I remember being taught in high school economics

[conuly]

that tariffs, long a favorite tool of protectionist governments, are typically bad in the long run. You save jobs, but at a high cost, and in the end free trade is better. Of course, this being high school you never know how much you're being educated vs. fed capitalist propaganda.

So I have two questions. First, is this actually accurate, and secondly... would it make sense to think of strict immigration controls as a form of tariff on labor rather than goods?

Comments

[melannen]

I think it depends on what you mean by "good", really.

Tariffs reduce imports.

The people who are currently in favor of tariffs because it will bring back American manufacturing jobs are probably wrong. In fact, most of the things those people blame on international trade are not really the fault of international trade. And usually what happens with reduced imports is not more cheap stuff is magically produced in the country, it's that people in the country have less access to cheap stuff.

Also, (relatively) free international trade is an important factor in the modern capitalist/imperialist economies, and restricting free trade is not actually good for those economies.

It also definitely hurts the trading partners, which is not good in a sense of not wanting people to be hurt. Reducing free trade will not make poor workers in other other countries magically better off either (which is sometimes what the leftist antiglobalists argue, super oversimplified), it will make them unemployed.

So to that extent, it's bad.

However, if you aren't 100% convinced that a capitalist/imperialist economy based on the massive overconsumption of cheap stuff provided by long-distance oil-burning transport is an unalloyed good, then... maybe tariffs aren't all bad in the long run? (They are probably still bad in the short run, though.)

I sometimes noodle around with the idea that the Embargo early on in US history (when ALL international trade was made illegal. No, all of it.) may actually have had a very strong role in the US's survival, and eventual dominance, as a country, because it very rapidly ended all the colonial trade norms that were still around from our time as a colony, and forced a rejiggering of the American economy to one that wasn't based entirely around being exploited by stronger countries. Sucked to live through, though. And certainly didn't succeed at keeping us out of the war.

(You see that to some extent in, say, countries like Cuba and Iran and even Israel, which have spent large periods of time cut off from most international trade, and while they aren't exactly utopias and standard of living isn't the highest, in some ways their economies are a lot more solid than in countries of similar size/age/culture that have spent their entire lifespan sucking up to the G8 instead. If I was sociopathic dictator-for-life of a small developing country, I would be very tempted to declare a total embargo just to see what would happen.

See also: some of the worldbuilding behind Wakanda.

Also, I don't think you get that effect if you are a, already G8, or b, just put in limited tariffs for some countries but still stay deeply politically and economically connect to the rest of the world. Then you get the downsides, very few of the possible upsidese)

[topaz_eyes]

The issue with "free trade" is that manufacturers tend to move their factories to the countries where labour costs are cheapest, because labour is the most expensive part of production. That's why goods end up being less expensive under free trade. Canada learned this pretty quickly in the late 80s/early 90s with NAFTA. Canadian manufacturing jobs went to the States, and American manufacturing jobs went to Mexico. Between the end of World War II and the signing of NAFTA, manufacturing workers made up the bulk of the middle class in both Canada and the US. After NAFTA, the US and Canadian economies began to focus more on information as manufacturing decreased in importance. But information also requires more education. In the 1960s my dad got a factory job while having only a Grade 10 education. He worked at the same plant for 36 years, supported a family of 6, and retired with his pension. That doesn't happen now. (The factory eventually closed about 5 years after that.) Almost every job demands at least a high school diploma now, or preferably a university degree.

would it make sense to think of strict immigration controls as a form of tariff on labor rather than goods?

Maybe? Again in Canada, the Harper government expanded the use of "temporary foreign workers" in several industries between 2006 and 2015. The idea was to supplement the workforce in areas where there were bona fide worker shortages. Usually, worker shortages should drive up labour costs overall. Except there were many instances of Canadian workers getting laid off (or just not hired) instead, mainly because it was legal to pay TFWs much less. The TFWs were also hugely exploited: e.g., they'd be limited to where they could work, their visas were tied to one employer, sketchy work conditions at times because they were kept in the dark about workplace standards. Not sure if this answers your question.

[movingfinger]

Keynes started out thinking that tariffs are terrible and cost jobs in the long run, but changed that opinion thanks to the Great Depression. "Tariffs are terrible and cost jobs" can be true and it can also be false depending on what other policies a government pursues. For example, a government which only sets tariffs and expects capital to pick up employment without compelling inducements will probably fail, particularly now given stateless capitalists' relentless self-interest; a government which also uses the tools available (e.g. taxation, subsidies, direct investment) to stimulate hiring will be more successful. [IMO IMO IMO imagine this in flashing red] I am not an economist.


