Posted on 10/16/2017 12:07:04 PM PDT by TBP
The economic argument for free international trade is basically that people produce in order to consume, not the other way around, so the economic system should be geared to the benefit of the consumer, not the producer. In the economic sense, producers include workers and owners of capital or land, who often join in associations called "firms." There are more consumers than producers, as everybody is a consumer but not everybody is a producer; some live off the production of parents, donors, or taxpayers. So there are more consumers than producers; but this is not the important point.
Free Trade Helps More Than Hinders
The important point is that free trade benefits consumers more than its competitive pressure harms producers. Economic theory provides a nice geometric demonstration of the proposition that the total cost of protectionism for consumers is higher than its total benefits to producers. The demonstration can be (imperfectly) rendered in plain English: if free trade harmed producers more than it benefits consumers, the former could outcompete their foreign competitors by bribing domestic consumers with better prices and still gain compared to ceding the market to foreign producers - and protectionism would not be necessary. When domestic producers are unable to compensate consumers for not patronizing foreign suppliers, it means that free trade benefits consumers more than it harms producers.
That free trade would have net benefits is not surprising in light of the theory of comparative advantage, due to 19th-century economist David Ricardo. If two countries - that is, all producers in the two countries - produce what they are most efficient at, the total volume of goods available for exchange and consumption will be larger.
A popular objection to these economic arguments is that a consumer cannot benefit from lower prices if he does not have a job. Since free trade destroys jobs, it cannot be said to help consumers in general. You can't consume if you lose your job - or you have to consume less by getting a lower paying job or relying on transfers, public (unemployment insurance, social welfare, and such) or private (help from family or charity). Let me call this the "populist" objection to free trade.
A first reply is that availability of jobs is a symptom, not the cause, of prosperity. If jobs were the cause of prosperity, banning agricultural technology would generate much prosperity by dramatically increasing employment in that sector. Nearly 12 million Americans worked in agriculture in 1910 (the year when agricultural employment reached its peak) while they number less than 2.5 million today (for a population three times as large). In the meantime, the total number of jobs in the American economy increased from 37 to 151 million. We should beware of the obsession of job creation, especially by government edict.
Even assuming that the number of jobs is a good indication of welfare, the populist objection is not valid. Although some workers can, like other producers, be harmed by competition, free trade does not destroy net jobs. At least as many new jobs appear as old ones disappear.
Job Creation and Job Destruction
Consider the example of manufacturing. The number of jobs in American manufacturing dropped from its peak of 19 million in 1979 to 12 million today. Most recent job losses in manufacturing come more from the impact of technological progress than from import competition; economists Michael J. Hicks and Srikant Devaraj estimate that international trade accounts for only 13% of these losses. And - this is the important point - while manufacturing employment was decreasing, total employment in the economy increased from 99 to 151 million between 1979 and today, for a net creation of 52 million jobs. In the meantime, and this is the really important point, GDP per capita (the most comprehensive measure of the standard of living) increased by 79%.
Another way to approach the populist objection that free trade destroys jobs is to observe that the main factor in employment is population growth. Employment naturally grows in line with population. Every new worker who arrives on the labor market creates his own job in the very real sense that he spends as much as he earns (or the rest is invested, creating jobs too); indeed, it is precisely in order to spend an equivalent amount that he starts working and earning an income (a reflection of Say's law, recently featured in The Economist). The new worker creates his own job by creating another one elsewhere in the economy through his own consumption.
The figure below illustrates the general point by showing the level of civilian employment in relation to the American working-age population (15 to 64 years of age) over the past half-century. Each dot on the chart represents one year. Observe how closely employment growth tracks population growth. A simple regression analysis confirms the visual impression: the coefficient of correlation is 0.992 and is highly statistically significant (at a level of significance much lower than 1%). Because the working population increases with time, the horizontal axis nearly coincides with the chronological order. The drop in the employment towards the end of the curve corresponds to the 2008-2009 recession and the slow recovery that followed.
