The Tipping Point

Benicia literary aficionados are familiar with Malcolm Gladwell’s “The Tipping Point.” Our nation has experienced a steady tipping in favor of normalization of cannabis as an agricultural product with multiple uses, most prominently as a medicinal supplement, or mood-modifier far safer than alcohol and completely non-toxic. Cannabis as an agricultural product brings with it billions of dollars of investment and consumer spending from residents and visitors to our state.
To this end, premier Napa Valley vintners have organized with a view towards integrating cannabis cultivation in addition to grapes. They have formed the Napa Valley Cannabis Association, with a goal to “…promote Napa Valley cannabis as the best in the world…” adding a new component to the agricultural identity of the Napa Valley. The fact that the Mondavi family is a major force in this effort is leading a change in formerly stiff opposition to cannabis in Napa County. Political candidates and issues in future Napa County elections cannot lose if they are endorsed by this group.
Accordingly, I have initiated the formation of Solano Cannabis Association, based here in Benicia as we continue to lead the way for seed to sale cannabusiness throughout Solano County. We will have an internet presence in the next couple of months, with information about regulated cannabis activity in the seven major Solano County cities as well as at the county governance level. We will be endorsing candidates and ballot measures for November that support regulated cannabis activity.

Stan Golovich,
Benicia

Why trade deficits and dumping aren’t bad

As a Libertarian and lay   economist, I agree that tariffs are bad, but there needs to be a much clearer and deeper explanation to the public at large, why a negative balance of trade, and specifically dumping are not bad.
Consider the 25 percent tariff on imported steel and 15 percent imported aluminum. I would like to make three points:

1. The American Institute for International Steel, says about 140,000 Americans work in the steel industry. Those workers would benefit. Two steel companies said they will create 800 additional jobs.
But economists say the trade action will cost the economy thousands of jobs. Mark Zandi, chief US economist at Moody’s Analytics estimated that job losses could range from 100,000 to 150,000, because steel and aluminum are used in thousands of products, and those products will become more expensive to manufacture. Thus those industries will be less competitive, will shrink and will lay off workers. It is the law of unintended consequences to think tariffs will help an economy. It won’t; it will hurt the economy overall.

2. The American consumer gains when other countries dump products in the US. Dumping means they are selling product for less than the cost of manufacture. This means foreign countries are subsidizing the products we buy. Products are cheap to us consumers; things are a bargain. We consumers love a sale. We should thank those countries, not prohibit the practice. In fact, it is a “free lunch” and we should accept it, with thanks. For instance, in the U.S., many welfare families have cellphones and large screen TVs today, benefiting from the trade deficit. They benefit greatly from the abundance of cheap products imported from China.
And yes, a certain segment of the American public will be harmed for a while, and they will send their toughest lobbyists to Congress to prohibit this dumping practice. But they are a concentrated few people who will be hurt (and therefore make a lot of noise) versus the disbursed group of all American consumers who benefit (who most often remain silent).
We win as a country overall when another country dumps products here in the U.S.

3. Most importantly: since currencies are floating, the issue is self-correcting, i.e. everything will eventually come out in the wash, so to speak.
Because we import more than we export– and we the consumer have the benefit of all those  cheaper goods–, U.S. dollars have flowed out. Those countries which have accumulated dollars will find that the value of those dollars goes down, because the world is awash in dollars. This means that goods priced in dollars become cheaper. Eventually they become so cheap, the balance of payments will shift over time. Our products will become cheaper to export, and their products will become more expensive. We will buy fewer of their products and they will buy more of ours.
Just look at Japan as an example. In the ’50s and ’60s, Japan’s products were considered very cheap and not very good. We imported a lot from Japan, and feared the trade imbalance. Today we import only a few, high quality items from Japan. Why? Because many of their products, in dollars, became too expensive. Well China is the new Japan.
Each country, and for that matter, each person, has a comparative advantage in producing something for the market place. You might be a lawyer, but you also might type faster than your legal stenographer. However, it is better for your business as a whole for you to do the legal part and let the secretary do the typing part, as you both together produce more with that division of labor.
Competition and the self-adjusting currencies fixed the “problem.” Free and honest trade between us will fix itself through currency exchanges. Notice I said “honest”. That eliminates stealing property, whether physical or intellectual. Free trade means you and I can agree on any price that is mutually beneficial. It is a contract.
I like to say “Water (in this case money, or currencies) seeks its own level.” In this case is self-correcting.
Thanks for listening.

Suzanne Kleiman,
Benicia

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