Fair Trade Fail - The Theory That's Killing America's Economy

[tangent4ronpaul]

Doing something weird with this post - I'm going to take each of his 7 dubious Assumptions and do a separate thread for each in economics and sound money - just because there is so much here.

http://www.huffingtonpost.com/ian-fletcher/the-theory-thats-killing-_b_846452.html

The Theory That's Killing America's Economy -- and Why It's Wrong

I wrote in a previous article how America's disastrous embrace of free trade is ultimately based on a false theory of how the global economy works: the so-called Theory of Comparative Advantage. This is what economists, from the government on down, believe in. This matters.

But I didn't explain why the theory is wrong -- which it is. Understanding its flaws is the price of admission to serious criticism of free trade, so it's well worth getting a grasp on them. Economic theory can be a tough chew, but it's worth the effort, if only to gain the intellectual confidence not to be intimidated by the so-called experts. So... let's take a look at some of that machinery behind the wizard's curtain, shall we?

The theory's flaws, which are fairly well known to economists but mostly ignored, consist of a number of dubious assumptions upon which the theory depends. To wit:

Dubious Assumption #1: Trade is sustainable.
http://www.ronpaulforums.com/showthread.php?287141-Dubious-Assumption-1-Trade-is-sustainable.&p=3202476#post3202476

Dubious Assumption #2: There are no externalities.
http://www.ronpaulforums.com/showthread.php?287142-Dubious-Assumption-2-There-are-no-externalities.&p=3202477#post3202477

Dubious Assumption #3: Productive resources move easily between industries.
http://www.ronpaulforums.com/showthread.php?287143-Dubious-Assumption-3-Productive-resources-move-easily-between-industries.&p=3202479#post3202479

Dubious Assumption #4: Trade does not raise income inequality
http://www.ronpaulforums.com/showthread.php?287144-Dubious-Assumption-4-Trade-does-not-raise-income-inequality.&p=3202482#post3202482

Dubious Assumption #5: Capital is not internationally mobile.
http://www.ronpaulforums.com/showthread.php?287145-Dubious-Assumption-5-Capital-is-not-internationally-mobile.

Dubious Assumption #6: Short-term efficiency causes long-term growth.
http://www.ronpaulforums.com/showthread.php?287146-Dubious-Assumption-6-Short-term-efficiency-causes-long-term-growth.&p=3202488#post3202488

Dubious Assumption #7: Trade does not induce adverse productivity growth abroad.
http://www.ronpaulforums.com/showthread.php?287147-Dubious-Assumption-7-Trade-does-not-induce-adverse-productivity-growth-abroad.&p=3202490#post3202490

I don't expect most readers to get all the above analysis the first time through. But I do hope that everyone who's read this far now understands that there is no good reason -- regardless of what most economists say -- to assume that free trade is necessarily best. The economic logic of those who say it is, is riddled with enough holes to sink a container ship.

This blogger has a book: Free Trade Doesn't Work: What Should Replace it and Why
by Ian Fletcher

http://www.amazon.com/Free-Trade-Doesnt-Work-Replace/dp/0578048205%3FSubscriptionId%3D0JJEH4PKQM4ZHS8QY102 %26tag%3Dthehuffingtop-20%26linkCode%3Dxm2%26camp%3D2025%26creative%3D165 953%26creativeASIN%3D0578048205

[specsaregood]

which one of those touches on how having a global fiat currency with an unlimited printing press affects things?

[torchbearer]

which one of those touches on how having a global fiat currency with an unlimited printing press affects things?

I posted a very similar response on dubious thread #1.
http://www.ronpaulforums.com/showthread.php?287141-Dubious-Assumption-1-Trade-is-sustainable.&p=3202486&viewfull=1#post3202486

[axiomata]

Oh goodie, another mercantilist, Ian Fletcher.

Pretty well debunked by free market economists.

http://dailycaller.com/2010/09/21/that-funny-old-dogma-ian-fletchers-ode-to-mercantilism/
http://cafehayek.com/?s=ian+fletcher

Perhaps you might enjoy this other HuffPo article by Fletcher: Libertarianism, the New Anti-Americanism (http://www.huffingtonpost.com/ian-fletcher/libertarianism-the-new-an_b_811271.html) (This ad hominem blog post is the result of a lack of a sack to publicly debate a CafeHayek economist.)

[tangent4ronpaul]

Don't think he goes there, but I also don't think that's the only factor at play. He makes some good points. Consider if he was writing from the perspective of Switzerland. The points remain the same.

[specsaregood]

I posted a very similar response on dubious thread #1.
http://www.ronpaulforums.com/showthread.php?287141-Dubious-Assumption-1-Trade-is-sustainable.&p=3202486&viewfull=1#post3202486

yeah i just saw that. gmta

[torchbearer]

yeah i just saw that. gmta

I actually heard ron paul explain it that way in an interview.

[tangent4ronpaul]

A goodie, another mercantilist, Ian Fletcher.

Pretty well debunked by free market economists.

http://dailycaller.com/2010/09/21/that-funny-old-dogma-ian-fletchers-ode-to-mercantilism/
http://cafehayek.com/?s=ian+fletcher

Perhaps you might enjoy this other HuffPo article by Fletcher: Libertarianism, the New Anti-Americanism (http://www.huffingtonpost.com/ian-fletcher/libertarianism-the-new-an_b_811271.html)

Interesting - will have to check it out.

Do you really think we have "free trade" now?

Posted a diferent thing about how seniors and savers were being screwed by low interest rates and how this inflation was different than others. Basically, that low wages driving work overseas and outsourcing lead to development and a growing middle class in places like India and China, putting growing demand for luxury goods and thus driving demand and rising prices. usually prices and wages both go up, this time it's just prices and this is why.

The guy is correct about some things.

Free trade agreements are not free trade. They always are biased in favor of the other country and screw us. We've never had "fair trade" just like we've never had a "free market".

[tangent4ronpaul]

Perhaps you might enjoy this other HuffPo article by Fletcher: Libertarianism, the New Anti-Americanism (http://www.huffingtonpost.com/ian-fletcher/libertarianism-the-new-an_b_811271.html) (This ad hominem blog post is the result of a lack of a sack to publicly debate a CafeHayek economist.)

I don't know... really have no problem with another country experiencing economic prosperity, but at the same time the administration and the Obama administration has been all about wealth re-distribution. Be it free trade agreements, cap and trade or Soros wanting China to have the worlds currency. We've been pushed into outsourcing and vulnerability for profit for years.

The diffrence is that these other countries are economically free, while we are shackled. OSHA, min wage, cost of living, taxes, regulations, licensing, and on and on and on. Our government has put us at a competitive disadvantage and the only ways to get out of it are to get rid of all that crap, sadle other countries with that crap if they want to do business with us or protectionism via tariffs, etc to bring jobs back here.

Otherwise, we are going down - and right now, we are going down.

[axiomata]

Strike at the root. Protectionism will only hasten our demise.