We thus have both a straightforward economic argument and empirical evidence to the effect that economic freedom in general and foreign trade, in particular, do not destroy net jobs in the economy. The number of jobs moves with the number of people who want to work, barring regulatory obstacles created by government.
A major problem with protectionism is retention obsolete technology since the producer does not have to keep up with the advancements of international competition.
Tariffs were huge political plums enriching some, bankruptcy for others.
Look dim bulb you have it backwards. Everyone everywhere agrees that trade is perfect for acquiring the things you cannot produce.
But only an idiot would say that a worldwide economy can work well, but that a nation spanning a continent cannot support do this. And look closely you will not find Japan Outsourcing a single thing that they can do at home. In America that’s exactly what the free traitors are doing
Adam Smith showed the economic superiority of Free Trade vs Mechantilism. Ricardo’s iron logic showed Free Trade benefits are built in, almost a law of nature.
Not to mention your sacred free trade it requires world government and the strip mining of your rights as a citizen to have a constitutional republic.
Which is exactly what we have seen happen. Control of the nation-state must be pried away from the citizenry
You need to read a little deeper into your Adam Smith
but that a nation spanning a continent cannot support do this.
Also try to avoid changing your argument in mid discussion. Do you now agree that it is NOT generally possible for a nation to sustain its economy in the same way that a planet can?
The Chinese military loves free trade and thanks you for their new Aircraft carriers and submarines.
You posted 8 more opinions to go with yours.
Each of those opinions is by somebody who personally benefits by “free trade” (which does not exist anywhere in the world). Modern “free trade” means ONLY, I say again, ONLY that there are no tariffs or restrictions on the sale of products imported into the US.
It has no other meaning, worldwide.
But you do not address the transfer of capital stock.
What an idiot.
“Free Trade” does not exist anywhere in the world.
Taxation of “trade” is effectively no different than taxation of income or taxation of sales. All taxes are “penalties.” Why some people think that “trade” from outside a country should be exempt from taxes, when we have always accepted that in the past AND we have income and sales taxes today, is beyond comprehension.
The author is a dolt.
ROFL!!!
Where have I made "free trade" (whatever that is) something "sacred"?
The answer, of course, is that I have not. Is it possible for you to discuss without insulting?
“Adam Smith showed the economic superiority of Free Trade vs Mechantilism. “
Cite a single era of Smithsonian Free Trade.
I contend it has NEVER existed.
Never.
It’s just a theory. And an unproven one at that.
And if folks want to take down all defenses to all the other Mercantilists, they are just stupid, or suicidal, or both.
I looked closely. I found this:
The Northern states prior to the War imported huge quantities of British capital to build the railroads. Inputs that produce more outputs are desirable.
Do you want the government to have Capital Controls on the flow of capital?
Tariffs are one of the reason third world countries are Third World countries. The lack of economic progress is not just political but due to the free flows of capital and commodities as well.
America’s premier financial position is because it has always been an innovating and creating country. We produce the NEW, not cling to obsolete technology. Those technologies are encouraged by competition which requires international trade.
The point is free trade is good between the 50 states.
Jobs follow technologies. When one is in an obsolete industry (cannot compete internationally) there will be pain.
Theory can tell you why the pain exists. Capitalism is a Storm of Created Destruction according to the most conservative of economists, Schumpeter). Life can get very hard when you are on the wrong side of the economic changes.
As others have pointed out we have not had true Free Trade, perhaps ever.
And then there is the problem of cheap imports driving out quality. I long ago had it with cheap junk and will not buy it. Too often the alternative is higher priced junk. Precision built things that last are rare items.
Your assertions are incorrect, and your lack of understanding of trade is showing.
If a Free Trade Agreement is 20,000 pages, it ain’t Free Trade.
You would rather the fisherman not get the buck? That will help.
Right — the producers don’t have to update because the government protects them with artificial favors.
(This is called rent-seeking.)
Because of they — and the country — fall behind, losing sales and production to others. Lost sales and production mean lower purchasing power, a lower standard of living, and fewer jobs.
You’e not going to get the GDP up by protecting obsolete technologies and means of production.
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