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January 18, 2007
What Galileo Must Have Felt
Don Boudreaux
When I read or hear protectionists such as Sen. Byron Dorgan, I think that I can imagine what Galileo felt as he listened to the Leaders of his day insist that the sun revolves around the earth.
Appearing just below is part of Sen. Dorgan's letter published in today's Wall Street Journal:
There is a growing public sense that blind support for unfettered "free trade" in Washington has cost our country dearly. It just the past four years our already massive trade deficits have nearly doubled, to well over $800 billion a year. And we have lost over three million manufacturing jobs. So it is not a surprise that in the November election, a number of new Democratic senators ran winning races on a platform of changing the course on trade policy.
Congress must reclaim its role in formulating trade policy. The Constitution gives Congress, not the president, the power to regulate commerce with foreign nations. We relinquish that authority to the president, in the form of so-called "fast track" trade authority, at our peril. I opposed granting such authority to President Clinton, and I opposed granting it to President Bush in 2002 (and so, by the way, did a majority congressional Democrats). The past five years of growing trade deficits have shown that our opposition to fast track and to unfair trade agreements was justified.
I've written in this cyberspace more than enough on why fears of the trade deficit are overblown -- and why such a "deficit" in no way justifies protectionism.
Here's a letter that I sent in response to Sen. Dorgan's missive:
To the Editor:
Attempting to discredit free trade, Sen. Byron Dorgan resorts to tired rhetorical tricks (Letters, Jan. 18). For example, he complains about the loss of manufacturing jobs. In fact, though, most of these job losses are due to automation that increases workers' productivity. As economies advance, the loss of manufacturing jobs is no more surprising or regrettable than was our loss over the past few centuries of agricultural jobs or our earlier loss of hunter-gatherer jobs.
Sen. Dorgan calls free-traders "blind." It is much closer to the truth to call protectionists antediluvian.
Sincerely,
Donald J. Boudreaux
Also, the Cato Institute's Dan Griswold has Dorgan's number. For example, discussing Sen. Dorgan's book on trade, Dan writes that:
As a nation grows wealthier, the share of the workforce in agriculture invariably falls and the share in the service sector rises. The share in manufacturing typically rises and then falls. According to the World Bank, countries with the lowest share of the work force in the service sector include Uganda, Vietnam, Romania, Sri Lanka, Indonesia, and Mongolia. Countries with the highest share in the service sector include, along with the United States, Sweden, Switzerland, Canada, Hong Kong, Japan, and Luxembourg. The first group is among the poorest nations, the second among the richest. Apparently one goal of Dorganomics would be to shift America from the rich group to the poor group.
In a typical flourish of hyperbole, the senator warns that “our manufacturing base is shrinking.” But here the senator confuses jobs with output. America’s manufacturing base has been both growing and changing. American factories are producing more aircraft and pharmaceuticals, more sophisticated machinery and semiconductors, more chemicals and even more passenger vehicles and parts than a decade ago. In fact, America’s factories are currently cranking out 50 percent more stuff by volume than they did in the early 1990s, before NAFTA and the World Trade Organization came into being. They can produce more with fewer workers because manufacturing productivity has been growing so rapidly.
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Comments
It is little surprise that Dorgan's type 1) panders to voters' ignorance, 2) confuses employment with success (if we've lost jobs we must be worse off).
From his words, it sounds like Dorgan really wants to prevent American companies from importing goods at cheap prices - how else could he balance the trade deficit? We couldn't raise export tariffs enough to cover the difference. Imagine what would happen if just a fraction of the $800 billion imports were messed with. The obvious answer is that things would become a lot more expensive, or a lot less available.
I love his non-sequiturs. Wouldn't it be funny if he had said "In just the past four years our already massive trade deficits have nearly doubled, and more illegals keep crossing the borders." That makes about as much sense as what he did say.
Posted by: python | Jan 18, 2007 12:16:59 PM
And free market naysayers must feel the same as those political and "religious" leaders of Galileo's time. They had built their reputation upon having a monopoly over knowledge and scientific discovery. Also, many of them had either made statements contrary to Galileo's or had sworn to defend the papacy (which made such ludicrous statements as "No one could live below the equator because it is too hot) to the death.
