The Data itself is pro free trade. Look at the poverty rates in the 1950s vs now. Yes Yes I know houses were cheap then but keep in mind ~1/3 of those houses lacked running water also food was much more expensive as it would eat up 30 to 40% of a household budget.
@@DaDARKPass Alexander Hamilton entered the chat: "Wait, let me invite Matthew Carey, Henry C Carey, Henry Clay, Lincoln & Friedrich List, they got to hear this"
The largest issue I have with this logic lies in the fact that often times the reason that many foreign countries can manufacture items so cheaply often is because of worker exploitation. If they don't have to provide their employees with the same standards of living as we do, they can afford to sell their product much more cheaply.
Exactly, I am all about free trade, but, to put an example, here in Mexico we don't make automoviles for eight dollars an hour, we make them for less than eight dollars a day. ¿Do we want to make them at that price?, of course we do not, in Mexico the minimum wage is not a living wage; three and a half dollars a day just will not make it. ¿Do we get richer by making those automoviles?, not really, they are made for american enterprises, in fact, most of the products made in big factories are made by foreign enterprises, almost all the capital earnings go back to another country. This is both fault of my government failures and the dominant culture of the economic potencies (let us be honest, it is mostly fault of my government), I support free trade because no sane man will propose to grow pineapples in Sweden instead of in caribbean lands. ¿But what will happen if people in china making cell-phones suddenly get payed, at least, what they need to live?, the western powers like to say they have a high minimum wage that covers the cost of living, this is true mostly because they live almost completely on imported goods from countrys where it is cheaper to produce it; but if Mexico, Taiwan, China, Peru, etc, decided to pay a higher minimum wage (let's say seven dollars an hour like the U.S.) and the price of all products raised accordingly to this new minimum wage, then suddenly the minimum wage of those countrys (say the Netherlands, Sweden, Swiss) is not as fair as they thinked. First world countries need third world countries to produce cheaper goods for their consume. We, third world countries inhabitants, make those goods at such low prices, not because we like it, but because we have no other choice. Free trade, as we know it today, will not suffice.
Samuel Winnie Free trade and capitalism does not protect workers or people's rights, which is why you must have some degree of socialism, including protectionism.
I depends, what you call exploitation others will see as a sense of overentitlement. In certain cases it is definitely true that workers are exploited almost like slaves, but over all would you rather these poor 3rd world people have poor paying jobs or no jobs? At least with a poor paying job they have better living standards that no jobs.
This is true. My uncle says "a strict regime, far right country will do better" and then he says "but look at the nordics, they're doing great, too-". "It's all about corruption, when there is corruption, there is no system that works".
Therefore we should rethink if we even need government as it is today. Switzerland practices Direct Democracy via their referendum policy. Btw, I don't think there such a concept as Direct Democracy because Direct Democracy is the only Democracy. Representative Gov't is not democracy and never will be.
I agree. Which is why we can begin negotiations with another country by agreeing on a set amount of universal laws which we both must abide by. This is how Alliances start and in principal it works the same economically. The punishment would be of course economic reparations or classic taxation.
Radioactive Snake you think China Mexico Brazil india will just relinquish their advantage and play along? Do you think people will buy China goods if it's the same price as American made products.
Of course not, but thats the entire point of negotiations. Finding a common middle ground both parties benefit from. Raising say the amount those workers are paid however it will still be nowhere near what american workers are paid. The point is to compromise and find a common ground like any good agreement. "A good deal is one both parties benefit from".
The arguments for free trade are compelling, i'd still argue nations should be as self reliant as possible because of catastrofies. Be it war, natural dizaster or pandemic, the trade routes can be disrupted. In the very least there should be storages in case of disruptions. One of the biggest problem with the extreme specialization i can see is the chip production: practically all of it is in Taiwan. Which makes it geopolitically massive bargainig chip. Lets just say decides to take control of it - and then (eventually) declares who can and cannot get chips - a commody everything from cars to electronics requires in the modern day.
Seems like we need to strike a balance, with a slight bias towards protectionism. If your country can't foster it's own economy, it becomes dependent on the economies of others. So to maintain the soveirgnty of the citizens, there should be enough protection so that the country can more or less maintain itself regardless of the global economy. However, people also like to buy goods from other countries. And there's no reason the govt should put unnecessarily high taxes on imports, because if people want it, the govt shouldn't use taxes to "encourage" them not to buy it. Which is what tarriffs do. Influence buying/selling behavior. The taxes should be low, and very close to each other, with imports having a very slight increase (or maybe reflective of the rates other countries put on our own goods? so a country that has high tarriffs, we would match their tarriff rate for their goods. this encourages other countries to reduce taxes as well so that they remain competitive globally).
This was actually great read. Excellent points. Im a a free trader but i love how you put this. Definitely posed it to me in different angle that provided better clarity.
As someone who is generally more on the side of free trade, I agree we need to manufacture a good amount of our own goods at home and not become dependant on foreign nations.
From the perspective of developing countries free trade is bad. For example, Germany and Sub-Saharan Africa. Germany specializes in machinery while most of Sub-Saharan Africa specializes in agriculture: (i) The flow of imported machinery into Sub-Saharan Africa hinders the industrialization of the areas in which the machinery is imported. A further consequence would be that the human resources that would have been developed to cope with industrialization never existed denying the country of potentially talented individuals. (ii) Well according to the logic of this video, Germany should be a market for Sub-Saharan African produce. But Germany rarely imports on mass because, even though they don't specialize in agriculture, their agriculture industry can support them. German produce is so cheap compared to imports, it creates a barrier to imports similar to that in protectionism. This is most extreme in the dairy sector. Things are so cheap there that even after shipping, the dairy is cheaper in Sub-Saharan Africa than the local milk. So not only has cheap agriculture barred imports from Sub-Saharan Africa forcing local business in Africa to rely on a poor population as their only market, cheap German products threaten their only safe haven; they do not have the ability to industrialize.
But what do the PEOPLE in these developing countries DO with the machinery they import? Does that machinery not make their economy richer? Does it not make the lives of the people easier?
@@frenchstudentA How can they use the machinery to develop a competitive industry - to improve their economy - if they have to compete with far more developed countries in the stages of their growth? More developed industries from richer companies can sell the same product far cheaper and at higher quality, then how does the developing country get their industries moving in the first place? The video seems to suggest that some countries are just naturally better at producing some things than others, but when developing countries have been kept under collonial rule in the past and stopped from being able to start at the same time as all other countries, how can they have just have an industry that is somehow better than all other countries?
@@mattwall1073 The real question is not who is the best at producing something (absolute advantage), but by how much is one economy more productive than another at producing a specific good (comparitive advantage). One country might be best at producing everything, and yet still it won't generate more welfare for the people of that country to produce everything instead of just the good with the most comparative advantage. This is because the labour force of that country is limited. Because of this, every country has comparative advantage in something (Ricardo-Theory). Also the problem with Africas agriculture is not that it hasn't implemented enough protectionism, but that Germany has to much of it. My country and the EU subsidize agriculture heavily "protecting farmers", thus harming farmers in Africa and Germany as well (huge welfare losses through taxes, which are needed to fund all of this).
I would like to deliver a few economic concepts as a food for thought - from an economics Undergraduate. In aggregate the comparative advantage to produce a certain good can be among others explained through the scarcity and abundance of factors which are required to produce this good. In simple economic models (like the H-O Model) there are two factors which are analyzed - capital and labor. Assuming two goods X and Y and two countries USA and China. Assume further, To produce X one needs relatively more capital than to produce Y. On the other hand Y requires relatively more Labor to be produced (e.g. X is a Hightech product, and Y is apparel). Furthermore, say the USA is relatively more capital abundant than China and China is relatively more labor abundant than usa. The hypothesis is: The USA has a Comparative Advantage in producing X and China has a comparative advantage in producing Y. This is mainly because in China the abundance of labor induce low wages, which therefore leads to lower prices of products which need relatively more labor. In the USa the abundance of capital leads to a lower interest rate, so that capital intensive products can be produced cheaper. The result of free trade depends on some further considerations. If the economy can absorb labor and capital from the industry X and Y which are unemployed after trade instantly, then there is a set of transfers so that everyone would be better off after the free trade. I would like to add a few remarks on this analysis so far: The possibility of permanent unemployment and the destruction of capital: The instant absorption of capital and labor is obviously not guaranteed. One has to distinguish between certain labor and capital classes and there isn't necessary a perfect substitution for the skills and the capital which have been useful to produce the good which is now outsourced and the other goods of the economy. In the long run one can argue that the society will educate their laborforce in the direction of "comparative advantage goods" but in the short run a whole labor and capital class can be left behind. The institutional framework of the free trade agreement: This is related to non-tariff barriers between countries. Like different regulations regarding environment, labor security, health etc. To eliminate this one has to harmonize the regulations, which basically makes the two countries one country in certain areas. If the preferences regarding this regulations are highly different in these two countries, the economic benefits of free trade are not necessarily higher than the detriments of "living together". This is a bit like having roommates which have different notions of appropriate noise, cleanliness etc. You are saving money by living with them but the disutility of the inner conflicts which are induced by the different ways of living is maybe exceeding the economic benefits. The equivalence of free trade and technological change: Most economists would argue that the most influential factor regarding inequality and instablitiy in the western countries is technological change.New machines and more powerfuel algorithms are like immigrants which are doing the same stuff more efficient (whcih is equivalent to making the same amount of a product cheaper) Imperfections in markets: environmental externalities To trade with each other one needs to transport goods. To transport good nowadays one need fossil resources. fossil ressources are not rightly priced because the costs of the destruction of the environment are not internalized. An expansion of trade and production would increase this costs. market concentration The most markets are organized as oligiopolies. Especially in the global environment the economies which can be achieved through concentration of the market are substantial (e.g. to hedge exchange rate risk, to hedge operational risk, economies of scale, better conditions on financial markets etc.). Besides the economic costs of a higher market concentration (higher prices, lower quantity, lower wages etc.) it is questionable if it is optimal if we have such powerful institutions which are not democratically legitimated. There is no gurantee of completeness here. I just wanted to throw in some arguments
@@harryburganjr.969 You can mix the two... tariffs and duties on only some goods, conditional tariffs based solely on the tariffs of other countries on those products, local subsidies and no tariffs like we do for oil just to maintain a local backup supply and accompanying jobs, it’s not cut and dry protectionism or free trade.
@@zekea7215 Yeah, I've learned a lot more about trade since I wrote that comment so I'd amend what I said slightly. Under the right circumstances, tariffs can be used to promote free trade and economic growth. If the state is strong enough and if they make the correct assessments, they can use temporary tariffs in conjunction with other institutions to, for example, promote infant industries. And, tariffs can also be used as an important tool to bargain with other states and foster multilateral liberalization. All that being said, however, a rules-based free-trade system should always be the end goal imo and trade barriers can be used to achieve that goal. Yes, the two are not mutually exclusive, but they are not equal. Any reasonable measure of protectionism (of which, the number is getting smaller and smaller as value chains globalize) should be careful and as limited as possible; freer trade should always be the goal of such measures.
@@harryburganjr.969 tariffs don't foster natural growth only artificially prop up inefficient industries. Along with draining the consumer of income unjustly and hamper overall economic growth by artificially constraining trade it hikes prices against actual market value. The jobs that distribution provides increases as well as overall economic value of the currency inside developing nations increases as the higher cheaper product is sold. The exchange creates leverage on the importer as it consumes the product of the producers and the greater that product does in the importer nation the more that nations economy expands. Free trade is much more productive to have real economic growth along with more stable living.
