This is one area where I will find myself at odds with both liberals and conservatives alike. Both groups are united against the one concept where almost all economists agree, that Free Trade is the best answer for any nation who would seek to employ it, and further, it is even the best possible answer for dealing with a nation that imposes tariffs upon your country in return. What it comes down to basically are two concepts that are difficult to explain to the average layman. Describing the effects of the unseen versus the seen, and the broken window fallacy. Tariffs may protect the Steel Workers so that they can charge a higher wage than what the market dictates for producing steel, while it may temporarily protect their jobs, industries that purchase steel for their businesses will be harmed by the additional costs associated with the, "protection." Those jobs, which remain unseen, at least in terms of consideration of the tariff, are put at risk. Long term, tariffs do more harm to the nation instituting them than those asked to pay the wasteful tax. So why is it that in the one area where you have as close to unanimity amongst economists as is possible to achieve, they are ignored completely, while simultaneously invoked in the argumentation in favor of the folly?
Our, "unfavorable trade balance," is almost entirely due to the fact that we import almost all of the oil we need in order to drive our cars and run our manufacturing sector. This is in fact a self inflicted problem. Like all self inflicted problems, it can be solved by simply not doing that which self inflicts the problem upon us any longer.
What seems a little unusual for this lecture when compared to the others in this particular series was the absence of young communists who challenged Dr. Friedman's arguments. Perhaps there is hope for Kansas after all.
Comment
Comment by SHARRON AMSTER on September 17, 2012 at 5:44pm Richard, Ye of little faith. If I make something and I know someone will but as long as I make it. I am not going to run out. I will find ways to make it better or bigger or faster. That is our way.
Comment by Herrmann Glockler on September 16, 2012 at 5:49pm There is an old saying, corporations do not pay taxes, they only collect them.
However taxes paid by corporations are added on to the prices of their products, which can make these products uncompetitive in the world market. This, not so called Corporate Greed, has forced may companies who sell their products on the international market to relocate their manufacturing operations to lower salary, or lower taxation countries, to remain competitive on the international marketplace
We could bring back to America much if not all of the manufacturing industry by eliminating all taxation on corporate profits.
This will free corporations to re-repatriate profits made abroad that are now siting in foreign bank accounts.
This will also eliminate any political meddling, (Lobbying) by industry, eliminate tax related accounting (GE famously sent a 75,000 page tax return to Washington to avoid all American taxes, and keeps politicians noses out of industry.
Distribution of profits in the form of bonuses, salaries, capital gains from increases in share prices etc can still be bring in revenues to governments.
It is government that is striving to hide the full extend of taxation they extract from their constituents, by distributing and hiding their taxation in many different ways.
Time to make the taxation code open and transparent, so we can see the nefarious nature of government.
Time for a Fair Tax, or a Flat Tax, but in all cases, a single tax
Comment by Richard Curtis on September 16, 2012 at 4:15pm What do you do when you run out of goods that we can produce more efficiently than any other country? Isn't that what is happening now? Unions anyone?
Unions get unrealistic raises in salary or benefits, which creates a unrealistic gap between union and non-union workers, therefore they get a raise. Same with Minimum Wage.... When the Minumum Wage goes up, all those who have Minimum Wage people reporting to them get a raise, and so on up the line. So, the result of High Union Wages or Minumum Wage cause the price of products to rise, helping no one, and pricing our goods out of the local and international markets, and therefore we import more and increase the Balance of Payments unfavorably.
Comment by Vern Shotwell on September 16, 2012 at 3:35pm Perhaps the best example of the effects of protectionism is the Smoot-Hawley Tariff Act of 1930. Initially intended to protect the agricultural sector, many others got on board as well, raising tariffs often 50%
Other nations, particularly the more developed, reciprocated in kind. Trade declined precipitously, by 2/3 overall and deepened the depression for many years. The decline in wheat sales also is seen as the major cause of mass starvation in Eastern Europe as well.
Free trade is a good thing! Products then tend to be produced in those areas of the world best suited for their manufacture, and increased efficiency results. Best for everybody, really.
No time for details! But I'd advise all to study the Smoot-Hawley Tariff Act in some detail. There is much to learn from that failed experiment.
Comment by David J Edwards on September 16, 2012 at 1:59pm Comment by SHARRON AMSTER on September 16, 2012 at 11:53am We need to start producing again. (When we get our country back) I remember how if was to see all the goods we made. How we worked hard and were happy when we saved enough money to buy our first home. We bought made in the USA and did not see to many things from other country's. We were the best. Let get to it again.
Comment by Pat Chadwell on September 16, 2012 at 10:53am The thing is that when the USA had trade products they worked and worked and worked. But the other countrys products worked until you got them home and then they broke except for Japanese products worked like ours. The bad thing is the imports from other countrys are still junk. Just like GE product today, you are lucky if they last out the warrenty before the break.... Today they dont make things they put junk together from other countrys. Our steel in not make in the US anymore and you see bridge and other product falling apart because the steel is tin not good steel products..
Comment by Debrajoe Smith-Beatty on September 16, 2012 at 10:29am Good article - thanks.
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