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The Forum > Article Comments > Some protection is essential > Comments

Some protection is essential : Comments

By John Turner, published 21/9/2011

The present national real assets situation of Australia needs to be understood and used to establish a long term view of Australia’s potential.

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"They aren't, and never will be, so therefore the assumptions are asinine."
Hear hear.
While we strive for a level playing field, more sensible governments try for the high ground, with the wind and sun at their backs.
I also liked the point about education and teachers. In one teacher country schools, students are often called to help the younger students, to the benefit of both. After all, writing an exam essay is essentially 'teaching'.
Modular course structures would also tend to break down class barriers.
Doctors and nurses begin with a first aid certificate, then continue to add modules for the rest of their careers. This simple philosophy could be applied in virtually all career paths.
First we need a free education system; much like the one our older statesmen enjoyed.
Posted by Grim, Wednesday, 21 September 2011 9:24:17 AM
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A well written and thoughtful essay. At last some explanatory writing on economic policy that is substantive and erudite without jargon, and allows the non academic reader access to a generally arcane science that affects us all on a daily basis.
Posted by GYM-FISH, Wednesday, 21 September 2011 10:08:39 AM
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I agree with your statement 'To assume that completely free trade is feasible, and that protection is always undesirable, is to believe that all other governments and all manufacturers and agents in other countries are wedded to and willing to adhere to those concepts'

The problem is to get international agreement on what trade may be protected (by modest tariffs as you suggest or other instruments) and what should not be. We have longed rued the US subsidisation of farmers in the US and Europe while ours deal in the 'level playing field'

Perhaps for those industries that are 'socially essential'- jobs and research intensive - such as some manufacturing and idustries should be agreed to be fair game for tariffs while resource industries should not?

How also do we tackle the problem that protection may prolong the life of 'dinosaur industries' such as; I suggest that our automotive industry is one of those; it has long produced inefficient vehicles.Perhaps tied Govt grants and low interest loands are the solution for such industries rather than tariffs?

In my opinion mining in Austrlia is now as much a problem as it is a benefit; perhaps more so for the majority for the 95% who do not work in mining related jobs and face the high prices it has brought, particularly for housing. We have a situation where the high dollar it has generated has reduced jobs in manufacturing tourism and agriculture by as much or more than the increase in mining jobs.

Answers to that are simple - first make them pay for all of their carbon emissions (giving them 65-95% free permits transfers the carbon burden onto the rest of us). Then bring in the original mining super profits tax; which only increases taxes on their excessive profits, it does not jeopardize the viability of mines.

PS. I also agree theat the old days of 'cadetships' for education were far preferable to the HECS debts of today.
Posted by Roses1, Wednesday, 21 September 2011 11:37:33 AM
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Rosie1
RE;
"How also do we tackle the problem that protection may prolong the life of 'dinosaur industries' such as; I suggest that our automotive industry is one of those; it has long produced inefficient vehicles".

The problem with abandoning car manufacturing in Australia is that we lose those industries that depend on it or supply it, the steel industry flat products section for instance. That industry is now suffering because it is incurring very high costs for coal and ore and has lost most of the demand and sheet for cars, refrigerators and washing machines and for steel plate for fabrication etc.

It should be possible for government to insist on near world's best practice for duty dependent industries. GMH is now producing a very credible and apparently successful small car with its Cruise models. The Commodore and the Falcon are now world class cars although a bit too big.

That is what we need.
Posted by Foyle, Wednesday, 21 September 2011 1:18:53 PM
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“Any contribution to a discussion on protection should focus on what kind of country we wish for Australian citizens two or more generations from now.”

John, who’s “we”?

Obviously you wouldn’t be using the term to include those who disagree with you, who don’t care one way or the other, or who would prefer their income not to be diverted to pay for any of the schemes you advocate.

So could you please explain how your theory would make sense after taking those subtractions into account – how would the situation be different from that obtaining as a matter of free trade?

Also, since the electoral process does not provide for the people to vote on any given proposed law or policy, how would you know that what you claim about "us" is true?

