The general idea is that when you buy stuff you're losing wealth so if you never buy anything then you never get poorer. Since we constantly dig gold up from the ground we still get richer over time even if nobody buys our stuff.
This is also why its importantly to gain colonies (Greenland/ Canada) or mineral rights from other countries so that the amount of stuff we have increases.
IMO, it's a theory that's missing the forest for the trees but it's historically very popular.
My main concern is that de-globalizing trade will remove a large barrier for real kinetic war. Bombing your economic partner is generally a dumb move, and that has been pretty nice for humanity in the last ~50 years.
Its definitely de-globalizing USA's trade but I don't think it will de-globalize the rest of the world's trade. One method for countries to combat US's tariffs is to reduce trade barriers between themselves thus reducing the barriers to sell their goods to other countries instead of US. EU and China just had an initial conversation regarding just this.
I don’t see that happening since the US has historically been the least protectionist of nations.
The EU loves protectionism. The single market is totally dysfunctional with a recent study saying it was equivalent to a 45% tariff between member states for manufacturing, a 110% for services.
If this is the cohort you expect to save the world economy with free trade I certainly wouldn’t be betting real money on it.
Historically, the United States of America pursued a protectionist policy from the beginning of the 19th century until the middle of the 20th century.
Between 1861 and 1933, they had one of the highest average tariff rates on manufactured imports in the world. After 1942, the U.S. began to promote worldwide free trade.
Within the EU single market, there are no tariffs or customs duties between member states for manufactured goods, services, capital, and people, fostering free movement and trade.
The report(?) you a paraphrasing badly talked about within Europe (not the EU) and referred to figures between, say, Germany and Russia.
\? At a guess (thanks for not citing the report) you meant the IMF Regional Economic Outlook report titled “Europe: A Recovery Short of Europe’s Full Potential” (October 2024) ?
> Between 1861 and 1933, they had one of the highest average tariff rates on manufactured imports in the world. After 1942, the U.S. began to promote worldwide free trade.
The US did this because of the free trade treaties between west European states after WW2. This eventually led to the EU. The US, not wanting to be isolated, pushed for their own treaties.
> I would have thought Japan and China hated each other more than they hated Trump but it seems otherwise.
I believe they still hate each other much more than Trump, but under the given circumstances even archenemies can reach temporary (likely unstable) pragmatic agreements as long as these agreements are clearly advantageous to all of the involved archenemies involved.
That's an extremely good point, which hits really close to home.
I wonder if Putin would have still invaded Ukraine, knowing the extent of sanctions that would hit them. He might have been lulled into thinking that the EU would not care, given the existence of people like Gerhard Schröder and his ilk.
edit: I am not sure that the reason for the Russian-German energy alliance was an attempt at pacification. It seems more likely to me that it was simply in the economic interest of Germany. Countries which are East of Germany certainly complained about it, for strategic reasons.
German Ostpolitik (eastern politics) goes back before independent Russia back to the 1960s attempt to cooperate and have peace with Eastern Germany and the Soviet Union. And peace with Russia (maybe even its transformation into a regular democraric state) was the primary stated motivator in recent years. Economics and even bribes helpwd grease the wheels but peace is what formed the national strategy in the first place and what entrenched it
kraut made some intresting videos on this topic recently. both the start of ostpolitik and their failure in recent hears compared with Polish politics towards Russia
Before WWI there was a similar belief in Europe, that the growing economic interdependence would prevent wars from breaking out. Instead once there was a spark, those relationships kept pulling more and more countries into the conflict and turned it into the "Great War".
> Instead once there was a spark, those relationships kept pulling more and more countries into the conflict
This is a bad take on the cause of alliances. large wartime coalitions had been a thing since the consolidation of power into monarchies in Europe: the 7-year war had involved all of Europe's significant actors, as did the napoleonic wars, the war for the spanish succession, the 30-year war, etc. This was much earlier than the development of cross-border trade.
In an imperialist era, diplomacy was the way to coordinate European nations' colonial efforts without repeating that kind of conflict. It was only temporary, though, since expansionist policies can't last forever peacefully.
The reason WW1 felt so different from previous wars was technological development. That aspect was already present in earlier wars, WW1 was just the first major European conflict in a long time.
Were they economic interdependencies or high-level political alliances?
The E.U. is clearly an example of the economic interdependency theory. It evolved in post-WW2 Europe from the European Coal and Steel Community. Mineral richness is why the Saarland was given to France after WW2. The idea is that economic integration will lead to political integration from the ground up.
My understanding of the pre-WW1 alliances is that they were deals made between a lot of people with “Habsburg” in their names.
The Habsburg dynasty technically became extinct in 1780. After that they were the house of Habsburg-Lorraine and they didn’t have much direct influence outside of Austria-Hungary.
Dynastic politics were by and large dead in the 1800s with few exceptions (but generally kings/queens were just pawns in the hand of the politicians unlike in the preceding centuries).
