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Symphony of Creative Destruction

You wouldn’t think a Hawaiian vacation would offer a Texan lessons about economic change, comparative advantage, and creative destruction—but my trip to Maui did.

Of course, my wife and I may have been in relaxation mode, but we still tuned in to the Republican primary debates. (We both take this election very seriously.) The one in Detroit, you may recall—the 11th one, believe it or not—featured familiar questions from the Fox News panelists and canned non-responses from the candidates.

Chris Wallace focused on the jobs question. He asked: “What specifically would you do to bring manufacturing jobs back to America and train residents of cities like Detroit to do those jobs?”

The junior senator from my state, Ted Cruz, did an admirable job of lamenting the impact of “60 years of failed left-wing policy,” eliciting audience applause, but he failed to address the key issue of comparative advantage. This is the economic principle that nations are better off importing goods at a lower cost than it would take to produce them domestically.

In Ricardian terms, a country increases its economic efficiency (and, ultimately, the quality of life enjoyed by its consumers) by specializing in the production of goods for which it has a “comparative advantage.” A related concept, Schumpeter’s theory of creative destruction, holds that a dynamic economy characterized by innovation will inevitably lead to technological obsolescence and the displacement of particular firms (and even industries). F.A. Hayek’s great insight was that no central planner has the knowledge or insight to predict consumer preferences, making the free market indispensable. The government will inevitably fail successfully to pick winners and losers. Shortages, rationing, and bread lines are the result.

We heard nothing about these theories in the Detroit debate, which is unfortunate, since the American public needs an economics lesson and it would have been a great opportunity to provide one. Take the case, as I said, of Hawaii. After Captain James Cook’s discovery of what he called the Sandwich Islands in 1778, the archipelago we know as Hawaii became an important port-of-call for the sailing ships that plied the ocean (until the advent of the steam engine, which would make wind-powered sailing obsolete) due to its strategic location in the middle of the Pacific Ocean.

Before petroleum replaced whale oil as the primary source of lamp fuel, essential for illumination prior to the discovery of electricity and incandescent bulbs—note the creative destruction contained in the first clause of this sentence—whaling was a major industry. Fleets of ships left New England to scour the Pacific Ocean for the large Cetaceans whose blubber was rendered into valuable oil. The whales would diminish in number eventually, but at the peak of the whaling industry, around 1846, 736 whaling ships arrived in Hawaii (chiefly Lahaina on Maui and Honolulu on Oahu).

When crude oil was successfully extracted from the ground in Titusville, Pennsylvania in 1859, providing a cheaper source of lubrication, heat, and lamp fuel, whaling quickly faded into oblivion. The hundreds of whaling ships that used to dock in Lahaina have been replaced with tourists wishing only to watch the magnificent creatures breach during their annual migration.

Did the federal government dictate this transformation, or assist displaced workers in the whaling industry? Hardly. Hawaii has experienced other episodes of major economic change. The Hawaiian Islands, with rich soil, abundant fresh water, and consistently warm temperatures, were perfectly suited for the cultivation of tropical fruit such as pineapples. At one time, large tracts (including the entire island of Lanai) were pineapple plantations.

Alas, after decades of production and canning in Hawaii, the labor-intensive crop ultimately proved to be cheaper to raise elsewhere (and environmental laws banned the use of invaluable pesticides). Most of the pineapple production and canning has moved to countries such as Thailand and the Philippines. Lanai now has luxurious destination resorts, and Maui replaced pineapple plantations with designer golf courses—all of which are extensively landscaped and tended by an army of gardeners. On the site of the old pineapple cannery in Lahaina is a modern shopping center. The economy has changed, without government interference or direction.

