The Case Against Neo-Protectionism

0:00Okay, now, what gave rise to this was reading things that, is that legible there? Reading stuff that Paul Craig Roberts wrote, which is posted up on the Mises website, and then the subsequent attempts to reply to him, which I thought was a very poor show, and so I thought someone should tackle it, particularly when I found that time after time After time people are prepared to make grandiose statements without taking the slightest look at any facts or any figures or anything. So I thought that as an historian it's my job to set the record straight.

0:47Incidentally if you have any questions or anything just keep asking as we go along because there aren't very many of us anyway and we're all friends so just feel free to comment or whatever. Okay, we'll start now with the things which I put up there, which are the elements of the argument. You begin by saying manufacturing employment in the US has fallen. You now import manufactured goods. You have trade deficits. Income flows out to those wicked foreigners. American assets are sold to pay for the trade deficit. Now foreigners, God bless them, earn trillions of dollars worth of assets, more income flows out in rent, interest, dividends, profits. Manufacturing jobs have been exported as a result of investing overseas. Americans are now investing to sell goods inside America, dreadful sort. Now they've started importing services from Asian countries where you have Low living standards, people live on the smell of an oil rag, excess supply of labour, marginal product, labour doesn't get its marginal product, we Americans cannot reduce our living standards to match, we have large enjoying deficits, so free trade in goods is one thing, capital mobility is something else, you might have very sinister consequences.

2:19Okay, now, my initial reaction after looking at that is, first of all, apparently we foreigners do nothing but sit around with folded hands, waiting for the Americans to make a mistake, and then we come rushing in with our manufactured goods. Okay, we're just sort of sitting there passively. The second point is that the world should have stood still if it had stood still when American manufacturing employment was X million or whatever the magic figure is, everything would have been alright. It's only because the world has changed after this dreadful position.

3:05Third question, of course, why has U.S. manufacturing employment fallen? In order to create trade deficits and problems, there has to be a reason. So what you've got is something simply dropping from the sky, concentrating on a few fairly, what appear to be fairly obvious things. US balances say even certain features in the late 1990s, and then carrying on as if it all simply occurred in a total vacuum. Okay, now my response to that runs two of our three pages, but we proceed step by step. Okay, now I have another thing somewhere here.

3:53I don't find where I've put it. Oh, here we are. I've taken everything out. Okay, so the first point of course is that the world does not stand still. There have been vast changes since the 1970s and what we want to do is have a look at what some of these changes are. Okay, what the changes will add up to, ultimately, is simply vast increase in capital accumulation in the rest of the world, production in areas which hitherto had not had industrial production, and therefore everybody else obviously having to adapt.

4:44You can't keep on doing what you've been doing for the last 15, 20, 30, 40, 100 years and then expect to continue along those lines. Okay, so the first thing is the new developments that we've got. First of all, we have continued capital accumulation, continued development in all the developed countries. Western Europe, Japan, all moving even further into industrial production, new types of industrial production, etc. Then, what we also have is the growth of industrial development in the East and Southeast Asian territories.

5:37South Korea, Taiwan, and the newly industrialized countries of Southeast Asia, Singapore, Malaysia, Thailand, Indonesia, etc. Okay, and therefore what we have is, as I said, also now China, and so therefore in consequence what we have is the need to adapt. and so what we have is adaptation in the developed areas. Developed areas adapting, which has been occurring in all developed areas since the 1970s. Okay, I might add that the growth in these countries is not new, and it is something which has been going on for a long time, and now finally it's reached the point where even the US has to take account of what's going on.

6:34Okay, Japan, as we know, has been developing since at least the 16th century. It's continuing. South Korea, 17th century onwards. And in the early 19th, early 20th century, it started developing as part of the development of the Japanese economy. As you might say, the career sector of the Japanese economy. South East Asian countries, the growth of the international economy in the late 19th century produced growth there, growth in both the economy and in populations, huge increase in populations all around, and that growth was of course export of commodities to the manufacturing countries, and then on top of that you had further industrial growth in the 20th century.

