The simple fact is that imports are real benefits, meaning real goods, for the importer and exports are real costs for the exporter, who exchanges real goods for financial goods ("money").
That is to say, one party to the exchange obtains real resources in exchange for monetary payment. This implies that the party accepting the payment desires to save, however, temporarily in the currency in which the real goods are priced.
Nothing else is claimed in saying that imports are real benefits and exports are real costs. One party, the importer, is preferring real resources and the other party, the exporter, is preferring financial resources.
This entails many other conditions as Richard Murphy states. However, those conditions don't alter the truth of the simple statement that imports confer real benefits on the importer at the real cost of sacrificing the use other those real goods by the exporter. MMT economists have discussed this, and the job guarantee, for example, is partially addressed toward it. MMT economists have also pointed out that a currency sovereign has the fiscal space to create new opportunities for work though public investment.
The other conditions involved are contingent on a variety of factors and a simple statement regarding this is difficult to impossible to make in a general way.
For example, it may seem that the statement that imports are real benefits (only) at full employment is categorically true, but it is contingent. For example, the importation of real goods produced by low skilled labor may result in eventual substitution of capital for labor, which is now actually happening through automation and robotics.
The low skill labor formerly involved in tedious and repetitive factory work is in the process of transitioning to more suitable employment for the times. A well-designed job guarantee (guaranteed work opportunity at a living wage) would cushion this transition and facilitate it.
Some of the exported manufacture is beginning to "come home," but not the former factory jobs that are now obsolete. The new jobs are higher skill jobs involving "knowledge," this is, more labor power per unit of labor time, resulting in higher productivity through a combination of knowledge and "high" technology. Of course, this is not one for one, since capital in the form of technology is being substituted for labor, and labor requires more skills.
The labor that was idled by the initial job losses eventually transitions to new jobs in other areas. Think the transition from horses and oxen to automobiles, trucks, and tractors. A job guarantee would ease the transition, and public investment in R&D, education, and training would replace low skill with higher skills, or at least more suitable skills.
The hilarious thing about Richard Murphy's criticism of Bill Mitchell is that he criticizes Bill for not understanding economics.
Bill has said here is fundamentally economically mistaken. Why do I say that? I have, as usual, good reason.
First of all, this is an absurd abstraction from reality, which is about as bad as the worst of neoclassical economics. What Bill is doing is to assume that we barter. Quite extraordinarily, it would appear that he thinks that we trade without requirement for payment to be made in settlement. For someone promoting monetary theory, this is staggering.Richard Murphy is a public accountant and not an economist. He appears to be minimally acquainted with work of Bill Mitchell and the MMT economists, which renders his criticism nonsensically uninformed. But he apparently thinks he has the ability to understand economics better than a full professor of economics. ROFLMAO.
Tax Research UK
Why Bill Mitchell is simply wrong on modern monetary theory and imports and exports
Richard Murphy
6 comments:
I don't want to add fuel to that fire, but if Richard Murphy criticises Bill Mitchell's alleged hyper-aggression, wouldn't it be a good idea for Murphy to adopt himself a more moderate stance?
"The capital employed in purchasing foreign goods for home consumption, when this purchase is made with the produce of domestic industry, replaces, too, by every such operation, two distinct capitals, but one of them only is employed in supporting domestic industry. The capital which sends British goods to Portugal, and brings back Portuguese goods to Great Britain, replaces by every such operation only one British capital. The other is a Portuguese one. Though the returns, therefore, of the foreign trade of consumption should be as quick as those of the home trade, the capital employed in it will give but ONE-HALF THE ENCOURAGEMENT TO THE INDUSTRY OR PRODUCTIVE LABOR OF THE COUNTRY. . . . "A capital, therefore, employed in the home trade, will sometimes make twelve operations, or be sent out and returned twelve times, before a capital employed in the Foreign trade of consumption has made one. If THE CAPITALS ARE EQUAL, THEREFORE, THE ONE WILL GIVE FOUR-AND-TWENTY TIMES MORE ENCOURAGEMENT AND SUPPORT TO THE INDUSTRY OF THE COUNTRY THAN THE OTHER." Adam Smith
"...imports are real benefits, meaning real goods..."
This touches something that has driven me to despise economists and advocates of "free trade."
"Real benefits"? NO, more like REAL CRAP. I'm sick and tired of cheap imported schlock that stops working just a few months after purchase. I will simply no longer buy anything offered by Black & Decker. Once upon a time, long before NAFTA and WTO, Black & Decker electric powered hand tools were reliable, valued tools for craftsmen and DIYers. No longer! I had three Black & Decker jigsaws stop working within just months of purchase. That was soon after I found Black & Decker rechargable flashlights just don't carry a charge very long.
I had and automotive thermostat made in China that did not work properly; and shelves made in China with metal so thin I could bend the side with one hand, so I did not buy them. Little Devil vacuum cleaner that did not stand upright; and Hoover vacuum cleaner that threw a belt every other month. Both made in China. The electric and UBS cords that were made in China and which soon had bare wire showing through cracked insulation seem innumerable.
When will we see economic studies trying to calculate the amount of wasted dollars and destroyed corporate reputation from customer dissatisfaction caused by this flood of cheap, inferior, shoddy goods?
Far from all goods are cheap quality goods.
If you accept a JG, you accept there is a political necessity to keep people employed AND a alternative political determined useful allocation of labor.
With those assumptions, trade has internal and external political and economic consequences larger than an exchange of goods and money between two people.
Once you accept and understand that, the old econ-101 imports-are-always-a----->"REAL"<----- benefit and exports a financial cost, is shown to be hollow econ jargon, nonsense that has no value in any human system or dialogue. True, but hollow, meaningless and meant to distract to push ideology. That's before you get to non-linear systems analysis and cheating when the econ-101 analysis is even more stupid and ridiculous in a competitive system where winners take all.
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