… people with clearer long term views have been ignored…”

Since, according to this theory, the people with unclearer short term views are in the majority, what makes you think you’re not in the majority?

“The Reserve Bank, which the citizens own through their government…”

If a citizen can’t sell or pledge his share, or exercise any of the incidents of ownership, then the claim that the citizens own it is obviously what is commonly known as a fiction or non-truth, isn’t it?

“Basically, balancing the internal sovereign government's budget is of little relevance…”

Your supporting argument established only that it’s of little relevance *to governments*. You haven’t established that it’s of little relevance to the people who are expropriated by such fiat redistributions, nor those ruined or unequally privileged in the economic recessions or artificial booms resulting from government’s addiction to based inflationary finance.


“Arguing that sovereign governments needs to, or should, adhere to the budgeting rules applicable to a business or an individual, is either mischievous, a result of ignorance, or sometimes both.”

Isn’t this just the standard Keynesian line that governments can print money or lower interest rates at whim, without it having any adverse economic or social effect? Current events in Greece and America prove you wrong. If it was true,

(cont.)
Posted by Peter Hume, Wednesday, 21 September 2011 7:15:42 PM
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... the Great Depression and the GFC would not have happened.

“To assume that completely free trade is feasible, and that protection is always undesirable, is to believe that all other governments and all manufacturers and agents in other countries are wedded to and willing to adhere to those concepts.”

No it doesn’t. The benefits of free trade do not depend on some imaginary state in which there are no restrictions on trade. If it did, we would still be back in the dark ages.

If other states subsidise their industries, the effect is to tax their populations so as to give free handouts to ours. Even in such a totally one-sided situation, our population is still better off than with greater restrictions on free trade.

There are three further fatal flaws with John’s argument.

1. John assumes that, unlike the common herd who don’t know the true evaluation of present versus future uses, he speaks with a god’s-eye view, looks down on the economy as a whole – now and in the future - and approves this or that activity as qualifying for a restriction of trade paid for by making society poorer.

But how can this be anything other than arbitrary and unsupported by any rational principle? For example what non-arbitrary standard can John set up to determine how much use of a given resource is “too much”?

Also, “Why should the future be able to enforce greater sacrifices than the present is willing to forego? Furthermore, after a span of years, the future will become the present; must the future generations also be restricted in their production and consumption because of another wraithlike “future”?”
Rothbard, “Man, Economy and State” at p.1132:
http://mises.org/Books/mespm.PDF

2. He assumes technology is fixed for all time.

3. The effect of his proposals would be to grant monopolistic privileges to the owners of resources whose capital values would rise as a result of the restrictions he proposes.

Therefore he has not refuted the arguments in favour of free trade, and it is rather his own protectionist assumptions that are asinine.
Posted by Peter Hume, Wednesday, 21 September 2011 7:19:20 PM
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I suggest Peter Hume read the item in Domain today written by Lee Sustar who explains why US why mainstream economists are referring to Karl Marx in discussions of the world economy–and why they won’t talk about the whole Marx.

Economist Nouiel Roubini, whose predictions of the financial crash of 2008 earned him the nickname “Dr. Doom,” has referred his patients to a specialist in capitalist crisis: Dr. Karl Marx.

In an interview with the Wall Street Journal, Roubini said:
"Karl Marx had it right. At some point, capitalism can destroy itself. You cannot keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand. That’s what has happened. We thought that markets worked. They’re not working".

It might also help if Peter read Clive Hamilton's "Growth Fetish" and some of the blogs of Professor Bill Mitchell.
Posted by Foyle, Wednesday, 21 September 2011 10:15:43 PM
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Thnx Foyle, I am recomend to take a read about the Peters mate in Austrian and you will no longer want to read his poppycock...If protection is any intervention then we need some...its simply what is the righr mix to obtain the most equitable outcome...Nev
Posted by Nev, Thursday, 22 September 2011 10:52:57 AM
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Foyle
Unfortunately that is no refutation of the arguments in favour of free trade, and please don't make me laugh about Karl Marx having it right.