7:24I might add that the newly industrializing countries of Southeast Asia only developed after the late 1970s because then governments stopped protecting industries and opened economies up. So that is in itself another example of the growth of the market order. And of course China only developed after its rulers opened it up to the market economy. Okay, and so therefore as a result you have the growth in all these areas, therefore growth in exports from these countries.

8:12Okay, US therefore, no exception, also having to adapt. One method of assessing the growth of production in the outside world and that is the proportion of foreign trade to aggregate output in the U.S. 11% in 1970, 26% in 2000. I might add that for all the developed countries the proportions usually run from 35 to 60% and more. In other In other words, they are all completely and fully integrated into the world economy and most developed countries are, in a sense, sectors, the British sector, the Australia sector, the German sector, etc. of the world economy.

8:59Okay, another example of increasing capital accumulation in the early 1960s, as you've got, I haven't put it up there, but if you looked at the world's largest banks, insurance companies, chemicals producers, car manufacturers, etc., most were American. But by the early 1980s, the majority were non-American. We had Japanese, German, Canadian, French, Swedish, what have you. In other words, capital accumulation elsewhere produces results, which everyone has to adapt to. As capital accumulation grows and diversifies, we have labour moving into those occupations where labour is the chief input.

9:49Therefore, you find growth of services, and that has been true of all the developed countries. I don't know if any of you remember this, but I do. Back in the late 1960s, this was first observed, the Chancellor of the Exchequer imposed his notorious selective employment tax in Britain to try and reverse the process. And what happened? The manufacturing employment declined by 38.5% between 1975 and 2001. Okay, even in Japan you find the decreases. Now the decreases are first proportional and then in more recent times if you have a look there are absolute declines. So that again the US is not exceptional. Everybody has been experiencing decline in manufacturing employment.

10:40Even in the newly industrializing countries you find there's a slight relative growth in service. Okay, now I've got, I don't know if I've mentioned there, I'll come to that later. Anyway, if you have a look at the direction of trade for the US, what you find is that, of course, the bulk of the trade is with the developed countries. In other words, its main trading partners are the ones whose manufacturing employment is also falling. Okay, right. Now if we go on from there and tackle the next question, and that is capital exports and imports.

11:29Capital exports and imports. Now I would like to underline the point that US capital exports have been going on since the late 19th century. The capital exports are not new and the operations overseas or in foreign countries have been exactly, virtually in the same category throughout, manufacturing, particular kinds of manufacturing at which the Americans are based, mass production, high technology, capital intensive, relatively little labor, relatively little skilled labor and producing again the kinds of mass production and Goods, a range of things, cars of course, obviously electronic goods, adding machines, office machinery, lifts, all the lifts in the world are probably American, elevators, and so on.

12:23They've been doing this since late 19th century. US, inward investment into the US again unchanged, going on since the late 19th century, exactly The same people as who invested in the late 19th century are still chief investors today. And more or less again broadly the same lines, the kinds of things which they invested doing, French producing cars, tyres, the Italians also producing tyres, and certain sorts of highly specialised goods, which in fact these companies produce for the world market, so they're simply also producing for the US market. Okay, so that it's no use looking at capital exports or capital imports.

13:12As I said, these things have just been going on. Okay, so we now come, therefore, to the other points that were made. The actual figures for U.S. balance of payments. Now, one reason why I again raise that issue is because, again, we have lots of economists I've prepared to say, of course, it's the way foreign central banks and others are holding US dollars and therefore we can run a trade deficit. In other words, the rest of the world gives us the goods free in order that they might have the privilege of holding US dollars.

14:02Okay, well let's have a look at the numbers then to try and see exactly what sorts of numbers are involved. I've also looked at separating the private transactions from government transactions for a particular reason. And what we see, have a look at all these numbers anyway, might be useful. Okay, there we are. I've just pointed out that the FDI in the US comes mainly from the developed countries and if you have a look it's exactly the same countries that were investing at the end of the 19th century. Japan is in fact a minor proportion of the total and all the others have in fact declined again proportionately.

