Friday, May 8, 2009

Free Traders: Friends or Foes?

I'm astonished that otherwise reputable economists continue to promote free trade dogma.

Free-trader enthusiasts consistently decry the horrors of tariffs, yet throughout U.S. industrialization (early 1800's to WWII), in fact, until Ronald Reagan's administration in 1980, we had broad protective tariffs on manufactured products as high as 48% and frequently averaging in the 30% range. And during this stretch of 150 years or so we saw consistent, profitable expansion of U.S. manufacturing, despite depressions, recessions, and a civil war intermittently impeding growth.

Since Reagan's income tax and tariff cuts, we've liquidated our industrial base for quick profits, dismantled the middle class and the unions that fostered it, eroded wages for wage-earners, and cemented in place an uber-wealthy, capitalized oligarchy. Our post-manufacturing banker class continues to sell out un-capitalized, wage-earners for a quick buck importing cheap junk from overseas and outsourcing design, manufacturing and service jobs. (John Jacob Astor would have been proud.) What's left? Retail, tourism (hawking Chinese t-shirts, hotel hospitality, rental desk clerks, etc.), health care, food service, and...wait for it...landscaping and gardening at the expansive homes of affluent bankers.

If free trade were such a godsend, would we not be seeing some real benefits, aside from cheap imported junk and profitable job outsourcing, by now? Benefits such as sustained and broad prosperity? Appealing employment opportunities? Health care for everyone? Education for everyone? Something besides cheap junk and a proliferation of rich bankers propped up by tax dollars?

Here's a revealing and contradictory take on free trade:
Thom Hartmann's review of Ha-Joon Chang's 'Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism'

Here's a Senator from South Carolina who recognizes the flaws in free trade: The Failures of Free Trade

The sooner wage-earning Americans wise up to the baloney we're being fed by our caviar-nipping, banking brethren, the better.

Here's a bit longer thing I wrote in response to comments on this and another post: Domestic Manufacturing vs. Free Trade

Here's a bracing rundown of NAFTA's caustic effects from Robert E. Scott at the Economic Policy Institute ( The high price of ‘free’ trade

Former Senator Fritz Hollings seems to concur:
We Are in Real Trouble
Politics Like Cancer

Here's a nice roundup of NY Times articles on NAFTA:

If you don't read all of the above, read this at least:
Free Trade Accord at Age 10: The Growing Pains Are Clear

And here's a nice little Wiki history of tariffs in the United States:


  1. A fascinating topic, but for quite different reasons, than what you imagine. With regards to Your arguments, they are not well constructed. There is plenty of well written papers that show just the oppposite. That the prosperity of the period you mentioned was enhanced by free trade, and open systems. The u.s. was amassive exporter at the time, the equivalent to todays china. in the later period, the U.S. bennefited from imports holding down inflationary pressures, and on, and on, and so forth.

    My point though is different, one thing that baffles me, and many economists to wit, is that people who study these things for a living, who spend a lot of time and energy learning and understanding the complexities and functions of the economy, become pro free trade, the better their grasp of how economies work. But, unlike negineers, or doctors or other professionals who deal with complex systems, Americans, even educated ones find it virtually impossible to accept what economists tell them in the same way. Now, many are skepitcal about the prognostications of their friendly doctor or engineer, but sneering comments that it must be dogma. And you write, you will take facts over rhetoric. Please take the time to read papers by those very same respected economists you so casually dismiss. Many of the answers to the list of complaints you put in your middle paragraph, will slowly be cleared up.

  2. Thanks for the comments.

    Granted, I could have been clearer -- tariffs were cut way before Reagan, but the cuts didn't really impact the economy until the 1970's, and then off shoring really picked up in 1980's.

    But the U.S. was never really "...the equivalent of today's China." I assume you mean from the 1950's to the 1970's, but there weren't any consumer cultures around equivalent to the U.S. that could import as much stuff as we do now (with borrowed money). The U.S. exported things like tools and infrastructure components, but not on the scale that China sells consumer stuff in the United States. Witness the huge U.S. trade deficit.

    As far as "...U.S. benefited from imports holding down inflationary pressures, and on, and on, and so forth." That's a pretty broad assertion, but tell me your time frame, and I'll respond.

    Finally, I wasn't so much "sneering," but I do believe many economists hold free trade as inviolable dogma and yet the benefits of broad prosperity just haven't materialized for the middle class and poor in the U.S.

    I attempt to clarify my position in a new post: