re: National Socio-Economic Security Need for Encryption Technology

Sandy Sandfort wrote:

>Been there, done that.  I repeat, the error that Bart made is
>assuming that because some US-source capital gets redirected 
>overseas, that the total amound of capital investment will 
>decline thus producing the wage drop he is fretting about.
>Unless he can show that foreign capital investment will not flow
>to US workers who are "forced" into working in industries where
>they have a comparative advantage, his argument must fail.  After
>all, I--like the economists Bart cite--think international free
>trade, the free flow of capital in persuit of the highest return
>and division of labor are a GOOD thing.

I also belief that international free trade, the free flow of capital in pursuit of the highest return and the division of labor are a GOOD thing. But in specific cases, I want to know the specific reasons. 
	You claim that I must show that foreign capital investment will not flow back to US workers. But in my original post, I said:

"Of course there are advantages also for the US (shareholders will get higher returns, trade will increase), but how can you proof that these advantages will offset the disadvantage of the lowered amount of capital in the US? "

You haven't answered this question yet. I don't claim that the U.S. is worse off when US capital moves abroad. I only ask: how can you proof that the US isn't worse off when US capital moves abroad? If you don't know the answer, there's nothing to be ashamed of. I don't know the answer either. That's why I asked my question, in the hope that somebody could provide the answer, so that in the future I would  be able to rebut arguments against the free movement of capital.

Another thing: I don't assume that the *total amount* of capital will be lowered in the US when US capital moves abroad. I assume that the amount of capital in the US will be *relatively lower*. So the wages will be *relatively* lower (lower than when the capital wouldn't have left the US), but not necessarily lower in any absolute sense. I thought this was obvious, but since Arun Mehta also misunderstood me, maybe I should have been more explicit here.


Bart Croughs

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                          SANDY SANDFORT
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C'punks,

On Tue, 13 Aug 1996, Bart Croughs wrote:

> You claim that I must show that foreign capital investment
> will not flow back to US workers. But in my original post, I
> said:
> 
> "Of course there are advantages also for the US (shareholders
> will get higher returns, trade will increase), but how can you
> proof that these advantages will offset the disadvantage of the
> lowered amount of capital in the US? "
> 
> You haven't answered this question yet. I don't claim that the
> U.S. is worse off when US capital moves abroad. I only ask: how
> can you proof that the US isn't worse off when US capital moves
> abroad?

The movement of capital from the US was an *assumption* in Bart's
argument.  He has done nothing to show that it would in fact
happen.  When he proves that, they it would be reasonable to
expect me to offer proof that foreign capital will flow to the US.

It seems just as likely to me that US source capital will NOT 
flow overseas if it can be profitably invested in other US
industries that retain--or gain--competitive advantage from 
relative changes in productivity, supply and demand, or whatever.

In my experience, Americans are loathe to invest money overseas
unless it is highly profitable.  The reason is obvious.  They
understand--or think they understand--the rules here.  In 
historical terms, US investments have been more stable and safer
than investments overseas.  (Which is why, by the way, that the
US is the worlds largest tax haven in the world, but I digress.)

Thus, until Bart can support his highly dubious assertion that
capital that flows away from some non-competitive US industries
will necessarily flow offshore, there is no need for me to prove
that such a situation will probably lead to a counterbalancing
foreign capital flow into the US.  So far, Bart has not yet met
his burden of proof.

While I'm sure per capita capital investment is a *factor* in 
determining how high wages are, it certainly is not the only
factor.  It appears that Bart has fixated on this one to the
exclusion of other (probably more important) factors.

> If you don't know the answer, there's nothing to be ashamed of.

It is just this sort of unnecessary condescending snottiness that
create the clear impression that Bart is an asshole.  Perhaps he
is a fine chap and this is just his style, but I find it very
offensive an counter-productive in this discussion.


 S a n d y

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On Tue, 13 Aug 1996, Sandy Sandfort wrote:
> 
> 
> In my experience, Americans are loathe to invest money overseas
> unless it is highly profitable.  The reason is obvious.  They
> understand--or think they understand--the rules here.  In 
> historical terms, US investments have been more stable and safer
> than investments overseas.  (Which is why, by the way, that the
> US is the worlds largest tax haven in the world, but I digress.)
>

Which is why it is possible to be angry about NAFTA and the Mexican 
bailout without being a protectionist.

Why should I pay taxes to my government so it can protect capital 
investments in Mexico, thereby reducing one of my selling points as an 
American worker?

... and while I'm ranting...

Can somebody explain why:

1. Good jobs of the future are knowledge jobs which require little 
capital investment.

and

2. We need a capital gains tax cut to encourage capital investment to 
stimulate the growth of good jobs of the future.

?

bd

Brad Dolan asks:
 
> ... and while I'm ranting...
> 
> Can somebody explain why:
> 
> 1. Good jobs of the future are knowledge jobs which require little 
> capital investment.
 
a)  Knowledge jobs require tremendous capital investment, as in degrees,
training, continual updating of skills, etc.  If the knowledge  worker
cannot recoup these investment costs via a higher salary, she will not
invest in the training.

b)  Knowlegde jobs require computers, automation equipment, etc. for the
knowledge to be applied to in order to create wealth.  These also require
capital investment.

c)  As rote manufacturing jobs are replaced by "quasi-intelligent" machinery,
human job focus switches to designing, caring for, and replacing those machines.
Example:  The ATM replaces the bank teller, requiring new jobs in ATM design,
manufacturing, repair, and the control of the computer network in the back-
ground.

Good jobs of the future may be knowledge jobs, but they require tremendous
capital investment, both by employee and employer.
 
> 2. We need a capital gains tax cut to encourage capital investment to 
> stimulate the growth of good jobs of the future.
 
In theory, this results in less spending and more saving.  More saving 
results in more investment capital (instead of spending on consumption),
lowering borrowing costs and resulting in business expansion, stimulating
both hiring and salaries to grow (at least until the Federal Reserve gets
into the act).

The second argument is that corporate earnings are actually taxed twice,
once at the  corporate level, and again when they are distributed to
share-holders as either dividends or as capital gains.

In actual practice, well, your mileage may vary.  For further info, see
any Macro Economics 101  textbook.

-- 
Checkered Daemon                              cdaemon@goblin.punk.net

Delirium:  There must be a word for it ... the thing that lets you know that
           TIME is happening.  IS there a word?
Sandman:   CHANGE.
Delirium:  Oh.  I was AFRAID of that.