by Ian Fletcher
Dan has again dragged irrelevant issues into this debate; I shall let the reader judge whether I am guilty of Maoism!
Dan’s conflation of protectionism with communism and related economic pathologies is telling: free traders of Dan's variety (ideologically-committed libertarians) habitually roll up all economic questions into one big homogenous ball. For them, all economic questions are the same—because abstract ideology tells them so—and the answer to every question is 100.0% economic freedom, 100.0% of the time. This is an extremist position belied by America’s experience in our domestic economy, where we rejected pure laissez faire a long time ago. It is also symptomatic of a larger inability to understand the complex reality that China, for example, is not a 100% capitalist economy, but a hybrid of central planning and free markets. According to Dan’s ideology, China should be broke by now.
Dan disputes that the U.S. historically succeeded by means of protectionism. But if free trade had been the winning move in the era of America’s industrialization from the Civil War to World War One, free-trading Britain would have outpaced protectionist America and Germany rather than declining in relative terms. American tariffs indeed raised the prices of industrial machinery et cetera in the short run, but encouraged the development of a domestic machinery sector that liberated the U.S. from dependence on foreign suppliers. If not for this, we'd quite possibly still be the commodities-dominated economy we once were and other New World nations remained.
Dan is correct that there is nothing new about my arguments; the problems with free trade have been known for centuries, which is why every single developed nation got that way by means of protectionism and industrial policy. For the details, please see Chapter Six of my book Free Trade Doesn’t Work, which is entitled “The Deliberately Forgotten History of Trade.”
Dan’s assertion that China’s policy in recent years has been “to unilaterally lower its barriers” is Soviet false. Dan has been taken in by paper tariff reductions belied by the more fundamental real-world fact of gargantuan Chinese trade surpluses against the U.S. A low tariff at the border means nothing if non-tariff barriers exist behind it. These range from currency manipulation to the inbred cross-shareholding relationships between corporations that freeze out foreign suppliers.
Many of Dan’s arguments, like those of free traders generally, continue to be valid—but they are arguments for trade, not free trade. This is the same logic that was once used to prove that because labor is beneficial, unregulated labor must be best: no minimum wage, no child-labor ban, no limits on hours or working conditions.
Any happy income figures Dan quotes from the last few years largely reflect an unsustainable financial bubble. And if you take out government employment, there is no improvement in service industry incomes.
The myth that the Great Depression had anything to do with protectionism has been debunked by economists from Paul Krugman on the left to Milton Friedman on the right, the latter a card-carrying libertarian. The official State Department evaluation at the time found no sign of a trade war, and the tariff changes in question were actually quite small.
Dan’s and my differing contentions about world poverty derive from using absolute vs. relative measures. (See http://siteresources.worldbank.org/DATASTATISTICS/Resources/WDI08supplement1216.pdf , p. 10.) What even Dan’s data do not deny, however, is that what progress against poverty there has been, has been concentrated in nations like China which employ neomercantilist trade policies as a development tool, not free trade.
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Ian Fletcher is an Adjunct Fellow at the U.S. Business & Industry Council, a Washington-based think tank founded in 1933, and author of the new book Free Trade Doesn’t Work: What Should Replace it and Why, available on Amazon.com. USBIC’s web site is at americaneconomicalert.org; the website for Ian’s book is at freetradedoesntwork.com; Ian’s page at USBIC is at usbic.net/ianfletcher; he may be contacted at [email protected].
(For the free trade view, see Dan Griswold's post here)
