Posts tagged ‘free trade’

Will Democrats Be Neanderthals on Trade?

I was wondering this morning if I could turn public opinion against penicillin.   After all, hundreds of people die every year from taking penicillin.  If I ran a newspaper, every day I could feature another heart-rending story about a small child or a single mother with four kids dieing from a penicillin allergy.  Sure, some heartless fools who don't understand these poor people's suffering will say that penicillin is a net benefit.  But that will be easy to counter - I'd ask them to show me who was saved.  Sure, lots of people take it, but how can you prove they would have been worse off without it?  How can you prove how many people would have died without it?  I would have an easy time, because the victims of penicillin are specific and very visible, and the beneficiaries are dispersed.

I thought of this analogy while I was reading Jon Talton's column on the front page of the Arizona Republic business section celebrating the Democratic victory in Congress because we may finally be able to get rid of this awful free trade stuff.  As an aside, Talton has always been an interesting choice as the primary business columnist int he Republic, given that he doesn't really feel bound by the teachings of economics and he really does not like business.   His socialist-progressive formulations may be appropriate somewhere in the paper, but seem an odd choice for lead business columnist, sort of like finding a fundamentalist evolution denier, who still accepts Archbishop Usher's age of the earth, as lead science columnist.

I would fisk Talton's column in depth, but he doesn't really say anything except throwing together a hodge-podge of progressive rants against globalization (CEO pay, China, decimation of manufacturing -- he's got everything in there).   Like most progressives, he extrapolates flatness (not even declines, but flatness!) from 2001-2004 and declares that the world economy has changed and he has seen a major macro-economic trend (no mention of how the business cycle and recession we had in the same period might have affected things).

I will just take on one piece, where he says:

Americans were assured that new trade accords and China's membership in
the World Trade Organization would mean better living standards for
American workers. That's because China and other countries supposedly
would buy American exports.

Economists, what grade does Mr. Talton get?  F!  Because he demonstrates that he does not understand the economic argument for trade.  Because the argument does not actually require that foreign countries buy our exports for us to be better off with trade.   Comparative advantage says that even imports alone help our economy, allowing us to purchase inputs more inexpensively and refocus our domestic labor on tasks which we do comparatively better. 

The second fallacy with his statement is that export numbers grossly understate the amount of goods and services that foreigners buy from us.  Exports are only the goods they buy from us and take back to their country.  But foreigners buy many goods from us and use them in the US (say to build a factory or as an investment or financial instrument) and these foreign purchases of American goods don't show up as exports.  As long as the US is the safest and most stable country in the world, we will probably always run a trade deficit, as foreigners will continue to want to keep the goods and financial instruments they buy from us in the US where these assets are safer.  I wrote a lot more about this topic, and the recycling of dollars from China, here.

Finally, implicit in this anti-globalization view of trade is an assumption that the economy is zero-sum -- ie, there is sort of a global fixed pool of jobs, and if China gains steel market share and employment, the US net loses employment.  I have taken on this zero-sum mentality before, but it is particularly wrong-headed in this case.  Historically, the argument makes no sense.  For example, the automation of the farm sector wiped out 80 or 90% of the farm jobs in the US over the last century.  By the zero-summers logic, we should be impoverished.  Instead, these people were redeployed to manufacturing and service jobs that create far more wealth than the old 19th century farm employment.  But while people can sort of accept this historically, they can never accept this in real-time.  But the fact is that when we lose, say, a textile job to foreign competition, we not only gain because everyone pays less for textiles and thus has more money to spend on other things, but that worker gets redeployed over time to higher-value functions.  Look at the old textile belt in North Carolina - what's there now?  Electronics and Bio-tech.

The problem with trade is very like the one in the penicillin analogy -- it is all-to-easy to identify the few short term losers, who lost their job in American industries that can't compete with foreigners, but all-too-hard to find the huge dispersed benefits from lower prices and the continuing creative destruction that comes with strong competition.  This doesn't mean that individuals lives aren't disrupted, but it does mean that it's short-sighted to the point of being a Neanderthal to use these disruptions as an excuse to throttle free trade, just as it would be short-sided to ban penicillin because some people have allergic reactions.

