Comments on: What’s Missing from this Picture? http://www.manufacturethis.org/2008/03/19/whats-missing-from-this-picture/ Just another WordPress weblog Sat, 22 Nov 2008 11:53:58 +0000 http://wordpress.org/?v=2.1.2 By: Pete Murphy http://www.manufacturethis.org/2008/03/19/whats-missing-from-this-picture/#comment-17510 Pete Murphy Fri, 21 Mar 2008 12:59:28 +0000 http://www.manufacturethis.org/2008/03/19/whats-missing-from-this-picture/#comment-17510 Our trade policy is an abysmal failure because it is based on an economic theory that is fatally flawed. The "principle of comparative advantage," developed by economist Ricardo in 1815, asserts that each nation benefits when it trades what it makes best for products made best by other countries. It sounds reasonable but, at that point in history, it was nearly impossible for Ricardo to take into consideration what would happen if one country was much more densely populated than the other. At this point, I should introduce myself. I have recently published a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." To make a long story short, the heart of this theory is that, as population density rises beyond some optimum level, per capita consumption of products begins to decline out of the need to conserve space. People who live in crowded conditions simply don’t have enough space to use and store many products. This declining per capita consumption, in the face of rising productivity, inevitably yields rising unemployment and poverty. This theory has huge implications for U.S. policy regarding population and trade. The population implication is obvious, buy why trade? It's because when we engage in free trade in manufactured goods with nations that are much more densely populated than our own, we actually import this population density-driven effect on unemployment and poverty. We become one nation economically. The manufacturing work is spread evenly across the new, combined work force. The other nation gets free access to our healthy market but, in return, all we get is access to a market emaciated by crowding and low per capita consumption (if we get access to their market at all). The result is an automatic, irreversible trade deficit and loss of manufacturing jobs. No amount of productivity improvement, dollar devaluation, etc. can have any impact because none of these alter the fundamental problem - the disparity in population density and the disparity in our markets. As a result, our enormous trade deficit persists. We have established a host-parasite relationship between the U.S. and these over-populated nations. It's a virtual global trade welfare state. We finance it through a sell-off of American assets. What will happen when those assets are depleted? The prospects are scary. I believe that the current recession is just a precursor for what's to come. If you’re interested in learning more you can visit my web site at OpenWindowPublishingCo.com. There you can read the preface for free and engage in my "discussion forum" (blog). The book is also available at Amazon.com. Thanks for attention and forgive me for the “spammish” nature of this reply to your post. You have an outstanding blog going here. Keep up your efforts to raise concern about our nation's misguided economic policies! Pete Murphy Author, Five Short Blasts Our trade policy is an abysmal failure because it is based on an economic theory that is fatally flawed. The “principle of comparative advantage,” developed by economist Ricardo in 1815, asserts that each nation benefits when it trades what it makes best for products made best by other countries. It sounds reasonable but, at that point in history, it was nearly impossible for Ricardo to take into consideration what would happen if one country was much more densely populated than the other.

At this point, I should introduce myself. I have recently published a book titled “Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America.” To make a long story short, the heart of this theory is that, as population density rises beyond some optimum level, per capita consumption of products begins to decline out of the need to conserve space. People who live in crowded conditions simply don’t have enough space to use and store many products. This declining per capita consumption, in the face of rising productivity, inevitably yields rising unemployment and poverty.

This theory has huge implications for U.S. policy regarding population and trade. The population implication is obvious, buy why trade? It’s because when we engage in free trade in manufactured goods with nations that are much more densely populated than our own, we actually import this population density-driven effect on unemployment and poverty. We become one nation economically. The manufacturing work is spread evenly across the new, combined work force. The other nation gets free access to our healthy market but, in return, all we get is access to a market emaciated by crowding and low per capita consumption (if we get access to their market at all). The result is an automatic, irreversible trade deficit and loss of manufacturing jobs. No amount of productivity improvement, dollar devaluation, etc. can have any impact because none of these alter the fundamental problem - the disparity in population density and the disparity in our markets.

As a result, our enormous trade deficit persists. We have established a host-parasite relationship between the U.S. and these over-populated nations. It’s a virtual global trade welfare state. We finance it through a sell-off of American assets. What will happen when those assets are depleted? The prospects are scary. I believe that the current recession is just a precursor for what’s to come.

If you’re interested in learning more you can visit my web site at OpenWindowPublishingCo.com. There you can read the preface for free and engage in my “discussion forum” (blog). The book is also available at Amazon.com.

Thanks for attention and forgive me for the “spammish” nature of this reply to your post. You have an outstanding blog going here. Keep up your efforts to raise concern about our nation’s misguided economic policies!

Pete Murphy
Author, Five Short Blasts

]]> By: Pete Murphy http://www.manufacturethis.org/2008/03/19/whats-missing-from-this-picture/#comment-17511 Pete Murphy Fri, 21 Mar 2008 13:05:25 +0000 http://www.manufacturethis.org/2008/03/19/whats-missing-from-this-picture/#comment-17511 By the way, one more thing. Our trade deficit with China gets all of the attention today, just because of its sheer magnitude. But few people realize that, using our trade data from 2006, in terms of per capita trade deficit in manufactured goods, China was only number 19 on the list. Our per capita trade deficits with Japan and Germany, among others, was much higher. In fact, at the top of the list is Ireland, a nation twice as densely populated as the U.S., with whom the U.S. had a per capita trade deficit in manufactured goods 25 times worse than that of China. The point of this is: what did the U.S. expect when it took a trade policy that was already a proven failure around the world and then applied it to a country with one sixth of the world's population? Of course it's a failure that dwarfs all the others! Just thought you'd be interested. Pete Murphy Author, Five Short Blasts By the way, one more thing. Our trade deficit with China gets all of the attention today, just because of its sheer magnitude. But few people realize that, using our trade data from 2006, in terms of per capita trade deficit in manufactured goods, China was only number 19 on the list. Our per capita trade deficits with Japan and Germany, among others, was much higher. In fact, at the top of the list is Ireland, a nation twice as densely populated as the U.S., with whom the U.S. had a per capita trade deficit in manufactured goods 25 times worse than that of China.

The point of this is: what did the U.S. expect when it took a trade policy that was already a proven failure around the world and then applied it to a country with one sixth of the world’s population? Of course it’s a failure that dwarfs all the others!

Just thought you’d be interested.

Pete Murphy
Author, Five Short Blasts

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