The last example of economic change in Hawaii is the cultivation of sugar cane. At one time, Hawaii was the nation’s biggest producer of sugar, and Maui was covered with sugar cane. At the industry’s peak, in 1931, Hawaii’s sugar plantations employed more than 50,000 workers and produced more than a million tons of sugar annually. Even now, 37,000 acres on Maui are planted in sugar cane. Despite the importation of foreign workers, labor costs are high compared to other countries, and environmental restrictions make the practice of controlled burns (to reduce excess plant material prior to harvest) increasingly problematic.

Accordingly, after 130 years, Maui’s last remaining sugar producer, Alexander & Baldwin, recently announced that it will halt sugar production at the end of this year, idling its processing plant and laying off hundreds of employees. Sugar is cheaper to import from countries such as Indonesia, Mexico, and the Philippines, and Americans increasingly consume artificial sweeteners and sweeteners derived from corn syrup.

The lesson: change is inevitable. Unlike the futile delusions of King Canute, politicians cannot wave a wand and halt the inexorable tide of progress. The discovery of petroleum doomed the whaling industry. High labor costs and environmental regulations—along with competing uses for valuable land–doomed the domestic pineapple and sugar cane industries. Attracting millions of visitors a year, Hawaii is better off with a tourist economy.

In the case of Detroit, U.S. automobile makers used to have a near-monopoly on domestic auto sales. The United Auto Workers cartelized the workforce, and—facing little resistance from an industry unconcerned with competition—drove up labor costs (wages and what used to be called “fringe” benefits) to an astronomical (and unsustainable) level. Simultaneously, quality and design declined. When the oil embargo imposed by the Organization of the Petroleum Exporting Countries hit America in the early 1970s, and U.S. auto buyers became interested in foreign cars offering better gas mileage, the U.S. auto makers were unable to compete, with restrictive work rules, no-layoff provisions, and absurdly expensive labor. The domestic auto industry has been in a freefall ever since—and the once-lucrative jobs in Detroit and Flint have shrunken accordingly.

Should the government fix this? Or more appropriately, is it even possible for it to do so? The laws of economics are as unyielding as the law of gravity. Jobs will gravitate to labor markets offering competitive wages and productivity. Businesses will invest capital only if they can reasonably anticipate an adequate return. Employers will eschew jurisdictions that impose excessive costs, regulations, and potential liabilities. Given a choice, consumers will buy products that are cheaper and better than the alternatives.

Free markets sort these things out. Detroit has fallen from grace—virtually imploded—due to irresistible economic forces. Despite bankruptcies and bailouts, the domestic auto industry continues to struggle.  The tragic plight of Detroit—once a vibrant, wealthy major population center—is a parable of free market economics at work.

We don’t bemoan the obsolescence of buggy whips, whale oil, kerosene lamps, or sailing ships. Neither should we bemoan the collapse of an artificially inflated wage structure in a now-competitive auto industry.

As has always been the case with economic dislocation, people will eventually adjust—relocating, re-tooling, or adapting as necessary to meet the reality of the market conditions. “Rescuing” affected workers from their plight will only perpetuate the dysfunction that caused their predicament.

That is the answer I would have liked to hear at the debate instead of vague denunciations of “failed left-wing policy.” It is a sad commentary that basic economic principles went unmentioned at a panel of GOP presidential aspirants.

Reader Discussion

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on March 22, 2016 at 09:54:06 am

Excellent comments. My only additional thought would be that the format of theses "debates" does not lend itself to deep explanations of much of anything and the lack of economics education in this country would require extensive explanation to make the candidate's Ricardian/Schumpeterian/Hayekian points.

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Ron Johnson
on March 22, 2016 at 10:25:36 am

A fine essay on comparative advantage and creative destruction.

That said, I’m curious about the assertion that, “Despite bankruptcies and bailouts, the domestic auto industry continues to struggle.” Does it?

This is no mere quibble. The subtext is that the US efforts to prop up the domestic auto industry in 2008-10 were as fruitless as efforts to maintain the domestic whale oil industry would have been. I suggest this is a false comparison: The US propped up the domestic auto industry to help it over the unusually severe economic contraction which people had cause to believe would temporary. As far as I can tell, this view has been vindicated.

