Letter to the Editor
The New American
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The New American, May 5, 2003
Free Trade |
I am writing about William F. Jasper’s articles “Your Job May Be Next!” and “Why the Race to the Bottom?” (March 10, 2003 issue). I agree with Mr. Jasper that we need to abolish socialist world government institutions such as the IMF, World Bank, NAFTA, WTO, and the UN, but I think his articles promote some protectionist fallacies.
First, we do not trade with foreign countries to “create jobs”; we trade with foreign countries so American consumers can get cheaper and higher quality goods. Mr. Jasper makes numerous mistakes by focusing on who is hurt by free trade, for example domestic steel producers, and ignoring those who benefit from free trade, for example Americans who can now buy cheaper foreign steel. If American steel consumers can now buy cheaper steel, they will have money left over to buy other products, to save, or to invest. If the American steel mill is shut down, then that labor, capital, and raw materials are free to flow to more productive sectors of the economy. It is not accurate to say free trade “creates jobs,” but it does shift the economy to “more productive jobs.”
Second, Mr. Jasper’s articles promote the “High-wage Fallacy.” This fallacy contends that American workers can’t compete with workers in lower wage countries and that American businesses will leave to the lower wage countries. The flaw in this argument is that it confuses wage rates with labor costs. When workers in a prosperous country receive twice the wage rate as workers in a poorer country and produce three times the output per man-hour, then it is the high-wage country which has the lower labor costs. That is, it is cheaper to get a given amount of work done in the more prosperous country simply because it takes less labor, even though the individual workers are paid more. The higher paid workers may be more efficiently organized and managed, or have more or better machinery to work with. After all, there are reasons one country is more prosperous than others and often that reason is that they are more efficient producers.
We should support free trade and lower taxes (including tariffs), repeal government regulations, and return to a sound monetary system based on gold or silver if we want to remain prosperous.
Adam Spivey
Lakewood, Ohio
Mr. Jasper responds:
Mr. Spivey brings up some very important points. The problem I see with his line of argument, however, is that it assumes that economic theory should trump all other considerations. Should the “right” of American consumers to get the best deals on cell phones, CD players, widgets, and wagons be considered the summum bonum to which all policy must be directed? Is this “prosperity” the only thing that counts? As Professor Hans-Herman Hoppe, a prominent libertarian economist, has noted: “To libertarians of the Austrian school, it should be clear that what constitutes ‘wealth’ and ‘well-being’ is subjective. Material wealth is not the only thing that counts.” Indeed not; and without conceding even the economic issue, I would suggest that moral, constitutional, and national security concerns also have claims in this matter.
I agree with Mr. Spivey on the need “to abolish socialist world government institutions such as the IMF, World Bank, NAFTA, WTO, and the UN,” and to “repeal government regulations, and return to a sound monetary system based on gold or silver.” Because these globalist institutions and socialist regulations are the handiwork of conspiratorial elites and are being methodically used to destroy our economy and our country and merge us into a new world order, I would suggest that it is impossible to discuss our present trade problems (“crises” is not too strong a word) simply in terms of the classical free trade/protectionism arguments, as if these other factors have no bearing.
American manufacturers move their plants to Red China because: the IMF, World Bank, Ex-Im Bank, OPIC, and other entities using funds from U.S. taxpayers heavily subsidize these operations and guarantee them against loss, should the Communist government later expropriate their facilities; the U.S. Commerce Department (again at taxpayer expense) actively recruits and encourages manufacturers to leave the U.S.; heavy U.S. taxes, regulations, minimum wage laws, etc., provide additional incentive for business expatriation; and the Red Chinese regime commands a vast pool of slave laborers compelled to work at slave wages. These and other similar factors strip from the matter the “free market-free trade” defense and inject important moral imperatives. Would we accept products from, say, a South American country, which had been made by imported African slaves in a system similar to what once existed here — even if this meant lower-priced products? Should we allow the importation of child pornography from Asia, because it was produced legally there and it provides domestic jobs for the porn retailers here? There is obviously much more than pure economic interest involved in these decisions.
Concerning the steel example: Yes, as in the case of many other industries, the consumer does benefit — in the short term — from cheaper steel. So does the axe owner who sells his implement to the axe murderer. But that benefit may be very short-lived — for the erstwhile axe owner, as well as his family, neighbors, etc. — once the new owner decides to put his new possession to use. At the moment of transaction, the seller may make a lovely profit, but five minutes (or five days) later he may pay with his life.
We live in a world populated by regimes run by axe murderers who have targeted many of our critical industries (and steel is one of the most critical) with a view toward not only acquiring and using them against us, but actually stripping us of the ability to defend ourselves. It is a proper function of government to protect against this kind of attack, although the danger is far less obvious and immediate than an overt military attack. Yet, instead of protecting ourselves, we are exacerbating the threat through technology transfers and myriad forms of foreign aid — effectively subsidizing the exports of axe murderers and other foreign “competition.” This may be called “free trade,” but it is no more “free trade” than a thief who sells his stolen property (the difference in this case is that the thief did not have to steal the property he sold).
Admittedly, there will always be inefficient domestic producers who will seek shelter from legitimate competition by citing national security, but that is not an excuse to jettison this vital concern. Finally, as Mr. Spivey suggests, we must repeal the incredible welter of suffocating regulations and taxes that has made our country less and less hospitable to every sort of business. There is a point at which the cost of government overwhelms any efficiency gains achieved through investment and innovation.
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