Do you expect a greater standard of living in this situation?

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Charles Anthony replied on Mon, Sep 5 2011 3:46 PM

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No.

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z1235 replied on Mon, Sep 5 2011 7:24 PM

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You stated in another thread that you are "no longer receiving much utility from further time invested in studying Austrian economics, or economics in general, even for investing." Even someone with very rudimentary understanding of Austrian Economics would answer your question with a resounding "No". 

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Duke replied on Mon, Sep 5 2011 7:58 PM

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I am not interested in how "resounding" their answer is, but the reasons behind it. If you can provide the reasons behind your answer, that would be more helpful and possibly some discussion should take place. The same for the poster above you and his one-liner.

Also, this thread is not about me. If you wish to discuss the issue of me, you can send me a private message. Other users that click on this thread are probably not very interested in me, and even if they are I don't really care to discuss myself in this thread. Just sticking to the theoretical situation above would suit this thread. It probably would have been more appropriate to post that quote in the thread in which you read it (and held its context), or sent me a private message if you believed that further study of Austrian economics can provide me more utility for investing than studying other subjects, which is what I wrote in the other thread. I invite you to post there if you have something furter to say, apart from a quote of what I had already said.

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Duke replied on Mon, Sep 5 2011 8:10 PM

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Here is an article by George Reisman highlighting some of the benefits of a massive increase of population into the world's labour supply:

http://mises.org/daily/2361
 

I find this quote especially important: "First and foremost among these will be the very substantial increase in the number of highly intelligent, highly motivated individuals working in all of the branches of science, technology, and business. This will greatly accelerate the rate of scientific and technological progress and business innovation."

What I wonder is whether the geniuses in semi-free, developing societies will be able contribute in fields like engineering and science to a degree that solves fundamental problems of nature and technology. Will there be a doubling in the number of geniuses in the world who can contribute to society, rather than til a field?

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Kakugo replied on Tue, Sep 6 2011 3:22 AM

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No, I expect the present trend towards a slight but steady decrease in average living standards in the Western world to continue. 

The benefits of a larger population entering the labor division are undeniable but it's only one factor among a myriad. For example raw materials (commodities) are bound to keep increasing in price, both because of increased demand and because of external factors to the supply-demand mechanism (cheap credit fueling old fashioned speculation, inflation disturbing the pricing system etc). We are already seeing this with Chinese goods in some sectors: to keep prices appealing they are cutting back on materials, resulting in "same price, lower quality" type of inflation. Finally don't rule politics out: the average person in the street may not care if his socks are made in China, Bangladesh or Belgium as long as he gets a good deal but rest assured special interest groups do. One example is the "anti-dumping legislation" put in place by the EU: this legislation doesn't affect all goods coming from China but just some industries which have been identified as having "excess capacity" like textile, glass and, curiously enough, wind power generators. Finally the Sword of Damocles of international transactions and/or "carbon footprint" taxes is always hanging on our heads as cash-strapped Western governments look for new sources of revenue.

Finally there's another thing to consider. Western States are economically disintegrating from the inside. Labor market is a complete and utter mess: this is proven by the fact most European countries have over 8% official unemployment figures but take in a steady (and possibly increasing) flood of foreign immigrants, most of whom are ready and willing to work but lack the skills and productivity of the average European worker. They either need to be trained on the spot or require substantial investments in non-skilled labor sensitive manufacturing procedures (as pioneered in the '50s by such firms as Volkswagen and Honda). This distortion in the labor market hints at the fact there are serious issues nobody seems ready to tackle: unemployed people and immigrants earning below the average income don't help increase standards of living.

Increasing monetary inflation, distorted credit practises and capital consumption (meaning capital is transfered from the productive to the non productive sector at a faster pace than it's accumulated) are slowly chipping away at the very fabric of the West. This is a gutta cavat lapidem type of process: slow, barely noticeable except to those willing to look closely but unreleting. Each time an investor buys government bonds instead of investing in a productive activity, each time a bank finances housing speculation instead of lending money to an artisan to buy a new lathe, a droplet falls on the stone.

Hemingway described the process perfectly "One goes broke slowly, without noticing. Then one day he wakes up a poor man".

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Duke replied on Tue, Sep 6 2011 10:12 PM

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I think it is probably true that *average* first world living standards will decline with high amounts of immigration from poor, unskilled countries. The problem with averages is that they don't tell us how well present citizens are going to do, and they only look at specific parts of the picture.

If a poor man forced into subsistence farming in Central America has the opportunity to move to America and enter the division of labour by being my cheap carpenter, then obviously 1. world productivity 2. his standard of living 3. my standard of living 4. total US productivity will all increase. However, the *average* standard of living in the United States may drop because we are adding a man who will live far below average, even if he lives at standards greater than in Guatemala, and even if he improves my standard of living by fixing my roof. Notice that his immigration and employment is a great thing for everyone involved, it's only a problem when looking at statistics.

There may be anti-dumping legislation in place in the EU, but the EU itself is a massive free trade vehicle, almost as good as the free trade zone between all of the American states which allows the US to prosper. I believe that regionalism / regionalist free trade blocks are a good thing, providing we're talking about moving away from the present situation where citizens of a country are legally allowed to trade only with eachother, and it is then made legal to trade with the citizens of an entire continent. Obviously, regionalism is not as good as worldwide unilateral free trade, but that's not what we are moving away from globally. They're moving away from trade and labour movement restrictions that are erected within their own continents, and then taking them down. Therefore I have a lot of hope for ASEAN, China-ASEAN, CAFTA, and other trade blocks that have been forming. Countries may be restricting trade with anti-dumping legislation or keeping their automobile and agricultural sectors protected when they sign these FTA's, but focusing on that ignores the 98% of barriers that are being broken down.