In short, I see no conflict between a belief in comparative advantage and creative destruction, and a belief in Keynesian counter-cyclical policies.

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nobody.really
on March 22, 2016 at 10:58:16 am

Mark:

All that you say is true and correct. However, it seems to me that we fail to account for one significant effect of the "off-loading" of manufacturing *might* (I use that word intentionally) as a consequence of creative destruction.

Simply put, how effective will our golf courses, our social media sites and all their pop-up ads be in countering the armed might of our potential enemies. Let us not suppose that it "will never happen here" (again) and that we will not ever be engaged in a global struggle, one significant enough to require a response not unlike that required for the Two World Wars. Look back over the history of the last 150 years. Why did we win? The North did not have better generals - far from it! The North had industrial might of an order or two of magnitude greater than did the South. Look at the industrial efforts / output of the US during the First and Second World Wars - not only did we provide arms, munitions, aircraft, etc. for our own services but we also provided the same to Britain and the Soviet Union (who took the brunt of the brutality, BTW).

We were able to relatively quickly convert our commercial industries to a wartime footing BECAUSE it was so large and capable. As a result we were victorious. Tell me how we will be able to convert Facebook into guns, airplanes, and tanks. Even if possible, we would still need to obtain the critical electronic components from - guess who? - China, which is a not inconceivable enemy.

We may talk all we want about rising GDP and / or median incomes and how much better it may be to enable your citizens to purchase the new X-box for $10 or $ 20 less than a domestically produced version, but it may be a not inconsequential result that the only warfighting that will be done by our techie friends is ON their X-boxes.

Creative destruction is fine in so far as it goes. Bear in mind that for the preponderant majority of those adversely affected the operative term is "destructive" rather than creative.

A couple of thoughts on this:

1) If you seek to win an election, you may want to consider that the alleged benefits of creative destruction will not resonate with a significant portion of the electorate (see H-1B victims as well).
2) If you wish to win a war, you may want to retain sufficient industrial might to successfully engage a potential or real enemy. (See recent papers on status of forces / equipment, etc).
3) Rather than bemoan the critique of failed left-wing policy, take a considered review of precisely what those policies are, what they have done, how they have resulted in a loss of manufacturing capacity; include in these left wing policy reviews the effects of both taxation and labor laws - and just for the fun of it, throw in environmental and other mischievous regulations, all of which give industry pause to consider WHERE they may wish to manufacture.

Yep, the candidates are doing no more than mouthing the usual conservative platitudes. Rather than denounce the platitudes - encourage them to flesh it out and make it plain to the citizenry what the effects of such policies are.

4) Remember, we are not here discussing the demise of the buggy whip but rather the critical electronic components that comprise critical defense and surveillance systems necessary for proper defense of the nation. Shall we, when in the midst of hostilities, request that China continue to ship crucial components to our shores? Or perhaps, we could ask them to engage in "virtual" warfare, we have lots of virtual toys and seem to be pretty good at it!

5) I don't recall any "service" economy winning any wars. Then again, we are pretty competent at banking - perhaps we can buy our way out of it?

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gabe
on March 22, 2016 at 11:01:38 am

While U.S. car sales are up in recent years, I believe U.S. auto makers' market share is declining; Toyota is the best-selling brand; sales in Europe are weak; etc. U.S. auto makers earn most of their profits from SUVs and pickups, which is a precarious market dependent on continued cheap gas. The U.S. auto makers are not out of the woods.

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Mark Pulliam
on March 22, 2016 at 11:11:30 am

All true, Gabe. The UAW is to blame for the plight of Detroit. Labor costs (including lifetime retiree medical) are ruinous.

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Mark Pulliam
on March 22, 2016 at 12:03:33 pm

HEY!

