Clarifications on the Case for Free Trade

Ludwig von Mises Institute ^ | 4/12/04 | Paul Craig Roberts

[fooman]

But gov monies spent on science and tech (space, intel, and supercollider) end up benefitting us companies (boeing, other contractors)

[sinkspur]

Is that your Pastoral Response? Or your most intelligent one?

It's the truth, Niner.

[BfloGuy]

Roberts has answered his critics well, and he's honest enough to admit he doesn't have a solution.

But I think that by reigning in litigation costs, eliminating corporate taxes, and eliminating capital gains taxes we would go a long ways towards making the U.S. an attractive place to do business -- despite higher labor costs.

This would also eliminate the need to legislate where Americans can invest and would obviate the temptation to raise consumer prices through tariffs.

[Torie]

PCR lost his mind 20 years ago. I saw him on Firing Line as an interlocutor, and he was such an embarrassment, that Buckley had to declare his questions out of order, and he was never seen again on the program. PCR is a dyspeptic ideologue rather than a serious economist. That is my opinion.

[templar]

Let all these foreign countries develop technologies with their own money, not the money of American companies.

Actually, if you trace it back enough, most of that technology is/was developed originally by U.S Taxpayer money.

[schu]

This is a tough issue. There are a couple of givens, however:

1. The supply of cheap labor is for all intent unlimited for the foreseeable future. There are hundreds of millions if not billions of people in SE Asia waiting to enter the low skill labor market and work for $.50/day.

2. The short term benefits to the US consumer are enormous. Our standard of living is very high. It is unlikely we will be willing to pay $100 for a pair of jeans or $5,000 for a home PC.

3. The global companies, many which started in the US or are US based, are profit maximizers. They cannot accede to the idea of higher costs, the executives would be fired very quickly by their stockholders and replaced by those who will move to low cost countries.

Therefore, it seems to me we need to work to make the US the most competitive/productive economy in the world. For us, the cost excluding labor of doing business is very high and we need to work to reduce these costs. Litigation, regulation, etc must be brought under control while still maintaining the necessary protections.

[St.Chuck]

Good article. Thanks for posting it.

[MountainPatriot]

Comparative advantage is not the norm and we are failing to adapt. The norm today is absolute advantage. This is what the Chinese are practicing and we are losing. Absolute advantage: low-wage; no wage labor coupled with the appropriate technology and advancement. We can't compete against that.

The Chinese are marching toward a confrontation. Ten to fifteen years, tops and we're going to get caught watching the paint dry...

[Havoc]

.. why has it never been put to the test?.. .. Perhaps wiser heads have prevailed seeing the folly in Ricardo's theory.

I would venture to say it was never put to a test because the predicted outcome of it has been destablization causing a revolution due to class struggle brought on by the destruction of the middle class and a widening of the gulf between upper and lower classes.. essentially throwing us back for all intents and purposes to feudalism. The idea of this was warming to the hearts of the communists; but, deemed unwise as the scope would exceed the reach of those who might attempt to control it.

As the author above noted, if you want to destroy America's sovereignty and enslave us to a one world government, Free trade is a perfect mechanism. The president cannot by treaty subbordinate this nation to an outside government body. That cannot be done without a constitutional authority granted by the required majority of states. But, if they subvert the economy by devaluing our currency, and lowering our standard wage, our debt would seem to grow in proportion to our lack of ability to pay it - all the while, as noted above, our means of production are being outsourced on the one hand and bought up on the other. A two pronged attack that removes our means for production and thereby our means to mobilize for war. Our borders are not being dealt with; but, if you're going to make us just another state in a one world government, that no longer is a concern - no reason to gaurd the border. And if you need an internal army to garauntee takeover, there are 8 million illegal immigrants here. Add an outside invasion force of unknown origin and you don't know who to strike back at - especially if they arrive in american technology which has been outsourced..

Subverting our economy can and will wreck us as fast or faster than an armed invasion. And I didn't have to sweat over thinking this stuff up. It's all right there in front of us. Osama hit the trade towers for a reason. Same reason we had an arms race through the 80s. If you bankrupt a Country, you don't have to invade - it'll destroy itself for you and you can then just march in and mop up. Free trade isn't providing prosperity for anyone in the US but the businesses taking advantage of the "new slave labor" as I have called it. The one worlders believe that a one world government will mean prosperity for all. And if that's what they're driving at without seeking audience from us constitutionally, there's only one other way they're going to get it - by destroying this nation economically.

Is that what they're doing? Can't say. Nor will I say it's likely - you have to make up your own minds on that. But we're in a ready position in which it could easily happen. What would our forefathers have done to this government if it had gone so awry as to leave us this vulnerable? What will you do. Do you sit and talk or hold feet to the fire and threaten if need be to get our house back in order and put a stop to this nonsense before it can go any further. Their already giving away what we've taken hundreds of years to build up. How much of it has to go before we do something about it? How many more lives have to be ruined? Cause if ya'll haven't figured out the free traitors at this point, they think of you as cattle. Doesn't take long reading their comments to get a real good bead on things. It's rather odd to that Post Enron when the books are being scrutinized more carefully, they suddenly and for some reason have need of employing slave labor. And the feb 4 hearing on H1B and L1 visas is a real eye opener if you want to know some of the things they're actually doing out there. here it is in real audio.

Your politicians are doing what they do best - studying and debating while the ship drifts out to sea ablaze.

[fooman]

Good points , but reducing these costs are not the full solution.

[WilliamofCarmichael]

I wish he'd picked a respectable partner for his nyt piece, but..

