Understanding World Economy, loss of American jobs, and how WW2 applies to it.

First let me draw a distinction between "An Inquiry into the Nature and Causes of the Wealth of Nations" by Adam Smith in 1776 and the "The Communist Manifesto" by Karl Marx in the mid-1800s.

How do those to books pertain to today? Well simply put, both make predictions. For example:

The Wealth of Nations predicts that if every nation produces a specialized good, such as coal, iron, steel, industrial products, ships and so forth. Every nation is dependent upon others, and they inter-trade for what they don't have with what they do have, and this system increases over-all the entire wealth of all the nations involved in this system.

The Communist Manifesto predicts that capitalist nations will devour themselves in wars leading the way to worker's revolutions that will engulf the world and lead to the next global change. This is because Marx's main point was not that Communism was "right" but that historically human civilization goes through periods of revolutions re-establishing itself each time. Example used by Marx is his admiration for the burgoisie over-throwing the "first estate" in France, this was the middle-classes's revolution against the upper-class. He figured the subsiquent revolution as a result of the Industrialization of the world would be the "working class" over-throwing the burgoisie in a "socialist revolution".

The distingushing characteristics between these two predictions if you can not already tell is, that Adam Smith's prediction was true, and Karl Marx's was false.

Karl Marx's predictions were proven false early after his death, which led Lenin to revise Marx's predictions, which were subsiquently proven false with the fall of the Soviet Union in 1991.

Lenin to try an perpetuate his predictions created the Communist International (In case you ever wonder what the Nazi-Japanese Anti-Comintern Pact was all about) which later became the "Communist Information Agency" which actively tried to undermine the Capitalist nations of the world. So next time you think "anti-war protestors" or "Democrats" just realize that they were actually funded in large parts by the Communist Information Agency through subsidiaries, much as Al Qaeda is funded today by subsidiaries, thus hiding the true nature of things.

*Forgive this tangent, it's important but not pertaining to the title and over all objective of the thread, back to the subject*

Now that an important book [Adam Smith's The Wealth of Nations] in modern global economics has been given some "context", I can now draw a distinction to how does this pertain to WW2, and of all things, today's jobs leaving America?

First I'll discuss WW2, rather I'll simply quote from a book that explains it excellently.

A second domestic-level cause of the war was the economic collapse. The Great Depression was systemic in the sense that it affected all countries and grew out of the inability of the major capitalist states to establish effective international economic coordination to deal with imbalances in transnational trade and finacial flows....

...The third domestic cause [of WW2] was the U.S. policy of isolationism. [Also called protectionism in regards to economy] The United States came out of World War I with the world's strongest economy, but it refused to fully accept the responsibilities of that position. In the 1930s, the Great Depression increased internal preoccupation and significantly deepened isolationism....

"Understanding International Conflicts" by Joseph S. Nye, Jr.

Let me put those two paragraphs together.

Basically the first paragraph and the second go hand in hand, while the second is concerning with the political implications of the isolationism movement after WWI, I believe it is the book "The Commanding Heights" that connects the concerns of protectionism.

*On the side* Today I was watching "The Beltway Boys" and they were discussing the running differences of two candidates in some southern state where the Republican was arguing against the idea of "protectionism". *End on the side*

What protectionism is in a nut-shell is expressed by the "Smoot-Holly Act" which was a liberal (not politically liberal, this concept of liberalism is too broad and beyond this small thread) policy that made Germany "Self-Dependent". Sounds like a good thing, wrong, it meant that no one would trade with Germany. This was before WW2.

The Smoot-Holly Act protected the American economy by not purchasing other nation's goods. Example, not purchasing German industrial products. This in turn caused Germany to lose export and thus income and thus they could not meet the demands of the Versailles Treaty causing economic collapse.

Later the Smoot-Holly Act would help cause the Great Depression which ruined the world for a decade in the west, and far longer in the third world.

This "protectionism" caused the rise of Hitler by creating the political and revolutionary hot-bed from a super-inflationary Germany.

After WW2, the victors decide to try something different than what they had done after WWI. The victors is really an over-statement as Britain was financially bankrupt. France's empire was falling apart. And both nations could not really afford to do anything. America decided it would learn from its mistakes of protectionism and instead help build the economies of Europe and trade with them.

This obviously did little to our economy early on, but as the idea of economic stability through economic-interdependence (Adam Smith's prediction) proved to be more true, it grew into today's World Trade Organization and the Free Trade movements and so forth.

Today for instance Japan builds cars in Mexico so that they are not taxed on import.

The consequence is America is losing jobs in the lower-tech sectors such as the steel industry.

Many here probably are proponents unknowinly of protectionism.

We are after all losing jobs, so by damn it we should do something about it.

Protectionism is the stupid means of solving this problem. By securing our economic power in one area, we ruin the economic growth that is available to other trading partners, thus collapsing their economies, once that happens there is revolutions and civil wars, we lose our trading partners and thus our economy collapses.

This was proven before WW2, and WW2 was in part a result of it.