I disagree the EU is peaceful because of democratic peace theory and because of the political union not because of trade. If it was just economic and some of those countries were authoritarian I could easily border conflicts turning into wars
The last dictatorship was in the 1970s? The last World War the 40s? The US might have had a civil war but it went in and came out the other side with the same borders, government, and constitution. Still going strong since the 18th century.
The person you are responding to was talking about the EU. It did not exist in the 40s and Spain wasn't a part of it til the 80s. You are really bringing the level of discourse down.
> The relationship would benefit both sides: Germany would supply the machines and high-quality industrial goods; Russia would provide the raw material to fuel German industry. High-pressure pipelines and their supporting infrastructure hold the potential to bind countries together, since they require trust, cooperation and mutual dependence. But this was not just a commercial deal, as the presence at the hotel of the German economic minister Karl Schiller showed. For the advocates of Ostpolitik – the new “eastern policy” of rapprochement towards the Soviet Union and its allies including East Germany, launched the previous year under chancellor Willy Brandt – this was a moment of supreme political consequence. Schiller, an economist by training, was to describe it as part of an effort at “political and human normalisation with our Eastern neighbours”.
Its prussian restorationism, it oozes out of berlin since the reunification and with it and its disciples (AFD) comes that idea that you can ignore the small countries if you are a big country. There are people not falling for it, but real-imperialists like Steinmeier, Schröder or Gauland are ready to send other smaller nations to the slaughter for their own benefits .
"Why don't presidents fight the war? Why do they always send the poor?"
Those in power right now have no personal disincentive to real kinetic war. It doesn't affect them personally, or so they think up until the moment it does.
I wouldn't put it past Teddy Roosevelt. When he was undersecretary of the navy that helped start the Spanish American war he resigned (despite his superiors asking him not to) to fight in the war. He also asked to fight in WW1 despite being old.
For all his positive attributes former senator McCain was known as a hawk. There have always been men who after fighting come away with a firm belief in military power. If you made service a requirement you wouldn't necessarily get fewer hawks just ones you can't criticize for not participating in war themseu
They've got to finish their one-for-you-two-for-me "audit". But don't worry I'm sure we'll be hearing any day now how JOEBIDEN was simultaneously sleepy and also a mastermind that stole all the gold, and how they now need to purchase a bunch of shitcoins to replace it.
I think it won't change much because frankly the peace trade theory has not worked out very well. I think it was first formulated around WW1 and didn't stop it or WW2.
Most modern wars don't make financial sense when accounting for everything but they are still fought. Often over stupid reasons.
For example Russia invaded Ukraine despite trade partnership with Ukraine and EU.
I don't think so: for example the Weimar Republic is a counterexample. Or a modern example is the current war between Ukraine and Russia (both are democracies even though in Russia some particular president and party has a lot of influence). Both of these examples show that even in a democratic country under specific circumstances it can happen that a particular group or party can gain lots of power.
--
If you want to see another interesting "peace theory", consider the madman theory:
It basically says that if a country has access to atomic weapons, and the president or person in power radiates the image that he is sufficiently "mad" that in case of an aggression against the country they are willing to use them and escalate the conflict into a global nuclear holocaust, other stakeholders will strongly attempt not to upset this country, i.e. seek more peaceful and diplomatic solutions with this country.
This theory explains well why the USA have not yet invaded North Korea and are hesitant to invade Iran.
I wouldn't consider Putins Russia a democracy especially in 2014 after the Medvedev shuffle.
Putins dislike and lack of understanding of democracy and how it lead Ukraine in a different path towards the EU was probably a major factor in his decision to invade
This is a pretty old idea that goes back to debates over David Ricardo's theory of comparative advantage in the early 1800s.
> “Free trade is God’s diplomacy. There is no other certain way of uniting people in the bonds of peace than by the bonds of interest.”
- Richard Cobden
People thought that international trade would prevent war before WW1[1]. The concept doesn't really account for how political leaders often care about things other than money, business, or the material welfare of their plebs.
The deglobalization is happening anyway if you believe Peter Ziehan. Biden implemented policies to start the deglobalization despite trumpers claiming he was a globalist.
When? Not for a long time. Slavery and witchcraft were historically very popular ...
> when you buy stuff you're losing wealth
That's a incredible failure of understanding. I can't believe that's the basis of mercantilism. Why would anyone buy something?
If you buy a house for $100,000, your wealth remains the same - you replace $100,000 in cash with a $100,000 house (ignoring complexities like a mortgage, transaction costs, etc.). That is basic accounting, of course.
In fact, your wealth probably increases: The house's value is <$100,000 to the seller and >$100,000 to the buyer, or else they would be disinclined to make the effort of making the deal - it would be like trading a $10 bill for a $10 bill, with lots of time and transaction costs. Market value - the value to others - may remain the same or vary, of course.
The economy works because people make these value-increasing transactions. I take $10 of inputs, manufacture $20 worth of output, and sell it to you for $15. We both gain $5. If your business isn't producing more output than its input, you're going to be out of business soon.