It will be interesting to see if the Lou Dobbs populists rule the day on this issue.  If so, they it will be ironic that it is the Democrats, not the Republicans, who take the first major steps to dismantling the work of Bill Clinton  (because it sure as heck hasn't been GWB supporting free trade).

My prior posts on why you should stop worrying and learn to love the trade deficit are here and here and here and here.  I also looked at trade with China from the other side, and found it is China that should be mad about their government's trade policies and currency manipulation, not us:

It is important to note that each and every one of these
government interventions subsidizes US citizens and consumers at the
expense of Chinese citizens and consumers.  A low yuan makes Chinese
products cheap for Americans but makes imports relatively dear for
Chinese.  So-called "dumping" represents an even clearer direct subsidy
of American consumers over their Chinese counterparts.  And limiting
foreign exchange re-investments to low-yield government bonds has acted
as a direct subsidy of American taxpayers and the American government,
saddling China with extraordinarily low yields on our nearly $1
trillion in foreign exchange.   Every single step China takes to
promote exports is in effect a subsidy of American consumers by Chinese
citizens.

This policy of raping the domestic market in pursuit of exports
and trade surpluses was one that Japan followed in the seventies and
eighties.  It sacrificed its own consumers, protecting local producers
in the domestic market while subsidizing exports.  Japanese consumers
had to live with some of the highest prices in the world, so that
Americans could get some of the lowest prices on those same goods.
Japanese customers endured limited product choices and a horrendously
outdated retail sector that were all protected by government
regulation, all in the name of creating trade surpluses.  And surpluses
they did create.  Japan achieved massive trade surpluses with the US,
and built the largest accumulation of foreign exchange (mostly dollars)
in the world.  And what did this get them?  Fifteen years of recession,
from which the country is only now emerging, while the US economy
happily continued to grow and create wealth in astonishing proportions,
seemingly unaware that is was supposed to have been "defeated" by Japan.

More Zero Sum Economics (Sigh)

I have tried many times to combat the absurdity of zero-sum economic thinking.  Unfortunately, Democrats seem to be testing income-inequality messages as their lead horse to ride in the upcoming elections, so we are going to hear a lot more of it.  It bothers me even more when smart liberals like Kevin Drum buy into the zero sum thinking.  To his credit, he doesn't totally buy into this mess from Paul Krugman:

The concern [is] that, through mechanisms we're not entirely sure of, the very richest are siphoning off the economic growth before it flows through the middle and lower classes. The worry is about the distribution of growth, but the suspicion is that the distribution is being warped by the sheer level of inequality.

But then he goes onto say nearly the same thing:

I'm not sure this gets the mechanism quite right, though.  There are two basic ways that unequal growth can happen:

  1. The rich suck up vast amounts of income growth, and this leaves very little money for the middle class. Thus, wages for the middle class are stagnant or, at best, rising slowly.

  2. Middle class wages are kept stagnant, and this frees up vast amounts of money from economic growth. The money has to go somewhere, and it goes to the rich.

Now, obviously, it doesn't have to be one or the other. It could be both. But I suspect there's a lot more analytic power in #2 than in #1.

And finally, this stupendously ridiculous statement:

After all, the income from economic growth has to go somewhere, and if it's not going to the middle class it's going to end up going to the rich. Where else can it go?

What's bizarre about all of these statements is it treats wealth, and in this case specifically income growth, like a phenomena that is independent of individuals and their actions.  They treat income growth like it is a natural spring bubbling up from the ground, and a few piggy people have staked out places by the well and take all the water before the rest of us can get any.

Wealth and income growth comes from individual action.  Most rich people are getting more rich because they are intelligently investing and taking risks with their capital, applying the output of their mind to create new wealth.  There is no (none, zero, 0) economic correlation that says that if the rich get really rich, then there is less left over for the poor. 

Here is his solution:

Now, there's certainly no reason to reduce marginal tax rates on the hyper rich in an effort to make inequality even worse than it otherwise would be. But as unjustified as this is, tax cuts aren't the main issue. Median wages are. Focus government policy like a laser on improving the wages of the middle class, and reductions in income inequality will follow.

And how the hell does he suggest the government do that?  Seriously.  Can anyone tell me one single thing the government can do to improve middle class wages that does not involve tax policy?  Well, we can back into his solution from this paragraph where he lists things the government can do that are bad for the middle class:

Appoint members to the Federal Reserve who are obsessed with inflation and act to cool down the economy at the least sign that average hourly wages are rising. Make it harder to form unions in new industries, thus reducing the bargaining power of the working class. Support free trade agreements that put downward wage pressure on low-income workers. Support tax and deregulation policies that make middle class jobs less secure.

So presumably, his solution to increasing middle class wages is: 1) allow inflation to run at a higher rate 2) encourage unionization  3) adopt protectionist measures for uncompetitive industries and stifle free trade  4) increase regulation on businesses and reverse deregulation in industries (presumably like airlines and telecoms).

I'm no Julian Simon, but if we could structure a bet as to whether these policies would help real middle class wages, I would sure take the opposite side from Mr. Drum.

Here is my theory for what is going on, if you even accept that middle class income stagnation is real and not a symptom of our difficulty measuring the benefit of improving products and technologies.  I think much like technological advances from time to time in the past have caused restructurings in the labor market for blue collar workers, we are going through the same thing, really for the first time, with white collar middle class workers.  Technology and globalization offer all sorts of opportunities for companies, and the result is a real restructuring of how many types of white collar workers are used.  Until this restructuring is complete, wages may stagnate, since any wage pressure will just lead to companies implementing changes from their backlog of streamlining opportunities.

At some point we will work through this, and wages will rise again.  If anything, I think the government does damage by slowing this process down.  Note that nearly every one of Drum's suggestions would slow or stop this restructuring.  This is one of the ironies of progressives -- despite their name, what they don't like about capitalism is the change.   They want safety and predictability from the inherently unpredictable.  So protectionism slows global outsourcing, and also reduces the pressure for cost improvement.  Regulation tends to lock in current practices and make changes harder.  Ditto strong unions.

One of the reasons I like some of what Bill Clinton did was that in the early 90's, he faced tremendous pressure to take many of these same steps, trying to halt the economic restructuring that was occurring due to competition from Asia.  He didn't have the government step in, though, and he supported free trade, and the country thrived.  His fellow Democrats (including his wife) should learn from that.

update:  A real economist (unlike me and probably Paul Krugman) discusses inequality and unionization

update #2:  More real economists, this time the awsome guys at Cafe Hayek, pile on.

Rising Economic Nationalism

A pair of news stories has me spooked tonight.  This first is via Instapundit, and is a story of human pettiness that would be funny if the stakes were not so high:

President Chirac and three of his ministers walked out of the room
when Ernest-Antoine Seillière, the leader of the European business
lobby UNICE, punctured Gallic pride by insisting on speaking the
language of Shakespeare rather than that of Molière.

When M Seillière, who is an English-educated steel baron,
started a presentation to all 25 EU leaders, President Chirac
interrupted to ask why he was speaking in English. M Seillière
explained: "I'm going to speak in English because that is the language
of business."

Without saying another word, President Chirac, who lived in
the US as a student and speaks fluent English, walked out, followed by
his Foreign, Finance and Europe ministers, leaving the 24 other
European leaders stunned. They returned only after M Seilière had
finished speaking.

That's the silly part, but the underlying issue that was being discussed is not so silly:

In the absence of his President, M Seillière gave warning about the
dangers of the "economic nationalism" being pursued by the French
Government. The summit, aimed at restoring confidence in the future of
the EU, has been overshadowed by a row over the tide of protectionism
sweeping the continent, with Tony Blair and Angela Merkel, the German
Chancellor, cautioning about the danger of raising barriers to foreign
competition.

What has me really worried is that the US, the only vaguely consistent defender of free trade in the world for the last 60 years, is having the same discussion, initiated not so much by the economic problems in Europe but by security issues.  As I warned earlier, Congress seems ready to use the events of the Dubai ports mess and the fear of 9/11 to clamp down on foreign investment (sorry, $ required I think):

Building on their win in the Dubai ports deal, U.S.
lawmakers are moving to gain leverage over a swath of foreign
investments in the U.S., an effort that business leaders and President
Bush's aides warn could harm the U.S. economy.

