Free Trade and American Values

Some people feel that all the have to do to prove Hillary Clinton is a rat is to show that she has supported trade deals. That does not make any sense.

I am linking here to an article that has some useful data about US/China trade.  We hear of the huge trade deficit with China, but that number is bogus.  As the article points out:

40% of Chinese exports to America are produced in China by American companies. In other words, the revenues of the exports to America produced by American enterprises in China are counted as Chinese trade surplus with America, while the money are remitted to America by American enterprises. – See more at:

It is important to realize that the United States is only 5% of the population of the world. When we make stuff and sell it, it is useful to be able to sell it to the other 95% of the people in the world.  According to the World Bank, about 13% of the US GDP is exports, and President Obama has been working to increase that.

There is an economic rule-of-thumb called Okun’s Law that says that for every extra percentage point of growth, unemployment drops one-half percent.  Of course, the reverse is true, so lowering GDP increases unemployment.

Part of Trump and Sanders’ platforms is anti-trade. The logic is that trade has stolen American jobs. In the case of NAFTA, it both created and took jobs in about a balance. With China, many low skill jobs have been exported. Even so, they are trying to solve the wrong problem. It is simple to say that and without thinking about it, it make sense, so it is great for politics, but, as I said, it is the wrong problem.

No matter what happens, over time things change. The buggy whip industry is gone. At the beginning of the 20th Century, more people were involved with agriculture than any other industry. By the end of the 20th Century, only a tiny fraction of people were. Even today, there are people hollering a screaming about how we should be going back to that time, but few of us want to do that.

Taxi cabs were rapidly displaced by Uber and Uber drivers will soon be replaced by self-driving cars. The speed at which robotics is evolving is staggering. Artificial biology is creating self-replicating organisms, almost life itself and genetically modified white blood cells are already curing cancer. Everywhere around us things change and in the aggregate, we are better off for it.

The US is, by far, the best at creating these innovations.

Not everyone can be an high-tech innovator. But, if we somehow manage to find a way that we can get US workers to have low enough wages and poor enough living conditions to compete with China and the rest of the world for those exports we need for our economy, what are our workers competing to do?  If we cut ourselves off from the rest of the world, we lose not only the 13% but also the 40% we are really getting from China’s exports. That’s a big hit. Unemployment would jump at least 7% just from this alone.  It doesn’t make sense. If we raise the cost of everything so we can’t compete with the rest of the world, exports would drop dramatically. The effect would be exactly the opposite of what they are trying to acheive.

What we really need is a new way of thinking about the value of human beings. That is not something we can push off on politicians.

One idea they have been trying in some European countries is guaranteed basic income. When people have that, they come up with creative new businesses. Not all economic growth needs to be from physical things. Anyway that people’s live can be made easier, happier, or more fulfilling is a potential business. Music and art thrive.

Once, I was in Kilpisjärvi, a town in the extreme north of Finland. It has a population of 114 people and consisted of a hotel, gas station, restaurant, and general store. The population grows when people go here for vacation in the summer, but I was there when the snow was deep and the lake was frozen over.

The restaurant had a dance area with an excellent live band.

Take a moment to think of the economics of that. It was about a 7-hour drive north of Oulu, where I was living, which is about a 7-hour drive north of Helsinki. It was only a few hundred miles from the North Pole. How could that be possible?

The answer is, that the Finnish government subsidized it. They support bands and music. Sometimes the bands tour and provide live music in places where it would never be possible.

Finns pay higher taxes that we do. They have some amazing rules. For instance, when people pay traffic fines, it is proportional to their wealth.  While I was there one wealthy person got a fine of about 10,000 Euros for speeding. But, Finns have live music available wherever they go. A person can grow up to be a musician and make a living.  There are many bands that work for a living and get paid by the venues, as well. What I am referring to are like grants that the bands apply for. It is not all peaches and cream playing for 15 people 300 miles from the North Pole.

They are not socialist. They are right next to Russia and have traded with it for many hundreds of years. They know the drawbacks of a centrally planned economy even better than we do. They have some awesome global corporations.

The Finns exist on trade. They have few natural resources. Trade is not the problem.

We are the problem with our country, the politicians are a reflection of our will. Our values are messed up. We don’t really value humans and what humans can do. It can be seen in our unwillingness to see us all healthy, our educational system that emphasizes becoming cogs in a labor machine, our disdain for education and intellectuals, that artists and musicians are considered to be flakes on the edge of society, and on and on.

Slowing trade will just make things worse for all of us. We are trying to solve the wrong problem.


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