Posted on 06/30/2016 8:53:36 AM PDT by Kaslin
Donald Trump is not a professor, but for years he will be yielding insights to every student of economics. His Tuesday address on trade did a masterful job of combining antiquated fallacies with misinformation and ignorance to create an encyclopedia of error. Instructors have never had so much free help constructing their lesson plans.
The vision Trump conjures is one of alluring simplicity. He promises to achieve "economic independence" by abandoning globalization, instead using American workers to produce American goods. This change, he said, would "create massive numbers of jobs" and "make America wealthy again."
It's a scam, skillfully pitched to fool the gullible. His framework is a house of cards built on sand in a wind tunnel. Its most noticeable feature is a total divorce from basic economic realities.
He scoffs at those who warn he would start a trade war. "We already have a trade war, and we're losing badly," he said. But what he objects to is everyday global commerce, which is not a form of war. It's a form of peaceful cooperation for mutual advantage.
In a war, the Japanese drop bombs on Pearl Harbor that we don't want. In trade, they sell us TV sets and cars that we do want. See the difference?
In war, both sides lose, because their people get killed. In trade, buyers and sellers in each country win -- which is why they trade with each other. What's true of individual consumers and producers is also true of nations.
Trump, however, thinks our economic troubles stem from the destruction of manufacturing production and employment, which he blames on foreign competitors. He's wrong on every point of this addled argument.
In the first place, the expansion of manufacturing jobs is not synonymous with prosperity. As countries grow richer, manufacturing's share of employment declines. South Korea, singled out by Trump for killing American jobs, has seen it shrink by nearly half since 1991. Japan and Germany have followed a similar path.
But U.S. manufacturing output is 54 percent higher today than in 1994 and 27 percent higher than in 2001. Those years are pertinent because 1994 was the year NAFTA took effect and 2001 is the year China gained entry to the World Trade Organization -- events Trump portrays as catastrophic for American industry.
Manufacturing jobs have vanished not because we don't manufacture anything but because companies have learned to produce more goods with fewer people. Higher productivity is what eliminated most of the jobs Trump mourns. He's no more capable of restoring them than he is of bringing back the dodo.
"NAFTA was the worst trade deal in the history of this country," he exclaimed. But he gives no sign of knowing what it actually did. The main provision was removing import duties among the U.S., Mexico and Canada. Before, the average tariff on Mexican goods coming here was 4.3 percent -- while the average tariff on U.S. goods going there was 12.4 percent.
So under NAFTA, Mexico had to cut its import duties much more than we cut ours. Even by Trump's logic, how could that have been bad for Americans?
Trump would have us believe that producers abroad succeed only because they have a free hand to cheat. "When subsidized foreign steel is dumped into our markets, threatening our factories, the politicians have proven ... they do nothing," he charged.
Wrong again. At the moment, the U.S. government is punishing allegedly unfair trade practices with special duties on 338 different imports -- nearly half of them steel products.
Blaming Mexico and China for the fate of our steel industry is like blaming email for the decline of telegrams. The biggest reduction in steel jobs came before the globalization of the past two decades. The number fell from 450,000 to 210,000 in the 1980s.
The total today is about 150,000. Even if Trump could manage the impossible feat of doubling the number of steelmaking jobs, it would be a blip in the overall economy -- which adds more jobs than that every month.
All he would achieve by putting up trade barriers, imposing tariffs and treating our trading partners as enemies is to inflate the cost of imported goods -- which would lower the living standard of every American household.
A Trump presidency would be useful for economists because it would serve to refute his misconceptions about trade -- just as a massive mudslide in Los Angeles is useful to physicists in dramatizing the power of gravity. But everyone else is advised to flee.
I think that it was Confucius who defined a knowing person, as one who knows what he knows and knows what he does not know. Mr. Chapman does not quite make the grade. He completely ignores the hidden costs, social, economic & long-range, in what he advocates. Whatever is saved in immediate expense, by having essential industrial products manufactured overseas, may be lost in the social damage to American communities; in the diversion of tax revenues to welfare payments to those who might otherwise be gainfully employed; in the possible loss of a future war, because of an inadequate domestic industrial potential, etc..
Remember that it was the incredibly large American industrial capacity, which enabled the allies to win World War II.
I do not necessarily disagree with the writer's postulations of near term monetary cost factors. Where he is truly pathetic, and completely out of his league, is in his cavalier ignorance of less immediate, less easily measured costs. Again, he is clearly "not one who knows."