In the first serious legislative move, Senate Banking
Chairman Richard Shelby (R., Ala.) released the summary of a bill
Friday that would greatly expand the array of foreign acquisitions
subject to automatic scrutiny and would require the administration to
notify lawmakers as soon as it begins to review any foreign
transaction. The bill also would require the administration to rank all
countries according to their relations with the U.S. and their support
for weapons-control deals. Approvals would then depend in part on the
ranking of a company's home country.

The administration would have to report to Congress on
why it approved or rejected any transaction, but the bill wouldn't give
lawmakers the power to veto a deal, as many critics feared.

Business groups and Bush administration officials
expressed immediate alarm over several provisions in the bill, which
Shelby aides claim has the support of other members of the Banking
Committee. In a letter to Sen. Shelby this week, seven groups
representing the nation's top banks and finance companies warned that
legislative proposals making the rounds of Congress "would threaten
job-creation prospects for the U.S. economy" and "reduce U.S. economic
growth."

Building on their win in the Dubai ports deal, U.S.
lawmakers are moving to gain leverage over a swath of foreign
investments in the U.S., an effort that business leaders and President
Bush's aides warn could harm the U.S. economy.

In the first serious legislative move, Senate Banking
Chairman Richard Shelby (R., Ala.) released the summary of a bill
Friday that would greatly expand the array of foreign acquisitions
subject to automatic scrutiny and would require the administration to
notify lawmakers as soon as it begins to review any foreign
transaction. The bill also would require the administration to rank all
countries according to their relations with the U.S. and their support
for weapons-control deals. Approvals would then depend in part on the
ranking of a company's home country....

The administration would have to report to Congress on
why it approved or rejected any transaction, but the bill wouldn't give
lawmakers the power to veto a deal, as many critics feared.

Business groups and Bush administration officials
expressed immediate alarm over several provisions in the bill, which
Shelby aides claim has the support of other members of the Banking
Committee. In a letter to Sen. Shelby this week, seven groups
representing the nation's top banks and finance companies warned that
legislative proposals making the rounds of Congress "would threaten
job-creation prospects for the U.S. economy" and "reduce U.S. economic
growth."

This sucks, particularly in the light of a president who has at best been only a luke-warm defender of free trade and who seems to have entirely misplaced his veto pen.  It is an interesting statement on how far this president has wandered from his party's traditional roots that I would greatly prefer to have his predecessor Bill Clinton in office for this fight.  Clinton was certainly a mixed blessing for us anarcho-capitalists, but he was always a strong and articulate defender of free trade, even to the extent of opposing the strong protectionist wing of his party.

In addition to the security issues involved, I have also tackled the overblown fears about trade deficits here, among other places.  For those of you in Arizona concerned about free trade, I know that Congressman Jeff Flake, one of the few remaining folks in Congress who understands free markets and small governments, shares some of these same concerns about rising protectionism.  I hope those of you in his district will continue to send him to Washington to serve us, and I would like to see where our other AZ Congresspersons stand on free trade.  I don't want to pre-judge, but this is one of those issues where I have no trust that McCain (for example) will land on the correct side of the issue.  I fear that conservatives are going to feel the need to flog the security horse right through the November elections, no matter what other principles get trampled in the process.

As a final note, I could add the current backlash against immigrants as
the third leg of this story on rising economic nationalism.  One of the
things that has surprised me the most in getting comments to this blog
is how many people who accept global free trade as right and beneficial
in turn support strong restrictions on immigration (Cafe Hayek comments on economist Robert Samuelson as one such person).
I see free trade and free immigration as having exactly the same
philosophic roots, based in the fact that our rights to trade,
associate, etc. stem from our humanity, not our citizenship.  I won't repeat my argument but you can read it here;
if you are pro-free-trade but anti-immigration, I ask that you give me
five minutes to make the case that no one else seems to want to make
today.  And even if you don't accept the philosophic similarities,
economicly open immigration and free trade are nearly identical issues,
each involving the free flow of labor, capital, and goods across
borders.  If you still can't see the similarity, here is a quick
example:  If I decide that my best sourcing decision is to subcontract
my tech support to Claude in France, I can do this equally well by
either straight outsourcing to Claude where he lives today (global
trade) or by encouraging Claude to move to the US to do the work for me
here (immigration).

