06 March 2008

Tired Old Protectionists

The New York Times has an opinion article by a trade lawyer named Robert Lighthizer claiming free traders act on principles, regardless of facts.
They see nothing but dogma — no matter how many jobs are lost, how high the trade deficit rises or how low the dollar falls.
Frederic Bastiat knew this criticism well, back in the 1830s.
"We advocates of free trade are accused of being theorists, of not taking practice sufficiently into consideration." Economic Sophisms, First Series, Chapter 13.
Too bad Lighthizer hasn't read the relevant literature.

More amusing though is this tidbit.
Free trade has long been popular with liberals, and it remains so with liberal elites today.
I could introduce him to quite a few liberals, but none that heartily support free trade. And, noticeably, this anti-free trade screed appears in....the New York Times.

Lighthizer is correct when he says
Conservative statesmen from Alexander Hamilton to Ronald Reagan sometimes supported protectionism...
That's exactly the problem--we can't even rely on our conservatives to support free trade consistently, which is why I'm concerned for our future.

And somehow Lighthizer thinks the best way to build "a prosperous middle class" is to make me pay more for the things I buy. Somehow he missed Adam Smith's lesson that the amount of goods and services you can command determines your wealth, not how much money you make, or where it is produced. 

Really, it's too bad he hasn't read the relevant literature.


James K said...

Sigh ...

The benefits of free trade is one of the most stable aspects of economic theory. The recommendation has been the same for 230 years, since before the United States even existed.

When will these people learn?

Having said that, in New Zealand free trade has a firm political consensus across the board so there are definitely liberals who support free trade. In fact the only parties that don't are the Greens ('nuff said) and New Zealand First, the only truly conservative party in New Zealand politics.

James Hanley said...

"in New Zealand free trade has a firm political consensus across the board..."

I'm amazed...not because it's New Zealand, but because I didn't think this existed anywhere. It's the most heartening news I've heard in years, because it means creating such a consensus is at least possible.

But your liberals may be different than ours (I don't really know). To be a liberal in the US, you apparently have to believe that the pursuit of self-interest is wrong, and since all corporations do is pursue their self-interest, they assume corporations are evil. Hence, anything that smacks of business is offensive to them.

Which is why I keep trying to point out to people that businesses are often anti-free trade, in hope of persuading them it's really not about being pro-business. It never seems to work, but I keep trying.

James K said...

I think New Zealand may be unique in having this consensus. The reason for it comes out of the reforms of the 1908s, referred to Rogernomics after the Labour government's Minister of Finance Roger Douglas.

Labour is the main left wing party in New Zealand and they took power in 1984 after our Prime Minister Robert Muldoon (a Nixonian conservative) got drunk and called a snap election (no, seriously).

After a long period of prohibitive tarrifs, crippling taxes and extensive price controls the economy was shot and the government was actually insolvent.

Roger Douglas was a fan of Friedman and adovocated massive economic liberalisation. Given the country's desperate straights there was no alternative. Naturally there was widespread reissitance by unions who felt betrayed by their party. Where Thatcher beat the unions with force of will, Douglas used speed, making so many reofrms at one that there was no way for the opponenets to keep up.

Ultimately Labour purged its self of its free market faction near the end of the 1980s, and the resulting infighting threw them out of power. National then ruled for 9 years, now following free market principles. By the time Labour was re-elected the reforms were full embedded, there was no appetite for going back to the way things were.

It seems that the successes of our reforms are the product of the "Nixon goes to China" effect and the passion and tactical brilliance of Douglas.

James Hanley said...

Very interesting. I'm going to have to read up on that series of events. I appreciate the fact that people learned to support free trade through experience.

Regarding Muldoon, over here in the US we try to teach teenagers not to make important decisions while they're drunk. (Doesn't work here, either!)

James K said...

That's the thing about Muldoon, he was far mor impervious to reason than he was to liquor.

James Hanley said...

"he was far mor impervious to reason than he was to liquor."

Great line! I know a few of the type myself.