Downsides of an export economy

[KrazyHorse]

Saudi Arabia drills up oil. Receives cash. Spends some buying consumer goods etc. With the remainder can choose to either buy machinery for factories in Saudi Arabia or machinery for factories in Taiwan. If it chooses the first it has 0 trade surplus. If it chooses the second it has a large trade surplus. The producer surplus on the Taiwan factory is shared between Taiwanese workers and Saudi Arabian capital. The producer surplus on the Saudi factory is shared between Saudi workers and Saudi capital. Which one is better for Saudi Arabia?

[KrazyHorse]

SA is a nation of lotus eaters, blessed by the gods with the greatest national resources of any country. They import labour while they have double digit unemployment rates among men and 0 female workforce participation.

[notyoueither]

Under your home investment strategy SA would have an ever increasing surplus, yes? Well, as long as the oil holds out.

How does that make you agree with VJ who said that an export economy is a slave economy?

[KrazyHorse]

Under your home investment strategy SA would have an ever increasing surplus, yes? Well, as long as the oil holds out.

No, if they invest their surplus entirely in SA then they have 0 trade surplus and high domestic labour productivity.

If they invest outside SA they have a large trade surplus and low domestic labour productivity (outside the extractive sector).

[notyoueither]

SA is a nation of lotus eaters, blessed by the gods with the greatest national resources of any country. They import labour while they have double digit unemployment rates among men and 0 female workforce participation.

Canada was not foresaken, and i would say we have parlayed our beaver pelt position fairly well.

The world still demands oil, lumber, food, and minerals.

Should we tell them to sod off and dig up their own back yards for whatever grubs they can find?

[KrazyHorse]

You're looking at a trade surplus as some sort of national savings account. It's not.

Saudi Arabia invests hundreds of billions in developed economies where the capital depth is much, much higher than in their own country. They are dooming their own citizenry to lower-paying jobs and higher unemployment to the benefit of massively more productive workers in the First World.

[notyoueither]

Under your home investment strategy SA would have an ever increasing surplus, yes? Well, as long as the oil holds out.

No, if they invest their surplus entirely in SA then they have 0 trade surplus and high domestic labour productivity.

How does that work?

They still sold 4 quatloos more then they bought.

You are assuming they spent the entire 4 quatloos on foreign equipment? Why?

What do they then do with the products of their investment, other than sell them?

[KrazyHorse]

Canada was not foresaken, and i would say we have parlayed our beaver pelt position fairly well.

The world still demands oil, lumber, food, and minerals.

Should we tell them to sod off and dig up their own back yards for whatever grubs they can find?

Who said that? I simply said that keeping track of a trade balance is pretty stupid unless it's some massively unsustainable rate like 8% of GDP (EITHER SURPLUS OR DEFICIT!). We should be selling beaver pelts, but I don't see why we shouldn't be buildng factories in Canada with the money. You're saying that you'd prefer we built US, Euro and Chinese factories. I don't see why.

[KrazyHorse]

How does that work?

They still sold 4 quatloos more then they bought.

You are assuming they spent the entire 4 quatloos on foreign equipment? Why?

What do they then do with the products of their investment, other than sell them?

Errr...dude, what else do you think they do with their trade surplus? They can hold it as dollar bills under the mattress, or buy Treasuries (both pretty dumb investments) or buy equity/directly invest in foreign countries. That last one is the equivalent of buying machines for Taiwanese factories. The first two are basically gifts to the US government.

[notyoueither]

You're looking at a trade surplus as some sort of national savings account. It's not.

Saudi Arabia invests hundreds of billions in developed economies where the capital depth is much, much higher than in their own country. They are dooming their own citizenry to lower-paying jobs and higher unemployment to the benefit of massively more productive workers in the First World.

No. I'm looking at it as jobs.

Some bint in Europe needs nickle. Fine, we dig it up, for cash that pays workers.

Some emo in California needs fuel for his smurfmobile. Fine, we dig it up and sell it for cash that pays workers.

A whole lot of Biafrans need food. Fine, we gather up a **** load of grain and sell it for cash that pays farmers.

Etc.

Etc.

Etc.

Meanwhile, we have our own factories and service industries that are very young, but still growing.

What do you propose we do once our more developed economy jobs grow? Stop selling food to the world?

[Naked Gents Rut]

The first two are basically gifts to the US government.

Let's hope to god those gifts keep coming...

[KrazyHorse]

I can't believe that you still don't understand this. Trade balance represents both the flow of consumer and of capital goods. By sustaining a large, permanent trade surplus (technically current account surplus, but whatever) a country is doing one of three things:

1) Building a stockpile of foreign currency
2) Building a stockpile of foreign debt
3) Building a stockpile of foreign equity/capital goods

Which of those three things do you want Canada to do more than

4) Import capital goods

[notyoueither]

Who said that? I simply said that keeping track of a trade balance is pretty stupid unless it's some massively unsustainable rate like 8% of GDP (EITHER SURPLUS OR DEFICIT!). We should be selling beaver pelts, but I don't see why we shouldn't be buildng factories in Canada with the money. You're saying that you'd prefer we built US, Euro and Chinese factories. I don't see why.

Pure Bull****, and not an one word of that crap have I said.

[KrazyHorse]

If you don't understand why preferring to run a trade surplus is the same as preferring to invest outside Canada rather than inside Canada then I'm afraid you're beyond hope.

That's pure accounting.

[KrazyHorse]

A pipeline has two ends, nye. For every extra dollar that China or SA sells than it buys on the international market it ends up with an extra USD.

Though I suppose those pretty green pieces of paper make nice wallpaper.