Tuesday, October 2, 2012

Freedom from Want 2

In my latest reading of Freedom from Want: American Liberalism and the Global Economy, Edward Gresser talked some about the history of trade and protectionism.

Gresser made the point that trade is good because other countries make some things better and more efficiently than we do, and we make some things better than other countries, so it's beneficial to all sides to let them stick with what they're good at and to trade.  Moreover, according to Gresser, protectionism makes foreign goods more expensive, with the result that consumers have less money to spend on other goods, thereby hurting the economy.  Gresser also points to places that tried to be self-sufficient and to cut themselves off from the outside world----Sparta, North Korea, etc.----and he believes that we should not want to be like them.  I'd like to see better arguments for why a country should not try to be self-sufficient, and yet I can see Gresser's point that we're better off importing certain things.  Coffee comes to my mind.

Gresser then talks about American history.  As Gresser notes, trade was a significant part of America's early days.  The Declaration of Independence criticizes the British for hindering the thirteen colonies' trade with other countries, the American flag consisted of imported goods, Thomas Jefferson promoted free trade as something that would be conducive to prosperity, and Thomas Paine thought that trade would lead to peace.  But Gresser says that there were strong protectionist voices, such as Daniel Webster, Henry Clay, the Whigs, and later the Republicans.  Like the leftist critics of free trade today, protectionists in America's history feared that free trade would drive down American wages because American workers would have to compete with foreign workers (in this case, in Europe), who were poor because they were not paid much.  But another reason that protectionists liked tariffs was that they were an easy and convenient source of government revenue, and the Whigs and early Republicans supported public financing (of infrastructure, for example) as a way to stimulate the American economy.

Moreover, whereas Lou Dobbs presents outsourcing as a devastating outcome of corporate influence on the U.S. government, Gresser notes that protectionism in America's history tended to coincide with a relationship between government and business interests----since the special interests back then were the businesses that wanted to be protected from foreign competition.

It will be interesting to read Pat Buchanan's The Great Betrayal to get his take on protectionism and free trade in America's history.  I wouldn't be surprised if some of the Founding Fathers supported trade as a general principle, while also practicing protectionist policies every now and then.  Such inconsistency or pragmatism is possible, for Ronald Reagan was believed to be a free trader, and yet, as Phyllis Schlafly states, he "imposed tariffs on motorcycles to protect Harley-Davidson and on electronic products from Japan" (see here).

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