@@zekea7215 we prop up oil only to make it competitively sold, it's not running out just that it's not providing enough value. Oil is incredibly cheap, so cheap infact that recently we've (globally) been producing it at a negative value due to lack of consumption and increased economic competition.
Interesting video but lets not forget that import tariffs were the main source of the US budget income from the revolution until 1913. Many people say that US developed its industry due to these tariffs. Abraham Lincoln was quoted "“Give us a protective tariff and we will have the greatest nation on earth".
The best analysis of "free trade" was actually written in the late 19th century by the American political economist Henry George. This book was read into the Congressional Record by a number of Congressmen and mailed to millions of their constituents. Although Henry George championed the ability of people to trade with one another across borders, he warned that the potential benefits of free trade would be significantly reduced because of others laws and taxation policies that protected "rentier" interests (i.e., those who produced nothing but because they controlled land and natural resources were able to charge others "rent" for the mere right of access). Thus, George called for the elimination of all taxation, except for an annual tax on the potential rental value of land (and land-like assets, such as the broadcast spectrum).
Free trade works when there is a level playing field. But when one country has workers rights and min. wage laws and competes with a country that doesn't, then it becomes problematic. For example, Japan trading with the US makes sense because they have similar ideals but the US trading with China is not a level playing field.
also, China has tariffs on anything we send over there, so its not like the trade is free. They get to dump their goods in our market and we can't do the same to them, hurting our exports
Keep in mind that Smith and his contemporaries like Hume stood to gain a lot from free market economics and minimalist state involvement - Hume only wanted the state to protect merchant property and that it. Whilst their points may be valid it's important to remember they themselves were merchants and stood to gain a lot by minimising the state and maximising the market.
May I point out the irony in the description? "What is the best way to make a country rich? Should you adopt a policy of free trade? Or is protectionism and economic nationalism the better way? We explore the history and theory of one of the central questions of economics and politics. If you like our films, take a look at our shop (we ship worldwide)" LOL! It's not really a paradox, of course, but it's almost an answer to the question which is very seemingly unintentional! I do love you guys' videos though, keep it up :)
This is great!, our instructor instructed us to make an essay as to which is more effective to the economy. I understand the concept of trade liberalisation and trade protectionism. However, the question's sort of hard to answer since there are a lot of factors to consider! So much thanks for this vid! I really got useful ideas😁
4:36 I do remember learning about the corn laws during my British comprehensive education, but not sure whether optimum economics is the only worthy consideration. Here in Japan, they still exist largely to ensure self-sufficiency but also to preserve farming communities - there is a huge tariff on imported rice, but I don't think it impinges on the wider economy - there's a huge drift to big cities like Tokyo and Osaka anyway. Young people don't want to be farmers anymore.
"Young people don't want to be farmers anymore." Exactly. In the U.S. farmers are subsidized. Nonetheless, it requires a lot of money i.e. wealth to start a farm.
Japan is a bit special here, they have a very high food dependency ratio. Thus if trade were to be halted, in the case of a war or widespread famines or something japan’s would struggle to feed itself.
Global free trade is superior in creating value for us as consumers. On the labor market however, the ensuing extreme labor division (alongside automation) tends to create pretty damn understimulating and alienating jobs. In a deeper analysis, that quantifies the very real values in fulfilling, engaging jobs and professions fit for human beings, would free trade still trump protectionism? I'm not so sure, and at some point (now), when a substantial level of general wealth has been reached, this is a question that needs to be taken seriously. I freely admit i like Le Pen, Trump et al. in regards to how they show that it's possible to think outside the shallow consensus box in this issue.
@@klintwhite9242 so you can make fun of scripture, unless you repent when you appear before your Lord and judge, you won't feel too humorous then, rest assured, get real knowledge instead of your shit humor
As others have pointed out, it is funny to see how an 8 minute video tells you with so much confidence what is right and what is not, when the academics and economists argue about the complex interplay of both. Not mentioning that quite a few simplistic assumptions break down when you introduce automation and a great disparity in the wealth/skills of countries. I agree with another comment here that this video is deceptive. Even in countries that you'd assume free trade is practised, it is not that simple. The US has maintained much of its industry like Boeing with its military arm, not mentioning supporting companies like IBM in the technology development, its way of supporting the educational system and universities are also a form of subsidy, etc. In the book Kicking Away the Ladder: Development Strategy in Historical Perspective by Ha-Joon Chang from Cambridge University, you can find more objections and difficulties. I think it is clear that there is no ideal answer to this free trade or protectionism, it is best to consider such matters policy by policy, and not allow yourself to be swayed with idealistic thinking that there is one true path to follow.
Something that should have been mentioned is the Import Substitution Industralization. That is, the idea that some goods, specifically industrial goods, can't compete on the global market, so you shouldn't let them. So you put high import tariffs into place and let your own industry supply domestic demand. Once you built up your own industry, you slowly lower tariffs and let your homegrown industry compete on the world market. This is effectively what every known industrial nation did, hence the belief that it works, even if there are certainly doubts about it. Basically, there's a time and a place for import tariffs and protectionism. Which is why industrial nations are the chief proponents of free trade. They already have industries which are able to compete on the global market.
NOT such a good video. You spend much more time on Adam Smith's theories, and the length of time spent far exceeds the time spent on the values of protectionism UNFAIRLY skewing the discussion.
I propose free trade within the borders of the country ( free trade between cities/states) and encourage a form of protectionism to keep your citizens jobs within the country but still trade for what would be more expensive to produce in your own country ( mainly because you don't have the necessary raw resources for those products).
Another point in favor of protectionism: Suppose you know your country could make good cars if it just had some practice. But whenever you try the foreign auto makers under-price you to keep you from getting off the ground. Then it makes sense to slap a tariff on auto imports to give your domestic industry time to get up to speed. The tariff can slowly be removed.
As the costs of commodities go up, minimalism will begin to develop in many and reduce the the practice of consumerism and capitalism. Our family has begun to pursue a lifestyle of minimalism and realized what a sham capitalism and consumerism has played in our lives. As the price of consumer goods increase we feel better every time we ask ourselves is this purchase a want or a need and found it astonishing how much we were spending senselessly. I've shared this philosophy with family, coworkers and friends and most have come to the same conclusion. Protectionism will drive up costs of consumer goods and erode the walls of capitalism / consumerism through necessity, mindfulness or both.
I really don't believe this is a good reason, as much as I hate consumerism, i don't think it's necessary. It's good for the people who already have money but what about the others? This practice is more of a personal thing and it doesn't need to be restrained by the govermnent to be popular.
@@matheuspinheiro4796Valid point however I don't think it's ethical for government to put constraints on or give advantages to people because of their economic status.
It's all well and good to say that workers whose profession's are outsourced to other countries just need to be trained in the new professions which are a strength of the country they live in, but this targeting of production can ultimately lead to a reduced variety of professions, which may not allow individuals to train in their personal strengths
True. And to train individuals means that education systems have to get out of the dark ages. Such as how education is funded by property taxes in the U.S.
I noticed, while watching this that the ill effects of Adam Smith's philosophy were down played. The term "learn to code" kept popping up in my head as the trite and condescending natural response to the economic suffering of others. In the US we have been fed a steady diet of free trade when all around us, the countries that we trade with, are heavily biased against our goods. How can you have "free trade" when your trading partners erect barriers to your own products? Now the free trade destroyed great swaths of the our manufacturing base they have turned their attention to open borders. The justification for this sounds very much like the defense of free trade. It will be great for businesses and the wealth of nations but it will stink for the average citizen. It's a good thing we can count on government programs to provide retraining and healthcare as well as bread and circuses.
Adam Smith proposed that the state break up monopolies, build public infrastructure and public healthcare and education. Don't criticize without reading.
The best way to view free trade is not through national statistics prism that most protectionists adhere to. When viewing the advantages of trade not inhibited by government interventions and manipulations, you must view why the transactions are mutually beneficial to the parties involved, not how they will impact a false dilemma about trade deficits at the state level. Government isn't going to enrich the nation nor will it ever protect anything efficiently from an economic perspective. This is the lesson of 20th century geopolitics.
The solution is Balance. Focus on producing what you have an advantage in while also trying to be as versatile as ur ability allows you to reduce dependence in countries with added advantage.
One aspect totally missing from the argument presented here is the question of power. The reason "the cries of the dispossessed" were unheard was not because the proponents of free trade had "fail[ed] to articulate the remedy" for the social dislocations and exploitation of the capitalist system but because power is an inherent part of human societies: some have the power over others to exploit, to dispossess, to introduce measures disregarding effects on human beings. Moreover, land and humans are NOT commodities and should not be simply "exchanged" on the market as such. This inevitably leads to environmental degradation and incalculable human costs.
Here's the thing though: when government tries to do what you imply, it invariably ends in failure; either reaction against it cripples it, or, more often, people support these, but the system (inevitably) breaks down within a couple of generations; these are usually because government methods are by default inefficient and impractical. Note for example the unfunded liabilities issue in the US' social security program, or the constant talk of Healthcare reform in the UK and Canada (and the US). I agree with you on the conclusion that free trade is fundamentally good, and also that one has to address any costs associated with it (as with any system), but we need a new way than what we have to do this. We also, to be honest, need a new set of social codes, to enhance the good in modern society, and to achieve this in a flexible, adaptable manner--without recourse to the current (shitty) methods. I also would argue that we need to abandon the idea that one must have a degree to succeed in life, but that's another story, and Mike Rowe expresses similar ideas better.
The solution is clearly between the two extremes, as always EDIT: - I agree that I don't answer the question by this comment at all. Finding the perfect ratio is hell of a complicated question. I just dislike when solutions are presented in a black and white way. That was the point of my comment. It didn't want to "close the debate", far from that. - I don't think it is a matter of principle that solutions to problems are always moderate. Yes, I should probably just have said: "You know you can also consider solutions between those 2 extremes, right?". But, empirically, moderation seems to work most of the time.
While i can't be sure you are insinuating this, I heavily dislike the attitude of being a "centrist for the sake of centrism". We build upon use the most efficient solutions and find ways of mitigating the problems. The problems to Protectionism can be solved with Free trade. The problems to Free trade can be solved by addressing the redistribution of wealth to the middle class. A genuine inquiry, What would a mix of these two economic models look like? since they seem, at least to me, to be mutually exclusive.
Vincent Laberge if you watched the full video the conclusion drawn was that free trade was the answer, but only when the people in sectors that did well were taxed and that money went towards helping those that had lost their jobs/assets due to free trade. otherwise there will be public unrest and popular opinion will revert towards protectionism.
Free trade is a policy followed by some international markets in which countries' governments do not restrict imports from, or exports to, other countries. Free trade is exemplified by the European Economic Area and the Mercosur, which have established open markets. Most nations are today members of the World Trade Organization (WTO) multilateral trade agreements. However, most governments still impose some protectionist policies that are intended to support local employment, such as applying tariffs to imports or subsidies to exports. Governments may also restrict free trade to limit exports of natural resources. Other barriers that may hinder trade include import quotas, taxes, and non-tariff barriers, such as regulatory legislation.
No matter how opposing the ideals of free trade and mercantilism seem, the upperclass thrives in either and nothing really changes for the men in the fields.
Exactly. No matter which economic model we chose, it never tackles the underlying problem which is proportion of the wealth the upper class have. We have ease the pain but sooner or later we need to treat the problem instead of avoiding it.
