Bill Bonner of dailyreckoning.com has lots of opinions on economic issues.This is what he said about Free Trade: ==== Free trade still benefits Americans; it permits them to squander their wealth on more favorable terms. As they trade their homes and homeland companies for geegaws and gadgets, they get more for their money. But each day that passes makes them poorer; that is what happens when you spend more than you earn. Many of America's most important businesses are no longer competitive on world markets. Free trade or not, the wealth advantage that Americans enjoyed from WWI to the mid-'80s has packed its bags and is moving East. Open markets, and E-Z credit terms, just speed up the process. And when the free traders finally figure it out, we predict that they will become more protectionist than even Smoot or Hawley. But that is still for the future. Right now, most Americans still think they have the world's most flexible and dynamic economy. They support free trade because they think it still pays. On the other side are those who think free trade never pays. Someone sent us a review from Patrick Buchanan's recent book, THE GREAT BETRAYAL; How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy. "Buchanan was a free trader as recently as 1987," begins the review. "So he is well versed in the free trade arguments. "From 1821 to World War II, with short term exceptions, the American tariffs ranged from 25% to 50% with an average of 40%. This was the period of the American industrial revolution. America was built under the shield of protection. Then from World War II to 1970, tariffs were lowered to 12%. There after they were cut to 5%. "All four presidents on Mt Rushmore were protectionists." Buchanan shows us that protectionism has a long and honorable past in America. But what we see is only that the Land of the Free never was quite as free as we thought - at least in matters of international trade. He might as well argue that we should re-institute chattel slavery; people once thought that was a good idea too. They thought it was a good idea - like free trade - when it paid. When it stopped paying they changed their opinions. Is Buchanan right? Does protectionism pay? Can America's competitive advantage be restored with tariffs, taxes, and quotas? Can regression to the mean in world labor rates (the process of bringing wages in the West and the East back in balance) be arrested by passing laws? Can the American empire be preserved by stifling globalization? ==== Do you agree or disagree? Discuss his idea please.
The Smoot-Hartley tariff act of 1930 was a major cause of the world-wide Great Depression. To me protective trade practices are something that may have worked in the old industrial economy but just don't work that well in the information economy.
Protectionism is surposed to protect something that otherwise would be under the threat of a particular foreign industry. So if we go with the way Buchanan proposed, what industries are we going to protect? Textiles? Toys, Shoes? Auto? Too bad Toyata is the most popular car in America. Would consumers buy American that's low quality in comparison? Unlikely. We have reached to the point of no return, I think. Cheap foreign imports benefit most of us, don't you think? It's benefiting the poor workers in the third world too. So free trade is good.
Wait a minute... spending more money than you have is BAD? What about trickle-down... oh, never mind.