14:52All right, now what I did there for the next two tables, if you'll have a look please, is classify it according to the inflow and outflow of foreign exchange. That is probably the simplest way of putting it all together, because then putting both capital and current account transactions. And I did that for 2001, you can do the same for all the other years. Right. Now, if we look at private transactions, we find exports of goods, exports of services and imports of services. And we'll come back to this. We have, you know, import of services increasing, et cetera, et cetera. You notice that there is still net export of services. Income in, income out. There is still net income inflow.

15:43Capital inflow, which provides foreign exchange, and you'll notice at the end that the private sector has not only been providing all of its own foreign exchange requirements, there's even a surplus which can go to government if government wants it, probably always does. Okay, and if you look at government transactions, you'll notice very small inflow, very large outflow. And in fact, I don't know why that's happened there, but the income out has been a huge increase in more recent years. Possibly someone who knows what's going on will be able to tell me, but that is a major outflow on a government account. Okay, and as you can see, it's in deficit, and the deficit has been made up by private sector earnings.

16:35Okay, now, what does this mean? This means that, again, the sky is not falling in exactly, you know, perfectly normal situations. From various sources, the private sector has been obtaining foreign exchange from various sources, and it's been using it for various purposes. Okay, now, before I... let me go on to have a look at the overall picture, and then we'll go back to see about capital inflows and outflows, what exactly they do. The number at the bottom there, 9.4 billion, is that the next trade government?

17:34Now, I haven't done all the years it could be done. I was better at using computers. What I've done there is simply looked at these one, two, three, four, five years. Now, I haven't actually looked further into these figures, would like to, but you'll notice that so far as the private sector is concerned, In general, except for two years, it's been providing itself with its own foreign exchange. So the earnings of foreign exchange and out-curve foreign exchange, not just balanced, but in 2001 you provided the US government with some money.

18:191990 there was a small surplus, and in the two years in which apparently US government has been supplying the foreign exchange, The important thing really is the extent to which the U.S. government has been net demanding foreign exchange which someone else has to supply and that someone else being either other central banks which means that the poorer populations of poorer countries are providing goods for free so that their governments can hold U.S. dollars so that the U.S. government can run a deficit on its own account. Alternatively, in some years, as I said, it might be inflows.

19:07Now, as I said, I want to go into these further, but I suspect that in the years in which I haven't had a look, you'll have pretty much the same sort of pattern. Okay, now capital imports, capital exports, what do capital imports and capital exports If you are going to be a net capital exporter, you have to save the foreign exchange. That means you have to run a current account surplus. This is first-year economics, and therefore you can run a capital account deficit. Vice versa, if you're a net capital importer on net, then you have a surplus in capital account and because people are investing in your country, your territory, you can now get in extra goods from abroad over and above your own current earnings.

20:07So you have extra goods coming in, and if it's on capital account, it means that in effect, you're getting in extra capital goods from somewhere, without reducing your own domestic production of consumer goods. Okay, now, the U.S. before 1981 ran a capital account deficit and a current account surplus. In other words, it was a net capital exporter. Since then, things turned around and the U.S. is now capital importer and therefore runs a current account deficit.

20:53It is in a position to import effectively increased supplies of capital goods without reducing consumption because other people are wanting to invest in here. Okay, now it's consistent. That picture is consistent because clearly you've got far greater capital accumulation elsewhere, therefore they invest in here. It is not a case of individually outrunning your own budget and therefore having to borrow and therefore having to sell your house, etc, etc. The great fallacy of treating the nation as if it were a single individual, it is not. The balance of payments is a summary of what millions of people are doing.

21:39And that's the way it has to be analysed, it's what millions of people are doing, the net result. And that shows up because someone somewhere collects an estimate, it's a balance of payments figure. Okay, what else can I go on to talk about, which I had a note to talk about? The growth in capital flows, again consistent with increasing capital accumulation everywhere. In China, as I said, investment has come from Hong Kong, from Taiwan, the overseas Chinese.