Many transactions are better with people who happen to be outside the borders of your country - why wouldn't they be?
You are thinking about it as an individual instead of as a state. If you put yourself in the position of Louis XVI as the King of France, it makes more sense.
I agree there's a big difference between individuals and states economically. And I understand why Louis (do you mean XIV?), in the absence any modern economic theory, pursued mercantilism.
But if Louis had known modern economic theory, it would have been ridiculous. He would know that the wealthiest, most powerful nations ever on Earth - universally, with no others competing - were built on free trade.
I think that's a misunderstanding. If you could build the house using only resources that you already have than you would have 100k dollars AND a house. That's the idea of mercantilism. Of course sometimes you just don't have needed resources and than you have to buy something but you should limit it to things you can't obtain in any other way. Mercantilism is one of the reasons of colonialism. If you can take resources from some part of the world that you don't really care about, then you are adding wealth to your own country for basically free.
> If you could build the house using only resources that you already have than you would have 100k dollars AND a house.
You still have to spend money on materials and labor - they are never free. You need to take them from other uses, and people may outbid you for them. There isn't infinite lumber and labor lying around the US for free - building houses is expensive!
The core of economics is there is a scarcity of resources and we want to allocate them as efficiently as possible. Money's fungibility allows us to move resources easily and rapidly. I can send you $50,000 much more easily than my car - you might be on a different continent; you might not even want my car or agree on its value, but I can count on you wanting $50K because you can buy whatever you need with it (a car, a few servers, a trip around the world ...).
It turns out in reality that someone with better skills and capital (hard resources, such as heavy equipment) can build a house so much more efficiently than you, that you would save money by hiring them rather than doing it yourself. That's specialization, another economic fundamental. Think of most work - orthopedists, C developers, pipe fitters, etc. They are so much more efficient than you are, you wouldn't dream of trying to do it yourself (on any significant level) - even if you are in the same domain, such as internists or Python developers.
You don't lose out at all, because they also hire you to do what you are specialized at. Then instead of the farmer building a house and the carpenter growing squash, both get better and more houses and squash for much less money.
> If you can take resources from some part of the world that you don't really care about, then you are adding wealth to your own country for basically free.
If you shoot someone on the street, you can take their wallet for 'free'!
... You are arguing against fundemental economics and even basic accounting. If you care about these things, learn about them a little. Microeconomics is actually fascinating, and basic double-entry accounting is essential.
> When? Not for a long time. Slavery and witchcraft were historically very popular ...
The wikipedia article places it as 16th to 19th century which is a longer time period than Globalism was popular.
If the end of my post wasn't clear, I'm not a fan of Mercantilism but one does need to understand the other side. Although a big critique I have of Globalism is that the gains from trade are not evenly dispersed automatically so countries like the US really need to raise the top tax rate and increase (or at least not lower) redistribution otherwise you get high income equality.
Also, slavery and witchcraft are still practiced to this day although maybe not globally popular.
> > when you buy stuff you're losing wealth
> That's a incredible failure of understanding. I can't believe that's the basis of mercantilism. Why would anyone buy something?
Economic theories like Mercantilism are on the country level so individuals would still buy stuff because they're not practicing Mercantilism.
On the country level, yeah you don't buy stuff. If your citizens love coffee and your climate doesn't support growing coffee beans then you get a South America colony so now your climate does support growing coffee beans.
> Many transactions are better with people who happen to be outside the borders of your country - why wouldn't they be?
At the macro-level sure. However, if the USA had continued to practices mercantilism post-WW2 then we wouldn't have complaints about the lack of manufacturing.
The industrial plants in China would've never been built by US investment because that's literally handing money away to another country. If China doesn't have a factory its irrelevant if their labor is cheaper; the only labor with access to a factory is the USA.
2. In my observation (not in the USA) in the last years (and also months/weeks) it has rather been a strong veering round back and forth of "globalism is good" vs "globalism is bad" with no clear observable direction at which side the pendulum will stop.
> Although a big critique I have of Globalism is that the gains from trade are not evenly dispersed automatically so countries like the US really need to raise the top tax rate and increase (or at least not lower) redistribution otherwise you get high income equality.
I agree with that critique, though it may be a problem with this specific version of Globalism, not globalism itself.
But do you think there is more equitable distribution with mercantilism or protectionism? Why would that be? In those systems government officials choose who gets the benefits; you can't get them for yourself. Also, they tend to oppress less powerful countries - globalism's astounding record of raising people from poverty all over the world is absolutely unmatched. People take for granted the relative prosperity in China, India, Brazil, ... - nothing like it ever happened before.
> if the USA had continued to practices mercantilism post-WW2 then we wouldn't have complaints about the lack of manufacturing.
You assume this mercantilist government can effectively manage manufacturing, and that it wouldn't deteriorate, having no competition. Industry without competition tends to do that. Basically, enshittification is doing that intentionally.
With only 5% of the population the US would not have nearly enough manufacturing capacity to meet modern needs.
