Saturday, August 04, 2007

The future's not ours to see

One of my pet themes is the importance of culture in economics.

Free trade is very good for those countries with high levels of education, technical skills, infrastructure etc. All these things being relative of course. You also need an government that doesn't hinder, entrepreneurial ethic among some and a work ethic among many. Britain in Victorian times had all of these and so was naturally keen on free trade.

Now we don't have the education system (with the implication for future technical skills), the government or the work ethic. Having a free market won't solve at least two out of three of those. After all, if it was possible to simply move into new areas easily, they'd have been able to make cars that people wanted to buy. Cars are as hi-tech an item as any these days, so if we can't make those what's suddenly going to make us turn out memory sticks or holographic videos ?

Conversely, with the right culture, technology and education, you can be successful with some pretty unfree markets. Japan 1960-1985 was protectionist and institutionally corrupt, but raised its game over that period from cheap plastic toys to the best cars, cameras and electronics in the world.


At Brussles Journal, Marc Huybrechts gets the crystal ball out :

It is often argued that authoritarian/totalitarian regimes inevitably breed high levels of favoritism and unaccountability, and therefore prove to be inferior economically and militarily in the long run. It is also claimed (or, rather, hoped) that authoritarian capitalist regimes will tend to democratize after passing a certain threshold of development. In a recent article in the July/August issue of the magazine Foreign Affairs, entitled The Return of Authoritarian Great Powers, the Israeli academic Azar Gat examined these and other claims. He notes that higher levels of social discipline can offset the inefficiencies of favoritism and of unaccountability, and that a transition to democracy by today’s authoritarian capitalist powers is not inevitable. Indeed, some of the differences between now and much of the past century are striking. For instance, the previous totalitarian capitalist great powers, Germany and Japan, were crushed in war and threatened by soviet power, and subsequently lent themselves to major restructuring and democratization. Also, many smaller countries that chose capitalism (and to some extent also ‘democracy’) over communism, did so in part because of the absence of a serious rival economic and political model and also because of Western liberal hegemony on the world stage. Today’s geopolitical situation is quite different. China and Russia represent a return of economically successful authoritarian capitalist powers, but they are much larger (and thus potentially much stronger) than the defeated authoritarian capitalist great powers of the previous century. The risk is real that a powerful authoritarian capitalist order is emerging in the world that “allies political elites, industrialists and the military” (writes Gat). Such an order is likely to be ‘nationalistic’ in a negative sense, i.e. in the sense that it will not favor liberal democracy and individual freedom.

I see exactly what he means. Those who wittered on about the US 'military/industrial complex may not have seen nothing yet. And that doesn't necessarily mean their economies will fail. We have pretty free markets, a ruined culture and education system, and our economy seems to me to be running on empty. As Elliott and Atkinson put it :

Hardly noticed in last Thursday's excitement was the release of the latest set of trade figures from the Office for National Statistics. These showed that in March, the UK imported £7bn more goods than it exported - more than 6% of GDP. This figure alone gives the lie to the notion that Britain under Labour has cracked the age-old problem of inflation, since a trade deficit is merely disguised inflation, evidence of excess demand that can only be met through imports.

It's not difficult to see why the UK is running a trade level of this size: consumption has been rising fast while manufacturing output has flat-lined. Unlike Germany, Japan, Sweden - or even the US, which has a huge trade deficit itself - Britain is no longer an industrial nation. Is this worrying? Well, it scares the life out of me, but not it seems the government. The fantasy here is that we can cope with living beyond our means at a national level through the profits generated by the City and by building up Britain's "knowledge economy". A £7bn trade deficit suggests we have some way to go; hardly surprising since the fastest growing job in the 1990s was hairdressing and the UK now has as big a slice of its population working as servants as it did in 1860.


Sorry about the pessimism. It was Ecclesiastes at Mass again tonight.

23 comments:

Henry said...

You might care to consider the destructive effect of our tax system on the economy. It has been estimated (Fred Harrison) that it results in around £130 billion in lost production annually. That is in addition to the running costs which are about 6% of what is collected. But it comes nowhere near providing the revenue needed to fund decent public services and a decent public realm.

