From: Bart  Croughs <bart.croughs@tip.nl>
Date: Wed, 14 Aug 1996 23:16:12 +0800
To: "'cypherpunks@toad.com>
Subject: Re: National Socio-Economic Security Need for Encryption  Technology
Message-ID: <01BB89EA.F3642600@groningen08.pop.tip.nl>
MIME-Version: 1.0
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Arun Mehta wrote:

>>Bart  Croughs wrote:
>I don't assume that the *total amount* of capital will be
lowered in the US when US capital moves abroad. I assume that the
amount of capital in the US will be *relatively lower*. So the
wages will be *relatively* lower (lower than when the capital
wouldn't have left the US), but not necessarily lower in any
absolute sense. I thought this was obvious, but since Arun Mehta
also misunderstood me, maybe I should have been more explicit here.

>	Henry Hazlitt in 'economics in one lesson' (p. 139): "The best
way to raise wages, therefore, is to raise marginal labor
productivity. This can be done by many methods: by an increase in
capital accumulation - i.e. by an increase in the machines with
which the workers are aided..."

Pardon me, but I'm still confused. When Hazlitt talks about how
many machines are employed, surely that's "absolute" capital, not
relative. If US capital is invested abroad sensibly, such that it
enriches the investors, they have more money to invest in
machines at home and thereby increase local productivity (and wages). <<

If investors use their capital to invest abroad, this capital cannot at the same
 time be used to invest at home. Only after the investors decide not to invest
 abroad any more, they can invest it at home. But I was not talking about
 investors who decide to stop investing abroad and start investing at home. I
 was talking about investors who decide to invest abroad instead of at home,
 and the effect of such a decision on the wages in the US. Maybe in the future
 these investors will have more money, and will decide to stop investing abroad
 and start investing at home. But in the mean time, all the capital that's
 invested abroad diminishes the amount of capital invested at home, and so
 causes the wages at home to be less than they otherwise would have been
 (but not necessarily less in any absolute sense).

Bart Croughs