Finally, keeping people in manufacturing (how? by force?) would prevent them from taking the newer, higher productivity jobs that followed.
The US was much less wealthy - order of magnitude at least - in the 1950s (or whatever golden age people think of). You don't want to go back to that economy.
> The industrial plants in China would've never been built by US investment because that's literally handing money away to another country.
If it was handing away money, then why would someone invest in it? They invest because the investment generates returns, in this case massive returns that changed hundreds of millions of lives and provided wealth that was used to buy and invest in yet more things.
> I agree with that critique, though it may be a problem with this specific version of Globalism, not globalism itself.
Well, there's nothing about Globalism that enforces this so it's really a complaint about most if-not all Globalism.
> With only 5% of the population the US would not have nearly enough manufacturing capacity to meet modern needs.
Expand your borders to include say Canada or all of South America. The UK moved up the value chain into industrial jobs while delegating out the cotton farming to their North American _Colony_ (as well as their South East Asian colony).
> If it was handing away money, then why would someone invest in it? They invest because the investment generates returns, in this case massive returns that changed hundreds of millions of lives and provided wealth that was used to buy and invest in yet more things.
Sending over capital goods in exchange for future considerations is not a Mercantilism argument. The reason why somebody would invest in it is because they're a Globalist.
The reason why "we" switched from Mercantilism to Globalism is because it generates more growth but you can't use Globalism arguments in a Mercantilism framework unless you're making the argument to switch frameworks.
(Also Mercantilism is also causing income equality by having an underclass in your colonies to support a wealthier main land; but the mainland isn't going to be complaining about being poor).
If you build a house from scratch, you created 100K of stuff. If you buy a house for 100K then sit on your ass for a year, you are no richer than before.
"The economy works because people make these value-increasing transactions. I take $10 of inputs, manufacture $20 worth of output, and sell it to you for $15."
You pretty much nailed the arguments in favor of trade protectionism right there. Import cheap unprocessed raw materials, export expensive finished goods, capture the majority of value created in the process.
How does that support protectionism? For one thing, it involves imports and exports, which requires trading partners who will want to sell you things too.
Maybe the argument for colonialism? Regardless, countries that largely operate without protectionism or colonialism have become the wealthiest in the history of the world, without any real competition. There's not much argument remaining.
The goal isn't to block all trade in favor of a purely domestic market. That would be stupid as now your manufacturing base is limited to the quantities of raw materials that can be produced locally and you're burning through non-renewable strategic assets just to float domestic day to day activities while simultaneously artificially limiting your available market for finished goods.
This is manufacturing economy 101 and how the US built and defended it's manufacturing base before the pivot to a "service" economy. China's trade strategy mirrors this, as is evidenced by the last 30-ish years of constant bitching by trade wonks and pundits.
What is? You haven't spelled out your theory. And I know economics well, and class 101 is free markets and specialization.
> how the US built and defended it's manufacturing base before the pivot to a "service" economy
Who wants to return to an economy of decades ago? The US was much poorer then. I want to move to the future. Services are much easier on people physically - you don't want to work in a coal mine.
"And I know economics well, and class 101 is free markets and specialization."
Then something must have changed with the introduction texts at some point because the one I had to slog through covered the concept of manufactured goods being inherently more valuable shortly after defining basic terms like "product", "value", and "manufactured goods". Literally 2nd chapter in the book.
"Who wants to return to an economy of decades ago?"
Literally everyone who works for a living making shit or who are stuck in bullshit service industry McJobs that aren't paying the bills. Also every small business owner in the country, although admittedly not all of them realize it.
"The US was much poorer then."
The oligarch class was certainly much poorer then, the same can't be said for the other 99.9% of the population.
"Services are much easier on people physically"
You might want to look into the long term health effects of poverty and stress before you float that statement. Additionally "I'm too soft to actually work" only becomes a compelling argument when you can prove the condition applies to a simple majority of working age Americans. Good luck with that.
>Regardless, countries that largely operate without protectionism or colonialism have become the wealthiest in the history of the world, without any real competition. There's not much argument remaining.
The wealthiest economies now are those of China and US. And both used colonialism and protectionism.
The further we look in history, the more we see most powerful economies practicing both colonialism and protectionism. From British Empire to Roman Empire.
> The wealthiest economies now are those of China and US.
China is not, unless you just add up the large number of people and their bank accounts (those who have any savings). Per capita, the "countries that largely operate without protectionism or colonialism have become the wealthiest in the history of the world, without any real competition.", as I said.
> both used colonialism and protectionism
Could you give examples? I mean, they used some, but not substantially. Unless you mean the distant past.
Note how this discussion is framed - for countries. I'm concerned with, and I think we should be concerned with, people.
> The further we look in history, the more we see most powerful economies practicing both colonialism and protectionism.
If you look at history, we are overwhelmingly nomadic hunter-gathers with stone tools - ~190,000 of 200,000 years of Homo sapiens. We are well beyond that history, and the history you name. Our economies far outstrip those empires, as well as our freedom and human rights and the benefit our economies provide to those outside aristrocracy.