Anonymous said...

Knowledge economy - bullshit! I wonder if the halfwits who bandy terms like that around have a clue what they are on about.

Ever since the 'service economy' was being touted, the 80s bullshit version of the knowledge economy I noted something.

Look in a school pencil case. Rulers, erasers, compasses, pens, pencils - where are most of them made? Germany and Japan.

These are really low-tech bits of kit but somehow the memo telling Germans & Japanese they had to stop making them and move into the service sector never got passed on. 20 years on and they still havnt got the memo.

What we need is a crack team of libertarian economists to parachute in and tell them where they are going wrong.

Japan is interesting in two ways. They dont have mega rich Wall St/City types directing investment and they dont have mass 3rd world immigration. Honestly! How can you run a 1st world economy like that?

Martin said...

Laban,

In economics, culture is unimportant. That's the whole problem with letting economists run things. Any things.

Being based entirely on reason - the most beautiful description of 'economy' I have yet come across is Alain Besancon's 'the rational management of scarcity, expressed in accounting terms' - economics has assumed the status of a secular religion. However, its intellectual demand that equilibrium is perfection means its priests must use more and more abstruse formulae to try to determine where equilibrium is. Like alchemists trying to turn lead into gold, they think that the road to truth lies in back of the fag packet differential topology.

If you think I'm being a bit harsh, ask yourself this - day in, day out, we're told that 'globalisation' is good for us.

My problem with this contention is that nobody who makes this statement, from Gordon Brown downwards, can tell me what 'globalisation' is. I've started collecting definitions - so far I've encountered four whole ones and a half one.

As practiced now, economics does not admit of the foibles of human behaviour. Yesterday, I treated myself to PJ O'Rourke's book on 'The Wealth of Nations'; one of history's great unwritten books would have been Hans Christian Andersen's analysis of Friedrich von Hayek. 'Spontaneous order'? BS. 'Altruism does not exist'? Whatever.

To criticise 'free trade' is taboo; yet our manufacturing sector has been allowed to die because of trade theories formulated 200 years ago to combat a very specific, and immediate, problem. Ricardo cooked up free trade because of the Corn Laws' impact on the price of bread; and in that situation free trdae was indeed good. However the Corn Laws' repeal rendered it redundant; the song was over, but the meoldy lingered on.

I think I'm running out of space - with your indulgence, I'll make another comment.

Martin said...

Laban,

Your anonymous commentor notes that his school ruler was made in Germany - there's a very good reason for that.

As constantly cited by Correlli Barnett, the Germans have a collective sense of purpose for which English has no word; they call it 'Schwerpunkt'. Barnett is an excellent historian, but after a while the sheer volume of validly sourced examples of where free trade has been allowed to let the United Kingdom down makes you want to open a vein.

For example, in 1914 British light manufacturing was so decimated by imports that we could not make bomb timers, the sort of thing that can be easily produced if you make clockwork toys. We had to import parts and labour from the USA, Sweden and Switzerland.

In the very same year, the UK did not manufacture the dyes used in military uniforms. We imported them all - from Germany.

Same thing before WWII. The Few flew in Spitfires which, if they had not contained American made instrumentation, would not have flown very far at all.

The difference between them and us is that German (and Japanese and French) 'Schwerpunkt', their sense of common purpose, realises the truth of what Pat Buchanan will go into his grave saying - that no nation can survive unless it can produce what it consumes.

No, we get 200 year old theories instead.

And if anyone says deficits don't matter, I invite them to make that argument to their bank manager.

Trade deficits are deferred inflation. And there is absolutely no such thing as 'the export of services'.

Henry comments about tax - with all due respect to him (as you might know I suffer from the Gilles de la Tourette Syndrome, so excuse me for being politically incorrect), that is the typically British, typically conditioned, typically spastic response to one very small part of one very big problem.

