Soon after the first Sears catalog was mailed in 1888, the catalog began to offer an astonishing array of goods to a population whose shopping had previously been limited to the local general store. Many such stores closed, unable to compete on price or selection. Yet, American prosperity increased.
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Samizdata quote of the dayApril 24th, 2016 |
 14 comments to Samizdata quote of the day |
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“Soon after the first Sears catalog was mailed in 1888, the catalog began to offer an astonishing array of goods….”
A whole year’s toilet paper, for a start.
A full auto Thompson machine gun, with high capacity drum magazine, AND a house?
Where ELSE are you going to get a treadmill for your dog, or goat, to power your washing machine AND butter churn?
“Yet”?
Shouldn’t that be “Therefore”?
And it is perhaps worth pointing out that Sears is currently in the process of dying out, crushed by another new technology replacing its innovation.
The wheel keeps turning, and we all keep getting better off.
To what extent is the increase in prosperity a direct result of the catalog?
Perhaps it was riding on the back of an increase that was already baked in, so to speak.
A contrarian view: Articles like this reek of dogmatism. Because a policy was correct in the 19th century or the 20th in the US does not mean it is always and everywhere correct. Tariffs on Chinese steel overproduction (which is not being driven by market demand, so it at least bears critique according to the canons of the faith) may or may not be wise now, but that has nothing to do with the 1888 Sears catalog. In fact China itself has attained its prosperity in the last 30 years on the basis of tariffs, or so I believe, so it cannot be said that free trade is a necessary condition for prosperity.
Brownstein says this: “If a farmer ordered a work shirt from the catalog, did that mean his daughter lost a job sewing shirts for the family? Yes, but it also meant she could turn to other pursuits, whether work or leisure. Either way, specialization increased the family’s wealth.”
Now this is the catechism, pure and simple. First, as noted, the economic posture of the 1888 farmer’s family has little or no bearing on today’s family. Second, just what are these “other pursuits” the displaced employee can turn to today? “Leisure”? Well, yes, if by that you mean permanent unemployment financed by taxes. “Work”? What work, and where? Look at the labor force participation rate in the US. Just as more humans have joined the global labor pool from China and India, to name the two biggest sources, technology has advanced to the point where it requires fewer and fewer employed humans to produce the consumables of the world.
Not even the economists can think past the doctrine. According to canonical analyses like this one, the exit of so many from active labor force participation ought to lead to an increase in wages, but of course no such thing is happening. And this chart shows that, no matter how many old people are retiring, their places are not being filled by younger workers, as the labor force participation of 25 – 54 year-olds has declined since the late 1990s. Nor does the canonical analysis account for the fact that boomer “retirement’ is not always, maybe not even usually, voluntary, nor for the fact that the boomer jobs with their higher wages are not being retained or replaced, but rather lower paying service jobs account for most of the periodic “upticks’ in employment nowadays.
It is not enough to measure increases in wealth solely by consumer price fluctuations. While ever cheaper and more readily available (Amazon) consumer goods makes me, personally better off, and I suspect this is true for all on this board, it is not therefore good universally. I am not saying this proves tariffs are the right policy today, just that a judgment based only on consumer prices is faulty. Left-liberal economists like Krugman are continually arguing for more “Keynesian” policy because it happened to work once 80 years ago (and maybe not even then). How is the example of the 19th century Sears catalog any different?
And I believe you are quite wrong. Chinese economic growth is not based on tariffs, it is based on a mixture of low labour costs, lack of regulation inflating production costs and sheer entrepreneurship… i.e. in at least some ways, China has freer markets than their target First World markets (of course and in other ways, not so much, but it very much depends on the sector). Anyone who thinks there is no capitalistic innovation going on in Shenzhen etc. simply does not know what they are talking about. Some things are now made in China because they can be made there better and more flexibly, not just cheaper.
And the fact highly regulated First World labour markets are finding it hard to adjust to economic change is hardly a surprise either. But the problem is not the market, the problem is governments rigging the markets and stifling new innovative businesses.
I’ll take on QET’s contrarian view.
First, I certainly don’t disagree that a policy which worked (I won’t use his term “correct” here) in the 19th or 20th century is necessarily the best policy today. Times do change, and it is always useful to re-examine old policies to confirm their continued applicability. And I also agree that “it cannot be said that free trade is a necessary condition for prosperity”. It is not necessary to prosperity, but history has consistently proven that the freer the trade the greater the prosperity. And that’s as true today as it was in the 19th century.
QET takes issue with Brownstein’s comment that “if a farmer ordered a work shirt from the catalog, did that mean his daughter lost a job sewing shirts for the family?” His objection is to the nature of the “other pursuits” in which she could then be engaging, but I reject the original statement. “Making shirts for the family” is not a job, it is a chore, like washing clothes by hand or going to the market every day because you don’t have refrigeration. Freeing that daughter from such economically inefficient drudgery is extremely valuable even if she chooses to spend all of her newly-acquired free time playing card games. And it’s even better if she can get a paying job or find more productive pursuits.
He asserts that the 1888 Sears catalog has no bearing on today’s economy. I beg to differ, because we see the exact same protectionist sentiment every time there is a fundamental change in technology (broadly defined). We see it today in local objections to new Walmart stores. Yes, they might put a few local stores out of business, costing a few jobs, but a huge majority benefit greatly by the greater selection and lower prices. It’s the modern equivalent to the Sears catalog, and is merely yet another illustration of Bastiat’s famous dictum about “that which is seen and that which is not seen.” It’s easy to see the handful of jobs lost (and I don’t deny the hardship that imposes on the individuals involved), but it can be difficult to see the gains enjoyed by the vast multitude of others (including those who don’t shop at Walmart, since other stores are forced to compete better). But whether or not observed by the average person those benefits are very real.