Today the free market bashers have done many similiar things. Many have staked their political careers on right the wrongs that have been committed against the American worker and our economy. And in effect have declared that they would forever defend such institutions as UAW and the Sunkist Cartel.
Just as Galileo's "judges" become more beligerent with each piece of data he presented, many of our current leaders have such a steely resolve that they refuse to look at raw data because it does not conform to the preconceived notion that won their election.
Posted by: Adam Malone | Jan 18, 2007 12:18:44 PM
This is why the new Democrats in Congress scare me.
These aren't Clinton Democrats.
Posted by: beeper | Jan 18, 2007 12:43:48 PM
Imagine a factory in the US making buttons. The workers would be making minimum wage with no benefits, so they'd be complaining - or they'd be illegals. But buttons would cost $2 each - and a blue denim shirt would sell for around $50 at Walmart. Sorry, but I'm really not seeing the plus side to this - for anyone.
Posted by: Randy | Jan 18, 2007 1:15:34 PM
I worry that you guys are making a risky argument by bringing productivity into this. Not that you're wrong, of course. But when the protectionists get swatted down, they'll go after computers, automation, and information management next. "Computers: They're destroying our jobs and making us sterile! ... next on Moneyline".
Posted by: Brad | Jan 18, 2007 3:00:19 PM
Brad: "But when the protectionists get swatted down, they'll go after computers, automation, and information management next."
Back when my dad was a union leader and I was a newly minted Wharton MBA, we argued about whether computers and automation would bring prosperity or doom. He spouted the predictible union anti-automation line.
Twenty-three years later, the evidence is clear. I was right. Were he still alive, I would probably point that out to him.
Posted by: JohnDewey | Jan 18, 2007 4:57:05 PM
Brad-"But when the protectionists get swatted down, they'll go after computers, automation, and information management next."
In some ways they still do. One of the big things that Unions negotiate is how many jobs/factories will be closed. They also negotiate how many jobs will be lost how many jobs will be replaced by automated machinery.
But technology is winning the day despite the Unions' best efforts. When McDonald's automates drink machines and french fryers it proves that technology can cut costs in every part of the market.
Posted by: Adam Malone | Jan 18, 2007 5:28:48 PM
The dichatomy between those who favor trade restrictions and those who, like Steven Warshawsky, who favor increased minimum wage to those who favor free trade and no minimum wage is very interesting. Here Don states he favors free trade, even if that means in the short-run that there will be American's displaced, but does not favor minimum wage even if it helps a low skill workers in the short run. Let me make it clear that I don't agree with Warshawsky and I agree with Don on both accounts.
Those who favor an increase in trade restrictions, along with those who believe that an increase in minimum wage is good, have no sense of the LONG RUN. They only consider the short-run effects. They don't understand the fluidity of the labor markets. How many southerners moved to the north for jobs in manufacturing when agricultural jobs were losing numbers? Many Jim Crow laws in the north were put in place because of competition from the blacks who were moving north.
Both the argument for increased trade restricition and minimum wage increases take away individuals ability to identify job markets and a job with better wages. I moved from Jacksonville, FL to Washington, DC because I knew that I had better opportunity for growth professionally. This was after I was laid off. Just because individuals work in manufacturing, doesn't mean they don't know where to find a job. I have cousin who is an electrician in western PA, but he is also union. He spends more time out of a job, than in a job. He has chosen not to move, why? Because he probably values making less money by collecting unemployment and sitting on his duff than moving to the Washington DC area where he could make great money, EVEN, if he weren't in a union.
There will always be retrenchment of capital and labor in a free market economy. But if the current policy of "a safety net" doesn't go away, there are no reasons for labor to move to a place where their labor is most profitable.
The way that trade restriction believers talked, you would think that no one was ever able to find other jobs. But what amazing me more than anything is that they seem to forget that this country was founded by those who MOVED to where their labor was most profitable to them. In the long run we all become better off because of this displacement and movement. Standard of living increases.