What we are witnessing, we think, is not trade based on comparative advantage but the flow of first world factors of production to cheap Asian labor where the productivity of capital and technology is highest.

Why does one have to "think" it? Is this Alice in Wonderland? It is exactly what is happening. The question is IMO, Is it wrong in today's world? Ans: YES! When it's with a Communist country that murdered tens of millions of its own citizens!

the [nyt] editors allowed us to present a problem without offering a solution.

Uh, remove George Bush from the White House usually suffices.

Interesting that the reactions of people Mr. Roberts knows are exactly like "free" trade Freepers. Also interesting is he asks them to stop calling him names and prove their case. Which reminds me. Without waiting for the final post on this thread I will predict our "free" traders will post mostly drive-by invective.

Add absolute advantage to Mr. Stephen Roach's labor arbitrage, leakage, imported productivity, and more that I cannot remember.

Libertarians need to substitute their thinking caps for their knee-jerk reactions. A hidden agenda might be behind "globalism"--the international redistribution of first world income and wealth.

I say again, "free" trade is Kyoto except there's no energy use penalty and "free" trade hooks many Americans on cheap labor, cheap goods and cheap services. (Drool) Cheap labor.

[underbyte]

""""Litigation, regulation, etc must be brought under control while still maintaining the necessary protections""

fine eliminate all that and you are not going to gap the dollar an hour the chinese worker makes, you still have another $15 USD to go.

[Havoc]

HAH I wouldn't even admit to being a Republican in a room of Union Thugs...

Indiana largely votes republican on national level and democrat locally. They're my neighbors and friends even if they're from another party. And I have a lot of family in that bunch. I dared them to spit their tripe before a room of 10,000 UAW workers and warned them they'd need a police escort or an ambulance because these folks are not going to stand for the lip these free traitor creatures give us. They wouldn't stand for the insults to their intelligence. Nor would they stand for being told that it's in everyone's best interest for them to lose what they've worked hard for while we give their jobs to African pygmies at 52 cents a day. They evidently lack the courage of their convictions as long as they're not hiding behind a keyboard. And when they do say anything, one doesn't have to be a rocket scientist to see the level of deciet and warring against average people over their pet theory - a pet theory because it tacitly lets them create a new class of slave labor after all these years. This gonna get real ugly.

[Torie]

Hey, Roberts, explain to me how a nation prospers by producing that which it is less efficient at vis a vis the rest of the world, versus that which it is more efficient at? The horrors of the free mobility of production seem to assume a nation would be better off producing stuff that others can produce more efficiently given all the costs involved. That is ludicrous. What protects the American standard of living as numero uno is not protectionism, but the value added by the relative skill of American workers, and the efficiency of the macro economy. If America loses its edge, all the protectionism in the world will not protect the American worker from earning average world wages.

Which brings up another point: If the average world wage of those in the international market economy goes up, the floor goes up.

Another little detail, is that with technology and mobility, and improved information, a regime of protectionism is frankly near impossible to really enforce. And to the extent enforced, that improved information, will provoke ever more rapid retaliation.

What I suspect is really bothering Roberts, and Buchanan for that matter, is the collapse of the cosseted position of certain American workers, in certain industries that are dominated by folks that he can identify with, at the cost of the American consumer at large.

[neutrino]

Excellent article!

Bottom line - David Ricardo's free trade postion (as of 1823) has been invalidated because the advance in technology has invalidated the underlying assumptions!

Free trade - outdated thinking, and obsolete policy.

[schu]

We still have some advantages, freedom and minimal corruption versus China being one. We are also much more creative and information flows/availability in the US are far ahead of the rest of the world.

Many friends think like you folks, ultimately we are looking at significant wage and asset deflation. I do not share the same view, but it is hard to see how wages will be rising anytime soon for low or medium skill labor. We need to focus on our strengths and get much better at some core items like education and overhead costs.

Whatever the answer, high tariffs will not solve the problem.

[Torie]

Ya, it is not really economics and the American standard of living that really bothers you, is it? What is it that bothers you? What bothers you is America being emeshed and dependent on foreign trade relationships, like the rest of the world, but not the US until relatively recent times, since it was so far away from the other productive centers, and had such a large internal economy.

What you really want is a lower American standard of living overall, in exchange for some measure of American autarky, which you conflate with "sovereignty."

That is how I see it.

[neutrino]

Which brings up another point: If the average world wage of those in the international market economy goes up, the floor goes up.

Ahh, yes - free trade, the U.N. backed global welfare scheme funded by American taxpayers.

[Havoc]

Whatever the answer, high tariffs will not solve the problem.

They built s into a superpower along with our other factors for the protectionist society. Your comment flies in the face of reality and the facts on the table. This is a standard position taken by free traitors though. It's a lie; but, to admit the truth sinks their ability to convince you that ruining the lives uf US citizens, subverting our economy, putting our nation at risk of collapse and or war is all just illusory tinfoil hat speak.. and that they must be allowed to do all those things at any rate because their motive is pure - profit. Ethics and morality be damned, slave labor is in vogue again and profit once again is the motive. Either they haven't learned any lessons from history or they're counting on them for pernicious purposes. Greed is not what drives this nation. It drives them to the exclusion apparently of much anything else..

[Torie]

OK, I'll bite. Why is buying goods from the one willing to sell them at the lowest price a "welfare scheme" for the seller? Or do you have a new and novel and sui generis definition of "welfare," meaning "subsidization," rather than the alternative definition of "well being."