It is enough to explode Roubini's theory to point out that governments controlled the price and supply both of money and money substitutes at all relevant times before, during and after the Great Depression, and the GFC. And it they were crises in the *financial* markets, get it?

And Marx never argued that capitalism would destroy itself because governments printed money like it's going out of style. He predicted that it would happen because the working class would get poorer and poorer. In fact the opposite happened: the living standards of the working class under modern capitalism have risen to the highest levels in the history of the world. So much for Marx's theory.

Yet as riddled with errors and fallacies as Marx's theory was, not even he was so confused as to call state control of the means of production "capitalism".

Let's cut to the chase. Are you honestly telling me that everyone would be better off if the people of each country did not trade with other the people of other countries? If so, why? And if not, why not?

Nev
Can you actually say what the arguments in favour of free trade are? If not, there's no point discussing it, on the ground that you don't know what the issue is.
Posted by Peter Hume, Thursday, 22 September 2011 12:33:10 PM
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Peter, nobody would want to stop trade with others, but simly engage in fair trade, not some version of 'no controls' espoused by your mate in Austria...nev
Posted by Nev, Thursday, 22 September 2011 6:41:42 PM
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Nev
Okay so you go from opposing free trade, to saying it's not all bad.

You now entertain an argument in favour of free trade (though you still haven't said what it is), and another argument against it. The problem becomes, why don't the principles in your argument in favour, apply to the areas where you argue against; or if the argument against it is correct, why aren't you against all free trade?

Look at it this way. Suppose all the world were ready to agree with you, to practise free trade where it is fair, and not where it is not. Now. There are six billion people, all busily engaged in exchanging goods and services with each other in gazillions of different permutations of transactions and goods. What principle can you give them that enables them to identify the difference between the market price, and your alleged fair price, in any given transaction?

Your inability to provide any standard than your own arbitrary opinion is enough to explode your entire argument. The reason is, because in reality the agreed price, and the fair price, are the same thing.

By the way, what is your argument in favour of the free trade that you agree with in principle? (And please don't say "because it's fair", which could only make for circular argument.)
Posted by Peter Hume, Thursday, 22 September 2011 8:43:23 PM
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“Any contribution to a discussion on protection should focus on what kind of country we wish for Australian citizens two or more generations from now.”

“John, who’s “we”?”

As should be abundantly clear to any normal Human Being, “we” are those people capable of considering the well being of persons other than ourselves; ie, our offspring or the offspring of others, as suggested in the sentence “...citizens two or more generations from now.”
Anyone who can't grasp that simple notion is either quite literally a moron, or quite literally a sociopath.
Either way, there is no conceivable value in debating with such a person as they would self evidently be incapable of understanding arguments that don't directly benefit themselves.
Posted by Grim, Sunday, 25 September 2011 1:57:49 PM
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Grim
Then it is not limited to Australia but includes everyone in the world who is not a moron or a sociopath, so the author's argument in favour of protection, ostensibly to benefit the people of Australia, fails.

Your argument depends on the proposition that protectionism is somehow altruistic or selfless. So should all free trade be banned? Wouldn't that be more social? If not, why not? But if only some free trade should be banned, why don't the arguments for free trade that you agree with, apply to the free trade that you don't.

It's you who is the moronic sociopath. Protectionism always involves forcing the many to pay for privileges for the few, your failure to understand it notwithstanding.
Posted by Peter Hume, Sunday, 25 September 2011 10:05:13 PM
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Hey Pete, I am wondering about your comprehension mate....Free trade is a phrase used by us....most on your side as well...for a certain form of fundermentalist non intervention..But trade can be free of fair and most of us understand well your views re no government at all...mate we just dont agree...can you get that...Nev
Posted by Nev, Monday, 26 September 2011 7:50:43 AM
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Peter Hume
Your argument might make sense if Australia was the only country offering protection for it's industries. If you had bothered to read the article in question, or if you had managed to understand the article in question, you would note it is about the fact that Australia is in almost exactly the opposite situation.
Once again:
“To assume that completely free trade is feasible, and that protection is always undesirable, is to believe that all other governments and all manufacturers and agents in other countries are wedded to and willing to adhere to those concepts. They aren't, and never will be, so therefore the assumptions are asinine.”

“Your argument depends on the proposition that protectionism is somehow altruistic or selfless.”

No it doesn't. My argument depends on the very simple concept that any government's first priority is to provide some service to it's citizens. If governments don't provide a valuable service, why have them?
If our government persists in chasing free trade purely in the name of principle (no matter how laudable) when all other governments are protecting their industries, then it is putting us (and our offspring) at a disadvantage.
Mises was implacably opposed to so called 'Free Trade Agreements'. His peaceful principle logically demands that all trade everywhere is completely free, which is just about as achievable as Marx's requirement for all nations to be communists.
Posted by Grim, Monday, 26 September 2011 1:57:14 PM
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Grim
The arguments for free trade do not depend on an imaginary state in which everyone is practising free trade simultaneously.

Even in your worst-case scenario, if Australia were practicing free trade with another country that subsidized its industries, all it would mean is that they are taxing their citizens to provide free handouts to us. It would not provide any ground for an argument in favour of protectionism in Australia.

Therefore your argument, and the author’s, is invalid.


"... putting us (and our offspring) at a disadvantage.”

No it’s not. It doesn’t disadvantage us, as I have just explained. The idea that it does is the oldest fallacy in economics, namely, "if A gets richer therefore B must be getting poorer".
In fact free trade is mutually beneficial.

Otherwise you have the problem of saying
a) why free trade in general should not be banned, and
b) if not, of saying which is to be permitted, and why the same argument doesn’t apply to the rest of trade.

“His peaceful principle logically demands that all trade everywhere is completely free…”

No it doesn’t.

“which is just about as achievable as Marx's requirement for all nations to be communists.”

Communism is not possible in theory, and must cause mass starvation and totalitarianism wherever it’s attempted.

But even imperfect free trade is both achievable, and better than any protectionism.

Nev
We haven’t eliminated the possibility that it’s you who’s the fundamentalist if you can’t explain why you don’t favour banning free trade in general.

Since you agree that some – if not most – trade must be free, otherwise society would collapse, please explain the principle on which you distinguish which trade should be restricted.

Now explain without self-contradiction why the same principle doesn't apply to the free trade you concede.

And how do you distinguish the fair price from the market price in any given transaction?

The question is not whether you *disagree* with free trade - obviously mere ignorance can do that - it's whether you can *refute* the arguments that it's beneficial.
Posted by Peter Hume, Monday, 26 September 2011 3:08:39 PM
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“Even in your worst-case scenario, if Australia were practicing free trade with another country that subsidized its industries, all it would mean is that they are taxing their citizens to provide free handouts to us. It would not provide any ground for an argument in favour of protectionism in Australia.”

Apparently Peter Hume has never heard of such practices as undercutting, price gouging or dumping. Once again we see the Misian foible of preferring theory to fact.
Scenario 1. American grain producers dump cheap grain on India. Half a million small farmers are forced off their land. Next year, American grain producers sell their grain to alcohol producers.
Half a million Indians starve to death.
Scenario 2. Japan, a heavily industrialised nation, loses a war. With cheap labour, it turns it's industries from weapons to manufactured goods. Australia finds 'it's cheaper to buy from Japan, than to make our own'. Australia's manufacturing sector is largely discarded.
Japan becomes rich.
60 years later, Australia is shipping raw materials to a country with higher labour costs than itself, and buying manufactured goods back.
What do they have, that we don't have?
60 years of manufacturing experience, and 60 years of established infrastructure.

“No it’s not. It doesn’t disadvantage us, as I have just explained. The idea that it does is the oldest fallacy in economics, namely, "if A gets richer therefore B must be getting poorer".
In fact free trade is mutually beneficial.”