Why do you keep trying to go backward to a relatively poor, oppressive time.
It is really effective at increasing the amount of gold in your vault, but The Wealth of Nations (Admin Smith) made a strong case against that primary goal. Crucially for the HackerNews crowd, Mercantilism increases the value of physical goods relative to services, and services becomes a smaller portion of the overall economy. Most of us sell server-time wrapped in software that performs a service…
Gold isn't really wealth any more than paper money is. Consider Spain, which looted S America of gold and silver. How did that work out for Spain? Spain had lots of inflation as a result, and didn't get any wealthier.
The same thing happened with both the California and Yukon gold rushes.
The same thing happens when the government prints lots of money.
What creates wealth? People creating goods and services that people want to buy. Things like making planes, trains, and automobiles. Making hamburgers. Making search engines. And so.
P.S. I always laugh at Jackson's Smaug who has a hoard of gold amped up to 11^11. It was so large it was beyond absurd. If even a portion of it was dumped into the Middle Earth economy, it would promptly become worthless.
>Gold isn't really wealth any more than paper money is.
Any scarce resource people want is worth very much. Be it gold or bitcoin.
You can't make gold (technically you can by transmuting elements but it will cost you more gold than the gold you will produce) but you can mine it with great cost.
Why do you think Amazon warehouse workers are payed less than Amazon coders? Because it's easier to find a warehouse worker than a coder.
What something is "worth" is dictated by the market. Which means it is dictated by the laws of supply and demand.
If we're both on a secluded island and you have 10 tons of gold and I have one hundred kilos of potatoes, my potatoes are worth more.
If we're both in NY City, my potatoes are almost worthless and you are incredibly rich.
As Spain discovered, when gold is used as money, and the supply of gold increases, the value of gold drops accordingly (i.e. inflation). As you said, the law of supply and demand.
Looting S America of gold did not make Spain wealthy.
In general I value service more than (manufactured) goods. Goods are mass manufactured, with millions of exact copies made. There is no scarcity to goods.
I’d rather have a great doctor, lawyer, or accountant when I need one than a great car.
Having an average car is always just fine, having an average lawyer might not cut it.
Ironically, Adam Smith would be called a socialist in modern USA with his views on preventing monopolistic behaviours, the need for government oversight and controls, and the need for strong public goods where the private market fails.
So many people would benefit from reading his works.
Adam Smith would be considered a right wing economist today, similar to Milton Friedman, perhaps with more support for certain government functions such as education. However, even on that issue, given the wildly different level of education available today, its not easy to predict what he would think.
Often quotations from him are taken wildly out of context to support a 'progressive' viewpoint. An example (From David Friedman's blog):
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
But, if we keep reading:
It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.
Adam Smith was a proponent of free trade, free markets, and flat taxation (proportional to income). Not very socialist.
Adam Smith died in 1790, a time when the world had little experience with free markets. He was a pioneer in economic thought, but that doesn't automatically mean all of his prognostications about the future are correct.
His prognostications were not necessarily considered by him to be "about the future". Smith believed that most of what he was writing was about things that were true for all time. He may (or may not) have been wrong about that, just as he may have been wrong about any of the specific things he wrote. But he was generally not predicting the future in any real sense.
> Smith believed that most of what he was writing was about things that were true for all time.
Theory is incredible - when it's right, it's right everywhere for all time. I don't know why people disparage it (other than to signal their anti-intellecutallism).
> This is also why its importantly to gain colonies (Greenland/ Canada) or mineral rights from other countries so that the amount of stuff we have increases.
So, basically, blueprint for the new opium wars. Or, more likely, WW3.
Maybe if we're lucky, one of these sophomores will have an epiphany that military protection and a stable currency are some of the most complex exports, and that getting imports by trading away a self-created currency is a pretty great way to not give away any gold or silver... Just sayin'.
> military protection and a stable currency are some of the most complex exports
And how come that always seems seem to come wrapped in ways that inexorably seems to concentrate wealth, so that the benefits of those exports seem to be less evenly distributed?
This was not true in the immediate postwar period. The turning point was roughly the 1980s.
Wealth concentration has been a deliberate US domestic policy for decades. This is, to a large degree, separate from the stability of our currency or military protection. It's the stated intent and logical result of relaxing taxes on the rich while enacting policies designed to hurt the working classes (e.g. reducing union power, not indexing minimum wage to inflation, refusal to address healthcare & housing costs, increasing fees at public universities, cutting existing safety net programs, etc.).
Concentration of wealth is a choice. America is a very rich country and has not always chosen to distribute our wealth this way. Other countries make different choices. We are also allowed to make different choices.
> Wealth concentration has been a deliberate US domestic policy for decades.
Wealth is not concentrated in a market society. It is created. Some people creating more wealth than others is not "concentrating" wealth in their hands.