The answer is in a more free-trade environment, where America secures its place in the highest tech branches of economies. We are the only nation capable of truly producing a massive economy of higher tech.

So as steel-workers lose their jobs they should be compensated with education to work in another sector, and so on.

For me, the new "specialized" sector for America would be manned-space flight.

I'm sure others disagree or have better ideas, but if we help Americans cope with the changes in jobs, then rather than losing jobs we are simply changing our work-force.

Create a job in the aero-space industry for every job lost in the steel industry, one in the alternate-fuels industry for every job lost in the computer industry and so on.

This way we do not cause the economic instability of the post-WWI and pre-WWII time period, and we also reduce the risks of war since nations who go to war more-so now would be going to war with a nation that produces their goods.

Take for example a war between China and America.

It does seem likely, we're a free nation they are a totalitarian nation, but they produce all our junk, clothes and purses and all that crap that makes our lives comfortable.

And in turn we produce their machinery and food. Most importantly their food, I was surprized to learn that China is the world's largest importer of rice and that rice comes from of all places, California.

So as you can see, the concept of economic inter-dependence proposed by Adam Smith (a name you probably never heard) has out-lasted Marx, has proven right, and has reduced the chances of war between the "Great Powers" contrary to what protectionism did between 1919 and 1939.

I find your post very interesting, as I tend to aggree with Adam Smith and feel that his standard that a nations wealth is defined by its products is quite troubling to our present day economy.
I like what you are saying about the connections between nations after WWII but, often wonder if the U.S. was highjacked by Keynesian Economics after the Bretton Woods Era. I am more from the Limited Goverment mind frame, and often find our current Service's economy with record high deficit's disturbing. I do belive that wars would not be affordable for our nation if it was not for our current fiat system of currency. I have not totally formed my opinion on how Globalization should work but find your post very interesting.

[edit on 19-6-2004 by sheatc]

[edit on 19-6-2004 by sheatc]

That was an interesting post on an angle most people dont bother to think about in their daily lives, there are many variables that modify your assertions allowing other posters to pick at details but for simplicity and understanding you probably had to keep the economic theory in its most elemental form.

I would agree that shortsighted legislation made today can indeed cause conflict down the road. Pre WW-2 Japan is a great example of these pressures combined with a militaristic bent of government.

Today technology seems to rule the roost but underlying that goal is the energy to run all that tech.

The US must use its imagination and technological prowess to find another way to power all these gadgets and transport that we rely on for economic growth.

The next major war is to be one of energy sources if the path is not changed soon and if its already not to late.

While I disagree entirely with Keynesian Economics (maybe I don't, I'm just not grounded enough with it, but I prefer the supply-side economics as it is more anti-federalist and pro-small business) I have to admit that at least Keynesian Economics was the answer for a short time.

It would level and moderate our market, but to do so it generated massive deficits. People complain about the deficit today but it is solely because of the legacy of Keynesian Economics.

If we are to break free from his system we have to incur massive debt until we can bring down government spending and balance that with economic growth.

As for energy crises, I don't think so. I think we have the techonolgy (well we do actually) to not be dependent upon limited resources for energy.

What we are waiting for is for oil-based energy supplies to be so unprofitable that it is time to replace all that investment into other energy-bases such as Nuclear power, Geothermal and Solar, and to switch to an electric car society whether those are just batteried and recharged at night or fueled by hydrogen-fuel cells.

America needs to stop holding on to any "protectivist" views and realize it needs to excell in a new market. Only by doing that will we maintain a position on the top by producing something no other nation can easily produce. Space technologies is a good area to start, as well as very safe alternate energy sources such as Nuclear power.

While we wouldn't have a monopoly (no more than any nation does) what we should be doing is ensuring we produce good enough products in those regions to be competitive, as we did when we were a steel nation in the late 1800s and early 1900s, we produced competitive steels.

Now we no longer produce competitive steels, Japan produces the best steel in the world (while in 1935 Japan was buying steel from the "American Steel Company").

So the loss in jobs in the industrial sector is not something we should blame companies for, it is not something that is requiring of blame.

As a river, it meanders and it is time we flow with it or be eroded as the banks shift across that land of time.

I have some additional arguments in support of free trade and outsourcing here. Highlights:

• Automation vs. outsourcing
  
• Open-source vs. outsourcing
  
• Imports vs. outsourcing
  
• A different look at the implications of protectionism
  
• Corporate profits and outsourcing
  
• Quality of service and outsourcing
  

Originally posted by HeirToBokassa
I have some additional arguments in support of free trade and outsourcing here. Highlights:

I'll kinda comment on your bullets to help merge the issue into this thread as well, since they are interesting.

• Automation vs. outsourcing

Good point, should we discriminate against only jobs going over-seas or should we break all those bad machines too?

Open-source vs. outsourcing

Imports vs. outsourcing

A different look at the implications of protectionism

I like how you mention that protectionism has been proven to harm economies, just as lowering taxes for the rich has been proven to help economies and thus everyone So any fuss on that thread should be carried over here

Corporate profits and outsourcing

Quality of service and outsourcing