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Made in China, America, India... (Page 2)

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Angel-likeDevil

IF-Sizzlerz

Angel-likeDevil

Joined: 29 January 2010

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Posted: 10 September 2012 at 12:28am | IP Logged
 
" I question the government, if it were to spent the taxpayers money on nothing but domestically made products it would boot the economy, or even control the prices on the products it would be cheaper to product and buy domestically. "
 
Aarya, marketization has become so important and is being adopted for plenty of reasons like trade relationships, enchancing friendship through exchange of goods, to prevent inflation, improve the standards of living of it's nation, to improve the economy as globalization leads to more profitability of it's own companies etc, and to increase the jobs, ameliorating poverty. 
Firstly, its impossible to cater to the demands of people if it were to produce all goods domestically, so the idea of spending the entire taxpayers' money on domestically produced is out of question. And, it's impossible to even spend so much on domestic production either... ours is a poor country.
 
At the same time, locally domestically produced goods should be promoted by the govt. because these small infant industries face the burden of the heavy competition from the international ones. Therefore, it's govt's responsiblity to prottect these small industries. It should maintain the perfect balance.


Edited by Angel-likeDevil - 10 September 2012 at 12:28am

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rock&roll

IF-Dazzler

rock&roll

Joined: 30 May 2007

Posts: 3414

Posted: 10 September 2012 at 12:21pm | IP Logged
Originally posted by -Aarya-

Can anyone really afford to produce all the products domestically?

And what if  we were all restricted to purchasing only those products that were made domestically?

How much buying all the products made domestically helps our country?


 
Ok,my answer to question 1:


Very few countries have/would have the resources to produce all products domestically.Lack of proper raw material,technology,skilled labour etc are some of the reasons why all products cannot be produced domestically.There may be some exceptional countries who can produce everything domestically,but most countries can't do so.

2) 

Well,the GDP(Gross domestic product) of all countries would come down.Cost of production would go up because no country can have the benefit of economies of scale.Consumers would not have access to the cheapest or the best quality products.Both producers and consumers will suffer.

The Law of absolute advantage and the Law of Comparitive advantage explains this beautifully.The law of comparitive advantage was framed by David Ricardo.He explains it thus:

Let us start with the example of just two countries.This can then be extrapolated to multiple countries. France can produce cloth and potatoes .They can produce 6 units( a unit could be equal to  metre/any std measure) of cloth in an hour and  6 kg of potatoes an hour.Portugal can also produce cloth and potatoes,but they are inefficient at both.They can produce 4 kg of potatoes an hour and 2 metres of cloth an hour.However,inspite of Portugal's inefficiency,they will continue to produce potatoes over cloth.This is because France has  a higher comparitive advantage over Portugal wrt cloth(6-2) than potatoes(6-4).So they will use all their resources to produce cloth(assuming unlimited demand).France will make greater profit by producing cloth .So it will choose to produce only cloth till demand is exhausted.With this greater money,it can buy more potatoes.Portugal is better off producing potatoes than nothing.

So though France has an absoulte advantage(6 per hr) over Portugal,which means,it has the ability to meet its needs domestically fully and efficiently,it will not do so because this does not lead to long term profitability.

I think that gives the answer to the third question.The only catch here is that if a country,if intentionally undervaluing its currency to make its exports cheaper and flooding foreign markets with its products,then other countries would think twice before purchasing those products from that country in the long term.This is because it could lead to over dependence on one country and in the process local industries could shut down.If this leads/could lead  to a downslide in the economy,then countries would think twice before such imports.Else the theory of Comapritive Advantage will hold.Smile





Edited by rock&roll - 10 September 2012 at 1:02pm

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*Dev.*

Coolbie

*Dev.*

Joined: 09 January 2012

Posts: 19026

Posted: 16 September 2012 at 6:50am | IP Logged
Originally posted by -Aarya-

Can anyone really afford to produce all the products domestically?

And what if  we were all restricted to purchasing only those products that were made domestically?

How much buying all the products made domestically helps our country?

simple they pay taxesEmbarrassed

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--arti--

Goldie

--arti--

Kasturi, RKS Banner Contest Winner

Joined: 20 June 2008

Posts: 1670

Posted: 07 October 2012 at 10:39pm | IP Logged
Many countries, particularly in the Global South, never developed industrial capacity to produce goods for themsleves. In the mercantilist era, Europe funded its industrial revolution and developed cutting edge technology (especially from profits made from free labour/slavery or wealth from the colonies), Europe's colonies (most countries in the Global South) were forced to produce raw materials or certain non-subsistance goods for export. They were then also forced to import all these finished/processed goods that were more expensive. The rationale used was that everyone should produce what they were "good" at. But this obviously led to massive underdevelopment or unequal development, which became the basis of global power. Funny thing with global power is that it operates not just through militaries, but also through ideas. All these economic policies were pushed onto formerly colonized countries that ended up worsening the problem.

