Monday, May 02, 2005


Imports? Never! "Late in 2001 and early in 2002, America's economic mercantilists (who tend to ascribe domestic economic difficulties to all things foreign) were complaining about cheap foreign steel in the U.S. economy. No sooner had the Bush administration slapped higher tariffs on foreign steel than the mercantilists started spinning sky-is-falling tales about Asians selling computer software and medical technology to Americans at bargain basement prices. The latter spawned a media cottage industry around the term, "outsourcing." So what's the mercantilists' 2005 cause celebre? Believe it or not, it's high-priced imports! Oil imports to be specific. Not low-priced imported oil, mind you, but high-priced oil. Apparently, low import prices and high import prices both pack a damaging economic punch, at least for the mercantilists. An economic contradiction? Yes. One of the scenarios has to be wrong.

A powerful case for free trade: "Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same-to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war. Can there be any greater misuse of language than to apply to commerce terms suggesting strife, and to talk of one nation invading, deluging, overwhelming or inundating another with goods? Goods! What are they but good things-things we are all glad to get?"

The British decline: "After years in which the UK actually managed to restrict the growth of government, a period not coincidentally that created the conditions for the best economic performance in a couple of generations, the tax take is set to rise sharply. Within three years, taxes will account for more than 40 per cent of gross domestic product, the highest level in 25 years, and beginning to close the gap again with the levels in sclerotic Western European countries. It will get worse. The Government now backs a more or less open-ended commitment to pouring ever more resources into the demonstrably inefficient bureaucracy of the NHS. Pensions, welfare benefits and education will devour tens of billions more even than current projections suggest."

An excellent response to the customary Leftist ignoring of the facts about poverty here. Excerpt: "Official statistics rely on income data that are misleading. Some low-income households earn money "off the books" either through illegality or because reporting it would cost them taxes or giveaways. Other households go through income droughts, perhaps due to layoffs or college attendance, and tide themselves over with savings or gifts from family. Finally, income data do not count the value of non-cash government benefits, such as Medicaid, public housing, or food stamps. Far more useful are data on consumption, which is one's standard of living. Research has shown that for the households in question, average consumption is as much as 40 percent higher than reported income".

Chinese currency issue is a red herring: "How determined is Congress to make China inflate its currency? Earlier this month the Senate, by a margin of 67 to 33, voted to consider a proposal to impose a 27.5 percent tariff on all imports from China unless it does. While the tariff proposal is not law -- yet -- its consideration bodes ill for U.S. trade policy. Misconceptions have spawned misgivings about trade in the Congress, where too many policy makers view it as an adversarial, zero sum game. The country either wins or loses, and the trade balance determines the score. According to this view, our growing trade deficit (search) means that we are losing, and our record bilateral deficit with China is proof that our toughest opponent is cheating. But this obsession is a fool's errand."

The mouse and the market: "Our society holds up invention as the spearhead of progress. Those who first discover an idea are the ones who receive the Nobel Prizes and earn their places in the history books. But in Man, Economy and State, Rothbard shockingly argues that technological invention is relatively unimportant in the progress of civilization. Instead, capital is the far more important, and limiting factor. In fact, he claims, 'there is always an unused shelf of technological projects available and idle.' Why idle? '. . . in order for the new invention to be used, more capital must be invested.'"


No comments: