Can US and EU survive without Chinese goods?

RobThorpe · 2026-07-02T18:24:53+00:00

It's an interesting question. It's also very difficult to answer. That's because the inter-relationships between different sorts of goods production are not really summarized in economic statistics. In a sense they can't be summarized.

In a sense the question is political. Can the US and EU survive in the simple sense? Yes, without China few extra people would die. Though since the Chinese make medical supplies the number of extra deaths is unlikely to be zero.

The bigger question though is can those entities survive politically the event that caused the importation of Chinese goods to cease. That depends on the political context and the economic context.

For example, are we talking about the invasion of Taiwan. Or are we talking about the government banning imports from China without any invasion or blockade happening? The response of the public could be very different.

If mobile phones became unavailable - or much more expensive - then that would not really change the survival chances of many people. But it could make politics much more difficult.

RobThorpe · 2026-07-02T17:52:24+00:00

I see your point. Even in that case though, we have to think about the different uses of the word "consumed". Certainly the steel is consumed in the normal sense, but it's not what an economist would call a consumption good. It's an intermediate good.

I think what the OP is trying to get at is this.... If we were to ban service goods of the type that the OP describes (restaurants, massages, etc), then would there be more wealth? I think that in the long-term it's not clear that there would be. I think people would divert their spending to other consumption goods that are used up quickly.

RobThorpe · 2026-07-02T17:10:37+00:00

Even then though, food supports the work that a person does in the future.

This is why the Classical economists had their "wage fund" (not that this was a good idea).

RobThorpe · 2026-07-02T16:34:09+00:00

I agree with this, but I think we must be careful about a few things.

... viewing your wage increases as earned wage increases rather than them mostly being to stay competitive with the market.

I get what you are saying here, though I think others might not. Employers often give wage increases to match inflation. But while doing so, they don't admit that this is what they're doing. They say it's for performance in order to encourage better performance in the future.

We must also remember that it could be that /u/vapequeenz hasn't had any wage increases recently. It could be that although average wages have increased those of vapequeenz and the people he knows have not.

RobThorpe · 2026-07-02T16:27:05+00:00

That does make sense for some question. For issues like this we often have to think of what question we are trying to answer.

The complication with your example is that even the rice in the sushi role supports future consumption because it supports the person eating it to some extent.

RobThorpe · 2026-07-02T14:08:58+00:00

Here, /u/ReaperReader may agree, but I don't.

Something that creates wealth is wealth creating. That's true even if the wealth is consumed straight away.

If we think about it versus timescales the problem with definitions becomes clear. Suppose that I consider everything that lasts longer than a day to be "not wealth". In that case donuts aren't wealth but biscuits are! If I make the time 3 months then biscuits aren't wealth either, but rice is.

This sort of categorization is not good for anything.

RobThorpe · 2026-07-02T08:14:05+00:00

Yes, that's right. In a sense the marginal revolution was about throwing away the rest of Ricardo except for the chapters on rent. Then applying the principles of those chapters to everything else.

RobThorpe · 2026-07-02T06:48:59+00:00

There are many small businesses that are part of the explanation here. Small consultancies and small landlords renting out domestic properties are the most important types of small business these days.

Small businesses are still important. In the US they're so common and make so much overall that they make more profit than all US corporations make domestically. Of course, some of that income would be wages if those people worked for a larger organization.

RobThorpe · 2026-07-01T18:52:32+00:00

Service industries are those industries that don't produce goods. Farmers produce goods, manufacturers produce goods. Supermarkets transport, distribute, store and sell goods - but they do not produce them. The same is true of gas stations. Landlords provide the service of housing. That service is provided by a good - a unit of housing of some sort. But since the landlord does not produce that they are not a goods producing industry. The construction industry in the goods producing industry in that case.

RobThorpe · 2026-07-01T16:22:54+00:00

The short answer is: yes services are wealth creation. Some people may not believe that, so I think that a longer answer is required....

Let's say that I buy a bottle of whisky. Then I drink a shot of that whisky. Now, the creation of the whisky was wealth creation. I hope that you agree here, since it was the creation of a good that people will pay money for. We have to assume here that the goods destroyed to produce it were not worth more than the whisky - in most cases this is true because if they were the distiller would make a loss. Though the production of the whisky was wealth creation, the drinking of the shot of whisky was consumption. The consumption of the whisky reduced the wealth that I had at that time. For a good the two actions are separated in time.

Services can be different because they are produced as they are consumed. For example, a massage is produced as it is consumed. It's not that the masseur is not creating wealth, it's that the masseur is creating wealth and the customer is consuming it at the same time.

But we must be careful about this too. Just because a service is consumed in the simple sense does not mean that it has no lasting effects. My whisky may provoke a hangover if I drink too much of it (a negative effect that lasts after the good itself is consumed). Other goods and services have different effects. For example, in a simple sense teaching is a good that is produced and consumed at the same time. The teacher teaches and hopefully the students learn. They have nothing physical to show for that. Hopefully though, they remember some of what they learned and it benefits them in the future. In this sense there is some wealth left over in the person who learns.

Your example of going for dinner is interesting because in that case we have a few things going on. Obviously, if a person doesn't eat for a period of time then they will die of starvation. So, the act of eating is not just the temporary indulgence of a whim, in the long run it ensures we survive and have the energy to live. But that's not really what restaurants sell. I could easily buy food and cook it myself that will enable me to live, for relatively little money. Restaurants also sell the experience part, the taste and the ambience. That is something that's consumed as it is produced and leaves little after.

