Sheep's Clothing and Adam Smith

World Net Daily ^ | March 13, 2006 | Vox Day

[antisocial]

Sheep's clothing and Adam Smith

-------------------------------------------------------------------------------- Posted: March 13, 2006 1:00 a.m. Eastern

By Vox Day

-------------------------------------------------------------------------------- © 2006 WorldNetDaily.com

How does one resolve the question of the presumably cataclysmic meeting between the hitherto immovable rock and the historically unstoppable force? Perhaps by reversing the logic of the famous question: "Who are you going to believe, me or your lying eyes?" Is the rock truly immovable? Or, alternatively, is the force actually unstoppable?

I mention this because I have long been a vocal advocate of free trade. I was raised on Adam Smith, inoculated against the usual collegiate flirtation with Marxism by controlled doses of Schumpeter taken in combination with "Das Kapital" and "The Communist Manifesto," and eventually found in the Austrian School of von Hayek, von Mises and Rothbard an intellectual home.

My first serious questions about the free-trade doctrine arose during the NAFTA debates. The fact that Democrats and Republicans were coming together in bipartisan support made me suspicious, as bipartisanship is a reliable sign that the American people are about to get screwed over in a big way, and it seemed very strange that a genuine free-trade agreement would require documentation exceeding the size of the average encyclopedia.

Thirteen years later, the honest observer is forced to admit that it is the opponents of NAFTA whose predictions have been proven to be correct. Free trade has not improved the Mexican economy enough to dissuade millions of Mexicans from coming to America, it has not improved the American wage rate and it has significantly reduced American industrial capacity. The base concept behind Smith's doctrine of free trade is a nation that stops protecting its inefficient sectors will turn its resources toward those sectors in which it has a genuine competitive advantage – apparently selling houses to each other is America's great strength.

Moreover, the recent history of the European Union demonstrates that free trade is the sheep's skin that clothes a very savage wolf indeed. The European Common Market was sold to the people of the formerly independent nations of Europe as a free-trade arrangement, and while it has not significantly benefited the economic welfare of those nations, it has managed to subjugate them to an unelected commission that rules over them, taxes them and from whose ever-more-invasive dictates they enjoy no appeal.

Can trade be free when the people aren't?

Now, it is certainly possible to argue that the free trade of the NAFTA variety is actually nothing of the sort and that the Third Way social engineering of the European Union is wholly distinct from the free-trade doctrine from which it was birthed. In fact, this is precisely how I have previously attempted to resolve the dilemma.

However, that reasoning is all-too similar to that of the public-school teachers who insist that merely spending more money on teachers will lead to better public schools, and socialists who argue that despite dozens of failed historical examples, the One True Method of communism has not yet been applied. At some point, even the most lovely theory has to pass the more prosaic test of practice or else be relegated to the children's nursery of daydreams and wishful thinking.

I am not arguing, yet, that it is time to do so with regard to free trade. However, for the first time in years, I find myself forced to re-examine the merits of this long-hallowed doctrine, and to do so with a jaundiced and critical eye. It is certain that there are false prophets of free trade – that they exist neither confirms nor denies that the god itself is false.

The deeper question is this: In a globalist world that denies not only the sovereignty of the nation-state, but even its right to exist, is there any fundamental relevance to a doctrine that is defined by the asserted benefit to the nation-state and its citizens? If there is no nation-state and there is no freedom for the individual, then where is the free trade and to whom does it apply?

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Vox Day is a novelist and Christian libertarian. He is a member of the SFWA, Mensa and the Southern Baptist church, and has been down with Madden since 1992. Visit his Web log, Vox Popoli, for daily commentary and responses to reader email.

[Paul Ross]

Thanks! This is truly a major departure from the lock-steppers ranks.

Especially keen was this cogent set of points:

bipartisanship is a reliable sign that the American people are about to get screwed over in a big way, and it seemed very strange that a genuine free-trade agreement would require documentation exceeding the size of the average encyclopedia.

Correct!

I have had a few disputes with Vox in correspondence, but on these conclusions, we are in complete accord.

[Paul Ross]

Especially galling is that imports from Mexico used to be only $12 billion...now they are over $170 billion!

This is CRIMINAL.

A rope is too good for the salesmen for this monstrosity.

[Mase]

Yah, and real DISPOSABLE INCOME has dropped

Sure. Is that why real average annual per-capita consumption has increased 2.3% a year for the past 30 years?

Median wage has dropped--it was high-water in the mid-1970's.

Someone's getting funny with their calculator.

"The typical household today has a disposable income higher than any other time in history, and when taking into account all forms of benefits that workers now receive, compensation to workers is about 27% higher in real terms than 25 years ago. Workers earn in less than four days a week what their parents earned in five, and they make in three days on the job what their grandparents earned in five."

"The median family income has risen to $52,600 a year, which, as Michael Cox of the Dallas Fed, points out, gives families a level of purchasing power that would have been considered wealthy through most of history."

Wages of Prosperity

"What the reports tell us is that the vast majority of Americans have not bumped into income glass-ceilings, but rather are experiencing an astonishing pace of upward income mobility. The Census data from 1967 to 2004 provides the percentage of families that fall within various income ranges, starting at $0 to $5,000, $5,000 to $10,000, and so on, up to over $100,000 (all numbers here are adjusted for inflation). These data show, for example, that in 1967 only one in 25 families earned an income of $100,000 or more in real income, whereas now, one in six do. The percentage of families that have an income of more than $75,000 a year has tripled from 9% to 27%."
"But it's not just the rich that are getting richer. Virtually every income group has been lifted by the tide of growth in recent decades. The percentage of families with real incomes between $5,000 and $50,000 has been falling as more families move into higher income categories -- the figure has dropped by 19 percentage points since 1967. This huge move out of lower incomes and into middle- and higher-income categories shows that upward mobility is the rule, not the exception, in America today."
"The middle class has not been "shrinking" or losing ground, it has been getting richer. For example, the Census data indicate that the income cutoff to be considered "middle class" has risen steadily. Back in 1967, the income range for the middle class (i.e., the middle-income quintile) was between $28,000 and $39,500 a year (in today's dollars). Now that income range is between $38,000 and $59,000 a year, which is to say that the middle class is now roughly $11,000 a year richer than 25 to 30 years ago. This helps explain why middle-income families can buy things like cable TV, air conditioning, DVD players, cell phones, second cars and so on, that were considered mostly luxury items for the rich in the 1950s and '60s."

"The upper-middle class is also richer. Those falling within the 60th to 80th percentile in family income have an income range today of between $55,000 and $88,000 a year, which is about $24,000 a year higher than in 1967. This rapid upward income mobility indicates that the great American Dream, in which each generation achieves a higher living standard than their parents, is alive and well."

The Great American Dream Machine

I copied the relevant text of the article in case you do not have a subscription. Real household median net worth is also at an all time high. I can link you to that information if you'd like.

[raybbr]

These data show, for example, that in 1967 only one in 25 families earned an income of $100,000 or more in real income, whereas now, one in six do. The percentage of families that have an income of more than $75,000 a year has tripled from 9% to 27%."

Back in '67 only dad had to work to support his family. Now I am sure those numbers reflect mom and dad working. Do we really have a richer society when both parents have to work?

[Paul Ross]

Do we really have a richer society when both parents have to work?

Nope.

[Mase]

Now I am sure those numbers reflect mom and dad working.

Then prove it.

We have an incredibly larger number of households now compared to 1967 and even with that increase in numbers, the average real income of the American family has risen dramatically. I suspect, should you really do your homework, that you'd find that the number of single parent households today is very large and refutes your assertion that the increase in income over the years is solely because both parents are working.

[raybbr]

The number of single-parent families has grown from 10 percent in 1965 to 28 percent in 1996. Most children come from families where there is no stay-at-home parent. The percentage of families with both parents working has risen from 37 percent in 1975 to 62 percent in 1996. In most families, both parents must work to get by. This is a big change. Combine this with working single parents and we've got a whopping 64 percent of families where all parents are working. From here.

In 2002, 18.4 million married families with children, almost 68 percent, had both parents working. In over 55 percent of these families, the women were working full-time, year-round. From here.

I suspect, should you really do your homework, that you'd find that the number of single parent households today is very large and refutes your assertion that the increase in income over the years is solely because both parents are working.

There are the facts. Believe them or not. I did not state that the increase was "solely because both parents are working". Even the WH sees this as a problem. But, to a super-capitalist like you it's just the way things ought to be.

[Clemenza]

We're doomed! There are breadlines everywhere! Nobody can afford to buy a house? We have AWFUL unemployment of 4.8%! Our children are starving! OH THE HUMANITY!

Other than some economically retarded places like Michigan, West Virginia, Wisconsin and Ohio, the country looks better than ever to me economically. My family isn't living in row houses and eating at home everyday like they were in the days of "gud payin' Yooooon-yun jobs."

[usapatriot28]

A law passed by both the House and Senate and was signed by the President, for your edification:

Actually, Amendments are not signed by the President. In fact, even the Volstead Act (which was the law that gave the enforcement teeth to the 18th amendment) wasn't signed by the President. Wilson actually vetoed it, only to have his veto overruled.

[antisocial]

"the country looks better than ever to me economically."

Sovereignty means more to some of us than to others, I don't like world trade bodies telling us how to handle immigration.

[hedgetrimmer]

You're right Amendments are signed by the states. My bad.

[antisocial]

"We're doomed! There are breadlines everywhere! Nobody can afford to buy a house? We have AWFUL unemployment of 4.8%! Our children are starving! OH THE HUMANITY! "

This guy explained it much better than I ever could.

http://www.freerepublic.com/focus/f-news/1597624/posts

[Mase]

I did not state that the increase was "solely because both parents are working".

What would be interesting is to know how many more households there are now than in 1965. What's truly amazing is that we've been able to grow real household incomes even with the dramatic increase in the number of households since then. 28% of all families in 1996 will produce a much larger number of households than 10% of all families in 1965. I'd also like to compare the number of families where both parents work but one has a part time job with the stats in 1965.

In most families, both parents must work to get by.

Based on what? Their need to keep up with the Joneses materially or is it real necessity? Most families today don't have to have both parents working but choose to for materialistic reasons. That's their choice and there is certainly more opportunity for women in the workforce now than in 1965. Also, the feminists in the 70's convinced a generation they could have it all which, IMO, is one reason divorces were so common in the 70's and 80's.

You said back in post # 63 "Now I am sure those numbers reflect mom and dad working." I guess what you're saying is that if we looked at real per-capita incomes we wouldn't see the kind of growth in incomes referenced in my linked article.

Real per capita incomes have increased from just $6,000 in 1929 to more than $30,000 today.

"Moreover, real earnings of the average worker have continued to rise. Over the past century, per capita real income has risen at an average rate of more than 2 percent per year, declining notably only during the Great Depression of the 1930s and immediately following World War II. Incomes trended higher whether we had a trade deficit or a trade surplus and whether international outsourcing was large or small."

Greenspan: FRB Speech

If real per-capita incomes were not increasing how could you explain the increase in per-capita consumption over the past 30 years?

Over those same 30 years, real per capita consumption has increased at an average annual rate of 2.3%

Pouting Pundits of Pessimism

Despite the problems price indexes have in coping with new and better products, measured real consumption per capita has nonetheless doubled since 1973. Unless the rich could somehow consume unlimited numbers of houses, cars, shirts and steaks, it is difficult to imagine how each American's real consumption could have doubled if real salaries had actually been unchanged.

Unreal Wages