Bull.
Out of all the people leaving a supermarket, -including the owner- how many feel richer?
To suggest that everyone ends up with equal worth is to suggest that the concept of 'profit' doesn't exist.
The essential problem with the free market is that it is reactive, not proactive. It is not teleological. The vast majority (if not all) of investors are concerned with what's going to happen tomorrow, not in 50 years time.
Posted by Grim, Wednesday, 28 September 2011 9:04:12 AM
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Grim
The fact that you think you know better than everyone else in the world put together doesn't mean you are talking anything other than bullsh1t.

"The essential problem with the free market is that it is reactive, not proactive."

So no-one else in the world considers the future. You're the only one, right? Admit that was an idiotic thing to say.

"It is not teleological."

If only they had you tell them what to do, then what a Paradise it would be, eh?

"Out of all the people leaving a supermarket, -including the owner- how many feel richer?"

How would you know one way or the other? You don't. All we know is that they considered the goods they bought more likely to satisfy their subjective wants than the money they parted with, otherwise they wouldn't have bought them. Who are you to say you know better?

"To suggest that everyone ends up with equal worth is to suggest that the concept of 'profit' doesn't exist."

No-one has suggested that "everyone ends up with equal worth", so your entire argument is invalid.

Define "equal worth".

You are just spouting the oldest economic fallacies in the world
a) that transactions take place because of equal worth. If that was the case, no transaction would ever take place, would it?, because what each party gained would be no better, from their own point of view, than what they gave.
b) that one person's gain is automatically another's loss; trade is a zero-sum game. If that were true, man would never have advanced beyond the material standard of our primitive ancestors.

" The vast majority (if not all) of investors are concerned with what's going to happen tomorrow, not in 50 years time."
1. How would you know?
2. What makes you think your view of their future is better, or worth any more to them, than theirs?
3. What makes you think you know how to manage a whole economy now and 50 years into the future, when you can't even understand what you're talking about?
Posted by Peter Hume, Friday, 14 October 2011 2:43:22 PM
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Oh my, we are getting snippy, aren't we.

“The fact that you think you know better than everyone else in the world put together doesn't mean you are talking anything other than bullsh1t.”
For this argument to fly, first you would have to prove the Misians were “everyone else in the world”, or even the majority (or new Bolsheviks?). If this were true, you wouldn't have to spend so much time promoting their dogma, would you?

"The essential problem with the free market is that it is reactive, not proactive."
Are you going to deny the market is reactive? I know Mises hated empirical evidence, but that's a bit much isn't it?
“How would you know one way or the other? You don't. All we know is that they considered the goods they bought more likely to satisfy their subjective wants”
There is a simple answer to that, that Mises would never condone -being a theorist and not an empiricist. We could just ask them.

“No-one has suggested that "everyone ends up with equal worth", so your entire argument is invalid. Define "equal worth". “
Actually, I think someone suggested that “free trade is mutually beneficial”.
Define “mutually beneficial”.
Posted by Grim, Saturday, 15 October 2011 7:42:32 AM
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Continued:
“No it’s not. It doesn’t disadvantage us, as I have just explained. The idea that it does is the oldest fallacy in economics, namely, "if A gets richer therefore B must be getting poorer".”
Again, if we break Mises cardinal rule and actually look at the evidence of the past few decades, we see pretty much all the countries which have exported manufactured goods have gotten richer, while their customers have gotten poorer.

“...that transactions take place because of equal worth. If that was the case, no transaction would ever take place, would it?”
Are you sure you understand your own argument, Peter Hume?
An apple can be freely traded for an orange, which might be of “equal worth” (1 for 1) and be “mutually beneficial”, assuming no coercion was attempted on either side. But to assume there was no coercion would be to suggest either;
a) a perfect state of LAW (involving, Rothbard would claim, state coercion)
b) perfect equality between trading partners (no bullying).
What a wonderful world that would be.
The greatest irony is that you persist in implying that I'm forcing my views on everyone, and insisting that I'm right, and everyone else is wrong.
Perhaps you should remove the plank from thine own eye.
Posted by Grim, Saturday, 15 October 2011 7:43:49 AM
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