1. Gabe didn’t say boo about the UAW. Don’t pin that on him.

2. The UAW didn’t do anything other than pursue its self-interest – and they seemed to have done it rather well. It was the auto manufacturers who had the duty to resist union demands – and they seem to have done that rather poorly. Place blame where blame is due, if you please.

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nobody.really
on March 22, 2016 at 12:04:10 pm

Partly vindicated, true!

Last time i checked the figures, Ford, who did not take the bailout (but did agree to some other minor "benefits") was doing the best of the once Big Three. Chrysler which after having been first sapped of its cash reserves ($5B) by the "friendly" merger with Daimler was in bad shape to begin with - then came the recession. They were effectively given to Fiat. GM was doing worst of all, until the last two years. Apparently new models, branding and quality improvements have helped. It cannot, or should not, perhaps, be denied that the "bailout" helped keep these companies afloat.
Yet:
1) It must be remembered that this was accomplished by a) screwing shareholders and b) primary creditors.
2) Non-union labor was also shorted in the settlement. It is, at this point, unclear what the total economic effect of that determination (screwing the non-union folks) is.
3) It is also an open question as to what would have resulted had the government not stepped in. Standard bankruptcy could have yielded some interesting results - but I leave that to you as you are far better informed on economics than am I.

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gabe
on March 22, 2016 at 12:08:56 pm

Arguably manufacturing has a kind of positive externality (preserving the capacity for large-scale warfare) that society values. Given that, arguably society should be willing to subsidize manufacturing to maintain that capacity.

(I recall that military contracting often involved adopting two contracts. True, this involved incurring extra cost, because the US would contract for both the least-cost bid and the second-to-least-cost bid. But the goal was to keep military contractors from becoming monopolies, which allegedly would be better for the US in the long run.)

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nobody.really
on March 22, 2016 at 12:13:22 pm

Nobody:

See my response to your earlier comment.

And, in a sense I do not blame the UAW - it is permissible and so they did it. They sought to protect their own interests
The "grown-ups" should have been more responsible:
1) I would place more blame on the Obama administration for dictating such terms - it was within the discretion (as they arrogated that to themselves) to proceed with standard bankruptcy and the government did not have to agree to "short" non-union labor and make whole union labor.

2) And you are absolutely correct - the automakers had the duty to resist. Then again my late father was saying this in 1958. What the heck, like father, like son. Neither of us are / were listened to anyway.

In any event, I will reiterate my point:
We must not lose sight of the critical importance of industrial "might" to our nations defense AND the sense of well being of our citizens.

Perhaps, it is time for a Great Compromise between Labor and Management.
Nest time we do an 'income inequality" piece, let us pursue this.

seeya
gabe

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gabe
on March 22, 2016 at 12:19:42 pm

Alternatively, sometimes the contract would be *awarded* to Company A, and with a wink and a nod, much of the production would be farmed out to competitor B. It seemed to work and it did help to avoid monopoly.

Of course, then there are the lijkes of that Great Statesman from Arizona, John McCain who seeing an opportunity sought to award a tanker program to Airbus. Little did the public realize that his chief of staff had served as a lobbyist for Airbus. Sometimes, it is simply better to preserve certain fundamental capacities even if it ain't all that competitive. The "market" isn't really *free* now is it?

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gabe
on March 22, 2016 at 12:40:16 pm

[P]erhaps, we could ask them to engage in “virtual” warfare, we have lots of virtual toys and seem to be pretty good at it!

We'll threaten to "un-Friend" them!

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nobody.really
on March 22, 2016 at 14:35:37 pm

All destruction is NOT creative.
All destruction does not occur as a result of creative attempts.
Creative attempts are often made by destruction in the conceit that the "created" will be superior to the destroyed. The historical and accidental success rate has been insignificant.

Without understanding, some terms become clichés.

Schumpeter, himself, describes an "evolutionary" process that occurs within economic structures. That is quite different from destruction by managerial incompetence.

