Saturday, February 6, 2016

Unless you believe it to be questionable that the economy grows as a result of economic change that occurs in response to changes in patterns of consumers spending you have no reason to question the economic benefits of freer, or more, international trade

See By Free Trade and Its Alleged “Losers” (Again) of Cafe Hayek. Excerpts:
"Kenneth Regas e-mails me (link added):
Dear Professor Boudreaux,
On the EconLog blog Professor Caplan recently opined that voter ADHD is fortunate, because if protects us from popular bad ideas, including resistance to free trade. On that point I commented to demur, hoping to get a free trader like you to engage. I wrote:
“‘Never mind centuries of economics classes on the wonders of comparative advantage; the masses are convinced that cheap foreign products make us poorer.’
Actually, they believe that those cheap products make them poorer. And to the extent they’re near the bottom of the socio-economic ladder, they’re right. Cheap shirts are a boon to you and me, not so much for the one who, absent the cheap imports, would have been the shirtmaker.
“The average standard of living in my country and in the shirt exporting country both increase due to free trade. But in my country, that increase amounts to a gain for me but a loss for the erstwhile shirtmaker, who already had a lower standard of living.”
I saw your response to another commenter. Could I get you to engage my point?
Sincerely,
Ken
I’ve written often on this very topic here at Cafe Hayek.  See here, here, and here.  (This last link has links to yet other Cafe posts on this topic.)

In addition to offering the above links to earlier posts, let me add two additional substantive points here – points which are perhaps repetitive but, if so, hopefully also worthwhile.

First, to say that someone is harmed by trade is, in fact, to say that someone is harmed by freedom of contract, private property rights, and economic competition.  That is, if you show me someone who today suffers economic harm because some fellow citizens have increased their purchases of imports, I’ll show you someone who, economically and ethically, is in a position no different than are the thousands of other people who today suffer economically because some fellow citizens exercised their freedom to contract with their own private property within a competitive economy.  I’ll show you someone who, economically and ethically, is in a position no different from a person across town from that someone who lost her job at the bakery because fellow citizens now choose to spend fewer dollars buying donuts and muffins. I’ll show you someone who, economically and ethically, is in a position no different from a person who lost his job installing telephones in homes because people choose to switch to mobile phones.  I’ll show you someone who, economically and ethically, is in a position no different from fellow citizens who lose their jobs as retail clerks because consumers more and more choose to shop on-line.

So unless you believe it to be questionable that the economy grows as a result of economic change that occurs in response to changes in patterns of consumers spending – changes which themselves are prompted by entrepreneurial innovation and economic competition – you have no reason to question the economic benefits of freer, or more, international trade.  Put differently, if you insist on pointing to the “losers” from international trade as potential justification for forcibly restricting such trade, then you should also point to the “losers” from intranational trade as potential justification for forcibly restricting such trade.  There is no economically or ethically relevant difference between economic change that is the result of more foreign-made widgets and economic change that is the result of more domestic-made zidgets.

Second, identifying someone as a “winner” or “loser” from trade (that is, from economic change) requires an appropriate time horizon.  If the time horizon we use is “today” – or “now” – then, yes, the economy is filled with losers from trade, both domestic and foreign."

"Everyone today in America – and I do mean everyone – is a huge beneficiary of an extensive global market.  Nearly everything that each American today consumes contains materials and labor inputs that originated outside of the geographical region called “the United States.”  This fact means that no American could afford to consume on a daily basis as much as he or she consumes were it not for the international trade that make today’s consumption possibilities possible (not only by creating many goods and services physically, but also by reducing the prices of “American-made” goods and services).

Likewise, nearly every job today in America – including those that are today being destroyed by changes in the pattern of international trade – is, to one degree or another, itself the result of international trade.  Many jobs simply wouldn’t exist if there were no foreign trade (or fewer such jobs would exist if foreign trade were less frequent or voluminous).  I speak here not only of jobs in industries that produce goods for export, but also of jobs whose economical existence requires complementary inputs imported from other countries – imported goods such as the low-priced Indonesian-made clothing inventories stocked and sold by workers at Target and Macy’s; the Japanese-made construction cranes operated by hard-hat-wearing workers in St. Louis and Santa Fe; or the Chinese-assembled cell-phones that justify Apple employing at good wages software engineers in Cupertino and retail clerks in Chattanooga.  Restrict these and other imports, and the costs of inputs used by producers and other employers in America rise and the productivity of American workers falls."

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