If you haven't come across it yet, I would suggest you read John Gray's 'False Dawn'; it deals with all this stuff, and although it was written in 1998 it is eerily prescient. Gray deals with rise of China and Russia in very straightforward terms - they will develop capitalist models that suit them.

Not us.

Meanwhile, our peripheral housing estates, filled with the sort of British working class that the Essex thug Simon Heffer (Heffer never mentions the word 'Glaswegian' without prefixing it with 'thuggish') makes a mint from calling 'workshy', will continue to decline. Unless radical steps are taken to cure this problem, in 20 years' time they will become like Sioux reservations in the USA - everyone getting hammered and trying to live from giro to giro.

A certain school of thought contends that this is the condition at which many of them have already arrived.

Socialism hasn't worked for these people. Laissez-faire hasn't worked for them.

Maybe 'Schwerpunkt' will.

What scares me is -whose 'Schwerpunkt'?

Marcusa said...

As I am, and do not have any education in economics, however it has for long time concerned me that our manufacturing base has 'disappeared'. This is not true of our 'colleagues' in Germany,Japan, Italy etc.
We import everything, we no longer manufacture the ammunition for our armed forces (there is an undereported fact that there is a severe shortage of ammo for the army.
Thanks Laban for this blog and the erudite comments that have followed.
Regards
Mal

Tim Worstall said...

"The fantasy here is that we can cope with living beyond our means at a national level through the profits generated by the City and by building up Britain's "knowledge economy". A £7bn trade deficit suggests we have some way to go; hardly surprising since the fastest growing job in the 1990s was hairdressing and the UK now has as big a slice of its population working as servants as it did in 1860. "

Slightly odd. Here's the Beeb's take on the trade figures:

"The shortfall in goods and services trade declined to £3.5bn from £4.2bn in April, according to provisional data.

That gave the UK its smallest trade gap since October 2005, largely because of an improvement in the goods deficit, which shrank to £6.3bn from £6.9bn.

Surplus on trade in services was £2.8bn, the same as in April."

You do need to look at the surplus (or deficit) on goods and services, not just goods. I agree that it still doesn't balance but you can see hat we are indeed exporting more services than we import? And that this makes up for at least some of our goods imports?

Anonymous said...

"Invisible exports" are all the transactions that analysts can't find a name for. If its big enough, and has a name (eg ICI) it can be measured, and put on the shelf for display.

But governments are only good at spotting the big boys - like themselves. The little guys go on making a living, partly across the exchanges, without much notice, and mostly without names. If you're not visible from a Whitehall/Town Hall window, they can't see you!

Anonymous said...

I am the anonymous at 1:10.

Ive also read the books you mention, 'The Audit of War' & 'The Lost Victory'. Vein opening stuff indeed.

What we get from liberal/libertian economist types is is ideology rather than practicality.

Ive mentioned this before here I think but if one drives in France one notes that 60%+ of cars on the road are French. French drivers at some level opt for French cars. As for vehicles owned by the state I can safely say its all but 100%. Bin lorries, police cars, municipal trucks etc Ive never seen one that wasnt French built.

A libertarian type (hello Anticitizenone, Verity!) will now pop up and tell us that if it werent for subsidies French drivers would buy all sorts (but would they?) and the horrid French state is distorting the market. That 'really' the auto industry in the UK is just as healthy - and say it with a straight face.

Yet are French vehicles cruddy Lada style things that cant hold their own on the world stage? Apparently not.

UK politicians have been happy to tell us for years that it doesnt matter which firms actually make the cars. I actually heard a Tory years ago saying that most people thought Ford was British. Therefore it didnt matter if Rover was sold off. There you have it. Economic policy resting on the solid foundation of some peoples misinformed views on corporation ownership.

dearieme said...

But what has most conspicuously gone wrong isn't the Free Market Scetor of the economy, it's the Government sector. They quite deliberately buggered up the schools, for example. The NHS is a disgrace. And if you approve of government interference in business, you have to defend government-owned horror stories like the National Coal Board, or government-implemented and protected idiocies like British Leyland.

