Why Trump's anti-free trade stance is bad for America's economy and the danger behind right wing populism.
Donald Trump is notorious for his anti-free trade stance and his opposition to free trade agreements between other countries.
Even though I find major fault with the TPP, since it's essentially crony corporatism in a faux trade agreement, Trump's contempt for free trade is vacuously based on silly assumptions.
Most of the last 300 years of exponential economic progress which the world has overwhelmingly experienced was based on our growing acceptance of free trade as mercantilism became unpopular when most intellectuals realized the problems associated with protectionism.
When Adam Smith promoted a spontaneous order through open markets with his publication, Wealth of the Nations, it paved and established the impetus necessary for industrial expansion and the myriad progress humanity has witnessed.
Thanks to open trade, the world revolutionized new ways of bettering the planet.
The Commercial Revolution in the late 1600s was just one example of how free trade benefits the world's economies.
Trump doesn't realize that free trade and open markets is a beneficial practice which ameliorates economic growth between multiple trading partners because of a particular concept called comparative advantage.
For example, if it's cheaper in Japan to mass produce computers and more expensive to produce food in Japan, since food scarcity is more prevalent in Japan due to decreased productive capital, and if it's cheaper in the US to produce food due to more efficient agricultural farming technology, then it would be advantageous to trade food for computers between the US and Japan, and this positive transaction will make each country better off, as each country will experience a surplus in cheap items, and the consumers in each country will be better off. This will save costs for consumers and suppliers both as both will be more economically benefited after the trade.
However, our trade deficits aren't caused by China's "manipulation of currency", as Trump has so eloquently stated, but our trade deficit is caused by our government's populist regulatory policies and our disastrious economic paradigm that is stifling any productive gains.
What Trump fails to realize is that most of his opposition to free trade relies on uneducated rhetoric from populist, economically underpriveledged white voters who are experiencing extremely vexing economic hurdles in their daily lives.
Don't get me wrong- much of these people are suffering and the government needs to enact major reforms in how we reduce poverty.
But these uneducated voters are ignorantly blaming their unemployment on open trade agreements, and rather than promoting sensible reform in our current economic paradigm, they fail to realize that most of the job losses (90% of job losses according to recent studies) are caused by automative forces, in particular the rise in technological growth that is replacing American manufacturing jobs, and most of the job losses are not caused from outsourcing of manufacturing jobs, although such a problem is being triggered from our poor comparative advantage that is created by increased wages and heightened overhead expenses that businesses must pay to meet the demands of supplying their workers with healthcare and entitlements.
Finding practical solutions towards reducing worker displacement and poverty is beneficial and most of our changes should rely on ways to circumvent rising costs for businesses while reducing prices for consumer items via sensible trade agreements.
Instead of driving up wages for workers as a poverty reducing tool, which exacerbates overhead expenses for small businesses, we should expand something called the Earned Income Tax Credit, a tax rebate or a government provided transfer payment provided by the government and given to poor workers who meet a work quota- with most productive workers being rewarded and lazy workers being rewarded less.
This poverty reducing agent should be paid through increased taxes on the wealthy, and instead of driving up overhead expenses for businesses and reducing productivity by draining capital from businesses, the rich should pay for the EITC through higher taxes- this is a much better idea than directly taxing business owners, which will exacerbate overhead expenses.
Income inequality is a major problem in our society and it must be reduced in a way that doesn't promote inefficiency in labor output.
Although America must remain competitive in this current global economy to outperform its trading partners and maintain a trade surplus and thus raise government revenue, which maintains a functional economy, trade itself can serve a beneficial function in reducing income inequality.
When production rises due to the economic progress created from smooth free trade, as efficiency becomes effective at delivering goods and services at a cheaper rate due to our previously mentioned concept of comparative advantage, prices for many goods will plummet in response, which creates enhanced purchasing power for consumers and producers alike.
This will lead to reduced prices as many businesses, now realizing that a surplus in their stock of goods and services, must be discounted to maintain current business operations. So items that were previously expensive, are mostly on sale due to improvements in efficiency and cost saving free trade.
Free trade is good for the global economy because it enhances the interactions between various trading partners and leads to better relations with these countries. As more countries trade with other trading countries, their goal is to maximize economic progress for all trading partners. Ideas, communication, bonds, and equity is subsequently shared between these nations which promotes diplomatic relations as being necessary for economic stability.