22:25The Japanese have not only been investing in Western Europe and the US, they've also The US has also been investing in South Korea and in the newly industrialized countries. Most of the growth in Southeast Asia is to a large part due to Japanese capital exports. And South Koreans are now exporting to Southeast Asia, etc. And therefore, obviously, part of all this, you've got increasing flows from the US to Western Europe and increasing flows from Western Europe to the US. If you look at the figures, you have what appear to be two-way flows, what is really simply increasing production of specific kinds of goods as a result of capital accumulation, complementarity, if you want.

23:12Okay, import of services, we'll go back to that argument. The people in the underdeveloped areas have very low living standards, live on the smell of an oil rag, Americans have mortgages to meet, we can't reduce our living standards and therefore it's impossible for us to compete with suppliers of services elsewhere. Two comments. One, these were exactly the arguments that were put forward for objecting to import of goods from the poorer countries. The workers live on the smell of an oil drag, therefore they'll be able to sell their goods dirt cheap and therefore we will all suffer and we can't allow these imports to come in.

23:59Exactly the same with services. Three comments actually. Second comment. This is a very insulting attitude to take towards the people of the underdeveloped areas, because the people who supply these services represent the investments of their families. You have to have long training periods in order to provide computer services, bookkeeping, whatever services are being imported. Lots of people fail, fall by the wayside. So what you've got are people who have large debts to pay, who owe their families some of this money, and therefore to say that, of course, you could afford to reduce your living standards is, as I said, pure insult.

24:44Lots of people now who could not otherwise get high incomes are now able to do so. For a rich country like the U.S. or rich Americans to complain is, I think, very for sure. Third point, of course, the great Ricardian principle of association, which Mises enunciated. It doesn't matter even if someone is better at doing everything than someone else. They can still gain from specialization and exchange. And that is precisely the situation here. Okay, so some people in the underdeveloped areas are specializing in providing certain sorts of services.

25:29That opens up opportunities for providing other sorts of services. And that is the same argument, of course, for goods. If they provide certain sorts of goods, it opens up opportunities for providing other sorts of goods. Okay, another point is that in India, in particular where most of these services come from, not China, again, you couldn't even be bothered to look at the facts. In India, why has the computer industry developed, why have these exports of services developed? Precisely because the planners in their wisdom did not get there. The planners and their wisdom have been concentrating on industrial production, centrally planning it and therefore killing it.

26:16On the other hand, the two things which have really developed in India and taken off, the two viable exports which have occurred in more recent years, polishing of gemstones, diamonds and so forth are imported into India from all over the place, Israel and so on, and so on, the polished and set and so on, highly skilled labour, very little capital, highly skilled labour, and then the gemstones are sent out, and the planners of course never thought of this, therefore they could not interfere, therefore it developed. Similarly with services, this is the one thing the planners can't control, therefore it developed and as you can see it developed to the extent to which you have Indian computer

27:28Patronising and Insulting Comments from Gephard Nollis He says the minimum wage, we should have a minimum wage imposed in various countries, according to each country, so that the Americans do not have to import goods produced by slave labour, child labour, sweatshop labour, etc. Thank you very much. There's 29 million people employed in factories, modern factories, doing far better than they would have done otherwise, throughout South Korea, the newly industrialized countries of Southeast Asia, and I can't imagine a greater insult. I find it very insulting to say this.

28:18Okay, oh yes, now there are some economists who are prepared to say that exports increase jobs, imports reduce jobs. Capital exports reduce jobs, capital imports increase jobs. Okay, the other side of capital imports is import of goods. Now, you can't have it both ways. If the capital imports increase jobs, the corresponding imports of capital goods have to reduce jobs. Conversely, if capital exports reduce jobs, the other side of capital exports is of course the export of capital goods, other goods, correspondingly.

29:06That therefore increases jobs. And let us proceed now, we haven't done this before but I think we should do that, let us proceed to the reductio ad absurdum of exports, creating jobs and imports, reducing jobs. Okay, we will ban all imports because they reduce jobs. We export every single thing that we produce, we have no goods in the country but we have a very high level of employment indeed. The poor foreigner, All of his goods are at home, no exports, he's unemployed. What's more, all these imports that have come in from elsewhere, sitting there on the walls, he's even more unemployed, just sitting there wistfully looking at all these goods, which you can't get.