The widely divergent proportion of wealth between the lowest and highest brackets are irrelevant. It is a perfectly equal society where everyone hasn't got a penny to their name. I would rather the society where one man has a thousand dollars, and another a million than equality, where both have none.
Galbart Denebar A more apt comparison is one man has a thousand dollars an another has a Billion.But the answer isn't that both have none or of equal standing, the answer is that one has a majority, not an "Overwhelming majority". They are entitled to their wealth that they have inherited or rightly earned like any man, but isnt reaping the benefits of subsidies,tax havens etc. We are advocating in laymen terms, to raise the minimum wage instead of "give me all your money for the sake of it".
The main issue with wealth divergence is the need for there to be a limited amount of money in the world in order for it to maintain its value to any extent. Ultimately, so long as the disparity is allowed to grow further, it does mean that someone will gain whilst another person loses. And since wealth tends to accumulate wealth, without being addressed this can only result in most people being in the position where most people are, as you put it, "equally penniless" anyway.
A reminder _ood_ of all things in moderation. Free trade is good for luxury goods and peacetime. Protectionism is good for criticals and wartime. For instance, how many countries suffered because they did not have what was necessary during COVID, whether it's drugs. Or protection equipment? Absolute free trade ignores security Absolute protectionism ignores efficiency.
As a mexican I couldn't agree more. By one end, Free trade with the US and Canada improved mexican industrial production and generated millions of jobs in factories, but it also caused lots of farmer families to lose their way of life, so even though the situation was generally better after than before NAFTA agreement, millions of mexicans from the countryside emigrated to the US seeking a better life because in Mexico there was nothing for them anymore and our government turned its back on them. This is why I've stopped being a libertarian, because absolutely free and unrestricted trade and unregulated economy has consecuences too. Great video btw.
This video would have been more timely last year, though is clearly informed and motivated by the political shocks of the last year and is greatly welcome.
Free trade is superior in not only the moral sense but also in the economic sense. From a purely economic standpoint, it makes no sense to have poor people in rich countries employed at a higher cost than it would take to employ people in poorer countries. This is not only true for the employer, who gets cheaper labor, but also the consumer, who gets lower prices, and the poorer people of the rich country to put their time to more productive use. Source: David Ricardo from over 150 years ago IIRC
@@rrose9161 people who are employed but just not doing that line of work. You are correct to point out that they need an income in order to be customers. However, the trend has been one of higher paying and more advanced jobs for the rich countries rather than mass unemployment when it comes to comparative advantage.
So to summarize. Allowing people to trade freely and across borders generates wealth but necessitates protective measures to prevent too much inequalities in the distribution of that wealth. Something which is often neglected by proponents of "free trade".
wow, I think you just articulated and explained the whole political change going on right now better than hours and hours of footage and writing trying to get thier heads around the rise of 'populism'. clap clap clap :)
Free trade is protectionism for the wealthy. Alexander Hamilton's tariffs helped the fledgling United States grow and prosper into the world's greatest economy. Unfortunately free trade leads only to job killers like NAFTA and TPP with a race to the bottom, serving corporations' profits, not a country's. Fair trade insures countries trade for supplies they need, while protecting consumers from poorly made products and low paying part time service sector jobs. Not only does buying local keep jobs, it keeps wages up, quality competitive and homes prosperous. Believe me, I'd rather buy a car made in Detroit than Mexico, or a product made in US than Vietnam, unless no one loves vehicle qualify/safety or cares about the treatment of workers in low paying, unregulated Nations.
*Feedback* I really love your videos, but this channel is supposed to be different than school, where I dont learn all these interesting stuff about life. the problem is, the voice of the narrator is very sleepy, and its hard for me to keep track with my ADHD, the content is very interesting, is it possible for you to brodcast the content in a more interesting way?
The video leaves out two important facts that heavily change the discussion: First, in times of little technological progress and at the same time the rule of multinational corporations like we experience them now there are very vew areas of production countries can really specialize in, which makes Smith's theory inapliccable to our times. When the only difference between countries, the only thing managers can take into account when for instance deciding where to put a new car production line, are wages and/or ecological obligations, we have a ruinous competition, in which no one gets rich. It's not really the case that Mexico is BEST at producing cars, they are simply cheapest. So, in order to get trade balances back in order, it actually makes some sense to get a certain amount of production of needed goods in ones own country. This way, one can force multinational players to compete within the country, thus necessarily applying the local social and ecological rules. Second, there is the fact that the term "free trade" is highly misleading. Can it be called "free trade" when highly subsidized industries throw their products into markets that have to produce at real costs? Is it free trade when a country with a well developed social security systems imports goods that are produced under conditions that would be outright illegal were they applied to that countries own workforce? The way the world is nowadays, the only real "free markets", meaning, such markets in which all the competitors have to compete under a set of equal rules and restrictions, are national. Like with most economical theories, Smith's is way too simple to be sensibly applied to the complex world we live in nowadays. China has proven that catching up to the established technological level can be done very successully by NOT fully opening markets, and if countries like the US will now start to close their borders to goods that can be made inside of them, that WILL lead to success. Because, as I said above, it is no longer the countries competing against each other, it's big corporations. Forcing them to produce the stuff they want to sell in a way that will allow their customers to share their economical success is not such a bad idea.
It seems to me that they didn`t even search of any liberal after Adam Smith. Why there`s no mention to the Mises, hayek, or any of the Austrian School. It´s too easy to criticize free trade (Even though criticizing poorly and in some parts just wrongly) just using the book that first started it all, why not criticize a modern Liberal like Mises?
The guy who publishes school of life did the Ted talk and what she was astonished the Brexit happened I hardly think he understands economics or politics in real terms. Simplistic dribble lacking any nuance
Redirect wealth through a negative-income-tax mechanism to guarantee a basic income for all. But for the sake of us all, the wisdom of Adam Smith must reassert itself.
Smith's theory holds among equal trade partners. The US has the biggest trade deficit in the world. Something has to be done about it. No one is against low prices or China's low manufacturing costs, but when one side exports much more than the other, you have a disbalance, and the side that imports the most is set to lose the most. Protectionism isn't just out of pride, but an economic necessity to get America's books in order.
I agree with most things in the video, but what was failed to be addressed was that economies that are more protectionist will be more financially stable even thought in the long term it will be poorer. Another thing is that part of the problem with free trade, is that our economy, in the west at least, grows so much that we need to spend more and more to keep up with it. This is a large factor in our debt. So yes it is true the economy would grow more when the system comes crashing down the protectionist nations will be better off. So would the rational conclusion not be that each police is better in different situations. And that we should at least keep some protectionist polices even when things are fine so that we have a diverse eccominy for when things get bad. And in a capitalist system there will always be ups and downs. Nothing in politics are politically one sided, and I am taken aback on how you guys do not understand this. But I would love to talk more about it.
Why does government spending have to go up politicians sell spending more but outside of that theirs no requirement for that we didn't need to spend 4.3 trillion in the Middle East since 2001 and a lot of our spending is protectionist based subsidizing multiple industries so their cheaper then foreign products, also there was no great stability before capitalism they had ups and downs it's just the up wasn't very high and the low was extremely low
One thing not addressed is that free trade not only makes economies more efficient, but also creates a situation where countries are less likely to fight each other, since each "relies" on the other for some portion of livelihood. So in a sense, preparing for bad times by adopting protectionism, can bring on those very bad times, as you are denying your countrymen, as well as your would-be trading partners in other nations, the very things that create the good times: cheaper, and higher quality goods. How do you get a valuable resource? You can buy it (trade) or you can steal it (war). The latter is much more expensive.
Wrong. Many countries compete by giving government assistance to their local industries, in the form of grants, low interest loans, government funded apprentice education, AND adjusting their currency exchange rates, so they DON'T NEED tariffs to unfairly compete.
I think your video is very one-sided. You're mixing the ideas of Adam Smith with those of David Ricardo. Smith was very concerned about the specialization of work, because he saw it as it was (and is): a destructive force which destroys the dignity and intellectual self-integrity of humans. Ricardos argument about the english and portugese wine, etc. has a fundamental flaw: he says that the only thing which prevents the owner of a company to leave the country, is some sort of an "sentimental/patriotic feeling" this is clearly nonsense in the modern world of global economy. Plus, his concept only works, if transportation is limited by the speed of sailing ships. And Ricardo was a financial speculator, who represented the interests of the rich english merchants, not the entire nation. Today, we see the results: Instability, social unrest and the rise of populism in the western countries, exploitation in the eastern countries and starvation and misery in Africa and other poorer countries. For example, Haitis economy was ruined by the "free trade" and unemployment and famines were the results for the people, while a few rich capitalists made profit. In general, the mass transportation of goods around the world and specialized mono-cultural farms are a massive threat to the environment. But despite it essentially only favours the rich and brings harm to the poor, almost all people are convinced that "free trade" is the solution for everything. It is as Marx said: The opinion of the ruling class is the opinion of the whole society... Oh, and your solution of an compensation by the state seems very impractical to me. It was born in the world of the 18th and 19th century, but it is far more complicated in the modern world. And why trying to fix a not-working system which fails because of the human character? You can't change the human character, but you can change the system.
Compensation isn't easy, but it's possible. The OECDs that have risen to the top in living standards over the last few decades have achieved that by compensating for the flaws in capitalism and neo-liberal free trade, while nations refusing to take those measures (like the USA, with their phobia of socialism) have fallen behind.
nextpkfr Exactly the highest standards of living you find in nordic european countries, switzerland, etcetera. And those countries all mix free trade with socialist ideas.
+Untrue Lie Everything you just described has little to do with "free trade" and much more to do with corruption, crony capitalism and state intervention. ie socalism.
+DaYouKlu When people talk about nordic countries, they fail to realize that it was not socialism that made their countries prosperous. It was capitalism that made them prosperous, the socialism only came "after" they had created their industry and prosperity.
You get the best of both wooooorlds! Chill it out, take it slow, then you rock out the show! You get the best of both wooooorlds! Mix it all together, and you know that it's the best of both worlds.
Free trade has been established as best for the country from the majority economists. Just look at countries who have free trade, and the ones who don’t.
Protectionism. From the perspective of developing countries free trade is bad. For example, Germany and Sub-Saharan Africa. Germany specializes in machinery while most of Sub-Saharan Africa specializes in agriculture: (i) The flow of imported machinery into Sub-Saharan Africa hinders the industrialization of the areas in which the machinery is imported. A further consequence would be that the human resources that would have been developed to cope with industrialization never existed denying the country of potentially talented individuals. (ii) Well according to the logic of this video, Germany should be a market for Sub-Saharan African produce. But Germany rarely imports on mass because, even though they don't specialize in agriculture, their agriculture industry can support them. German produce is so cheap compared to imports, it creates a barrier to imports similar to that in protectionism. This is most extreme in the dairy sector. Things are so cheap there that even after shipping, the dairy is cheaper in Sub-Saharan Africa than the local milk. So not only has cheap agriculture barred imports from Sub-Saharan Africa forcing local business in Africa to rely on a poor population as their only market, cheap German products threaten their only safe haven; they do not have the ability to industrialize. Free trade has led them into a trap which cannot be escaped unless they use protectionism.