This is how the commercial revolution brought us out of the dark ages into the new age of enlightenment.
Even though I find major fault with the TPP, since it's essentially crony corporatism in a faux trade agreement, Trump's contempt for free trade is vacuously based on silly assumptions.
Most of the last 300 years of exponential economic progress which the world has overwhelmingly experienced was based on our growing acceptance of free trade as mercantilism became unpopular when most intellectuals realized the problems associated with protectionism.
When Adam Smith promoted a spontaneous order through open markets with his publication, Wealth of the Nations, it paved and established the impetus necessary for industrial expansion and the myriad progress humanity has witnessed.
Thanks to open trade, the world revolutionized new ways of bettering the planet.
The Commercial Revolution in the late 1600s was just one example of how free trade benefits the world's economies.
Trump doesn't realize that free trade and open markets is a beneficial practice which ameliorates economic growth between multiple trading partners because of a particular concept called comparative advantage.
For example, if it's cheaper in Japan to mass produce computers and more expensive to produce food in Japan, since food scarcity is more prevalent in Japan due to decreased productive capital, and if it's cheaper in the US to produce food due to more efficient agricultural farming technology, then it would be advantageous to trade food for computers between the US and Japan, and this positive transaction will make each country better off, as each country will experience a surplus in cheap items, and the consumers in each country will be better off. This will save costs for consumers and suppliers both as both will be more economically benefited after the trade.
However, our trade deficits aren't caused by China's "manipulation of currency", as Trump has so eloquently stated, but our trade deficit is caused by our government's populist regulatory policies and our disastrious economic paradigm that is stifling any productive gains.
What Trump fails to realize is that most of his opposition to free trade relies on uneducated rhetoric from populist, economically underpriveledged white voters who are experiencing extremely vexing economic hurdles in their daily lives.
Don't get me wrong- much of these people are suffering and the government needs to enact major reforms in how we reduce poverty.
But these uneducated voters are ignorantly blaming their unemployment on open trade agreements, and rather than promoting sensible reform in our current economic paradigm, they fail to realize that most of the job losses (90% of job losses according to recent studies) are caused by automative forces, in particular the rise in technological growth that is replacing American manufacturing jobs, and most of the job losses are not caused from outsourcing of manufacturing jobs, although such a problem is being triggered from our poor comparative advantage that is created by increased wages and heightened overhead expenses that businesses must pay to meet the demands of supplying their workers with healthcare and entitlements.
Finding practical solutions towards reducing worker displacement and poverty is beneficial and most of our changes should rely on ways to circumvent rising costs for businesses while reducing prices for consumer items via sensible trade agreements.
Instead of driving up wages for workers as a poverty reducing tool, which exacerbates overhead expenses for small businesses, we should expand something called the Earned Income Tax Credit, a tax rebate or a government provided transfer payment provided by the government and given to poor workers who meet a work quota- with most productive workers being rewarded and lazy workers being rewarded less.
This poverty reducing agent should be paid through increased taxes on the wealthy, and instead of driving up overhead expenses for businesses and reducing productivity by draining capital from businesses, the rich should pay for the EITC through higher taxes- this is a much better idea than directly taxing business owners, which will exacerbate overhead expenses.
Income inequality is a major problem in our society and it must be reduced in a way that doesn't promote inefficiency in labor output.
Although America must remain competitive in this current global economy to outperform its trading partners and maintain a trade surplus and thus raise government revenue, which maintains a functional economy, trade itself can serve a beneficial function in reducing income inequality.
When production rises due to the economic progress created from smooth free trade, as efficiency becomes effective at delivering goods and services at a cheaper rate due to our previously mentioned concept of comparative advantage, prices for many goods will plummet in response, which creates enhanced purchasing power for consumers and producers alike.
This will lead to reduced prices as many businesses, now realizing that a surplus in their stock of goods and services, must be discounted to maintain current business operations. So items that were previously expensive, are mostly on sale due to improvements in efficiency and cost saving free trade.
Free trade is good for the global economy because it enhances the interactions between various trading partners and leads to better relations with these countries. As more countries trade with other trading countries, their goal is to maximize economic progress for all trading partners. Ideas, communication, bonds, and equity is subsequently shared between these nations which promotes diplomatic relations as being necessary for economic stability.
This is how the commercial revolution brought us out of the dark ages into the new age of enlightenment.
Comments
Post a Comment