29:54I mean, you know, I mean, there's clearly something wrong with that line of reasoning. Now, the superficial plausibility is, of course, that if you have tariffs, or in other words, subsidies, what you are doing is preventing those incremental adjustments which would occur day by day, month by month, year by year. And then when you remove the tariffs, you then have to do everything all at once. Therefore, you know, remove tariffs, free trade, dreadful things happen, let's go back to the old regime. Okay, another point which I'd like to make is that many of these points we already see in the rest of the world, in the kinds of arguments which I've been mentioning here, which have been put forward seriously, by serious papers like the Christian Science Monitor and so on, my second year students in Australia would laugh at them, because we've had the experience, and we know positively, that with the growth in real incomes and output in Southeast Asia and elsewhere, we can now sell them goods.

31:00With the import of cheaper goods, living standards have increased. The other question which isn't asked, everybody says, how nice, imports reduce prices. Okay, but what do people do with the extra income which they save? Stick it under the mattress, sit on it. You can now buy not only what you had before, you can buy other goods. I mean, a very humbly example. Before we reduced tariffs in Australia, we had to buy Australian made jerseys, woven jerseys. They cost $50, $60, $70 a piece. After the tariffs were removed, Chinese sent in jerseys, you can buy them for $10 a piece. Now I can buy two jerseys for tennis, and I still have $30, $40, $50 left over which I can spend on other things.

31:50Of course I do. Now, the real problem, of course, is that that expenditure is diffused. Because it's diffused, there's no way anyone can actually see it. You don't have other outputs increasing and then coming with little labels tied down their necks saying, you remember those tariff reductions? Well, I am the increasing output that resolved it. Okay, your steel tariffs here. Okay, the lesson here is the conclusion which I will be reaching is that laissez-faire is best. Not because this is the best of all possible worlds, but because anything you do is going to make things worse. Therefore do nothing. Okay, your government in its wisdom has imposed steel tariffs.

32:38What is the consequence inside the country? Higher costs and therefore reduced output. People doing exactly, working as hard as they did before, but getting less in return, because output has fallen. And the other consequence, you start importing cheaper goods from elsewhere, and therefore, surprise, surprise, your trade deficit gets worse and everybody jumps up and down and says, terrible, terrible. Okay, now the Franco-German Empire imposes restrictions on US exports. In its wisdom, what happens?

33:26Real income falls inside the EU. People are working just as hard as before, they're getting less. Both sets of populations are suffering because they've got governments. And therefore, as I said, laissez-faire is the best policy. If the US government had done nothing when cheaper steel imports were coming in, then you would have had the adjustment which is necessary, capital and operating losses in the steel industry, people having to move out and find somewhere else to work. Painful for them, yes, but eventually things would have settled down. If the EU had not imposed restrictions on US exports, what would have happened? Okay, steel exports are reduced, but at least you don't suffer further reduction in real income.

34:15And now what's happened is, as a result of the so-called retaliation, both countries have suffered double reductions in real incomes, and the only people who are better off, if anyone is better off, are these bureaucrats, with the headlines of politicians and, you know, saving the economy, blah, blah, blah...etc, etc. Okay, I think that's about all the thoughts that I had after reading Craig Roberts. As I said, I was infuriated. The kinds of things he was saying and no one was answering properly. Yes? I didn't read this, Paul, but what implications did he see coming from this summary?

35:22In his testimony for Congress, you kindly did let the other shoe drop, and proposed a kind of regional, a global system of regional autocracy.

35:52The British had unilateral free trade from 1846 to 1931, and free trade was abandoned only with the very greatest reluctance, because they felt they had no choice, partly because of what the US was doing. And in that period of unilateral free trade, all its trading partners, of course, restricted, did try to restrict British exports from one way or the other, even the colonies did. And the clothing office didn't stop them. Nevertheless, of course, Britain, as we know, flourished as the Green Bay Tree.

