Why so much concern over foreign policy when it is dictated by domestic policy. So if we are unhappy with foreign policy we should analyze our domestic policy.
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Why so much concern over foreign policy when it is dictated by domestic policy. So if we are unhappy with foreign policy we should analyze our domestic policy.
... and the Taliban, Iran, Al Qaeda and the other clowns forcing the foreign policy to exist. Good thought, dark_crow.
XenoSapien
Yep, the foreign policy has been intervention, following the domestic policy of intervention. Maybe if the government stopped playing mother and intervening in everyone’s life, life for everyone might improve.Quote:
Originally Posted by XenoSapien
Quote:
Originally Posted by Dark_crow
If you give a chimp a baseball bat, the probability is very high that he will brain you.
I removed this response
History has proven several points, DC.
1) Foreign and domestic policy cannot exist independently of each other. Foreign piolicy drives domestic policy, and vice versa. Each drives the other, which is as it should be. A desire for more Americans to be gainfully employed (a domestic issue) should be part of our decision-making process when entering or rejecting deals like NAFTA (a foreign policy issue). The desire to support foreign allies like Israel (a foreign policy issue) should drive our government's decisions regarding military-preparedness, arms-manufacture, etc. (domestic issues).
2) There are many situations where the line between foreign and domestic policy blur. The immigation/border control issue is one such, and it's a big topic now. Another case is anti-terrorism action and legislation which has a domestic and a foreign aspect.
3) A non-interventionist policy is doomed to failure and leaves us open to attack. I spoke about this in excon's question about Ron Paul in my comments about his "citadel defense strategy". FDR found that out when we were attacked at Pearl Harbor, and Bill Clinton found it out when the WTC was attacked in 1993 and numerous other times during his presidency and he did nothing in response.
The fact is that foreign policy dictates domestic policy just as much as domestic policy dictates foreign policy. Neither exists in a bubble, nor should they. It's a two-way-street.
Elliot
I don’t believe anyone in their right mind would argue against the interplay between the two; however, what made me wonder about this was protectionism, which is exclusively a domestic issue in its origin; that is, protection of domestic industries, and yet has so much influence on foreign countries. For instance, look at the Smoot-Hawley tariff Law and its effect.Quote:
Originally Posted by ETWolverine
This one act had the terrible consequences of angering the industrial world to the extent that it still exists today, and at the same time ushered in the welfare state; to which in another thread I attempter a distinction between that and the welfare system.
Smoot Hawley was indeed a terrible piece of legislation. And it did have a terrible effect on the economy of the nation by driving foreign trade away and slowing our recovery fom the Great Depression. But that was during a time in our nations history when taxes (rather than monetary and interest rate policy) was used by government as a way to try to control inflation. Back then, the answer to any financial or economic problem was to raise taxes... which, of course, just made money scarcer, drove prices higher, took cash flow out of the hands of the people who needed it the most, and increased unemployment by forcing marginal businesses to fire or lay off employees in order to remain solvent and profitable. Back then, congress was very tax-happy (gee, not like today, right?) and Hoover was happy to go along with the entire mess in order to seem as if he was Doing Something. But taxes were considered the cure all for any financial situation back then. We know a bit better now... at least some of us do.
You are correct that Smoot-Hawley was a product of protectionism, and that it was a case of domestic policy and foreign policy dictating each other. I don't necessarily see that as a bad thing. This particular legislation was bad... REALLY bad. What they should have done is, instead of using tax policy to close out foreign competition, they should have loosened restrictions and taxes on domestic companies to allow them to compete in the international markets on even footing. That too would have been a case of foreign and domestic policy dictating to each other, but would have been a perfectly productive response to the situation at hand. It would have increased America's ability to compete without damaging our relationships with foreign trade partners.
So, again, I don't see the relationship between foreign and domestic policies as a bad thing. It's what we do with that relationship that makes all the difference.
Elliot
I agree with you; there is nothing inherently bad about the connection itself between the two.Quote:
Originally Posted by ETWolverine
I only wondered, and that is what philosophers do, if America’s domestic policy affected foreign policy more so than the opposite.
On a larger domestic policy what you say reflects misguided economic theory of capitalism that production must be based on demand.
First, I would ague that before 1945, our domestic policy basically drove foreign policy. After WWII, however, the USA emerged as a world power, and from that point on, it can be argued, that foreign and domestic policy began to drive each other more evenly.
As for economic theory, in the modern day of "drop-shipping" of product, companies trying to cut inventory costs as much as possible by not keeping any unnecessary inventory, and international production companies that can ship directly to the end-user, we are definitely living in a "demand economy". Demand does drive production these days. Whether that was always true or not is up for debate, but it is definitely true today.
Most of my clients only produce product based on orders received inhouse. They don't maintain inventories if they don't have to. Even the ones who do maintain inventories do so because they are basing inventory levels on expected/historical demand levels. They are definitely demand-driven businesses. That has become the widespread norn in the "global economy". Production HAS become almost completely based on demand.
The US auto industry is only just starting to figure that out. They have been losing money for for years because they have been producing too much inventory, too much of what customers don't want (SUVs are a good example), and not enough of what they do want (economic cars with high mileage per gallon). They were slow to react to public demand, and because of it, and the result has been that A) foreign car manufacturers have captured the US market, and B) US car manufacturers are losing money, laying off employees, and scrambling to retool their factories to give Americans what they really do want.
If that isn't evidence of a demand-driven economy, I don't know what is.
The only industry that may not be demand-driven is agriculture, which is more of a catch-as-catch-can industry. They produce as much as they can in as short a period as they can in order to sell as much as possible, regardless of what real demand from the public is. They can get away with that because most agricultural goods are subject to spoilage, which means that inventory levels never get too high, and demand always remains relatively constant, even when supply is relatively high. Other than that example, however, we are definitely in a demand-driven economy.
