Aging Populations and Replacement Birthrate

Posted by PITHOCRATES - April 28th, 2014

Economics 101

(Originally published July 8th, 2013)

Trying to follow a Baby Boom with a Baby Bust creates Problems in Advanced Economies with Large Welfare States

In the late 1960s began a movement for zero population growth.  It called for women to have only enough babies to replace the current population.  Not to have too many babies that would increase the population.  Nor have too few babies that the population declines.  Something that women could easily do because of birth control.  And, later, abortion.  The drive behind this was to save the planet.  By keeping large populations becoming like a plague of locusts that devour the earth’s resources and food until the planet can no longer sustain life.

China did these zero population growth people better.  By promoting a negative population growth rate.  Limiting parents to one child.  They did this because during the days of Mao’s China the country set some world records for famine.  Their communist state simply couldn’t provide for her people.  So to help their communist system avoid future famines they tried to limit the number of mouths they had to feed.  Of course, trying to follow a baby boom with a baby bust creates other problems.  Especially in advanced economies with large welfare states.

China’s one-child policy and the preference for boys have led to a shortage of women to marry.  Some Chinese men are even looking at ‘mail-order’ brides from surrounding countries.  But China is going to have an even greater problem caring for her elderly.  Just like Japan.  Japanese couples are having less than 1.5 babies per couple.  Meaning that each successive generation will be smaller than the preceding generation.  As couples aren’t even having enough children to replace themselves when they die.  Leaving the eldest generation the largest percentage of the overall population.  Being paid and cared for by the smallest percentage of the overall population.  The younger generation.

States with Aging Populations are Suffering Debt Crises because they Spend More than their Tax Revenue can Cover

As nations develop advanced economies people develop careers.  Moving from one well-paid job to another.  As they advance in their career.  Creating a lot of income to tax.  Allowing a large welfare state.  Which is similar to a Ponzi scheme.  Or pyramid scheme.  As long as more people are entering the workforce than leaving it their income taxes can pay for the small group at the top of the pyramid that leaves the workforce and begins consuming pension and health care benefits in their retirement.  And there is but one requirement of a successful pyramid scheme.  The base of the pyramid must expand greater than the tip of the pyramid.  The wider the base is relative to the top the more successive the pyramid scheme.  As we can see here.

Babies per Generation - Constant Replacement Birthrate

Generation 1 is at the top of the pyramid.  It is the oldest generation.  Which we approximate as a period of 20 years.  In our example Generation 1 are people aged 78-98.  They’re retired and collecting pension, health care and other benefits.  Some combination of Social Security, Medicare, Medicaid, food stamps, heating assistance, etc.  All paid for by Generation 2 (58-78), Generation 3 (38-58) and Generation 4 (18-38).  Each generation is assumed to bring 6 children into the world.  So these couples are not only replacing themselves but adding an additional 4 children to further increase the size of the population.  Which really makes running a pyramid scheme easy.  For if we assume each member in Generation 1 on average consumes $35,000 annually in benefits that Generations 2 through 4 pay for that comes to $555.56 per person annually.  Or $46.30 per person monthly.  Or $10.68 per person weekly.  Or $1.53 per person daily.  Amounts so small that Generations 2 through 4 can easily pay for Generation 1′s retirement.  Now let’s look at the impact of a declining birthrate with each successive generation.

Babies per Generation - Declining Replacement Birthrate

When all couples in each generation were having on average 6 children this added 1.9 billion new taxpayers.  Which greatly reduced each taxpayer’s share of Generation 1′s retirement costs.  But thanks to birth control, abortion and the growing cost of living each successive generation has fewer babies.  Generation 2 only has 3 children.  Enough to replace themselves.  And add one new taxpayer.  Generation 3 has only 2 children.  Only enough to replace the parents.  Providing that zero population growth that was all the rage during the late 1960s and the 1970s.  While Generation 4 only has 1 child.  Not even enough to replace the parents when they die.  Causing a negative population growth rate.  Which is a big problem in an advanced economy with a large welfare state.  For instead of adding 1.9 billion new taxpayers they only add 217.5 million new taxpayers.  Greatly increasing each taxpayer’s share of Generation 1′s retirement costs.  Instead of paying $555.56 per taxpayer they each have to pay $5,384.62 annually.  Or $448.72 per taxpayer monthly.  Or $103.55 per taxpayer weekly.  Or $14.79 per taxpayer daily.  Numbers that prove to be unsustainable.  The state simply cannot tax people this much for Generation 1′s retirement.  For if they did this and added it to the rest of government’s spending they’re taxing us to fund it would take away all of our income.  This is why advanced economies with aging populations are suffering debt crises.  Because their spending has grown so far beyond their ability to pay for it with tax revenue that they borrow massive amounts of money to finance it.

If you want a Generous Welfare State you need Parents to have More Children

If you carry this out two more generations so every generation only has one child the per taxpayer amount tops out at $14,736.84 annually.  Or $1,228.07 per taxpayer monthly.  Or $283.40 per taxpayer weekly.  Or $40.49 per taxpayer daily.  Amounts far too great for most taxpayers to pay.  This is what an aging population does in a country with a large welfare state.  It makes the population top-heavy in elderly people who no longer work (i.e., pay taxes) but consume the lion’s share of state benefits.  When couples were having 6 children each across the generations there was a ratio of 84 taxpayers per retiree.  When there was a declining replacement birthrate that ratio fell to 15 taxpayers per retiree.  If we look at this graphically we can see the pyramid shape of this generational population.

Generational Population - Constant Replacement Birthrate

With 84 taxpayers per retiree we can see a nice and wide base to the pyramid.  While the tip of the pyramid is only a small sliver of the base (Generation 4).  Making for a successful Ponzi scheme.  Far more people pay into the scheme.  While only a tiny few take money out of the scheme.  This is why Social Security and Medicare didn’t have any solvency problems until after birth control and abortion.  For these gave us a declining replacement birthrate over time.  Greatly shrinking the base of the pyramid.  Which made the tip no longer a small sliver of the base.  But much closer in size to the base.  That if it was an actual pyramid sitting on the ground it wouldn’t take much to push it over.  Unlike the above pyramid.  That we could never push over.  Which is why the above Ponzi scheme would probably never fail.  While the one below will definitely fail.

Generational Population - Declining Replacement Birthrate

If you want a generous welfare state where the state provides pensions, health care, housing and food allowances, etc., you need parents to have more children.  For the more children they have the more future taxpayers there will be.  Or you at least need a constant replacement birthrate.  But if that rate is below the rate of a prior baby boom the welfare state will be unsustainable UNLESS they slash spending.  The United States has a replacement birthrate below the rate of a prior baby boom.  While the Obama administration has exploded the size of welfare state.  Especially with the addition of Obamacare.  Making our Ponzi scheme more like the second chart.  As we currently have approximately 1.75 taxpayers supporting each social security recipient.  Meaning that it won’t take much pushing to topple our pyramid. We’re at the point where a slight breeze may do the trick.  For it will topple.  It’s just a matter of time.

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Canadian Hospitals suffer from Overcrowding in British Columbia

Posted by PITHOCRATES - March 22nd, 2014

Week in Review

The left likes to say we’re idiots here in the United States.  Because every other advanced economy has national health care.  Of course, every other advanced economy doesn’t have the best health care system in the world.  No.  That honor goes to the United States.  And perhaps NOT having national health care is the reason why we have the best health care system in the world.  For those national health care systems have their problems.  Even the system north of the border the American left yearns to have.  The Canadian single-payer system (see New B.C. seniors advocate to focus on needs of growing elderly population by ROB SHAW posted 3/19/2014 on The Vancouver Sun).

Isobel Mackenzie, a longtime Victoria seniors care administrator, was named Wednesday as the province’s first seniors advocate, more than 16 months after the office was first announced…

There are more than 700,000 seniors in B.C. and that’s expected to double to 1.4 million over the next 20 years…

Mackenzie said she’s not sure if her office will get involved in how hospital overcrowding is affecting seniors care, and sidestepped a reporter’s question at her press conference Wednesday about the case of an elderly man who had spent eight hours waiting in a hospital emergency room…

“Obviously, health care is a priority and home care – giving support to people so they can stay at their home and healthy,” she said.

Logan said the government tried an “experiment” of providing funding to United Way but they’ve been “overloaded with requests.”

All of the advanced economies share something in common.  They all have an aging population.  Thanks to birth control and abortion people in the advanced economies stopped having babies after the Sixties like they used to have.  Which is why the seniors are now the largest growing sector of the population.  We have fewer people entering the workforce to pay the taxes that support a greater number of people leaving the workforce.  And thanks to modern medicine, these people are living long into retirement.  Which is why Canadian hospitals in British Columbia are overcrowded.  Which lead to longer wait times and the rationing of care.  Things common with national health care.  And these things are only going to get worse as their aging populations age further.

This is the future of Obamacare.  For the Affordable Care Act is already proving unaffordable to those who have to pay.  And people are losing the health insurance and the doctors they liked and wanted to keep.  A lot of doctors are opting out of Obamacare.  Leaving fewer in the system to treat a larger number of patients.  Which will, of course, lead to longer wait times and the rationing of care.  Just like in Canada.  And in every other advanced economy with a national health care system.  Which is why the United States is the only advanced economy without a national health care system.  Because Americans don’t want longer wait times and the rationing of care.  And they don’t want the Affordable Care Act.

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Aging Populations and Replacement Birthrate

Posted by PITHOCRATES - July 8th, 2013

Economics 101

Trying to follow a Baby Boom with a Baby Bust creates Problems in Advanced Economies with Large Welfare States

In the late 1960s began a movement for zero population growth.  It called for women to have only enough babies to replace the current population.  Not to have too many babies that would increase the population.  Nor have too few babies that the population declines.  Something that women could easily do because of birth control.  And, later, abortion.  The drive behind this was to save the planet.  By keeping large populations becoming like a plague of locusts that devour the earth’s resources and food until the planet can no longer sustain life.

China did these zero population growth people better.  By promoting a negative population growth rate.  Limiting parents to one child.  They did this because during the days of Mao’s China the country set some world records for famine.  Their communist state simply couldn’t provide for her people.  So to help their communist system avoid future famines they tried to limit the number of mouths they had to feed.  Of course, trying to follow a baby boom with a baby bust creates other problems.  Especially in advanced economies with large welfare states.

China’s one-child policy and the preference for boys have led to a shortage of women to marry.  Some Chinese men are even looking at ‘mail-order’ brides from surrounding countries.  But China is going to have an even greater problem caring for her elderly.  Just like Japan.  Japanese couples are having less than 1.5 babies per couple.  Meaning that each successive generation will be smaller than the preceding generation.  As couples aren’t even having enough children to replace themselves when they die.  Leaving the eldest generation the largest percentage of the overall population.  Being paid and cared for by the smallest percentage of the overall population.  The younger generation.

States with Aging Populations are Suffering Debt Crises because they Spend More than their Tax Revenue can Cover

As nations develop advanced economies people develop careers.  Moving from one well-paid job to another.  As they advance in their career.  Creating a lot of income to tax.  Allowing a large welfare state.  Which is similar to a Ponzi scheme.  Or pyramid scheme.  As long as more people are entering the workforce than leaving it their income taxes can pay for the small group at the top of the pyramid that leaves the workforce and begins consuming pension and health care benefits in their retirement.  And there is but one requirement of a successful pyramid scheme.  The base of the pyramid must expand greater than the tip of the pyramid.  The wider the base is relative to the top the more successive the pyramid scheme.  As we can see here.

Babies per Generation - Constant Replacement Birthrate

Generation 1 is at the top of the pyramid.  It is the oldest generation.  Which we approximate as a period of 20 years.  In our example Generation 1 are people aged 78-98.  They’re retired and collecting pension, health care and other benefits.  Some combination of Social Security, Medicare, Medicaid, food stamps, heating assistance, etc.  All paid for by Generation 2 (58-78), Generation 3 (38-58) and Generation 4 (18-38).  Each generation is assumed to bring 6 children into the world.  So these couples are not only replacing themselves but adding an additional 4 children to further increase the size of the population.  Which really makes running a pyramid scheme easy.  For if we assume each member in Generation 1 on average consumes $35,000 annually in benefits that Generations 2 through 4 pay for that comes to $555.56 per person annually.  Or $46.30 per person monthly.  Or $10.68 per person weekly.  Or $1.53 per person daily.  Amounts so small that Generations 2 through 4 can easily pay for Generation 1’s retirement.  Now let’s look at the impact of a declining birthrate with each successive generation.

Babies per Generation - Declining Replacement Birthrate

When all couples in each generation were having on average 6 children this added 1.9 billion new taxpayers.  Which greatly reduced each taxpayer’s share of Generation 1’s retirement costs.  But thanks to birth control, abortion and the growing cost of living each successive generation has fewer babies.  Generation 2 only has 3 children.  Enough to replace themselves.  And add one new taxpayer.  Generation 3 has only 2 children.  Only enough to replace the parents.  Providing that zero population growth that was all the rage during the late 1960s and the 1970s.  While Generation 4 only has 1 child.  Not even enough to replace the parents when they die.  Causing a negative population growth rate.  Which is a big problem in an advanced economy with a large welfare state.  For instead of adding 1.9 billion new taxpayers they only add 217.5 million new taxpayers.  Greatly increasing each taxpayer’s share of Generation 1’s retirement costs.  Instead of paying $555.56 per taxpayer they each have to pay $5,384.62 annually.  Or $448.72 per taxpayer monthly.  Or $103.55 per taxpayer weekly.  Or $14.79 per taxpayer daily.  Numbers that prove to be unsustainable.  The state simply cannot tax people this much for Generation 1’s retirement.  For if they did this and added it to the rest of government’s spending they’re taxing us to fund it would take away all of our income.  This is why advanced economies with aging populations are suffering debt crises.  Because their spending has grown so far beyond their ability to pay for it with tax revenue that they borrow massive amounts of money to finance it.

If you want a Generous Welfare State you need Parents to have More Children

If you carry this out two more generations so every generation only has one child the per taxpayer amount tops out at $14,736.84 annually.  Or $1,228.07 per taxpayer monthly.  Or $283.40 per taxpayer weekly.  Or $40.49 per taxpayer daily.  Amounts far too great for most taxpayers to pay.  This is what an aging population does in a country with a large welfare state.  It makes the population top-heavy in elderly people who no longer work (i.e., pay taxes) but consume the lion’s share of state benefits.  When couples were having 6 children each across the generations there was a ratio of 84 taxpayers per retiree.  When there was a declining replacement birthrate that ratio fell to 15 taxpayers per retiree.  If we look at this graphically we can see the pyramid shape of this generational population.

Generational Population - Constant Replacement Birthrate

With 84 taxpayers per retiree we can see a nice and wide base to the pyramid.  While the tip of the pyramid is only a small sliver of the base (Generation 4).  Making for a successful Ponzi scheme.  Far more people pay into the scheme.  While only a tiny few take money out of the scheme.  This is why Social Security and Medicare didn’t have any solvency problems until after birth control and abortion.  For these gave us a declining replacement birthrate over time.  Greatly shrinking the base of the pyramid.  Which made the tip no longer a small sliver of the base.  But much closer in size to the base.  That if it was an actual pyramid sitting on the ground it wouldn’t take much to push it over.  Unlike the above pyramid.  That we could never push over.  Which is why the above Ponzi scheme would probably never fail.  While the one below will definitely fail.

