Fish Story II – Village Elders make wrong decision. But why?

Fishing Village Elders Choose the Path of MultinationalsI enjoyed the magical context of “Who Moved My Cheese” and wrote my fishing village blog, trying for a similar simple imagery. To provide some insight on the America’s structural unemployment issue, I did take the liberty of starting with a uniform landscape; one combined currency and product, and two distinct villages.

The elders in the story agree on a wrong conclusion, to have able bodied fishermen sit on the bank of their economy when they could obviously reduce their village’s debt burden. The perplexing question to ponder from the story is why they or any nation that has trade imbalances would come to the “elders” conclusion.

Certainly adding more products to the mix allows less able fishermen to find other talents. But within the constraints of the story, with no other options and being unable to fully contribute their own sustenance, it still makes sense for the fishermen to fish. The west village let all eat till satiated. Having all people fish would lessen the charitable burdens of others in the village.

Adding more products to the story opens up more possibilities to reduce the trade deficit. Through innovation, we can create foreign demand for our products and command a higher than commodity price. I hinted at this possibility when I suggested that the children might be able to catch more fish in less time and pay back the east with innovation inflated fish dollars. Innovation is a product of America and must be guarded.

But within the constraints of the story, with no other options and being unable to fully contribute their own sustenance, it still makes sense for the fishermen to fish. The west village let all eat till satiated. Having all people fish would lessen the charitable burdens of others in the village.

In addition, having one product for the story is sufficient if we make the assumption that utopian free trade existed for these two villages. I suggest that in one world market dominated by multinational corporations, “utopian free trade” is the ultimate trajectory point. We have a long path to that point I know. However, America is already experiencing the effects of traveling down this path.

In my utopian market, all products have become a commodity and, therefore, neither community has a product advantage over another, other than transport distance and geography. In the story, utopian trade existed. The elders of both villages agreed on a market clearing price of fish. Investment capital freely flowed to keep both villages fully employable with boats, fishing gear and bait. All trade secrets were fungible and, therefore, neither village had any technology innovation advantage. Access to raw materials and skilled labor was unconstrained. Profit sharing between workers, management, shareholders, and government was equal for both villages, they shared fish to satiation. Neither camp showed any civil unrest, government instability, uncooperative weather, natural disaster risks, or harm for the environment. They coexisted sharing the one lake peacefully. Demographics of both camps were similar, so neither carried, for example, the burden of an excessive aging population. The means of exchange was also transparent and constant, fish in boats.

The difference between these two communities therefore was in their motivations. The east was willing to accept less than the west for their work and to produce more than they needed, saving the results of their labor in future currency. The west was willing to trade later labor for current leisure given that 1) later labor was less work than they would currently have to work for the same fish and 2) the potential that the work might be borne by future generations and that they might escape the work altogether.

Skipping whether the west village’s motivations were pure, one issue must be explained for the story (and our current trade imbalance) to be logical. Why would the western villagers not allow the able bodied fishermen to fish on behalf of their village? It certainly would be less burdensome on the other villagers who would have to fish later to make up the debt that could have been lessened if they fished. How could this decision have been reached?

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