Immigration control as a tariff on labor: in a way we are seeing something like that play out with the current situation. People with no grasp of reality, or more likely mendacious people, claimed that immigrants were taking jobs from others by working for artificially low rates. It turns out that immigrants are doing jobs that others will not do and the low rates of pay are because the efficiency of the capitalist system is to always screw a worker out of a nickel if there is any way to do it. Anecdata of wage hikes in farm work not attracting the supposedly unemployed-at-the-expense-of-immigrants labor force indicate that there has been no loss of jobs to immigrants. Large companies like Wal-Mart pay a higher hourly wage, but do not schedule workers for sufficient hours to get benefits or enough take-home to support a household. The effect of immigration suppression for the short-term seems to be a standoff (I haven't heard of ICE raiding Midwestern meat processing plants, for example, this week) with a drive toward private investment in automation accelerating for the long term. Many jobs, in the long term, will go away altogether.


A lot of the the problem with any economist's thinking on anything is that the devil is in the assumptions---of free-moving labor, of frictionless trade, of opinionless consumers, and of capital that somehow can be exploited fully and efficiently without damaging welfare.

[chickenfeet]

With odd exceptions it's not true that labour is the most expensive factor of production but it is the one that varies most. I could build a factory to make baked beans but the beans and the tomato paste would cost me more or less the same wherever I went. They would cost many times the cost of the labour in an automated factory but the labour would still be much cheaper in Bangladesh than California.

In the case of NAFTA it was less about labour cost and more about consolidation. If Lever Bros had a plant in NJ that produced every thing they needed for the US, it was much cheaper to crank up production by 10% to supply the Canadian market too there than maintain a separate, much less efficient, plant in Toronto.

Tariffs could make it worthwhile to keep a plant in Canada but the cost would be higher prices for Canadians.

[chickenfeet]

Part of the problem with this thesis is that is predicated on the notion that "free markets" are the most efficient. The trouble is that hardly ant actual markets meet the stringent conditions that define a "free market".Once you begin to relax those conditions it doesn't necessarily follow that following some free market like policies will produce the most efficient result consistent with the constraints. This is known as "Lipsey's theory of second best" which has been understood by economists and ignored by politicians for decades.

[siderea]

I have no idea, but I just want to express my utter delight at your posing the question.

[conuly]

Anecdata of wage hikes in farm work not attracting the supposedly unemployed-at-the-expense-of-immigrants labor force indicate that there has been no loss of jobs to immigrants.

Shitty-as-hell conditions probably play their part here too. It's not just that the work is hard or unpleasant, it's that the living conditions suck on top of that.

[nodrog]

Yes, and - yes.

[conuly]

Thanks :)

I do try.

[conuly]

So what do we know about the effect of tariffs in the real world, and why do I keep trying to double that r?

[conuly]

a government which also uses the tools available (e.g. taxation, subsidies, direct investment) to stimulate hiring will be more successful.

So... for example... if you put a lot of cash into the economic stimulus that is SNAP, and also hired lots of people to mend the infrastructure, all their cash would have to go somewhere and capitalism would gladly provide stuff for those folks to buy?

Many jobs, in the long term, will go away altogether.

And if we don't figure out a solution for that we're in the deep shit.

[conuly]

If I was sociopathic dictator-for-life of a small developing country, I would be very tempted to declare a total embargo just to see what would happen.

Not the worst thing a dictator-for-life has ever done.

[chickenfeet]

I think what we kinow is that it's very difficult to predict the consequences. Economies are extremely complex systems (and not, of course, isolated from politics). I would argue that the SAFEST approach is to try and build free/far trade areas with standardised rules relating to employment rights, environmental protection, product standards and so on. I can't guarantee this is the MOST efficient economic solution but it does have the advantage that countries with heavily interdependent economies rarely go to war with each other. I realise that this is unlikely to convince the Honourable Member for the 18th century or the Orange Moron.

[peoriapeoriawhereart]

I did read some post WWII history that suggests moving the most 'unskilled' aka the low wage manufacturing jobs was intentional national policy not merely business decisions being made.

The difficulty now is that tariffs affect things that there aren't alternatives for in the short term in that the supply chain crosses borders often multiple times when it comes to cars and other complicated things. And most losses of jobs are related to automation and some consolidation efficiencies. You'd be amazed at how much people Hate outsourcing that crosses state lines.

