Monday, July 9, 2012

Free trade is good people!

Here is a link to a good article by John Tamny of Forbes. Mr. Tamny calls out the Romney economic team for agreeing with Obama's recent complaint to the WTO about China.

But more importantly, Mr. Tamny does a pretty good job of explaining why trade with China, in both jobs and goods, is good for America. From the article:

"We’re once again exceedingly rich in the U.S. precisely because unskilled workers around the globe take on the labor that investors don’t value, and this allows us time to toil in areas that investors do. Backwards moving economies are capital repellents, there are no jobs and no wages without capital, so the American ability to constantly migrate away from the jobs of yesterday is what makes us so prosperous."

 I think that the bold part is key. It is America's ability to be at the frontier, to move things forward, that make us so wealthy. Why are so many people infatuated with low skilled manufacturing jobs? It is amazing to hear people talk about the good old days of standing on an assembly line for 10 hours a day putting irons, dryers, toasters, etc. together. And now people are upset because Americans aren't doing the boring job of putting ipads together? I don't get it.

Another quote I like from the beginning of the article is:

"Unemployment is a wholly unnatural phenomenon always and everywhere caused by government error"

I think that is a pretty valid statement. I would qualify it with involuntary perhaps, because some people will always choose to be unemployed, but other than that I think it is spot on. If the government stayed out of the labor market wages would adjust to meet the supply of available workers. This means that wages might fall to some low level in an economy like the current one, but everyone who wanted a job and was willing to work at the prevailing wage would have one. Governments create unemployment, not businesses or corporations.

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