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Claudia Valdes

International Traffic Department, Diamonds International Corporation

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Is it really possible to eliminate poverty around the world? or is it just an utopia?

I'm from Mexico, and this Sunday Mexicans will elect a new president. Why do I give this explanation? Because the main topic that all the candidates had was the elimination of poverty in our country. But those statements really make me think deeper in the subject, and look back across human kind history, just to find out that poverty is almost inherent to human kind, and across all this years the people have been in this world, there always have been poverty.
Why? simply for the very own nature of the human kind and the relation between each other.
Then I ask myself, how a single person, in this case the president of a nation, can promise millions of persons, that will eradicate such a big problem, that has been with us for thousands of years.
Going in another line, millions of persons across the world are becoming more aware of the world situation about poverty, but it just stay there, very few people do something about it, including myself, I must say. But how can a few persons can make a difference? and going on with that idea, will it be sufficient to really solve the problem? Will it be eradicated for good? or just because our nature it will never be possible?

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  • Jul 3 2012: However, contrary to my last post, I believe that some level of poverty is going to always exist simply because of human nature. Human nature has a desire to survive. It is a pretty basic one. Food is great motivator. A lot of people don't realize, but there is a transfer of wealth between nations going on constantly. When nation A sells overseas to nation B, nation A is gaining wealth while nation B is losing wealth. When a nation loses real wealth its real income will go down (if ceterus paribus is held). This means that it citizens will be able to buy less and its standard of living will go down. No one wants their standard of living to go down, and this is why people work hard. This competition with other people in different countries is part of life. It basically means that if one works hard he can advance in status in life. The only thing is that in order to do this, an individual must sell to (or work for) another person, and he ultimately taking that wealth from someone else (because someone had to buy his service or good). This type of competition is vital to society.
    However, if there was some sort of program that prevented people from having any sort of need, a lot of this incentive to work would be taken away. Human nature can also be pretty lazy, so why work if there is no danger of starving? This is why some people complain about government programs like welfare. And ultimately if there were a global program that would support people who chose not to work, the rest of the working population would have to cover that cost. (I am not saying anything about the validity of America's welfare program. Also I do not believe that everyone on welfare "chose not to work;" I am just noting some humans do not wish to work.)
    Really though, I cannot see humans giving up some of their resources to help those who simply choose not to work. I most certainly believe that people would help those who can't work, but poverty will remain. The competition is too vital.
    • Jul 3 2012: No matter how harsh that comment and explanation may seem I can't help but agree with you.

      I would love for poverty to go away eventually but the majority of the worlds economy is held by rich and powerful men who are only being human. Greed and lust are part of our very nature. Civilization is what trains us to be more kind to our neighbours and teaches us right and wrong but we are far away from perfecting such things to the point where everyone is equal in skill and resources. I my self would love some sort of existence similar to the Federation where there is no wealth only service to ones work and a prosperous life guaranteed to all. Such a thing if it did ever exist is far away and such a thing would require the unification of the planet to prosper properly. Sharing resources globally and group collective community could maybe, one day create this paradise.
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      Jul 3 2012: "When nation A sells overseas to nation B, nation A is gaining wealth while nation B is losing wealth"

      it is the complete opposite of what economics and common sense tell us. if both nations agree to the transaction, it means they both gain, both get wealthier. nation A will have more money than they valuate the product sold (otherwise would not sell), nation B get a product more valuable than the money they gave for it (otherwise they would not buy).

      one can argue, however, that money has no real value, only products does. so in that sense, not nation A, but rather nation B is the winner. it gave up worthless money, and got valuable products. of course, nation A will not sit on that money. sooner or later they will show up in nation B to spend their money on something, and so the equilibrium is restored.

      at the end, any transaction must have its mirror transaction. it is impossible that nation A constantly sells more to nation B then vice versa. if this happens, nation A soon will have loads of money of nation B, while nation B will have less and less of his money. this will increase the value of money for nation B, and lower it for nation A. this reverses the flow of materials, and restores balance of trade.

      that, unless nation B is the united states, and nation A is a poor country anywhere. the united states prints mountains of money to exchange it for real goods in china, india and others. how they can get away with it, is a mystery. but the beneficiary is the united states, not any country A.
      • Jul 4 2012: Maybe I did a poor job explaining what I was attempting to say. The concept I was trying to explain was net capital outflow. It basically says that if a country imports more than it exports, it is losing real wealth (not money but actual "stuff"). I was talking about if the imports were consumed and if there were no government involvement or change in productivity. (America isn't printing any more money in this case.) Having a negative NCO will eventually result in less income per person and a lower standard of living. Sorry if i did a poor job of explaining, but I don't believe that this is incorrect.