That form of "evolution" may be seen in the development of the continuous casting process in steelmaking that was not widely adopted in the United States; but, it does not include comparative advantage for agricultural crops, specific industries, or labor markets.

Does this have to do with the individual liberty? Let us take some words from Schumpeter:

"Faced by the increasing hostility of the [social] environment and by the legislative, administrative and judicial practice born of that hostility, entrepreneurs and capitalists – in fact the whole stratum that accepts the bourgeois scheme of life – will eventually cease to function." **

He outlines much that is destructive (of "Capitalism") but does not assert a creative process for socialism or democracy – at least to my reading.

The fact that within the conditions of capitalism some destruction occurs in the process of creation (innovation, if preferred) does not controvert the occurrence of destruction of those conditions without creative advancements of society.

** "Capitalism, Socialism and Democracy" (1943, 1950) [Chap. XIV]

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R Richard Schweitzer
on March 23, 2016 at 00:15:23 am

"That is quite different from destruction by managerial incompetence."

Priceless - oops "priceless" also may add to GDP - so it must be good, right?

"Creative attempts are often made by destruction in the conceit that the “created” will be superior to the destroyed. The historical and accidental success rate has been insignificant."

This is all the more true when one considers the rather "creative" attempts at social engineering which in the context of the above essay would seem to expose the conceit of Tyler Cowen and his (wished for?) techno-elites.

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gabe
on March 23, 2016 at 09:16:16 am

Well written article but like most of economics now it seems to ignore reality. Don't get me wrong, I learned the same economics in college (which BTW I was in during the 82 recession in a Rust Belt town that had 20% unemployment then and lost 20% of its population to the Sun Belt). I've been repeating the memes to myself in the decades since graduation and convincing myself that they are true because, well, my own life hasn't been so bad. It is only in the last 10 years or so that I have had to challenge my personal comfort in those beliefs because those beliefs are increasingly conflicting with reality.

That college town didn't really adjust (even though it has won awards for doing so). Nor did that first forced adjustment come about as any 'free market'. The central bank then was protecting the status of the dollar relative to stuff (via high interest rates to kill the stuff part of the economy). It succeeded then - but there is no question that, in the decades since, everything about the US economy has been geared to keep protecting the dollar-producing (read financial sector) part of the economy. Recent 'free trade agreements' are not about trade. That is just the meme used to sell them. They are about protecting the dollar as reserve currency. We bail out bankers and those with valuable paper assets to 'keep the credit spigot flowing' - and that reverse Robin Hood ain't a free lunch.

How is someone my age who took a different path then supposed to 'adjust' so that they can, say, learn to be a hedge fund manager rather than a just-a-job worker? Back then, that college cost about 80% of what a HS student could expect to earn. Even then, it was getting impossible to do what my dad had done - work your way through college and graduate without a mortgage on your future income. Today, that college costs about 160% of what a HS graduate can earn. Mathematically impossible to do anything but mortgage future income - and all the cost/benefit calcs are based on the career earnings assumptions of a 20-year old not a 55-year old. And bogus credentialism in the workplace (see Michael Spence's Nobel) mandates that unless they go that direction, they ain't gonna get a job now unless they start a company.

I don't know the answers anymore. And am confident that the answers I do know don't really apply to most people who aren't as well off as I am. But I have enough old-fashioned ethics to be profoundly uncomfortable at the notion that economics (founded on the notion of decision-making in conditions of inevitable scarcity) is now serving the interests of those to whom scarcity just doesn't mean much and who have successfully rigged the field. I am also confident that the boorish boob (Trump) will win the primary vote in that town - and in so doing flummox an economic establishment that just can't seem to understand why the morons don't get what is so obvious to Top Men who know what's really good for them.

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Jfree
on March 23, 2016 at 11:13:30 am

Jfree,

Would you be surprised to "learn" that the views you state conform to the development of "Social Hostility" ** to which Schumpeter ascribed a force destructive of both Capitalism and Democracy?
That citation of his tendency toward economic determinism is not intended as an assertion or implication of invalidity.

Whether it will offer any comfort or not, consider the analogy of Jacques Barzun's comment about "teaching" and learning history; that one does not teach and learn - one "reads" history.
Perhaps the same is even more true of "Economics." We don't "learn;" we read.

At the end of his life Schumpeter was completing what became his posthumous "History of Economic Analysis" published as the manuscript edited by his wife in 1952 as an enlargement upon Max Weber's "Epochs." What it seems to me to offer are ways of examining (possibly understanding) the history of social orders (evolutions?) through analysis of their economics and the "grasp" of those economics by their members.

As you note, it does seem we are at a stage in our society where the responses to dissatisfactions are less to seek means to attain satisfactions than to develop hostilities from dissatisfactions.

As noted by Schumpeter and Robert Nozick, we do have wordsmiths (intellectuals) who aspire to the notoriety (and pre-eminence) of fomenting hostility; and we have a vacuous political class dependent upon it.

** Chap. XIII in "Capitalism, Socialism and Democracy"

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R Richard Schweitzer
on March 23, 2016 at 12:59:51 pm

At core I disagree that we are at a stage in our society where the responses to dissatisfactions are less to seek means to attain satisfactions than to develop hostilities from dissatisfactions. TARP bailout is a good example - and one that still resonates (see Bernie Sanders). In particular, those weeks of Oct/Nov 2008 when it was all truly a crisis. While some of the major free market or libertarian advocates started off in principled opposition (like many millions of Americans who could see corruption/extortion happening in plain sight); they almost all (esp the biggest ones) sold out those principles to preserve the nominal value of their asset/stock/housing portfolios. They attained satisfaction. And some of them were significant enough thought-leaders where their sell-out (eg the Kochs via AFP) was enough to make the sell-out happen in between the 1st and 2nd House votes. And the second they attained satisfaction for themselves (via a govt bailout not the free market), they turned around on a dime and advocated 'free market' for everyone else who didn't get bailed out. By March 2009, even the true 'deep thinker' types weren't at all interested in looking at the lessons of the financial crisis too deeply - and haven't done anything since to prepare for the next one. Only in pivoting to oppose all the completely predictable follow-on actions.

It is very easy to view a pol like Sanders as simply stoking hostilities from that bailout - and to a socialist like him, he'd have no problem if you view him that way. He is a class warrior and proud of it. But I view it differently. He is selling the exact same means of attaining satisfactions (govt bailouts and subsidies) that those who are now loudly free market advocates used back in 2008. Those advocates are now silent about what they actually did then. Their credibility is gone. They are the establishment precisely because they did get a bailout then. So the only people left on that public battlefield are the Trumps and the Sanders who have their own solutions to offer those who are little more than the bystanders of a rigged game.

I personally still believe in a free market. But the true enemies of it now seem to be those who are loudest in advocating it - for thee but not me. And that is where I have the ethical problem with whats happening.

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Jfree
on March 23, 2016 at 14:50:58 pm

What do you think the cause is?

Do we have a good system that puts bad people into power?

Or do we have a dysfunctional system that puts good people into power, but prevents the good people from doing good things?

Or ... ?

It isn't the case that we have a good system that puts good people into power and allows them to do good things. Or perhaps that is the case and the system enables good things but it fails because it doesn't prevent bad things.

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Scott Amorian
on March 23, 2016 at 15:48:46 pm

"It was the auto manufacturers who had the duty to resist union demands – and they seem to have done that rather poorly. Place blame where blame is due, if you please"

Except for the fact that the UAW had already squeezed so much in good times, that in bad times the Big 3 automakers couldn't afford to take a long strike. GM was unable to do so, because they were caught between the UAW and Wall Street, so they caved in to unaffordable contracts (especially regarding SUBs and other fringes) and hoped for the best, assuming they would somehow grow share enough in order to avoid paying out those SUBs. instead they skimped on product development, and the Japanese were on a four year cycle, while the Big 3 were on a five year cycle, and pretty soon, their only option was to buy share with large fleet sales, especially to captive rental companies.