 

Another Defense of Immigration

I won't repeat all that I wrote in my defense of open immigration, but I will summarize by saying that the right to associate with whom you want, to own and live on the property you choose, to negotiate with whomever you please to sell your labor, are all rights that we have as humans, not via the state.  These rights in effect pre-date, rather than flow from, the state, and as such should not be subject to citizenship test.

Anyway, Prawflawblog has a nice defense of immigration up as well:

Apparently both parties, with Republicans in the
lead, have embarked on an anti-immigrant frenzy. The hysteria has been
fueled for some time now by daily broadcasts in all major networks and
gravely sounding members of Congress discussing the "crisis on our
borders", "our bankrupt immigration system", etc. The virulence of this
sentiment makes Le Pen in France seem like a cosmopolitan liberal.

Yet liberal principles require a drastic reduction
of immigration controls. Foreigners flock to our shores because there
is demand for their labor. The same principle that supports free trade
of goods and services -- the law of comparative advantages -- applies
with equal force to freedom of movement. Freer immigration would
alleviate world poverty and allow people in our country to redirect
resources toward more efficient activities. Every single argument for
strict immigration controls is flawed

By the way, I know that "Social Security Reform" has been dropped from the media radar screen, even if the demographic problem hasn't gone away.  If one is not willing to privatize it (as it should be) the next best alternative to the Social Security's demographic bomb is... allow free immigration.  Nothing would do more to help the long-term Social Security picture like a few million new young immigrants hungry to work and perhaps to share in the American entrepreneurial spirit, paying their taxes to support the rest of us in our old age.

Libertarians Even Further Adrift

I think maybe its time for me to stop reading the news.  What else can a good libertarian do when Republicans oppose free trade, support government intervention in the economy, and spend tax money like drunken sailors while Democrats vote for new restrictions on free speech?

The latter occurred yesterday, as the House failed to get the 2/3 majority necessary to pass the Online Freedom of Speech Act, mostly on the strength on opposition from Democrats (you know, those principled supporters of civil liberties).  Politicians have again shown themselves ready to trash the Constitution in order to limit the speech of those potentially critical to themselves.  Apparently, there is reason to hope, since bill sponsors are trying to bring the bill to the floor in a more routine process that would require only a majority vote for passage (which the bill appears to be able to garner).

My only problem with this initiative is that it falls far short of the mark of protecting all Americans.  Right now, only the major media outlets have full free-speech rights in an election.  This bill would extend free speech to the Internet.  Here's an idea:  Why don't we give everyone back their first amendment rights, as I wrote here:

These past few weeks, we have been debating whether this media
exemption from speech restrictions should be extended to bloggers.  At
first, I was in favorThen I was torn.
Now, I am pissed.  The more I think of it, it is insane that we are
creating a 2-tiered system of first amendment rights at all, and I
really don't care any more who is in which tier.  Given the wording of
the Constitution, how do I decide who gets speech and who doesn't - it
sounds like everyone is supposed to:

Congress shall make no law respecting an establishment of religion, or
prohibiting the free exercise thereof; or abridging the freedom of
speech, or of the press; or the right of the people peaceably to
assemble, and to petition the government for a redress of grievances.

I
have come to the conclusion that arguing over who gets the media
exemption is like arguing about whether a Native American in 1960's
Alabama should use the white or the colored-only bathroom:  It is an
obscene discussion and is missing the whole point, that the facilities
shouldn't be segregated in the first place.

By the way, I don't want to ever hear from the NY Times again about some company that is being monopolistic.  The NY Times has opposed the Online Free Speech Initiative from the very beginning in a transparent attempt to quash a competitive media that is stealing readers from it at a very fast clip.  I'm sure they hate having this type stuff on the Internet.  And this is the same NY Times that was one of the very few supporters of the Kelo decision because they were in the midst of getting a new HQ via an eminent domain landgrab.  Reason number 635 I don't agree with giving the press more rights than the rest of us have.

