Posted on 08/26/2015 5:29:57 AM PDT by SeekAndFind
The quote of the day comes from pages 476-477 of the 5th edition (2015) of Thomas Sowell’s Basic Economics:
At one time, it was believed that importing more than was exported impoverished a nation because the difference between import and exports had to be paid in gold, and the loss of gold was seen as a loss of national wealth. However, as early as 1776, Adam Smith’s classic The Wealth of Nations argued that the real wealth of a nation consists of its goods and services, not its gold supply.\
Too many people have yet to grasp the full implications of that, even in the twenty-first century. If the goods and services available to the American people are greater as a result of international trade, then Americans are wealthier, not poorer, regardless of whether there is a “deficit” or a “surplus” in the international balance of trade.
Yes. And it matters not how Americans (or, more generally, how denizens of whatever country is considered to be the “domestic” one) gain greater access to goods and services produced globally.
If the Chinese become zealous devotees of a religion whose doctrine requires that they serve Americans by shipping to Americans goods and services free of charge, then Americans are made better off.
If the Chinese innovate in ways that lower their costs of production — and distribution and, thus, enable them to sell goods and services to Americans at lower prices — then Americans are made better off.
If the Chinese invent new products and offer to sell these new products to Americans at prices that Americans find attractive, Americans are made better off.
If the forces of international competition oblige Chinese producers to lower their export prices to levels closer to their costs of production, then Americans are made better off.
If the Chinese government forces Chinese citizens to subsidize the production of goods and services sold to Americans so that Americans can purchase these goods and services at artificially low prices, then Americans are made better off (although Chinese citizens, other than those involved in the export trade, are made unjustifiably worse off).
If the Chinese monetary authority buys US dollars with newly created yuan in order to (of necessity temporarily) make Chinese exports artificially inexpensive for Americans to buy, then Americans are made better off (although Chinese citizens, other than those involved in the export trade, are made unjustifiably worse off).
The above reality is missed by people, such as Donald Trump (but hardly limited to him) who judge trade to be “successful” only if the jobs and businesses that it visibly — that is, directly — creates in the domestic economy are perceived as being greater than the number of jobs and businesses that it visibly destroys.
This error is among the oldest and most difficult to kill in economics — not only because this error is serviceable to domestic producers who greedily seek protection from competition, but also because it appeals to people who refuse to think beyond what is immediately and blindingly obvious.
A version of this post appeared at Café Hayek.
You are willing to account for offsetting ramifications for "cheapifying" labor in the US, but won't consider the offsetting ramifications of US regulations and domestic government interference that "cheapifies" manufactured goods by offshoring production.
All while wanting to build a wall and deport the illegals.
Let the rest of the world worry about their own economies. Do what is best for ours, first, last and always.
There are no links or quotes from say, Washington's inaugural address or maybe a state of the union saying this was official admin policy. Pure fantasy. What really happened was his vice president was sent to Holland to open Ameica's first embassy to negotiate open trade and on top of that back then we were also opening up trade deals w/ China and Russia.
Let's give this goofy protectionist founding myth a rest.
Which sounds closer to Fair Trade than Free, which I prefer, so he can call it whatever he likes.
But the labor/environmental arbitrage that goes on now - essentially permitting US corporations to avoid complying with US regulations by contracting with polluters and sweat-shops - it too has to be accounted for in the lost opportunity for American workers. Now too, Silicon Valley is importing bright workers, whose cheap local education hasn't saddled them with hundreds of thousand of dollars in school debt. These foreign workers come from economies with a lower per capita living costs so they are willing - and able - to work for substantially less than most US graduates.
The best economic solution is not which country obtains the most money [perhaps one person, or a few], it is which country’s population is better off. In a voting democracy pure economics does not provide the best answer. Most people have to be better off or off with their heads in the next election. Hence the growth of socialism.
California here and Germany abroad are experiments serving as examples.
How about Fair Free Trade?
Jobs here pay wages that keep currency circulating locally. No jobs equals no wages, thus no money to purchase goods unless taken from someone (taxes) for distribution.
Money leaving the country for trade goods removes currency locally. To create currency the fed must create debt in proportion. Money loaned to purchase goods increases debt; as opposed to money invested into manufacturing, which as an investment will create wealth.
Actually a higher percentage of our GDP is manufacturing now than just prior to WWII. Lots of stuff gets made here.
Importing, retailing and marketing are value added processes and do not create wealth. A service economy does not create wealth.
The only form of fair trade is free (or freer) trade. Fair trade requires a more influential government and a belief that it can create an even playing field. The even field doesn't exist in the real world.. All government can do is make trade harder and more expensive. Anyone truly wanting fair trade supports free (or freer) trade.
This is laughable, if this were true then every South American country would be an economic power.
Re: Don’t give facts to free traitors, it messes up their cute little models.
and don’t remind them that Adams favored tariffs under certain circumstances, and Ricardo admitted that ‘comparative advantage’ only works if capital and labor don’t cross borders (Ricardo assumed patriotism would prevent this from happening).
If it was literally "even" there wouldn't be much of an incentive to produce the goods outside the US.
American companies producing their goods only in the US will always be competitive as long as we have an even playing field -- that doesn't/can't exist.
And whatever you do, don’t forget that is was Republican protectionists who gave us the 16th Amendment. We should remember to thank the anti-freedom traders for giving us the federal income tax. That’s worked out so well and all......
Patriotism would keep it from happening except that the globalists aren’t loyal to the US.
Here are some real basic economics. If interest rates return to the historical norm every dime the government confiscates will go toward servicing the debt.
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