The importing country is getting commodities that the members of society in the exporting country are not able to enjoy in spite of having produced them, while the members of society of the importing country are enjoying those commodities instead of the actual producers.
The Lens
Trade Isn't Money for Nothing
Stephanie Kelton | Professor of Public Policy and Economics at Stony Brook University, formerly Democrats' chief economist on the staff of the U.S. Senate Budget Committee, and an economic adviser to the 2016 presidential campaign of Senator Bernie Sanders
So, from a real point of view rather than a financial one, importers are getting a better deal in exchanging currency for actual goods — almost. Imports mean that the importer is receiving embedded labor as part of the deal which may affect employment in the importing country negatively Exporting has the opposite effect on labor by creating jobs. But these jobs are producing goods for others rather than the producer country.
Focusing on the financial aspect of the exchange obscures this. The Trump team seems to be overly focused on the financial aspect of international transactions.
On the other hand, unlike the US which is a net importer, China is a net exporter. The reason is that China's domestic demand is insufficient to absorb its productive potential resulting from it policy toward primary investment in productive capital.
The export market serves to provide employment where the domestic market is lacking in demand to do so. Addressing this is is a current topic in China now, and the leadership is working on policy planning to reverse this condition by increasing domestic demand and thereby domestic consumption as a percentage of the economy. The goal is to do this without increasing moral hazard resulting from "easy money" and "hand outs" in form of "helicopter money."
Leaving out a lot of detail, China is a large and diverse country, so increasing demand domestically across the board in an equitable fashion is challenging. The conclusion is that this eludes central planning and policy that acts directly. The currency planning debate is focused on doing increasing domestic demand regionally and locally to take diversity and equity into account in a socialistic environment., e.g, without overly increasing inequality. China wants to avoid what has been happening in the West, with the top of the town profiting inordinately from policy.
The Lens
Trade Isn't Money for Nothing
Stephanie Kelton | Professor of Public Policy and Economics at Stony Brook University, formerly Democrats' chief economist on the staff of the U.S. Senate Budget Committee, and an economic adviser to the 2016 presidential campaign of Senator Bernie Sanders
4 comments:
Ignorant of private property …
If both nations are commie then yes…
The really interesting part there is the moral hazard one i think, one possibility would be indeed handing out money to increase consumption in a way that doesn't create a moral hazard, however the problem here is that this doesn't really solve the core issue, that to me seems to be that with technology advancement we are becoming able to produce way more than what we need in every single field, so in a competitive system that tries to push the cost down to a minimum you eventually will have excess labor or you need to export a lot, also you have other things show up like planned obsolescence or making new things that are fundamentally the same as the old ones, such as every freaking cell phone that gets a new version every year without really significant changes.
a sane possibility to solve this would be to change for example to a 4 hour working day or less days of 8 hours, what you are doing there is basically increasing the amount of labor required per product, that would probably need to be adjusted continously to match the level of automation in industry vs consumption.
now a question would be, what to do with that free time?
given the current situation probably a lot of people would just go deeper into the bottomless pit of social networks, that could very much be considered a moral hazard, but a possible alternative imo could be setting up social centers, where a lot of different activities could be done.
you like building rc planes? here is one group that does it
you like british literature? there is an other group that does it
want to learn to design chips but outside the competitive environment of a university? yup, some other group
in other words what you want to do is shift human activity outside of mandatory work but keep it going in a way that is not wasted nor self destructive.
a pre requisite however would be that
1: the society that first implements this remains competitive in the international market despite this implementation or
2: an agreement is reached that all countries (or at least advanced not de industrialized countries) will all implement something along these lines so that this can be implemented without big harm to the implementing parties or
3: maybe just start thinking and implementing a system of international trade that is based on mutual agreement and cooperation rather than a self destructive race to the bottom....
Putting this in a few words, technology enables an increase in leisure to the degree that labor is freed from the necessity to work to produce. This gives rise to a number of issues.
A major economic issue becomes demand sufficient to increased supply capacity that emerging technology makes available.
In a monetary production economy, this would require subsidizing leisure as a substitute for the way wages traditionally compensate work. Or the traditional approach to production, distribution, consumption model could be revised based on emergent information technology.
While this seems doable, it would take out of the box thinking that may be difficult given entrenched interests, culturally embedded rigidity, and ideological blinders, as well as a host of other factors.
Another major issue is how to transition to this state of increased leisure when it would have to be staged in order to scale. Social, political and economic transitions are not a matter of making a a quantum leap to the new state, as it were.
This topic has also been a topic of discussion in economics under the subject of labor-leisure choice. The issue now is the impact of advanced technology that is creating conditions similar to the period in which industrial technology replaced traditional agriculture rather than individuals deciding how to distribute their labor and leisure.
Historically this involved the transition from feudalism to capitalism, which became the subject of classical economics, chiefly Smith and Ricardo, through Marx-Engels. It is possible that the world is at the brink of another monumental transition, not only economically but also socially and culturally as the Modern Age winds down and the Post Modern Age rises as the next wave of "progress."
Anyway, a lot of people are engaged in thinking about this as "the cutting edge." The message of MMT that affordability is not the issue but rather the availability of real resources is central to this debate. But the superabundance (redundence) of supply shows that demand is also a factor as paid labor is increasingly replaced by emergent technology.
Then it is simply a matter of the monetary authority supplying finances sufficient to enable the level of consumption that is most desired by adjusting effective demand
In addition, the process must be ecologically sustainable.
These issues all involve policy choices subject to the political process in the various jurisdictions involved, ideally configured in the context of the world system. This process is likely to be dialectical historically and therefore messy owning to the diversity of factors involved in seeking a new equilibrium. In a dialectical process, equilibrium is never achieved other than for a "moment" (technical term), since the process of seeking equilibrium generally involves overshooting and undershooting (excess and defect).
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