GWB the Spending Champ

President Bush has passed even Lyndon Johnson for the title of worst spender in the last 40 years.  While it is probably not a surprise that real military spending has grown an outrageous 8.8% per year during his tenure, it is amazing to see that domestic spending has grown 7.1% (yes, that's real, excluding inflation) per year.  Absolutely shameful.  More here in this Cato report (pdf).

Revised data released during the summer by the Congressional Budget Office (CBO) provide analysts the ability to make side-by-side comparisons of the spending habits of each president during the last 40 years.1 All presidents presided over net increases in spending overall, though some were bigger spenders than others. As it turns out, George W. Bush is one of the biggest spenders of them all. In fact, he is an even bigger spender than Lyndon B. Johnson in terms of discretionary spending.

It is interesting to note that Bill Clinton, who drove Republicans into a frothing hatred, can rightly be classed, along with Reagan, as one of the two most fiscally conservative administrations in 40 years.  Granted the Republican Congress kept him honest on spending and carved off his roughest edges (e.g. Hillarycare) while Reagan had to fight his Congress tooth and nail, but this spending record in the Clinton years combined with his passage of NAFTA and welfare reform make him a far better free market defender than either of the Bushes that bracket him.  I wonder if, in turn, liberals who are driven into a frothing hatred for Bush, will someday come to appreciate the work he has done for them in expanding the size of government and slowing the pace of free trade.

Exhibit #1 for the FEC v. Club for Growth

The FEC is suing the Club for Growth for campaign finance violations, basically arguing that they are controlled by the Republican Party and therefore not an independent political group (or whatever, I can't really be bothered to understand just what argument the FEC is using to trash the First Ammendment).

So I have Exhibit #1 for the trial.  Yesterday I published a blog piece blasting the Republican Party, concluding:

The Republicans are lost.  Combine this kind of spending with their
Patriot Act and Sarbabes-Oxley driven Big-Borther-Is-Watching
intrusiveness, luke-warm committment to free-trade, and bizarre , and I find nothing at all attractive about the party.  Only the economic insanity of the opposition party continues to keep Republicans in power.

If the Club for Growth is a subsidiary of the Republican Party, then why are they linking my post today from their home page? 

The Death of Small-Government Republicans

My liberal in-laws always give me this strange condescending look whenever it comes up that I have voted for a Republican at some point in time, that same look you might give the otherwise beloved family dog that keeps pooping on the front lawn.  As a libertarian, I seldom fully agree with any political candidate of either party.  Every election is a tradeoff:  Do I vote for the unelectable and perhaps truly odd Libertarian candidate?  Or do I vote for a mainstream party with which I disagree with about half of everything they promote?

So here is how I normally make the decision:  On pure self-interest.  Since, as a small business owner, I am much more likely to need strong protection of property rights than I am going to need an abortion, a gay marriage, or legal marijuana, I end up voting Republican more often than I vote Democrat.  For this reason, the Republican party has generally garnered a good many libertarian votes, and the two most identifiable libertarians in Congress (Flake and Paul) have both called themselves Republican, though I am sure with some reservations.

This relationship, however, may be at an end as Republicans are disavowing their libertarian wing, and returning to their large government tendencies of the 1970's.  Bush and his buddy Tom Delay are turning out to be classic Nixon Republicans.  The most recent evidence comes from the fact that the following is not from our Republican President, or our Republican Speaker of the House, but from the for-god-sakes Washington Post:

But this spirit of
forbearance has not touched the Louisiana congressional delegation. The
state's representatives have come up with a request for $250 billion in
federal reconstruction funds for Louisiana alone -- more than $50,000
per person in the state. This money would come on top of payouts from
businesses, national charities and insurers. And it would come on top
of the $62.3 billion that Congress has already appropriated for
emergency relief.

Like looters who seize six
televisions when their homes have room for only two, the Louisiana
legislators are out to grab more federal cash than they could possibly
spend usefully. ...

