Ok, ok, I admit it, sometimes I am a bit hard on my beloved Buenos Aires. It seems neither my yoga nor my Oolong tea drinking has yet quelled my inner cynic but alas, I'm working on it. As such, today I would like to talk about something that I think is quite positive about Argentina and that I feel perhaps, especially in this economic crisis, the United States could learn something from.
Here in ARG, the economy is what I would describe as protectionist. What I mean by that is that almost everything says "Made in Argentina" on it. If it is not made here, it has a prominent stamp indicating that taxes have been paid. I don't know what the exact percentage of tax on imports is, and I'm too lazy to look it up, but I can tell you it's significant; maybe 100%. Folks here bitch about it because gadgetry like PS3's, i-phones, etc. are more expensive, but I think in many ways it's sagacious policy we gringos could learn a little somethin' from.
Let me give you an example, because my shipment was delayed (see saga in previous post) and I don't like to smell like many of my amigos' mommas, I ran out of cologne. So off I went to my local perfumeria, and although all the honies sweat me when they catch a waft of the Armani, when I saw that a bottle was gonna set me back a c-note I said fuck that shit they still sweat me when I'm rockin' Brut by Fabregize! Fast forward half an hour and we're in an Argentine clothing store and low and behold, they had their own brand of cologne. I took a whiff and was like "Damn boo, this is better than my beloved Armani" and only set me back all of about $12 worth of pesos.
Now, let's look at the economic impact of this series of olfactory occurrences. They had me from the git-go 'cause whichever way I went they woulda won. On the one hand, I bought a product from an Argentine company that I would not otherwise have bought. So that of course creates revenue for that company, jobs, tax dollars, etc. On the other hand, if I really had to have the Armani, Argentina would have won that way as well because they would have made like $35 in tax revenue from just that one purchase.
Now compare that with the US. We'll set aside that there probably would not have even been a US made cologne because those jobs/companies are already gone the way of Lehman Brothers. Why, because everything is made in countries where the labor is so cheap. So how do we compete with these countries where people work for next to nothin'? Why not make imported products as or more expensive than US-made alternatives by taxing them to compensate for the job losses they cause? I bet on a level playing field most would prefer US-made products because they are higher quality.
Furthermore, how much of a positive environmental impact would not having to ship every earmuff, toothpick, piece of silverware and everything else we buy half way around the world? How do we get the banks out of the rut they're in right now just sitting on trillions of dollars? Ummmm, how 'bout loaning motherfuckers money so they can start factories that have a chance of being profitable? Then folks who work at and build these factories can get mortgages, buy American made goods, pay taxes, etc. instead of collecting unemployment, having their houses foreclosed upon and otherwise being a drain on society.
If you ask our policy makers, I suppose they would argue that consumer spending is what floats our economy. Well I don't think anyone needs my blog or Alan Greenspan to realize that model did not work. Perhaps we should really look at big economic policies like these as we attempt to pick up the pieces and rebuild the American economy moving forward. I think today a lot of people would agree with the argument that people having jobs is way more important than buying household goods cheaply.
Now I know people are probably gonna say that suggesting we follow Argentina in economic policy is akin to following Fidel Castro on the path to peace or going to Rosie O'Donnell for diet advice. That being said, I think we can look at the positive aspects of their policies and also learn from their mistakes. One example would be to exempt import taxes on things that are not made in country. For example, nobody makes computers in Argentina so I think they are stupid to tax them as that just holding people back from having needed technology and henceforth probably costs jobs as opposed to saving them.
Our lawyer was over today and said he bought his first house. My wife said "oh welcome to thirty years of debt" and he responded that, no, he'll have it paid of in a year because that's how they do it here. Now on the one hand you might as well use pesos to wipe your ass they're so worthless, on the other hand when you're sittin' in a dope crib that's all paid off and your job hasn't gone to the 3rd world you can sit back and use one of those peso notes to light up a nice cigar and ask yourself how worthless are they now. Food for thought...
Protectionism has been around for thousands of years and is common in most governments today including the States and all governments throughout history. Politicians love it because it gives them power over businesses, businesses love it because they don't need to fear foreign competition, and the employees of the businesses love it because they don't have to worry about losing their jobs to foreign companies that can produce a similar product for less. The rest of population has to pay more for everything because of such policies.
ReplyDeleteThe only countries in history that have had strong economies that resulted in high standards of living for the majority of the population are those where the government has for the most part stayed out of economic policy and let people freely trade and work without the intervention of government. Government intervention into the economy gives more power to the politicians and businesses that are strong or big enough to influence the government.
Your luck of finding a cheap local cologne that you prefer over Armani was a fortunate side effect of bad economic policy that severely impacts the everyday lives of the poorest people in Argentina and in the vast majority of the countries in the world. Why should every Argentine have to pay more because the local industry doesn't have to compete? Why not allow them to freely choose which products they purchase instead of taking money from one group to give it to the other? If I make cologne and lobby the government to make my local competitor have to pay twice as much in taxes for every sale it would be blatantly wrong but when my competitor is in a different country we don't give it a second thought. In either case the poor are the ones that lose the most because they don't have a choice anymore. If you're rich you can still choose Armani over Brut.
Dear Eric,
ReplyDeleteThank you so much for taking the time to read and comment on my blog. I think you make an incredible point, especially when you ask why is it different to have an advantage over a foreign competitor versus a local one.
I mean we're all just brothers and sisters working to improve productivity and wealth throughout the entire world, right?
This is where the challenge comes in. While in theory, your point works, on a macro-economic level the playing field is not even because of currency valuations and differences of cost of living.
This is why in the US we have exactly the policy you describe but we're still in the gutter and manufacturing is gone.
Por ejemplo, let's say as an American I want to get into the perfume business and I am deciding where to locate my factory. While I'd love to create American jobs, when an American worker costs me six grand a month for the same standard of living as a Chinese worker who I pay six hundred a month what am I going to do?
Now I ask you, is that really free trade and fair competition?