[melannen]

Well, obviously I would be a well-meaning sociopathic dictator for life! One who wanted what was best for the people! Just one who didn't mind crushing a few small folks underfoot in pursuit of the big picture. (Like Doctor Doom.) (I may have put a worrying amount of thought into this over my life span. Or just played too many Sim games in the 90s.)

[topaz_eyes]

Canadians already pay higher prices for a lot of goods compared to the US, even with NAFTA. Very little of that is actually due to tariffs. We also have higher taxes, supply management in some industries, smaller markets, less competition...

[highlyeccentric]

I do know that 'free trade agreements' with the US tend to be better for the US than they are for the other party.

[chickenfeet]

No question. But the dynamic of the job losses due to NAFTA was more due to supply chain considerations than comparative labour costs.

[veryrarelystable]

Economics nowadays is about where medicine was in the nineteenth century -- the experts know what the right answers are because they have a comprehensive theory that predicts them, and the fact that the real world keeps getting it wrong reflects badly on the real world, not on the theory.
I'm basing this on the fact that my job (taking notes in university lectures for students with disabilities) takes me to classes in all kinds of subjects, including economics and the health sciences, and I get to compare their respective attitudes to data vs. theory directly.
That said, there are some parts of economic theory that align better with reality than others, and the part about trade being generally a good thing is one of the better ones. Countries that block themselves off from trade tend to be fairly miserable.
Some of the countries that are now economic powerhouses are ones that, in the past, isolated themselves from international trade, and so had to build up their manufacturing base to produce everything for themselves. But I'm talking about places like Germany and Japan, and it's probably worth finding a different way to build up one's economy that doesn't replicate the conditions of Germany and Japan in their isolationist phases.
If your infrastructure is running at peak efficiency, i.e. you're paying not one cent more for it than your current needs dictate, and then you get immigration on top of that, your needs are going to get bigger and your current infrastructure isn't going to cope and you're going to start incurring costs from infrastructure failures (e.g. transport congestion). There are three ways to deal with this problem; all of them incur costs and you have to pick one.
There is the populist option: cut off the flow of immigration. You'll need to spend a lot of money strengthening your borders, and you'll erode away social trust by painting excess immigrants as wrongdoers.
There is the free-market option: let in the immigrants and allow your infrastructure to fail. The market adapts to present needs, not future ones, so market-driven infrastructure never has quite enough to cover immigration. This is popular with governments because although it does incur costs, as in infrastructure failures, you don't have to admit to those costs up front on your policy budget. You then blame the infrastructure failures on immigration, thus fomenting public suspicion of immigrants, eroding social trust, and creating support for the populist option.
And there is the social democratic option: over-fund your infrastructure so there's slack in the rope, and then let in the immigrants. Governments don't like this because they have to pay the costs up front and admit that they're doing so to high-tax-bracket voters. But there would be costs with either of the other two options anyway, and this one is by far the least damaging to social trust.

[conuly]

Succinct!

[tcpip]

would it make sense to think of strict immigration controls as a form of tariff on labor rather than goods?

Yes. Exactly that.

However, I will put the caveat that under a free-movement of goods and labour, there is an exported cost of labour-rights and quality of production. Capital will move the cheapest source, and often the cheapest source is where people are executed for joining unions, or slave labour camps

[brokenallbroken]

It's one of my favorite thought games too.

[gingicat]

Well said.

[mindstalk]

Trade is good. Tariffs are a tax on trade, and you get less of what you tax. Of course, you have to tax *something*.

Economists are very proud of the concept of comparative advantage, justifiably so. Even if you suck at everything, it's still worthwhile to trade with you, with you specializing in what you're relatively best at. A lawyer who can type at 100 WPM can profitably hire someone who types at 30 WPM because her time is much better spent lawyering than typing.

(Hidden assumption: that the inferior trade partner is going to continue to exist no matter what. If you can kill them and replace them with someone more efficient, it's a different matter.)

Trade is like advanced technology: if you wanted to turn sheep into cars, you would need a nigh-magical combination of not just nanotechnology but transmutation. Or you can sell sheep and buy cars with the money. Or oil into medicine. Interrupting trade is like breaking a magic cornucopia machine, and why sanctions can be so devastating.

(Though that's only really true for proper subsets of the economy. Trade lets me turn lead into gold but doesn't let the whole world turn lead into gold.)

Tariffs can have some practical advantages, though. For a country with poor tax collection, it can be easier to raise revenue by tariff than by an income or sales tax. In many cases imports are preferentially imported by the rich, in which case tariffs are implicitly progressive.