+oreo31598 Norway for example, is a part of the EU internal market, with a few exceptions (like the fish and agriculture industry). Last time I checked, the norwegian GDP per capita is doing just fine. Creating money is not the only thing that matters in politics (which I am sure you are aware of). If more money = better, it wouldn't matter if 1% had all the money for example, as long as they were earing more and more. Norways kids are actually the ones most against total free trade, so yes, they don't give a shit about having tariffs :)
eizhowa In a way, this makes no sense. You cannot tax something and not tax it simultaneously. But you're right, their are more options than zero tariffs Vs. as much tax as possible.
+Matilda Vere You can absolutely tax something and not tax something at the same time. For example, you tax goods x if imported from maket a, but not goods x that are imported from market b at the same time(/simultaneously). Or you can have tafiffs on only certain goods, to protect certain kinds of jobs. Norway does both, I believe. My point when saying you can have both was that it is possible to engage in free trade in some areas while protecting others. So you are using both methods to achieve the poltical goal of the country.
its also a method that works great when the economic advantage is clearly in favor of your nation. Ex. In Norways case they are among the few nations in Europe with lots of oil so they protect their own oil rig workers and industry by placing high tariffs on Saudi oil. Not saying they do that but ofc they could if they wanted to.
the timing of the video couldn't be more perfect.With world powers having met to no avail, I grew some questions and frankly doubts regarding the much hyped free trade over mercantilism. But Adam Smith's acquaintence allayed much of them. History is a proof of the benefits of the free trade. thank you:)
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The problem with having government tax the prosperous to retrain anyone whose industry is negatively impacted is that government does a terrible job at determining the people's needs, potential, and what skills & industries those people should be trained for. Small groups of elites in government have no special insight to know how best to get people working in new jobs, and this is even making the huge assumption that everyone in said government is actually honest & virtuous, with a genuine interest in the well being of the poor unemployed & underemployed.
Emily Whitney The main reason for some degree of protectionism is to protect workers from the monopolies on labor found in countries with more workers, resources or technology.
Free trade would be good only when countries agree to a certain set of standards. If we want free trade, then we can't have large scale environmental regulation in individual countries or proper labor laws. This is ESPECIALLY true with automation and standardization, as nearly EVERYTHING can be manufactured will low skilled workers. The industrialization of large populations such as China and India, where they have very little in ways of labor protection, have been easily able to overpower every other country with cheap and plentiful labor.
Another fact about the Wisdom of Adam Smith: well it can be summed up by the adage of "The more parts a machine has, the more ways it can break down." His wisdom requires a massive infrastructure with many points where it can completely break down, leading to chaos. From a perspective of self-reliance/sufficiency, you're setting yourself up for failure.
The solution to this could be a mix between the two systems. Protectionism on essential food items such as grain, meat etc. And free trade for let´s say, technology. Then a country can survive if the foodsupply is cut from abroad, and also get some items cheaper from other countries.
Free trade is OK for luxury goods. Countries, in times of conflict, need to be self sufficient in food water and energy. A we can see presently Cheap goods exploit workers out of your sightline so you have little guilt.
I live in swizerland and production in swizeeland that requires labor is extremly expensive due to the record high wages is swizerland. this makes it verry atractive to import produced goods from countries like china. however this is considerd generaly as moraly dubious due to the working conditions in those chinese factorys.
Yea, no I didn't, and for all the reasons that you stated in the video, it's what au keep trying to say, but noone will listen. :( More people need to watch this video.
Protectionism isn't bad as the video has stated. History has show us that a country must go through both systems in order to develop. Protectionism was the first step for the UK and the US (in the 30's) to develop. Then some free trade was allowed, complementing with that a full economic system able to produce and to keep competitiveness in the global arena
When you think 'cheaply' I think 'efficiently'. The quality of the product depends on the materials used and the skill of the craftsman making it. If someone in a third world country makes a product that does not meet the standards you set for it, then its a useless product and you should find somebody else to make it.
I think true free trade can only be achieved the day that there are no longer borders and no longer nations. For example, you can’t have free movement of products and not have free movement of labor. We see this today with the collapse of industry in many western nations because jobs can get exported to places where cost of living is less but if these workers that got laid off can’t move to those areas, they can’t take advantage of those opportunities. Limiting movement of people is basically just modern mercantilism and in my view, is the biggest trade barrier of all.
That is obvious, many companies depend on the fact that there are many Africans who cannot move and therefore are forced to accept wages of 2 dollars for 10 hours of work, a question. Where is a child useful to Nike In Vietnam where you can put him to work for less than 50 cents an hour or in France where you can't even convince him to work?
Free trade is great granted all other trading nations also lift their tariffs. But when you trade with other nations who impose tariffs on your exports, they have the advantage. They're allowed to dump their goods into your country without accepting your exports. So putting up trade barriers can act as temporary leverage to get them to take their barriers down. Obviously, you need to be one of the largest consumer nations (US) in order for this to work or the exporting country won't care. Also, the manipulation of currency by other trading nations creates other problems. Another issue probably unforeseen by Smith at the time is the fact that it's not always the foreign country producers who are manufacturing goods. Sometimes, its your own countrymen who set up shop overseas for cheap labor and low taxes, then try to export back to their home country for a massive profit, taking advantage of the lack of tariffs. Adding a tariff can then prevent that business leaving the country in the first place with the foreknowledge that you cannot manufacture and sell back to the home country. The cost imposed by the tariff must outweigh the amount that company will save by moving to another country. Any imports that do make it through with the added tariff, the government can use that tax revenue to subsidize exporting industries. I don't like any of this and wish that all countries would trade freely but that's not the reality at present.
Regarding the ongoing U.S.-China trade war, my logic is this: "Protectionism towards our nation's enemies! Free trade towards everyone else (friend or otherwise)!" "Those who conduct protectionist measures against us are our enemies." "Therefore, we must implement protectionist policies towards those that do so to us." Ultimately, I believe a balanced and discreet approach between free trade and protectionism would be best for our economy.
The US is so geographically diverse and so culturally diverse that the comparison between the archaic concept of mercantilism and modern US protectionism is comparing apples to Oranges. America can essentially afford protectionist policy because they don’t need goods from other regions due to their size and diverse landscapes. Especially considering that most other countries produce goods of lower quality than American goods.
Hi School of Life, great video. Just wondering on your thoughts on Kicking away the ladder by Ha-Joon Chang. More specifically, the idea that protectionism being used to allow industries/sectors to develop past the high cost stages of production to the more cost efficient stages that later allow them to compete on the international standards.
I recommend you to read books by Michael Pettis. He described how distorted policy lead to imbalance in global trade and they eventually hurt both surplus and deficit countries, and surplus countries will take even more damages
With regard to how the lower class suffered in England when cheaper corn was allowed to be imported, I think it was the bubble created by the regulation keeping it out for so long, preventing free trade, that made the adjustment of labor supply and demand so much worse. I also don't think it necessarily follows that government need be involved in retraining the affected workforce. Unregulated labor costs would allow true market pricing of labor, and people would be able to determine where they want to pursue employment based on the economic trends. In essence, the labor force is much more attuned to what's making them money or not, and better at choosing where to focus their resources. Career fields that need people are more willing to pay attractive salaries and publicize that they're looking for people. This is why you see (in America at least) plenty of commercials for jobs in the IT and healthcare sectors. There's a growing demand for skilled workers. It doesn't take a rocket scientist to figure out that if you want to decent paying job that you're likely to be able to hold onto, to switch to a field that is in demand.
I think we'd better enrich a country with internal free trade policy and protect its industry from other country's - a cue should be followed by poor countries.
The value of free trade depends on there being unalterable differences between countries. If humans get such a handle on manipulation of the physical world that they could replicate anything anywhere, free trade would no longer have any value.
![Stromae, Pomme - “Ma Meilleure Ennemie” (from Arcane Season 2) [Official Visualizer]](http://i.ytimg.com/vi/1F3OGIFnW1k/mqdefault.jpg)
It is a hard policy to balance.
Some things are cheaper cause of currency manipulation, poorer quality control, poorer work conditions.
I love how he starts neutral and then goes ultra pro free trade
Ehhh he points out how free trade can destroy livelihoods and people in general.
The Data itself is pro free trade. Look at the poverty rates in the 1950s vs now. Yes Yes I know houses were cheap then but keep in mind ~1/3 of those houses lacked running water also food was much more expensive as it would eat up 30 to 40% of a household budget.
That might be because free trade is a million times better.
@@DaDARKPass No Freetrade country stopped Putin from invading Ukraine because he controlled their supply chain. Yea, it didn't age well.
@@DaDARKPass Alexander Hamilton entered the chat: "Wait, let me invite Matthew Carey, Henry C Carey, Henry Clay, Lincoln & Friedrich List, they got to hear this"
The largest issue I have with this logic lies in the fact that often times the reason that many foreign countries can manufacture items so cheaply often is because of worker exploitation. If they don't have to provide their employees with the same standards of living as we do, they can afford to sell their product much more cheaply.
Right. That may be a comparative advantage, but it's an UNFAIR advantage.
Exactly, I am all about free trade, but, to put an example, here in Mexico we don't make automoviles for eight dollars an hour, we make them for less than eight dollars a day. ¿Do we want to make them at that price?, of course we do not, in Mexico the minimum wage is not a living wage; three and a half dollars a day just will not make it. ¿Do we get richer by making those automoviles?, not really, they are made for american enterprises, in fact, most of the products made in big factories are made by foreign enterprises, almost all the capital earnings go back to another country.
This is both fault of my government failures and the dominant culture of the economic potencies (let us be honest, it is mostly fault of my government), I support free trade because no sane man will propose to grow pineapples in Sweden instead of in caribbean lands.
¿But what will happen if people in china making cell-phones suddenly get payed, at least, what they need to live?, the western powers like to say they have a high minimum wage that covers the cost of living, this is true mostly because they live almost completely on imported goods from countrys where it is cheaper to produce it; but if Mexico, Taiwan, China, Peru, etc, decided to pay a higher minimum wage (let's say seven dollars an hour like the U.S.) and the price of all products raised accordingly to this new minimum wage, then suddenly the minimum wage of those countrys (say the Netherlands, Sweden, Swiss) is not as fair as they thinked.
First world countries need third world countries to produce cheaper goods for their consume. We, third world countries inhabitants, make those goods at such low prices, not because we like it, but because we have no other choice. Free trade, as we know it today, will not suffice.
Samuel Winnie Free trade and capitalism does not protect workers or people's rights, which is why you must have some degree of socialism, including protectionism.
Life isn't fair. Strip away these jobs from impoverished nations and they resort to prostitution and have a lower quality of life.
I depends, what you call exploitation others will see as a sense of overentitlement. In certain cases it is definitely true that workers are exploited almost like slaves, but over all would you rather these poor 3rd world people have poor paying jobs or no jobs? At least with a poor paying job they have better living standards that no jobs.
Meanwhile in the real school of life,
British: We want wine.
Portugal: We don't need wool.
British: Warrrrrrrrrr...
Portugal: wtf...
@@pergrinepi3130
British: We want tea.
Chinese: We don't need wool.
British: May I interest you with some of Britain's finest opium.
sunny portugal needs that wool really bad to sweat in
Switches wine to tea. *plants Union Jack 🇬🇧 *
Portugal and Britain have the longest alliance in the world ever since the Anglo-Portuguese Treaty was signed in 1373.
@@hedgehog_fox Hong Kong ends up becoming the pearl of the orient until the Chinese ruined it.
See? Colonialism good.
If your goverment is corrupt, it doesn't matter.