Another way to put it is it is not a fixed pie, where if one gets more another necessarily gets less. If I buy some art supplies for $20, and paint a masterpiece I sell for $100,000, wealth was not "concentrated" in me.
When people talk about wealth concentration, they're not talking about artists with high-variance paydays. They're focusing on all of the captive-market middlemen that have been allowed to set up shop playing negative sum games via regulatory capture, externalities, lack of anti-trust enforcement, etc.
When people like Sanders talk about wealth concentration in billionaires like Musk, how did Musk make his money with negative sum games, regulatory capture, etc.?
Oh boy. There have been tomes written on how Musk's companies are set up around capturing government subsidies. If you're earnestly interested, such analyses are not hard to find.
The stock market itself is a shining example of regulatory capture - a perma-bubble due to fake "fiscal responsibility" political marketing that causes massive streams of newly printed money to be handed out to banks to dump into the asset bubble (that newly printed money representing the gains from technology and offshoring that would have otherwise caused price deflation)
But sure, I'll also agree that some of Musk's riches are due to actual wealth creation - before the crippling social media addiction and subsequent spiral into lunacy, anyway.
But that's all focusing on the problematic ways wealth concentration can arise (the context it was originally brought up in). The other critique (likely what you're referencing about Sanders) is about the corrosive effects that concentrated wealth tends to have. And surely you can see how that applies pretty strongly to Musk...
> So how much subsidy did Musk receive for SpaceX? (The answer is $0.)
Wut? SpaceX's largest customer is the government. If you're just looking to play semantic games where that revenue isn't a "subsidy" then I don't see how it's possible to have a conversation.
You also didn't address the other point, which is especially salient given that Musk has now spent a chunk of his concentrated wealth lobbying to gain significant control of the government that gives him funding. But I guess revolving doors, corruption, and grift is just normalized good behavior in 2025 as long as the person is wearing the right color hat?
Respectfully, you should do some reading of basic economics. Absent of external forces to correct for it, wealth absolutely concentrates in unregulated markets.
For economics, I prefer history to academic theory. (But I have read Friedman's "Monetary History of the United States", and books by economist C. Northcote Parkinson, "Capitalism" by Reisman, etc. My dad also had a degree in economics from MIT and an MBA from Harvard and a doctorate in economicis and taught finance in college. We had many many long talks about economics. And yeah, I did take econ 101 at Caltech from a Marxist professor. My dad would have had him for lunch.)
> wealth absolutely concentrates in unregulated markets
The US had more or less unregulated markets for well over a century since its founding. The result? The most stupendous wealth creation, pushing scores of millions of people from poverty into the middle class and beyond.
There was no "transfer" of wealth from the poor people to the wealthy (there couldn't have been, because they, being poor, didn't have wealth).
"There was no "transfer" of wealth from the poor people to the wealthy (there couldn't have been, because they, being poor, didn't have wealth)."
You're ignoring value created through labor. The poor may not have wealth but they have their labor to sell on the open market. The returns on that exchange have been steadily declining since the post-war period thanks to flat wages and inflation. Meanwhile increases in productivity (as demonstrated by increases in GDP) by definition have to go somewhere. Since it isn't going into working folks savings accounts then it's accumulating somewhere. Also worth considering, the middle class has been declining for the last 40 years.
Taxes as a % of GDP have been relatively flat over the last 60 years, and on average have been lower over the last 25 years so claiming the government or "entitlements" are the culprit doesn't scan.
Claims that the market has become less free are perfectly baseless and a non sequitur here as even if that claim was true and verifiable it does nothing to explain the decline of the middle class or why increases in GDP aren't reflected in either household buying power or real wages.
Have you counted state & local taxes, as well as the deficit? All those count. Washington State has heaped on a lot of new taxes in the last few years. California has done even worse.
> Claims that the market has become less free are perfectly baseless
So the mountains of new regulations have no effect?
Consider all the thousands of burned out houses in LA. So far, only 4 building permits have been issued.
In Seattle, constant burdens by the City Council heaped on the rental business have driven out a lot of landlords (things such as free lawyers for tenants), resulting in a shortage of affordable housing. Those don't show up as government spending, but they retard the market anyway.
The deficit should count, but since Federal taxes haven't been increased to service it it doesn't, so there is that. Likewise, CA and WA are what they are, but I think it's a bit of a stretch to suggest they're so central to the US economy that their local tax structure is driving tracked changes to household income and savings, real wages, inflation, etc. metrics on a national level. Additionally relatively recent changes in these states do nothing to explain flat wages and the declining middle class over the last 50 years.
"So the mountains of new regulations have no effect?"
Difficult to say until there's a few specific examples to examine. I've just spent the last half hour digging around for evidence that suggests there's been a spike in enforcement actions by the government at any point in the last three presidential terms and I'm not coming up with anything so until some evidence surfaces I'm going with probably not.
As for local goings on in LA and Seattle, neither are "the market". This isn't the first time I've been exposed to the apparent self-absorption of West Coast politics but I gotta tell you, y'all aren't the singularity around which the US economy or global markets pivots around. That'd be the oil and gas industry.
