Trade and the Exchange of Value

  • by Gitabushi

My good friend and blog proprietor, PCBushi, informed me regarding an article he’d encountered:

If you don’t want to go look at that tweet series, the gist is that many US military systems rely on lithium-ion batteries. Since China owns 55% of the lithium industry, and is trying to ramp up that control to 90%+, it puts the US in even more of a bind than the peril of having so much of our economy and standard of living dependent on China’s lithium production.

It might have been this article.

I didn’t really respond because it seemed to me to be PCBushi granting me a point in the trade issues the US faces with China.  He wasn’t conceding, nor really trying to rekindle the argument about Trump using tariffs against China (and other nations), but he was acknowledging that the issue is complex, with points that can be made on both sides.  As I acknowledge that while I disagree with him, his view is certainly defensible and perhaps superior to my own.

battery charging device display
Photo by rawpixel.com on Pexels.com

All this is merely an introduction to what I do want to talk about: the exchange of value.

Going back to my thing about assembling arguments against socialism, one of the things that attracts people to socialism is the notion of being exploited by corporations, or being seduced into mindless consumerism, and thus compelled to be a wage slave.

To me, that’s nonsense.

Yes, the vast bulk of humans live and die without making much of a worldwide difference.  The overwhelming majority of mankind can be seen as selling the hours of countless lives for a handful of geegaws like high-definition television.  But I note that the people making this complaint the most probably have one earbud in to listen to their favorite counterculture band, dress according to the current counterculture fashion, and will be more than happy to tell you about their favorite movie or television show.

No one in the US is out of the system they claim to hate.

I think this complaint is born of angst or ennui, not understanding the purpose of life, or unable to enjoy the simple pleasure of existence, but that’s another issue.

To try to yank this back on topic, we want to enjoy our lives, and life, in general and for the most part, is improving.

On one level, there is no exploitation.

On another level, yes, you might buy a product with expectations that aren’t met, or with a belief in resale value that doesn’t come to fruition because of some hidden aspects, or at a price that gives the seller a bigger profit than you think is fair.

But really, there is no exploitation in a free market system.

This next point is basic economic philosophy, but I think it isn’t stated openly and clearly enough: in a free market system, an exchange can only happen if both sides think they are getting a good deal.

I only by the TV if I think the TV is more valuable than the money in my account (which represents hours of life worked).  The salesman only sells the TV if he thinks the money in my account is more valuable than TV (which represents the hours worked of all the people in the manufacturing and sales/marketing chain).

It might have only cost $10 to make, but if I value it more than the $500 in my pocket, then $500 is a good price.

Another aspect to trade that I had to learn (sometimes painfully) through my guitar obsession is:

The actual value of an item is approximately/vaguely whatever price I’m willing to sell at, in combination with whatever price someone else is willing to buy it at.

So if I want to buy a guitar, and I bid $700, and other bids push it up to a winning bid of $500, then it is worth $500, no matter what I’m willing to pay, and no matter what the seller thinks it is worth.

If I get tired of the guitar and decide to sell it, and after a round of bidding (or after weeks on the market) the highest bid/offer I get is $300, then that means the market changed between the time I bought it and the time I sold it.

Maybe the guy who thought it was worth no more than $499 lost hope and no longer wants the guitar, and the next-most enthusiastic buyer thinks it is worth $300.  Maybe a new guitar came out with all the same good points, but due to economies of scale, is being sold for only $325, undercutting the value of the one I bought.

You don’t know.

All you know is the value of an item is dependent on what both sides are willing to agree on at that moment.

And that’s what makes international trade so difficult.  Because right now, US corporations are willing to buy all sorts of stuff from China at low prices, even though China uses those business partnerships to steal technology that it will then use to undersell their current partners.

Insert some quote by a Marxist about how capitalists are stupid enough to sell you the rope you will use to hang them.

The United States (like much of the rest of the Western World) has allowed itself to become dependent on Chinese manufacturing, allowing our own industries to atrophy. Whether correctly or not, President Trump is trying to reinvigorate our domestic manufacturing capability. Because while China is not exploiting anything but our own willingness, China is explicitly not doing it for own benefit.

That is not the fault of the Free Trade system, but it is a risk that the US should consider and discuss more often.

The article above about the problems of over-reliance on China? It mainly exposes that we are complacent. The same warning was given five years earlier, and nothing was done.  I’m sure there were earlier warnings, but I just thought it interesting that the earlier warning was in the same publication. Self-serving, yes, but that doesn’t make it wrong.

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2 thoughts on “Trade and the Exchange of Value

  1. The article I read was from Nation Defense magazine; not sure if there’s an online version of it (probably, right?). Didn’t really have a point, I guess. The issue reminded me of you, and yeah, I do recognize that China is an opponent if not an outright antagonist.

    The problem here is – what’s the solution when there is no domestic supply? The article points to some steps the government can take, which amount to investing in the development of production capital (basically to jumpstart the industry, since it’s expensive to build plants for this kind of thing) and guaranteeing ongoing procurement contracts to domestic manufacturers.

    This kind of government action may sometimes be necessary in the reality of things, but tends to fly in the face of our preferred, small government approach.

    I don’t have any answers; just something to think about.

    Liked by 1 person

    1. I agree with everything you just said.
      This is a thorny problem, with no easy solutions.
      Probably could sink a little more money into R&D for battery alternatives to lithium. There have been some promising developments with graphene, I think.

      Liked by 1 person

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