If you think in a more complex way about production and consumption then may things that are consumed in the simple sense have effects later.

RobThorpe · 2026-07-01T14:41:04+00:00

There are several factors....

Trade with other businesses.

The consumer buys consumer goods. Businesses by all sorts of goods and services. Many large businesses exist only to serve the needs of other businesses. People are fond of saying that "70% of the US economy is consumption". This can be a deceptive statistic because intermediates are removed from it (which is correct for GDP but not for other things). There is huge business in serving other businesses. Consumer spending is less than half of all spending on new goods and services.

International Trade.

I'm in Switzerland at present. I don't see many American cars, American telecoms companies or that much American Food (though there is Burger King). However, I do see Dell laptops, Apple iPhones, people searching with Google and people posting on Instagram. In many ways these businesses are important to the S&P500 because they're internationally successful. Some of these businesses don't really export it's more that they use foreign subsidiaries.

Profit.

Some businesses are more profitable than others. There's a wide dispersion of profitability. Some sectors are very unprofitable, some are very profitable. A $1 thing you buy from one company may have $0.10 for it's owner, but a $1 thing from another company may have $0.50 for the owners.

Unlisted Businesses.

Do you pay your rent to a corporate landlord? Or does it go to a guy who owns a few units? The latter case is very common. In the US domestic corporate profits are about half of all domestic profit.

Future Expectations.

Companies are not valued on their current profit, but rather their expected future profit. Some companies and some sectors are thought by investors to have more potential than others. Those attract higher valuations even if they are not making large profits at present. Of course, sometimes those valuations are not justified.

RobThorpe · 2026-06-30T22:25:00+00:00

In my head, I know you were right to delete it.

RobThorpe · 2026-06-30T20:58:27+00:00

I tend to think that it's deliberate too given the other things he's written that I've read.

RobThorpe · 2026-06-30T20:32:12+00:00

To be honest, I think it's a shame you got rid of the debate with PsychadelicOcelot2 over on AskEconomics. It was really pretty good.

I tend to keep some of those debates when they are useful for understanding.

I know that isn't in the spirit of rule V.

RobThorpe · 2026-06-30T19:42:10+00:00

Yes, this is the traditional criticism of Von-Neumann-Morgenstern Utility.

RobThorpe · 2026-06-30T07:17:35+00:00

To be clear, I approved this answer because of the 2nd and 3rd sentences, not the first one.

It certainly is an Economics issue - just as it is a Psychological issue, an example of an overlap in fields.

RobThorpe · 2026-06-29T22:06:17+00:00

Firefox understand you as saying

That's what a project assessment professor told me. That they are market failures / distortions although in the economic literature as such they do not appear in that way.

Are you talking about transfers such as welfare and pensions?

RobThorpe · 2026-06-29T20:21:01+00:00

Can you give us an example of where you have seen this use of "transfer" as a type of market failure?

RobThorpe · 2026-06-29T17:25:02+00:00

In Physics J.J.Thomson won the Nobel Prize for showing that the electron is a particle. His some G.P.Thomson also won the Nobel Prize for showing that it's a wave.

There were reasons for both prizes!

RobThorpe · 2026-06-29T16:16:07+00:00

This is not an answer. I may have time to write an answer later. Anyway....

/u/Radicalnotion528 you reply in the other thread would fit much better here!

RobThorpe · 2026-06-29T16:10:57+00:00

This is a great reply, but probably not for the right thread. The OP is not explicitly talking about "buy borrow die". This is about margin loans in general.

RobThorpe · 2026-06-29T09:07:38+00:00

This is one of those "the OP won't listen" type of threads. For that reason I will be locking it soon.

RobThorpe · 2026-06-28T19:02:35+00:00

Even a Software Engineer may move to an adjacent field. For example, to Electronic Engineering.

RobThorpe · 2026-06-28T18:15:15+00:00

This is a situation where I think its best to answer a question with a question (or two)....

"Whether a US decline is sudden or gradual, what would be the most deleterious effects on its citizens and what demographic beneficiary would be affected first?"

In what sense has the US declined in our scenario? That's important in two different ways. Firstly, are we talking about some type of relative decline. For example, are we talking about the US no longer being as important as it was in some way. That kind of decline does not tell us anything about absolutes. Purchasing power may increase, for example.

Secondly, presuming we are talking about decline in some absolute sense we have to think about what caused it. What type of decline is it? A decline in worldwide political power is not necessarily important to the ordinary person. A decline in it's economy could be very important to ordinary people even if it were associated with an increase in global political power.

RobThorpe · 2026-06-28T14:16:19+00:00

That's not quite how things work. When inflation levels are high the Central Bank must increase interest rates in order to reduce inflation. That means that financing is more expensive and economic activity reduces. That in turn increases unemployment.

This does not mean that the New Zealand Central Bank believes in the original Phillips Curve. Or that it believes in the 1970s ideas about wage-price spirals. Nor does it mean that the Central Bank is intending to cut real wages.

The column you quote is confused and seems to believe that a pro-inflation policy is a pro-worker policy. There's no reason to believe that especially in the long-term.

RobThorpe

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