NationStates Jolt Archive

I think most people here are familiar with the concept of supply and demand... and for some reason I appear to have a cogent sentence block, possibly due to my tiny amount of sleep. This, anyway, was inspired by my pathetic attempt to debate chechnya, an area I know virtually squat about, and being countered utterly in both of my points *after which I hastily retired*

But, let us assume that there is a nation. For one reason or another, it is unable to produce enough food for itself by a long way, so it needs to rely on imports. However, this nation has also been blessed with a particularly valuable resource. Oil, gold, diamonds, a great collection of zombie and kung fu DVDs, it's irrelevant. But to these people, money is less of an object than it is to you or I. There is also only a small population living in this country.

Under the traditional rules of supply and demand, the cost for their food would be escalated, because of their demand, regardless of how easy it was for large multinational corporations to fill this demand, costs would be through the roof as it is a necessary resource, and they cannot supply their own. My question is, is this fair? Right? Does it serve them right for having such an unfortunate geographical location and they should be forced to sell their valuable resources just to have access to food that is readily available, but hideously expensive to them for no good reason? Or should we have balances? Measures to prevent extortion like that from taking place?

I'll admit that I am biased in favour of there being checks and balances to prevent such a situation from occuring. I tried to keep it out of my post... but I acknowledge that I may have done a poor job. Re-reading it, it seems like socialist rant on a semi-hypothetical situation. Never mind. Opinions?

Even if I made a terminological error (is that a word?) You understand what I'm getting at. Have at thee. I'm off to the shops for milk.

The demand wouldn't go up limitlessly, as there is a small population that can only eat so much. Prices would still be kept to a reasonable level. The market tends to balance itself out like that.

Kinda like Arab countries. Rich in oil. But they are very rich in turn.

Fair? I think so. If you have checks and balances, wouldn't it make them poorer? The world won't just rotate on giving aid.

Though you are right to some extent there are monopolies who abuse their power and sell for a crazy high price. Hence you need more competition.

There's two sides of the coin. It's all your resources including labour, some countries like Singapore, Hong Kong, has virtually no resources. Their resource is the people and their infrastructure but yet they are able to flourish.

It's how you make do with what you have.

Uh.. sorry if it doesn't make sense. My train of thought is all over the place. Reading too many threads at once.

If they have plenty of gold, should they ship it out cheaply? this could destabilise surrounding economies.
If they sell it dear then the world gold price is stable and they can use the money to buy the expensive food.

Your idea works but only in a very small area. They favorite saying of my economics teacher spring to mind "if all else remains equal" in this case you dont devalue other countries currency.

Robbopolis: The small population was meant to introduce/eliminate two factors, respectively. Firstly, with a small population, there would not be that big a market for food there compared to places like say... china. Secondly, given that not that much food would need to be imported, the costs in transporting the good would be lesser, eliminating "well the cost in bringing the food in would drive up the price" argument. You say that the cost would not rise limitlessly... I may have implied that, but I was not truly arguing it. My argument is that they would be distorted to a far higher rate simply because said country cannot refuse to buy in the food. if it doesn't, it dies. I was asking if it was fair that they should have to pay more than I would simply because of where they live.

Greedy pig:In regards to checks and balances... to explain further, I mean a government of a nation without food problems, eg one of the European nations would step in to subsidise food delivery if it felt that corporations were going too far. This would force the corporations to become competitive. If the government is shipping in food they can sell for a far lower price, the business loses out, and will become more competitive to survive. To me, that's keeping the advantage of capitalism, but ensuring it doesn't run rampant. Your comparison with singapore and hong kong was not something I had considered before, I was more thinking of the African countries which do have huge resources at their disposal, but cannot afford them (admittedly due to immense corruption and civil strife, but assume that was magically corrected.) They would find it almost impossible to survive as their fledgling mining and drilling operations would have to sell virtually all they make for food, stopping them from developing, forcing stagnation.
(erm, this feels incomplete, as a response.)

See U Jimmy: But if they tried to sell the gold (resource) expensively, why would anyone buy from them when there is doubtless someone offering it for less? They would have to be competitive in that market, preventing them from making as much money, forcing a disproportional amount to go on food, again, as above, forcing stagnation. It's a viscious cycle, to me.

Basic economics first: You would first notice the increase in food prices due to the low supply. Assuming a non-closed system, another country may agree to sell food in exchange for the rare resource. Now as food is supplied, the price would decrease. If one country (or company) sees a profit, it's more than likely more countries will follow, in turn further increasing the supply. This process should continue until the supply is equal to the demand, and at this point they would pay roughly the same cost of food as anyone else.

If neither government nor the population are concerned with money (I assume you mean personal wealth), they will still want to better the country and become self-sufficient. So they will spend their resource on farming equipment and seeds. Here the country may have been forced to spend some of its resources, but in return they improved the living conditions of its entire population. Not a bad trade off if you ask me.