36:39It had huge increases in output, per capita income rose, population rose, etc., etc. The other 20th century example is of course Hong Kong. What's Hong Kong going to do to anybody who tries to reduce its exports, send a popcorn out or something? So again, it's had unilateral free trade throughout, and as you know, it flourished as a Green Bay tree. It now exports more than most developed countries. South Korea, by the way, is the world's 12th largest exporter and the world's second largest producer of certain types of electronic consumer goods, and so on.

37:24If anybody wants to talk about South Korea, I can say definitively that it is, in fact, the result of free access to world markets. Because if you look at what South Korea has been doing, in effect, the inputs were purchased at world prices, capital goods and so forth were purchased at world prices, and if you look at their trading partners, the major trading partners for a long time were the US and Japan. So that in effect, what you had was a trilateral, you might say, free trade area. And then, of course, with the Southeast Asia developing, you started getting more multilateral trade. Okay, that's the other thing that your US trade figures show, and that is growth in multilateral trade.

38:12In other words, trade not only with developed countries, but growing trade, of course, with all these other countries that are growing. Okay, back to the late 19th century. Even the French had very low tariffs in the course of the 19th century, there was even a short period of free trade, the Cobden Treaty with Britain. Germany had relatively low tariffs, they had an internal huge free trade area, and of course throughout the free trade area, except for where the colonies imposed tariffs. The Indian textile industry developed as a result precisely under this regime.

39:13In fact we had the first textile mill in India before Japan got a textile mill. The Japanese were forbidden to impose tariffs as a result of the so-called unequal treaties. So the early period, when you're supposed to need the tariffs, precisely when they didn't have them. And tariffs in any case are subsidies. I mean, the monster is saying that if you subsidise something, it's going to grow. But of course it's going to grow, but at whose expense? You know, what's really happening is that the growth has overtaken the results of the tariffs. And then you're, in other words, you're peacocking around in burrowed feathers. That's about what it amounts to.

39:59I know you were a real jobs business program on CNN. Yes, yes, I was horrified. He's become, for some unknown reason, a vehement protectionist. And I can't quite figure that out unless he's planning on running for president someday. But he turned his guns last week to the export of service jobs to India and other countries. And he had a professor, a business professor from New York, I think he was a management professor from New York University of Columbia. and he made a very good argument that the export of these service jobs actually saves jobs in the United States because companies that basically were in the absence of these service jobs being exported abroad that they would have to shut down or at least retail operations in the United States so that our retail operations and finance and electronics can remain viable simply by exporting various categories of service jobs. I think it was a good argument that he made it, but actually it's effective in countering docs. The only sad part of that was that they

41:25reported the next night that that professor had died. Oh dear. Common sense says, if you can get something cheaply, a fraction of what it used to cost you, that's a good thing. You've got the extra income, output, whatever, to do something else with, so that if the Asians can supply particular services, particular goods or whatever, anybody can supply it, In fact, a fraction of the previous cost. You can now use your resources to produce a whole range of other things. As I said, the only trouble is that the other things which you produce will not come with these labels tied around their necks.

42:11Saying, you know, remember those cheap imports were the result of increased output. So therefore, one has to argue in a sense that it's a completely abstract argument, which I think many people would find difficult to follow through. Let me ask about the politics of these international trade negotiations. The team at the Cancun talks to the World Trade Organization. The developing world represented on balance, of course, for pre-trade, and the industrialized world was all for colonization and regulation, opening up tariffs, removing tariffs abroad by keeping them on at home, and generally promoting a kind of regulatory protectionist program.

42:59Is that a new development or is it just more visible now that we have the international trade talks? Has the developing world always been a force for liberalization?

43:25The developing world is developed only after all that was dropped, and therefore they are now discovering, of course, that all these things are a real problem now. Again, I think in these circumstances, given that all governments are going to be doing something nasty all the time, the best principle for everybody is unilateral free trade. Okay, so the US negotiators come out and say, open up your economies, we want to send goods, and let them get the goods. The Americans, by maintaining their tariffs, are cutting off their nose to spite their face. They are busy buying things at higher cost than they need to.

