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In Globalization (Greenwood Press, $44), Donald J. Boudreaux, chairman of the economics department at George Mason University, intends to help us understand worldwide free trade. The author begins by documenting the many benefits of globalization. Chief of these, he writes, is that people who live in more open economies have higher standards of living than people who live in less open economies. But Boudreaux also shows that people around the world who earn higher incomes have higher life expectancies, achieve higher levels of education, enjoy more leisure, drink cleaner water, and breathe cleaner air.
The author also refutes the claim that economic growth increases income inequalities. He cites a study that concludes that poor people in countries with a high average level of income tend to have higher incomes than poor people in countries with a low average income. Put simply, life as a poor American is better than life as a poor Cuban. “Today, ordinary citizens of modern open economies enjoy nearly as much access as do the world’s wealthiest persons to the most basic, most essential goods and services,” he writes. Free trade remains unpopular, however. American autoworkers, for instance, correctly reason that competition from foreign auto producers may cost them their jobs. Boudreaux emphasizes that “foreigners sell only to buy.” If Americans buy cars from Japan, the Japanese may use the dollars to buy lumber from America. Or, if the Japanese buy coffee from Brazil, Brazilians may use the dollars to buy American software. The implication is that jobs lost in import-competing industries will be offset by the jobs gained in the exporting industries. Although the author acknowledges the misfortune of laid-off workers, he rejects the notion that trade is the source of their misfortune. To him trade has the same impact on markets that technological progress and entrepreneurial innovation does: It offers consumers a better way to get what they want. Boudreaux also strives to correct the view that a trade deficit is an “unfavorable” balance of trade. The U.S.trade deficit, he writes, results from the fact that foreigners buy American assets as well as goods and services. In addition to stocks and real estate, these assets include the debt incurred when U.S. corporations or governments issue bonds. Boudreaux contends that borrowing to finance government expenditures is unwise, but maintains that foreign lending does not encourage it. He also points outs that foreign lending reduces the interest rates U.S. taxpayers have to pay on U.S. bonds. Boudreaux is perhaps the staunchest advocate of free trade on the scene today. Globalization makes a compelling case for free trade and allays many of the concerns of ordinary people. He has set a high bar for any protectionist to write an equally effective rebuttal.
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I'm also not so sure we are better off because foreigners are trading their hard assets for our debt. Ten years from now, nearly all our Chinese electronics will be sitting in landfills, leaching their toxic innards into our water supply, but our kids will still be paying off the Treasury debt the Chinese have bought (assuming the Chinese haven't dumped them). Control over debt is control over our economic lives, as many people now in debt to credit companies are now finding out.
Free trade has its blessings, but it does no good to exaggerate these blessings. Free trade comes with a cost, just like free love has proven to be expensive.
Note also that an over taxed labor force has very little desposable revenue that he can spend on price inflated (due to the tax burden in general on the local economy) products produced in his local economy. Thus they both burn on the historic trash heap of despotic governments. If a government wants to tax its labor force, it must, as a matter of mathematical certainty, also provide protective tarrifs to protect the labor forced from a foreign trade onslaught, thus "bye bye" global free trade. Our Forefathers well understood the effects of competing with slave labor over 200 years ago, hence the constitutional provision to allow tarrifs in an effort to maintain a level playing field for international trade.
Consequently it stricks me that anyone who is advocating global free trade is hiding his desire to have a global socialist system where all labor is reduce to slave labor behind the Wizard's Curain of OZ, hopefully never to be exposed.
Mr. Boudreaux is one of many who continually provide intellectual muscle behind the merits of free societies, their arguments insurmountable by big government advocates on anything but an emotional level.
Yet the cultural battle for policy evaluation, the fight for the hearts and minds of ordinary people, seems to wrest clearly in favor of those who advocate controlled economies.
Two points I'd like to make regarding the comparative philosophies:
(1) The objectives of Socialism are never fully satisfied by government expansion - rather, they are best accomplished through free societies where people can achieve their own unhindered prosperity. Yet humanity never seems to tire of giving authoritarianism another shot!
(2) Only governments have the power to put bullets into their citizens; trade and free enterprise have never led to atrocities. By definition, free economic activities are devoid of force relationships. On the contrary, government direction of society is predicated on force. People seem to keep hoping for some sort of benevolent dictator; what they usually end up getting is quite the opposite!