At one point, countries such as India tried to follow something called Import Substitution Industrialization (ISI) where they wanted to try and produce refined/finished products for themselves instead of importing them. But this didn't work very well, because there was a need for huge capital costs (and the revenue was just not there), and many of these countries simply didn't have the infrastructure to "catch up." At one point, there was a turn again towards importing goods and exporting what you can produce the cheapest.

Yet another turn took place when nation-states became basically weak and ineffective at controlling the global economic elite (the new corporations, multinationals, etc.) who threatened to pick up and leave to wherever they got the cheapest labour costs, and the least regulations, such as environmental, etc. You also had some like Margaret Thatcher and Ronald Reagan who kind of helped define these right-wing roles for the state - the state's main job became to protect finance capital, to keep the inflation rate low, etc. rather than coming up with long-term economic sustainability, etc.  That's when the free trade agreements and all those things happened, to basically accomodate these big companies. India, for example, used to have before the 90s, a fairly "closed" economy where national industries were supported. But once foreign companies entered the market (such as Coke, for example) they effectively shut down those national companies because they simply couldn't keep up.

So long story short, the reason why products are made in all these places is because it costs the company barely anything, and these countries won't enforce any labour laws because they don't want to lose the investment. Some of them (China, America, etc.) are also countries in which organized Labour/trade unions are really weak and ineffective.

National industries in underdeveloped countries never had a chance, so many of them went kaput. And we are a in a difficult situation now globally, because these big companies can threaten to "pull out," as it were, if they are forced to be accountable. We are in a totally unsustainable situation and unless there's a revolution of some kind, we can expect nothing but a downward spiral.

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Freethinker112

IF-Sizzlerz

Freethinker112

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Posted: 08 October 2012 at 2:19am | IP Logged
I think products should be manufactured in one's own country if it is possible. Of course you cannot develop everything domestically due to various factors, but if it can be done in home do it in home. Corporations like to outsource work due to cheap labor. So, you spend and money goes out of the country. Also it decreases employment.

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--arti--

Goldie

--arti--

Kasturi, RKS Banner Contest Winner

Joined: 20 June 2008

Posts: 1670

Posted: 08 October 2012 at 8:35am | IP Logged
^ Lots of barriers against doing precisely that. One being how economic policies and directions are set by the global economic elite, as I referred to in my post above. They have more power now than nation-states do. Since the neoliberal trun, nation-states view their role as protecting finance capital and defending foreign investments. That does not lead to sustainable economic growth.

Consider the Special Economic Zones in India. They were created specifically to offer the most to foreign capital. Latin America has some interesting examples, but I don't think the same culture of resistance exists in most of India. It's there in many parts of it, where people are actively resisting the exploitative aspects of global capitalism. I only see that happening in pockets within India. Most of the middle class and upper middle class is really proud of the "progress" in India, because this current system is benefitting them. The struggles by those who are not within that class, such as the Koodankulam struggle for example, are not really even covered by the mainstream media, and I suspect most middle class or wealthy Indians do not identify with it.

I think a cultural revolution is really important if there is to be economic justice. Countries won't just change policies unless there is people power forcing them to. That's pretty much the only thing that has ever forced the powerful to do things that benefit all of us, and not just a tiny percent of us.

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Freethinker112

IF-Sizzlerz

Freethinker112

Joined: 16 May 2012

Posts: 13809

Posted: 13 October 2012 at 5:08am | IP Logged
Originally posted by --arti--

^ Lots of barriers against doing precisely that. One being how economic policies and directions are set by the global economic elite, as I referred to in my post above. They have more power now than nation-states do. Since the neoliberal trun, nation-states view their role as protecting finance capital and defending foreign investments. That does not lead to sustainable economic growth.

Consider the Special Economic Zones in India. They were created specifically to offer the most to foreign capital. Latin America has some interesting examples, but I don't think the same culture of resistance exists in most of India. It's there in many parts of it, where people are actively resisting the exploitative aspects of global capitalism. I only see that happening in pockets within India. Most of the middle class and upper middle class is really proud of the "progress" in India, because this current system is benefitting them. The struggles by those who are not within that class, such as the Koodankulam struggle for example, are not really even covered by the mainstream media, and I suspect most middle class or wealthy Indians do not identify with it.

I think a cultural revolution is really important if there is to be economic justice. Countries won't just change policies unless there is people power forcing them to. That's pretty much the only thing that has ever forced the powerful to do things that benefit all of us, and not just a tiny percent of us.

Yes, I know it is difficult. Corporations have created a power for them, as developing countries are hungry for investment. So, they just have to threaten them by saying that they will be moving their business. Changing this condition is very difficult because you can't combine everyone in the opposition. All it takes is one country to take up the offer and the work of corporations is done. And this fear, that someone will say yes and they will suffer loss, keeps oppositions separate and corporations in power. I don't know if there is a way out of this, because it is difficult to unite a group of people let alone a group of countries.

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