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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (20885)	1/11/2005 5:15:46 AM
From: zonder	Read Replies (4) \| Respond to of 116555

The US was once a developing nation. I'm not that old but my father-in-law is and we've discussed the early days as the US rose up, extensively. And that means you know all about the development of a market economy in a third world country in today's world? That may be the weakest argument I have ever seen in a post of yours, Grace. I've spent a lot of time in developing nations. I like to travel. As a TOURIST. You have no idea how and why a developing country opens its markets to giant brands and what happens thereafter. Visiting a couple of palaces and taking photos of the locals does not mean you are an authority about the political and economic facets of a developing country becoming a market economy. >>>Free markets are a great idea if both trading partners are on equal footing.<<< There are three reasons why this is not true: 1. absolute advantage 2. comparative advantage 3. economies of scale Those are some of the reasons whey my statement IS true. A third world country opens its market to Coca Cola, which has absolute advantage, comparative advantage, AND economies of scale. What chance does this country's local refreshment business have against Coke, Sprite, Fanta, etc? They have efficient production. They have multi-million dollar advertising budgets. AND they do not care if they make a loss the first five years, in order to gain market share. So comparatively tiny companies making the local soft drinks go out of business one by one. Or they get bought by other foreign brands with similar capital and ad budgets. Meanwhile, US slams quotas or tariffs on this third world country's basic exports like steel and textiles. And then Grace A. Zaccardi goes to that country on holiday, takes a couple of pictures on the beach, drinks her Coca Cola, and while re-reading her Econ 101 books, muses about what a great thing free markets are so that she can drink her Coke in this backward place :-) even individuals like yourself who claim to be well educated in markets Yeah, well, "markets" is not a place I visited on holiday or heard from my father-in-law. I actually studied this stuff and worked on various aspects of it over the last ten years. Let's see: I studied microeconomics, macroeconomics, corporate finance, accounting, etc. I worked as a research analyst, visited & valued state monopolies about to be privatized in six countries. Then I passed to the buy-side and ran three funds - two dedicated to separate developing countries and one dedicated to a region of developing countries. So, yes, I would "claim" to know a bit about the markets, especially developing countries undergoing the transition to capitalism and free markets. What is YOUR "claim to be well educated in markets", Grace? Let's hear it. A degree in business? What then? If country B is very inexperienced in producing television sets, it will take an inordinate amount of time to make one -- time that could have been better spent producing chairs and trading them to Country A to get television sets. Thanks for the Econ 101 theory. The reality, of course, is quite different. A strong economy like the US does not let its non-competitive industries go under - it subsidises them. Places tariffs and quotas on imported products so the domestic industry is served by the more expensive domestic produce. Implements incentives and tax breaks. A weaker country has no choice but to allow its non-competitive industries to perish. That is the reality, which you would quickly see if you take your eyes away from those books long enough to take a look around in the real world.