Many economists and people who trade in global markets have been interested in the question of whether parties who trade with each other benefit equally. James Mill (the father of J.S. Mill) thought that by increasing the efficiency of markets both parties would benefit equally in global trade. This was proved later, by J.S. Mill to be inaccurate. J.S. Mill formulated the principle of reciprocal demand. Under this principle, the gains from trade are seen to be unequal.
If vendors/producers in a small market trade with a bigger market, the demand for goods in the smaller market will increase and the small market can raise prices and therefore benefit more from the trade. Also as a benefit, the smaller market expands. And that observation makes it seem that the little guy gets to win. But that only works out for the little guy in a sound money system like that sponsored by Great Britain under the strict gold standard. The strict gold standard was the global monetary system in play during the period from the end of the Napoleonic Wars until about the end of WWI. J. S. Mill lived from 1806-1873, during the period of the strict gold standard. And under sound money the little guy could gain from trade in terms of gaining a higher demand for their product.
But what happens under today’s fiat money with mobile capital? In this case, parties with the largest capital can influence the price and value of currencies and commodities more than the little guy can. Periodic instabilities in markets due to hot money coming into and leaving the marketplace can create conditions that favor the acquisition of the little guy’s hard-won gains by the big capital holder. So under this kind of system the big guy with more capital wins. The lesson here is that the global monetary system matters in determining who benefits more from global trade.
Reference: A History of Thought on Economic Integration, by Fritz Machlup, (Columbia Press, NY, and MacMillan Press, Ltd, printed in Great Britain, 1977, 219)
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What is all the fighting about? First of all there are 3 different political ideologies over American history. People fight about politics from different ideological perspectives without realizing that or understanding how to find common ground. Big fights are also happening because there are less economic resources for people in the grassroots under the neoliberal ideology. The economy’s resources are available to corporations in the form of low-interest loans and tax reprieves and regulatory loopholes while big government continues getting deeper into debt even though it is already under trillions of dollars of debt. “The little people” are being overtaxed and over-regulated. And this neoliberal system will only demand more of everyday people without offering incentives to win them over. The biggest economic players are winning access to more economic resources in this corrupt neoliberal system. The appetite of the government and of corporations to exploit others and gain their own advantage seems limitless.
It’s become harder for Americans to understand American politics because there are so many points of view from different ideologies and from the perspective of conflicting interests. Meanwhile, real estate has inflated prices, cars have inflated prices, healthcare has inflated prices. Education has an inflated price both within communities where superintendents make six figure salaries and at universities. For example, Edward Lee Vargas, the Superintendent for Kent School District in 2014-2015 made $596,212 (1). A college education has become so unaffordable that education may cease to be the community crossroad that it has been in the past. Some have noted a decline in college level enrollments (2) (3). The Federal Reserve continues to create social mayhem with low-interest rates that support mal-investment, and in support of a fiat monetary system that overprints money. The Federal Reserve pretends to keep track of the consequences of its policies but it is ignoring 94 million working age people out of work, inflation in food, volatility in energy and other bloated price tags mentioned above. Meanwhile wages aren’t growing to meet new expenses. This makes people irritable about politics. And so they fight.
If you would like to understand how these circumstances developed, buy Political Catsup with Economy Fries on Amazon.com.
(1) Washington State School Salaries: 2014-2015, data.spokesman.com/salaries/schools/2015, accessed June 2016.
(2) Current Term Enrollment Estimates-Spring 2015, Research Center, May 13, 2015, Current Term Enrollment Estimates, Reports, nscresearch.org/current termenrollmentestimate-spring2015/ , accessed June 2016.
(3) Current Term Enrollment Estimates-Spring 2016, Research Center/May 23, 2016/Current Term Enrollment Estimates, Reports, nscresearchcenter.org/currenttermenrollmentestimate-spring2016/, accessed June 2016.