Exporting back to economic growth

Some people give lip service to the idea that economies can export their way back to growth. It is lip service because it is not practical.

The idea is that if the local economy is sluggish, we can increase output by selling more to others.  There are two problems with this. The downturn is world-wide and it is going to be very difficult to find foreigners with spare cash.  The second problem is that trade has to be a two-way street.  Increased sales will have to be matched with increased purchases.

Free trade is based on the law of comparative advantage which states that two countries will produce more if they specialize in items at which they are most efficient and trade even if the other country is more efficient at the items they are not producing.  This is usually interpreted to mean total output will increase but I think it could also mean more efficient production leaving more time for other activities such as leisure.

The big problem in implementing free trade is making the adjustments as some people will lose their employment and have to make changes.  Most of us most of the time, think and act in our own short-term interests.  Most economists are in favour of free trade but I have never heard it suggested that economic advice should be included and outsourced to another country.  If we really wanted to try free trade the best way would be for a country to do it unilaterally.  We should remove all subsidies and other barriers to imports and not worry about what other countries do.  If they want to support our consumption, we should not object.

This guy figures the major economic issue facing the world today is that we have used up the most easily accessible energy and mineral resources  Yes, there are lots left but they are so difficult and expensive to extract that they are probably not useful to us.  The result is that we are heading into a prolonged period of economic decline.

If this is true then trying to increase production will consume the remaining resources even faster and will bring forward a major economic collapse.  The way to deal with the crisis is an orderly reduction of production and standards of living.  Not likely to happen.

More likely people will blame Brexit and the results of the U.S. election for continued economic problems.

What ever happens and whatever the reason it appears we are in for an extended time of economic decline.  What we most need is clear and realistic thinking about economic issues.  What we least need is desperate attempts to return to growth and scapegoats.

Emotions and denial in the U.S. election

Some of us were raised to believe elections should involve a rational discussion of issues and voting for the candidate which best represents our point of view.  The current U.S. election appears to ignore this tradition and be based mostly on emotion and denial.

I believe the major economic issue facing the world today is that we have used up the most easily accessible energy and mineral resources  Yes, there are lots left but they are so difficult and expensive to extract that they are probably not useful to us.  The result is that we are heading into a prolonged period of economic decline.

Lots of people recognize we are experiencing some serious economic problems although very few understand the problem or agree with the above explanation.  Too many people, especially economists and politicians believe  with the right policies we will soon return to economic growth.

From where this blogger lives, about 200 miles north of the Canada-United States border, it appears one of the candidates is basing his campaign mostly on a strong appeal to emotions, especially fear.  This is a problem as generally emotions overrule rationality.  All the rules of managing an election and predicting its results are out the window. Rational responses to outrageous statements are meaningless to those swayed be emotion.

The outcome of this election is very uncertain.  Most if not all writers have biases even if they think they are being objective.  Therefore we need to be careful in evaluating analysis of this election.  A lot of what is being written many be wishful thinking.

The other side of this election is based on denial that there is an economic problem.  They want us to have faith that she will be able to solve impossible economic problems.

This guy has written a book about how to adapt to a down economy.  (See the top of this weblog.) It will be difficult and a lot of people will have to accept a lower standard of living.  The fear is justified.

Whoever wins this election the economic problems will still be there along with all the emotions and denial.  Not a promising outlook.

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