Martin said...

Dearieme,

O deary, deary me.

You pile half truth upon shibboleth like Pelion on Ossa.

"But what has most conspicuously gone wrong isn't the Free Market Scetor of the economy, it's the Government sector. They quite deliberately buggered up the schools, for example."

Hmm...why was that? Because the grammars got very much higher per head funding than the secondary moderns (Barnett, 'The Verdict of Peace'). If the secondary moderns had got equal funding they'd have been quite good.

The reasons the grammars got more money was that they were teaching clever boys how to be good chaps and to read Themistocles - while those same boys' German counterparts were being taught stuff which might have slightly more practical application than knowing your datives than your ablatives.

This psychosis was, of course, a consequence of the same early 19th century evangelical Anglicanism which also helped give us - free trade.

Now, of course you mention the National Coal Board and British Leyland. Laissez-faire economics, the delightful school of thought preached by Tim Worstall, the one that gave England the Poor Law (Ferguson, 'Empire'), doesn't really like the idea of labour being able to organise. I have a theory, one which I've never really put down on paper before, that the poor history of British industrial relations were nothing to do with Chartist, Socialist or Communist ideology but a direct consequence of laissez-faire instead - the enclosure of common pastures having turned them off the land, the proletariat ended up in the towns, dividing their labour like good wee children of Adam Smith. Along comes free trade, all of a sudden it's very important for us to give the Bujumbonians a helping hand, Richard Cobden feels very holy for a minute, the British market gets flooded with uncompetitively cheap goods and the British proletariat get stuffed. What they've been told is shown to have been a pack of lies. The elites enclosed the common pastures for their own enrichment; and their public school educated, Pliny-reading, Methodist chapel going sons were more interested in vague sh*t like 'peace' with other nations with whom we were at little risk of going to war than with the poor and wretched on their own doorsteps.

No nation has encouraged the departure of its own people from its shores more avidly than the United Kingdom. They can't get us out of here quick enough. That alone says much for the mindset of those who govern us.

Tim W., although a great gentleman, is so in thrall to this laissez-faire crap that he does not mention the rider attached to every single Office of National Statistics' release on trade figures that I have read for at least 18 months - that carousel fraud might affect the picture.

Yes, guys, carousel fraud has rendered the United Kingdom's true trading position incapable of measurement - a great victory for the free market.

And services cannot be exported. Period.

Dave said...

I have to disagree with the premise here, Britain is not a Liberal Democratic Free Market.

If you took someone from 1850's, or even 1920's and brought them to live in modern Britain they will be horrified by the level of taxation and over baring government regulation.
Farmers are not even allowed to bury dead animals on their land now, they have to pay to have them taken away.

Our political system is not democratic, 3 parties 95% same policies in practise.

Our culture is libertine not 'Liberal'. Just because you have the 'freedom' to do something doesn't mean you have to do it.

The market with all the authoritarian regulations sure as hell isn't free.
The EU's CAP would be one example, but there are hundreds more.


I support genuine liberal democratic free markets, but as long as its between countries of similar or the same culture, because its no good if one culture has certain standards that the other did not, child or slave labour for example.

Having a free market doesn't mean you have to choose the cheapest or foreign or whatever, if governments choose to buy foreign military equipment that is the fault of the government who makes the decision not the fault of 'free markets'.

E said...

Allow this ignorant person to raise a question.

I work abroad installing IT solutions. In the past two years I have worked in UAE and Rumania, both for telcos. This is a service. My company invoices for me, and charges a daily rate far higher than I take home. Expenses are also reimbursed.

In what sense is this not an export?

Anonymous said...

Libartarians are certainly fond of bashing the unions but why not corporations?

Why are corporations free of criticism? The pure market process is suspended within a corporation.

Martin said...

e,

You

"...work abroad installing IT solutions. In the past two years I have worked in UAE and Rumania, both for telcos. This is a service. My company invoices for me, and charges a daily rate far higher than I take home. Expenses are also reimbursed.

In what sense is this not an export?"