Here is a great report by John Stossel.
http://abcnews.go.com/Video/playerIndex?category=2020&subcategory=2020_Stossel_subnav
Posted by: Matt C. | Jan 18, 2007 6:44:16 PM
In the link pull up the Myth:Outsourcing is Bad?
Posted by: Matt C. | Jan 18, 2007 6:46:19 PM
Don brings up a good point about the loss of agriculture jobs. It just goes to show how hard if not how nearly impossible it is to rid the protectionist mindset--we are still trying to protect those agrucultural jobs. Strangely though, you hardly hear the outcry off all the farmer jobs that were lost.
The real danger is, once a protection policy is put in place, you create a small group with a huge vested interest in keeping it that way. The harm it does to everyone else is relatively small and widespread, so there is little outcry.
Posted by: Stephen Reed | Jan 18, 2007 7:19:53 PM
If China would allow its currency to float freely our congressmen wouldn't have to threaten proctectism. A weaker dollar would encourage our manufacturers to increase goods manufacturing investment here at home. That would open up more manufacturing jobs for Americans. Sounds like ur saying Americans wouldn't take the jobs because the wages would be too low?
Posted by: John Booke | Jan 18, 2007 11:30:39 PM
John,
For Americans to make a majority of the products at the same price that we import them from China, or any third world country, the wages paid to the American worker would be far below minimum wage. This is one reason why those products aren't made here. But on the other hand, we are told that Americans should raise minimum wage.
I believe the average wage of a Chinese laborer is around $1.25. Imagine the kind of currency float that would need to take place to get this wage compatible. It's not possible, so at best you are hoping to get products/jobs that use automation or some other efficiency over labor - and therefore wouldn't lead to significantly more American employment.
In short, I doubt that a floating currency would greatly impact production of cheap goods. At best it will slow down the exodus of higher value items like refrigerators, air conditioners, cars, etc.
Of the yearly $200 Billion trade imbalance with China, I doubt you could claim more that $80 billion of it with a currency adjustment. And since Dorgan is referring to a yearly $800 billion imbalance, I don't see how it will affect much.
http://www.census.gov/foreign-trade/balance/c5700.html
http://www.cato.org/research/articles/hanke-050509a.html
http://www.forexblog.org/2005/06/is_the_yuan_rea.html
http://www.google.com/search?q=yuan+undervalued
Posted by: Python | Jan 19, 2007 12:31:59 AM
John-
Those of us who are against trade restrictions of all stripes and colors generally do not try to make guesses about which jobs will be "saved" or "lost". IF no other than jobs are not actually a tangible good.
Rhetoric about saving and losing jobs shows a misunderstanding of what the function of a job is. The only reason why we/people have jobs is to create some sort of product for consumption. The only tangible result of a job is the product that it creates.
Therefore the creation or loss of a job has little bearing. Plus the data most often mentioned by politicians "We lost 3 million jobs this year" or "This year we created 5 million jobs" is extremely unimportant. It also promotes the idea that government creates jobs.
Thankfully it does not.
Posted by: Adam Malone | Jan 19, 2007 8:58:55 AM
This has nothing to do with Galileo. That the sun revolves around the earth is a scientific fact.
Whether free trade is "good" or "bad" is a matter of values, and values aren't subject to scientific proof.
To be like Galileo, you need to write about the importance of IQ differences.
Posted by: Half Sigma | Jan 19, 2007 10:26:09 AM
Economists need to do what many climate scientists and other members of the global warming industry have done. They repeat the mantra about all published papers being in support of AGW (scientific consensus) and then attack any group or scientist who doesn't go along with it or at least keep quiet if they disagree. To even begin to actually debate global warming you have to break through various layers of attacks, ie is it published, peer reviewed, who funded it, what is the guys background, etc once you've gone through that you can start talking about GW, but expect to come back to the non scientific parts of the arguement frequently. See the recent threats to decertify any weathermen who express skeptism about GW and UCS press statements on Exxon's funding of groups for examples. I don't think this is the right approach, but is working pretty well for the global warming crowd.