If China chooses to subsidize its steel exports, all that means is the Chinese taxpayers are subsidizing American consumers of products made with cold rolled steel. Yes, it can be harmful to the American steel industry, but so what? They’ll either develop better technologies, find ways to lower their costs or otherwise compete better, or they’ll go out of business. A relative few workers will lose their jobs, but everyone else benefits enormously at the cost of the Chinese (who are really the ones who should be complaining about the subsidies, as it’s coming out of their pockets). The displaced workers will have to find other employment, possibly at lower wages, but that’s life. If we’re compassionate we (the rest of us) will offer help during the transition, but compassion only goes so far; in the end those workers have to accept that the world has changed and exert the effort to adapt. If they won’t, it’s not my problem.
So while 19th century policies aren’t necessarily the best today, free trade unquestionably is. It is a universal truth, applicable at all times and places (except, arguably, during time of actual war). And the fact that there are always a few losers doesn’t change that fact.
Perry, I may be wrong, but “quite wrong”? Wrong, because it is always wrong, strictly speaking, to isolate one variable and load the entire function onto it. I don’t see that what you are saying contradicts what I am saying, in any case. Both in the US and Britain, tariffs shielded early manufacturers, especially textiles, from foreign competition, and under that protection they innovated wildly. China’s tariffs, and other barriers to entry, may not be what they once were, but prior to its accession to the WTO they were quite high in many areas. Nations must have a free trade infrastructure in order to benefit from it, and that infrastructure has to be built, which takes time.
In any case, while disentangling the effects of the market from the effects of the government interferences is nearly impossible, I believe that it is sheet dogmatism to hold that all of the jobs lost will be replaced. The jobs were lost because they were unnecessary for the production of the material we all consume. The billions of Chinese and Indian workers need jobs every bit as much as US and EU workers do, and all want “good” jobs and not “McJobs.” I do not see an unquestioning faith (for that is just what it is–faith) in the eventual workings even of unfettered markets to be sound at this date. Right now, the consumption of tens of millions in the US is being subsidized by taxes, because there are not sufficient “good paying jobs.” I see nothing that suggests that trend is going to change in the foreseeable future.
Here is another example of what I consider to be “canonical” analysis. Typically, it analyses as though the steel industry existed in isolation from all other industries. It ignores that worldwide demand for steel has been declining even as China has been overproducing as a method of state welfare. Materials other than steel are being used more and more where steel once was, and their production does not require the masses of proletarians and massive factory complexes employed in the extraction of iron & production of steel.
Again, while I do not pretend to have any special insight or competence in economics, I do believe that the simple repetition of the canon, which is what Brownstein’s article appears to me to be, is unsound.
@QET
I’d be interested in what you mean by “McJobs”
A large proportion of the jobs in any sector are the sort of things could be handled by a well trained chimp. Probably more efficiently. Clerical work as well as industrial. I’d even add managerial, in some cases. Always will be. lot of work is mindless, repetitive, needs minimal skills but still needs to get done or nothing else happens.
So what’s so special about flipping burgers?
Had this with a bank branch manager a while back. Far as I could see, his job was implementing the rules set out in the bank’s rule book, with no room for deviation. You could teach a dog this. The only skilled part seemed to be signing his chop on the transfer paperwork
Bloke–the phrase does not refer only to fast-food jobs, but generally to low-paying, low- or no-benefits service sector jobs: fast food, retail clerk, barista and others. The issue with them is not so much the intellectual requirements as it is the pay and benefits. So they refer not so much to the specific tasks or skill sets so much as the economics. Although the former are not unimportant. After all, various labor rights documents state that there is a “right” to “decent” work or “productive” work (I am not endorsing those statements or “rights,” merely pointing them out as indicative of how some people perceive the matter). But usually what is being referred to–or at least what I am here referring to–is the phenomenon whereby a unionized factory worker, or an “office worker” making $XXX and with medical benefits and a pension plan loses his job and the only replacement within an effective time frame (from termination to, say, 5 or at most 10 years) is a job at a Wal-mart at minimum wage and no health insurance. The Wal-mart job may require no greater intellectual ability than the factory of office job, but, in addition to the reduced economic profile, the “status” and “esteem” are going to be lower as well.
Most of the good in the Sears catalogues were American made.
And the ones that were not were still not bought with borrowed money.
I am no Protectionist (I have read Sir Dudley North and co), but a system where people borrow more and more money and use it to fund their consumption of imported goods – is not going end well.
Taxes on production are far too high – and government spending and regulations are crippling.
But no one in politics, bar Ted Cruz, appears to have noticed.
QET said,
Complete nonsense. since when does limiting markets and forcing people to operate in less efficient circumstances and limiting options result in greater prosperity for a nation? Tariffs not only raise prices on imports, it also raises prices on domestic “like” items. And you also set up less production and product innovation that is usually forced through competition.
Would a nation’s tariffs on import cars, say, result in greater prosperity for that nation’s domestic car manufacturers?
Yup.
Would it mean a gain in NATIONAL prosperity? No. The result would be LESS total economic surplus due to dead weight losses. Protectionism and, to a lesser degree, tariffs are self-imposed embargo. It’s dumb-assery writ large.
To see why, watch these to very informative videos.
https://youtu.be/h2XAII9HdHA
https://youtu.be/TDY2sIMDZLM