What\'s Wrong With Low Prices?

Are low prices a bad thing? I mean, overall. Obviously, if you've invested time and money in a career or business that assumes high prices in your field, you wouldn't be happy to learn of some competitor or technology lowering prices in your field. You'd certainly be worse-off in the short term.

But what about in the long term? Isn't it good to not have to pay much for the things you want and need? Low prices for food and clothing (and anything else) leave you with more money to spend on other things.

Low prices for internet phone calls are sure to put many people out of work in the telecom industry. You might be concerned for them, but don't forget their jobs were probably the result of putting lots of couriers out of business (I'm guessing). Cheap, mass-produced cars put plenty of buggy makers out of business. That was bad for them (in the short term, at least), but much better for the millions of people who could then afford to own cars. Cheap air conditioners certainly made life difficult for distributors of ice, but allowed people to be productive in the worst hours and months of the year. Factory workers who produce cheap computers have certainly displaced those producing slide rules, adding machines, cash registers and typewriters. It must have been tough for those displaced, but would you like to return to the days before affordable PCs?

The US textile industry is calling for protection from China's "unfair trade practices". While the US textile industry might regard cheap clothing as "unfair", millions of Americans, and plenty of Chinese workers, surely benefit from such "practices". It sounds like a good thing to me.

Rather than fighting cheap clothing, shouldn't we be basking in the good fortune? Shouldn't we accept cheap clothing as a given, and employ our workers elsewhere - in more productive industries? If you were stranded on a small island (with a poor economy), would you turn-away textile goods that washed ashore because they made redundant your efforts at weaving? Or would you re-prioritize your efforts, and find something more important to do (now that you didn't have to worry about something as basic as clothing)?

There are plenty of other good fortunes we don't fight, but simply benefit from. Bastiat teaches us that we certainly benefit enormously from the sun - at great expense to the light bulb industry. Think of all the General Electric jobs that could be "reclaimed" if we blotted-out the sun (not to mention the number of jobs that would be created by tasking NASA with such a job). Why do we forego this brillian plan, but press the WTO for sanctions against China?

Share this

Before you referenced

Before you referenced Bastiat, that's exactly what came to mind. My father used to have some clever quip about the horse-drawn buggy, or the "typewriter repairman" who coincidentally is still employed by the municipal bureaucracy that employs my father. Once a month he stops in, unlocks the storage cellar, and proceeds to dust and clean a dozen typewriters that haven't been used in 15 years, but I digress.

Unfortunately, it's terribly difficult to impress this concept on someone who has just lost a job, someone who is about to lose a job, or someone who depends on a person in either of those situations. Living in Detroit area here, where the auto-industry is caving in on all sides, being a pro-market libertarian is frowned upon, to say the least. I hold terribly unpopular opinions.

Was it Marx that said something like, "A million people save money on shirts, and nobody notices. But close the factory and lay off 1000 workers, and suddenly its a tragedy."

Whoever it was, just another example of ce qu'on voit, et ce qu'on ne voit pas.

But it's more complicated

But it's more complicated than that.
When you're competing with a country that has no child labor laws, that has absolute control over goods and services, can keep the majority of its population in dire poverty to keep its competitive edge, that uses prison labor in manufacturing, then you have to be a bit more circumspect. And the Chinese keep a clamp on what goods and services they will allow to come in from the outside. They expect and benefit from free trade out in the world, but do not allow free trade at home. Their efforts to stop the trade in copied goods is also a problem.

To some extent, they are a country-wide monopoly. They know they can use their coordinated approach to drive competitors out of the market, then reap the benefits later.

That having been said, I still think we have to accept that the world needs more free interchange of goods and services, and more sharing of the wealth. We don't need a return to the 50's and 60's, where we sucked up the world's money, then doled out foreign aid, much of which went to corrupt politicians.

so what? Developing,

so what?

Developing, industrializing nations often employ children. Workers often have few rights, and work long hours in miserable conditions. Where do you think the United States and Great Britain would be today, were it not for the industrial revolution, which wouldn't have occurred in the midst of laws that prevent people from working 16 hours a day, or sending their kids to the shop.