Posted by: Jacob Kearns | Jan 19, 2007 11:17:05 AM
Half Sigma said "Whether free trade is "good" or "bad" is a matter of values, and values aren't subject to scientific proof."
Note that "free trade" does not mandate or imply international trade to any extent. OTOH, protectionism explicitly proscribes it. You see, the protectionist position is not quite the antithesis of free-trade. Were it so, I would be clamoring for a law that would force you to trade with other peoples. And you're correct, in such a setting, our positions would be diametrically opposed, and there could be no rational justification for either. Under your protectionism, one of us is free to do as he prefers, and the other is not. And you can no more defend my subjection to your whims than I can you to mine. Which is why I don't walk that path.
Protection implies a law, the resistance of which ultimately ends in my death. On the contrary, what I want is *not* a law; the absolute absence of a law. I will never threaten to imprison you, or worse, kill you if you don't trade with me or with my friends.
If you support protectionsim, you are telling me with whom I may peaceably trade. You are imposing your will upon mine - and it is not possible for you to defend this with logic; instead you appeal to force. You are so concerned with the person from whom I acquire my [insert good, here] that you would have me shot if you don't approve of that person. So I'll ask: why do you want me shot? Merely because I want tea and zippers from China, shoes from Malaysia, and shirts from India? Because that's what it boils down to, your proscription. You want the government to chase me down and prosecute me for violating a law that enforces your will over my self and property. You cannot defend your position without admitting that you want me shot; because defiance of or resistance to this law ultimately ends with my death.
The "free-traders" aren't asking you to do anything except leave us alone. That you refuse to do so speaks volumes.
Posted by: David Z | Jan 19, 2007 12:41:28 PM
David Z:
While I agree with your perspective, for the most part, I would offer that these tired, hoary statements:
"Protection implies a law, the resistance of which ultimately ends in my death"
&
"You are so concerned with the person from whom I acquire my [insert good, here] that you would have me shot if you don't approve of that person"
are so hyperbole-filled, hyperventillating, over-the-top and nonsensical that they make your argument sound silly and childish. Yes, you may be right - but this approach makes you look just as vapid as Lou Dobbs & Co.
Frankly, I'm ever so tired of and disappointed in the rhetoric of the classical liberal movement. If the best argument one can use is "you'll have me shot" (which is pure hyperbole), then there's not much "meat" in the argument....just lots of sizzle.
Posted by: faultolerant | Jan 19, 2007 1:20:22 PM
Don't blame me for pointing out the fact that there's a gun in the room. I'm not the one who wants to use it.
Posted by: David Z | Jan 19, 2007 2:00:17 PM
And the "you'll have me shot" is not so much my argument as it is a paraphrase of their position.
To try and debate the logic of a position which depends not on logic, but on force, is silly. What I want to do is demonstrate that they haven't used logic yet - and a good way to do this is to show them what they have in fact used: a gun.
If they want to start using logic, I welcome the opportunity. Until then, pardon me for pointing out the gun in the room.
Posted by: David Z | Jan 19, 2007 2:05:04 PM
David Z,
Well said. Folks like Faulttolerant have the idea that "we're all in this together" so deeply embedded in their psyches that when we say we'd prefer to be left out of their schemes, they just can't understand that we really mean we just want to be left out of their schemes. They assume the idea of "us or them", so it seems perfectly reasonable to use force. It has to be my way because otherwise it will be your way. They can't imagine a world where both ways coexist. The concept of "voluntary" totally escapes them.
Posted by: Randy | Jan 19, 2007 3:06:04 PM
"Whether free trade is "good" or "bad" is a matter of values, and values aren't subject to scientific proof."
First, there is no such thing as scientific proof. If there was, then scientists would not feel it necessary to repeat ad nauseum the mantra that scientific theories are *always* provisional.
Second, while values are subjective and not open to scientific criticism, the methods by which we seek to satisfy our values are. The fact is that free trade better satisfies the values of almost everyone within the constraints reality imposes upon us.
To most classical liberals, people who do not value free trade as the best choice among the possible alternatives, are doing so due to factual errors, a misunderstanding the constraints within which society must function.
