Economists For Protectionism: Part 1  

March 19, 2014

Most economists think sort of like Uwe E. Reinhardt, an economics professor at Princeton, who posted in the New York Times,

“Whether a fellow American gains from a trade or someone in Shanghai does not make any difference to most economists, nor does it matter to them where the losers from global competition live, in America or elsewhere.”

When talking about the most bang for a buck, $100 goes a lot further and does a lot more in China than in the U.S. This is true. Free trade, from that mentality, is wildly successful and makes sense from a maximizing return on your investment point of view. But if the question is, how can we increase wages for the lower/middle class of Americans starting now, free trade is not the answer.

Another common view by economists is held by David Henderson, research fellow with the Hoover Institution and an economics professor at Naval Postgraduate School, who has essentially said,

“it’s fine if people choose to maximize short-term consumption at their long-term cost–which means it’s fine if people chose economic decline.”


Opponents to Free Trade

There are some vocal opponents to international free trade though.

Heard of Keynesian economics? Named after John Maynard Keynes who said,

“I sympathize therefore, with those who would minimize, rather than with those who would maximize, economic entanglement between nations. Ideas, knowledge, art, hospitality, travel, these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible. And above all, let finance be primarily national.”

It is for different reasons than for increasing wages of low/middle class workers, but he’s in favor of protectionism.

Herman Daly, Emeritus Professor at the University of Maryland and former Senior Economist of the World Bank,

“Free trade also has enormous consequences for the standards a society choses for itself that must be treated separately from questions of pure economic efficiency. Standards regarding the distribution of income exemplify the issue. Whether intended or not, free trade between the countries of North American under NAFTA represents an active commitment to a low wage policy.

While NAFTA was often presented as a generous act by Canada and the United States to share their great wealth with Mexico, proponents made little mention of who was to do the sharing. In fact, it is the laboring class, which in the United States has already suffered a seventeen percent decline in real wages since 1973.

Lower wages mean that returns to those who own capital in all three countries will go up.

He’s saying that free trade in North America from NAFTA meant lower wages, but bigger returns to those with lots of money.

Nobel laureate Paul A. Samuelson, Professor of Economics and Institute Professor Emeritus, MIT, and author of the best-selling economics textbook in history,

“Most noneconomists are fearful when an emerging China or India, helped by their still low real wage rates, outsourcing and miracle export-led developments, cause layoffs from good American jobs. This is a hot issue now, and in the coming decade, it will not go away.”

He goes on to say,

rebut any mainstream economist’s claims that the United States cannot suffer long-term harm from innovation abroad in a world of free trade“.

(Continued in Part 2)

One Response to Economists For Protectionism: Part 1

  1. withheld on February 26, 2015 at 6:56 pm

    Perhaps of interest. Engineer argues there has never been a sound theory of economics:

    Critique welcome.

    best regards

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