So what if China wants to use prisoners for labor? That they produce something they can sell cheaply to us serves only to benefit us. When we use prison labor in the US (chain gangs, cleaning highways, etc.,) it costs us money and nets us very little, if any, in return. Or not prisoners, another means of subsidizing. As long as China wants to burden their people with the cost of providing us cheap imports, I say let them do it. It cannot work both ways. If they subsidize their production, it is China that will ultimately lose because of this practice, not its trading partners.

The "competitive edge" that China gains by enslaving its people, using child/prison labor, etc., is a benefit that we can reap at their expense. As long as they are willing to flog themselves for our benefit, why would you ask them to stop?

I'm a veteran of the telecom

I'm a veteran of the telecom wars where we saw bandwidth pricing halving every 6-12 months. As a supplier I'd love it if voice minutes were still $.15 and T1 lines were $1000+, but as a consumer and business user cheap bandwidth is a wonderful thing that enables all sorts of new business models.

Despite having experienced a few bankruptcies and some unplanned sabaticals, I prefer this to a more regulated market that doesn't allow pricing to fall.

Looks like more evidence to

Looks like more evidence to support my suspicion that economics is the opposite of politics.

Of course, everyone is right

Of course, everyone is right in claiming that freer trade will benefit all of us much more in the long run that it will hurt some of us in the short run.

The reason why all trade is not already perfectly free is of course because the aggrevied parties feel their pain more keenly than the masses feel their benefit, so the textile producers lobby congress to stop the elimination of trade barriers.

And I don't think they're *necessarily* wrong to oppose immediate, complete elimination of trade barriers - they won't have time to react to the rapid change and will suffer more than if the barriers were gradually eliminated.

And strictly from a tactical standpoint as well, a proposal to eliminate trade barriers over, say, a 5 or 10 year period will garner much less opposition than a binary all or nothing approach.

Baby steps, people! Change is good, but push for violent change and you'll get a violent pushback.

On a different note, it kills me every time I see someone arguing that a country's trade barriers "protect" that country. Trade is always a two-way street - any barrier, on the part of either of two trading countries, will hurt parties in BOTH countries!

When you’re competing with

When you’re competing with a country that...can keep the majority of its population in dire poverty to keep its competitive edge... you have to be a bit more circumspect.

But we aren't competing with that country. We're competing with China, the country which is lifting more people out of poverty faster than the world has every seen, a phenomenon which has been discussed and marveled at and wondered over in newspapers and magazines frequently for the last several years.

keeping the majorit of its population in dire poverty is the exact opposite of what China is doing. Most people find the economic progress of poor Chinese both awe-inspiring and heartwarming.

But we aren’t competing

But we aren’t competing with that country. We’re competing with China...

Are we? It looks more like cooperation than competition to me. Sure, American textile manufacturers are competing with Chinese ones, but when you take into account the benefits for consumers of textiles, it's a net win for us, and not a loss, if Chinese manufacturers can sell us textiles at better prices than domestic manufacturers.

Even if it were true that the Chinese government was somehow oppressing its people for the purpose of keeping costs down, this would help us economically, not harm us. We might decide to refrain from trading with China to protest these human rights violations, but to do so out of the belief that they were "cheating" and not competing fairly would be absurd.

Trade is cooperative, not competitive, and to speak of it as if it were a competition is to surrender half the battle.

so what? Developing,

so what? Developing, industrializing nations often employ children. Workers often have few rights, and work long hours in miserable conditions. Where do you think the United States and Great Britain would be today, were it not for the industrial revolution, which wouldn’t have occurred in the midst of laws that prevent people from working 16 hours a day, or sending their kids to the shop.

Fair enough - but we shouldn't labor under the belief that the low prices (or, rather, the conditions that create them) come at no cost whatsoever, or that they are an absolute good. There are unjust and artificial reasons why those prices are low (read Kevin Carson), and whether or not there's anything we can or should do about it from the standpoint of economic effectiveness, we don't need to perform the moral acrobatics of cheering it on.

As an analogy, just because I support an end to the drug war doesn't mean I'm rooting for junkies shooting up in the alley. Part of being a libertarian and a human being (I believe) means trying to better the lives of others - whether or not political means called for. Just because we understand the nature of the commodity in question (3rd world labor on the world market) doesn't mean we need to commodify the people who offer it, and pretend their suffering is somehow justified.