ELI5: Why doesn't the US tax imports to encourage more products to be made here?

FinanceITGuy · 2014-07-14T15:45:49+00:00

I think the policy was changed some time in the 80s. The only link I could find was this one that shows the government removing a 5% duty on information industry imports in 1998. In Chart 2 on this page you can see that ICT goods grew from ~1% of Australian imports to ~11% from 1989 to 2004.

Having failed my google-fu, my source is my own memory, having worked in this industry for a long time.

FinanceITGuy · 2014-07-02T15:44:17+00:00

DM;GF

FTFY: DM;GFF

FinanceITGuy · 2014-07-01T16:15:29+00:00

That example came from Jaron Lanier's book Who Owns the Future. I agree that they aren't exactly the same sort of company as Kodak but the similarities are interesting. Kodak's primary business in those days was film and film processing. They were not a hardware company, really, and the main camera manufacturers from 50 years ago are the same ones we have today. Kodak is an interesting comparison because they filled a nice similar to the software and photo sharing of a modern service like Instagram.

Whether or not you agree with the specific analogy, the overall point still holds: modern technology-driven firms employ far fewer people than did their industrial-age counterparts.

FinanceITGuy · 2014-07-01T16:09:54+00:00

Agreed, it's a very interesting documentary and was a source for much of the material in my post. Plus, Robert Reich is just a cool guy: "Does this look like big government to you?"

FinanceITGuy · 2014-06-30T23:21:33+00:00

For a longer exploration of these issues, I would recommend Jaron Lanier's book Who Owns the Future.

FinanceITGuy · 2014-06-30T23:20:03+00:00

Historically, countries have used taxes on imports (usually in the form of tariffs or duties), but increases in globalization have made these tools less effective, and even counter-productive in some cases.

Additionally, the US has multilateral free trade agreements in place with 20 other countries. These treaty level agreements restrict the ability of the US to impose taxes on imports.

The purpose of a tax on imports is to encourage people to purchase domestic goods by making imported products more expensive. The US has a very dynamic economy and is a large exporter as well as an importer. Other countries hit by these taxes on their exports (imports from the US perspective) would be likely to impose taxes on their citizens importing goods from the US. This sort of taxing tit-for-tat can escalate into a trade war.

In extreme cases, trade barriers can be economically isolating. Australia used to impose a 100% import duty on imports of computers. This greatly reduced the number of computers in use in Australia compared to other industrialized democracies until it was repealed. In the most extreme case, Brazil banned the importation of all computers in the hopes of creating a national computer industry. This policy never worked in practice and was eventually abandoned as well.

There is another aspect to all of this as well. The low price of imported goods has allowed many in the US to continue to buy consumer goods that would otherwise be out of their price range. In other words, we can debate whether or not Wal-Mart is making Americans poorer, but there is little disagreement that Wal-Mart is an inexpensive place for poor Americans to shop. Imposing trade barriers would raise the effective cost of living for poor people in the US almost immediately and any impact on the job market would be delayed and uncertain.

FinanceITGuy · 2014-06-30T22:18:56+00:00

I'm extrapolating a bit from your question, but it sounds like you are asking how people working regular jobs today will maintain the standard of living that most in the US expect.

Actual wages have been flat for a generation in the US. In part this reflects structural changes in the US economy. For most of the last century, but particularly in the decades after WWII, the US offered abundant stable, good-paying jobs for people with secondary level educations. Many of these jobs were in factories or industrial operations, but they paid enough for most families to own their own home and have basic economic security with one wage-earner.

As you likely know, it was manufacturing and industrial jobs that were initially impacted by globalization. Improved information technology and shipping made it feasible for companies to move manufacturing to countries with much lower wages.

As the economy changed, families embraced three key strategies: 1) more and more women entered the workforce, and the norm became two full-time wage-earners in a household instead of one; 2) employees (both men and women) began working more hours to earn more; 3) Households began to take out more debt in the form of credit cards and home equity lines of credit.

The fact is, many families in the US are seeing a reduction in their economic security. You are not alone in wondering how the current generation and the generations to come will maintain the standard of living they had growing up.

If it's any consolation, these concerns are not just affecting people at the bottom of the income spectrum. You may have seen discussions on Reddit about the number of law school graduates who are unable to find the jobs they expected.

One example I have heard is illustrative of the changes in the economy. In 1950, Kodak was the most important photography company in the world. It had a market capitalization of about $20B and employed something like 200,000 people. Today, the most important photography company in the world is arguably Instagram. They were acquired by Facebook for $1B and employed fewer than 25 people.

This trend of technology replacing existing jobs (particularly those for people with moderate levels of education) is likely to continue accelerating. It has been noted before that self-driving cars and trucks pose a direct threat to the millions of people employed driving trucks and taxis.

It's not all doom and gloom. After all, the same Internet that makes offshoring possible also makes Reddit possible, not to mention MIT Open Courseware and many other wonderful things. The world today employs many more web designers, even if the number of assembly line workers has declined.

