Saturday, March 11, 2006

Free Traders and Capitalists

Daniel Drezner blogged a contempt for the Argentinian President Kirchner, who banned Beef Exports from the Country because of the escalating Price for Beef. The NYTimes carries an article listing the debate going on in China--of Socialism v. Private Aggregation of Wealth. These two elements have a correlation, though Many may not see it.

Let Us consider the Kirchner Ruling: Argentinian Beef Growers believe this will ruin the industry, because of loss of Capital. This is Traditional Economic theory, but does it work out in practice? Domestic Beef will drop in Price, but will Save an approximate 12% of Beef Cost in Transportation of Export Beef--remembering they will retain internal Transport Costs for the Domestic Sales. A number of Studies indicate internal domestic Pricing for Product will always reflect International Price for Product--in the absence of Trade barriers. This means domestic Consumers pay higher internal prices, if the International Price is higher. Argentinian range and agriculture has reduced total quantity of Beef production since Internationalization of Beef markets--to specialize on quality Product at higher Prime Cut pricing--exactly like the American Beef industry. The Beef Export ban can actually be expected to raise Beef production in Argentina--as Beef Growers lower Prime Cut standards and search to make up for the loss of Profits from the Ban. Argentinians will eat more Beef, the International Beef Pricing will reduce in Pricing as domestic Beef producers raise quantity supplied under higher Domestic Demand, and more Labor is employed by the Beef industry across the Board--both domestic and Internationally. A Countercyclical Economic theory!

The argument in China is identical to the one held in China prior to the Communist Revolution. Then and Now there were filthy-Rich Private Capitalists who exploited Chinese Labor and Consumers. The whole Debate, including the Argentinian one Above, revolves around a specific Point of Discussion: Does the majority of Society have to be exploited by a special Interest group, simply to aggregate sufficient Capital to advance the Economy? The Opinions vary from rabid Revolutionist to Ultra-Conservative--Paris barricades to "If the Poor have no bread, let them eat Cake." The Former Revolutionists never mention the Cost of dislocation caused by Revolution, the Later never mention how the Poor could afford to eat Cake when they cannot afford Bread. We might have found the justification for socially-directed Economic regulation. lgl

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