Generational Population - Declining Replacement Birthrate

If you want a generous welfare state where the state provides pensions, health care, housing and food allowances, etc., you need parents to have more children.  For the more children they have the more future taxpayers there will be.  Or you at least need a constant replacement birthrate.  But if that rate is below the rate of a prior baby boom the welfare state will be unsustainable UNLESS they slash spending.  The United States has a replacement birthrate below the rate of a prior baby boom.  While the Obama administration has exploded the size of welfare state.  Especially with the addition of Obamacare.  Making our Ponzi scheme more like the second chart.  As we currently have approximately 1.75 taxpayers supporting each social security recipient.  Meaning that it won’t take much pushing to topple our pyramid. We’re at the point where a slight breeze may do the trick.  For it will topple.  It’s just a matter of time.

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Coal Mines, Steam Engine, Electric Motor, Coal-Fired Power Plants, Water Pumps, Ventilation Fans, Strip Mining, Draglines and Coal Washing

Posted by PITHOCRATES - September 12th, 2012

Technology 101

The Steam Engine pumped Water from Mines allowing them to go Deeper as they followed Veins of Coal

Petroleum is the lifeblood of advanced economies.  It propels our airplanes, ships, trains, trucks, ambulances, air ambulances, fire trucks, cars, etc.  It moves everything.  Our sick and injured.  Our families.  Our food.  Our goods.  The raw materials that build the world we live in.  You would not recognize the world if we removed petroleum from it.  There would be no aviation.  No emergency vehicles that could respond in minutes.  No family car.  But we could still have ships and trains.  Because before petroleum there was coal.

Before the Industrial Revolution we used animals to move people and things.  We were using fuels for other things.  But not to move people and goods.  Until there was a problem getting that fuel.  The British were mining coal near the coast.  But there was a problem.  As the coal veins they mined moved under the sea they filled with water.  Limiting how far they could follow those veins.  They had a pump.  Driven by a crude steam engine.  But it just didn’t do the job very well.  Until a man came along and improved it.  James Watt.  Who improved that crude steam engine.  And changed the world.

The steam engine pumped water from coal mines allowing them to go deeper as they followed veins of coal.  But the steam engine had other uses.  They could power a drive shaft in a factory.  Allowing us to build factories anywhere.  Not just by moving water that drove a waterwheel.  And using a steam engine to move a train allowed us to connect these factories with other factories.  And to the stores in the cites that bought the things they built.  Steam-powered tractors replaced the horse and plow on the farm.  While steam locomotives brought coal from distant coal mines to our homes we burned for heat.  Coal was everywhere.  We had a coal-based economy.  And a coal-based life.  The more we used the more we had to mine.  Thanks to the coal-fired steam engine we could mine a lot of it.  And did.  It powered the Industrial Revolution.  And powers our modern economy today.  Because coal even powers the engines that replaced the steam engines in our factories.

The two largest Electrical Loads in a Coal Mine are the Water Pumps and the Ventilation Fans

We’ve replaced the steam engines in our factories with the electric motor.  Instead of having a main drive shaft through the factory and a system of belts and pulleys we put an electric motor at each workstation.  And connected it to the electric grid.  Greatly increasing our productivity.  And the electric power to drive these electric motors came predominantly from coal-fired power plants.  Coal has never been more important in the modern economy.  It provides about half of all electric power.  Followed by natural gas and nuclear power at about 20% each (though natural gas is on the rise).  Hydroelectric dams provide less than 10% of our electric power.  And everything else provides less than 5%.