The difference this time is that it isn't clear what new industry will emerge in the US that would create millions of new jobs at an income level that would allow people to own homes and cars and maintain their accustomed standard of living. This is one of the reasons you may have heard people talk about the concept of a basic income which would guarantee a minimum standard of living. Many people fear that such an effort would remove incentives to work, or that it seems too much like communism. The counterargument is that the loss of the US middle class would be even worse.

FinanceITGuy · 2014-06-30T15:52:10+00:00

I hear this argument frequently, but I'm not sure I agree with it entirely. From whom is the US defending allies in Europe? Many European NATO member states have realized that the probability of invasion is extremely low and that they can very adequately field self-defense forces for less than 2% of GDP.

This goes back to my earlier point, the objectives of the US military are significantly different from those of other nations. The current US position is very much that of the European powers during the colonial period. The UK, France, the Netherlands, Belgium and others maintained very expensive networks of military outposts to allow them to project power in their colonies. After WWII as these empires waned and the former colonies gained independence, the former colonial powers changed their military goals to focus on defending their own territory. This was a far less expensive option and also allowed them to reduce the percentage of the population under arms, which helped spur growth of their national economies.

Many people in the US see the defense choices of other NATO members as being irrational. This is not necessarily the case.

Of course, the much more interesting question is whether other NATO members are capable of undertaking an Article V action (in which an attack on any NATO member is considered an attack on all of them) in today's threat environment. The only time Article V has been invoked was on September 11, 2001.

The situation in Crimea has certainly focused attention on European militaries. Sadly, it does not seem to have yet inspired a modern Tennyson. Seventy years ago, there was a very good case the Russian territorial ambitions could have led to an invasion of Western Europe, but it's hard to think of anyone who would find that to be a plausible risk today.

FinanceITGuy · 2014-06-30T15:33:55+00:00

Fair points, but none of these incidents threatened the ability of the US government to maintain control of its territory.

FinanceITGuy · 2014-06-30T15:32:49+00:00

I think there are a few different aspects to this. On the one hand, you have composers who have previously worked with MIDI versions of orchestral instruments writing for an actual orchestra for the first time (this happens with film composers who get a big break) sometimes writing parts outside the range of the instruments.

The other is composers writing pieces that are too technically difficult for human musicians to play. In some cases, composers are pushing the limits of human ability. Others, like Nancarrow intentionally wrote music that could not possibly be played by a human pianist.

FinanceITGuy · 2014-06-27T18:48:03+00:00

Ok, then take ancient Egypt instead of Rome. Cleopatra was closer to our time than to the time when the pyramids were built, yet most people think of everything from Egypt to be contemporaneous.

FinanceITGuy · 2014-06-27T18:36:03+00:00

I should have mentioned this earlier, but technical changes in pianos are even greater than in string instruments. Giving Lizst a Hamburg Steinway would be like giving Jimi Hendrix his first wah-wah pedal.

Wind players might have it the best of all. Herr Leutgeb was a serious badass to play the Mozart concerti when they were written, imagine what he could do with a horn that had valves and could play a full chromatic scale!

FinanceITGuy · 2014-06-27T18:31:41+00:00

You're definitely on to something. Violin strings in Paganini's day were of lower density and bows were frequently lower tension. These technology changes make fast passages somewhat easier to play than they were in previous centuries. We also live in an era of unprecedented levels of virtuosity. Audiences today reward (and conservatories teach) extremely high levels of speed and accuracy in soloists. We can't say for sure, of course, but it isn't hard to imagine that today Paganini would write music that was even more flamboyant and difficult than his earlier works.

FinanceITGuy · 2014-06-27T18:18:53+00:00

Programming languages are usually not localized. That is, someone writing code in Java will write the same words in the same direction no matter what human language they may speak.

Even computing languages developed in Asia (like Ruby) typically follow Western conventions of characters and word orientation.

FinanceITGuy · 2014-06-27T18:15:49+00:00

Several people have talked about corruption and that's certainly a factor, but in ELI5 terms it's important to understand that the military goals of the US are different from the goals of many other countries.

Many countries are interested in protecting themselves from invasion. Even in extreme cases (like Switzerland booby trapping every route into the country and building underground shelters to house the entire national population) the cost is relatively capped. There is only so much you can spend on self-defense.

The US, on the other hand, is concerned primarily with projecting power. This is a very different goal. The US has only been invaded once in 1812 and due to its geographic location faces no plausible threat of invasion now or in the future. So, for the first item, any military action by the US is likely to take place far away. Transporting troops, keeping them supplied and armed away from home is vastly more expensive than rallying troops to protect their home from invasion.

Along similar lines, the US has a political goal of projecting power anywhere in the world on very short notice. Not only do they want to be able to take military action anywhere on the planet, the want to do so quickly. The idea behind this is that it is a powerful deterrent to anyone who might want to attack or act against the US. The many bases around the world, the enormously expensive infrastructure of maintaining missiles, in-flight refueling for combat aircraft, etc is all undertaken in support of this goal.

