Two Opposite Articles On WSJ

Here are two opposite articles on WSJ published on the same day. The first one, accuses the FED’s policy for bringing into a difficult position Brazil and the rest of the world, and even accuses the U.S. for mindlessness and purposeful action to damage the other countries. The second one, explains that buying medium to long-term Treasuries is a valid monetary policy of the FED in order to stimulate the economy. The first one is written by a journalist. The second one by Alan Blinder, economics professor at Princeton. Who speaks logic is your call. Just read them.

Why Increasing China’s Labor Costs Is Good For Everyone (Almost)

The featured article on Economist is about the rising power of the Chinese worker. Indeed. A long waited increase in Chinese workers salaries will have many good implications for China itself and the rest of the world. This article analyzes some of these benefits. In addition to the mentioned benefits in the article, which I summarize briefly bellow, there is one more.

This is that an increase in Chinese workers salaries will improve the competitiveness of other countries, like the Europe’s south, who now suffer, from the abundance of cheap labor in motherland China. In sort, the benefits from increasing China’s labor costs are:

1. Increase the ability for the Chinese workers to enjoy the fruits of their labor.
2. Balance the Chinese economy which is currently heavily depended upon investment.
3. Boost the world economy, by increasing consumption.
4. Balance the China’s trade imbalances with the rest of the world.
5. Adjustment in the Juan’s exchange rate.
6. Increase the employment in the rest of the world, as less jobs from the other countries are going to be lost to China.
7. Improve the competitiveness of other countries.

The main cost from this increase, will be the increase in the price of Chinese products, but this is counterbalanced with all the above benefits, especially that of increasing employment in other countries, and also the fact that at this time a little inflation is not bad.  The ones who may lose more form this rise, is going to be the shareholders of the big corporations who have factories in China.

Trade Can Be A Non-Zero-Sum Game

I, like John Kay, think that reiterating what seems to be obvious to economists, has value, as it may not, and in this case it is not, at all obvious to non-economists. There are people, in some cases populations, who still think that engaging in commerce is a zero-sum game. One benefits only in the loss of the other. The benefit of one is due to tricking the other counterparty to accept a not good deal for him. In order to change this fundamental misconception, that still exists after centuries since it was proved wrong; I started this blog with an article on mercantilism. Today, John Kay on “It may be a Rembrandt to you, but markets can beg to differ” writes about the same subject providing examples where trade is not a zero sum game. It is a good read for everybody.

Mercantilism And Closing Ports In Greece

Recently a certain one labor union in Greece closed the Ports of Piraeus and Corinth. Piraeus closed for two days. In Corinth two European Union owned ships were blocked for more than fifteen days. Surprisingly, though, and even though courts decided against the blocking of both ports and in favor of free trade and free transportation, the government took the side of the minority-representing union, by not imposing the law-and-order that by the constitution is supposed to maintain. These are clear signs of mercantilism and agreements under the table between the government and the union. For this reason and in order to provide some evidence of the bad consequences of these practices in the economy, I cite two articles on mercantilism. The first one is borrowed from the Library of Economics and Liberty and the second one from Wikipedia. Hopefully, the general public in Greece will become more aware of the welfare implications of mercantilism.