Just as the steam engine made mining more efficient so did electric power.  Mines can go deeper because electric pumps can more efficiently pump water out of the mines.  And large fans can circulate the air underground so miners can breathe.  As well as disperse any buildups of methane gas or coal dust.  Before they can explode.  Which is one of the hazards of mining a flammable and, at times, explosive material.  The hazard is so real that you will not find ventilation fans inside the mine.  You’ll find water pumps deep in the mines.  But not the ventilation fans.  Because if there is a fire or an explosion underground they’ll need to protect those fans from damage so they will still be able to ventilate the mine.  For if the mine fills with smoke surviving a fire or an explosion will matter little if you cannot breathe.

The two largest electrical loads in a coal mine are the water pumps and the ventilation fans.  Mines consume enormous amounts of electric power.  And most of it goes to fighting the water seepage that will fill up a mine if not pumped out.  And making the mines habitable.  Electric power also runs the hoists that haul the coal to the surface.  Transports miners to and from the mines.  And runs the mining equipment in a confined space without any hazardous fumes.  As critical as this electric power is to survive working in such an unfriendly environment more times than not the power they use comes from a coal-fired power plant.  A plant they feed with the very coal they mine.  Because it’s dependable.  That electric power will always be there.

Coal will always let you Charge your Electric Car Overnight and Surf the Web in the Morning

But we just don’t mine coal underground.  We also dig it up from the surface.  With strip mining.  Most of the coal we use today comes from great strip mines out West.  Where they use mammoth machines called draglines to scrape away soil to get to the coal.  And then they scrape out the coal.  These machines are as big as ships and actually have crew quarters inside them.  They even name them like ships.  They operate kind of like a fishing rod with a few minor differences.  Instead of a rod there is a boom.  Instead of nylon fishing line there is a steel cable up to two inches in diameter.  And instead of a hook there is a bucket big enough to hold a 2-car garage.  The operator ‘throws’ the bucket out by running it out along the boom.  Then drops it in the dirt.  Then drags the bucket back.  The massive scale of the dragline requires an enormous amount of power.  And the power of choice?  Electric power.  Often produced by the very coal they mine.  Some of these machines have electric cables even bigger around than the cables that drag their buckets.  At voltages of 10,000 to 25,000 volts.  Drawing up to 2,000 amps.

These draglines can mine a lot of coal.  But it’s a lower-quality coal than some of our eastern coal.  Which has a higher energy content.  But eastern coal also has a higher sulfur content.  Which requires more costs to make it burn cleaner.  In fact, before any coal ships today we wash it to remove slate as well as other waste rock from the coal.  And it is in this waste rock where we find much of the sulfur.  So the washing makes the coal burn cleaner.  As well as raise the energy content for a given quantity of coal by removing the waste that doesn’t burn.  There are a few ways they do this.  But they all involve water.  Therefore, at the end of the process they have to dry the coal by spinning it in a large cylindrical centrifuge.  So a lot happens to coal between digging it out of the ground and loading it on a unit train (a train carrying only one type of cargo) bound to some power plant.  And chances are that it will go to a power plant.  For our coal-fired power plants buy about 80% or so of all coal mined.  So if you see a coal train it is probably en route to a coal-fired power plant.

Coal created the modern world.  And it powers it to this day.  From the first steam engines that dewatered mines to the coal-fired power plants that power the massive server farms that hold the content of the World Wide Web.  Yes, coal even powers the Internet.  As well as our electric cars.  For only coal will be able to meet the electric demand when everyone starts plugging their car into the electric grid overnight.  Because solar power doesn’t work at night.  And wind power is even less reliable.  For if it’s a still night you’ll have no charge to drive to work in the morning.  But if you plugged into coal you’ll always be able to charge your electric car overnight.  And surf the web in the morning.