Money comes back in to the UK, for sure - but what leaves it?

Squander Two said...

> Money comes back in to the UK, for sure - but what leaves it?

Labour. I am not aware of any economic theory that gives zero value to labour, apart from yours, Martin.

If your argument is that services cannot be seen and touched and picked up, you should be aware that that argument, if valid, doesn't show merely that services can't be exported, but that they can't be bought at all.

I work for a UK firm of about 1500 people. The only thing our firm does is sell services to a large US company. None of us ever does anything that is used or useful in the UK. We bring millions into the UK economy, and what leaves us for the US? Expertise, labour, know-how, skill, enterprise. I'll be sure to let my colleagues know that we don't actually export anything.

Of course, underneath all this, it's a popular fallacy that exports make a country wealthier and imports make it poorer. But hey.

Anonymous said...

There are 50million people in China recongnisably middle-class, out of a population of 1300million (and still growing). They are also crucially dependent on the West. They are not quite the success story some would have it - wait till the US slumps and then we will see the great Chinese lie exposed.

Martin said...

Squander Two,

"I am not aware of any economic theory that gives zero value to labour.

Neither am I. Indeed, Roach's 'global labour arbitrage theory' of globalisation indicates that labour's just about the only production factor to which any value is attached these days.

"If your argument is that services cannot be seen and touched and picked up, you should be aware that that argument, if valid, doesn't show merely that services can't be exported, but that they can't be bought at all."

How, please?

Division of labour? Do solicitors pull teeth? Or accountants ride racehorses?

"The only thing our firm does is sell services to a large US company. None of us ever does anything that is used or useful in the UK"

Interesting example of laissez-faire 'Schwerpunkt'. But whatever.

And I bet that the efficiency of everything you do is dictated by the quality of your IT; a tool which might just have been acquired solely on the basis of cost, not whether it might the right one for the job in hand.

And if all you're doing is servicing one client, Squander, that tells me that the labour of 1,500 people is divided so finely that it's probably down to a vanishing point; and that everyone's job might be at risk from a service centre in Bangalore doing the same job but with a workforce earning on average a fifth of what you are paid.

"Expertise, labour, know-how, skill, enterprise. I'll be sure to let my colleagues know that we don't actually export anything."

No, you, you're not exporting anything - what you are doing is performing work more cheaply than it can be performed elsewhere. Someone somewhere else might be able to perform it even more cheaply than you can; and then your labour will have no value, because you'll be unemployed.

Free trade was not meant to rest solely upon labour. Its exemplars are wine and cloth; not respective pay rates in Belfast and Bombay.

"Of course, underneath all this, it's a popular fallacy that exports make a country wealthier and imports make it poorer. But hey."

Yes, hey. Where's your focus? On the wealth? Or the country?

Your choice is that stark. Read the examples I quoted above and see then if you believe that all imports make us richer.

Yes, some imports can make us richer - if these are of goods that we cannot make ourselves. Wine and cloth - you sell us cashew nuts, we sell you landmines.

But importing stuff we can make ourselves in order to lower costs doesn't really do very much for, you know, the country.

And you'll also know that the 'imports make us richer' canard stems from a very simple, almost fatal flaw that crept into Bastiat's thinking when he was chortling to himself writing the Candlemakers' Petition; he forgot that sunlight has no cost.

Anonymous said...

Good points there Martin. The reason many jobs/services/industries have relocated to India/China is not because they are done 'better' its because the workforce is vastly cheaper at a given skill level.

But I believe there are cases of automated production lines from the west being replaced in China by hand assembly.

Thats not progress is it.

Squander Two said...

> How, please?

OK, you're saying services can't be exported because they aren't things that can be picked up and moved from one country to another. However, neither are they things that can be picked up and moved from one person to another, yet you seem to have no trouble with the idea that a person can buy a service from another person. Either services are mobile or they aren't. You've not given any reason why they should be mobile in general but not across national borders.