The Louisiana delegation has apparently devoted little thought
to the root causes of the Hurricane Katrina disaster. New Orleans was
flooded not because the Army Corps of Engineers had insufficient money
to build flood protections, but because its money was allocated by a
system of political patronage. ...

The Louisiana bill is so preposterous
that its authors can't possibly expect it to pass; it's just the first
round in a process of negotiation. But the risk is that the
administration and congressional leaders will accept the $250 billion
as a starting point, then declare a victory for fiscal sanity when they
bring the number down to, say, $150 billion. Instead, Congress should
ignore the Louisiana bill and force itself to think seriously about the
sort of reconstruction that makes sense.

The Republicans are lost.  Combine this kind of spending with their Patriot Act and Sarbabes-Oxley driven Big-Borther-Is-Watching intrusiveness, luke-warm committment to free-trade, and bizarre , and I find nothing at all attractive about the party.  Only the economic insanity of the opposition party continues to keep Republicans in power. 

More on the Louisiana money grab here.

More on the Republicn Party

My post on libertarians and Republicans, and ones like it on other sites, has generated a lot of response from folks arguing about whether there is a true schism emerging in the Republican Party.  I am not a Republican, so I am not on the inside.  Strong libertarians like me (read this if you want to know what that means) can pretty safely be treated as a fringe, so I haven't really been in a position to argue that the Republicans mights truly be in trouble.

However, yesterday I had the chance to interact with a number of family friends.  Included were a number of men, many in their 60's-80's, who have been lifelong classic Chamber of Commerce Republicans, including two that ran Fortune 100 companies.  These were classic red state Republicans, many of whom had been active in the party at some point in their lives.  And, almost to a man, they were disenchanted with the Republicans.  They cited trade protectionism, profligate spending, and Tom-DeLay-type capture by the system.  These men, all who would call themselves religious, were frustrated at the apparent capture of the Party by religious interests.

Several of these folks pointed me to this editorial by John Danforth as representing what is frustrating them about the Administration and the Party.

    During the 18 years I served in the Senate, Republicans often disagreed with
  each other. But there was much that held us together. We believed in limited
  government, in keeping light the burden of taxation and regulation. We encouraged
  the private sector, so that a free economy might thrive. We believed that judges
  should interpret the law, not legislate. We were internationalists who supported
  an engaged foreign policy, a strong national defense and free trade. These were
  principles shared by virtually all Republicans.

    But in recent times, we Republicans have allowed this shared agenda to become
  secondary to the agenda of Christian conservatives. As a senator, I worried
  every day about the size of the federal deficit. I did not spend a single minute
  worrying about the effect of gays on the institution of marriage. Today it seems
  to be the other way around.

    The historic principles of the Republican Party offer America its best hope
  for a prosperous and secure future. Our current fixation on a religious agenda
  has turned us in the wrong direction. It is time for Republicans to rediscover our roots.

For those of you who don't know and might mistake Mr. Danforth for some rampaging secularist, former Senator Danforth, beyond having gone to the greatest undergraduate institution in the world, is a pro-life .

I encourage you to read it all. 

 

Free Trade Rules

Free trade, despite it enormous benefits, is constantly under attack.  Yesterday I heard a radio ad, with the sound of a toilet flushing, and the a voice over saying something like "that is the sound of 3 million jobs being lost due to NAFTA".  Since the US unemployment rate when NAFTA was passed was over 7% and is currently under 5.5%, its hard to figure out just how they did their math.  The problem is that it is relatively easy to spot job losses due to foreign competition (cars, apparel, memory chips) and much harder to find the jobs that were created due to lower cost materials supplies and increased exports.

Virginia Postrel has a really nice article in the NY Times (yes, reg required) on how industries and jobs have prospered due to NAFTA.

Economists argue for free trade. They have two centuries of theory and experience to back them up. And they have recent empirical studies of how the liberalization of trade has increased productivity in less-developed countries like Chile and India. Lowering trade barriers, they maintain, not only cuts costs for consumers but aids economic growth and makes the general public better off. 

Even so, free trade is a tough sell. "The truth of the matter is that we have one heck of a time explaining these benefits to the larger public, a public gripped by free trade fatigue," the economist Daniel Trefler wrote in an article last fall in The American Economic Review.

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