Why do economists support Free Trade?

(FAQ: Frequently Asked Questions)

Why do many economists say that Free Trade is good for us?

It seems like it would be obvious to everyone that closing thousands of factories
in the US and causing millions of American workers to lose their jobs is not good
for our country.

As hard as it is to believe, there are politicians, corporate leaders, and many
economists who keep saying that Free Trade is good for the American people.

Free Trade is when countries enter into trade treaties which allow unlimited
quantities of goods to be imported into their counties, without any import taxes
or other restrictions. Free Trade is what allows US corporations to move factories
to China, and then bring the Chinese-made goods back into our country.

We don’t really know why economists continue to say Free Trade is good for us.
We can only speculate. Some economists work for large corporations who make
a lot of money by sending our factories to China. Maybe they are being paid
to tell us that closing factories in the US is good for us.

We also think that many economists are out of touch with the real world, and
rely too much on theories, surveys, and statistics for their information. It
may be hard for them to comprehend how detrimental Free Trade has been to the
US economy and the lives of millions of American workers.

Another reason is that Free Trade theory is orthodox economic theory. And many
economists are “true believers” in Free Trade.

It would probably be easier for an economics student, especially a PhD candidate,
to get an advanced degree, if he or she goes along with the mainstream economics
thinking and theories, such as Free Trade.

There is one interesting aspect of modern economists going around preaching the
benefits of Free Trade. Free Trade is based upon the Comparative Advantage
theory popularized by David Ricardo of Great Britain in his book, “On the
Principles of Political Economy and Taxation”, published in 1817.

In Ricardo’s Comparative Advantage theory, upon which Free Trade is based,
Ricardo himself stated that his theory assumed that there was full employment
in each country, and that capital (money) was immobile.

It is obvious that there is not full employment in the US, and that US
corporations are taking billions of dollars from the US and building factories
in China. It would seem that modern Free Trade theory is being applied to a
situation that goes counter to the original premise put forth by David Ricardo.

Sometimes economists try to tweak their theories, in order to explain what is
happening to our economy. Instead, they should declare Free Trade theory dead
and bury it, along with the Flat Earth theory, etc.

They refuse to look objectively at the results of pursuing Free Trade at all
costs. As our economy continues to crumble, many economists are still preaching
Free Trade.

The difference between 5 percent or 10 percent unemployment is a statistical
aberration to many economists. “OK, the numbers are off a little, but Free
Trade is still good for our economy”. What is hard for many economists to
realize is the real impact that the additional 5 percent unemployment has on
the lives of millions of unemployed workers.

When unemployment goes up from 5 to 10 percent, the number of unemployed workers
increases from about 7 million to 14 million. This means that 14 million
workers have their lives thrown into a state of upheaval and chaos. These 14
million unemployed workers face the prospect of foreclosures, calls from
creditors, loss of health insurance, etc.

But this devastation is hard for many economists to understand if they live
lives of comfortable isolation. It is difficult for many of them to relate to
the real world of Jane or John Six-pack, who are living paycheck-to-paycheck.

Many economists are tenured professors at some college or university. Others
work for very large trans-national corporations or large banks. Most local
barber shops do not have an economist on their staff.

Both tenured university professors and many corporate economists tend to be very
well paid, perhaps $125,000 or more per year, with very generous job benefits
and job security.

But, there are a few economists who realize that Free Trade is detrimental to
the US economy.

Tenured Economics Professors and Outsourcing

Being a tenured professor means that you essentially have a guaranteed
lifetime employment. You have to do something really bad to be fired.

It is interesting that a tenured economics professor at a major university,
earning maybe $125,000 yearly with full benefits, who can’t be fired and
replaced with a lower-paid teacher, is teaching his or her students the
benefits of outsourcing and Free Trade.

And outsourcing and Free Trade has caused millions of American workers to
lose their jobs. But this tenured economics professor still preaches how
great outsourcing and Free Trade are for the American economy.

But, what if colleges did away with tenure, and every year they brought
in 10,000 English-speaking economics professors from India who were willing
to work for $15,000 per year.

The US economics professors would then begin losing their jobs or work
for $15,000 per year. After losing their jobs, they might look at Free
Trade and outsourcing differently.

Of course, with tenure, this will never happen to the economics professors.

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