If I hire a cleaner, they clean my house. If I hire a French cleaner, they clean my house. The terms "import" and "export" merely describe where the money goes when I give it to them. When you say services can't be exported, which is it: that my house doesn't end up clean or that the money doesn't end up in French hands?

> Division of labour? Do solicitors pull teeth? Or accountants ride racehorses?

No, they don't. And? I literally have no idea what your point is supposed to be there.

> I bet that the efficiency of everything you do is dictated by the quality of your IT; a tool which might just have been acquired solely on the basis of cost, not whether it might the right one for the job in hand.

Look, I'm not going to tell you who my employers are, but you're wrong on every level. By IT, I think you're referring to hardware, and you're wrong: we're working on our client's mainframes, all of which remain in the US. All we need is to connect to them. Our hardware is just a bunch of PCs and a building -- hardly unique. The only reason to hire my firm is the quality of our labour.

> And if all you're doing is servicing one client, Squander, that tells me that the labour of 1,500 people is divided so finely that it's probably down to a vanishing point

Again, wrong. You have no idea how big our client is. You know, if you have absolutely no idea about something, it's generally a good idea not to talk quite so authoritatively about it.

> and that everyone's job might be at risk from a service centre in Bangalore doing the same job but with a workforce earning on average a fifth of what you are paid.

It's not about what the workforce are earning, it's about what the company are charging, and a fifth isn't even remotely close. Again, I'm not going to give you details, but our client do in fact use centres in India as well as ours, and that's never yet been any threat to us. The Indian companies fill a different niche than what we do, and the extent to which they are cheaper is negated by other factors -- and I don't mean the quality of their work. In the face of all this dreadful competition that you think should be destroying us, all we've ever done is expand.

> No, you, you're not exporting anything - what you are doing is performing work more cheaply than it can be performed elsewhere.

Whether it's cheaper or more expensive has nothing to do with whether it's an export.

"No, you, you're not exporting anything - what you are doing is building a car more cheaply than it can be built elsewhere." Yes. And once that car is bought in another country, it is called "export". By sane people.

> Someone somewhere else might be able to perform it even more cheaply than you can; and then your labour will have no value, because you'll be unemployed.

This is always true for everyone, whether they're performing a service or building a product. Again, it has nothing to do with whether their labour is being exported.

> Read the examples I quoted above and see then if you believe that all imports make us richer.

I don't need to read them to know that I believe no such thing, which is why I said no such thing.

Speaking of which...

> But importing stuff we can make ourselves in order to lower costs doesn't really do very much for, you know, the country.

You appear to have given yourself an idea of what my opinions are and started arguing with it. That idea didn't come from me.

Martin said...

Squander two,

"Either services are mobile or they aren't. You've not given any reason why they should be mobile in general but not across national borders."

As Damed Edna says, call me old-fashioned, but I prefer to think of them as 'personal'.

"The terms "import" and "export" merely describe where the money goes when I give it to them."

Where did you see that defined?

Because it's b*ll*cks. By that standard, the only stuff that would be either imported or exported is money itself.

"When you say services can't be exported, which is it: that my house doesn't end up clean or that the money doesn't end up in French hands?"

Righty ho...

So you would class wages paid by a British employer to a French employee in Britain as exports?

That's a reductio ad absurdum.

"I literally have no idea what your point is supposed to be there."

Read it again then, perhaps even in context - or try thinking about it.

"I'm not going to tell you who my employers are, but you're wrong on every level. By IT, I think you're referring to hardware, and you're wrong: we're working on our client's mainframes, all of which remain in the US. All we need is to connect to them. Our hardware is just a bunch of PCs and a building -- hardly unique. The only reason to hire my firm is the quality of our labour."

Ah, softwareless hardware! Call the padre! It's a miracle!

Squander, your clients' mainfranes are a tool. Tools have three critical limitations; they are only as good as their makers, they are only as good as their users and they are only as good as the uses to which they are put. You don't use a blowtorch to hammer nails. Solicitors don't use dentists' drills to write wills.