The "problem" comes in where a few people control the resource and are only concerned with personal wealth. Here they get rich, the remainder country maintains its food problem. Fair? probably not, but this is the world we live in.

Greedy pig:In regards to checks and balances... to explain further, I mean a government of a nation without food problems, eg one of the European nations would step in to subsidise food delivery if it felt that corporations were going too far. This would force the corporations to become competitive. If the government is shipping in food they can sell for a far lower price, the business loses out, and will become more competitive to survive. To me, that's keeping the advantage of capitalism, but ensuring it doesn't run rampant. Your comparison with singapore and hong kong was not something I had considered before, I was more thinking of the African countries which do have huge resources at their disposal, but cannot afford them (admittedly due to immense corruption and civil strife, but assume that was magically corrected.) They would find it almost impossible to survive as their fledgling mining and drilling operations would have to sell virtually all they make for food, stopping them from developing, forcing stagnation.
(erm, this feels incomplete, as a response.)

Oh okay. Now I get what you mean. Yeah. I do believe in having some amount of restrictions. Especially in the growing stages of a nation, But too much restrictions, they'll get uncompetetive and eventually useless in the long run, when your resources run out you'll still die an eventual death.

It's something like what we're facing now. Our Proton cars are totally uncompetetive in the global market. Proton is sold with more luxuries for a cheaper price overseas then it is here in Malaysia. They survive because Imported cars here have a 300% import tax. Eventually when our market opens up (if) they're goners.

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I think they are several ways of making your market competetive still, rather than simple protectionism. However some level of protectionism I have to agree, but some countries like mine are taking it too far.

Invite multinationals in, but have some sort of labour law that requires multinationals to have at least a percentage of labour that they hire must be locals, especially some in the upper levels. This way, the citizens themselves can learn the skills and the effecient way of running the businesses. And in turn profit the government through taxes and boost the economy.

People tend to have the wrong concept of Multinationals. But the very matter of the fact, is that they can farm/mine better than the locals (and they don't need subsidies) leave something much to be desired. The idea here is to work with them carefully to make it a win-win situation for both sides.

Another way is making your currency cheap, ie pegging to the US dollar at a fake rate like China. So that your prices are equally competetive.

My question is, is this fair?


Of course it's fair. People in the multinational corporations have to eat too.

Is it fair... what a question. NO, it's not, but that doesn't mean you're automatically going to have higher prices. Agricultural producers are price Takers-why? because, a customer can go to almost anywhere else to buy food. This is true in Macro as well as micro economics-most of the world has farming, if you don't limit your choices to a single producer or single group of producers, you can prevent monopolistic pricing structures-no regulation attatched (other than, of course, mandating multiple suppliers or shopping the open market for the best deals).

The hazard is when you get something like OPEC, where the bulk of both raw crude production, and the refining companies, are under the same roof-this becomes a problem because your price-takers become Price-fixers. Here in the U.S., the price of Gasoline, Diesel, etc. has almost nothing to do with the average price per barrel of oil-and hasn't since 1973, when the majors fabricated an oil-shortage to run the smaller outfits out of business. (Storage tanks full of oil, tankers offshore, full of oil, but nothing coming from the refineries.)
Artificial shortages are also caused by taxation, so you want to make sure your suppliers aren't bound by those.

Under the traditional rules of supply and demand, the cost for their food would be escalated, because of their demand, regardless of how easy it was for large multinational corporations to fill this demand, costs would be through the roof as it is a necessary resource, and they cannot supply their own. My question is, is this fair? Right? Does it serve them right for having such an unfortunate geographical location and they should be forced to sell their valuable resources just to have access to food that is readily available, but hideously expensive to them for no good reason? Or should we have balances? Measures to prevent extortion like that from taking place?
well under normal supply & demand, in a global market, there is no real reason why the price of food sold to that country would be (much) higher than the 'normal' price (it would be higher obviously due to transport & transaction costs). however in an unchecked global market these firms would be able to engage in price discrimination - selling the exact same product at different prices to groups with differing price elasticity of demand. those with high elasticity for food will recieve the lower price, and those in that country, with a low elasticity, will just have to put up with being exploited. this isn't quite true cos food is a necessity and doesn't quite follow these rules, but meh, its hypothetical...

in answer to the question, no i don't think this is either fair or right. every person around the world has the right to eat, and to be exploited by a greedy few for extra profit is immoral, imho. this is going on in the UK ("treasure island") where the cost of living is stupidly high, and the cost of food, an every day necessity, is a contributing factor. but even worse than this, this would appear to be happening in Africa en-masse (i think...)

The hazard is when you get something like OPEC, where the bulk of both raw crude production, and the refining companies, are under the same roof-this becomes a problem because your price-takers become Price-fixers. Here in the U.S., the price of Gasoline, Diesel, etc. has almost nothing to do with the average price per barrel of oil-and hasn't since 1973, when the majors fabricated an oil-shortage to run the smaller outfits out of business.

I agree. When OPEC started, it was to protect the little people. Now their not little anymore.