Trump, being a master sales person, knows the best "deals" are essentially "win-win" for both sides. . .but must be negotiated from a position of strength. Thus, most of what Trump reveals about his plans is actually another important sales method called "bringing the pain." It's saying things are going to be intolerable unless you play ball on my home court.
I know "deal-making" and compromising scares us conservatives, but, in reality, we have not seen any true negotiating. . .only RINO capitulation and "pants dropping." Ok, Trump is not Reagan, but Trump is not a RINO bent-over with his pants around his ankles, either. Trump can stop the bleeding and turn the country, economically, militarily and socially in the right direction. GO TRUMP!
Our foreign policies and trade laws are a complete corrupt disaster and have been for decades Kaslin. But the article you posted says it’s Trump who has it all wrong. It’s interesting what you post here.
Btw, are you still a Bush fan as your home page indicates?
Are you unable to communicate?
90 million in the U. S. out of work
those that changed the trade policies...
anyone who disagrees with us knows nothing
we're the experts...
Trump is their reality check, and it's about damned time...
Other countries impose tariffs and currency manipulations and we are left with no jobs and fewer businesses. So how are these free markets fair?
At least he knows his birthdate, his kids’ names, his wife’s name, how many states there are, his favorite sound most definitely isn’t that awful muslime screech, and he and his wife aren’t ashamed of America.
I think that it was Confucius who defined a knowing person, as one who knows what he knows and knows what he does not know. Mr. Chapman does not quite make the grade. He completely ignores the hidden costs, social, economic & long-range, in what he advocates. Whatever is saved in immediate expense, by having essential industrial products manufactured overseas, may be lost in the social damage to American communities; in the diversion of tax revenues to welfare payments to those who might otherwise be gainfully employed; in the possible loss of a future war, because of an inadequate domestic industrial potential, etc..
Remember that it was the incredibly large American industrial capacity, which enabled the allies to win World War II.
I do not necessarily disagree with the writer's postulations of near term monetary cost factors. Where he is truly pathetic, and completely out of his league, is in his cavalier ignorance of less immediate, less easily measured costs. Again, he is clearly "not one who knows."
Excellent analysis. Thank you.
Yes. And let's not forget that Trump has built successful businesses all over the world. If anybody comprehends the mechanics of international trade, it is he.
I am so sick of this schlock. It is possible to be pro free trade while also being pro fair trade. If our supposed partners are cheating or getting benefits from the deals never intended, they why can’t we revisit them? Were they suicide pacts? Are they like social security, that third rail you don’t touch?
When did common sense become an alien concept?
... Well do you want a hands on person who has actually worked in the business world, or do you want the ivory tower, overly educated ignoramous’ professors that can’t find their way out of a wet paper bag??
Do you want an Adam Smith type or the John M Keynes type. We’ve had Keynesian Economics for the last 8 years or more — maybe it’s time to switch back to Adam Smith and the old Classical Economics — get rid of regulations, Laissez Faire so to speak after we’ve imposed sanctions/tariff/tax on the tradeous violators and begin to have the economy under control! or when our economy begins to return back to P* and. Q*.
And of course, we must win for those who will come after us; those who trust us to have done better than we have done, lately, to preserve what is irreplaceable.
YES HOWEVER that was when the Federal income tax did not exist. Tariffs was the money raised to run the government. Start a tariff war with federal income taxes in place kills the middle class because on top of federal income tax tariff recoup from products is passed to the consumer. There hang been a recent example of a sustainable 10 years period in which tarrifs have produced jobs
Just doesn’t happen
There had been no greater currency manipulation than the Federal Reserve. No damage by any other nation has been caused by any other country than our very own Fed reserve
China 1990 to present. High import tariffs and huge industrial growth. So you would be wrong. Totally wrong.
If universities had to follow the rules of economics then economics professors would have more credibility.
Every idea works when you can preface them with ceteris paribus.
The tarrifs haven’t provided or supplied China with jobs enmasse and haven’t built up the middle class. Their production has done that. The US starts a tarrif war you can bet anything on it the middle class here would be killed. Getting government out of the way is the only solution. It would allow for the free building of production factories uninhibited for product production and sale inside the US. Why would we ever in our lives think it’s conservative to allow the government to pick the winners and losers of products in a free marketplace by imposing tarrifs? That is called totalitarian control and is in no way a free market.
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