Site Meter
Fritz Feds

Monday, April 17, 2006

In Defense of Free Trade

Lou Dobbs and others have critiqued free trade, and it's an issue that's always current. I thought this article was a very good defense of free trade. Here's the crux of the argument, which I'm afraid many politicians either intentionally ignore for short term political gain, or are just ignorant of.

The reason is that as some capital and jobs leave America, workers -- along with some supply routes and capital equipment remaining in America -- are freed up to work at other tasks that in the past were insufficiently profitable. By freeing up this labor and capital, outsourcing increases the profitability of new investment opportunities. These diligent and honest workers, along with some capital equipment, remain in place, willing to work, all in an economy and culture friendly to enterprise. Perceiving these profit opportunities, entrepreneurs sweep in and create new capital, capital that never before existed and that would not be created were it not for the fresh opportunities opened by outsourcing.

I'm definitely in favor of compulsory remedial econ for anyone in or running for office. President Bush's steel tariffs were a prime example of ignorant policies that had harsh effects on the economy, effects that a first year college student in intro econ could have forseen.


It all depends on what type of econ is taught. Too many brands fail to take into account, well, the reality within which the framework operates.
I could understand your critique if I was insisting that only Austrian economics be taught. But I think that most economists would agree that free trade is generally better for all the parties involved. I actually think dealing in reality is far more a trait of the free trade rather than "fair trade" movement. Generally (in my opinion) many of the tenets of the fair trade movement are simple platitudes shouted by inexperienced undergrads who need a machine to rage against. I don't mind if someone wants to buy coffee that is more expensive but is environmentally friendly, fair to workers, etc. That's the free market. I do mind if people are trying to use government to prevent me from making other choices. Even at Carleton, a good institution of higher education, the justifications for "fair trade" did not deal in the economic realities, but in anecdotal evidence of poor people working their fingers to the bone. Perhaps that makes me biased. I'd actually like to hear an economically sound argument for fairer trade (Ivan?).
Post a Comment