Six Reasons for U.S. to Abandon Free-Trade Myth: Ian Fletcher

[NNN0LHI]

http://www.bloomberg.com/news/2010-10-26/six-reasons-for-u-s-to-drop-free-trade-myth-commentary-by-ian-fletcher.html

By Ian Fletcher - Oct 25, 2010 8:00 PM CT Bloomberg Opinion

The price of living in the fantasy world of free-trade economics continues to rise for America.

Failure to recognize the pitfalls will probably mean a continuing struggle to emerge from recession, as much U.S. domestic demand leaks abroad due to the trade deficit, rather than being recycled at home. And America will continue to lose key industries: not just the primitive ones a developed nation should shed, but the high-tech jobs of the future.

Any serious discussion of free trade must confront David Ricardo’s celebrated 1817 theory of comparative advantage, whose tale of English cloth and Portuguese wine is familiar to generations of economics students. According to a myth accepted by both laypeople and far too many professional economists, this theory proves that free trade is best, always and everywhere, regardless of whether a nation’s trading partners reciprocate.

Unfortunately for free traders, it is riddled with holes, some of which even Ricardo acknowledged. If they held true, the hypothesis would hold water. But because they often don’t, it is largely inapplicable in the real world. Here’s why:

[midnight]

1. For those who opposed this ridiculus idea from the start, I wonder how many

see the tea bag movement as the second wave of this nonsense?

[DirkGently]

2. These myths are coddled when times are good. Then things blow up, and it's suggested we need more

of the same thing. We simply can't afford to pretend that invisible hands and downward trickles and war economies and endless privatization do anything for anyone but the handful of people who manage to scramble to the top of the trash heap and crow.

[glitch]

4. VERY well said.

Nice encapsulation of the issue with a great visuals.
:applause:

[snot]

3. In addition to the measures he recommends,

we should talk about imposing tariffs calculated to equalize the true cost of imports.

For example, if a good imported into country A is mfgd more cheaply in foreign country B bec. mfgr there is not subject to environmentally-protective laws, then such mfgr is causing excess pollution that may impair the quality of life, etc., of citizens in country A or elsewhere, and country A would be justified in imposing a tariff equal to the cost of remedying such impairment.

A similar approach could be attempted with respect to labor protections, etc., to equalize the playing field.

[DirkGently]

5. Sounds reasonable.