A Bit of a Rant on Free Trade

Ah, but it’s a good rant, colorful and defensibly reasoned, by Angry Bear reader OldVet, “Taking the other side of Trade – what’s free and what’s not.” He makes a valid core observation: free trade hasn’t delivered the goods (at least for the US) that it was alleged to, and that is at least in part due to the fact that the system we have isn’t free trade. To his post:

Today I read the latest newsletter of John Mauldin, an investment advisor who puts out very interesting articles from time to time on a variety of subjects, and today’s was “free trade.” It’s called Draw the Curve, then Plot the Data. My response follows:

Read with interest your latest, “Draw the curve. ….” And the conclusion about trade: “I am well aware that global free trade is not a one way ticket to prosperity for all. If it is your job that goes to another country, that affects you deeply. But the US as a whole has benefited tremendously from globalization, as has the world. And yes, some benefit more than others, but that is the nature of free market economics combined with technological change.”

Sorry, but that’s just orthodoxy and the same old propaganda of recent decades, in my own opinion. (I’m not Alfred Einstein, but am a retired economist of the more practical sort – I worked on audits of very big corporations on their transfer pricing, for purposes of income declaration. I’ve drawn a curve more than once.)

Here’s a curve to draw: US trade balances from 1945 to the present. Look at the last 40 years and tell me that we have free trade again. Really? Thirty years of negatives. Massive transfers of technology offshore, wage arbitrage across borders (mass immigration and mass outsourcing), loss of entire swaths of industrial capacity, wages flat since the 1970’s. I believe thirty years of experience ought to teach America something, and that is that we don’t have free trade. We have manipulated trade, and a pattern of manipulated trade. Changing this trend is not “protectionism” from trade, but a redirection of the rules of trade to make it more free.

Vendor financing from Asia and Saudi Arabia for excess consumption over production means that the US , in both public and private sectors, have become the “sub-prime borrowers” of the world. And do you truly believe this is a stable platform for future “growth” in US economy? Really? Because the US government can afford more interest payments on debt for now, does that mean we should keep increasing debt? Why?

His post continues here.

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