44:10We can buy whatever Americans produce at world prices. Why should we, you know, why complain? I have two questions. You promised a new introduction to address the point that some people say that the Chinese central bank and other central banks have developed the word for client dollars, and I took it to mean that you thought that was not strictly speaking true, so that the trade deficit was not financed by dollars in 2016. I didn't want to do it the conventional way, which is, you know, balance on services, balance on goods, because that is just analytically meaningless.

45:05The trade deficit is huge. And as you can see, you also have very large capital imports. And that's the link between the two. The link is between those two. The growth in capital accumulation elsewhere, and therefore export of capital directly, instead of exporting it via goods. And again, if you import capital, it means you can import more goods than with your current earnings. And that's what's been happening. That's why the demonstration I think there, or at least what the figures seem to show, that the private sector earns all its own foreign exchange plus some.

45:50Which means that none of this is being financed by somebody somewhere holding dollars. that trade deficit is being paid for by either capital imports or foreign exchange earnings of some sort because when you balance, when you compare the two, what you've got is, at least in 2001, a surplus for the private sector. But, I mean, we agree that if the dollar is being stockpiled in the Bank of China or Bank of India, wherever, What is the actual quantitative significance of this?

46:49In the crepancy in the figures, at least you would have some inputs coming in, some imports or something coming in, which is not paid for by foreign exchange earnings. You would be running a deficit. The only sector which is running a deficit is the US government. The U.S. government's expenditures are being financed by central banks holding dollars or whatever, however they've been doing it, pulling others to pay for it or whatever. My second question would be, do you know what Paul Craig Roberts views on immigration are? No, I don't. Does anyone? Other people might know if he has?

48:02These are some of the architects of the five-sided economic policies in the region. It's not as if he's done a long-time protectionist or anything. He claims that circumstances are very sophisticated. These are new circumstances, and they require a rethinking. Then we must assume that he just lost immigration, for example. I mean, that's a point probably overlooked in Europe, the relationship between trade policy and immigration. I mean, these people do not come just because they love so much the Alps or Clots and Dutch Chiefs or something like that. There was an interesting possibility that you sort of raised that when you said that in 1981 the United States had a trade surplus, but that now of course the trend seems to get upward, ever higher as we have a trade deficit, a growing trade deficit.

49:12Of course the government deficits have also increased during that period but in 1981 you have the Monetary De-Control Act here in the United States which was a major regime shift from the US dollar we have in ramifications as we go forward in terms of trade.

49:42And basically I think what's been driving the whole scenario is the growth in capital accumulation, output, diversification elsewhere. And that's how these adjustments that are showing up in the trade figures. Now up to 1981, what happened was that the US, as I said, was a net capital exporter, and therefore it had to have a trade surplus. The rest of the world, therefore, by definition, was a net capital importer from the U.S. and therefore had a trade deficit with the U.S. Okay, now that's another point which we might perhaps make, if the Craig Roberts argument is correct, then before 1981 it was the US which was busy draining income away from the rest of the world through, because they had a trade deficit with the US, and the US it was which was busy, you know, obtaining trillions of dollars worth of assets from other people, because it was exporting capital to them and further draining away rent.

50:50In that case, how did the rest of the world suddenly turn around and start doing exactly the same to the US itself? You know, I mean, that is not what's been happening. What has been happening are these other changes. These other changes have been therefore showing up one way or the other inside, in the structure and composition, whatever, balance of payments everywhere. And these are, you know, solid long-term changes, solid long-term developments. For everyone. I mean, there's no way we're going to, you know, drive the Southeast Asian countries back to where they were in 1861 or wherever.

51:36There's no way Japan is going to... I mean, you know, they're there. And already I would, you know, seriously, the rest of the world has adjusted, it's just the US which is now beginning to discover that even it has to adjust, despite the size of its economy.