- Competitive advantage: trading partners generate higher overall productivity via trade.
- Free market efficiency: free markets are very efficient at allocating capital between profitable activities.
- Free trade: maximizing efficiency and overall productivity between trading partners.
- Floating currencies: work to correct imbalances between trading partners.
However, be careful, there are a lot of nuances in there! Now, let's turn our attention to an article that caught my ire:
Adding Value To Our Raw Materials Won't Make Us RichSounds good, right? Well, I'm sure you noticed the title to this post so it will come as no surprise that I have a few issues with such a statement. The only part I agree with is that if we allocate productive capacity to one area it will not be directly available to be employed in another area. The rest has a lot of baggage riding with it.
It’s important to keep in mind that when discussing international trade, exports are costs. The purpose of engaging in international trade is to import goods and services more cheaply than we can produce ourselves; exports are the price we pay in order to obtain those imports. Productive capacity that is devoted to making things that will be exported is productive capacity that is not available for what really matters to Canadians’ economic welfare, namely, domestic consumption.
For example, exports are not purely costs. To be ridiculously hypothetical we could allow tankers to siphon fresh water from coastal lakes and rivers for delivery to foreign parched lands. Well, shoot, we didn't even have to lift a finger, did we. Where is this allocation of productive capacity coming from in this case?
Another less contrived example. How about some smart software programmer creates software for a local company and then sells or licenses hundreds of thousands of copies to businesses outside the country? Look, we aren't living in a purely theoretical world anymore, and it's douchebag economics to present conclusions based on assumptions that we are.
Now, let's consider what we do with all this cash sitting in Canadian coffers due to exports. Yes, we could certainly make sure we spend all of it on trinkets and crap sold at Nmart if we wanted to. However, there is a concept known as investment as well. What if we decided to buy a stake in PetroChina or more realistically an Australian coal exporter? Oh no. Now we have expected capital gains or even a revenue stream magically arriving in our country. According to douchebag economics we'll have to import more crap for sure!
Sort of a side topic but I also have issues with how douchebag economics deals with unemployment. For example, if we are sitting around with non-elective unemployment then it's strange to suggest that further optimization, so that we get rid of well paying jobs in exchange for lower valued jobs, is going to be good for Canada. A higher paid populace with high levels of employment can lighten the tax burden for all, by spreading the load across more upper income individuals, while simultaneously reducing load on social assistance programs.
Finally, I consider it douchebag economics to suggest that the buying of more crap, in total, is more important than making sure that a larger number of Canadians are participating in the economy in a way that allows them to earn a good income, buy the things they need, and raise a family. Of course, these are somewhat social issues and can't easily be measured in dollars. Douchebag economics thinks that everything that matters is expressed in total dollars and absolute efficiency. It just isn't so.
While heading out of the domain of the quoted article I'll give you another example. Let's assume Canada decides to stop producing finished wood products and ship raw lumber to the USA. If we have 20,000 people employed in that field then we'll be putting those people into other industries as the jobs are lost. Yes, all true. However, let's say we shut down all finished wood product work overnight. I'd like douchebag economics to tell me the impact that this will have on real people today in exchange for longer term efficiency tomorrow.
When you see economics being spouted in the media you really have to take it with a grain of salt. Generally, think tanks or other motivated parties are spewing crap in order to promote a political or financial viewpoint that benefits someone.