+Piwi hey lizard people are nice once you get to know them
THANK YOU!!!!!
So we should just give up and lie down like dead dogs.
Right.
This is true. My uncle says "a strict regime, far right country will do better" and then he says "but look at the nordics, they're doing great, too-". "It's all about corruption, when there is corruption, there is no system that works".
Therefore we should rethink if we even need government as it is today. Switzerland practices Direct Democracy via their referendum policy.
Btw, I don't think there such a concept as Direct Democracy because Direct Democracy is the only Democracy. Representative Gov't is not democracy and never will be.
Free trade only work if all players play a fair game
I agree. Which is why we can begin negotiations with another country by agreeing on a set amount of universal laws which we both must abide by. This is how Alliances start and in principal it works the same economically. The punishment would be of course economic reparations or classic taxation.
Radioactive Snake you think China Mexico Brazil india will just relinquish their advantage and play along? Do you think people will buy China goods if it's the same price as American made products.
Of course not, but thats the entire point of negotiations. Finding a common middle ground both parties benefit from. Raising say the amount those workers are paid however it will still be nowhere near what american workers are paid. The point is to compromise and find a common ground like any good agreement. "A good deal is one both parties benefit from".
In my opinion,that’s impossible with human nature but if anybody has a solution for that I would be open to listen
Trade is real life, not some silly children's game.
The arguments for free trade are compelling, i'd still argue nations should be as self reliant as possible because of catastrofies. Be it war, natural dizaster or pandemic, the trade routes can be disrupted. In the very least there should be storages in case of disruptions. One of the biggest problem with the extreme specialization i can see is the chip production: practically all of it is in Taiwan. Which makes it geopolitically massive bargainig chip. Lets just say decides to take control of it - and then (eventually) declares who can and cannot get chips - a commody everything from cars to electronics requires in the modern day.
Seems like we need to strike a balance, with a slight bias towards protectionism. If your country can't foster it's own economy, it becomes dependent on the economies of others. So to maintain the soveirgnty of the citizens, there should be enough protection so that the country can more or less maintain itself regardless of the global economy.
However, people also like to buy goods from other countries. And there's no reason the govt should put unnecessarily high taxes on imports, because if people want it, the govt shouldn't use taxes to "encourage" them not to buy it. Which is what tarriffs do. Influence buying/selling behavior.
The taxes should be low, and very close to each other, with imports having a very slight increase (or maybe reflective of the rates other countries put on our own goods? so a country that has high tarriffs, we would match their tarriff rate for their goods. this encourages other countries to reduce taxes as well so that they remain competitive globally).
This was actually great read. Excellent points. Im a a free trader but i love how you put this. Definitely posed it to me in different angle that provided better clarity.
As someone who is generally more on the side of free trade, I agree we need to manufacture a good amount of our own goods at home and not become dependant on foreign nations.
From the perspective of developing countries free trade is bad.
For example, Germany and Sub-Saharan Africa. Germany specializes in
machinery while most of Sub-Saharan Africa specializes in agriculture:
(i) The flow of imported machinery into Sub-Saharan Africa hinders the
industrialization of the areas in which the machinery is imported. A
further consequence would be that the human resources that would have
been developed to cope with industrialization never existed denying the
country of potentially talented individuals.
(ii) Well according to the logic of this video, Germany should be a
market for Sub-Saharan African produce. But Germany rarely imports on
mass because, even though they don't specialize in agriculture, their
agriculture industry can support them. German produce is so cheap
compared to imports, it creates a barrier to imports similar to that in
protectionism. This is most extreme in the dairy sector. Things are so
cheap there that even after shipping, the dairy is cheaper in
Sub-Saharan Africa than the local milk. So not only has cheap
agriculture barred imports from Sub-Saharan Africa forcing local
business in Africa to rely on a poor population as their only market,
cheap German products threaten their only safe haven; they do not have
the ability to industrialize.
But what do the PEOPLE in these developing countries DO with the machinery they import? Does that machinery not make their economy richer? Does it not make the lives of the people easier?
@@frenchstudentA How can they use the machinery to develop a competitive industry - to improve their economy - if they have to compete with far more developed countries in the stages of their growth? More developed industries from richer companies can sell the same product far cheaper and at higher quality, then how does the developing country get their industries moving in the first place? The video seems to suggest that some countries are just naturally better at producing some things than others, but when developing countries have been kept under collonial rule in the past and stopped from being able to start at the same time as all other countries, how can they have just have an industry that is somehow better than all other countries?
@@mattwall1073 The real question is not who is the best at producing something (absolute advantage), but by how much is one economy more productive than another at producing a specific good (comparitive advantage). One country might be best at producing everything, and yet still it won't generate more welfare for the people of that country to produce everything instead of just the good with the most comparative advantage. This is because the labour force of that country is limited. Because of this, every country has comparative advantage in something (Ricardo-Theory).
Also the problem with Africas agriculture is not that it hasn't implemented enough protectionism, but that Germany has to much of it. My country and the EU subsidize agriculture heavily "protecting farmers", thus harming farmers in Africa and Germany as well (huge welfare losses through taxes, which are needed to fund all of this).
Yeah just like the sun dumping cheap light on us hinders the lamp and candle industries...
@@frenchstudentA they would be able to develop their own machinery industry if they were protected from foreign markets.
I would like to deliver a few economic concepts as a food for thought - from an economics Undergraduate. In aggregate the comparative advantage to produce a certain good can be among others explained through the scarcity and abundance of factors which are required to produce this good. In simple economic models (like the H-O Model) there are two factors which are analyzed - capital and labor. Assuming two goods X and Y and two countries USA and China. Assume further, To produce X one needs relatively more capital than to produce Y. On the other hand Y requires relatively more Labor to be produced (e.g. X is a Hightech product, and Y is apparel). Furthermore, say the USA is relatively more capital abundant than China and China is relatively more labor abundant than usa. The hypothesis is: The USA has a Comparative Advantage in producing X and China has a comparative advantage in producing Y. This is mainly because in China the abundance of labor induce low wages, which therefore leads to lower prices of products which need relatively more labor. In the USa the abundance of capital leads to a lower interest rate, so that capital intensive products can be produced cheaper. The result of free trade depends on some further considerations. If the economy can absorb labor and capital from the industry X and Y which are unemployed after trade instantly, then there is a set of transfers so that everyone would be better off after the free trade. I would like to add a few remarks on this analysis so far:
The possibility of permanent unemployment and the destruction of capital:
The instant absorption of capital and labor is obviously not guaranteed. One has to distinguish between certain labor and capital classes and there isn't necessary a perfect substitution for the skills and the capital which have been useful to produce the good which is now outsourced and the other goods of the economy. In the long run one can argue that the society will educate their laborforce in the direction of "comparative advantage goods" but in the short run a whole labor and capital class can be left behind.
The institutional framework of the free trade agreement:
This is related to non-tariff barriers between countries. Like different regulations regarding environment, labor security, health etc. To eliminate this one has to harmonize the regulations, which basically makes the two countries one country in certain areas. If the preferences regarding this regulations are highly different in these two countries, the economic benefits of free trade are not necessarily higher than the detriments of "living together". This is a bit like having roommates which have different notions of appropriate noise, cleanliness etc. You are saving money by living with them but the disutility of the inner conflicts which are induced by the different ways of living is maybe exceeding the economic benefits.
The equivalence of free trade and technological change:
Most economists would argue that the most influential factor regarding inequality and instablitiy in the western countries is technological change.New machines and more powerfuel algorithms are like immigrants which are doing the same stuff more efficient (whcih is equivalent to making the same amount of a product cheaper)
Imperfections in markets:
environmental externalities
To trade with each other one needs to transport goods. To transport good nowadays one need fossil resources. fossil ressources are not rightly priced because the costs of the destruction of the environment are not internalized. An expansion of trade and production would increase this costs.
market concentration
The most markets are organized as oligiopolies. Especially in the global environment the economies which can be achieved through concentration of the market are substantial (e.g. to hedge exchange rate risk, to hedge operational risk, economies of scale, better conditions on financial markets etc.). Besides the economic costs of a higher market concentration (higher prices, lower quantity, lower wages etc.) it is questionable if it is optimal if we have such powerful institutions which are not democratically legitimated.
There is no gurantee of completeness here. I just wanted to throw in some arguments
i’m not reading this
If you like Adams you might check out 17th century economist Henry George's "Progress and Poverty"
Learned more about economics in this video than I did in a semester.
The school of life does that haha
Stan KMT Check out Ha Joon Chang, Ralph Gomory and Noam Chomsky on this.
You must have been too lazy.
Maybe you need some ritilan.
Ha Joong Cha is excellent on this. Most economists are blind but he isn't.
This assumes you have to choose one over the other. You need to combine then two
You can’t combine the two... They have opposing goals
@@harryburganjr.969 You can mix the two... tariffs and duties on only some goods, conditional tariffs based solely on the tariffs of other countries on those products, local subsidies and no tariffs like we do for oil just to maintain a local backup supply and accompanying jobs, it’s not cut and dry protectionism or free trade.
@@zekea7215 Yeah, I've learned a lot more about trade since I wrote that comment so I'd amend what I said slightly. Under the right circumstances, tariffs can be used to promote free trade and economic growth. If the state is strong enough and if they make the correct assessments, they can use temporary tariffs in conjunction with other institutions to, for example, promote infant industries. And, tariffs can also be used as an important tool to bargain with other states and foster multilateral liberalization. All that being said, however, a rules-based free-trade system should always be the end goal imo and trade barriers can be used to achieve that goal. Yes, the two are not mutually exclusive, but they are not equal. Any reasonable measure of protectionism (of which, the number is getting smaller and smaller as value chains globalize) should be careful and as limited as possible; freer trade should always be the goal of such measures.
@@harryburganjr.969 tariffs don't foster natural growth only artificially prop up inefficient industries. Along with draining the consumer of income unjustly and hamper overall economic growth by artificially constraining trade it hikes prices against actual market value. The jobs that distribution provides increases as well as overall economic value of the currency inside developing nations increases as the higher cheaper product is sold. The exchange creates leverage on the importer as it consumes the product of the producers and the greater that product does in the importer nation the more that nations economy expands. Free trade is much more productive to have real economic growth along with more stable living.
@@zekea7215 we prop up oil only to make it competitively sold, it's not running out just that it's not providing enough value. Oil is incredibly cheap, so cheap infact that recently we've (globally) been producing it at a negative value due to lack of consumption and increased economic competition.
Interesting video but lets not forget that import tariffs were the main source of the US budget income from the revolution until 1913. Many people say that US developed its industry due to these tariffs. Abraham Lincoln was quoted "“Give us a protective tariff and we will have the greatest nation on earth".
At this point I'd go with protectionism. We've been dealing with the negative effects of Neoliberal economics for decades.
@Jack McCabe That's because there is high consumer confidence.
The best analysis of "free trade" was actually written in the late 19th century by the American political economist Henry George. This book was read into the Congressional Record by a number of Congressmen and mailed to millions of their constituents. Although Henry George championed the ability of people to trade with one another across borders, he warned that the potential benefits of free trade would be significantly reduced because of others laws and taxation policies that protected "rentier" interests (i.e., those who produced nothing but because they controlled land and natural resources were able to charge others "rent" for the mere right of access). Thus, George called for the elimination of all taxation, except for an annual tax on the potential rental value of land (and land-like assets, such as the broadcast spectrum).