Also, my limited understanding is that every industrial power has industrialized behind protective tariffs, except for Britain which didn't have any competition worth protecting from since they were inventing industrialization.

Relatedly, while comparative advantage is great for maximizing income in the short run, "I'll specialize in a diverse industrial economy and you specialize in selling me raw materials" is not good for you in the long run; the former is probably far more robust to changes than the latter. Tariffs and domestic subsidies would make things less efficient but that inefficiency might be worth paying as insurance.

(Similar logic applies to farm subsidies. I've come to think that it's good policy to make sure you have an oversupply of food because you *really* don't want an undersupply.)


As for labor... that's probably valid. Certainly immigration controls have been said to be preventing major economic gains (especially for the immigrants); I think some estimates are that world GDP could double if everyone who wanted to move did.

[moon_custafer]

My sociopathic dictator dreams mostly just involve forbidding citizens to put up signs without first passing a written test on the use of apostrophes and quotation marks.

[topaz_eyes]

It still doesn't change the fact, for example, that NAFTA gutted the Canadian automotive industry -- the leading manufacturing industry in the province of Ontario at the time -- and changed Canada from a net exporter of automobiles to a net importer.

[chickenfeet]

That's just not true.

Canada automotive exports(primarily to the US) 2018 S59.267 million
Canada automotive imports from the US 2018 $51.113

Canada's deficit in the sector is due to imports from other countries

There has been free trade in automotive vehicles and components between Canada and the US since 1965

The US automotive sector; especially in the traditional regions, has been hit at least as hard

Blaming the decline of the Canadian auto sector on NAFTA just isn't consistent with the facts. It's rather a function of the decline in auto sales generally and a shift in preferences to Japanese and other far Eastern products. Ford, GM and (once upon a time) Chrysler were terribly slow to react both to changes in consumer taste and in manufacturing technology and, as a result, lost their near monopolo of the Noth American market. Canada has actually been quite successful in establishing itself as a North American base for non-American auto companies.

[brokenallbroken]

I spend an inordinate amount of time designing the state school curriculum. Still trying to figure out how to incorporate sufficient skills practice time without making homework a thing.

[movingfinger]

Yes. People have already forgotten that for a long time there were internal, citizen migrant workers who did a lot of the farm labor now done by immigrants. Whole families would travel around and live in tents, sheds, etc. as seasonal crops needed to be picked; children might or might not make it to school. Living conditions were bad.

[movingfinger]

Those are both direct stimuli. IMO a government needs to use the stick on capital as well as the carrot on the workforce. In your example of SNAP, capitalism would provide food for people to buy, but it might not be fairly priced or of good quality. So the government would need to use other inducements to have supermarkets within reach of the people who needed to shop there. (The answer to this question is not "farmer's markets" without an entire other structural program bringing back small truck farms within reach of population centers.)

In the example of hiring lots of people to fix infrastructure, in the past this has been effective. I don't know enough about the present state of the labor force to guess whether it would work now. As with farm work, physically demanding labor of this kind has to be something that is perceived as dignified and respectable. In the present, I'd guess that including access to good health care; access to blue-collar training/apprenticeship programs (which are howling for new blood, by the way, because parents want their kids to go to college, not to become electricians); and setting wages at levels that would allow better-than-mere-survival existence would help. This all presumes the presence of an able-bodied workforce or one that can become able-bodied (addiction treatment would have to be part of the program). Again, this is a direct stimulus undertaken by the government. It would be most efficient without subcontractor middlemen.

The single most effective things the United States government could do to stimulate the economy (IMO IMO IMO) would be to tax corporations worldwide as it does private citizens and to provide comprehensive health and dental care. The latter would require far more than just writing checks, because capitalism has run the physical infrastructure of health care into the ground and fails to provide service in less-profitable areas. Small businesses would be greatly helped by this.

[conuly]

SPELLING REFORM.

[brokenallbroken]

In the teaching of, or in the de-Victorianizing English of? The former is much more easily achieved than the latter, what with the whole wanting-to-communicate-with-the-rest-of-the-world thing.

[conuly]

The rest of the world can adapt to us. USA! USA! USA!

(No, seriously, I've given actual thought to the subject of spelling reform.)

[peoriapeoriawhereart]

Some of them were farmers themselves that would plant their corn then head out to harvest citrus or avocados until it was time to return for their crop's harvest.

[thekumquat]

Building an area like the EU, in fact. Which, whatever anyone says about it, has prevented its members from going to war.


Sigh. (I'm a UK civil servant tasked with making Brexit something other than an almighty clusterfuck...)

[conuly]

Sounds fun!