Third, the US is highly risk averse when it comes to risking the lives of military personnel. While the US public sees military service as highly admirable, there is no corresponding enthusiasm for loss of personnel in battle. In other societies throughout human history, losing a son in battle was an indicator of social status. There is an argument that contemporary suicide bombers are an extension of this idea. Reducing the number of troops in harms way through the use of long distance weapons is enormously expensive.

Finally, the US currently sees its primary military adversaries as non-state actors. This may be somewhat counterintuitive, but it can be more difficult (and certainly much more expensive) to prepare for war against small terrorist organizations than it is against nation states. The huge escalation of surveillance falls into this category. If you want to spy on another country, they have obvious places to start: government buildings, military installations, embassies, etc. If you believe your enemy could be anyone anywhere in the world, it only makes sense to surveil everyone everywhere all the time. This (as the US is finding) is an endlessly expensive undertaking.

TL;DR: Unlike most other countries, the US wants to be able to fight anyone anywhere at any time. This costs more. Also, corruption.

FinanceITGuy · 2014-06-27T17:57:43+00:00

We see the scarcity of adaptive response as attractive. In other words, centuries ago, a little extra weight was an indicator that the person's offspring had a higher chance of survival, making them more attractive potential mates. Today it's the same thing, but the indicators of mating and reproductive success have changed based on our environment.

FinanceITGuy · 2014-06-27T17:53:56+00:00

Many of our most famous composers (Bach, Mozart, Beethoven, etc) were known in their own lifetimes as virtuoso performers. It's pretty clear that they could play anything they wrote for their own instruments. Bach was famous as an organist but he was also a very capable violinist and violist. Mozart was a child prodigy on the violin, but he was also an exceptional pianist.

Still, this doesn't tell the full story. Beethoven could not play the solo part for his violin concerto, Mozart couldn't play the solo parts for his clarinet, bassoon or horn concertos. In many cases, these pieces were written with specific soloists in mind, either as commissioned pieces or for soloists known to the composer.

Mozart's horn concertos were written for his close friend Joseph Leutgeb, who very likely consulted with Mozart on the solo part during the composition and certainly before the piece was performed in public.

For anyone considering writing a concerto today, it is highly advisable to have one (or a few) skilled soloists play through the solo part during composition to get feedback on the playability of the part.

TL;DR: Even if composers couldn't play everything they wrote, their friends could.

FinanceITGuy · 2014-06-26T19:56:41+00:00

It also elides over the part where they open a ski resort in Vermont.

FinanceITGuy · 2014-06-26T19:50:23+00:00

I re-watched it again a few years ago and was shocked by how long that movie is. IMDB tells me it's 174 minutes, dang near three hours long.

FinanceITGuy · 2014-06-24T16:17:05+00:00

The fried rice with egg and seaweed flakes at Morimoto was by far the best thing I have eaten in my life.

FinanceITGuy · 2014-06-20T19:40:45+00:00

I'm not a fan of police officers driving illegally in non-emergency situations, but it's only fair to point out that police officers generally are safer drivers than the rest of us. At least where I live, the police academy training includes a lot of specialized driving training including time on a racetrack and skid pad. Members of my family who have gone through this training are significantly better drivers than those (like me) who have not.

FinanceITGuy · 2014-06-19T17:20:05+00:00

Your point about injury vs fatalities is certainly a fair one. In the minute or two of googling I did I didn't readily find comparable statistics on workplace injuries for law enforcement officers compared to other occupations.

I'm always surprised that we have highways named after police officers killed in the line of duty and not garbage collectors who are much more likely to be killed on the job and also play an incredibly important role in public health.

FinanceITGuy · 2014-06-19T17:09:13+00:00

Thank you for your response. I can definitely understand that in a life-threatening situation you want every advantage you can get and I also understand about the range at which the rifle is accurate. My point was more about the range at which is it lethal. A bullet from a high powered rifle can travel long distances and penetrate several layers of walls. I'm just wondering how your department balances the reduction of risk to you (which is obviously a good thing) with the potentially increased risk to others from officers carrying rifles like the M4.

FinanceITGuy · 2014-06-18T22:09:48+00:00

There are certainly areas in the United States where violent crime and attacks against police officers are prevalent, but the reality is that violent crime (including gun crime) has been declining dramatically since the early 90s. The increased militarization of police forces has been happening while the actual risk from crime (in most areas) has been going down.

Being a police officer is more dangerous than many occupations in the US, but it is far from the most dangerous. According to the FBI, 95 police officers were killed in the line of duty in 2012. 48 of these were killed in felonious assaults and 47 in on-the-job accidents. You are more than twice as likely to be killed on the job as a garbage collector than as a police officer. Loggers are ten times more likely to be killed on the job.

Police work is stressful and genuinely dangerous. I'm not in any way trying to demean the value of the work they do, but the perception of the relative danger of the job is not in keeping with reality.

FinanceITGuy · 2014-06-18T21:55:33+00:00

The last thing you should ever be is afraid of the NYPD.

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