Posted by: Lee | Jan 20, 2007 5:11:18 AM
In fact, most disagreement about morality is disagreement about fact, which is why rational criticism (including scientific experiment) are applicable to the moral questions surrounding free trade.
Posted by: Lee | Jan 20, 2007 5:21:05 AM
Lee, I think what he meant was "mathematical" proof. But your point is well taken. As far as the values-system is concerned, I think its' at least partially incorrect (or incomplete) to suggest that classical liberals support free trade because it "better satisfies the values of almost everyone within the constraints reality imposes upon us." This is a utilitarian position, and is the same strain of logic used by varying degrees of collectivists.
The fact of the matter is, we believe it is the best system not because of its consequences (which can't be determined ex ante), but because it is the most amenable to a system of individual rights and inviolable property rights - being the foundation of any well ordered, functioning society.
Posted by: david z | Jan 20, 2007 10:59:37 AM
Half Sigma says: "This has nothing to do with Galileo. That the sun revolves around the earth is a scientific fact."
But there are those who dispute science when it tests one instincts and casual observation: http://www.reformation.org/stationary-earth.html
Thus when Copernicus hypothesized and demonstrated a Solar system, or when Dr. Friedman tours the globe with a TV crew to demonstrate the superiority of free trade, there will still be Luddites rejecting such notions on "moral" or religious grounds.
We no longer have to live in the dark ages, either scientifically or economically.
Posted by: True_Liberal | Jan 20, 2007 11:07:06 AM
"I think its' at least partially incorrect (or incomplete) to suggest that classical liberals support free trade because it "better satisfies the values of almost everyone within the constraints reality imposes upon us." This is a utilitarian position, and is the same strain of logic used by varying degrees of collectivists."
I was careful to not argue a utalitarian position. The comment was meant more broadly, to include values such as individual liberty, though I can see why there would be a misunderstanding.
For example, one of the most peculiar and dangerous mistakes is assuming that individual libery can be reconciled with socialism and achieve economic growth (as many so-called libertarian socialists presume), but the constraints within which me must work simply do not allow for it.
Posted by: Lee | Jan 22, 2007 4:06:30 AM
Good discussion about free trade or not. If we don't get cheap imports American manufactured goods becomes too expensive. If we do have cheap imports driven by cheap labor then jobs suffer. I don't care about how much automation has improved output, how do I pay for the inflated home prices and rent in America? One guy above tells another guy to get off his duff and move from PA to DC. There may be jobs in his field in DC. Just suggesting that he pick up and move doesn't mean he can get a job there. I have moved to a different state twice to get a job. I have 2 college degrees and I can't seem to get a job any more, even stating that I am willing to relocate at my own expense. How can free trade help me? When I don't have resources to move to another city or state, then what? Have you looked at any lease requirements lately? In case you haven't, a person still has to show gross income of 4 times the rental rate. Perhaps 4 minimum wage earners could qualify. What about new and old graduates who can't get a minimum wage job because they are over qualified? How does free trade and automation fix that problem? How does blaming democrats or republicans for the current status fix that?
Posted by: Clint | Jan 30, 2007 6:21:13 PM
What is going to happen when the average American can't even afford to buy an 11.00 shirt at Wal-mart? You guys take it for granted that jobs will just be created! The more jobs that are shipped overseas,means there will be less Americans working those jobs. It affects pay roll taxes, property taxes and just about any other revenue generating income for state, local, and federal governments. Quite frankly, all kinds of jobs are being outsourced, including, but not limited to white collar jobs. Do you gentlemen suggest lowering the basic standard of living for America? How will the Asian Economic Machine survive if there aren't any rich Americans to buy their cheap stuff? The average minimum wage worker in the Western makes far more than the average worker in China! I still think the working stiffs in America are pulling the wagon. What good do cheap shirts do if it threatens the very basic living standards that most Westerners take fot granted.
Zingding
Posted by: zingding | Feb 7, 2007 1:47:43 AM
Former proponent of free trade I almost forgot. There is no such thing as a free school lunch. Sooner everyone against the protectionists understand, the quicker America will be safer, more independent, free and sustainable.
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