A statist friend of mine made the following argument:
Romania needs a tax for import cars (based on age and pollution level because): - With no tax Romania becomes Europe's dumpster - With no tax Romania becomes extremely polluted - All "our" money will go away to Germany or some other state and the GDP will fall by as much as 2% (this was calculated).
What are the usual Free Market objections to these?
xSFx: A statist friend of mine made the following argument: Romania needs a tax for import cars (based on age and pollution level because): - With no tax Romania becomes Europe's dumpster - With no tax Romania becomes extremely polluted - All "our" money will go away to Germany or some other state and the GDP will fall by as much as 2% (this was calculated). What are the usual Free Market objections to these?
I would say "Well, in that case...."
*throws brick*
*sound of glass breaking*
"Its ok, I'm keeping the GDP up"
To be serious, it is an application of the broken window fallacy. Forcing people to buy Romainian cars instead of German cars reduces the well-being of everyone involved.
Agora! Anarchy! Action!
His reply is that what Romanians gain by the autotax exceeds what they lose by having to buy more expensive, but Romanian cars, as a 2% drop in the GDP affects more people and far more drastically than some having to buy cars at a higher price.
More neoclassical bull*** externalities. How exactly did he calculate Human Action, might I ask?
wombatron: To be serious, it is an application of the broken window fallacy. Forcing people to buy Romainian cars instead of German cars reduces the well-being of everyone involved.
Does Romania manufacture vehicles at all? Romania is kind of the least developed former Eastern Block country. The only thing that I can imagine is that production capability was shifted to that country and that they have a sales outlet there. So Romanians will have to deal with them, instead of making the trip to Germany to by a Volkswagen there and return with it as an imported article.
Anyway the argument doesn't make sense, since it will increase the cost of those products and hence you can buy less with your money in Romania as a result. This will make cars affordable to rich Romanians only. And actually it may make the exports even more expensive. The only one that may be benefiting financially are the privildged sellers in Romania + the government officials they bribe.
commodities
Yes, we make the Dacia Logan, a sub-brand of Renault (it's marketed in the west as Renault Logan). Why is the argument a weak one? Why isn't it better for the economy as a whole if less (rather than more) of our money go to another country? The problem isn't German car vs Romanian car, it's to prevent old-cheap-second-hand-cars from polluting the air and draining all the money to other countries. That's their argument, anyway.
Refer him to Ricardo's law of association. This guy lives in the Stone age with regard to economics. GDP means nothing on its own. It's just a (faulty) aggregate of spending in the economy (it doesn't even reflect the structure of production properly.) I don't see why Romania will become polluted if it imports cars. If he has a problem with people driving, well tough ***.
-Jon
I cannot be caged. I cannot be controlled. Understand this as you die, ever pathetic, ever fools.
Irenicus' Diaries.
Not a free market argument but I seem to recall that Roumania has joined the EU and hence accepted the Schengen Treaty. Free circulation of goods and persons between member states, case closed if he's a pro-UE bluff.
But Roumania is a very bad case. I seem to recall that it has a catastrophically bad export balance (please do not throw me out of the window) and it isn't getting any better. Soviet-type Socialism has never been completely eliminated, leading to immense problems: widespread corruption, difficulties in becoming anything more than a sweatshop for Italian firms, widespread poverty, social mayhem (you don't need to go to Brazil or Nigeria to see swarms of starving children living on the streets), inflation (which was wiped clean in 2006, when the old lei was replaced by the new lei at a 10.000 to 1 exchange rate)... perhaps you can help us shedding some light on why Roumania failed to follow in the footsteps of the Czech Repulic and Hungary.
In light of this situation there's small wonder that such oversimplistic solutions pop-up. I doubt that blocking the import of second-hand cars would make Roumania a less polluted place (no offense meant): when Ceasescu was still in power and nobody apart from the "selected few" could afford a car sheep in some areas were litterally dyed black by emissions from plants archaic even by Victorian standards. But the elegant leftists love to hate the car (ie individual freedom to get where you want), apart when you touch their beloved BMWs. It's always other people's cars that pollute. But I am getting long-winded and the hour is late.
A very simple argument is the following: if you put a very high import tariff it's almost certain that the ones you are hitting the most will retaliate by rising their tariffs on your goods. It's a simple matter of retaliation. Germany can live with exporting less cars to Roumania but can Roumania afford to export less goods to Germany?
Final argument: the pollution argument has already been used in both Italy and Belgium to force people into buying brand new cars. I won't go into the details because they matter not here but the result is simple. For a couple of years there has been a sales bonanza (helped by insanely low interests on payments) with dealerships popping up like mushrooms after an August thunderstorm. Now sales have grinded to an halt and car manufacturers are becoming victims of their own greed (now where did I hear this before?). Local governments happily lent an helping hand to their good buddies in the automotive industry while keeping the few but very influential elegant enviromentalist-lefties happy. I hope you catch my drift here.
Yes, it's time for the Dr Goebbels show!
I'd like more details on why the GDP argument is wrong. They claim a drop in the GDP means a drop in the quality of public services.
GDP is a false measurement of production because the government is included in it.
Because all GDP is, is a measure of economic activity, specifically consumptive activity. It does not reveal the level of productive activity in the economy. Reisman and Skousen both have articles on this that you can find by just googling them. E.g. even wasteful expenditure is measured as an increase in the GDP. It's meaningless. As for why a drop in GDP might mean a drop in public service quality, this doesn't quite follow. I presume the logic is that because production falls, tax receipts fall. But that isn't the case, for the reasons I just outlined.
Taxes based on rational and measurable unaccounted for externalities make sense. It's impossible for someone to own the air, so it is the governments job to protect it. As long as they also tax domestically produced cars, I see no fault in that part of the argument (taxing old heavily polluting cars).
I think this general idea that money leaving a country is always bad for that country assumes that the countries own productivity is not covering that gap. If the United States has something like a 10% growth in productivity then losing 1% of that productivity in trades with other countries is relatively insignifigant and worth what is gained out of it (lower prices for material goods that add to our wealth). This trade gap idea assumes there is only so much wealth in the world and it is a competition between nations for that wealth.
It is an import tax that naturally discourages imports.