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The U.S. and Japan assailed Argentina’s Mercantilist Trade Policies at the World Trade Organization

Posted by PITHOCRATES - August 26th, 2012

Week in Review

International trade can be a funny thing.  For mercantilist ways of the past are hard to give up.  Especially the misguided belief that a trade deficit is a bad thing.  Some nations are better at some things than other nations.  And have a comparative advantage.  And it would be foolish to try and produce something another nation can produce better.  It would be better for nations to do the things they are best at.  And import the things that others are better at.  Just as David Ricardo proved with his law of comparative advantage.  Still everyone still wants to export more than they import.  Still believing that their mercantilist policies are superior to the capitalistic policies that are characteristic of advanced economies.  While mercantilist policies can rarely advance beyond emerging economies.  Case in point Argentina (see Argentina says to file WTO complaint against U.S by Tom Miles and Hugh Bronstein posted 8/21/2012 on Reuters).

The United States and Japan assailed Argentina’s import rules as protectionist at the World Trade Organization on Tuesday, putting more pressure on the country to revamp policies that many trading partners say violate global norms.

The two complaints mirrored litigation brought by the European Union in May and triggered a swift reaction from Argentina’s center-left government, which vowed to challenge U.S. rules on lemon and beef imports.

Argentina is seen by many fellow Group of 20 nations as a chronic rule-breaker since it staged the world’s biggest sovereign debt default in 2002. It remains locked out of global credit markets and relies on export revenue for hard currency.

They have inflated their currency so much that it is nearly worthless.  They can get little of foreign currency in exchange for it.  So they depend on the foreign currency buying their exports for their money needs.  For they can’t destroy foreign currency with their inflationary policies.  Only the wealth and savings of those in Argentina who don’t have access to these foreign currencies.

In the old days the mercantilist empires brought gold and silver into their countries.  They had their colonies ship raw material back to the mother country.  The mother country manufactured them into a higher valued good.  Then exported it for gold and silver.   Today we don’t use gold and silver anymore.  So Argentina just substituted foreign currency into the formula.  While keeping the rest of it in place.

Argentina began requiring prior state approval for nearly all purchases abroad in February. Imports have since fallen compared with last year’s levels, boosting the prized trade surplus but causing some shortages of goods and parts and sharply reducing capital goods imports.

EU and U.S. officials say Argentina has effectively restricted all imports since the new system came into place…

On Monday, Argentina hit the EU with a separate WTO complaint, alleging discriminatory treatment by Spain against Argentine shipments of biodiesel.

“This measure, like others taken by the European Union and other developed countries for decades, effectively aims to keep our industries from rising along the value chain, limiting the role of developing countries to the provision of raw materials,” the Foreign Ministry said in a statement…

Latin America’s No. 3 economy relies heavily on a robust trade surplus, which is used to help fatten central bank foreign reserves tapped to pay government debt. The government has also moved to curb imports to protect local jobs, while imposing capital and currency controls to keep dollars in the country.

“Import growth has halted, which we should have done long before,” Foreign Trade Secretary Beatriz Paglieri was quoted as saying on the presidential website last weekend…

Argentina has also been criticized for a policy of “trade balancing,” which forces an importer to guarantee an equal value of exports. That has spawned offbeat deals whereby a car producer, for example, must ship a large amount of rice out of the country in return for a consignment of vehicle components.

Mercantilist to the core.  Which will forever trap them into being an emerging economy.  For they’ve been doing this for decades.  And they’re still an emerging economy.  Juan Peron rose to power with the same mercantilist arguments.  He was a Justicialist.  Today’s president is a Justicialist.  President Cristina Fernandez.  And little has changed since World War II.  Argentina is still an emerging economy.  Thanks to their mercantilist policies.  If they’d only give capitalism a chance their economy would explode with economic activity.  At least, based on history.  For the most advanced economies today are NOT based on the current Argentine model.  They’re based on the free trade of capitalism.  And David Ricardo’s comparative advantage.

In countries with free trade people enjoy higher standards of living.  Their governments give them this good life by doing as little for them as possible.  Letting the free market shower them with wealth and happiness.  Which brings us back to the funny part about international trade.  The countries that try to do the most for their people by restricting free trade give their people a lower standard of living.  Except, of course, for the few in power.  Or for those connected to power.

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