our current economic situation. The mortgage backed securities you mention are the substance of this recession. Indeed, if anything our troubles are grounded in the overproduction of physical products - namely housing. When the US government cut capital gains tax on real estate without lowering it elsewhere, and at the same time engaged in expansionary monetary policy they caused an influx of investment into housing, an artificial over investment that snowballed. At the same time, it blindfolded mortgage lenders by taking away a significant portion of their ability to choose who to give mortgages to, and leant on them to give more mortgages to poor people - in an attempt to make housing more affordable. Of course, this resulted in mortgages being given to people who, it would later turn out, could not pay them back. The housing bubble burst (or rather, deflated) and the mortgages couldn't be repaid - mortgages that had been used to back securities which had spread through the banking sector. Banks no longer knew how solvent each other were and stopped lending to one another. Credit dried up as a result, and business suffered - laying off workers and cutting wages. This knocked consumer confidence which cut consumer spending, perpetuating the problem. Bad harvests and biofuel regulation that drove up commodity prices, reducing disposable income, only exacerbated the situation.

The existence of that insurance may have been an aggravating factor, but it's like blaming a house fire on the curtains that burnt rather than the cigarette that started it.

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RE: avoiding protectionism - 6/11/2009 8:25:55 AM

LadyEllen

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quote:

ORIGINAL: Daddystouch
Perhaps a more dangerous fallacy is the idea that value/wealth is only derived from making stuff i.e. physical objects when in fact wealth can be produced through a wide range of activities. Indeed, non-tangible production is, in general, actually far more efficient than physical production.

thanks for your defence so far - this is what I was looking for because the prosecution is far too easy a case to understand.

but if you would I'd like to get from you how wealth can be produced without actually producing something tangible? for it seems to me that all other economic activity proceeds directly from the making of a product in a way that if the product were not produced, those other activities could not exist.

now its obvious even from that, that where the product is made is largely irrelevant to the economic activities that are consequent to it, as long as we have access to the product to be able to make it the subject of our other economic activities, but from what I can see, the product remains at the nexus of those other activities even so.

and these other activities, related as they are to the product, then do not create wealth at all. the cost of these activities is added to the final sale price of the product, which is what creates the wealth in the difference between its value as raw materials and its final sale price. in other words, the other activities surrounding the product are adding cost but not adding actual value in the way that value was added to the raw materials by converting them into the product. the incomes and profits generated by the other activities merely represent a slice of the wealth that was created by the product, not wealth inherently generated by the other activities.

E

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RE: avoiding protectionism - 6/11/2009 11:45:27 AM

Daddystouch

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Well the easiest example is prostitution :-P

Access to a prostitute, for someone who enjoys that, makes them wealthier. No physical products need be involved.

Hair dressing is another. Yes, the hairdresser uses scissors and a chair and such like, the the total wealth produced is far greater than the sum of the physical articles employed. Non-tangible wealth has been created.

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RE: avoiding protectionism - 6/11/2009 2:16:57 PM

LadyEllen

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neither of those examples are good however.

the hairdresser is producing a product which I wish to buy; that he/she uses raw materials some of which belong to me makes the situation unusual perhaps, but he/she has taken them and improved their value in the same way that a wigmaker should have.

more relevant would be to explain how banking and insurance, importing and distributing create wealth.

E

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RE: avoiding protectionism - 6/11/2009 3:45:35 PM

Daddystouch

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Well I'm not sure what you want me to do. All things involve the physical world in some way. I need something to stand on and a body to act with. I breathe air and eat food.

Making a car takes physical objects and combines them into a new object which can be packaged and sold. Growing rice, the same thing. Cutting hair or washing cars or delivering packages are not the same thing, they are services - but they still produce wealth. Equally, creative work such as programming, writing music and directing movies is all productive though not physical.

< Message edited by Daddystouch -- 6/11/2009 3:46:30 PM >

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