Welcome to Liberrants, a blog dedicated to editorials, discussions, and studies of all things libertarian. Don't let the title mislead you; it's merely my attempt to be creative in describing myself as a "hopeful curmudgeon" who embraces the goal of the free, peaceful, economically vibrant society envisioned by America's founding fathers. Jump in! Contribute! Enjoy!

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Location: Tucson, Arizona, United States

A critically thinking curmudgeon whose goal, in addition to creatively venting about the imperfect world in which we live, is to induce critical thinking in others. The ultimate goal is to help bring about a peaceful world in which we can all live in freedom.

Monday, March 06, 2006

More Nonsense From Charley

The statist/socialist half of Charley Reese’s brain has asserted itself again. In today’s column on his King Features site, titled “Losing Our Country”, Charley falls for the straw man argument that “free trade” is destroying America. He decries the fact that America is losing more and more of its economic base in the manufacturing and service sectors to foreign ownership, and is especially indignant at the fact that “45 percent of U.S. government debt is foreign-owned.”

What Charley doesn’t seem to realize, even though he (perhaps unknowingly) acknowledges it in the first sentence of his second paragraph, is that what we have today isn’t “free trade” at all, but “managed trade.” In fact, it should be referred to as “grossly mismanaged trade.” Small wonder that we’re in the dire straits as a nation that we’re in. It’s just too bad that Charley isn’t savvy enough about economics to realize that if genuine “free trade” were actually the order of the day, as just one component of a truly free market economy, he wouldn’t have had any reason to write such an editorial and could have spent his precious time writing one of his usually spot-on critiques of out-of-control federal dictatorship or our hyper-regulated, centrally-managed economy.

It is the latter in particular that is the real cause of job losses abroad and ever-increasing foreign ownership of our assets. Government in America at all levels has made life hell for business owners through a combination of crushing regulation (and its attendant bureaucratic paperwork drills) and confiscatory taxes that have rendered the American economy non-competitive in global terms. I should add that the United Kingdom and the EU are in the same dire straits, neither apparently realizing that they have strangled themselves through miles of red tape.

As for the growing foreign ownership of American assets, particularly by Asian entities, I can only say, what else did you expect? After all, who do you think is financing our runaway deficit spending and reckless inflation of our currency? Although the Asian nations have been the biggest investors in U.S. treasury bonds of late, it is hard for anyone to believe that these nations really expect a meaningful return on investment in these instruments. A much smarter investment strategy is to use their dollars to buy up tangible assets such as real estate, businesses, and industrial capital. It is we, after all, who have of our own free will sold them these stocks of seed corn in order to allow us to maintain our never-satisfied consumer economy. You have to foot the bill for it at some point.

It is this combination of a state-shackled economy and irresponsible monetary policy that has led to the decline of the American manufacturing and service sector, not “cheap wages” in the Third World, as Charley states. It is highly likely that, absent such things as OSHA, the EPA, and the capital gains tax, to name just a few current destructive obstacles, that businesses would not be quite so eager to move abroad. As for the argument sure to follow this statement that “well, then Americans would all be working for fifteen cents an hour”, I say BRAVO SIERRA! If American manufacturers want to pay American workers sub-minimum wage, they will quickly find that they will have no market whatsoever for their products. It is only the American consumer who now justifies the operation of the manufacturing centers in Malaysia, the Philippines, and El Salvador. Without their disposable income, the manufacturing sector has no raison d’etre.

I won’t even go into the reasons why it would be unwise, as Charley suggests, to slap punitive tariffs on foreign-made goods in order to “compensate” for the lost profits to American workers. Three words should suffice: Smoot-Hawley Tariff. I could go on, but economists far more firmly grounded in the principles of the Free Market than I have made much better arguments (see here, here, and here, just for starters). The point is that without the distorting affects of state intervention in trade and the supply of money, a balance would be found that keeps all peoples and nations satisfied and that would restore the benefits accrued through free trade and the maximizing of comparative advantage.