From: Bart  Croughs <bart.croughs@tip.nl>
Date: Tue, 13 Aug 1996 17:00:01 +0800
To: "'cypherpunks@toad.com>
Subject: re: National Socio-Economic Security Need for Encryption Technology
Message-ID: <01BB88ED.98A382E0@groningen16.pop.tip.nl>
MIME-Version: 1.0
Content-Type: text/plain


Sandy Sandfort wrote:

>Been there, done that.  I repeat, the error that Bart made is
>assuming that because some US-source capital gets redirected 
>overseas, that the total amound of capital investment will 
>decline thus producing the wage drop he is fretting about.
>Unless he can show that foreign capital investment will not flow
>to US workers who are "forced" into working in industries where
>they have a comparative advantage, his argument must fail.  After
>all, I--like the economists Bart cite--think international free
>trade, the free flow of capital in persuit of the highest return
>and division of labor are a GOOD thing.

I also belief that international free trade, the free flow of capital in pursuit of the highest return and the division of labor are a GOOD thing. But in specific cases, I want to know the specific reasons. 
	You claim that I must show that foreign capital investment will not flow back to US workers. But in my original post, I said:

"Of course there are advantages also for the US (shareholders will get higher returns, trade will increase), but how can you proof that these advantages will offset the disadvantage of the lowered amount of capital in the US? "

You haven't answered this question yet. I don't claim that the U.S. is worse off when US capital moves abroad. I only ask: how can you proof that the US isn't worse off when US capital moves abroad? If you don't know the answer, there's nothing to be ashamed of. I don't know the answer either. That's why I asked my question, in the hope that somebody could provide the answer, so that in the future I would  be able to rebut arguments against the free movement of capital.

Another thing: 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.


Bart Croughs