Free Trade: Friend or Foe?

"Trade deficit a record again" screams the AP headline. "Oil price chief among culprits" is the subhead.

Sounds ominous…but if you haven't been losing sleep over it, don't start now.

Where the commonly held (mis)perception that trade deficits are bad and surpluses are good originated confounds me. Many others have laid this fallacy to rest. Yet newspapers and politicians keep promulgating this rubbish -- I suspect because selling misery is a necessity of their trade.

Do you feel miserable when you buy Asian made electronic goods at prices so low you can't believe it? How bad do you feel after paying next to nothing for gorgeous clothes made in the global marketplace? Do you feel sucker punched when you buy an imported car with either a quality or price you can't find in an American made product?

Now that you're past all that misery, what about warnings like those made by Mark Zandi, chief economist at Moody's who asserts: "Trade is far and away the largest weight on the US economy at present. This is a risky time." And Richard Trumpka of the AFL-CIO claims "America's gargantuan trade deficit is a weight around workers' necks pulling them into a cycle of debt, bankruptcy, and low-wage service jobs."

Congress is threatening a 27.5% tariff on Chinese imports to counter the loss of 3 million US manufacturing jobs since 2000. Some economists express concern that foreigners may lose their appetite for buying our stocks, bonds and real estate (the incoming cash flow which balances the trade deficit) causing the value of the dollar to plummet. Shouldn't we push the panic button and stop all this importing and free trade?

First, if Trumpka thinks having us pay higher prices for TVs, clothes, and autos will reduce our likelihood of going into debt and bankruptcy, I'd suggest he re-enroll in the math class he slept through.

Second, manufacturing jobs have been declining for decades worldwide (not just in America) due to the arrival of the information age. This is no different than the precipitous drop in farming jobs we saw during the industrial age. Does Zandi think Americans would better off toiling on farms and in factories to earn their living?

It's true millions of jobs are destroyed each year, sometimes in clumps when factories close. That makes news. But millions more jobs are created than lost -- often one at a time. You seldom hear about those.

Despite what the alarmists would have you believe, more Americans are employed now than ever before, and average annual earnings stand at an all-time high.

Can someone please restate the problem here? Because I just don't see one.

So long as foreigners will accept little green slips of paper (intrinsic value zero) in exchange for fine cars, clothes, and computers, aren't they the ones who need trade protection?

And for those who own any stocks, bonds, or real estate, you have the trade deficit to thank for pushing up prices. It's only natural that we trade things which we have in abundance (the same stocks, bonds, real estate, plus our American know-how) for that we have little (oil and willingness to toil).

No doubt the day will arrive when this state of affairs changes…after all that's the natural result of free trade. The ever-changing US dollar exchange rate is what allows such changes to occur smoothly. A weaker dollar is the market's response to large trade deficits.

Ultimately, the value of the dollar (like any other commodity) is determined by supply and demand. Since there's no shortage of demand, we only need look to overproduction of greenbacks by the US Treasury to explain the devaluation of the US dollar over the last 5 years (as defined by the 135% rise in the price of gold).

If you're looking for the real culprits of economic misery, try the voracious appetite of government, crushing taxation, and politicians' promise of guns, butter, and a free lunch. Not free trade.

Wal-Mart: Love 'em or Hate 'em

I'm trying to put Wal-Mart out of business.

So are some others, but there's a difference.

By not shopping at Wal-Mart, I'm voting with my wallet. That is my choice.

Others want to take away my choice. They want to make Wal-Mart play by different rules. They claim that Wal-Mart is bad because they pay low wages, don't offer health insurance to employees, buy merchandise that is made overseas, and drive smaller stores out of business.

None of that bothers me. Nobody is forced to work for Wal-Mart. Nobody is forced to buy from Wal-Mart. Nobody is prevented from competing with Wal-Mart. Yet some want to use force against Wal-Mart.

Me, I don't like driving a long way to Wal-Mart; I don't like searching for items without help; I don't like lesser quality no matter what the price. So I shop at smaller stores closer to home. But hey, I'm "rich", I can afford it.

Funny thing -- I'd bet most of the elitists attacking Wal-Mart are "rich" too, at least compared to the millions of honest folks who work and shop there. Trouble is, wealthy elitists don't see things the way the poor do.

Paul Krugman, professor of economics at Princeton (does that sound elitist?) believes that Wal-Mart should pay higher wages and offer more benefits.

Of course, this would be the opposite strategy of what made Wal-Mart so successful. (That and the use of technology and innovative managment to maximize efficiency.) So, it's reasonable to assume we would see fewer Wal-Marts opening (the real goal of the elitists). That means:

a. More unemployment. No new stores, no new jobs. But of course Krugman and his ilk, who pose as champions of the poor, aren't applying for those kind of jobs, so do they really care?

b. Higher prices for merchandise. Naturally, since the elitists don't shop at Wal-Mart (they've got money to burn), what do they care? Nevermind the poor who can't afford to pay more; they'll just have to do without.

c. The older, established retailer might stay in business. That means the owner can still pony up dues to his country club, or buy tickets to the black-tie charity event. Darn me for thinking elitists don't care about the poor!

d. Workers overseas can keep their feet planted in steaming rice paddies for $10/month, rather than working in a factory for $100/month. I'm sure they'll appreciate that.

Oops, I forgot poor people overseas don't really matter. They can't vote!

Is it envy or ignorance about the enormous profit Wal-Mart makes that so riles the elite? Krugman should have his mortar board knocked off for attacking Wal-Mart as detrimental to the economy. Profits serve as a signal to guide our society's scarce resources to where they're needed most.

That's how capitalism works. As opposed to government. Which doesn't work. I point to the colossal failure of FEMA during Hurricane Katrina.

While the bumbling FEMA wasted $100 million driving ice-cubes around the country for a week, Wal-Mart, a model of logistical efficiency and nimble disaster planning, delivered staples such as water, fuel and toilet paper to thousands of evacuees.

Did the elite give any thought to what allowed Wal-Mart to respond with an unrivaled $20 million in cash donations, 1,500 truckloads of free merchandise, food for 100,000 meals and the promise of a job for every one of its displaced workers?

No doubt these are the actions of a villainous corporate citizen, driven only by greed. Perhaps so, because obviously Wal-Mart cares greatly about the long-term relationships with their customers and employees. Sounds like they want to hold on to them.

How far ahead do you think Mayor Ray Nagin or any other government bureaucrat looks? Can anybody spell: N-e-x-t  e-l-e-c-t-i-o-n?

So please - don't let me hear anyone use the phrase "obscene profits" to justify special regulations, taxes, or penalties on successful companies like Wal-Mart or Exxon that skillfully deliver the goods in our hour of need.

These companies and the profits they earn should be celebrated, not condemned.

George Conrad Dick
Chairman Libertarian Party of Kentucky