> The deficit should count, but since Federal taxes haven't been increased to service it it doesn't, so there is that
Inflation is the result of the deficit, and it is the equivalent of a tax. This is why politicians work so hard to deny that inflation comes from the deficit.
Want more examples of burdensome regulation? Try Lina Kahn of the FTC with her frivolous (but very expensive) lawsuits. Regulation is why the California high speed rail failed to be built, and why Biden's big spending program to install car charging stations resulted in zero chargers being built. Nearly every aspect of a car is subject to regulation, which is why they pretty much all look the same (unlike the variety in earlier years). EV regulation have been resulted in massive costs for the auto industry.
As for oil and gas, Biden blocked the pipelines that would have saved a ton of money.
The only unregulated market in the US is the software industry. And look how spectacularly successful it has been!! Prices have been driven down to literally zero! I'm in the software business, and I do not need approvals, permits, licenses, or any regulations pertaining to the software I write and sell.
Price inflation is the result of the explicit government policy that says price inflation must happen, and that enough new money will be created (monetary inflation) to make it happen. The part of the deficit that is debt owed to non-government entities is those entities wanting the large-scale equivalent of a savings account, and is not any more inflationary than a savings account. The part of the deficit that is "debt owed to the Fed" is monetary inflation. The other nongovernmental "debt owed to the Fed" like home mortgages is also monetary inflation. If the monetary inflation from that part of the deficit did not occur, then the Fed's technocratic mandate would be to lower rates even further to send even more new money to the banking industry so that price inflation would still occur.
This is the dynamic we've been suffering for the past 40+ years of fake "fiscal responsibility", that has seen the government starved of being able to spend for deliberate purposes like mitigating the damage to our industrial base from offshoring. Meanwhile all that monetary inflation still had to occur, so most of that money was just dumped into the banking sector. This mainly bid up the asset bubble, but to close the feedback loop that new money still has to get back to the consumer price index. This happens through consumer goods that can be financialized (housing, cars, insurance, education). Which is why those things have shot up in price - to bring up the average while manufactured goods have continued to go down in inflation-adjusted terms.
I've engaged with you on economic topics in the past and I've just read this thread. Suffice it to say you have some relatively unorthodox perspectives on economics and regulation so I was wondering -- What regulations if any do you consider necessary?
Two societies. In each one, someone buys $20 of art supplies, paints a masterpiece and it sells for $100,000.
In one society, a marginal tax rate system taxes the artist with an upper rate of 92%, and they end up retaining about $50,000 of the income, with the rest flowing back into the control of the society (via its government).
In the other society, a margin tax rate system taxes the artist with an upper rate of 28%, and they end up retaining about $70,000 of the income. In this society, the artist retains control over twice as much of the income as flows back into the control of society.
"Wealth concentration" is not a policy related to markets, production, and trade. It's a policy related to taxation.
> "Wealth concentration" is not a policy related to markets, production, and trade. It's a policy related to taxation.
I agree with most of what you say, but the pre-tax results of income are not some single natural outcome, but the results of policies about business, economy, education, healthcare, international relations, trade, immigration, monetary policy (of course), regulation, government budget, etc. - pretty much everything.
Those things can be adjusted to result in less or more wealth concentration.
They also depend heavily on capital gains tax in particular.
While the fact that the artist ended up selling a piece of art for $100k is absolutely reliant on the full totality of the social context .. what happens next is where wealth concentration does or does not happen. And that is (to a good approximation) almost entirely the realm of tax policy.
That is why I gave two different societies as examples - both have managed to construct a social context where this happens, but what happens next is different in each of them.
Put more crudely, wealth concentration is about not taxing high levels of income at high marginal rates. It is not about the specifics of how those high levels of income arise, who they happen to, etc. etc.
In the first society, the probability of the artist completing and selling that masterpiece is correspondingly lower, since money is a strong motivator and even artists have bills to pay.
Thus the first society tends to create less value overall, since value creators are demotivated by punishing taxation. Because of that, prospective buyers for that piece of art will be overall poorer so they will bid less for it, pushing the artist's reward even lower.
The first society ends up poorer than the second, from its own policy. And that’s how you get inequality between nations, which you can’t “redistribute” away. Which inequality sooner or later leads to wars, as we can clearly see these days.
> In the first society, the probability of the artist completing and selling that masterpiece is correspondingly lower, since money is a strong motivator and even artists have bills to pay.
I live near the (supposedly) largest art market in the USA, and I know a large number of artists here for whom two things are true:
1. they cannot make a living from just their art.
2. they will create art whether they make a living from or not.
Thus, the claim that taxes on their art income act as a disincentive to create just holds zero water for me. In fact, less than zero. It betrays a fundamental lack of understanding of why all the artists I admire actually do what they do.
This also applies to most of the people I admire in almost every field. I don't know of any example where the motivation was such that increased taxation would have acted as a disincentive. That's true even for Bezos @ amzn.