Why do you say otherwise? And can you provide examples?
Elliot
I must admit to a great confusion and am perplexed about your response about demand-driven economy.Quote:
Originally Posted by ETWolverine
I think it would go a long way towards my understanding of Economics if you answered the question: Are you persuaded to accept as best, either Keynesian, Monetarist, Supply-side or some economic system altogether different?
Why do you think foreign policy is dictated by domestic policy. Domestic policy is about the economy, health, taxes. Foreign policy is about relationships between nations. Can you truly say the US attitude to Iran is dictated by domestic policy. I fail to see the connect.
Of these three, I tend to believe in Keynsian theory the least and supply-side economics the most in terms of economic growth. I also believe that monetarism is an important control for inflation.Quote:
Originally Posted by Dark_crow
Simply put, I believe that the government should stay out of trying to control the economy through regulation and taxation. That only screws things up. The government is there to bust monopolies and control the money supply to control inflation. That's it. Anything more than that creates an unnecessary burden on the economy and limits growth. I tend to be a Reagan, supply-side economist in that I believe that lowering taxes at the highest levels increases employment by 1) creating additional cash available for purchase of luxury goods, which increases demand for those luxury goods, which in turn increases the need for human resources to supply those luxury goods, which increases employment, and 2) by allowing greater capital invenstment in companies that will now hire new employees, which will increase employment. Once employment increases, the new employees now have more cash to spend, demand for goods at all levels increases, and emp0lyment is thus increased further. This is simple Reaganomics, as it used to be called. I like to call it pump-priming, a term I learned from one of my economics professors about 25 years ago.
The key, from that point forward, is to monitor inflation. Since cash is now more readily available, demand for products becomes higher, which can drive up prices. The key to that is to monitor the availability of cash by controlling interest rates. Higher interest rates mean that more people take money out of the operating economy and put it in savings or long-term investments. It also makes borrowing cash more difficult. These factors combine to lower the availability of cash in the system, thus lowering inflation. Lowering interest rates reverses that process. This is the second, necessary step in growing the economy once the pump has been primed.
However, the pump is only primed when the new employees start demanding products that they didn't demand before. If they are taking that money and putting it in savings, paying off old loans, paying taxes, or doing anything with it other than buying more products, the pump hasn't really been primed. Until that demand increases, the companies that produce the products won't increase production or hire more new employees, and the economy won't grow. Demand must increase in order for production to increase. Otherwide, inventory will be sitting in warehouses, costing the manufacturers money, and not generating any income. In that sense, the economy is, by its very nature, a demand-driven economy. Lowering taxes (at all levels) is a necessary step that encourages that increased demand, but doesn't guarantee it. Consumer confidence is also necessary to make that growth in demand occur.
As for Keynes, I think the guy was a fool. I cannot remember any economic system in history that has grown through government intervention. The more the government gets involved, the more it drives people OUT of the economic system. Of the 20+ flu vaccine manufacturers that existed prior to 1990, only 4 are still in existence today because Bill Clinton's interventionist policies drove the others out of business, resulting in flu vaccine shortages and panics over the past several years. The communists of the Soviet Union destroyed their economy through their interventionist policies. Cuba has done the same. Interventionist economics kills economies.
So, bottom line: I am both a monetarist and a supply-side economist as ideals. But there are so many factors in any economic system that being a "purist" for any single economic theory is nearly impossible in real-life situations. I am a supply side economist who believes that lowering taxes at all levels increases DEMAND and that is what primes the pump of the economy.
Labor can only create new value by expanding capital; so that we can say, “Labor whether mental or manual, whether in goods or services, is productive only insofar as it increases capital: So that foreign policy is dictated by protecting capital or expanding capital. Iran is a participant in foreign policy, one among many; it however does not represent the whole of foreign policy.Quote:
Originally Posted by paraclete
It is as I thought, you are very familiar with the salesmanship of your particular brand of economic theory of capitalism, which is that production must be based on demand i.e. Keynesian and monetarist.Quote:
Originally Posted by ETWolverine
However, to include Supply-side economic models which focus attention upon the conditions affecting producers, not consumers, of goods and services, is a contradiction.
P.S. Focusing on demand does nothing to create value, it only creates exchange of commodity which in and of itself is exchange of equal value and produces nothing which will create new value.
We're not talking about creating value. We're talking about creating a sustaining a strong economic system. Value-added production comes later... when there is a demand for a certain new item, a certain new innovation, a certain new technology, AND when people are willing and able to pay for that item, then the item will be created and value will be added. Innovation comes from necessity, which is another way of saying "demand". All of economics is demand-driven. Really good salespeople and innovatos "create" a demand by knowing how to sell their innovation better than anyone else. Bill Gates CREATED THE DEMAND for his computers and technologies. Before he came along, nobody had a personal computer. Since he came along, nobody can do without one. He created the demand, produced the supply, and became the richest man in the world (give or take). But the trick was in creating the dermand. That is what drove Microsoft's growth... high demand for what he had to sell.
And, no, that is not the essence of Keynesian economics. The essence of what Keynes said was that government intervention is necessary for economic growth. I disagree strongly with Keynes. I believe that it is absolutely necessary for government to stay out of the economy as much as possible in order to grow the economy.
I tend to be more of a Friedman-style economist... that is, supply-side taxation policies to increase the capital available in the system and reduce unemplyment, monetary control to maintain inflation control, and demand-driven production to maintain low-costs and continue growth. All with a large amount of "realistic" perspectives, rather than idealism, thrown in. This is not at all a contradiction. Each of these factors, as I have illustrated above, affects the others and drives economic growth.
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