Free trade works when there is a level playing field. But when one country has workers rights and min. wage laws and competes with a country that doesn't, then it becomes problematic. For example, Japan trading with the US makes sense because they have similar ideals but the US trading with China is not a level playing field.
also, China has tariffs on anything we send over there, so its not like the trade is free. They get to dump their goods in our market and we can't do the same to them, hurting our exports
@@AroundSunthen why there is difficulty in completely Bann them from us market ...not so easy ,isn't it 😅
Keep in mind that Smith and his contemporaries like Hume stood to gain a lot from free market economics and minimalist state involvement - Hume only wanted the state to protect merchant property and that it. Whilst their points may be valid it's important to remember they themselves were merchants and stood to gain a lot by minimising the state and maximising the market.
Wait a second, this isn't my daily dose of depression.....
May I point out the irony in the description?
"What is the best way to make a country rich? Should you adopt a policy
of free trade? Or is protectionism and economic nationalism the better
way? We explore the history and theory of one of the central questions
of economics and politics. If you like our films, take a look at our
shop (we ship worldwide)" LOL! It's not really a paradox, of course, but it's almost an answer to the question which is very seemingly unintentional! I do love you guys' videos though, keep it up :)
This is great!, our instructor instructed us to make an essay as to which is more effective to the economy. I understand the concept of trade liberalisation and trade protectionism. However, the question's sort of hard to answer since there are a lot of factors to consider! So much thanks for this vid! I really got useful ideas😁
4:36 I do remember learning about the corn laws during my British comprehensive education, but not sure whether optimum economics is the only worthy consideration. Here in Japan, they still exist largely to ensure self-sufficiency but also to preserve farming communities - there is a huge tariff on imported rice, but I don't think it impinges on the wider economy - there's a huge drift to big cities like Tokyo and Osaka anyway. Young people don't want to be farmers anymore.
"Young people don't want to be farmers anymore." Exactly. In the U.S. farmers are subsidized. Nonetheless, it requires a lot of money i.e. wealth to start a farm.
Japan is a bit special here, they have a very high food dependency ratio.
Thus if trade were to be halted, in the case of a war or widespread famines or something japan’s would struggle to feed itself.
Global free trade is superior in creating value for us as consumers. On the labor market however, the ensuing extreme labor division (alongside automation) tends to create pretty damn understimulating and alienating jobs.
In a deeper analysis, that quantifies the very real values in fulfilling, engaging jobs and professions fit for human beings, would free trade still trump protectionism? I'm not so sure, and at some point (now), when a substantial level of general wealth has been reached, this is a question that needs to be taken seriously.
I freely admit i like Le Pen, Trump et al. in regards to how they show that it's possible to think outside the shallow consensus box in this issue.
Working on a rice paddy your whole life is pretty boring too.
Blessed are the Cheesemakers, for they shall inherit the Earth
Obviously you don't mean that literally, I assume you are referring to any dairy manufacturers
@@klintwhite9242 Because otherwise it would be dairist
@@klintwhite9242 so you can make fun of scripture, unless you repent when you appear before your Lord and judge, you won't feel too humorous then, rest assured, get real knowledge instead of your shit humor
@@justicetruthwarrior4756 Do you know if there talking bout just cheese makers?
As others have pointed out, it is funny to see how an 8 minute video tells you with so much confidence what is right and what is not, when the academics and economists argue about the complex interplay of both. Not mentioning that quite a few simplistic assumptions break down when you introduce automation and a great disparity in the wealth/skills of countries.
I agree with another comment here that this video is deceptive.
Even in countries that you'd assume free trade is practised, it is not that simple. The US has maintained much of its industry like Boeing with its military arm, not mentioning supporting companies like IBM in the technology development, its way of supporting the educational system and universities are also a form of subsidy, etc.
In the book Kicking Away the Ladder: Development Strategy in Historical Perspective by Ha-Joon Chang from Cambridge University, you can find more objections and difficulties.
I think it is clear that there is no ideal answer to this free trade or protectionism, it is best to consider such matters policy by policy, and not allow yourself to be swayed with idealistic thinking that there is one true path to follow.
never heard it clearer. Great job
7:14 why would France need to manufacture back massagers??
Hon hon hon, oui oui rub me ( ͡° ͜ʖ ͡°)
Something that should have been mentioned is the Import Substitution Industralization. That is, the idea that some goods, specifically industrial goods, can't compete on the global market, so you shouldn't let them. So you put high import tariffs into place and let your own industry supply domestic demand. Once you built up your own industry, you slowly lower tariffs and let your homegrown industry compete on the world market. This is effectively what every known industrial nation did, hence the belief that it works, even if there are certainly doubts about it.
Basically, there's a time and a place for import tariffs and protectionism. Which is why industrial nations are the chief proponents of free trade. They already have industries which are able to compete on the global market.
NOT such a good video. You spend much more time on Adam Smith's theories, and the length of time spent far exceeds the time spent on the values of protectionism UNFAIRLY skewing the discussion.
I propose free trade within the borders of the country ( free trade between cities/states) and encourage a form of protectionism to keep your citizens jobs within the country but still trade for what would be more expensive to produce in your own country ( mainly because you don't have the necessary raw resources for those products).
Another point in favor of protectionism: Suppose you know your country could make good cars if it just had some practice. But whenever you try the foreign auto makers under-price you to keep you from getting off the ground. Then it makes sense to slap a tariff on auto imports to give your domestic industry time to get up to speed. The tariff can slowly be removed.
As the costs of commodities go up, minimalism will begin to develop in many and reduce the the practice of consumerism and capitalism. Our family has begun to pursue a lifestyle of minimalism and realized what a sham capitalism and consumerism has played in our lives.
As the price of consumer goods increase we feel better every time we ask ourselves is this purchase a want or a need and found it astonishing how much we were spending senselessly. I've shared this philosophy with family, coworkers and friends and most have come to the same conclusion.
Protectionism will drive up costs of consumer goods and erode the walls of capitalism / consumerism through necessity, mindfulness or both.
I really don't believe this is a good reason, as much as I hate consumerism, i don't think it's necessary. It's good for the people who already have money but what about the others? This practice is more of a personal thing and it doesn't need to be restrained by the govermnent to be popular.
@@matheuspinheiro4796Valid point however I don't think it's ethical for government to put constraints on or give advantages to people because of their economic status.
Smells like Scotland versus Brexit.
According to Smith: International consumerism leads to specialisation and freedom of choice.
Also interdependency on other nations! As a result, nations are losing their national sovereignty.
It's all well and good to say that workers whose profession's are outsourced to other countries just need to be trained in the new professions which are a strength of the country they live in, but this targeting of production can ultimately lead to a reduced variety of professions, which may not allow individuals to train in their personal strengths
True. And to train individuals means that education systems have to get out of the dark ages. Such as how education is funded by property taxes in the U.S.
This one is really good. Being an economist I am very happy a philosopher got this right.
You should study empirical data and not theory and then maybe one of you economists could get something right for a a change.
This video couldn't have aged better ! 🇨🇵🇺🇲
I noticed, while watching this that the ill effects of Adam Smith's philosophy were down played. The term "learn to code" kept popping up in my head as the trite and condescending natural response to the economic suffering of others. In the US we have been fed a steady diet of free trade when all around us, the countries that we trade with, are heavily biased against our goods. How can you have "free trade" when your trading partners erect barriers to your own products? Now the free trade destroyed great swaths of the our manufacturing base they have turned their attention to open borders. The justification for this sounds very much like the defense of free trade. It will be great for businesses and the wealth of nations but it will stink for the average citizen. It's a good thing we can count on government programs to provide retraining and healthcare as well as bread and circuses.
Adam Smith proposed that the state break up monopolies, build public infrastructure and public healthcare and education. Don't criticize without reading.
The best way to view free trade is not through national statistics prism that most protectionists adhere to. When viewing the advantages of trade not inhibited by government interventions and manipulations, you must view why the transactions are mutually beneficial to the parties involved, not how they will impact a false dilemma about trade deficits at the state level. Government isn't going to enrich the nation nor will it ever protect anything efficiently from an economic perspective. This is the lesson of 20th century geopolitics.
The solution is Balance. Focus on producing what you have an advantage in while also trying to be as versatile as ur ability allows you to reduce dependence in countries with added advantage.
The solution to every problem is balance ( but imbalance and chaos/exercises of authority are a hell of a drug in how addictive they are)
One aspect totally missing from the argument presented here is the question of power. The reason "the cries of the dispossessed" were unheard was not because the proponents of free trade had "fail[ed] to articulate the remedy" for the social dislocations and exploitation of the capitalist system but because power is an inherent part of human societies: some have the power over others to exploit, to dispossess, to introduce measures disregarding effects on human beings. Moreover, land and humans are NOT commodities and should not be simply "exchanged" on the market as such. This inevitably leads to environmental degradation and incalculable human costs.
Here's the thing though: when government tries to do what you imply, it invariably ends in failure; either reaction against it cripples it, or, more often, people support these, but the system (inevitably) breaks down within a couple of generations; these are usually because government methods are by default inefficient and impractical.
Note for example the unfunded liabilities issue in the US' social security program, or the constant talk of Healthcare reform in the UK and Canada (and the US).
I agree with you on the conclusion that free trade is fundamentally good, and also that one has to address any costs associated with it (as with any system), but we need a new way than what we have to do this. We also, to be honest, need a new set of social codes, to enhance the good in modern society, and to achieve this in a flexible, adaptable manner--without recourse to the current (shitty) methods.
I also would argue that we need to abandon the idea that one must have a degree to succeed in life, but that's another story, and Mike Rowe expresses similar ideas better.
In my opinion,we must strike a balance between businesses being reliant on the government and the government being reliant on other nations.
The solution is clearly between the two extremes, as always
EDIT:
- I agree that I don't answer the question by this comment at all. Finding the perfect ratio is hell of a complicated question. I just dislike when solutions are presented in a black and white way. That was the point of my comment. It didn't want to "close the debate", far from that.
- I don't think it is a matter of principle that solutions to problems are always moderate. Yes, I should probably just have said: "You know you can also consider solutions between those 2 extremes, right?". But, empirically, moderation seems to work most of the time.
While i can't be sure you are insinuating this, I heavily dislike the attitude of being a "centrist for the sake of centrism". We build upon use the most efficient solutions and find ways of mitigating the problems.
The problems to Protectionism can be solved with Free trade.
The problems to Free trade can be solved by addressing the redistribution of wealth to the middle class.
A genuine inquiry, What would a mix of these two economic models look like? since they seem, at least to me, to be mutually exclusive.
But redistributing "wealth to the middle class" stifles the "freedom" part of the free trade a priori, no?
you radical!
Radioactive Snake Not all the problems of free trade can be solved by redistributing wealth to the middle class.
Vincent Laberge if you watched the full video the conclusion drawn was that free trade was the answer, but only when the people in sectors that did well were taxed and that money went towards helping those that had lost their jobs/assets due to free trade. otherwise there will be public unrest and popular opinion will revert towards protectionism.
Free trade is a policy followed by some international markets in which countries' governments do not restrict imports from, or exports to, other countries.
Free trade is exemplified by the European Economic Area and the Mercosur, which have established open markets.
Most nations are today members of the World Trade Organization (WTO) multilateral trade agreements.
However, most governments still impose some protectionist policies that are intended to support local employment, such as applying tariffs to imports or subsidies to exports.
Governments may also restrict free trade to limit exports of natural resources.