        I said this to make one point: if i want to sell a good or service, someone else has to buy it. This means someone else has to pay for it. This in the big picture means that if (if productivity isn't going up) one country does well (gains 100 dollars), another country has to do the opposite (had to pay the 100 dollars). This world-wide competition makes this utopian idea of equality basically impossible.

        The idea of equality is great, but I still don't think it is possible. While I love the notion that everyone can be equal, I know that money is a great incentive to work hard. If everybody were treated equally, there would be little motivation to do hard jobs or do them well. This competition is vital to society. That being said, I still think people should help those who do not have the resources that they do. Generosity can go a long way.
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          Jul 4 2012: i don't think that it would be misunderstanding or poor wording. you committed serious mistakes in this post again. i think it is deeper.

          first. you got it reversed again. if a country imports more than it exports, the country is gaining, and not losing, real wealth. if it could go on forever, it would be ideal for that country. however, it can not go on forever, since the difference is produced by someone else, who will sooner or later stop doing that. that is what happens now. large parts of the world consumes more than it produces. the USA, greece, spain and others. they enjoy this as of now, but it is not sustainable, and must be reversed in the future.

          second .the very nature of exchange is not zero sum. zero sum exchange does not happen, because it has no motivation. exchange happens only if there is gain for both parties. that is explained well in the wealth of nations by adam smith, so kind of old wisdom. it is called the division of labor. this is the primary source of our wealth. the difference between our lifestyle and the lifestyle of the neanderthals can be attributed to exchange and division of labor.
      • Jul 4 2012: Krisztián, I think you are ignoring some parts of the issue:

        1: Some imports are durable, some are consumables. A country which imports its consumables will eventually bankrupt itself. A country which imports durable goods has those goods, potentially, forever. The latter is truly a zero sum game, as they paid for those goods with the equivalent amount of good/services/money.

        2: All things being equal, exchange is indeed zero sum for those exchanging. If both parties win, they are still on even ground, in other words, zero sum. The fact they both are happy about getting what they want doesn't make the trade lopsided. The 'sum' only leaves zero when other factors, like need vs want and consumable vs durable come into play. In short, if both parties win, neither party wins. Zero sum.

        -------------------------------------

        @Noah's comments, I think he is ignoring the lopsidedness of taxation and regulation. Only in a purely free-market society can more work equal a better lifestyle. I, personally, have turned down salary increases due to being bumped into a higher tax bracket. If I accepted the raise, I would end up making less money due to taxes.

        As for people simply "being lazy", I think that is complete nonsense. If someone were risking starving to death, do you honestly think they would sit there and die if given the opportunity to work for food? It is industry, discrimination, laws and regulation which prevent many people from working who otherwise are willing and able. Some easy examples are refusing work to convicts, homeless people, people without a home phone, drug testing, required college degrees for otherwise simple work and I haven't even listed regulation based discrimination such as licensing requirements.

        There are a rare few jobs which are purely skill/performance-based anymore. Have you tried getting a government job, even a low end one, without a degree? It is nearly impossible today, for jobs which people are otherwise highly capable of.
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          Jul 4 2012: i'm actually losing my patience debating economics with people who does not understand the basics. i assume you would be rather upset if a computer illiterate tried to tell you how css works.

          1. durability or any other property is just muddying the waters. at a certain point in time, goods have a market value which comes from supply and demand. at any time if a country has a negative trade balance, it means that at market price (!) they are getting more than they produce, and they compensate for it by promising future goods (accumulating debt). you have some elements of truth though, because a country that imports production goods will easily meet its obligations later, due to the increased production. production goods (=capital) can be seen as "durable" in the sense that it maintains and even creates value (if used the right way, let me add). borrowing for consuming leads to hangover.

          2. an exchange is NOT zero sum. zero sum means that the gain of one plus the gain of the other is zero. if there are only two parties, one's win is the other's loss. if they both win the same amount, it is not zero sum, it is positive sum. in addition nobody said they gain the same amount, they can win very different amount. more precisely, we can not even measure how much they gained, since it is subjective. all we know is that they both gain, otherwise the exchange would not happen.
      • Jul 4 2012: "i'm actually losing my patience debating economics with people who does not understand the basics."

        Then add citations to your explanations, so those of us who are confused or wish to learn more, can. You state yourself how it is counter-intuitive, so unless people, like myself, have a means of fully learning it, the chances of us understanding it from a few sentences is pretty unlikely.

