Kinsley: Free Trade Means Free Trade
Published January 09, 2004
Back when I was more liberal and more inclined to be influenced by a dwid in bad glasses, I was a Michael Kinsley fan. But he has been way on the wrong side of the War on Terror, too rabidly anti-Bush without giving him any credit for his successes, and has had little or nothing to say to me for some time.
But, just to show you can never entirely write someone off, all of a sudden he has summarized and clarified my own free trade position better than I ever have, and I now stand in admiration of the pencil-neck wonk once again:
- Schumer and Roberts are alarmed by some of the effects of the high-tech revolution. And the alarm is understandable, if misguided. When David Ricardo first articulated the theory of free trade a couple of centuries ago, he was thinking bushels of wheat. In the 20th century, it was cheap clothes and heavy metal cars. But now we're talking electronic blips of information. So, you've got $20,000-a-year software engineers in India replacing $150,000 software engineers here. The consolation for losing, say, the shoe market to some dirt-poor Third World country was that we still had the market for computers. When foreigners started churning out computers, we still had the software. But when you've got doctors in Asia reading the brain scans of patients here in the United States, what is left? How can America possibly compete?
The core of free-trade theory is the concept of "comparative advantage." Schumer and Roberts make the classic college-student mistake of confusing comparative advantage with absolute advantage. Nations trade because for each one there are goods or services it is more efficient to buy from abroad than to produce at home. If there is nothing America can offer the world that is either uniquely desirable or cheaper than elsewhere, the world will not buy anything from America. And after a while the world won't sell anything to America either, because we won't have the foreign currency to pay for it. So, even in this extreme case there is no need to restrict trade because trade will restrict itself. But in fact, as Ricardo demonstrated, there will always be something worth trading. Even if Nation A can produce both apples and oranges more efficiently than Nation B, it will still make sense to concentrate on producing one fruit and import the other. And Nation B will make itself poorer, not richer, by keeping out fruit from Nation A. If Nation A retaliates by keeping out fruit from Nation B - and why shouldn't it? - Nation B will be doubly punished.
....Traditionally, the most troublesome thing about free trade - apart from the difficulty of persuading people that it works - is the unequal distribution of its benefits. The whole country is better off, but there are winners and losers. Generally, the losers are lower-income workers, whose jobs are the easiest to duplicate in less-developed countries. It seems misguided to me to avoid a policy that makes the whole nation richer because it makes some individuals poorer. With more to play with, it ought to be easy to ease the burden on free trade's losers.
- Kinsley: Free Trade Means Free Trade
- Published: January 09, 2004
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- Section: Culture
- Writer: Eric Olsen
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I forgot to mention Thailand, another country that has been thriving recently, since jettisoning IMF laizzes-faire for a more South Korean model.
Ah, facts! The enemy of ideologues everywhere.
Free trade is good, as long as the trade policies allow more of our goods to be exported to foreign markets, allowing American-based companies to profit from such policies, allowing the result of a greater number of Americans being hired to work in America.
However, when free trade includes human capital (i.e., employees), American workers suffer, and therefore should not be permitted without a price to ensure that American workers aren't eliminated from the job rolls (Unemployment claims were up today, by the way - jobless recovery - jobs leaving America for India, etc.).
Trade deals are just that: deals. A good deal requires a good negotiator, but we often give too much away and receive too little in return. Corporations win, but common working class, or even middle class Americans lose under the current deficient policies.
America was built by immigrants, and many of these immigrants worked at American factories. When free trade exports jobs overseas, America undergoes a process of deconstruction because immigrants stay in their country to work for an American company.
Free trade is a wonderful thing as long as it is fair to both trading parties. The current practice is not fair trade, nor is it free, as the cost of high unemployment does not benefit the United States of America.
It does, however, make it easier to create a global government and strengthen the argument for a one-world village and currency, but if you are a true globalist, that may be exactly what you're hoping for.
Cheers.
Many people confuse protectionist policies with state socialist policies. When the government is shielding an unproductive economy, protectionism only adds to the mess. But when protectionism is used on behalf of a dynamic economic sector--such as the Japanese and German auto industries--it is extremely effective.
The proof of this is in the garages of the yuppie free traders. They're all driving BMWs and Hondas on their way to the pro-NAFTA symposiums. What a laff riot!
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Well, no. Latin American followed strict free trade policies in the 80s and 90s, and collapsed. Asia--South Korea, Singapore, China--followed a mix of free trade and nationalist-protectionist policies, and thrived.
Open capital borders are important but only within systems that temper them intelligently (panicky steel tariffs are not intelligent).
The best car companies in the world--BMW, Audi,Toyota, Honda--are all in countries that subsidize these companies and protect them from foreign competition. This is an amazing little fact that completely discredits the free trade myth.
The United States rose to economic power in large part through the intelligent and strategic use of restrictive tariffs. Had it pursued strict free trade policies in anything but rhetoric, it never would have prospered.
U.S. prosperity has also relied historically on the defense industry, the mother of all protected markets.
In short, the "free trade" line is nothing but an ideological fantasy, similar in some ways to the socialist fundamentalism of decades past. Same ruinous result to those who follow it.