Other barriers that may hinder trade include import quotas, taxes, and non-tariff barriers, such as regulatory legislation.
No matter how opposing the ideals of free trade and mercantilism seem, the upperclass thrives in either and nothing really changes for the men in the fields.
Exactly. No matter which economic model we chose, it never tackles the underlying problem which is proportion of the wealth the upper class have. We have ease the pain but sooner or later we need to treat the problem instead of avoiding it.
The widely divergent proportion of wealth between the lowest and highest brackets are irrelevant. It is a perfectly equal society where everyone hasn't got a penny to their name. I would rather the society where one man has a thousand dollars, and another a million than equality, where both have none.
Galbart Denebar In our modern society the disparity is more like one man has a billion dollars and another can't afford to feed his family every day.
Galbart Denebar A more apt comparison is one man has a thousand dollars an another has a Billion.But the answer isn't that both have none or of equal standing, the answer is that one has a majority, not an "Overwhelming majority". They are entitled to their wealth that they have inherited or rightly earned like any man, but isnt reaping the benefits of subsidies,tax havens etc. We are advocating in laymen terms, to raise the minimum wage instead of "give me all your money for the sake of it".
The main issue with wealth divergence is the need for there to be a limited amount of money in the world in order for it to maintain its value to any extent. Ultimately, so long as the disparity is allowed to grow further, it does mean that someone will gain whilst another person loses. And since wealth tends to accumulate wealth, without being addressed this can only result in most people being in the position where most people are, as you put it, "equally penniless" anyway.
A reminder _ood_ of all things in moderation. Free trade is good for luxury goods and peacetime. Protectionism is good for criticals and wartime. For instance, how many countries suffered because they did not have what was necessary during COVID, whether it's drugs. Or protection equipment?
Absolute free trade ignores security
Absolute protectionism ignores efficiency.
As a mexican I couldn't agree more. By one end, Free trade with the US and Canada improved mexican industrial production and generated millions of jobs in factories, but it also caused lots of farmer families to lose their way of life, so even though the situation was generally better after than before NAFTA agreement, millions of mexicans from the countryside emigrated to the US seeking a better life because in Mexico there was nothing for them anymore and our government turned its back on them.
This is why I've stopped being a libertarian, because absolutely free and unrestricted trade and unregulated economy has consecuences too.
Great video btw.
Free Trade requires Free Association, Free Expression and Free Movement.
This video would have been more timely last year, though is clearly informed and motivated by the political shocks of the last year and is greatly welcome.
Free trade is superior in not only the moral sense but also in the economic sense. From a purely economic standpoint, it makes no sense to have poor people in rich countries employed at a higher cost than it would take to employ people in poorer countries. This is not only true for the employer, who gets cheaper labor, but also the consumer, who gets lower prices, and the poorer people of the rich country to put their time to more productive use.
Source: David Ricardo from over 150 years ago IIRC
Then who will be the consumer ( afterall citizens need expendable income in order to be a consumer and thus able to buy stuff)
@@rrose9161 people who are employed but just not doing that line of work. You are correct to point out that they need an income in order to be customers. However, the trend has been one of higher paying and more advanced jobs for the rich countries rather than mass unemployment when it comes to comparative advantage.
So to summarize. Allowing people to trade freely and across borders generates wealth but necessitates protective measures to prevent too much inequalities in the distribution of that wealth. Something which is often neglected by proponents of "free trade".
wow, I think you just articulated and explained the whole political change going on right now better than hours and hours of footage and writing trying to get thier heads around the rise of 'populism'.
clap clap clap :)
Free trade is protectionism for the wealthy. Alexander Hamilton's tariffs helped the fledgling United States grow and prosper into the world's greatest economy.
Unfortunately free trade leads only to job killers like NAFTA and TPP with a race to the bottom, serving corporations' profits, not a country's. Fair trade insures countries trade for supplies they need, while protecting consumers from poorly made products and low paying part time service sector jobs.
Not only does buying local keep jobs, it keeps wages up, quality competitive and homes prosperous. Believe me, I'd rather buy a car made in Detroit than Mexico, or a product made in US than Vietnam, unless no one loves vehicle qualify/safety or cares about the treatment of workers in low paying, unregulated Nations.
*Feedback* I really love your videos, but this channel is supposed to be different than school, where I dont learn all these interesting stuff about life. the problem is, the voice of the narrator is very sleepy, and its hard for me to keep track with my ADHD, the content is very interesting, is it possible for you to brodcast the content in a more interesting way?
The video leaves out two important facts that heavily change the discussion:
First, in times of little technological progress and at the same time the rule of multinational corporations like we experience them now there are very vew areas of production countries can really specialize in, which makes Smith's theory inapliccable to our times. When the only difference between countries, the only thing managers can take into account when for instance deciding where to put a new car production line, are wages and/or ecological obligations, we have a ruinous competition, in which no one gets rich. It's not really the case that Mexico is BEST at producing cars, they are simply cheapest. So, in order to get trade balances back in order, it actually makes some sense to get a certain amount of production of needed goods in ones own country. This way, one can force multinational players to compete within the country, thus necessarily applying the local social and ecological rules.
Second, there is the fact that the term "free trade" is highly misleading. Can it be called "free trade" when highly subsidized industries throw their products into markets that have to produce at real costs? Is it free trade when a country with a well developed social security systems imports goods that are produced under conditions that would be outright illegal were they applied to that countries own workforce? The way the world is nowadays, the only real "free markets", meaning, such markets in which all the competitors have to compete under a set of equal rules and restrictions, are national.
Like with most economical theories, Smith's is way too simple to be sensibly applied to the complex world we live in nowadays. China has proven that catching up to the established technological level can be done very successully by NOT fully opening markets, and if countries like the US will now start to close their borders to goods that can be made inside of them, that WILL lead to success. Because, as I said above, it is no longer the countries competing against each other, it's big corporations. Forcing them to produce the stuff they want to sell in a way that will allow their customers to share their economical success is not such a bad idea.
The School of Life is at its best when it tackles economics.
Selman Adzovic You're joking right? Most of what this channel churns out is simplified drivel. Including its awful attempts at "economics".
It seems to me that they didn`t even search of any liberal after Adam Smith. Why there`s no mention to the Mises, hayek, or any of the Austrian School. It´s too easy to criticize free trade (Even though criticizing poorly and in some parts just wrongly) just using the book that first started it all, why not criticize a modern Liberal like Mises?
The guy who publishes school of life did the Ted talk and what she was astonished the Brexit happened I hardly think he understands economics or politics in real terms. Simplistic dribble lacking any nuance
Redirect wealth through a negative-income-tax mechanism to guarantee a basic income for all. But for the sake of us all, the wisdom of Adam Smith must reassert itself.
Thank you for dropping this a day before my Economics paper. This is a great recap of macro-economics!
Smith's theory holds among equal trade partners.
The US has the biggest trade deficit in the world. Something has to be done about it.
No one is against low prices or China's low manufacturing costs, but when one side exports much more than the other, you have a disbalance, and the side that imports the most is set to lose the most.
Protectionism isn't just out of pride, but an economic necessity to get America's books in order.
I agree with most things in the video, but what was failed to be addressed was that economies that are more protectionist will be more financially stable even thought in the long term it will be poorer. Another thing is that part of the problem with free trade, is that our economy, in the west at least, grows so much that we need to spend more and more to keep up with it. This is a large factor in our debt. So yes it is true the economy would grow more when the system comes crashing down the protectionist nations will be better off. So would the rational conclusion not be that each police is better in different situations. And that we should at least keep some protectionist polices even when things are fine so that we have a diverse eccominy for when things get bad. And in a capitalist system there will always be ups and downs. Nothing in politics are politically one sided, and I am taken aback on how you guys do not understand this. But I would love to talk more about it.
What gave you the idea that they don't understand this?
Why does government spending have to go up politicians sell spending more but outside of that theirs no requirement for that we didn't need to spend 4.3 trillion in the Middle East since 2001 and a lot of our spending is protectionist based subsidizing multiple industries so their cheaper then foreign products, also there was no great stability before capitalism they had ups and downs it's just the up wasn't very high and the low was extremely low
One thing not addressed is that free trade not only makes economies more efficient, but also creates a situation where countries are less likely to fight each other, since each "relies" on the other for some portion of livelihood.
So in a sense, preparing for bad times by adopting protectionism, can bring on those very bad times, as you are denying your countrymen, as well as your would-be trading partners in other nations, the very things that create the good times: cheaper, and higher quality goods.
How do you get a valuable resource? You can buy it (trade) or you can steal it (war). The latter is much more expensive.
Wrong. Many countries compete by giving government assistance to their local industries, in the form of grants, low interest loans, government funded apprentice education, AND adjusting their currency exchange rates, so they DON'T NEED tariffs to unfairly compete.
I think your video is very one-sided. You're mixing the ideas of Adam Smith with those of David Ricardo. Smith was very concerned about the specialization of work, because he saw it as it was (and is): a destructive force which destroys the dignity and intellectual self-integrity of humans. Ricardos argument about the english and portugese wine, etc. has a fundamental flaw: he says that the only thing which prevents the owner of a company to leave the country, is some sort of an "sentimental/patriotic feeling" this is clearly nonsense in the modern world of global economy. Plus, his concept only works, if transportation is limited by the speed of sailing ships. And Ricardo was a financial speculator, who represented the interests of the rich english merchants, not the entire nation.
Today, we see the results: Instability, social unrest and the rise of populism in the western countries, exploitation in the eastern countries and starvation and misery in Africa and other poorer countries. For example, Haitis economy was ruined by the "free trade" and unemployment and famines were the results for the people, while a few rich capitalists made profit. In general, the mass transportation of goods around the world and specialized mono-cultural farms are a massive threat to the environment. But despite it essentially only favours the rich and brings harm to the poor, almost all people are convinced that "free trade" is the solution for everything. It is as Marx said: The opinion of the ruling class is the opinion of the whole society...
Oh, and your solution of an compensation by the state seems very impractical to me. It was born in the world of the 18th and 19th century, but it is far more complicated in the modern world. And why trying to fix a not-working system which fails because of the human character? You can't change the human character, but you can change the system.
Compensation isn't easy, but it's possible. The OECDs that have risen to the top in living standards over the last few decades have achieved that by compensating for the flaws in capitalism and neo-liberal free trade, while nations refusing to take those measures (like the USA, with their phobia of socialism) have fallen behind.
nextpkfr Exactly the highest standards of living you find in nordic european countries, switzerland, etcetera. And those countries all mix free trade with socialist ideas.
Thank you for inspiring me to seek further education. :)
+Untrue Lie Everything you just described has little to do with "free trade" and much more to do with corruption, crony capitalism and state intervention. ie socalism.
+DaYouKlu When people talk about nordic countries, they fail to realize that it was not socialism that made their countries prosperous. It was capitalism that made them prosperous, the socialism only came "after" they had created their industry and prosperity.
You get the best of both wooooorlds! Chill it out, take it slow, then you rock out the show! You get the best of both wooooorlds! Mix it all together, and you know that it's the best of both worlds.
Free trade has been established as best for the country from the majority economists. Just look at countries who have free trade, and the ones who don’t.
nice argument. (not at all)
Look at the temporal dynamics :)
Free trade. I cannot see how protectionism works if people want to buy things at a lower price and there is someone to make it for them.
It's called government subsidies, China has done pretty well on that front
Protectionism.
From the perspective of developing countries free trade is bad.