        Just as I wouldn't simply capitalize the words in my arguments, but point a person to where they can learn more about CSS and better understand where I am coming from.

        Do you have a link to share which explains how trade is not zero-sum? As, even after reading your explanation, I still do not see how both parties can win in a trade.

        Here is my confusion, which I'm hoping your link will explain to me:

        Party A trades item A to Party B for item B. The most even trade which can happen is both parties slightly lose after transaction costs. Any other outcome would entail Party A getting more of item B than item A is worth on the open market because, say, Party B needs item A badly (or the exact opposite). If Party B were in desperate need, Party B could simply go to the open market and find it for market value instead of trading more of item B than they had to. It seems your example assumes there are only ever two parties in existence, which isn't realistic.

        Again, all things being equal, ignoring transaction costs, if Party A wants item B and Party B wants item A, neither is going to pay more than the market value, unless one of the two parties has a monopoly on that item. That said, I can't think of a single example of a nation being the only one in the world with a certain product, but that doesn't mean there isn't an example.

        So, with that said, I don't see how two nations can ever 'win', as they both would have to overpay for a double 'win' to happen. So, that is my confusion, and I hope you can provide a link which corrects that confusion, if my understanding is wrong.
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          Jul 4 2012: okay, tell me then. if not both of them win, why the loser engage in exchange? until you answer that question, there is no advance. there are other formulations of this question. namely: if you think that a bar of chocolate worth exactly its price, so you are not better off not worse off, why do you buy it? it does not worth the effort. but if it worth more than its price, why don't you buy two? three? a hundred?

          what you need here is another basic principle of economics, namely the diminishing marginal utility. these theories are more than a hundred years old.
        • Jul 5 2012: Mr Webber, the point I was trying to make about "being lazy" was not exactly what I intended. I was merely stating that this competition and the fear of starving is probably the biggest motivation to work. If we had some system in which prevented any sort of poverty, this fear of starving would be taken away, and the motivation to work would go away too.

          Mr Pintér, I believe that a side may engage in an exchange out of simple need. I was mainly talking about consumable goods. If Party A is very populated and cannot produce enough food, it would often import food from Party B. Party A values the food bought and that why Party A buys it. However, Party consumes the food and it is gone. Party B still has the money that Party A spent on the food. It is still a sum zero exchange, but more of the world's wealth is going from Party A to Party B. If Party A does not have some export that it sells to offset the food that it had to import, it will eventually have a standard of living/net income per capita decrease. (assuming government doesn't intervene or some other force acts on the market.) This is because net income is consumption + investment + government expenditures + net exports. If net exports is negative and consumption, investment, and govt expenditures are the same, the income must go down. After a while, Party B would begin buying more and reverse the process. This competition makes countries attempt to gather wealth and resources in order to improve the lives of its citizens. This competition makes total equality very unlikely.

          This being said, Mr Pintér, your choice of words is very derogatory. If I am committing "very serious mistakes" that are "the complete opposite of what economics and common sense," you probably should simply ignore what I say. If you are losing your patience because I don't "understand the basics," just don't respond. If I am blatantly wrong, people will realize that and disregard my statements. Condescending remarks aren't necessary.
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      Jul 9 2012: " I believe that a side may engage in an exchange out of simple need."

      the satisfaction of a need is a benefit by definition.

      "Party A ... import food from Party B. ... consumes the food and it is gone. Party B still has the money"
      "If Party A does not have some export that it sells to offset the food that it had to import"

      depending on how party A got the money they spent in the exchange: either they worked for it, in which case it is perfectly balanced, and then don't become any less wealthy. or they did not, in which case party A is the winner here, they get food for worthless papers. i assume you are referring to saving vs consumption here. that is valid, but a completely independent issue.

      "It is still a sum zero exchange"

      no, it is still not zero sum due to the same reasons i have said already. but now i add division of labor as an addition to the perceived value gain (which is the real gain). with exchange, the total sum of produced goods is higher.

      "This is because net income is consumption + investment + government expenditures + net exports."

      in the keynes-ian theory. in common sense theory, income is the sum of production.

      but even in keynes-ian theory, nobody says that a country borrowing for consumption would be worse off. in fact, based on keynes-ian theories, the US borrows like crazy to consume. the only problem with that is the world won't always be a partner in it. and when they stop financing the party, the party will end abruptly.

      "very serious mistakes"

      does not constitute as an insult. unless you have the self image that you can't make mistakes.

      "you probably should simply ignore what I say"

      why should i? mistakes are to be corrected, not ignored.

      "If I am blatantly wrong, people will realize that"

      come on now, not everyone is an economist.

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