Now I'm sure that your colleagues and yourself are all desperately, ravishingly, breathtakingly, mindbogglingly, stunningly, blindingly good at whatever it is you all do - but you're probably doing just as well as someone who could do it very much more cheaply in Bangalore.

"Again, wrong. You have no idea how big our client is."

Couldn't give a monkey's actually.

And I thought size didn't matter...

"You know, if you have absolutely no idea about something, it's generally a good idea not to talk quite so authoritatively about it."

Sorry, did I touch a raw nerve? Cold light of reason dawning on youse, like?

"It's not about what the workforce are earning, it's about what the company are charging, and a fifth isn't even remotely close. Again, I'm not going to give you details, but our client do in fact use centres in India as well as ours, and that's never yet been any threat to us."

The operative word in that rhetoric is 'yet'.

"The Indian companies fill a different niche than what we do, and the extent to which they are cheaper is negated by other factors -- and I don't mean the quality of their work. In the face of all this dreadful competition that you think should be destroying us, all we've ever done is expand."

For the moment.

Sic transit gloria mundi...sigh... What was it Freddie Mercury said? 'Another one bites the dust'?

I'll ned to get my big styrofoam hand from 'Gladiators' out of storage...

"Whether it's cheaper or more expensive has nothing to do with whether it's an export.

"No, you, you're not exporting anything - what you are doing is building a car more cheaply than it can be built elsewhere." Yes. And once that car is bought in another country, it is called "export". By sane people."

1. You've just lost my respect by questioning my sanity.
2. And I marvel at your logic in saying that "Whether it's cheaper or more expensive has nothing to do with whether it's an export", when that's precisely the rationale used to determine whether or not a lot of those 'import' thingummys are worth letting in...

But then again I'm mad, so I don't know sh*t...

And yet...you do make a very important point; badly, I'll grant you, but you do try.

A prevous commentor noted that a lot of Brits think Ford is a British company. Did sales of Fords made at Dagenham go into British trade figures? If so, why? Ultimately the net revenues were going back to the USA.

Should have been marked as American trade instead.

"This is always true for everyone, whether they're performing a service or building a product. Again, it has nothing to do with whether their labour is being exported."

You have a short memory. This practice only really started round about 1991.

And I take it you agree with the 'global labour arbitrage' theory of globalisation then?

pedant2007 said...

There are works of Themistocles available for reading?

Squander Two said...

> You've just lost my respect

Damn.

> So you would class wages paid by a British employer to a French employee in Britain as exports?

I'm sorry; I should have made my example clearer. What I was thinking of was a French cleaner who lives in France but just jets across to clean your house. Slightly absurd example with cleaning -- though it's hardly far-fetched for a Calais-based cleaning firm to accept contracts in Dover -- but it illustrates the point. French worker, pays French income tax, keeps money in a French bank, spends it in France, but the money came from Britain in return for service performed in Britain.

> By that standard, the only stuff that would be either imported or exported is money itself.

German car bought in Germany: car stays within national borders, money stays within national borders: not an export. German car bought in England: car crosses national border, money crosses national border: an export. In what way does that explanation imply that the money has been exported but the car hasn't?

> I marvel at your logic in saying that "Whether it's cheaper or more expensive has nothing to do with whether it's an export", when that's precisely the rationale used to determine whether or not a lot of those 'import' thingummys are worth letting in.

You are conflating the reason for doing something with its definition.

> This practice only really started round about 1991.

What practice? I referred to the fact that any worker can face redundancy if another worker starts doing their job more cheaply.

> Read it again then, perhaps even in context - or try thinking about it.

Oh, I have, I have. It's still a total non-sequitur. "Services can be exported." "But solicitors don't use dentists' drills to write wills!"

> your clients' mainfranes are a tool. Tools have three critical limitations; they are only as good as their makers, they are only as good as their users and they are only as good as the uses to which they are put.

Yes, obviously. And that is my point: that it is our expertise that has a value.

>> "Again, wrong. You have no idea how big our client is."
> Couldn't give a monkey's actually.


You brought it up: it was you who decided to tell me that my firm has too many employees to service just one client. Based on no knowledge.

