In defense of free trade

As we’ve blogged about, both candidates are campaigning against free trade.  Texas Tech economist Benjamin Powell defends free trade, examining the complaints both candidates are making.  He concludes that importing goods from abroad and even trade “cheating,” such as China subsidizing its steel industry, makes Americans wealthier.

Is Prof. Powell right?  Does he leave out some considerations? [Read more…]

Both parties have abandoned free trade

Whoever gets elected president will oppose free trade.  In fact, both parties are rivaling each other in condemning trade agreements such as NAFTA (which forms a common market with Canada and Mexico) and the not-yet-ratified TPP (which eases trade with Australia and Asian countries other than China).

Such a turnabout is astonishing, since Republicans have long championed free markets and Democrats have come around to agree with them.  Credit, or blame, for this new stance goes to the popularity of Donald Trump, who has roused the masses against American industries moving factories and jobs overseas and American products being driven out by cheaper imports.

I can see the appeal of a self-contained national economy, but getting there would seem to involve some dangerous tradeoffs.  If we erect trade barriers such as high tariffs and our trading partners retaliate, won’t that be economically disastrous?  American companies will suddenly lose a major part of their markets.  Prices for consumers will skyrocket.  After awhile, maybe new companies would take up the slack, but, in the short term at least, wouldn’t this cause recession and even more unemployment?

This is not my field, so I am open to instruction. [Read more…]

Slow economy due to not enough government action?

A report from the Harvard business school argues that the reason the economy is growing so slowly is because of government inaction.  The government has been in a state of gridlock, so that the government can’t do what it needs to in order to make the economy grow.

Read the reasoning, after the jump.  This would be the Democratic diagnosis, as opposed to the usual Republican diagnosis that the government is holding the economy back.  Here, “regulation” is listed as one of the good things government does for the economy.  Whereas free marketers believe government regulation prevents economic growth.

Who makes the best case? [Read more…]

Millennials like socialism, but don’t want a government-run economy

Millennials–young adults 30 and younger–like socialism.  85% of that cohort in Iowa and New Hampshire voted for socialist Bernie Sanders, and a majority (53%) in one poll favor socialism over capitalism.  At the same time, 64% of this age group do not want the government running the economy, preferring instead the workings of the “free market”!

Which tells us that Millennials are such relativists that they have no problems believing in two contradictory ideas, or don’t know what socialism is, or have never been taught economics in school, or all of the above.  They also have no memories of the Cold War, with its death struggle between capitalism and communism, and no experience with socialistic experiments, such as the Nixon administration’s wage-and-price controls, which gave us gasoline and food shortages.  (Anybody remember that?  And Nixon is usually portrayed as a conservative!)

Read the research from the Federalist, linked after the jump. [Read more…]

Sesame Street and the free market

Sesame Street has signed a deal with HBO that will allow the popular children’s show to double the number of original episodes that it will produce next year.  Those shows will be shown free on Public Television nine months later.

In the meantime, we can see the difference in how a free market supplies a public good as opposed to government financing. [Read more…]

Does capitalism undermine traditional values?

The left is always saying that big business really runs this country.  There may be some truth to this claim.  The irony is that big business is supporting the left, at least on social and moral issues.  When corporations from Apple to Walmart turned against Indiana’s religious freedom act to support the gay agenda, notice how Republican politicians fell in line.

Charles Lane says that the Indiana controversy may be the Gettysburg of the Culture Wars, the turning point, after which social conservatives will start retreating until they lose their political clout completely.  He says that modern conservatism has depended on an alliance between pro-business free market advocates and social conservatives.  But this alliance is unstable.  He quotes a scholar who refers to “the cultural contradictions of capitalism,” saying that free market economics ultimately destroys traditional values.

There was arguably a time when capitalism and moral traditionalism went together, when capitalism depended on the values of self-control, restraint, and deferred gratification, as may still apply to small business today.  But today’s consumer capitalism depends on instant gratification, the satisfaction of all desires, and constant change.  Our financial system won’t even pay interest on a savings account, but rather depends on having everything now and going in debt.  This creates a cultural climate, so the argument goes, that will undermine traditional moral values.  But is this correct?  Would any other economic system be any better? [Read more…]