Taking advantage of self-driven people and stealing the results of their hard work is something communist dictators tried quite hard. Also brainwashing people to work their asses off for some other reason than the selfish one.
It didn’t work. The society produced less and less value, crappier and crappier quality, uglier and uglier and grayer and grayer.
Also, none of my artist friends would say that they were being "taking advantage of". I have no idea why you'd try to connect the situation I've described in the US art world to communist dictators, other to make some facile point that isn't relevant or even correct.
If you think that Bezos was motivated to create amazon because the taxes were just-so, you're delusional.
There are numerous books on this topic. Obviously not everyone agrees with them, but Alfie Kohn's "Punished by Rewards" is an excellent starting point for reading about what we know about the connections between motivation, creativity and rewards.
The example is bad because nobody thinks of $100k as "concentrated wealth" and your argument has some purchase at those numbers.
At $100 million, $1 billion, $10 billion, or $100 billion, the argument you put forth does not make sense.
There is no motivational quantum for attaining the second, or third, or fourth billion, much less the 200th.
Incidentally, most of the people who might be considered to be concentrating wealth do not and have not done so primarily on the basis of their labor and creativity like in the example. There is no credible argument that Jim Walton ($119 billion net worth) ever built or created anything of value anywhere near commensurate with his wealth. His path from $30 billion to nearly $120 billion had nothing to do with rewarding him for value creation.
But in the meantime, the state has $40b of wealth under its control to invest.
And while the $100B winner may have had some insight that contributed to the $100B, there also had to be a $100B winner in an economy structured the way ours is. Consequently, we don't really know whether there's a reason to prefer their investment choices over the ones the state will make.
It currently remains unclear, for example, whether what Musk or Bezos have done with their vast wealth thus far will, in the medium or long term turn out to be a net benefit to society (it certainly has not been so in the short tem).
The belief in the business genius really is overblown. Yes, some folks are better at it than others, but when we run the economy like a casino, there will always be big winners no matter what personal qualities the players bring to the game.
> the state has $40b of wealth under its control to invest.
Defense spending is not an investment in the economy, neither are entitlements.
The returns on government investments that are legitimate investments, however, are quite a bit less than the returns on the investments of rich people. The reason is simple - people who get rich off of investments are very, very good at it. Government bureaucrats are not.
Government investments are socialism, which have an inglorious history of poor returns.
> The belief in the business genius really is overblown
4 out of 5 business ventures fail. The survivors tend to be pretty good at it. You'd be very hard pressed to find a dummy who grew a business to a billion dollars. The ones who have done it more than once are very, very rare. (Like Steve Jobs, who did it 3 times.) If you want to argue that Jobs, Gates, Musk, Bezos, etc., just fell into it, go right ahead!
Because they're centralized sources of power, and power corrupts.
In my younger days I used to argue for a non-inflationary currency, and how that would have gone a long way towards not concentrating the wealth from offshorting and technological progress (instead enough money was printed to make price inflation keep occurring in spite of the fundamentals, and most of that new money was just given to banks to pump up the asset bubbles)
These days I've kind of just accepted the monetary inflation (cf Gresham's law), like other centralizing but perhaps inevitable dynamics like the economies of scale for electronics manufacturing.
It's funny because the US right wing (and a huge part of it's so-called left, too) keeps trying to portray US global military power as the opposite. As charity for us ungrateful Canadians and Europeans
It's completely backwards from how people usually perceive empires. And from what it is. Which is a projection of power to ensure the supremacy of American capital interests.
Which is why US GDP per capita etc is incredibly high compared to the rest of the G7. It's not because they're smarter or better than the rest of us. It's because they've built the world order around themselves. By, as you say, exporting that military protection.
The US exports military dominance, and it gets paid in having its currency, regulatory needs / environment, etc. dominate almost everywhere.
(Whether this actually benefits the regular American worker vs its own wealthy business class is a whole other discussion, and may explain why this has become such a fertile ground for rage and frustration among Americans)
The GDP per capita comparison talking point keeps getting brought up as "why Canada is an economic failure" -- frustrating because it really isn't a good analysis.
When the global economy was close to being a zero sum game and the concerns about too much of your silver/gold flowing to China/etc. were real (Great Bullion Famine) it wasn’t that absurd. These days.. yeah..
Mercantilism is certainly what we have today, with much of the world exporting to one perennial importer. Perhaps Trump means to reverse that state of affairs (i.e., make the U.S. mercantilist), which I surmise from your comment that you think would be bad (certainly I think it would be bad!), or perhaps he means to not have mercantilism at all, which I surmise you think would be good.
The general idea is that when you buy stuff you're losing wealth so if you never buy anything then you never get poorer. Since we constantly dig gold up from the ground we still get richer over time even if nobody buys our stuff.
This is also why its importantly to gain colonies (Greenland/ Canada) or mineral rights from other countries so that the amount of stuff we have increases.
IMO, it's a theory that's missing the forest for the trees but it's historically very popular.