You could argue that the pre-crisis Big 3 management could have been better, but they had a very bad hand to play to start with, based ion events ten to fifteen years earlier.

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Doug Wenzel
on March 23, 2016 at 16:28:47 pm

Jfree:

"At core I disagree that we are at a stage in our society where the responses to dissatisfactions are less to seek means to attain satisfactions than to develop hostilities from dissatisfactions."

I suspect that there is not really a distinct disagreement between your position and the position espoused in the selected quote.

I think if we differentiate between the *political actors* ( to include lobbyists, politicians and wonks) AND the citizenry - or at least the message that a significant number of the political actors propound to the citizenry - we may see that both responses are not only possible but are in fact operative.

Surely, the political actors when confronted with a threat to their own *resources* (both financial and power) can be expected to seek "satisfaction," i.e., crafting a way using government instruments and mechanisms to protect their assets. Thus, we have TARP and a whole host of other government sponsored, but taxpayer funded, schemes.

Yet, at the same time, these same actors, or more significantly a considerable segment of them with a particular ideological predisposition may seize upon the occasion of this latest government largesse to advance their a) ideological perspective and b) their own political careers. Indeed, both spectrums of the political class will be seen to have done this. Yet, it is also to be observed that the spectrum whose "voice" or messaging appears to hold sway is the one that asserts the "inequality" of it all and further capitalizes on the apparent (yet real) dissatisfaction of the citizenry. Indeed, it incites both anger and envy in the citizenry at the advantage that the political actors, primarily in this case the financial lobbyists and their clients, have enjoyed and exercised in the attainment of their satisfactions.

Indeed, such an approach may even be said to have been adopted by the theoretically (as you suggest) other spectrum - the *free market* Republicans - witness the rise of The Trumpster. Yet, it can not be denied that so much of what passes for political discourse is at root nothing more than a euphoria inducing vocal (and soon to be electoral) outrage based upon the DISsatisfaction of the citizenry. Is this not what the entire Democrat agenda has been for the last eight decades - a coalition of the aggrieved, the dissatisfied and the victim.

It is unfortunate but this does seem to bee the driving force behind and in support of contemporary political exchange.

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gabe
on March 29, 2016 at 11:27:50 am

I was interested to learn that the affected workers (not just at the Maui sugar refinery but also at businesses that supply or service the refinery) will receive generous federal benefits (up to 130 weeks of cash payments of up to $2,000 per month) and free college. All thanks to the federal Trade Adjustment Assistance program, because Mexico is "dumping" cheap sugar in the U.S.

http://www.civilbeat.com/2016/03/workers-affected-by-hcs-closure-qualify-for-federal-relief/?utm_medium=email&utm_source=users&utm_campaign=morning_beat&mc_cid=7666ae0f69&mc_eid=b98d7a76de

This type of boondoggle needs to be factored into the economic analysis of the costs and benefits of free trade. If everyone affected by global competition receives costly benefits, it may be cheaper to impose tariffs or restrict imports.

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Mark Pulliam
on March 29, 2016 at 12:39:52 pm

What makes it worse is that the only reason Mexico is selling its sugar at a loss in the U.S. is because U.S. corn syrup is displacing cane sugar with Mexican soda bottlers.

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Doug Wenzel
on March 29, 2016 at 13:40:27 pm

And if we peel away enough layers of the onion we would probably find that Archer Daniel Midland has managed to get some type of federal subsidy/price support/mandate that gives a competitive advantage to corn growers and makers of corn syrup. Someone needs to hose out the Augean Stable of cronyism, rent seekers, and special interests who distort the economy in so many negative and counter-productive ways. The free market can only work if it is free.

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Mark Pulliam

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