For example, Germany and Sub-Saharan Africa. Germany specializes in machinery while most of Sub-Saharan Africa specializes in agriculture:
(i) The flow of imported machinery into Sub-Saharan Africa hinders the industrialization of the areas in which the machinery is imported. A further consequence would be that the human resources that would have been developed to cope with industrialization never existed denying the country of potentially talented individuals.
(ii) Well according to the logic of this video, Germany should be a market for Sub-Saharan African produce. But Germany rarely imports on mass because, even though they don't specialize in agriculture, their agriculture industry can support them. German produce is so cheap compared to imports, it creates a barrier to imports similar to that in protectionism. This is most extreme in the dairy sector. Things are so cheap there that even after shipping, the dairy is cheaper in Sub-Saharan Africa than the local milk. So not only has cheap agriculture barred imports from Sub-Saharan Africa forcing local business in Africa to rely on a poor population as their only market, cheap German products threaten their only safe haven; they do not have the ability to industrialize.
Free trade has led them into a trap which cannot be escaped unless they use protectionism.
@@drunkcatphil9911 Lol, ¿who is doing better Switzerland or China?
You can have both by the way.
+eizhowa yeah let's kill off some GDP growth by having tariffs. Our kids won't give a shit
+oreo31598 Norway for example, is a part of the EU internal market, with a few exceptions (like the fish and agriculture industry). Last time I checked, the norwegian GDP per capita is doing just fine. Creating money is not the only thing that matters in politics (which I am sure you are aware of). If more money = better, it wouldn't matter if 1% had all the money for example, as long as they were earing more and more.
Norways kids are actually the ones most against total free trade, so yes, they don't give a shit about having tariffs :)
eizhowa In a way, this makes no sense. You cannot tax something and not tax it simultaneously. But you're right, their are more options than zero tariffs Vs. as much tax as possible.
+Matilda Vere You can absolutely tax something and not tax something at the same time. For example, you tax goods x if imported from maket a, but not goods x that are imported from market b at the same time(/simultaneously). Or you can have tafiffs on only certain goods, to protect certain kinds of jobs. Norway does both, I believe.
My point when saying you can have both was that it is possible to engage in free trade in some areas while protecting others. So you are using both methods to achieve the poltical goal of the country.
its also a method that works great when the economic advantage is clearly in favor of your nation. Ex. In Norways case they are among the few nations in Europe with lots of oil so they protect their own oil rig workers and industry by placing high tariffs on Saudi oil.
Not saying they do that but ofc they could if they wanted to.
the timing of the video couldn't be more perfect.With world powers having met to no avail, I grew some questions and frankly doubts regarding the much hyped free trade over mercantilism. But Adam Smith's acquaintence allayed much of them. History is a proof of the benefits of the free trade. thank you:)
In the end, the ideas are rather simple, but very well explained, especially thanks to the visuals.
corect me if im wrong. Its simple choose sharing with other country or protect ur country.
Dear School of Life,
Could you please make a video regarding the recovery, feelings and struggle of sexual assault?
Thank you.
Hello Baba Jaga. I thought I could send you a little list:
1. There is an excelent psychology podcast called " Shrink Rap Radio". They have several episodes on this issue. Just search on google for:
" Shrink Rap Radio, Sexual Abuse".
You can start with the episode called: " Resurrection after rape with Matt Atkinson".
2. There is an incredibly moving TED Talk by" Ione Wells", called " How we talk about sexual assault online". She herself is a rape victim, or better to say a " survivor". An incredibly wise and brave young woman who really has something to say about it.
3. There is a podcast called " On Being with Krista Tippett". You can listen to the episode " Trauma and resilience in our bodies" with the trauma expert Bessel van der Kolk. He is very well known on that field.
I hope this helps. I wish you so well.
The problem with having government tax the prosperous to retrain anyone whose industry is negatively impacted is that government does a terrible job at determining the people's needs, potential, and what skills & industries those people should be trained for. Small groups of elites in government have no special insight to know how best to get people working in new jobs, and this is even making the huge assumption that everyone in said government is actually honest & virtuous, with a genuine interest in the well being of the poor unemployed & underemployed.
Ok but you don't mention how less developed countries want protectionist policies so their labor isn't exploited by richer countries!!!!
All workers worldwide want protectionism. It's the forces of capital that want "free trade".
Emily Whitney The main reason for some degree of protectionism is to protect workers from the monopolies on labor found in countries with more workers, resources or technology.
Workers are also consumers, they aren't mutually exclusive. Consumers want free trade.
Galbart Denebar The working class throughout history has mainly supported candidates that at least pretend to be protectionist.
Galbart Denebar If all consumers wanted free trade the debate wouldn't exist, genius.
Everyone in Europe knows this. Free trade must be balanced with social democracy.
Why do I have a hard time understanding this
Free trade would be good only when countries agree to a certain set of standards. If we want free trade, then we can't have large scale environmental regulation in individual countries or proper labor laws. This is ESPECIALLY true with automation and standardization, as nearly EVERYTHING can be manufactured will low skilled workers. The industrialization of large populations such as China and India, where they have very little in ways of labor protection, have been easily able to overpower every other country with cheap and plentiful labor.
Is that a vibrator at 7:19? Lol
Lmao
Seems like it. Lolzzzz
Back Massager
Another fact about the Wisdom of Adam Smith: well it can be summed up by the adage of "The more parts a machine has, the more ways it can break down." His wisdom requires a massive infrastructure with many points where it can completely break down, leading to chaos. From a perspective of self-reliance/sufficiency, you're setting yourself up for failure.
id be down for helping relocate and educated coal miners if it meant cleaner air.
The solution to this could be a mix between the two systems. Protectionism on essential food items such as grain, meat etc. And free trade for let´s say, technology. Then a country can survive if the foodsupply is cut from abroad, and also get some items cheaper from other countries.
Thank you School of Life you always upload such great videos.
Free trade is OK for luxury goods. Countries, in times of conflict, need to be self sufficient in food water and energy.
A we can see presently
Cheap goods exploit workers out of your sightline so you have little guilt.
Free trade and war. I learned this from Rome: Total War the game :D
I live in swizerland and production in swizeeland that requires labor is extremly expensive due to the record high wages is swizerland. this makes it verry atractive to import produced goods from countries like china. however this is considerd generaly as moraly dubious due to the working conditions in those chinese factorys.
Imma say rn, i'm leaning towards free trade, tell you if I change my mind.
Yea, no I didn't, and for all the reasons that you stated in the video, it's what au keep trying to say, but noone will listen. :( More people need to watch this video.
Protectionism isn't bad as the video has stated. History has show us that a country must go through both systems in order to develop. Protectionism was the first step for the UK and the US (in the 30's) to develop. Then some free trade was allowed, complementing with that a full economic system able to produce and to keep competitiveness in the global arena
There's a flaw here, or one I've noticed, the assumption that made cheaply=best.
When you think 'cheaply' I think 'efficiently'.
The quality of the product depends on the materials used and the skill of the craftsman making it.
If someone in a third world country makes a product that does not meet the standards you set for it, then its a useless product and you should find somebody else to make it.
I think true free trade can only be achieved the day that there are no longer borders and no longer nations. For example, you can’t have free movement of products and not have free movement of labor. We see this today with the collapse of industry in many western nations because jobs can get exported to places where cost of living is less but if these workers that got laid off can’t move to those areas, they can’t take advantage of those opportunities. Limiting movement of people is basically just modern mercantilism and in my view, is the biggest trade barrier of all.
That is obvious, many companies depend on the fact that there are many Africans who cannot move and therefore are forced to accept wages of 2 dollars for 10 hours of work, a question. Where is a child useful to Nike In Vietnam where you can put him to work for less than 50 cents an hour or in France where you can't even convince him to work?
i love watching your videos before going to sleep. The voice is so calming :)
Free trade is great granted all other trading nations also lift their tariffs. But when you trade with other nations who impose tariffs on your exports, they have the advantage. They're allowed to dump their goods into your country without accepting your exports. So putting up trade barriers can act as temporary leverage to get them to take their barriers down. Obviously, you need to be one of the largest consumer nations (US) in order for this to work or the exporting country won't care. Also, the manipulation of currency by other trading nations creates other problems. Another issue probably unforeseen by Smith at the time is the fact that it's not always the foreign country producers who are manufacturing goods. Sometimes, its your own countrymen who set up shop overseas for cheap labor and low taxes, then try to export back to their home country for a massive profit, taking advantage of the lack of tariffs. Adding a tariff can then prevent that business leaving the country in the first place with the foreknowledge that you cannot manufacture and sell back to the home country. The cost imposed by the tariff must outweigh the amount that company will save by moving to another country. Any imports that do make it through with the added tariff, the government can use that tax revenue to subsidize exporting industries. I don't like any of this and wish that all countries would trade freely but that's not the reality at present.
Your voice is like male Joanna Lumley
Ikr? You should watch potholer54....His voice does something in explainable to me....
In the free market, it's not that we import from countries that can do a job the best, it's who can do the job cheapest.
Thank you! This was perfect.
Regarding the ongoing U.S.-China trade war, my logic is this:
"Protectionism towards our nation's enemies! Free trade towards everyone else (friend or otherwise)!"
"Those who conduct protectionist measures against us are our enemies."
"Therefore, we must implement protectionist policies towards those that do so to us."
Ultimately, I believe a balanced and discreet approach between free trade and protectionism would be best for our economy.
To say about modern protectionism that "these arguments make no sense" lacks explanations...
The US is so geographically diverse and so culturally diverse that the comparison between the archaic concept of mercantilism and modern US protectionism is comparing apples to Oranges. America can essentially afford protectionist policy because they don’t need goods from other regions due to their size and diverse landscapes. Especially considering that most other countries produce goods of lower quality than American goods.
Hi School of Life, great video. Just wondering on your thoughts on Kicking away the ladder by Ha-Joon Chang. More specifically, the idea that protectionism being used to allow industries/sectors to develop past the high cost stages of production to the more cost efficient stages that later allow them to compete on the international standards.
I recommend you to read books by Michael Pettis. He described how distorted policy lead to imbalance in global trade and they eventually hurt both surplus and deficit countries, and surplus countries will take even more damages
With regard to how the lower class suffered in England when cheaper corn was allowed to be imported, I think it was the bubble created by the regulation keeping it out for so long, preventing free trade, that made the adjustment of labor supply and demand so much worse. I also don't think it necessarily follows that government need be involved in retraining the affected workforce. Unregulated labor costs would allow true market pricing of labor, and people would be able to determine where they want to pursue employment based on the economic trends. In essence, the labor force is much more attuned to what's making them money or not, and better at choosing where to focus their resources. Career fields that need people are more willing to pay attractive salaries and publicize that they're looking for people. This is why you see (in America at least) plenty of commercials for jobs in the IT and healthcare sectors. There's a growing demand for skilled workers. It doesn't take a rocket scientist to figure out that if you want to decent paying job that you're likely to be able to hold onto, to switch to a field that is in demand.
I think we'd better enrich a country with internal free trade policy and protect its industry from other country's - a cue should be followed by poor countries.
Luís Nask Like the United States.
Chris Q
Can't we just have a ubi for the high cost?
There is no such thing as "internal free trade."
Mercantilism is mercantilism.
The value of free trade depends on there being unalterable differences between countries. If humans get such a handle on manipulation of the physical world that they could replicate anything anywhere, free trade would no longer have any value.
2:19 My country was good at nothing according to that map :( we had mercenaries at the time