> Sorry, did I touch a raw nerve?

Er, no. It was just good advice. Like not writing reviews of films you've not seen. But I don't actually give a damn how stupid you make yourself look. Please, do carry on. Oh, you did:

> Ah, softwareless hardware! Call the padre! It's a miracle!

Now you're trying to lecture a professional computer programmer about how computers work. Wow.

> you're probably doing just as well as someone who could do it very much more cheaply in Bangalore.

I've already told you that we're not: there is no significant saving in moving our work to India. Some people, not even knowing who I work for, might guess that I know a little more about my company than they do and would therefore just take my word for it. But not you. You just shout louder. It's terribly convincing.

Bye.

Martin said...

S2

You write,

"I'm sorry; I should have made my example clearer. What I was thinking of was a French cleaner who lives in France but just jets across to clean your house. Slightly absurd example with cleaning -- though it's hardly far-fetched for a Calais-based cleaning firm to accept contracts in Dover -- but it illustrates the point. French worker, pays French income tax, keeps money in a French bank, spends it in France, but the money came from Britain in return for service performed in Britain."

No I think it's just a bad example. You're trying to graft labour onto trade.

"German car bought in Germany: car stays within national borders, money stays within national borders: not an export. German car bought in England: car crosses national border, money crosses national border: an export. In what way does that explanation imply that the money has been exported but the car hasn't?"

Context alert! Context alert!

You had written,

"The terms "import" and "export" merely describe where the money goes when I give it to them."

I replied,

"Where did you see that defined?

Because it's b*ll*cks. By that standard, the only stuff that would be either imported or exported is money itself."

I think you've tripped yourself up.

"You are conflating the reason for doing something with its definition"

Don't see how.

"What practice? "

Offshoring.

"I referred to the fact that any worker can face redundancy if another worker starts doing their job more cheaply."

Global labour arbitrage theory in a nutshell.

Everything to do with wages, nothing to do with 'trade' per se.

"Oh, I have, I have. It's still a total non-sequitur. "Services can be exported." "But solicitors don't use dentists' drills to write wills!"

"Oh, I have, I have. It's still a total non-sequitur. "Services can be exported." "But solicitors don't use dentists' drills to write wills!"

OK...

At comment 11.10 you wrote,

""If your argument is that services cannot be seen and touched and picked up, you should be aware that that argument, if valid, doesn't show merely that services can't be exported, but that they can't be bought at all."

At comment 8.09 I wrote,

"How, please?

Division of labour? Do solicitors pull teeth? Or accountants ride racehorses?"

Perhaps my point was not as clear as it might have been.

Of course they can be bought - I would be out of work if they could not.

But what is critical to the success of your argument is the idea that a service, which by its very nature must be conducted personally, can be carried out across borders - a leap necessary to call it 'export'.

London lawyers might act on behalf of New York clients, but only in respect of affairs regulated by British law. The service is not exported, because the purpose of its consumption is to enable some outcome to be achieved here.

In your line of work, presumably the services you perform are all to further the interests of a USA entity. You might believe that every service you provide is consumed in the USA so, yes, I can see how you might fall into the trap of thinking that you perform export services; but for that argument to be successful, it would have to be proven that all of the fruits of the service were enjoyed in the USA.

Which of course, they don't; because they could not be eaten without having you at the other end of the line, wherever you might be.

"Yes, obviously. And that is my point: that it is our expertise that has a value."

I've never claimed it didn't happen. It's the value's moving target that's the problem.

"I've already told you that we're not: there is no significant saving in moving our work to India. Some people, not even knowing who I work for, might guess that I know a little more about my company than they do and would therefore just take my word for it. But not you. You just shout louder. It's terribly convincing."

S2, your last few remarks sort of slid into hysteria.

Suffice it to say that I don't think I have ever claimed to know more about your job than you do; but what I have tried, and perhas failed, to do is maybe shake you out of your complacency.

Beacuse you never know when somebody cheaper than you. It's called 'competition'.