Blog Credo

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.

H.L. Mencken

Thursday, June 14, 2018

Proving A Negative

The argument for global trade is primarily an economic one with a dash of collective security thrown in.  You engage in free trade so that each country and region can use their competitive advantages to grow their economy. Competitive advantage might be climate, so Mexican can sell their oranges in the American market and Americans can get oranges in winter.  Perhaps it's labor costs, Mexican labor costs less, but is less skilled, so certain jobs move to take advantage of that.  Additionally, nations that do a lot of business with each other go to great lengths to avoid a war with each other. 

That's pretty much it.

The argument against trade is that it siphons jobs away from "our country" to "their country."  This is undoubtably true.  Of course, every worker is also a consumer.  What you lose in job opportunities, you make up for in cheaper goods. Trying to suss out whether stagnant wages are a result of globalization or regressive taxes and a failure to redistribute wealth is very tricky.  Grueling, pervasive poverty and stagnating wages have a lot of causes - fiscal policy, automation - but globalism is definitely one of the causes.

The "good" part of trade described above is largely invisible.  You see the orange in your hand in January.  You don't see the orange that's not in your hand in January.  You can't "prove" the negative of a reduction in global trade until it happens. 

Trump seems invested in making it happen

Right now, Trump's only real positive is that he has not tanked the Obama Recovery.  Yeah, he got the tax cut and Gorsuch on the bench, but those are partisan goals, rather than national priorities.  Overall national economic health is a national priority, outside of peace, the largest priority. If Trump launches a full-scale trade war, it will almost certainly launch another recession.  As an American, I am appalled by this.  But the damage done by a trade war is easier to unwind economically than a financial crisis.  The 2008 Crisis was a financial crisis that created long lasting pain across the developed world and in many ways led directly to Brexit and Trump.  Both Brexit and Trump are responses to the continued weakness in certain economic regions brought about by 2008. 

What Farage and Bannon did was harness that anger and direct it at "globalization."  This allowed them to demonize both ethnic and racial minorities while blaming the outside world for everyone's problems.  Starting a trade war - one that punishes the global economy - might be what is necessary to "prove the negative" about what happens if you do the thing economists say you should not do. 

No one wants a recession, especially so close to 2008.  But what if we need one to drive home the point about what is actually good about trade?  What if Trump's childish tantrum over Canada and the G-7 is the thing that actually destroys his political movement by giving it exactly what it wants?


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