National Specialization, the Virtuous Obverse of Protectionism (Part Six of a Series)

Note: This is one part of a multi-lecture series written for the intelligent ignorant. All lectures in this series include the word “protectionism” in their title. No previous knowledge of economics required (or preferred). SORRY, I THINK HERE IS NO PART 5.

(Continued)

Luis, I, the Canadian farmer, Hans, and Pierre have all improved our productivity. We all earn more. We have increased our ability to buy anything at all, stuff, leisure, occupational training, or anything we want. We did this without working more than we used to. We have helped the world become richer. None of us, except maybe Pierre, has achieved any stupendous success. Even Pierre’s bold killing on the Chinese wine market ranks far below other successes we read about in the newspaper everyday. His success barely rates the local newspaper. It’s not Google, or Apple, or Craig’s List or even Fred’s List. It’s pretty conventional stuff.

We have all done this without cheating, without despoiling anyone, without doing any damage to anybody. Now think of what we have not done: I have not improved my technical ability; it’s doubtful whether Luis has done anything of the sort. In fact, it would not be absurd to argue that blowing leaves is more skillful than washing dishes. Same for the Quebec farmer. Hans may have augmented his training; he did it on the job if he did it at all, at the expense of his manufacturing employer. Pierre knows more than he did when he was still at his hum-drum government job. He learned what he learned under his own power, on his own dime, at no perceptible cost to anyone else. Here is the main factor that accounts for our joint improved production:

I, Luis, the Quebec farmer, Hans, and Pierre all stopped doing some or all of what we were doing badly and we switched to what we were doing a little, or much better. (“A little better” would be good enough.) All our moves were virtuous by conventional standards because we cut down on wasting our main resource, our time.

Now, what is true for this handful of people can be equally true for all kinds of economic actors, including business organizations. Do you agree? It’s a “Yes” or a “No.”

What’s is true of work time, is equally true of any other resource that goes into the production of goods. Again, it’s a “Yes” or “No,”

I mean by “good,” merchandise, services and anything else you can think of that people produce and that is useful to someone. Resources that go into production include money. The short version is this:

If you stop wasting you will end up richer and no one will, end up poorer. If you are richer you can buy more of what makes other people richer.

Do you agree with this triple statement. Again, it’s a “Yes,” or a “No.”

As you have probably noticed, if some people somewhere switch like I did, and Luis, and Hans, etc… at some point, some degree of what will approximate national specialization in production will emerge. Note the cautious language. (For the technically minded among you – if you are not, skip – “national specialization” is a gross approximation. It will be more a degree of real national specialization and/or (plus/or) natural regional differences. German apprenticeship education is a “national” feature; it’s the result of a narrowly national pedagogical tradition. The inclemency of Quebec ‘s climate to bananas is a regional thing. (It’s shared by the American state of Maine, for example.) I do not refer here to some sweeping movement of rationalization but to gradual, tiny, piece-meal steps in a certain direction.

Here is what will happen, in accordance to my story.

Fewer residents of the US will be washing dishes, and blowing off leaves, both generally low-paid jobs everywhere. As a result Americans together have become more productive and therefore richer. That’s true even if my actions and Luis’ are imperceptible. There is a possibility that some dishes will go unwashed. More on this latter. (I know I keep promising but I can’t risk losing the main thread of my main story.) By the way, Luis is an illegal immigrant. Don’t tell me you did not see that one coming!

The Canadian farmer is making more money growing raspberries than he was dairying. Canadians together are producing more organic raspberries, a high value product, but less milk, a low value product. In good logic, this is true even if a single Canadian makes the move. They have avoided -for the time being – the pitfall of growing bananas in the cold. Canadians collectively are richer than they were before, even if by a speck.

Technical note: Observe that whatever I mean by national specialization can be defined in the negative as validly as in the positive. “No bananas are produced in Canada” is exactly as much a statement about national specializations as “ Many manufactured products are made in Germany.”

Thanks to Hans’ move, more high-value manufactured products come out of German factories. Germans are richer but there may be a mini-shortage of sandwich-makers there. I will take care of this matter later, as I said.

Finally, thanks to Pierre’s ballsy enterprise, the propensity of the French to sell wine has increased, of course. What is more important, even more hot air is coming out of France for a price. Let me be clear, the three main categories of high-value products coming out of France toward other destination in the past thirty years do not include wine as such. They are railroad equipment, aircraft (Airbus, military jets) and hot air (Evian water, Louis Vuitton luggage, much unwearable high fashion, movies that no one understands, etc).

We are not going to worry about the government job Pierre left behind. Do you agree?

The world is definitely richer than before as a result of what I call crudely ”national specialization.” No one is worse off except, possibly as noted above in connection with unwashed dishes in America and a shortage of sandwiches in Germany.

National specialization is a relative term. It’s difficult to discern in large and developed countries. Americans make all kinds of stuff but not, as you know, television sets, flashlights, or much clothing. They turn out stupendous quantities of soybeans and cotton. American movies account for more than half the motion pictures profits in the world. The degree of national specialization of the US ( of American economic actors together) is not very high. (It’s much too low for my taste.)

In smaller or in less developed countries, the level of national specialization can be striking. The economic producers of the Ivory Coast, a small country on the west coast of Africa, produce cocoa and coffee plus some chickens for their pots and not much else. They don’t grow the wheat that goes into the French bread they eat every day, for example.

Should they? (This is a real question, a kind of ungraded quiz.)